Many New York contractors believe that once they purchase a Commercial General Liability (CGL) policy, they are fully protected. Unfortunately, that is often not the case. Over the past several years, insurance carriers have added numerous exclusions to contractor policies that significantly limit coverage.
Some of these exclusions are buried deep in the policy endorsements and may not be obvious when a contractor first reviews the documents. Yet when a claim occurs, these exclusions can be the difference between the insurance company paying the claim or leaving the contractor responsible for hundreds of thousands—or even millions—of dollars in damages.
Below are 10 of the most dangerous exclusions commonly found in New York contractor liability policies that every contractor should understand before a claim happens.
⸻
1. Labor Law Exclusions
New York has some of the most contractor-unfriendly laws in the country, specifically New York Labor Law Sections 240 and 241, often called the Scaffold Law.
These laws make property owners and general contractors automatically liable for gravity-related injuries such as falls from ladders or scaffolding. When these claims occur, the liability is typically pushed back onto subcontractors through indemnification agreements.
Some insurance carriers attempt to eliminate this exposure by adding Labor Law exclusions to the policy. If such an exclusion exists, the policy may not cover claims involving these laws—even though they represent some of the largest claims in the construction industry.
⸻
2. Action Over Exclusions
Closely related to labor law claims are Action Over exclusions.
Normally, when an employee is injured on the job, workers’ compensation insurance pays the claim. However, under New York law, injured workers can still sue third parties such as the building owner or general contractor. Those parties then file a lawsuit back against the subcontractor that employed the worker.
This process is called an “action over.”
If a contractor’s liability policy contains an Action Over exclusion, the insurance company may refuse to defend or indemnify the contractor in these situations.
⸻
3. Employee Injury Exclusions
Another dangerous exclusion limits coverage for injuries involving employees, leased workers, temporary workers, volunteer workers, or casual laborers.
Some policies contain very broad wording that excludes coverage for injuries to anyone performing work on behalf of the contractor, regardless of employment status.
This can create serious coverage gaps, especially for contractors who occasionally use day laborers or temporary workers.
⸻
4. Residential Construction Exclusions
Many insurance carriers today have strict restrictions on residential construction.
Policies may exclude coverage for:
• Work on one- or two-family dwellings
• Work on condominiums or cooperatives
• Work on multi-family buildings
• Exterior residential construction
Contractors often assume their policy covers all their work, only to discover that residential jobs—some of their most common projects—are excluded.
⸻
5. Height Limitations
Some policies limit coverage based on the height of the building being worked on.
Common limitations include:
• No work above 3 stories
• No work above 40 feet
• No work on buildings above a certain number of floors
If a contractor performs work above the stated limit, the insurance carrier may deny the claim entirely.
⸻
6. EIFS and Exterior Stucco Exclusions
EIFS (Exterior Insulation and Finish Systems) and certain types of stucco or exterior cladding systems have been associated with major water intrusion claims.
As a result, many carriers add exclusions for:
• EIFS installation
• Exterior stucco systems
• Exterior finishing systems
Contractors who perform stucco work, exterior plastering, or façade finishing must carefully review their policies to ensure their work is not excluded.
⸻
7. Subsidence and Earth Movement Exclusions
Contractors performing excavation, site work, or foundation work often face another serious limitation: subsidence exclusions.
These exclusions remove coverage for claims involving:
• Soil movement
• Settlement
• Earth shifting
• Structural movement caused by excavation
Even small excavation jobs can potentially trigger these exclusions.
⸻
8. Roofing Exclusions
Roofing work is considered high risk due to both fall hazards and water intrusion claims.
Some contractor policies completely exclude:
• Roofing installation
• Roof repairs
• Torch-down roofing
• Flat roof systems
If a contractor performs even occasional roofing work, this exclusion can become a serious problem.
⸻
9. Subcontractor Warranty Endorsements
Many policies now contain Subcontractor Warranty endorsements, which require contractors to verify that all subcontractors:
• Carry their own liability insurance
• Provide certificates of insurance
• Name the contractor as an additional insured
• Maintain specific coverage limits
If the contractor fails to meet these requirements, the insurance company may deny coverage for claims involving the subcontractor’s work.
⸻
10. Completed Operations Exclusions
One of the most overlooked limitations involves Completed Operations coverage.
Many construction defect claims arise years after a project is completed, often involving issues such as:
• Water intrusion
• Structural defects
• Improper installation
Some policies either exclude completed operations entirely or restrict coverage for certain types of work, such as residential construction or exterior cladding systems.
Without proper completed operations coverage, contractors may face lawsuits long after the job is finished with little or no insurance protection.
⸻
The Bottom Line
Contractors in New York face significant liability exposures due to strict labor laws, complex construction projects, and aggressive litigation. Unfortunately, many insurance policies contain exclusions that eliminate coverage for the very risks contractors face every day.
A policy that appears affordable may contain endorsements that severely limit protection. That is why it is critical for contractors to work with an insurance professional who understands the unique risks involved in construction.
⸻
About BGES Group
BGES Group (chatgpt://generic-entity?number=0) specializes in construction insurance and workers’ compensation solutions for contractors in New York and across the United States.
We help contractors identify dangerous exclusions in their policies and structure coverage designed to protect them from the complex liability risks that exist in today’s construction environment.
Our firm works with contractors of all sizes, including:
• General contractors
• Subcontractors
• Interior trades
• Excavation contractors
• Demolition contractors
• Specialty construction trades
Our goal is simple: make sure contractors truly understand what their insurance policies cover before a claim happens.
⸻
Contact Information
Gary Wallach
BGES Group
Phone: 914-806-5853
Email: bgesgroup@gmail.com
Website: www.bgesgroup.com
If you are a contractor and are unsure whether your liability policy contains dangerous exclusions, contact us for a review of your coverage. A simple policy review today could prevent a devastating financial surprise tomorrow.
⸻
This article is for informational purposes only and does not constitute legal or insurance advice. Coverage depends on the specific terms, conditions, and exclusions of each insurance policy.