Construction is an inherently dangerous industry. Employee injuries are frequent and can be severe. When employees suffer injuries on the job, they have two courses of action available to them: collect workers' compensation benefits from their employer's workers' compensation policy and/or attempt to collect damages under a tort action against a negligent third party.    

The latter is a third party over action claim. It occurs when an injured employee is unable to sue his or her employer directly because of the exclusive remedy nature of workers' compensation. So, the injured employee brings suit against a third party, such as an upper-tier contractor or owner, alleging that the third party's negligence contributed to the employee's injury.

In order to avoid using their own liability insurance to defend the claim, the third party may before the job starts contractually require and seek indemnification from the worker's employer for damages, with the goal of transferring any liability back to the employer. 
Third Party/Action Over- What You Need to Know
Construction contracts typically seek to make the contractor employer - those most responsible for primary employee safety at the job site - the party responsible for all injuries suffered by employees.

In efforts to better manage third party over actions in the construction industry, it is important for all parties to be aware of factors that impact these claims, specifically: 
  • The hazardous nature of construction work. 
  • The close proximity of multiple independent parties at the job site. With so many different entities involved - including owner, general contractor, construction manager, subcontractors and their employees - risk for third party over actions increases as all parties work on various projects at the job site.
  • Contractual risk transfer devices. These types of devices - including indemnification agreements, hold harmless agreements, additional insured status and waivers of subrogation - allow the potential for a third party over action to come from a construction injury of a subcontractor's employee. By using these devices, an employee can bring a lawsuit against two parties, such as the general contractor and owner, triggering two layers of additional insurance and indemnification contractual relationships.
Whether you are the owner, general contractor or subcontractor, the key to providing coverage for these types of claims is to customize your company's insurance plan to specifically fit your needs and provide protection against potential claims.

It is necessary to have insurance policies in place that anticipate claims that could arise. Coordinating policies, such as workers' compensation and commercial general liability insurance, with contractual risk transfer will help reduce the risk of uninsured financial loss associated with third party over claims.
Creating and maintaining the right insurance program for your construction business is essential to help reduce claims costs. Having a broker who an expert in the construction insurance industry is expertise is crucial when purchasing a policy so you can ensure you are receiving the best possible range of products needed to keep you covered. 
If you need third party/action-over coverage or would like to learn more about it, please contact us and we will be glad to answer any questions you may have.


Jay Weiner

I hope you find this of interest. Over the coming weeks we will be providing you with more essential insurance information so you can ensure that your construction business is being adequately covered. 

DT Insurance Brokerage Corp.
108-18 72nd Ave | Forest Hills, NY 11375