General contractors doing business in New York are aware of New York Labor Laws 240 and 241 and the need for commercial general liability insurance without an action over exclusion. But how much does action over coverage cost anyway?
And is action over coverage necessary? What happens if you don’t get action over coverage?
This article describes three cost factors for general liability insurance and some rough estimates of what contractors can expect to pay for insurance with and without action over coverage in New York City.
How Much Does Action Over Coverage Cost?
The cost of general liability with action over coverage for a general contractor or subcontractor largely depends on three factors:
- You and your business
- Your location
- How much insurance you need
And the following business details related to the above may influence the cost of your general liability insurance:
- Age of your business
- Type of work that you do
- How much work your business does each year
- Percentage of sub-contracted work (if any)
- History of claims
- Payroll
- Location of the work
- Limits of insurance you need
- Exclusions in your insurance policy (such as action over)
- Size of deductible or self-insured retention (SIR)
- Any prior gaps in coverage
An established general contractor or subcontractor with a good insurance track record should expect to have insurance carriers competing over them.
However, the opposite is also true.
If your business is new with no insurance history, has a history of claims, or canceling policies (i.e. going bare), has had insurance non-renewed or canceled by carriers, etc. you may find yourself with few, if any, affordable options.
Do I Need Action Over Coverage?
Whether you should have action over insurance coverage depends on the type of work you do – and your appetite for risk.
It also depends on whether your clients require you to have action over coverage to do business with them.
As mentioned above, location has a lot to do with the cost of general liability insurance with action over coverage.
While an “action over” claim can happen in any state, New York City is a whole different animal. This is because of the size of claims related to New York Labor Law and personal injury lawsuits.
New York Labor Law 240, also known as the “scaffold law“, provides special plaintiff-friendly legal protection to certain workers exposed to special hazards related to heights. Labor Law 240 also imposes absolute liability on property owners and applies to apartment buildings, three family homes and any commercial building.
Workers in the five boroughs1 engaged in erection, demolition, repairing, altering, painting, cleaning or pointing of buildings or structures are protected by the scaffold law for falls from heights and/or falling objects, such as materials or equipment, that should have been secured.
Landlords in New York and elsewhere are getting smart about requiring action over coverage from the contractors they hire, especially if work is being done at heights.
They know that if a contractor has no action over coverage in their commercial general liability policy, and a claim occurs, it could not only come back to haunt them, but also leave their project in limbo and potentially put the contractor out of business.
As such, landlords increasingly require GCs and any subs to not only have ample insurance limits, but also include action over coverage.
Some projects may also require a contract bond (aka construction bond) from a surety that guarantees the work will be completed according to the terms of their agreement.
Cost Of Insurance WITHOUT Action Over Coverage
In New York, a newly formed general contracting business (commercial or residential) doing business in the five boroughs – including up to 100% sub-contracted operations seeking general liability insurance – WITHOUT action over coverage may pay $5,000 – $15,000 annually.
This coverage may include potentially risky exclusions and reflect the following estimated terms and limits:
- $1,000,000 per occurrence
- $1,000,000 personal & advertising injury
- $2,000,000 general aggregate
- $2,000,000 products/completed operations aggregate
- Action over exclusion, hammer clause
- Height limitations
- Per project aggregate capped at $5,000,000
- Blanket additional insured including products/completed operations
- May include roofing operations exclusions, scaffolding exclusions and construction manager/project manager exclusions
- Additional fees for coverage including professional liability (errors & omissions), umbrella or excess coverage, auto/hired non-owned auto, property coverage, workers’ compensation, cyber liability, inland marine, builder’s risk and surety bonds.
Note that an action over exclusion usually goes hand-in-hand with another exclusion known as a hammer clause.
A hammer clause requires the general contractor to be responsible for insurance of their subcontractors, suppliers and other contractors who do work on their behalf.
Regardless of the hammer clause, the insured company would be required to monitor any sub-contractors’ insurance to confirm it is adequate and in compliance with what they need. Subcontractors should also indemnify and hold harmless the general contractor (insured) with limits greater than, or equal to, those of the general contractor.
Cost Of Insurance WITH Action Over Coverage
In New York, general liability for a newly formed general contracting business (commercial or residential) doing business in the five boroughs – including 100% sub-contracted operations – WITH action over coverage may be 5x to 10x the cost of insurance without.
This may include the following estimated terms and limits:
- $1,000,000 per occurrence
- $1,000,000 personal & advertising injury
- $2,000,000 general aggregate
- $2,000,000 products/completed operations aggregate
- Per project aggregate capped at $5,000,000
- No action over exclusion, no Hammer Clause
- Blanket additional insured including products/completed operations
- Waiver of subrogation
- Primary and non-contributory endorsement
- May include roofing operations exclusions, scaffolding exclusions and construction manager/project manager exclusions
- Additional fees for professional liability (errors & omissions), umbrella or excess coverage, auto/hired non-owned auto, property coverage, workers’ compensation, cyber liability, inland marine, builder’s risk and surety bonds.
- Solar contractors may qualify for a program of insurance including many of the above coverages, at a discount.
The insured company would be required to monitor any sub-contractors’ insurance. Subcontractors must indemnify and hold harmless the general contractor (insured) with limits equal to, or greater than, those of the general contractor.
At The End Of The Day...
Whether action over coverage is necessary for you as a contractor in New York is ultimately your decision.
If you do not get coverage for action over in New York, you may limit the types of jobs you can apply for and qualify for… And if a workplace injury occurs, you run the risk of a potentially catastrophic lawsuit for which you are not covered by your insurance.
If you have questions about contractors insurance in New York, or want help with the insurance for your business either with, or without, an action over exclusion, schedule an appointment with me or give me a call.
