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New York's 1885 Scaffold Law causes headaches for construction insurers


New York is a problematic area for construction risks because of a law more than 100 years old that has become a major issue in today's litigious environment.

New York's Labor Law 240/241, or the Scaffold Law, originally enacted in 1885, mandates that construction contractors or developers who hold the construction insurance policy for a job be solely responsible for any injuries suffered by workers in cases where there is an elevation-related accident.

Despite the wording of the law, over the years it has come to be interpreted to cover slips and falls, as well as injuries caused by falling objects, said Mike Hastings, Atlanta-based managing director and project risk practice leader for Marsh L.L.C. “There's a very active plaintiff bar for claims” arising out of this issue, he said.

There have been attempts in recent years to amend the law but none have been successful.

Brian Cooper, managing director in the construction practice of Arthur J. Gallagher & Co. in San Francisco, said the cost of insuring a project in New York is about 8% of construction value vs. 2% to 3% “anyplace else on earth.” Because of the law, average claims are $2 million to $3 million for an alleged fall from a height of more than six feet, he said.

XL Group P.L.C., which entered the construction business in 2011, “has not participated in the New York marketplace” particularly because of the scaffolding law and “the reluctance to do anything to move away from that,” said Gary Kaplan, the insurer's Chicago-based president of North American construction.

“We're still engaged in writing business in New York,” but it has necessarily led to significant increases in attachment points, said Geoffrey Hall, New York-based senior vice president of construction for Ace USA.

Retentions have increased from the hundreds of thousands of dollars to the millions for project work, while fixed costs have increased as well.

Insurers have become “significantly more selective” as to how they will deploy their capital with respect to New York. “There's a great deal of focus on the rigors of safety control,” Mr. Hall said.

“There's been a lot of effort among very large developers in New York to try to somehow amend or get relief from that labor law,” said Tim McGinnis, Addison, Texas-based senior vice president for the national construction practice with Willis North America Inc. But their attempts have been unsuccessful, as the unions and the plaintiffs bar have been “very strong” in their own lobbying efforts, he said.