What Is an Action Over Lawsuit?
An action over lawsuit is a chain of litigation unique to New York's workers' compensation and Labor Law environment. Here is how it unfolds:
- Injury occurs. A worker employed by a subcontractor is injured on a job site in Nassau County or NYC.
- Workers comp claim filed. The worker files a workers compensation claim against their employer. Workers comp pays, and the worker generally cannot sue their employer directly.
- Third-party lawsuit filed. The worker then sues the general contractor and property owner under NY Labor Law 240 or 241.
- Indemnification claim. The GC and property owner — now facing a potential multi-million-dollar verdict — turn around and sue your client, the subcontractor, demanding indemnification for any damages they must pay.
- The action goes over. The lawsuit has now come over the workers comp system and landed on the subcontractor's doorstep — which is why it is called an action over.
Many standard contractor GL policies contain an employer liability exclusion that prevents coverage for claims arising from injury to the insured employees. Action over claims — where the GC sues the sub for indemnification related to the sub employee injury — often trigger this exclusion. The result: the sub GL policy refuses to pay, leaving the sub personally exposed.
Why Labor Law Makes Action Over So Dangerous
Action over lawsuits exist in other states, but they are far more dangerous in New York because of the Scaffold Law (Labor Law 240). In most states, comparative fault reduces the damages an injured worker can recover. In New York, the Scaffold Law creates absolute liability — meaning the GC or property owner can be 100% liable even if the worker was entirely at fault. When the GC pays a $2 million verdict, they want that money back from the sub whose employee was injured. That indemnification claim can equal the full verdict amount.
How to Ensure Your GL Policy Responds
When reviewing a contractor GL policy, we check for:
- No employer liability exclusion blocking indemnification claims — some policies exclude all claims arising out of employment relationships; this language can capture action over claims.
- Contractual liability coverage — if your subcontract agreement includes an indemnification clause, your GL must cover contractual liability to protect you when the GC invokes it.
- Cross-liability coverage — each named insured treated as a separate insured so one party claim does not create a conflict.
- Defense outside the limits — action over litigation is long and expensive. Defense costs must not erode your liability limits.
- Adequate limits with umbrella — when indemnification claims can equal full scaffold law verdicts, minimum GL limits are often insufficient.
A Real-World Example: Nassau County Roofing Sub
A roofing subcontractor in Nassau County sends a crew to a commercial renovation. One worker falls from a roof and suffers a serious injury. The worker files workers comp — and then sues the GC and property owner under NY Labor Law 240. The GC and owner are found liable for $2.2 million. They sue the roofing sub for full indemnification under the subcontract indemnification clause. The sub GL carrier denies coverage — the claim arose from injury to the sub own employee, which the policy excluded. The sub is now personally liable for $2.2 million with no insurance coverage. This scenario plays out across Nassau County, Suffolk County, and all five NYC boroughs every year.
Before any contractor GL policy leaves our office, we review it for action over exposure: employer liability exclusions, contractual liability coverage, cross-liability, defense structure, and limit adequacy. This is standard — not optional.