Labor law coverage is an essential part of general liability insurance for businesses operating in New York. It offers protections against potential lawsuits and other financial claims that a business might face due to their operations. This is particularly important for general contractors and real estate owners due to the strict nature of New York labor laws.
Insurance agents should help their construction and real estate clients understand the importance of New York labor law insurance. They can do this by explaining the unique risks faced by construction employers within the limits of New York State, including New York City, Long Island, and Westchester County.
In this article, we’ll break down some of the key New York labor laws, what they mean for contractors, and what steps general contractors should be advised to protect themselves.
The Scaffold Laws had good intentions when they were created, but have now become a loophole of sorts that Plaintiff Attorney’s and the Litigation Funding community have taken advantage of. The laws hold both general contractors and property owners strictly liable for negligent acts committed by their subcontractors. That means that if a GC or property owner hires a contractor with a GL policy that contains an Action Over Exclusion or Injury to Employee Exclusion, the upstream party faces an increased legal hazard. The legal climate has created an environment rampant with fraudulent activity as claimants are incentivized to exaggerate and even fake injuries by bad actors promising financial rewards.
Understanding this is key to ensuring a client has proper insurance coverage. Insurance agents should walk clients through the most important New York labor laws and emphasize the risks that they entail
The scope of labor laws in New York is extensive, which can make attempting to digest it all a little daunting for general contractors. These three laws are particularly important for clients working in construction and should inform their insurance needs.
Established in 1885, the Scaffold Law predates OSHA and other now-common worker protections. It holds property owners, general contractors, and construction businesses 100% liable for employee injuries caused by a fall or by falling objects. Employers can also be held liable if they fail to provide sufficient protective gear in these situations. The law automatically applies to owners of commercial buildings, three-family homes, apartment buildings, and any homeowner who directed construction activities that led to the injury.
Labor Law 240 only applies to work done on buildings, bridges, subway tunnels, garages, water towers, and boats. It is also limited to a list of specific construction types:
Crucially, this law affords injured workers a right to recovery beyond what would typically be provided by worker’s compensation. That means that coverage provided by worker’s compensation insurance might not be sufficient for claims that fall under Labor Law 240.
Labor Law 241 is similar to the Scaffolding Law in that it requires contractors, employers, and building owners to be responsible for ensuring maximum safety for construction workers. Instead of fall-related injuries, however, Labor Law 241 specifically applies to construction, excavation, and demolition work. It also holds employers and contractors liable for the safety of visitors.
The law includes a detailed list of required safeguards, construction practices, and equipment arrangement and storage to maximize the safety of the work environment. Like the Scaffolding Law, 241 can result in owners and contractors facing full liability in the event of injury. Supplemental protection from products like umbrella insurance can help construction clients close their coverage gap.
This law is also known as Common Law Negligence. It charges general contractors and construction companies with a “general duty” to protect their employees on construction sites. It applies generally to all construction sites in New York State, rather than the specificity of 240 and 241. Employees have a right to a claim if they are injured due to employer negligence or intentional torts. Law 200 also applies strict liability to employers. Penalties for violations can include fines, business license revocation, and even jail time for the liable party. That’s all, in addition to the financial responsibility of the injured worker.
The strict liability of New York labor laws has caused construction insurance rates in the state to be significantly higher than the national average. That makes it even more important for insurance agents to fully understand the coverage needs of their construction clients. Wholesale insurance experts specializing in the construction industry can provide greater context and connect agents with providers that will meet their needs.
New York labor laws also impact the insurance needs of building owners and property managers throughout the State, who are the upstream parties. These entities are subject to strict liability for injuries caused by falls or objects falling from any height. These protections apply to contractors hired by tenants as well as any hired by the building owner or property manager. As a result, more and more claims are being brought against these entities in New York state, with claimants often awarded millions of dollars.
There are steps that New York contractors can take to protect themselves, and steps that insurance agents can take to help them do it. Wholesale insurance brokers can advise on both the insurance needs of contractors and the specific language that should be included in all contracts. For example, contractual risk transfer can help mitigate risk and financial responsibility. Subcontractor agreements can be drafted with indemnity clauses to protect upper-tier contractors from claims as a result of subcontractor actions. There are common policy enhancements like Blanket Additional Insured, Waiver of Subrogation, Primary and Noncontributory wording among others that can create more favorable situations with subcontractors. Risk management professionals must be diligent in the screening and hiring of subcontractors. Risk Managers should also be mindful of subcontractor forms and exclusions when they screen them for jobs. Labor law exposures can manifest within Height Limitations, Direct Labor Exclusions and Classification limitations. Other measures, such as not loaning equipment to subcontractors, can also help mitigate potential risk.
Much like general contractors, building owners and property managers can protect themselves by drafting strong lease agreements that prohibit tenants from hiring contractors without prior approval. It is important for their risk management representatives to transfer as much risk to the downstream parties as negotiable. Oftentimes, lease and hold harmless agreements can be broader than the insuring agreements between the parties, so risk managers should be mindful of the terms of each parties insurance programs.
The nature of New York labor laws makes construction insurance needs an inherently hard-to-place risk, but insurance agents shouldn’t be discouraged. By reviewing current legislation and consulting with wholesale brokers and other niche experts, agents can stay informed and help their clients find sufficient labor law coverage.
Novatae Risk Group can help. Our wholesale insurance brokers are versed in a wide range of niche industries and insurance products for high-risk clients. Contact us to learn more about labor law coverage or to get a free quote.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.