What is an action over?
An “action over” (also called a “third-party over action”) is a type of legal action (lawsuit or arbitration) in which an injured employee, after collecting workers’ compensation benefits from his employer, files a tort claim against a third-party whose negligence allegedly caused the employee’s injury.
For example, assume an HVAC company is subcontracted on a commercial warehouse project. An employee of the HVAC company (Paul Plaintiff) is badly injured while in a lift, installing ducts. Paul receives Workers’ Comp from his employer, the HVAC company. Due to the “comp bar,” those benefits are usually the most Paul can recover from his employer related to the injuries.
Paul, however, is not satisfied with the benefits provided by Workers’ Comp, so he goes “over” his employer and sues third parties.
Paul sues the general contractor at the construction site, arguing that the general contractor failed to provide a safe work site. Paul also sues the property owner, claiming the lighting in the warehouse was insufficient and led to his injury. These are “action over” claims.
What is “Third-Party Over” or Employee Injury Indemnity?
Third-Party Over Indemnity protects owners (primarily) against claims from such injured employees. These indemnity provisions require the contractor to defend and indemnify the owner – even for the owner’s alleged negligence.
Why is “Third-Party Over” or Employee Injury Indemnity needed?
Some will initially find it unusual that an owner requests indemnity, even for its own negligence. This is a reasonable concern, as most states have “anti-indemnity” laws which prohibit such contract provisions in construction contracts. For example, the Texas Insurance Code provides:
Sec. 151.102. AGREEMENT VOID AND UNENFORCEABLE. Except as provided by Section 151.103, a provision in a construction contract, or in an agreement collateral to or affecting a construction contract, is void and unenforceable as against public policy to the extent that it requires an indemnitor to indemnify, hold harmless, or defend a party, including a third party, against a claim caused by the negligence or fault, the breach or violation of a statute, ordinance, governmental regulation, standard, or rule, or the breach of contract of the indemnitee, its agent or employee, or any third party under the control or supervision of the indemnitee, other than the indemnitor or its agent, employee, or subcontractor of any tier.
You will notice that the anti-indemnity law has an exception, which is, again, common. The exception provides:
Sec. 151.103. EXCEPTION FOR EMPLOYEE CLAIM. Section 151.102 does not apply to a provision in a construction contract that requires a person to indemnify, hold harmless, or defend another party to the construction contract or a third party against a claim for the bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.
So, Texas law specifically allows for third-party over indemnity in construction contracts. There are both practical and policy reasons why this is the case.
From the practical standpoint, one need only look at the incentives for the injured employee, Paul Plaintiff. Because Paul usually cannot further pursue his own employer, if he wants additional compensation for his injuries, he is incentivized to find reasons to bring suit against third parties.
Assume that the “real” causes of Paul’s injuries were that he was not properly trained to operate the lift combined with the fact that his employer failed to properly maintain the lift, causing it to occasionally move too suddenly. Those damning liability facts will not prevent Paul from blaming his injuries on the general contractor’s allegedly inadequate safety program or the owner’s allegedly poor lighting, and if Paul’s injuries are severe, he will still make a sympathetic case to a jury. For these reasons, third-party over claims are common.
From the policy standpoint, the law recognizes that employers are in the best position to take steps to ensure the safety of their own employees. Neither the owner nor the general contractor had authority to direct Paul’s actions on the day of his injury. They had to rely on the HVAC company to make sure Paul was properly supervised, trained, and equipped for his job, so it is unfair to burden them with responsibility for failings of Paul’s employer.
Additionally, because employers do receive the protection of the “comp bar,” the law guards against those employers who might become lackadaisical on employee safety. Third-party over liability gives those employers added incentives to keep their workers safe.
Thus, the law specifically carves out employee injuries from anti-indemnity limits.
Key Points to Consider
Owners
- Make sure to request broad-form indemnity in your construction agreements, which extends to cover third-party over claims.
- Texas (and many other states) has strict requirements regarding how broad form indemnity provisions must be written in order to be enforceable. Make sure to consult an attorney before signing any agreement.
Contractors
- If you agree to provide third-party over indemnity, make sure (1) your insurance covers this liability and (2) you receive similar indemnity from your subcontractors.
- Who is an “employee” for purposes of this type of indemnity? A recent court decision has analyzed this question in Texas. (Maxim Crane Works, L.P. v. Zurich Amer. Ins. Co., 642 S.W.3d 551 (Tex. 2022).)
- General contractors can sometimes enjoy protections of the comp bar through a contractor-controlled insurance program (CCIP). (See Lab. Code § 406.123; Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 444 (Tex. 2009).)
