Transferring Risk With Contracts, Insurance Coverage and Sometimes, Litigation

A recent decision from the U.S. District Court for the Eastern District of New York illustrates an effective approach for an owner or general contractor to receive defense coverage as an additional insured to a subcontractor’s liability insurance.

In Axis Construction v. Travelers Indemnity Company of America, 2:20-cv-01125 (DRH) (ARL) (E.D.N.Y. Sept. 1, 2021), a general contractor was found to be entitled to such defense coverage as an additional insured, even though the original lawsuit did not name the subcontractor as a party. The original lawsuit was brought by an employee of that subcontractor, claiming injury on the jobsite for a gravity-related injury. As is commonly seen, the employee sued the general contractor, the property owner, and the property manager, asserting claims for an unsafe workplace under New York’s Scaffold Law [N.Y. Labor Law §§240 and 241], among others. Worker’s compensation laws precluded the employee from suing his employer, the subcontractor.

While specific to New York law, the approach in Axis Construction should be applicable in other jurisdictions for additional insureds seeking to effectuate the intended transfer of risk from a construction contract.

Allen R. Wolff is a shareholder in the New York office of Anderson Kill P.C. and co-chair of the firm’s construction and real estate group.

Ethan W. Middlebrooks is an attorney at the firm and a member of the insurance recovery group.