A worker, while cutting a piece of ribar, safety glasses absent, obtains a piece of debris in his eye. He informs his boss (Masonry sub-contractor), who then informs the site supervisor. The gentlemen is sent to a local hospital to get checked out. The hospital rinses his eye and sends him home. He reports to work the next day, all is right with the world. The incident report is logged into the job's daily activity, but no Notice is given to any liability insurance carrier. Notice was filed with the sub's comp carrier for reimbursement of treatment received. Does this sound familiar? Sounds like the majority of the job sites in the country, accept in the great State of New York, where the story continues due in part to the Labor Law.
Several weeks go by and the workers vision begins to fail incrementally. He mentions nothing to anyone, not wanting to risk his job or wage. Shortly there after he develops a serious eye infection that put's his eye in jeopardy. He is fails to show up for work because he is hospitalized. Several weeks, several surgeries later the worker emerges, informing his employer he will not be returning to work, his is going out on disability, how do we file the claim? The Steel Sub-Contractor notifies his disability carrier, and his comp carrier (again) , updating them on this news. The sub fails to notify the G.C. of this critical update, simply slipping his mind. He also never notified his Liability Carrier. The broker that handles the liability insurance for the sub is different than the broker who handles his worker's comp, again, sound familiar?
Quiet months pass, until the thud-some sound of legal papers being served echos in the offices of both the G.C. and the Steel Sub-contractor. Bewildered first thing they do is call their respective General Liability insurance brokers to deliver the loathsome news. Having received these calls thousands of times myself, the first questions I ask is when did this happen, did you know about it, and is there a paper trail documenting your knowledge? You can actually hear the guy blink on the other end of the phone, then panic starts to creep in. Are you telling me I may not be covered, why I am paying all this insurance premium for?
What transpired was the employee filed suit against both the G.C. and the Sub-Contractor, under the New York State Labor Law , alleging grave injury which this fits the classic definition. Since the Steel sub-contractor signed a hold harmless agreement with the G.C. promising to defend and indemnify him in the event of an employee based suit, the Steel Sub-contractor has a legal obligation to defend the G.C., and if they lose in court, then the Steel Sub-Contractor may be responsible for some or all of the judgement awarded. All of this is fact, and understood at the time the job was awarded. The problem arises because both the Steel Sub-Contractor, as well as the G.C. never gave proper notice to their respective general liability carrier.
Under the terms and conditions of almost every insurance contract there is an obligation by the insured ( G.C. & Sub-Contractor), under each of their respective insurance policies that stipulate you must give the insurance company proper notice of any incident or occurrence, this applies incidentally to additional insureds as well, put that's a whole different topic. This clause protects the insurance company by allowing them to jump on, and procure information quickly on a claim that they may have to defend and litigate at some future point. The longer the time period between when the incident occurred, and when the company was put on Notice, the less chance they will have to build a proper defense. Information, witnesses, and potential material facts become contaminated with the passage of time. I will speak at length about Proper Notice, and the Declination of Coverage in a future post. Suffice it to say, the carrier for the G.C. and the carrier for the Steel Sub in all probability will decline coverage based on improper notice of loss.
The G.C. should have reported to their carrier same day the incident was filed, having no knowledge of where the claim may lead. Although the G.C. is counting on the sub's carrier to step up, you cannot rely solely on that. The G.C. should always use their policy as a safety net. The upside is they can control their financial destiny, in absence of that, their financial destiny is in the hands of a sub contractor. Similarly the sub-contractor, aware of their promise and obligation to the G.C. must always be cognizant that any workers compensation claim may lead to a labor law claim, which will always lead to a liability claim.
In Conclusion: If you are the G.C. there should always be a closing disposition report on any job injury. As part of that closing report there should be a box that states something like "reported to G.L. Carrier" or "Reported to G.L. (General Liability) Broker." This will force your staff to recognize the importance of at least having the conversation with respective to future obligations that may appear from this particular injury. It also forces the G.C to close out , or track any job site injury for a change in condition. Hint, back injuries, and eye injuries are almost always reported to the G.L. carrier.
If you were the Sub-contractor here, be mindful of your contractual obligations, and remember to discuss all Worker's Comp claims with your Construction Liability Advisor. Make it protocol that all C-2 forms ( Workers Comp Claim Forms) are sent to both the Liability Broker and the Comp Broker if they are different. Best advice is to think of all Workers Compensation Claims as potential General Liability claims, handling them with care.
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