It’s a tough time to be in the construction business in New York. All across the state, it’s an industry in crisis.
The main culprit? The state’s outdated labor law – specifically, the “absolute liability” provisions in Sections 200, 241(6) and 240(1) concerning employee safety. Also known as the “scaffold law,” these provisions allow workers to sue property owners and/or their agents – usually general contractors – for injuries sustained at construction sites, mainly due to falls from height. But the law says nothing about worker responsibility. Even if an injured worker is almost solely to blame for the accident, such as being intoxicated or violating safety regulations, the developer is held 100% responsible for the costs.
This has created an untenable liability situation for New York contractors, property owners, and insurers alike, leading to multimillion dollar lawsuits, skyrocketing insurance costs, the exit of many contractors and insurance carriers from the market, and a no-win liability situation for even the most conscientious builders.
Unfortunately, a recent court case suggests the situation won’t be improving anytime soon. In Humphrey v. Park View Fifth Ave. Assoc., LLC, in January of this year, the First Department (of the Appellate Division of the Supreme Court of the State of New York) reversed the Bronx Supreme Court decision denying a plaintiff who was knocked to the ground by a falling aluminum beam. Though many questions were left unanswered, the court ruled the plaintiff was entitled to judgment as a “matter of law.”
New York is the only state with this law, and the cost of insuring construction projects here can be as much as 10 times higher than in other states because of it. Some in the industry have seen their insurance premiums double. Some can’t find insurance at any price – and for those who can, exclusions often apply that can leave them exposed to uninsured claims, breaches of contract, and financial ruin. And with insurers increasingly excluding 240/241 issues from coverage, many construction firms have found themselves with no way to defend themselves in liability cases that fall under these statutes.
All of this has left the construction industry wondering how long it can survive.
Five survival strategies for a volatile construction insurance climate:
The battle over New York’s scaffold law is still being fought, with contractors, property owners, and insurers on one side and labor unions, workers’ advocates, and trial lawyers on the other. Until the two sides can find a compromise and enact reforms, it’s an uphill battle for the construction industry. But here are five key strategies to help you get the most from your insurance investment:
- Beef up your safety and training efforts.
- Know your workers’ compensation costs and make sure your experience modification factor is accurate.
- For all new projects, conduct an audit so you understand how the risk is allocated, who’s liable in case of a claim, and whether all subcontractors have proper insurance and documentation.
- Aggressively investigate workplace accidents. Get all the facts and provide your insurance carrier with a detailed report.
- Don’t automatically renew policies. With every new project, ask plenty of questions and explore alternative ways to structure your coverage to get a better rate.
Most of all, don’t even try to do business in this market without a knowledgeable insurance partner at your side. At BNC Insurance and Risk Advisors, we have more than 150 years of combined experience in the New York construction industry, so we understand what you’re up against. We’ll help you navigate the maze of insurance requirements, weather this crisis, and protect your bottom line. Want to know more about how we can help? Download our construction case study collection.