New York construction risk is unlike any other jurisdiction in the country. Labor Law 240 and 241 create strict liability exposure for owners and general contractors, which dramatically increases severity potential. Because of this, many carriers apply an action over exclusion on the general liability policy for contractors working in New York.
The problem most insureds do not see is how that exclusion flows into the excess tower.
Most excess policies are written on a follow form basis. That means they adopt the terms, conditions, and exclusions of the underlying general liability policy unless specifically modified. If the primary policy contains an action over exclusion, the excess carrier typically follows it. Many insureds assume the umbrella will somehow provide broader coverage. In most cases, it does not.
The result is a coverage cliff.
If a subcontractor employee is injured and sues the owner or general contractor under Labor Law 240, the claim may be excluded at the primary level due to the action over exclusion. Because the excess policy follows form, it is also excluded there. The insured is left without coverage for what is often a seven-figure exposure.
There is also a second issue. Additional insured endorsements do not override an action over exclusion. Even if a subcontractor agrees to name the upstream party as an additional insured, the exclusion can still eliminate coverage for bodily injury claims brought by that subcontractor’s employee. Many insureds incorrectly believe the contractual transfer solves the problem.
In layered towers, this becomes even more complex. One excess carrier may have modified follow form language while another adheres strictly to the primary. Small wording differences can create inconsistent coverage positions between layers, increasing litigation risk between carriers.
For New York construction risks, reviewing only the primary policy is not enough. The excess wording must be examined line by line. A true coverage analysis requires understanding how Labor Law exposure interacts with exclusions across the entire tower.
This is not a pricing issue. It is a structural coverage issue.