f you’re a contractor working in New York, you’ve likely been asked whether your insurance provides “Labor Law coverage” or “Action Over coverage.” These terms are commonly used in construction, but they often create confusion.
The reality is that there is no endorsement called “Labor Law Coverage.” Instead, the question is whether your General Liability policy will respond when a General Contractor or Property Owner is sued under New York Labor Law Sections 240 and 241 and then seeks protection from you through a contract or indemnification agreement.
What is Contractual Liability Coverage?
Most Commercial General Liability (CGL) policies contain coverage for liability assumed under an “insured contract.” This provision is important because construction contracts often require contractors to indemnify owners and general contractors for claims arising out of their work.
When properly structured, contractual liability coverage can help protect a contractor when a Labor Law claim leads to an indemnification demand from an owner or GC.
Why Action Over Claims Matter
An “Action Over” claim typically arises when:
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An employee of a contractor is injured on a job site.
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The employee collects Workers’ Compensation benefits.
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The employee sues the property owner and/or general contractor under New York Labor Law.
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The owner or GC then seeks indemnification from the contractor that employed the injured worker.
This is where the wording of the contractor’s General Liability policy becomes critically important.
Not All Policies Are Created Equal
Many surplus lines carriers have introduced endorsements that restrict or completely eliminate coverage for employee injury, third-party-over claims, or Action Over exposures. Contractors should carefully review their policies to determine whether these exclusions exist.
When evaluating a policy, it is important to look for:
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Employee Injury Exclusions
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Action Over Exclusions
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Third-Party Over Exclusions
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Labor Law Exclusions
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Restrictions on Contractual Liability Coverage
The absence of these exclusions is often just as important as the coverage that is included.
Additional Insured Coverage Is Key
Most General Contractors and Property Owners require contractors to provide:
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Additional Insured Status (Ongoing Operations)
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Additional Insured Status (Completed Operations)
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Primary and Non-Contributory Coverage
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Waiver of Subrogation
These endorsements work together with contractual liability coverage to help satisfy contract requirements and transfer risk appropriately.
The Importance of Risk Transfer
Even when a policy provides strong coverage, contractors should maintain sound risk transfer practices, including:
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Written contracts before work begins
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Clear indemnification language
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Certificates of Insurance from subcontractors
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Verification of Additional Insured status when applicable
Strong documentation can make a significant difference when a claim occurs.
For New York contractors, understanding contractual liability coverage is essential. [COMPLIANCE FLAG: original line read “The lowest premium is not always the best value if the policy contains exclusions that could eliminate coverage for Labor Law-related claims.” — pending revised wording from client.]
Before signing contracts or starting a project, contractors should work with an experienced insurance professional to review both their policy wording and contractual obligations. A careful review today can help avoid costly coverage disputes tomorrow.
At Brewster Allen Wichert Insurance, we will review your current policy to make sure that it provides the coverage that you need when dealing with a General Contractor or Owner of a Commercial building. Signing a contract before not being assured you can meet their requirements can cost you money and jeopardize your company if you don’t have the correct insurance policy. Running a Construction business is hard enough — let us help you protect it through insurance.
