Construction Risk

The Empire State Bind

New York is a nightmare for construction insurance carriers.
By: | November 1, 2013 • 7 min read

The New York market for construction-related general liability risk is becoming smaller and ever more expensive, with legal costs increasing and carriers jumping ship. That makes risk management and safety more important than ever for property owners, general contractors and subcontractors wishing to secure meaningful general liability coverage in the state.

“Over the last 10 years, a lot of carriers got burned in New York,” since “some were willing to accept a submission from a prospect saying, ‘Yes, we’re doing all the things we need to with regards to risk transfer,’ with no follow up or confirmation,” said Adam Schnell, executive vice president with the casualty practice at WKFC Underwriting Managers, an MGA and a unit of Ryan Specialty in Melville, N.Y.

Those days are over. Today, said Schnell, “It’s a very tight market. I’d say there are maybe half a dozen surplus lines markets that are writing in the space and offering a viable GL product to property owners, general and trade contractors in New York.”

Legislative Quirks

To understand the problem fully, it’s important to know how construction workers tend to proceed when they’re injured — and to know a little something about New York labor laws.

Since construction workers employed by independent contractors cannot sue their employers directly, they’re initially likely to go through the workers’ compensation system for lost wages and medical expenses. But they don’t stop there.


“They’ll file a comp claim when they’re injured but they’ll frequently sue the property owner and the general contractor as well,” said Schnell.

In fact, this is how the system tends to work all across the country, said attorney Peter Gould, managing partner with Patton Boggs in Denver.

But New York is a different animal compared to other states, because for over a century, it has had certain laws on the books which greatly exacerbate the problem on the claims side.

From an insurance industry perspective, one of the state’s most onerous provisions is the so-called “Scaffold Law.”

This law imposes “an absolute, non-delegable duty upon owners and general contractors to provide a safe working environment for laborers who work at elevation to protect them from ‘gravity-related’ accidents, such as such as falling from heights or being struck by an inadequately secured item,” said Schnell.

The law has been on the books since the late 1800s. It is an “absolute” liability doctrine in that, from Schnell’s perspective, “Even if workers were told 1,000 times to use a safety harness and flagrantly failed to protect themselves, property owners and general contractors cannot impose culpability on those injured.”

According to the Lawsuit Reform Alliance of New York, pure premium losses for construction projects in New York, especially New York City, are 300 percent higher than anywhere else in the nation, and these costs are a significant factor in every taxpayer-funded construction project — from roads and bridges to buildings and schools.

Don Baldini, assistant vice president and state affairs officer at Liberty Mutual in Boston said that in every state but New York, the legal concept of “comparative negligence” is often used in court to try and determine “what percent of the fault belongs to owners or general contractors.”

In New York, however, “You can’t even raise as a defense that a construction worker may have been grossly negligent and contributed to his own injury. The way that the workers’ compensation system and the general liability system tend to intersect in New York, in particular, leads to higher building costs, contributes to job losses, and is a burden for taxpayers,” he said.

Baldini says that Liberty Mutual continues to supply coverage in the state for contractors’ GL and workers’ compensation risks.

And yet it’s quite clear that as a result of the Scaffold Law and its sister statutes, the New York liability market definitely has a supply and demand problem, said Fred Heath, senior vice president with Marsh’s Construction Placement group in New York.

That’s why some of the key markets providing contractors’ general liability in New York, according to sources, are excess and surplus lines companies such as Princeton E&S Insurance Co., State National Cos., Catlin Group, Colony Specialty, Scottsdale Insurance Co. and American Empire Group.

Nevertheless, “you still have a small number of admitted carriers writing casualty risks in the New York marketplace,” Heath said. “These admitted markets will not entertain monoline general liability, however, and generally will require at least one other casualty line such as auto liability and/or workers’ compensation.”


But clearly, these remaining markets are very stringent in terms of how they underwrite the risk. The underwriting process will focus on loss control measures to eliminate fall hazards, detailed analyses of past claims experience and proper contractual risk transfer language for contractors that utilize subcontractors, said Heath.

Keys to Minimizing Risk

For his part, WKFC’s Schnell is able to offer clients a New York contractors program with a surplus lines carrier with an A+ rating from A.M. Best. He said that he is able to offer property owners and general contractors a guaranteed-cost primary GL, but noted that his program requires New York City subcontractors to carry $5 million, and $2 million for subcontractors outside of the five boroughs of the city.

R11-13p52-54_06_RR.inddBeside making sure the proper coverage and limits are in place, Schnell offered the following risk management recommendations for those hoping to secure meaningful coverage:

• Have safety measures in place. For trade contractors, be sure to hire skilled and experienced workers and be sure to hold daily “toolbox” meetings with laborers to ensure that the proper equipment is being used and to enforce job site and public protection.

• Secure legal guidance. Seek coverage through an insurance program where legal guidance is available. Companies such as WKFC provide resources to buyers. It’s included in their price, and provided throughout their policy term. Insureds have access to legal consultation in order to navigate the complexity of exposures to ensure proper risk transfer.

• Don’t go cheap. “Some trade contractors may ‘cheap out’ and buy a $5,000 policy with a multitude of exclusions,” said Schnell.

A solid contractors’ GL program in New York State will have premiums ranging anywhere from 2 percent to 10 percent of the contractor’s per-project or annual gross revenue, he said.

Three or four years ago, prices maxed out closer to 4 percent of that, but things have changed.


“There had been a lot of capacity and carriers writing the business without realizing the risk they were taking,” Schnell said.

Gould, who specializes in environmental safety and health law, has some tips of his own for insurers.

He cautioned that, despite New York’s liberal labor laws, plaintiff’s attorneys will try to go for the jugular. In addition to showing a causal connection to the workers’ injury, they will almost certainly try to establish that the property owner or contractor being sued had a history of workplace accidents.

“They’ll want to show some kind of historical connection or indifference to employee well-being though a pattern of workplace safety problems,” the attorney said. “Insurers need to be careful when they agree to write policies for these property owners, contractors or subcontractors to understand the potential insured’s safety violation history. There has to be some higher level of due diligence involved to help mitigate or at least understand the risk.”

Because the risk of insuring a repeat safety violator is typically higher than insuring a company with a clean safety record, he said, insurers should also look at policyholders’ training documents to make sure they maintain rigorous training programs for their employees in such areas as fall protection, trenching and any other key construction project elements which tend to have higher workplace accident rates.

Gould said that companies with a wellness or fitness program in place at work may also represent better risks.R11-13p52-54_06_RR.indd

“Keeping people more healthy, nimble or flexible” can also mitigate the risk of serious injury, he said.

Insurers and insurance buyers should require that the subcontractors themselves have strict hiring practices in place where they “don’t just bring labor in off the street but hire qualified, competent people who’ve served a lot of time in their particular construction industry trade,” Gould said.

In addition, he said, it would be “a good idea to make this an insurance policy term.”

Gould also stressed the importance of requiring a zero-tolerance disciplinary policy for workplace safety infractions, where an employee caught working contrary to his or her safety training is terminated.

“This may be supplemented by carriers’ spot checks or audits of the insured’s workplace to ensure the insured takes safety matters at least as seriously as the carriers,” the attorney said.

Janet Aschkenasy is a freelance financial writer based in New York. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Absence Management

Establishing Balance With Volunteers

It’s good business to allow job-leave for volunteer emergency responders, whether or not state laws apply.
By: | January 10, 2018 • 7 min read

If 2017 had a moniker, it might be “the year of the natural disasters,” thanks to a phenomenal array of catastrophic or severe events— hurricanes, tornadoes, wildfires, ice storms and floods.


Combined with smaller-scale fires and other emergencies, these incidents tax the resources of local and state emergency services, often prompting the need to call volunteer emergency responders into action.

But as lean as most organizations are already running, volunteer activities can sometimes cause friction between employees and employers. Handling conflicts the wrong way can potentially lead to legal headaches, harm employee morale and batter a company’s reputation.

State by State Variations

Most employers are aware of the various federal and state leave laws protecting their employees, including family and medical leave, pregnancy leave and military leave. But leave laws that protect the livelihoods of volunteer emergency responders are more likely to fly under the radar of some HR managers and risk managers.

Such laws don’t exist in every state, but more than 20 states do have some type of law in place to protect volunteers including emergency responders, firefighters, disaster workers, medical responders, ambulance drivers or peace officers.

Marti Cardi, vice president of Product Compliance for Matrix Absence Management

The laws vary broadly. Nearly all specify that such leave be unpaid, and that employees disclose their volunteer status to employers and provide documentation for each leave. But there is a spectrum of variations in terms of what may trigger an eligible leave. Some, for instance, apply for any emergency that prompts a call from the volunteer’s affiliated responder group. Others may require a government declaration of emergency for the law to be triggered.

While many of the laws do not explicitly require employers to let employees leave work when called to an emergency during a shift, most specify that an employee may be late or even miss work entirely without facing termination or any other adverse employment action.

Some states mandate a maximum number of unpaid leave days that a volunteer can claim. But others may place more significant burdens on employers. In California, for instance, employers with 50 or more employees are required to grant up to 14 days of unpaid leave for training activities in addition to any leave taken to respond to emergency events. For multistate employers, keeping on top of what obligations may apply in each circumstance can be a challenge.

Significant Risks

Large or mid-sized employers may rely on absence management providers to keep them in compliance. For smaller employers though, it may be as simple as looking up a state’s law via Google to find out what’s required. However, checking in with the state department of labor or the company’s attorney may be the best way to get the correct facts.

“I would caution that just because you don’t find something [on the internet], it doesn’t mean it’s not there,” said absence management and employment law attorney Marti Cardi, vice president of Product Compliance for Matrix Absence Management.

For example, Cardi said, an obscure Texas law provides job-protected leave for volunteer ham radio operators called into service during an emergency.

Cardi said employers should task HR to investigate the laws in each state the company operates in, and to ensure that supervisors are educated about the existence of these laws.

“If a supervisor is told by one of his or her employees, ‘Sorry I’m not coming in today … I’ve been called to volunteer firefighter duty for the [nearby region] fire,’” she said, you want to be sure that the supervisor knows not to take action against the employee, and to contact HR for guidance.

“Training supervisors to be aware of this kind of absence is really important.”


An employer that does terminate a protected volunteer for responding to an emergency may be ordered to pay back wages and reinstate the employee. In some cases, the employee may also be able to sue for wrongful termination.

And of course, “you don’t want to be the company in the headlines that is getting sued because you fired the volunteer firefighter,” she added.

If an employer bars a volunteer from responding, the worst-case scenario may be a third-party claim. Failure to comply with the law could give rise to a claim along the lines of “‘If you had complied with your statutory obligation to give Jane Doe time to respond, my loved one would not have died,’” explained Philadelphia-based Jonathan Segal, partner at law firm Duane Morris and managing principal of the Duane Morris Institute.

“That’s the claim I think is the largest in terms of legal risk.”

Even if no one dies or is seriously injured, he added, “there could still be significant reputational risk if an individual were to go to the media and say, ‘Look, I got called by the fire department and I wasn’t allowed to go.’”

The Right Thing to Do

What employers should be thinking about, Segal said, is that whether or not you have a legal obligation to provide job-protected leave for volunteer responders, “there’s still the question of what are the consequences if you don’t?”

Employee morale should be factored in, he said. The last thing any company wants is for employees to perceive it as insensitive to their interests or the interests of the community at large.

“Sometimes employers need to go beyond the law, and this is one of those times,” — Jonathan Segal, partner, Duane Morris; managing principal, Duane Morris Institute

“How is this going to resonate with my employees, with my workforce, how are people going to see this? These are all relevant factors to consider,” he said.

There’s an argument to be made for employers to look at the bigger picture when it comes to any volunteer responders on their payroll, said Segal.

“Sometimes employers need to go beyond the law, and this is one of those times,” he said. “Think about the case where’s there’s not a specific state law [for emergency responders] and you say to a volunteer, ‘No, you can’t leave to deal with this fire’ and then people die. You as an employer have potentially played a role, indirectly, because you didn’t allow the first responder or responders to go,” he said.

The bottom line is that “it’s the right thing to do, even if it’s not required by law,” agreed Cardi.

“I feel that companies should have a policy that they’re not going to discipline or discharge someone for absences due to this kind of civic service, subject to verification of course.”

Clear Policy

While most employers do strive to be good corporate citizens, it goes without question that employers need to guard their own interests. It’s not especially likely that volunteer responders will try to take advantage of the unpaid leave allowed them, but of course, it could happen.

That’s why it’s important to have policies that are aligned with state laws. Those policies could include:

  • Notifying the company of any volunteer affiliations either upon hire or as soon they are activated as volunteers.
  • Requiring that employees notify a supervisor as soon as possible if called to an emergency (state requirements vary).
  • Requiring documentation after the event from the head of the entity supervising the volunteer’s activities.

If at some point it becomes excessive – someone has responded to emergencies five times in nine weeks, then it’s time to examine the specifics of the law and have a discussion with the employee about what’s reasonable, said Segal. It may also be time to ask specifics about whether the person is volunteering each time, or are they being called.


In some cases, the discussion may need to be about finding a middle ground, especially if an employee has taken on an excessively demanding volunteer role.

“We encourage volunteers to pick the style that best fits their schedule,” said Greta Gustafson, a representative of the American Red Cross. “Disaster volunteers can elect to respond to disasters locally, nationally, or even virtually, and each assignment varies in length — from responding overnight to a home fire in your community to deploying across the country for several weeks following a hurricane.

“The Red Cross encourages all volunteers to talk with their employers to determine their availability and to communicate this with their local Red Cross chapter.”

Segal suggests approaching it as an interactive dialogue — borrowing from the ADA. “Employers may need to open a discussion along the lines of ‘I need you here this week because this week we have a deliverable on Friday and you’re critical to that client deliverable,’” he said, but also identify when the employee’s absence would be less critical.

No doubt there will be tough calls. An employer may have its hands full just trying to meet basic customer needs and need all hands on deck.

“That may be a situation where you say, ‘First let me check the law,’” said Segal. If there’s a leave law that applies, “then I’m going to need to comply with it. If there’s not, then you may need to balance competing interests and say, ‘We need you here.’” &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]