In 2020, a New York City construction worker decided to pull himself up seven feet from a platform to a window cutout. He did this despite knowing the practice was forbidden on site and having two other safe entry options into the building. The worker fell seven feet onto the platform below and suffered injuries. In most states, the construction worker could be found partially or completely liable for his injuries, but that wasn’t the case in New York. His employer was held liable and ordered to pay damages.¹ The case, Waldemar Biaca-Neto et al. v. Boston Road II Housing Development Fund Corporation, is representative of the risks construction companies and contractors face when working in New York.

Unlike the other 49 states, New York is the only U.S. state with an absolute liability standard. New York State Labor Law sections 240 / 241, known as the Scaffold Law, holds contractors and property owners engaged in construction, renovation, or demolition work 100% liable for gravity-related injuries despite any negligence on the part of injured workers, such as failure to use proper safety equipment.²

​CONSTRUCTION BOUNCEBACK POST-PANDEMIC

While construction across the country was negatively impacted by the COVID pandemic, construction bounced back, especially in New York. In 2022, there were more than 3,200 filings for new construction projects in New York City. That’s a 60% increase over 2021.³

While New York construction growth has slowed in 2023, various trade associations have noticed patterns of concerning behavior. The New York City Special Riggers Association (NYCSRA), a group representing more than 100 construction companies, recently reported a significant increase in claims involving employees falling from “low heights.” ⁵ The organization reports that a fall from any height, even from a small stepladder, can lead to six-figure claims, and it’s not uncommon for claims to escalate up to $3M. According to NYCSRA, their members have even faced claims where workers were intoxicated at the time of the injury, and the employer was still held liable under New York’s Scaffold Law.⁵

Section 241 is a key part of the escalating cost in New York. Third party action over claims require substantial defense costs, serving as an impetus for higher settlement costs. If an employee collects Workers’ Compensation for an injury, he or she cannot also sue for negligence / liability and be paid under the general liability policy. Therefore, an injured employee often files suit against the general contractor and/or project owner under the strict liability provisions. Those parties then invoke their contractual language and tender the claim back via additional insured status to the injured party’s employer.

While sections 240 and 241 are intended to protect workers, the vague nature of the law has created an atmosphere of open-ended liability for construction companies and produced a challenging environment for insurance agents as they seek to find affordable protection for their contractor clients. Beyond the issue of cost, a lack of available construction general liability insurance in New York has created substantial challenges for small businesses in particular. More and more insurers have exited New York entirely and will no longer write construction policies there.²

PROPOSED SCAFFOLD LAW REFORMS

There have been multiple attempts over the years to reform or even repeal New York’s Scaffold Law. To date, none have been successful, but a renewed effort is underway. Proponents of reform argue that millions of dollars could also be saved in state and municipal budgets and infrastructure costs.²

When it comes to reform, it’s not the safety provisions that are in question, it’s the absolute liability portion of the law and how the courts have historically interpreted it. Reformists want to see liability imposed in the same way that every other state imposes it.² New York Congressman Brandon Williams has introduced the Infrastructure Expansion Act of 2023. It specifically focuses on projects funded with federal financial assistance. If passed, the law would bar absolute liability on any claims arising from these specific projects.

The bill is backed by multiple trade organizations in New York, including the Homebuilders and Remodelers of Central New York.⁶ Reforming this Scaffold Law would encourage insurance carriers to re-enter the marketplace, promote competition, drive down rates, and make it easier for customers to obtain the appropriate coverage. This would ultimately also result in significant savings for taxpayers on all publicly funded construction projects.² Any attempt to reform the Scaffold Law, including the current legislation, will face stiff opposition. The law creates significant opportunities and judgments for plaintiffs’ attorneys, who are likely to oppose reform efforts. Bar associations and plaintiff attorney organizations have substantial political influence. While reform has plenty of supporters, it is likely to be an uphill battle.

WHAT CAN AGENTS AND INSUREDS DO?

There is no uncertainty about liability with Scaffold Law claims. The only question is the amount that will be paid. There are few carriers willing to expose themselves to that level of risk, which can make it difficult to find coverage. The good news is there are steps agents and construction industry insureds can take to find quality coverage.

REVIEW SUBCONTRACTOR CONTRACTS

General contractors who work with subcontractors may be able to limit their exposure by implementing contracts that include a clearly articulated boundary on liability. Subcontractors should carry their own insurance and be wholly responsible for the safety of their own workers. Contracts with subcontractors should be specific about accidents and injuries and indemnify the general contractor. With the right contracts in place, a general contractor can minimize their risk for outsized claims and may find that they have a more competitive insurance market available.

SAFETY TRAINING & EDUCATION

Construction companies that employ their own workers may face a more difficult insurance marketplace. These companies can’t transfer the risk to subcontractors, so there are usually fewer carriers available. In this situation, employee training and safety protocols are critical. There cannot be too much training around workplace safety or visible signage reminding workers of standard operating procedures. It should be absolutely clear to every employee what is and is not allowed on the job site. Some construction companies even offer financial incentives for safety. If a company can maintain a record of minimal claims, they may find more coverage options are available.

WORK WITH AN EXPERIENCED BROKER 

Knowledge of the law, marketplace, and carrier appetite is critical when dealing with New York construction. An experienced wholesale broker knows which carriers have an excellent track record of handling claims and are able to challenge whether a claim falls under the Scaffold Law or is actually a Workers’ Compensation claim.

BOTTOM LINE

The insurance market for New York contractors and construction companies can be challenging. While there is support for Scaffold Law reform, there is also significant opposition. Reform faces an uphill battle. Even if reform is passed, it could be years before it’s reflected in the insurance market. In the meantime, agents and their insureds should work with an experienced broker who can help align them with the best carrier for their needs. Contact CRC today to learn more about available coverage for New York construction.

CONTRIBUTORS

• John Engeldrum is a Broker & Senior Vice President with CRC Group’s New York, NY office as well as a member of the Casualty Practice Group.
• Robin Sheridan is a Broker & Vice President with CRC Group’s Long Island, NY office as well as a member of the Casualty Practice Group.

END NOTES

1. ”Recalcitrant Worker” Defense to NY Labor Law 240(1) a After Biaca-Neto, JDSupra, March 21, 2020. https://www.jdsupra.com/legalnews/recalcitrant-worker-defense-to-ny-labor-93099
2. Calls for Reform Revived Over More Than A Century Old New York Law, Insurance Journal, October 8, 2020. https://www.insurancejournal.com/news/east/2020/10/08/585902.htm
3. YIMBY’s 2023 Construction Report Reveals 60 Percent Rise in Filings Over Previous Year, New York Yimby, February 17, 2023. https://newyorkyimby.com/2023/02/yimbys-2023-construction-report-reveals-60-percent-rise-in-filings-over-previous-year.html
4. Fewer construction workers unemployed in N.Y. compared to a year ago, Times Union, November 9, 2020. https://www.timesunion.com/business/article/Unemployment-falls-in-construction-industry-17567789.php
5. Workers may be using 138-year-old New York State Scaffold Law for bogus claims, Daily Commercial News, February 14, 2023. https://canada.constructconnect.com/dcn/news/usa/2023/02/workers-may-be-using-138-year-old-new-york-state-scaffold-law-for-bogusclaims
6. Rep. Williams legislation aims to reform NY’s scaffold law, WRVO, May 22, 2023. https://www.wrvo.org/politics-and-government/2023-05-22/rep-williams-legislation-aims-to-reform-nys-scaffold-law