CLIeNT AdvISOrY
“Third Party Over” Claims - Part Three
Superior Builders, Inc. is a general contractor hired by the building owner, Webster, LLC, to build a new
apartment building. Peerless Plumbing Corp. has been engaged as a subcontractor of Superior Builders to
install the plumbing fixtures in the new building. During the installation of a fire sprinkler pipe in one of the
apartments, while working as an employee of Peerless Plumbing, Paul fell from a ladder that collapsed,
causing him to sustain serious injuries. The ladder was provided to him by Peerless Plumbing.
To learn more about how AmWINS can
help you and your clients, reach out to
your local AmWINS broker or
marketing@amwins.com.
The Subcontract Agreement. The Subcontract Agreement between Superior Builders and Peerless
Plumbing requires Peerless Plumbing to indemnify Webster and Superior Builders for any damages and
attorney fees resulting from injuries or property damage that is caused in whole or in part by Peerless
Plumbing’s negligence in the performance of its work. This indemnification provision states that Peerless
Plumbing must hold harmless Webster and Superior Builders to “the fullest extent permitted by law, against
claims, damages and expenses, including attorney’s fees, arising from the subject work, but only to the
extent caused by the negligent acts or omissions of the subcontractor.” The Subcontract Agreement also
requires Peerless Plumbing to obtain various kinds of insurance, including workers’ compensation and
commercial general liability coverage, and naming Webster and Superior Builders as additional insureds on
such policies.
New York Labor Law §240. When employees suffer injuries on the job, they have two courses of action
available to them: collect workers’ compensation benefits from their employer’s Workers’ Compensation
policy and/or attempt to collect damages under a tort action against a negligent third party (because an
injured employee is unable to sue his or her employer directly due to the exclusive remedy nature of
workers’ compensation).*
Due to the severity of his injuries, workers’ compensation benefits will not fully compensate Paul for his
damages. Paul retains counsel to advise him how he can be fully compensated. Paul’s attorney advises
that although the exclusive remedy prevents Paul from suing his employer Peerless Plumbing, it does not
prevent him from suing third parties who may be responsible for his injuries. Paul’s lawyer further explains
that New York’s Labor Laws protect workers engaged in several different activities, including construction,
renovation, demolition, excavation and painting.
Specifically, Labor Law §240 (AKA the “Scaffold Law”) is intended to prevent those types of accidents in
which a scaffold, ladder or other protective device is proven inadequate to shield the injured worker from
harm, and requires that a property owner and general contractor furnish workers with a safe workplace.
Under Labor Law §240, Webster and Superior Builders are absolutely liable for Paul’s injuries proximately
caused by a violation of the statute. Liability is solely status-based and is imposed regardless of whether
Webster or Superior Builders exercised supervision or control over the work at the site. Proof of negligence
is not required and Paul’s failure to exercise care is not a defense; Paul need only show that the statute was
violated and that the violation was a proximate cause of his injuries. Once established, Webster and
Superior Builders are liable. They cannot escape absolute liability under section 240 by showing that
necessary and adequate safety devices were generally available at the work site. Rather, the safety devices
must be available and in place for use at the workstation by the worker, and must be visible at the worker’s
immediate work site. While Paul’s contributory negligence is not a defense to a Labor Law §240 claim,
Webster and Superior Builders can potentially defeat liability under the “recalcitrant worker” defense if they
can show that Paul refused to use the safety devices that were properly provided by Webster, Superior
Builders or Peerless Plumbing.
Third Party Claim. As such, Paul brings suit against Webster to recover for his damages not paid by
workers’ compensation, such as pain and suffering, alleging Webster breached its duty to provide a safe
workplace. The suit is commenced against Webster even though Webster completely delegated the
responsibility to carry out the construction of the building to Superior Builders, who in turn completely
delegated the responsibility to install the building’s plumbing to Peerless Plumbing. Paul’s suit against
Webster is considered a “third party” claim.
Third Party Over. Not wishing to pay any money to Paul resulting from Peerless Plumbing’s negligence,
Webster seeks to enforce the terms of the indemnification provision of the subcontract agreement between
Superior Builders and Peerless Plumbing. Webster contends that the injuries to Paul were caused by the
negligence of Peerless Plumbing and, therefore, Peerless Plumbing should indemnify it for any damages it
may be found liable to Paul. The claim for indemnification by Webster against Peerless Plumbing is known
as third party “over” claim because Paul’s claim for damages has come full circle – Paul first sued Webster
who, in turn, is demanding contractual indemnification from Peerless Plumbing for injuries to Paul, Peerless
Plumbing’s employee.
Contractual Indemnification. Webster has a legal right in tort to be reimbursed for the damages it incurs
Legal Disclaimer: Views expressed here
do not constitute legal advice. The
information contained herein is for
general guidance of matter only and not
for the purpose of providing legal advice.
Discussion of insurance policy language
is descriptive only. Every policy has
different policy language. Coverage
afforded under any insurance policy
issued is subject to individual policy
terms and conditions. Please refer to
your policy for the actual language.
AmWINS Group, Inc. is a leading
wholesale distributor of specialty
insurance products and services.
AmWINS has expertise across a
diversified mix of property, casualty and
group benefits products. AmWINS also
offers value-added services to support
some of these products, including
product development, underwriting,
premium and claims administration and
actuarial services. With over 1,800
employees located in 16 countries,
AmWINS handles over $5 billion in
premium annually through our four
divisions: Brokerage, Underwriting,
Group Benefits and International.
CLIeNT AdvISOrY
“Third Party Over” Claims - Part Three
by reason of Paul’s claim against it from all the contractors responsible for the work which gave rise to Paul’s injuries under New York Civil Practice
Laws and Rules (“CPLR”) §1401, et seq. In addition, by virtue of the indemnification provision included in the subcontract agreement, Webster has a
legal right to be reimbursed for one hundred percent of its losses upon a contractual indemnification claim also known as a “pass through”. The
success of Webster’s claim for indemnification from Peerless Plumbing depends on whether the indemnification provision of the subcontract
agreement is consistent with New York General Obligations Law (“GOL”) §5-322.1, which prohibits a party to a construction contract from being
indemnified for its own negligence.
Consequently, while Webster can require Peerless Plumbing to indemnify it for the actions of Peerless Plumbing, its agents or even unrelated thirdparties, Webster cannot force Peerless Plumbing to assume responsibility for the acts of Webster itself. Webster’s claim for indemnification against
Peerless Plumbing will only succeed if it can establish that it was completely free of active negligence with respect to Paul’s injuries, and that its only
liability was based on strict or vicarious statutory liability, such as that imposed by Labor Law §240. Thus, if Webster is free of negligence, but
nevertheless liable to Paul under Labor Law §240, it would be entitled to full indemnification from Peerless Plumbing, including reasonable attorneys
fees and costs. On the other hand, if Webster was negligent to any degree, the indemnification provision may be entirely void and unenforceable even if
Webster was only 1% negligent and Peerless Plumbing was 99% negligent. However, courts attempt to construe indemnification provisions so as to
provide partial indemnification if such a construction is possible. Thus, a properly worded indemnification provision (e.g., permitting indemnification to
“the fullest extent permitted by law…”) may allow Webster to be indemnified 80% of Paul’s damages even if Webster’s negligence is found to be 20%
of the cause of Paul’s injuries.
employers’ Liability Insurance. Peerless Plumbing will likely be unable to tender Webster’s indemnification claim against Peerless Plumbing to its
employers’ liability insurer for coverage because its employers’ liability policy is subject to a contractual liability exclusion, precluding claims arising
from contractual liability as opposed to tort liability.*
Commercial General Liability Insurance. However, Peerless Plumbing’s tender of Webster’s indemnification claim may be covered by Peerless
Plumbing’s commercial general liability (“CGL”) policy despite the fact that policy also includes a contractual liability exclusion because the contractual
liability exclusion of a CGL policy may be subject to an exception for contractual liabilities arising from “insured contracts” (defined in many CGL
policies as a contract in which the named insured assumes the tort liability of another party to pay for bodily injury or property damage to a third party,
such as the indemnification provision of Peerless Plumbing’s subcontract agreement).*
In order to avoid using Webster’s own CGL policy to cover Paul’s claim, the subcontractor agreement required Peerless Plumbing to indemnify Webster
for claims arising from Peerless Plumbing’s work. In an effort to circumvent the vagaries of GOL §5-322.1 (e.g., a possible determination that Webster
was negligent, which may lead to voidance of the indemnification provision), the subcontractor agreement also required Peerless Plumbing to name
Webster as an additional insured on various insurance policies, including its CGL policy. Although an indemnification provision indemnifying a party for
its own negligent conduct is void in New York because it is against public policy as embodied in GOL §5-322.1, a contractor can be required to
purchase insurance indemnifying other persons for their own negligence, which is not against public policy. This may be accomplished by adding such
other persons as an additional insured on a policy.
For example, ISO Form CG 201007 04, a standard additional insured endorsement, reads, in pertinent part:
A. Section II - Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but
only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf; in the performance of your ongoing operations for the additional insured(s) at
the location(s) designated above.
Generally, as long as the injury arises in the course of the subcontractor’s work, the injured worker’s claim against the owner is covered under the
subcontractor’s CGL policy as an additional insured, even if the subcontractor is not a party to the suit as the result of the exclusive remedy nature of
workers’ compensation. Therefore, even in the event a court was to find that Webster’s negligence contributed to Paul’s injuries and voided the
subcontract agreement’s indemnification provision, Webster would not need resort to its own CGL policy for coverage for Paul’s claims against it.
Instead, such coverage would be provided to Webster as an additional insured under Peerless Plumbing’s CGL policy so long as Paul’s injuries were
sustained during his performance of work for Peerless Plumbing.
This example is an illustration of a third party over contractual indemnification claim with regard to commercial general liability insurance.
*As explained in parts one and two of our Third Party Over Claims.
About the Author
Marlene Monteleone is the Managing Partner of New York City-based Bivona & Cohen, P.C., a multi-faceted litigation firm that provides legal services to
the insurance industry, corporations and the commercial marketplace. She heads the firm's Mass Tort and Insurance Coverage Litigation Unit, and
primarily practices in the areas of Toxic Tort and Insurance Coverage Litigation, representing insurance companies in high profile cases. Bivona & Cohen
was established in 1974. Email at marlene.monteleone@bivonacohen.com. Website www.bivonacohen.com.