It is customary in the construction industry for a general contractor to retain sub-contractors to complete a portion of a construction project in CGL policies. Often, subcontractors themselves will retain other subcontractors to complete part of a job.
A contractor’s greatest liability exposure is that of bodily injury sustained by an employee of a subcontractor while performing work at the job site.
Thus, the addition of an exclusion barring coverage for what would be your greatest liability exposure is a significant limitation in coverage.
Increasingly, I am seeing CGL carriers include an exclusion that significantly limits coverage for work site injuries. CGL carriers often attempt to exclude coverage for injuries by adding an exclusion to a policy barring coverage for injuries to “any employee of any insured, to any contractor hired or retained by or for any insured or to any employee of such contractor.”
CGL policies have historically included an injury to employee’s exclusion. This exclusion is much broader and excludes coverage for injuries to the employees of your sub-contractors.
Consider the following scenario. General contractor ABC Corp. is completing a residential housing project and enters a sub-contract with XYZ Corp. to complete roofing work at the home.
An employee of XYZ Corp. sustains an injury while working on the project. Under New Jersey’s Workers Compensation Statute, the injured employee is barred from suing his employer.
Instead, suit is brought against the general contractor, alleging that it failed to maintain an adequately safe worksite.
If your policy contains an exclusion for injuries to the employees of your subcontractors, you may have no coverage for the suit brought against you. This can be economically devastating.
So, what to do?
Review your CGL policies for any such exclusion. If your policy contains an exclusion for injuries to employees of your subcontractors, contact your insurance broker immediately and discuss obtaining a policy that does not contain this exclusion.
If your insurance carrier refuses to cover you for an accident, seek legal help so you can fully understand your rights.
There may be some ways we can challenge the application of this exclusion. My firm offers free consultations.