Understanding Action-Over Claims for the Contractor

Maryjane E. Cason

Ask a few contractors. They’ll nod their heads in agreement: Contractor insurance seems to cost more and more, particularly in states that side with the laborer. Ask an insurance agent and you’ll get an earful about the causes.

Some state legislature in regard to labor disputes are predisposed to the worker. It’s for this reason that insurance companies will end up paying more in defense and liability costs if there is a worker that gets injured at your site. And it’s for this reason, the premium is higher.

General contractors operating in these places, as well as property managers – among others like them that hire subcontractors – need to think about getting another form of insurance in regard to worker accident liability. While it’s true that this insurance, known as action-over claims, adds to already high premium costs, in the event there’s a third-party injury claim and the commercial general liability policy excludes this type of claim, coverage means everything.

Action-over claims insurance protects you if your worker or the subcontractor’s worker incurs injury and then collects worker comp benefits – and then targets a liability claim against the property owner who then casts the liability back to you.

Action-Over Claim – What it Means

Here’s an example that may help explain the insurance idea.

Do-All Property Management Company put its signature on an indemnification agreement provided by an apartment complex it was assigned to oversee. The agreement meant all job risks were the responsibility of Do-All.

It so happened that a painter slipped off his ladder. The accident resulted in a serious breakage of both legs. The painter needed money right away to take care of expensive doctor bills, hospital stays and loss of income so he filed a workers compensation claim with his boss – Do-All’s subcontractor.

Now, the painter needed a venue for further compensation. He knew that suing his boss was out of the question because he had already collected workers comp benefits from him. He was advised to file a multi-million lawsuit against the apartment complex owner. Once the apartment complex owner was notified about the suit, he contacted Do-All Property Management who as per the indemnity agreement was now responsible for the liability.

In the event Do-All had the foresight to include action-over claims coverage with his commercial general liability policy, there would be protection and peace of mind. On the other side of the coin, in the event there was an action-over claims exclusion on the Do-All business policy, the management company would find itself in ‘hot water’ with the need to pay total out of pocket third-party charges.

To find out more about this important coverage for the general contractor and industries like him or her, contact an experienced independent agency.

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