The owners of small businesses that provide general contracting or construction trade services know that workers’ compensation and commercial general liability insurance is expensive. Unless your company has also taken the steps discussed below, all the money spent for those policies may not fully protect your company in the event of a worksite personal injury claim.
The situation arises from New York Labor Law §240 and §241(6). Each statute applies to all contractors, property owners and their agents, except owners of one and two-family dwellings that contract for, but do not direct or control the work. These statutes apply to a vast array of jobsite injuries involving failure to secure an object or worker (Labor Law §240), or an industrial code violation (Labor Law §241(6) in connection with work related to any sort of building or structure.
The courts have interpreted Labor Law §240 to be one of absolute liability. With certain limited exceptions, it does not matter how negligent the injured worker was, or whether (s)he caused the accident. Broadly speaking, if the accident was caused by the operation of gravity and an object or worker fell because a safety device was not provided or failed, the negligence of the worker is of no significance. The law applies even if the owner or contractor is not onsite, had no active role in the accident and did not employ the worker(s) involved.
While the Courts do allow an offset for the worker’s share of negligence in §241(6) cases, as with §240, the statute applies to offsite parties if they are in the “chain” of contractors whose scope of work includes the work or equipment from which the claim arose.
Because of the broad nature of these statutes and the way they have been applied by the Courts, most owners and high level contractors have adopted contracts that require their subcontractors to do one or all of the following:
1. Indemnify and defend them in the case of injury claims that arise from the contracted work.
2. Buy a specified liability insurance policy and name the owner, general contractor, construction manager and/or other high tier contractor(s), as an “Additional Insured.”
3. Be responsible for compliance with all codes and safety regulations applicable to their work, including OSHA and the New York State Industrial Code.
4. Accept liability for their sub-subcontractors’ negligence and code violations in addition to their own.
5. Require their sub-subcontractors to also name the owner, general contractor, etc. as “Additional Insureds” on their liability policies, and accept responsibility for their failure to do so.
In light of the above, the following are recommended to protect you and/or your company:
1. Read every contract you sign, especially items labeled “insurance,” “indemnification,” or “claims.” The terms are probably not negotiable, but you should know what they are. If you do not understand the language, consult with an attorney.
2. Make your insurance agent aware of every contract with insurance or indemnification requirements. Provide a copy of the agreement and request coverage that complies. Document that you have done this.
3. Investigate contractual liability coverage if you do not already have it.
4. Work with an attorney to develop a contract to be signed by your subcontractor(s) that requires them to indemnify your company and name your company as an Additional Insured on their liability policy. (Your company will still have to maintain its own coverage).
5. If a jobsite accident does occur, make sure that your liability carrier and the liability carrier(s) for any involved subcontractor(s) are notified right away. All polices require prompt notice as a condition to coverage. While your agent may help you with this notice, be aware that giving notice to your agent is not the same as giving notice to the insurance company. The insurance company is the entity that wrote the policy, not the business that sold it to you.
Taking the steps outlined above will put your company in a better position to deal with an injury claim arising from a construction accident.