Why is it so difficult for contractors working in New York to get General Liability coverage? And why, when they do buy a policy, is the cost so high and the coverage so full of gaps?
New York State Labor Laws
The answer lies in statutes know as New York State Labor Laws. These laws, which pre-date the Workers’ Compensation statute, were originally designed to make workplaces safer and to ensure that proper precautions were taken to protect those working at heights. One such law, NY Labor Law 240(1), commonly known as The Scaffold Law, makes property owners and their agents strictly liable for any height or gravity related injuries that occur during construction, repair or service operations on the property. Covered injuries include those involving ladders, scaffolding and even falling materials. What makes the law especially problematic for the property owner is that the injured worker’s own negligence isn’t considered when damages are awarded.
So why is this a problem for the contractor when the property owner is the one responsible under the law? When a property owner hires a contractor, he commonly includes provisions transferring the financial consequences of his liability to the contractor. He will require that the contractor indemnify him for injuries to workers on the site and include him as an Additional Insured on a General Liability policy.
Insurance companies writing coverage for contractors in New York regularly see large liability awards arising from worker injuries. The injured worker collects Workers’ Compensation benefits from his employer’s Workers’ Compensation carrier, but then files a claim against others involved in the project for pain and suffering and other damages. With few defenses available, the General Liability carrier is forced to pay the claim.
As a result, many insurance companies have stopped offering coverage to contractors working in New York, especially those whose work involves heights. Many policies are written in the unauthorized insurance market or the Free Trade Zone, where coverage forms are less regulated. With limited competition and the potential for large claims, rates are high. Many companies writing coverage for New York contractors exclude claims by injured workers, the coverage contractors need the most.
If you are a contractor working in New York, it is important to discuss the details of any proposed policy with an insurance professional. This is the only way to be sure you understand what coverage the policy does and does not provide.