When it comes to construction-site injuries, New York presents the perfect storm of frequency, severity and, because of a unique state law, blockbuster judge and jury awards, too.
Labor Law 240(1)—colloquially known as the Scaffold Law—assigns absolute liability to owners and general contractors, even if an injured employee was at least partly responsible for the accident. It’s an exposure nightmare for New York construction companies and property owners.
When the law was first designed in 1885, it was meant to protect workers from elevation-related injuries. The language changed in 1948 after a Court of Appeals ruling that said workers’ contributory negligence wouldn’t exonerate owners and general contractors.
That puts Empire State builders in a bind. Insurance is the second-biggest expense after labor, and not all insurance companies will cover claims related to Labor Law 240(1). Some contractors have chosen to roll the dice by forgoing Scaffolding Law insurance and filing for bankruptcy as needed. That’s not hyperbole. Numerous New York projects have faced significant losses due to Labor Law 240(1), some in the hundreds of millions in aggregate. We know of one man who tore his ACL in a scaffolding-related accident and received a $27 million settlement.
Some legislators and special-interest groups have issued calls to reform Labor Law 240(1) over the years. Their argument is that Scaffold Law claims have driven up insurance and building costs. In fact, a 2013 report by the Rockefeller Institute of Government estimated that Labor Law 240(1) costs New York builders $785 million a year in insurance-related expenses.
Many New York contractors feel like much of this issue is out of their control, but there are a few steps you can take to limit exposure.
Find the right insurer. Expertise always matters, but especially in this complex area. Your insurance company should have a construction practice that knows every aspect of the pertinent laws, staffed by professionals who clearly explain what you’ll be covered for and up to how much. Better still if your insurer has a strong safety program that meets with injured workers to detect fraudulent claims.
Investigate general-liability certificates. On behalf of owners, the construction practice at Crystal & Company regularly reviews contractors’ general liability certificates and policies to make sure they’re worth more than the paper they’re written on. This often leads to redrafting contracts and having corrective endorsements issued, which can be annoying in the moment but worthwhile should an accident occur.
Choose your subcontractors wisely. Whether you’re an owner or general contractor, do all you can to hire the best available workers. Besides the usual—reviewing qualifications, checking references, verifying licenses—we suggest getting the contractor’s experience modification rate and verifying their OSHA citation history. And it’s never a bad idea to question subs about their safety program and past workers’ comp payouts.
Create (or review) a site-specific safety plan. It’s not enough to give workers basic safety training. You also must: vigilantly monitor workers while on the job, even if you have to hire a site safety manager; routinely audit job-site equipment to make sure it’s in proper working order; and develop a fall-prevention plan and falling-object plan. Some insurance brokers offer specialized construction safety teams that can review contractor safety programs and analyze whether they are adequate for the exposure.
Be sure your contracts are iron-clad. Your legal counsel can, and should, work an indemnification and “hold harmless” clause into written contracts that require subcontractors to compensate the general contractor or owner if their work or workers are to blame for any incident. The contract also needs to declare that certain limits will be provided, that you are named as an additional insured, and that the contractor’s insurance is primary and non-contributory while waiving subrogation.
Whether a mega build or small demo job, one mistake can cause Labor Law 240(1) claims to seriously affect your business. But you can go a long way toward avoiding trouble by being hypervigilant about workplace safety, while letting quality legal counsel and the right broker arrange insurance to solve for the rest.
Brian Schofield is the senior managing director of Crystal & Company’s construction practice.
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