NY’s Construction Industry Being Driven Into Worst Crisis in Decades

Mon March 22, 2004 - Northeast Edition
Mary S. Yamin-Garone

It is a law whose time has come — for reform that is.

If you are a contractor or subcontractor in New York you already know that over the past few years general liability insurance costs in the state have spiraled out of control. Contractors are struggling to find carriers to underwrite them at all and — many times — the coverage they can obtain is at rates 300 percent to 500 percent higher than past premiums.

This crisis can be directly attributed to Sections 240/241 of the state’s labor law, which makes contractors absolutely liable for certain construction-related injuries — even if they bear none of the blame.

On March 30, the New York State Construction Industry Council (NYSCIC), the construction-related affiliate of The Business Council of New York State Inc., hopes to change that.

On that day, NYSCIC will participate in an industry-wide lobby day in Albany, NY, focusing on repealing section 240/241. They will join the New York State Builders Association (Home Builders), the General Building Contractors (GBC), Empire State Subcontractors Association (ESSA) and the Building Industry Employers of New York State (BIE) in efforts to educate legislators and staff as to the 240/241 crisis hitting New York’s construction industry. Four hundred builders from around the state are expected to attend.

The Law

Sections 240/241 of the state’s labor law imposes strict standards of care on contractors and owners with the purpose of preventing injuries to workers on construction sites.

Under Section 240 absolute liability is imposed on contractors and owners for job site injuries to workers, even if the worker did something significant that contributed to his or her own injury. Consequently, this strict standard of care tied to absolute liability lays down a heavy burden on contractors and owners and, ultimately, subcontractors. Sometimes called the “scaffold law,” this section imposes absolute liability on owners and contractors for injuries suffered by a worker injured while working in an “elevated” position.

Section 241 does not concern itself with accidents involving “elevation” issues but rather with construction, excavation and demolition work. It has 10 subdivisions. The first five provide both specific requirements of construction with which contractors and owners must comply and absolute liability. Subdivisions 6 through 8 authorize rule making by the governing public board; subdivision 9 provides certain exemptions for architects and engineers from absolute liability; and subdivision 10 deals with the discovery and remediation of asbestos.

The Need for Change

New York is the only state that has a law of this nature and the loss costs of insurance carriers in the state versus other states show the law’s result (500 percent more in New York City and 232 percent in the rest of the state).

The state’s courts have upheld this absolute liability standard, which means property owners and their contractors have no way to defend their actions and their safety records in liability cases that fall under this statute. As long as the law stands as it is, premiums will continue to rise and contractors will continue to leave the state or close up shop.

Philip LaRocque, executive vice president of the New York State Builders Association Inc. (NYSBA), stresses the importance of amending the labor law. “This law must be repealed to keep homes affordable in New York. Abuse of Section 240 adds up to $10,000 to the cost of a new home and significant dollars to remodeling projects.

“To prevent home builders from leaving New York, the Home Building Industry provides the state with $740 million in state and local tax revenue annually and provides 250,000 jobs statewide. These jobs and tax dollars will not be around if the labor law is not reformed. Many builders are already considering moves to states that provide more insurance choices and more reasonable insurance rates. Those who remain in New York have faced up to 500 percent increases in their insurance rates over the past two years — a cost passed on to the new home buyer or home owner doing a remodeling project,” said LaRocque.

Johnny Evers, legislative analyst of the Business Council of New York State Inc., agreed the time for reform is now. “We have a problem that is gnawing away at the economy and running businesses out of the state, out of competitiveness and causing others to shut their doors. If you are lucky enough to get coverage from your carrier, there are fewer and fewer choices. There used to be many carriers offering competitive rates. Next there were fewer carriers with less competitive rates. Now there are even fewer with astronomically high rates.”

One builder from the Hudson Valley said, “The cost of liability insurance has become so high that I have curtailed the number of houses I can build and the amount of land I can develop. I am forced to buy a 10-year warranty on my homes at a cost of $2 per thousand of sales price in order to get the right to purchase liability insurance. Additionally, that insurance is almost twice as costly as in the past. It’s no wonder we have an affordable housing crisis.”

The Battle Continues

Fighting for labor law reform is nothing new to the construction industry. Over the past several legislative sessions the Business Council and other construction associations have lobbied the legislature for repeal of this law, so far without success.

“We’ve been at this for years,” admitted Evers. “At first it was a nuisance and we knew it was bad. Now it has become critically important to have it changed or else the state is going to run out of construction firms.”

Experts say the legislature’s objection to repealing/amending the labor law has been a result of being unduly influenced by trial lawyers and trade unions.

“We don’t see this as a worker protection issue like they do,” claimed Evers. “If that were the case we would be the safest state in the union by having this on the books. It’s a punitive issue. We have a reform bill that would change the law from an absolute standard to a negligent standard. We think that is fair.”

The bill supported by NYSBA serves to remedy current abuses of the law by letting builders, owners and contractors defend themselves in certain narrow fact patterns against lawsuits brought about by negligent employees.

“It does not take away an employee’s right to sue,” asserted LaRocque. “It only allows a builder to introduce evidence in court if he/she feels the worker contributed to their injury.”

For more information, contact NYSBA at 518/465-2492.