New York contractors operate in one of the most litigious construction environments in the country. Between New York Labor Law §§ 200, 240, and 241, aggressive plaintiff attorneys, high jury awards, and complex contractual risk transfer requirements, even well-insured contractors can find themselves exposed to lawsuits that exceed or fall outside their liability insurance coverage.
Insurance is critical—but insurance alone is not enough.
This article explains, at a high level, how New York contractors can structure their businesses and operations to better protect personal and company assets from large lawsuits that liability policies may not fully cover. Just as important, we will also explain how working with the right insurance advisor—like BGES Group—can help close many of the gaps that lead to devastating claims in the first place.
Important Disclaimer:
We are not attorneys, and this article is for general informational purposes only. Business formation, asset protection, and risk management strategies depend on individual circumstances and New York law. You must consult with a qualified attorney and tax professional before making any legal or structural decisions. Do not treat this article as legal advice or “the gospel.”
⸻
Why Insurance Alone Isn’t Always Enough
Many contractors assume that if they carry general liability, workers’ compensation, and an umbrella policy, they are fully protected. Unfortunately, that’s not always the case.
Some common gaps include:
• Claims that exceed policy limits
• Contractual liability assumed but not properly insured
• Exclusions buried in policy language
• Personal liability due to improper business structure
• Claims involving gross negligence, labor law exposure, or uninsured subcontractors
When these situations arise, plaintiffs often look beyond the insurance policy and go straight after the company’s assets—or even the owner personally.
That’s where proper company setup and risk layering becomes essential.
Choosing the Right Business Entity Matters
One of the most important steps a New York contractor can take is selecting the right legal entity.
Sole Proprietorship: High Risk
Operating as a sole proprietor offers no legal separation between you and your business. If your company is sued, your personal assets—home, savings, investments—can be at risk, regardless of insurance.
LLC or Corporation: A Necessary Shield
Most contractors should operate as either:
• A Limited Liability Company (LLC), or
• A Corporation (S-Corp or C-Corp)
When properly set up and maintained, these entities create a legal barrier between business liabilities and personal assets.
However, simply forming an LLC is not enough.
⸻
Maintaining the “Corporate Veil”
Courts in New York can “pierce the corporate veil” if the business is not run properly. This means personal assets may still be exposed even if an LLC or corporation exists.
To maintain protection:
• Keep separate business and personal bank accounts
• Never pay personal expenses from the business account
• Use written contracts in the company’s name
• Maintain proper licenses and registrations
• File required annual reports
• Keep operating agreements and corporate records up to date
This is an area where attorneys and accountants are essential—but insurance professionals play a role by ensuring contracts and policies align with the entity structure.
⸻
Using Multiple Entities for Risk Segmentation
Some larger or growing contractors choose to separate operations into multiple entities. For example:
• One entity owns equipment
• One entity employs labor
• One entity signs contracts
The idea is to limit exposure so that a catastrophic lawsuit in one area does not jeopardize the entire operation.
This approach must be done carefully. Poorly structured entity layering can create tax issues, insurance coverage disputes, and even increased legal exposure if done incorrectly. Again, legal guidance is critical—but insurance must be coordinated across all entities to avoid dangerous coverage gaps.
⸻
Contracts Are as Important as Insurance Policies
Many large claims arise not from accidents alone, but from bad contracts.
Key contract issues include:
• Indemnification clauses that go beyond insurance coverage
• Additional insured requirements that are impossible to meet
• Waivers of subrogation not properly endorsed
• “Defense outside limits” assumptions that are incorrect
• Agreements that shift all liability upstream or downstream unfairly
Contractors should never sign contracts without understanding how they interact with their insurance program. This is where experienced insurance advisors add tremendous value.
⸻
Umbrella and Excess Liability: How Much Is Enough?
New York verdicts can be enormous—especially under Labor Law 240 (“Scaffold Law”). A $1 million general liability policy may barely scratch the surface of a serious injury claim.
Umbrella and excess liability policies:
• Provide higher limits
• Can drop down over certain claims
• Often require careful underwriting and disclosure
However, umbrellas are not all the same. Some follow form, some don’t. Some exclude labor law claims. Some require strict underlying coverage compliance.
This is another area where contractors think they are protected—until a claim is denied or limited.
⸻
Workers’ Compensation Strategy Reduces Lawsuit Exposure
Workers’ compensation isn’t just about statutory compliance. A properly structured workers’ comp program:
• Reduces employee injury frequency
• Limits third-party over actions
• Improves defense against labor law claims
• Keeps experience modification factors under control
Poor workers’ comp management can increase both insurance costs and lawsuit severity.
⸻
Why Working With the Right Insurance Advisor Is Critical
This is where BGES Group comes in.
At BGES Group, we specialize in working with New York contractors across all trades. We understand:
• New York Labor Law exposure
• OCIP and CCIP projects
• Additional insured and contractual risk transfer
• Completed operations issues
• Workers’ compensation strategies
• Umbrella and excess liability placement
• How underwriters view New York risk
We don’t just “sell policies.” We help contractors identify where lawsuits come from, where insurance stops, and how to structure coverage to reduce exposure before claims happen.
⸻
Insurance as Part of a Larger Protection Plan
The smartest contractors treat insurance as one layer of protection—not the only one.
A strong protection plan includes:
• Proper legal entity structure
• Sound contracts
• Disciplined operations
• Safety programs
• Correct insurance placement
• Ongoing reviews as the business grows
BGES Group works alongside attorneys, CPAs, and contractors to make sure insurance supports the broader risk strategy—not undermines it.
⸻
Final Thoughts
Large lawsuits are not a matter of “if” in New York construction—they are a matter of when. Contractors who survive and thrive are the ones who plan ahead, structure their companies properly, and work with professionals who understand the realities of New York risk.
Again, we are not attorneys, and you must seek legal advice before implementing any structural changes. But ignoring these issues entirely is far riskier than addressing them proactively.
⸻
About BGES Group
BGES Group is a New York–based insurance brokerage specializing in construction insurance and workers’ compensation for contractors and businesses across all industries. We help clients identify risk, close coverage gaps, and position their companies for long-term stability in a challenging legal environment.
Contact Information:
• BGES Group
• Website: www.bgesgroup.com
• Phone: 914-806-5853
• Email: bgesgroup@gmail.com
If you’re a New York contractor and want a second set of eyes on your insurance program—or want to understand where your real exposure lies—BGES Group is here to help.