Construction Risk: The "Action Over" Threat

The Confusion: Builder's Risk vs. General Liability

One of the most common misunderstandings in the construction industry is the difference between a Builder's Risk policy and a General Liability (CGL) policy.

• Builder's Risk is a First-Party Property policy. It covers the physical structure, materials, and lumber against fire, theft, or wind while under construction. It does not pay for lawsuits or injuries.
• General Liability is a Third-Party Liability policy. It pays the legal defense and settlements if someone is injured on the job site or if your completed work causes property damage later.

The "Action Over" Threat

In theory, Workers' Compensation is the "Exclusive Remedy" for an injured employee. If a worker falls off scaffolding, they get their medical bills paid by Workers Comp, and they surrender the right to sue their employer.

However, savvy plaintiff attorneys use "Third-Party Over Actions" (or "Action Over" claims) to bypass this block. Here is how it works:

1. A subcontractor's employee falls and is severely injured.
2. The employee collects Workers Comp from the subcontractor.
3. The employee then sues the General Contractor (GC) or the Property Owner, claiming the GC failed to maintain a safe job site.
4. The GC is pulled into a multi-million dollar lawsuit.

The "Pass-Back" and the Hidden Exclusion

To defend themselves, the GC will rely on the indemnity agreement in their contract. The GC "passes the lawsuit back" to the subcontractor, demanding the subcontractor's General Liability policy pay for the GC's legal defense.

If the claim is denied, the subcontractor is now personally responsible for paying the GC's legal defense and the multi-million dollar settlement. This bankrupts construction companies daily.

The Wedjat Standard: We heavily scrutinize General Liability policies to ensure there are no hidden Action Over exclusions, ensuring your contractual risk transfer mechanisms actually work when tested in court.