Construction companies generally do not expect to be targets of tort liability for the injuries of their employees.  They are protected by workers compensation laws against such claims.  It follows then that general liability insurance policies do not expect to insure the tort injuries of the insured’s employees, because the insured should have no tort liability for its employees’ injuries.  However, a quirk of the various contracts that are entered into between construction companies does allow for an employer to find itself paying for the tort injuries of its employees, in which case the employer’s liability insurer may foot the bill.  This strange quirk where an employee’s damages are ultimately paid by his employer and the employer’s insurer are known as “action over claims.”  This article explains what an “action over” claim is, and what steps insurers are taking to avoid insuring such claims. 

Arrowood Surplus Liurancenes Ins. Co. v. Westport (D. Conn. 2010) (January 2010), aff’d (2d Cir. 2010)

The cedent sought reinsurance for $6.7 million for claims that arose from occurences taking place after the termination of the reinsurance contract. The cedent argued that the "follow the fortunes" doctrine bound the reinsurer to pay any claims under a reinsurance policy, regardless of the reinsurance contract limitations. The district and appellate courts, however, fully agreed with BatesCarey LLP's argument that the client reinsurer had only agreed to cover risks insured by the cedent during the time limits of the reinsurance contract.

Reinsurance disputes arise when an insurer treats claims as multiple occurrences to force the insured to pay multiple retentions, but that same insurer treats the same claims as a single aggregated occurrence for purposes of reinsurance. In the past, reinsurers have found success when challenging aggregation by citing language in the reinsurance contract. However, in a recent New York case, the reinsurer was successful in challenging a cedent’s aggregation even without specific aggregation language in the reinsurance contract. The reinsurer was not required to follow its cedent’s fortunes.