Here is a sequence that ends contractor businesses, and almost nobody sees it coming. A subcontractor carries workers' compensation, employers liability, and general liability. They sign a standard subcontract, name the general contractor as additional insured, and go to work. One of their employees is hurt. And when the lawsuit lands, the sub discovers the coverage they paid for isn't there.
The mechanism is the action over claim, and the thing that guts the coverage is the action over exclusion. If you sign construction contracts, this is the most important page of your policy you've probably never read.
Exclusive remedy isn't the wall you think it is
Start with how workers' comp is supposed to work. An injured employee gets medical and wage benefits regardless of fault, and in exchange comp is the worker's exclusive remedy against their own employer — they can't also sue the employer in tort. Most contractors assume that bar protects them once comp is in force.
It protects you from one thing: a suit by *your own employee, against you.* It does nothing to stop that employee from suing everyone else.
The action over claim
Watch what happens on a job site. A subcontractor's employee is injured. They collect workers' comp from the sub — and under exclusive remedy, that's as far as they can go against the sub. So they sue the parties they *can* reach: the general contractor and the property owner, for failing to provide a safe site.
Now the GC and owner, defending that suit, reach for the subcontract — the one with the indemnity clause and the additional-insured requirement — and bring the sub right back in. The employee couldn't sue their employer directly, but the GC's claim over against the employer does it indirectly. That's an action over (also called a third-party-over action). It pierces exclusive remedy through the contract, and the sub who thought comp closed the book is now defending the entire injury.
Why New York is the epicenter
Action over is dangerous everywhere, but New York is its own category. Under Labor Law §240(1) — the "Scaffold Law" — and §241(6), owners and general contractors carry near-absolute liability for gravity-related construction injuries, and the injured worker's own negligence is often no defense. That drives large judgments against GCs and owners, and every one of those judgments becomes an action over aimed back at the sub whose employee was hurt. In New York, this isn't a tail risk; it's the main event.
The exclusion that closes the trap
Here's the part that turns a claim you expected into one you can't survive. Many general liability policies — especially construction GL, and especially in New York and New Jersey — carry an action over exclusion.
Under various names (employer's liability exclusion, injury to employees of the insured, "employee injury — action over"), the endorsement removes GL coverage for bodily injury to an employee of the insured — including the liability the insured assumed by contract to indemnify a third party for that injury. Line that up against the sequence above: the action over claim is precisely a third party seeking indemnity from the sub for injury to the sub's own employee. A broad action over exclusion is written to knock out exactly that.
So the trap closes like this:
1. The sub carries workers' comp. Part One pays the injured worker. 2. The comp policy's Part Two — Employers Liability is supposed to cover suits outside Part One, including third-party-over actions — but Employers Liability has its own exclusion for liability *assumed under a contract.* 3. So the contractual indemnity shifts to the general liability policy as contractual liability. 4. And if the GL carries an action over exclusion, that coverage is removed too.
The result: a sub can hold comp, employers liability, *and* general liability, have signed the indemnity in good faith, named the GC as additional insured — and have no coverage when the action over claim arrives. The GC's additional-insured status is worth nothing, because there's nothing left on the policy to extend.
How to close the gap
The fix isn't exotic, but it has to be deliberate and it has to happen before you sign:
- Pull your GL and look for an action over or employee-injury exclusion. It's an endorsement, often easy to miss in the policy.
- Get it removed or bought back, or confirm you're on a form without it. The exclusion comes in broader and narrower versions, and many can be amended for additional premium.
- Do it before the indemnity and additional-insured promises are made, so the coverage you're committing to is actually in force when the claim tests it.
- Mind your employers liability limits — don't let Part Two sit at a token amount, since it's your backstop for the third-party-over claims that aren't purely contractual.
Where this fits
The action over exclusion is the sharpest example of a broader problem: assuming liability by contract without the coverage to back it. That's contractual liability, and it's why reading the indemnity and the policy together matters. In the four monopolistic states — North Dakota, Ohio, Washington, Wyoming — employers liability isn't even included in the state-fund comp policy, so the action-over backstop has to be added separately through stop gap coverage. And in New York, proving the comp behind all of this means Form C-105.2, not an ACORD certificate.
Our approach
At Cory Washington & Co., we check your general liability for an action over exclusion as a matter of course — because on a construction account it's the gap most likely to turn a routine injury into an uncovered catastrophe. We get it removed or bought back, confirm your employers liability limits are real, and make sure the contractual liability and additional-insured status you're promising in your subcontracts are actually backed by a policy that will respond.
Signing a subcontract, or unsure whether your GL has this exclusion? Request a quote or a policy review and we'll read the endorsements with you.
Frequently Asked
What is an "action over" claim?
It's the lawsuit that gets around workers' comp. An injured employee collects comp from their own employer — whose liability to them ends there, under exclusive remedy — but then sues a third party like the general contractor or property owner. That party pulls the employer back into the case through the indemnity clause in the contract. The employee couldn't sue their employer directly; the GC's claim over against the employer does it indirectly.
What is the action over exclusion?
It's an endorsement on a general liability policy that removes coverage for bodily injury to an employee of the insured — including the liability the insured assumed by contract to indemnify a third party for that injury. Since an action over claim is exactly a third party seeking indemnity from the employer over its own employee's injury, a broad action over exclusion is written to knock out that claim. It's common on construction GL, especially in New York and New Jersey.
How do I fix an action over exclusion?
Identify it before you sign the contract, and get it removed or bought back — or confirm you're on a form without it. The exclusion comes in broader and narrower versions, and some can be amended for an additional premium. The key is doing it before the indemnity and additional-insured promises are made, so the coverage you're committing to is actually in force.
This article is general information for business owners, not insurance or legal advice, and does not bind or alter coverage. Policy terms, eligibility, and pricing vary by carrier and state — confirm specifics with our licensed team before making decisions.