If you’re a general contractor doing business in New York City, you’re probably frustrated by the cost of general liability and umbrella insurance. You may be wondering how much NY contractor insurance should cost and why it is so expensive…
The answer to “why” it costs so much is because of New York Labor Laws 240 and 241, also known as the “scaffold law” or “safe place to work” law. These laws drive up the cost of insurance related to personal injury and action over claims.
The answer to “how much” NY contractor insurance costs depends on three cost factors that drive general liability insurance for you if you’re a NY contractor.
Below are rough estimates of what you may pay as a NY contractor for commercial general liability insurance both with and without action over coverage in New York City.
How Much Does NY Contractor Insurance Cost?
NY contractor insurance costs are affected by three main factors related to your business profile:
- Your experience and your business’s track record with insurance
- Where you do most of your work
- The limits of insurance you want and the exclusions in your policy
Depending on the business profile factors above, the following business details can influence the cost of your commercial general liability (CGL) and umbrella or excess insurance:
- Age and history of your business
- The type of actual work that you do
- How much work your business does each year (volume in sales or jobs)
- Percentage of your work that is sub-contracted out to other contractors (if any)
- Your history of claims (if any)
- Your payroll
- Whether your work is on the inside or outside of buildings
- Whether you do work at heights, on roofs, façades or scaffolds
- Exclusions you can accept – or cannot accept – with in your insurance policy (such as action over) which limit your actual coverage
- Size of your insurance deductible or self-insured retention (SIR)
- Any prior gaps in insurance coverage (i.e. history of periods with no insurance)
An established general contractor or subcontractor with a good insurance track record should expect their broker to have insurance carriers competing over them…
However, because the market for general liability carriers offering good NY contractor insurance in NYC is very limited, the opposite is also true.
In other words, if your business is new with no insurance history, or if you have a history of insurance claims, or you’ve canceled policies (i.e. gone bare), or have had your insurance non-renewed or canceled by prior carriers, etc. you may find yourself with few, if any, affordable NY contractor insurance options.
Why Is NY Contractor Insurance So Expensive?
NY contractor insurance is so expensive because of the size of personal injury claims related to New York Labor Law.
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.1
The scaffold law protects workers in the five boroughs2 engaged in erection, demolition, repairing, altering, painting, cleaning or pointing of buildings or structures in the event of falls from heights and/or falling objects, materials or equipment, that should have been secured.
A contractor with no action over coverage in their commercial general liability policy could find their project in limbo and on the hook for a million dollar personal injury claim that could potentially put them out of business.
Landlords in New York and elsewhere are getting smart about requiring action over coverage from their GC and any contractors they hire, especially if work is being done at heights.
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
NY contractor insurance without action over coverage is less expensive than insurance with action over coverage.
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
NY contractor insurance with action over coverage is more expensive than insurance that excludes action over.
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 you should have action over insurance coverage depends on what your clients require and the type of work you do – and your willingness to take on risk.
Real estate owners in New York are increasingly requiring contractors to have action over coverage as a prerequisite to doing business with them.
As mentioned above, where you do your work has a lot to do with the cost of general liability insurance with action over coverage.
If only 5% of your work is in NYC/the five boroughs, and 95% of it is in New Jersey and Connecticut or elsewhere, you may decide that you want to forego action over coverage. This just means passing on contracting jobs in NYC that require it.
While an “action over” claim can happen in any state, New York City is a whole different animal.
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.
Footnotes
- Attempts have been made for years to reform Labor Law 240 and 241. The latest attempt is NY State Senate Bill S707 being put forth by 59th District Senator Patrick M. Gallivan.
- Manhattan, Queens, Brooklyn, Bronx and Staten Island.
