New York construction contractors operate in one of the most legally complex environments in the country. While many contractors believe their general liability policy protects them from lawsuits arising out of job site accidents, the reality is often very different. One of the most misunderstood issues in construction insurance is whether a contractor’s liability policy actually provides protection for claims brought under New York’s labor laws.
These laws can create massive financial exposure for contractors, subcontractors, and property owners. If your insurance policy contains the wrong exclusions, you may find yourself defending a lawsuit with little or no coverage.
Before you assume you are protected, it is important to understand how New York labor laws work and what to look for in your liability insurance policy.
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Understanding New York Labor Laws
New York has some of the most contractor-unfriendly labor laws in the United States. The most significant are Labor Law 200, Labor Law 240(1), and Labor Law 241(6). These statutes create legal liability for construction accidents and often allow injured workers to sue parties other than their employer.
Labor Law 240(1) – The “Scaffold Law”
Labor Law 240(1) is commonly referred to as the Scaffold Law. This law applies to gravity-related accidents such as:
• Falls from ladders
• Falls from scaffolding
• Falls from roofs or elevated work areas
• Injuries caused by falling objects
The key issue with Labor Law 240 is absolute liability. If a worker falls from a height or is struck by a falling object, the property owner and general contractor can be held liable regardless of the worker’s own negligence.
This means that even if a worker misuses equipment or ignores safety instructions, the contractor or property owner may still be responsible for the damages.
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Labor Law 241(6)
Labor Law 241(6) involves violations of specific safety regulations under the New York Industrial Code. These claims often arise from:
• Unsafe work conditions
• Improper safety equipment
• Violations of construction safety rules
Unlike Labor Law 240, comparative negligence may apply, but the financial exposure can still be significant.
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Labor Law 200
Labor Law 200 is essentially a codification of common-law negligence related to workplace safety. If a contractor or owner had control over the worksite and failed to provide a safe working environment, they can be held liable for injuries.
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Why Workers’ Compensation Is Not the Whole Story
Most contractors believe their workers’ compensation policy protects them from lawsuits involving employee injuries. While workers’ compensation generally prevents employees from suing their employer directly, New York law allows injured workers to sue other parties involved in the project.
For example, an injured subcontractor’s employee may sue:
• The property owner
• The general contractor
• Another subcontractor
When this happens, those parties may attempt to bring the injured worker’s employer into the lawsuit through third-party action over claims or contractual indemnification agreements.
This is where your general liability insurance policy becomes critically important.
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The Hidden Problem: Labor Law Exclusions
Many contractors are shocked to discover that their liability policy contains exclusions that limit or eliminate coverage for labor law claims.
Some policies may include:
• Labor Law exclusions
• Action over exclusions
• Employee injury exclusions
These endorsements can dramatically change how your policy responds to lawsuits.
If your policy excludes claims involving employee injuries or action-over claims, you could be forced to defend a multi-million dollar lawsuit without proper insurance protection.
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Watch Out for “Action Over” Exclusions
An action over exclusion is one of the most dangerous endorsements a contractor can have in New York.
This exclusion typically removes coverage when an injured worker sues a third party and that third party attempts to bring the employer into the lawsuit through indemnification or contribution claims.
In practical terms, this means:
1. A worker gets injured on a jobsite.
2. The worker sues the property owner or general contractor.
3. The owner or GC brings the subcontractor (the employer) into the lawsuit.
4. The subcontractor’s insurance refuses coverage because of an action-over exclusion.
The contractor is then responsible for defense costs and potential damages.
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Employee Injury Exclusions
Another common problem is the employee injury exclusion.
While some exclusions are intended to avoid duplication with workers’ compensation coverage, certain versions are written so broadly that they eliminate coverage for claims related to employee injuries altogether.
This can leave contractors exposed to:
• Third-party lawsuits
• Contractual indemnification claims
• Labor law litigation
A properly structured liability policy should allow coverage to apply when a third party sues the contractor due to an employee injury.
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Temporary Worker, Volunteer, and Casual Labor Exclusions
Contractors should also carefully review their policies for exclusions related to different categories of workers.
Some policies attempt to exclude injuries to:
• Temporary workers
• Casual laborers
• Volunteer workers
This can create a dangerous coverage gap.
For example, if a contractor hires a worker for a short-term project or uses a day laborer and that individual gets injured, the insurance company may attempt to deny coverage if the policy excludes injuries to temporary or casual workers.
Contractors often do not realize these exclusions exist until a claim occurs.
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Why Policy Structure Matters
Not all liability policies are created equal.
Two policies may appear identical based on price and limits, but their exclusions can dramatically affect the coverage.
Important elements contractors should review include:
• Labor law exclusions
• Action-over endorsements
• Employee injury exclusions
• Temporary or casual worker exclusions
• Contractual liability provisions
• Additional insured wording
The wrong combination of exclusions can turn what appears to be a standard liability policy into one that provides very limited protection for construction-related claims.
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The Importance of Working With Construction Insurance Specialists
Construction insurance in New York is highly specialized. Many general insurance brokers do not fully understand the impact of labor law exclusions or how they affect contractors’ risk.
An experienced construction insurance broker will carefully review policies to ensure they are structured correctly and will negotiate with insurance carriers to avoid problematic endorsements whenever possible.
The goal is to make sure that when a claim occurs, the policy responds the way the contractor expects.
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How BGES Group Helps Protect New York Contractors
For contractors operating in New York, having the right insurance advisor can make a significant difference in how well your business is protected.
BGES Group specializes in construction insurance and workers’ compensation programs designed specifically for contractors and construction-related businesses.
BGES Group works with contractors to:
• Review liability policies for dangerous exclusions
• Identify potential labor law coverage gaps
• Structure policies to provide stronger protection
• Ensure contractual insurance requirements are met
• Help contractors understand how their policies respond to claims
With extensive experience in New York construction insurance, BGES Group understands the unique challenges contractors face in a labor law environment.
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Contact BGES Group
If you are a contractor operating in New York, it may be worth reviewing your liability policy to make sure you are properly protected against labor law claims.
BGES Group
Construction Insurance & Workers’ Compensation Specialists
Gary Wallach
Phone: 914-806-5853
Email: bgesgroup@gmail.com
Website: www.bgesgroup.com
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Disclaimer
This article is for informational purposes only and does not constitute legal or insurance advice. Insurance policies vary widely based on carrier, endorsements, and underwriting guidelines. Contractors should review their policies with qualified insurance professionals and legal advisors to fully understand their coverage.