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Construction in NY, as we know it, might finally come to a screeching halt, due to existing labor laws which have caused rates to double and carriers to shy away, experts are speculating.  Over the past five years, insurance rates have steady climbed to record highs.  Since legislation laws passed in 2007, Workers Compensation laws have given broader rights to construction employees.  On top of all the increases within the past half-decade, rates have now doubled in just one year.


Why have insurance rates doubled?

The insurance claim process is a lengthy one.  Only now are claims from early 2000 finally reaching the balance sheets of insurers.  The claims filed from projects started in 2003 and 2004 are finally taking a toll on the companies who backed them.

Chris Smith of Turner Surety and Insurance Brokerage of Woodcliff Lake NJ had this to say about rising rates, “liability claims are coming in so much higher than anybody anticipated.  It was not unheard of to have minor claims like shoulder injury or back strain costing millions of dollars.”

Insurance Rates are an aspect of construction that harm you more as you grow.  Projects that are estimated at more than $100 million dollars have a ten percent cost for insurance, by law.  In comparison, just a year ago, rates were only at about 4 or 5 percent.  In addition to high rates, the New York Labor laws concerning employee safety allow workers to sue owners of property and agents, who are typically contractors for any injury sustained at construction sites.  This legislation was put in place in order to protect workers, but over time workers compensation claims have put strain on the system.  Employees often know that chances of filing a suit are very much in their favor.


Loopholes in the System

NY labor laws, regarding construction, allow for workers to file liability claims when falling from ladders; without having to prove fault.  The current legislation leave the owner or contractor with full responsibility.  No matter what height the worker falls from, they are responsible, leaving the insurer with very little to defend themselves against the claim.  Large projects, like the WTC, could never be handled in a market like today with current statutes.  When the project was procured back in 2009, the environment was “much more reasonable,” according to Smith.

Construction in NY is suffering from high rates.  If new legislation isn’t put into place, the industry will continue to struggle.  The next few years will most certainly be critical for the market.

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