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Inside in Full: Focus on NY construction: Labor laws, nuclear verdicts challenge insurers

The New York construction insurance market is becoming bifurcated, with plenty of capacity available for easier to write risks while more complex work, for example in steel or concrete, is much harder to insure...

Meanwhile, strict labor laws ensure that contractors are heavily liable for injuries on job sites, with those laws unlikely to change in the near term.

Especially for certain heavy industries, that makes coverage harder to find.

“If you’re looking at trade contractors - heavy trade contractors - you have your steel, your concrete, your demo, and excavation foundation concrete, it’s extremely difficult to get capacity for these risks. And if you can get it, it's not cheap. Some of these guys are paying somewhere between 10 to 14% of revenues in insurance costs currently,” Michael Yovino, SVP, casualty broker at Jencap, told Inside P&C.

Carriers who are in the complex construction space are careful with capacity and are seeking rate increases for the volatile risks.

“They've probably been doing it for a few years, and I think now they're starting to feel the pain of those losses. And so they're readjusting their book, and pricing,” RPS EVP Northeast construction leader Mike Mulvey told this publication.

"You have to get creative and it's tough to find solutions for [insureds], and [those] usually involve large retentions [and] large premiums.”

Umbrella capacity is particularly hard to source for complex risks in New York city. “There aren’t a lot of players – especially for the first $5 million. Once you get outside of the first five, it opens up a little bit. But for that first $5 to $10 million, depending on the class, depending on their loss experience and track record, it is a challenge,” Yovino said.

Meanwhile, a number of new entrants in recent years are looking to write general contractor business, sources said, expanding capacity and easing pricing.

“There are the accounts where I would say there's ample capacity, and even a fair amount of competition, and they tend to be what would be deemed maybe lower hazard trades,” Mulvey said.

Construction is the largest industry segment insured in the New York E&S market, accounting for 30% of E&S premiums written, according to figures from the Excess Line Association of New York (Elany).


The predominant lines of business purchased by the construction industry as a percentage of construction E&S premiums are general liability and environmental liability, accounting for 56% and 22% respectively of all construction liability premiums, according to Elany data.


More generally, construction risk in New York is split almost evenly between the admitted and non-admitted market, sources said, with non-admitted players growing in recent years.

Insurers still generally look to write worker’s comp and casualty insurance together so they control the whole chain and can head off claims, sources said.

“If you’re looking at trade contractors - heavy trade contractors - ... it’s extremely difficult to get capacity for these risks”

Michael Yovino, SVP, casualty broker at Jencap

Challenging labor laws 

Labor laws 240 and 241 remain a challenge in New York and leave construction professionals on the hook for claims that are now also subject to social inflation.

“These two laws impose absolute liability on the construction companies, property owners and/or contractors who are responsible for maintaining a safe work environment,” Swiss Re said regarding these laws on its website.

“Generally, it does not matter whether or not the injured worker acted negligently, unless their negligent conduct was the sole cause of injury.”

“There is no comparable negligence taken into account, so whether the injured party was doing something wrong or illegal, was inebriated or had a hand in it even in an accidental way, none of that's taken into account,” explains CAC Specialty construction and development practice leader Sean Pender.

Despite insurance and other industry pressure, the laws have not been adjusted. “There's a massive lobby from the personal injury attorneys in the state that are fighting to keep them unchanged and on the books, because it's incredibly financially beneficial to them,” Pender said.

The strict laws and resultant jury verdicts in a worker-leaning state like New York make loss costs hard to predict for insurers.

“The carriers that write the business in New York, they can't account for it, the awards are so vastly in excess of anything that would be considered reasonable for the type of injuries we're talking about here,” said Pender.

“The only way they can help to compensate is, if they're willing to write in the state, to charge massive premiums.”

Verdicts are generally higher owing to the laws and New York’s worker-friendly jurisdiction and are now also developing quicker.

“When I first got into this, your average labor law claim was $300,000 to $400,000. And it took anywhere from 3-7 years to fully develop,” Yovino said. “The verdicts are now in that $2mn-$3mn range on average, and they are developing in 2-5 years."

A recent crane accident in late July highlighted the issues a dense urban area like New York can throw up. In that case no one was killed, but multiple people were injured and the issue of liability is still being solved, according to news reports.

“Excess liability insurance for crane business has becoming increasingly more difficult to obtain as insurance carriers have exited the class due to some of the high-profile incidents and large awards,” Adrian Smith, managing director, broker, casualty, at Burns & Wilcox Brokerage, wrote regarding the accident.

“I'm not gonna say repeal entirely per se, but they have to be updated with the times, comparable negligence and things like that have to be taken into account in these laws,” said Pender of possible changes to the law.


“There are the accounts where I would say there's ample capacity, and even a fair amount of competition, and they tend to be what would be deemed maybe lower hazard trades”

Mike Mulvey, RPS EVP Northeast construction leader

New York not immune to general construction trends

Looking more broadly, the city is experiencing similar trends as the general US construction industry. Higher interest rates are slowing projects, but materials shortages and higher prices are less of an issue, or already baked into project costs, sources said. Labor shortages on the other hand are acute and seem here to stay.


“The effect of higher interest rates has a dramatic effect on one particular segment which is the private development market, so high rise condominium projects, private development for rental office space,” Jason Lamonica, SVP, head of construction at Vantage Risk, told Inside P&C.

Impacts from federal initiatives like the CHIPS Act and renewable energy projects are being felt in some jurisdictions, but spread unevenly throughout the country.

“These projects are easier to identify because they're billion-dollar plus jobs, sometimes two, three, four billion jobs and we've participated in some of that work with some of our customers, but that doesn't tend to be in New York City,” Lamonica said.

But New York is also seeing some possible upcoming construction growth from projects like the expansion of the 2nd Avenue subway and bridge and tunnel work, sources said.

Given labor laws are unlikely to change, and the city’s unique make-up, New York will remain a challenging jurisdiction for complex risks. But there are also opportunities for those willing to dig in.

“I would say New York is kind of a unique state, especially with the labor law and also considering how dense everything is. The numbers of buildings, the height of them definitely brings some challenges,” Mulvey said.

“It's always going to be a challenging state to write in but there are carriers that have found a way to do it profitably.”


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