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Construction Insurance - Third Party Action-Over Claims

  

  

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Last week, the Massachusetts Supreme Judicial Court affirmed the right of an employee of an uninsured subcontractor to pursue third party action against the general contractor that hired them due to injuries sustained at a job site. One man was killed and another suffered severe injuries in the course of working for the subcontractor when an unexpected explosion occurred.   The two were employed by a subcontractor that did not carry workers compensation insurance.

The General Contractor had workers compensation in force, which eventually paid out lump sum settlements to both men.  Shortly after that, however, one of the worker’s family members filed suit against the General Contractor’s General Liability policy alleging lack of controls and work site negligence. 

Attorneys for the GC argued that the claimants had accepted the lump sum workers compensation settlements, and as such, that Massachusetts G.L. c. 152, 23 bars workers from maintaining negligence claims against their employers if they have accepted workers' compensation benefits.  Initially, this argument was successful, prompting the trial court to issue a summary judgment in favor of the GC.  However, this judgment was later overturned by the Appeals Court.  The SJC decision last week affirmed the Appeals Court ruling.

The ruling for both the Appeals Court and the SJC centered on the fact that the claimants were not employees of the general contractor, and that that Massachusetts G.L. c. 152, 18 clarified that suits were not barred against general contractors obligated to pay workers' compensation benefits to uninsured subcontractor's employees. The ruling vacated the summary judgment and the case was remanded for further proceedings.

This particular case is a stark reminder to all (owners, GC’s and subcontractors) who subcontract any portion of their work; they need to maintain and execute proper risk management on each and every job site.  By itself, insurance for contractors is simply not enough.  They must remember that they have a responsibility for anyone they bring or authorize to do work at their job site.  Standard operating procedures should include:

• An executed written contract that includes a Hold Harmless/Indemnification agreement in your favor and minimum insurance requirements.
• Certificate of Insurance evidencing carriers, limits and coverage in place for WC, GL, Auto, etc should be obtained before any work is performed.
• As the upper tier party you should look to be added as  Additional Insured on all liability policies of your subcontractor.
• All policies should include a waiver of subrogation in your favor to limit to possibility of being pulled into a claim of a subcontractor.