The “Action Over Coverage” Insurance Problem for Small Contractors in New York

The issue of “action over coverage” has become a significant concern for small- to medium-sized contractors in New York, and it does not appear there will be any easy solutions any time soon.    

The issue generally arises when a contractor is hired for a renovation or construction project in a building and one of the contractor’s employees gets injured or accidentally injures someone else while working on the job. He can put in a claim for Workers’ Compensation, but he may also try to sue the property owner of the building he was working in, if his injuries were due to negligence on the part of building maintenance. The property owner will defend himself by claiming that he is also covered as an additionally insured party under the contractor’s insurance policy.

What Happens If You Under Insure Your Space?

Though the odds of a total loss may be small, it could happen.

That is the reason insurance companies do not want you to under insure a building because you think you can’t afford whatever amount the insurance is.

If you have a $10 million building and decide you can’t afford to pay for $10 million worth of insurance, so you only insure it for half a million dollars, the insurance company will likely penalize you for insufficient insurance if there is a claim. 

The Affordable Care Act – Not So Affordable?

The Way We Were —

Prior to 1990, most health insurance plans involved a deductible – and coinsurance after the deductible was reached. It was affordable and uncomplicated.

The early ’90s brought higher insurance rates, co-pays and the “in-network/out-of-network” system. Co-pays were associated with the “in-network” providers. Deductibles and coinsurance would apply if the patient went to an out-of-network provider.