Obscure N.Y. law drives up construction insurance costs

Obscure N.Y. law drives up construction insurance costs

Source: http://www.businessinsurance.com, February 21, 2014
By: Daniel Geiger, Crain’s New York Business

For years, construction executives and real estate developers have insisted that an arcane New York state law that foists the liability for construction accidents solely on the builder has dramatically driven up the cost of construction insurance and even hurt worker safety.

Now the law’s opponents say they have proof of its ill effects on both the industry and economy.

A study conducted jointly by the Cornell University Department of Policy Analysis & Management and SUNY’s Nelson A. Rockefeller Institute of Government, and paid for by the nonprofit New York Civil Justice Institute, concluded that the law had resulted in more accidents and cost the construction and real estate industries billions of dollars.

The study found that New York state has 667 more construction accidents per year on average because of the rule, and that it incurs as much as $3 billion a year in additional costs.

“Yet another in the long line of anti-worker research that purports to advocate for worker safety by weakening business’ responsibility for workplace safety and health,” said Paul Fernandes, chief of staff of the Building and Construction Trades Council of Greater NY, in a statement. “We’ll put this on the shelf next to the rest of the research in this decade-long campaign against scaffold safety that has later been proven to be completely false.”

Known as Labor Law 240, or simply the Scaffold Law, the rules, according to its opponents, mandate that a construction contractor or developer who holds the construction insurance policy for a job be solely responsible for any injuries suffered by workers on that project. The law is problematic, these critics say, because it excludes workers from any responsibility for an accident they suffer, even if they are carrying out work improperly or with disregard to safety procedures.

Insurers, who have seen injury payouts on construction jobs in the state balloon in recent years, have dramatically raised the cost of insurance policies as a result, or in some cases have pulled out of the market here altogether. Those withdrawals in turn have created a shortage of options for policyholders that has further pushed up the price of policies.

“If the Scaffold Law causes injuries and costs our economy $3 billion a year, why are we the only state to have it?” Tom Stebbins, executive director of the Lawsuit Reform Alliance of New York, said in a statement. “We cannot waste public money on a law that makes work sites more dangerous. It defies all common sense.”

A representative for unions, who support the law, did not immediately respond to a request for comment.

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