Here is a scenario that surprises a lot of general contractors and trade contractors alike. A subcontractor’s employee is hurt on your jobsite. The sub’s workers’ compensation policy pays the injured worker’s medical bills and lost wages, exactly as it should. Case closed, you assume. Then, months later, you receive a lawsuit. The injured worker is suing you, the general contractor, for negligence, and the sub’s carrier may be pursuing you as well.
This is known as an action-over claim, sometimes called a third-party-over claim, and it is one of the most expensive and least understood liability exposures in construction.
Why the Injured Worker Can Sue You
Workers’ compensation is generally an exclusive remedy, which means an injured employee usually cannot sue their own employer for a workplace injury. But that protection covers only the employer. The injured worker remains free to sue anyone else whose negligence contributed to the accident, and on a construction site that often means the general contractor, the property owner, or another trade working nearby.
The theory is usually that the general contractor controlled the site, failed to provide a safe workplace, did not enforce safety rules, or allowed a hazard to exist. Because the worker’s own employer is shielded, the general contractor frequently becomes the primary target, and the damages claimed can go well beyond what workers’ compensation paid.
How the Claim Circles Back to the Subcontractor
Most subcontracts contain an indemnification clause under which the subcontractor agrees to defend and hold harmless the general contractor for claims arising out of the sub’s work, including injuries to the sub’s own employees. When the injured worker sues the GC, the GC tenders the claim back to the sub under that clause. The sub’s general liability policy may then be asked to respond through its contractual liability coverage, and the sub’s employer’s liability coverage under its workers’ compensation policy may be involved as well.
This is why the claim is called action-over: the injury starts with the sub’s employee, goes over to the GC through a lawsuit, and then comes back over to the sub through indemnification. Every party in that chain needs to understand what their policies will and will not do.
The Exclusions That Cause Problems
Action-over claims run into trouble because of exclusions on the subcontractor’s side. Some general liability policies sold to contractors contain an injury to employees exclusion or a similar provision that removes coverage for injuries to the insured’s own employees, even when the claim arrives as a contractual indemnity obligation. Others include a broadly worded exclusion for injuries to the employees of any insured, including additional insureds.
If a sub’s policy has one of these exclusions, the GC’s tender may be denied, and the indemnification clause in the subcontract becomes a promise the sub cannot back with insurance. The GC then relies on its own general liability policy, and the sub may face uninsured exposure. Reviewing subcontractor policies for these exclusions before work starts is one of the most valuable things a GC’s risk management process can do.
Additional Insured Endorsements and Their Limits
General contractors typically require subcontractors to name them as additional insureds. In an action-over claim, the GC may look to the sub’s policy for defense as an additional insured. Whether that works depends on the endorsement’s wording, whether it covers ongoing operations and completed operations, and whether the injury exclusion discussed above applies to additional insureds.
Some states also limit how far indemnification and additional insured provisions can go, particularly when they would shift responsibility for the GC’s own negligence. Contract language that is enforceable in one state may not be in another, which makes it important to work with an agent and attorney who know the rules where you build.
What Employer’s Liability Coverage Has to Do With It
The employer’s liability section of a workers’ compensation policy exists partly for this situation. When an employer is pulled into a lawsuit through indemnification because its employee was injured, employer’s liability coverage may respond. Its limits are often modest by default, and a serious action-over claim can exceed them quickly. Many contractors increase employer’s liability limits for this reason, and umbrella policies frequently require higher underlying employer’s liability limits as a condition of coverage.
Practical Steps for General Contractors and Subs
For general contractors, the key steps are to collect and actually read subcontractor certificates and endorsements, to look specifically for employee injury exclusions, to require additional insured status that covers both ongoing and completed operations, and to make sure your own policy’s contractual liability coverage and umbrella limits are adequate for the projects you run.
For subcontractors, the steps are the mirror image. Understand what your indemnification clauses are asking you to promise, confirm that your general liability policy does not exclude the very claims those clauses create, and carry employer’s liability limits that reflect the real cost of an action-over claim. If a GC’s contract requires something your policy cannot support, raise it before signing rather than after an injury.
An Independent Agent Can Check Your Contracts Against Your Coverage
Action-over claims are where contracts and insurance meet, and where a mismatch can turn a covered injury into an uninsured lawsuit. An independent agent who works with contractors can review your subcontracts, examine the exclusions on your policies and those of the subs you hire, and compare carriers to find forms that support the obligations you are taking on. If you have never had that review done, it is a conversation worth scheduling before the next project starts.