New York has one of the most challenging insurance markets for construction companies in the country, largely due to the impact of Labor Laws 240 and 241. These laws, originally intended to protect workers, have significantly increased liability costs for contractors, leading many insurance companies to exit the New York market entirely. As a result, the cost of general liability insurance has skyrocketed, making it harder for construction firms—especially small and mid-sized contractors—to stay competitive.
This article explores Labor Laws 240 and 241, their effects on liability insurance, and the growing challenges New York contractors face in securing affordable coverage.
Understanding Labor Laws 240 and 241
Labor Law 240 – The “Scaffold Law”
New York Labor Law 240, commonly known as the Scaffold Law, is one of the most contractor-unfriendly laws in the nation. It imposes absolute liability on property owners and general contractors for elevation-related injuries on construction sites. This means that if a worker falls from a height—whether from scaffolding, ladders, roofs, or any other elevated surface—the owner or general contractor is fully responsible, regardless of whether the worker was partially at fault.
Unlike most personal injury cases, where comparative negligence applies (meaning fault is shared between parties), the Scaffold Law does not allow for a worker’s negligence to be considered. Even if a worker disregards safety protocols, fails to use provided safety equipment, or was under the influence at the time of the accident, the contractor is still liable.
Labor Law 241 – Construction Site Safety
Labor Law 241 complements Labor Law 240 by setting strict safety requirements for construction, excavation, and demolition sites. Unlike the Scaffold Law, 241 allows for comparative negligence, meaning liability may be shared if a worker contributes to their own injury. However, it still imposes strict safety standards that owners and contractors must follow.
This law gives workers broad rights to sue for injuries caused by violations of specific safety codes. It also opens the door for costly litigation, with courts often ruling in favor of injured workers—even in cases where the contractor had comprehensive safety measures in place.
How These Laws Impact the New York Insurance Market
Because Labor Laws 240 and 241 increase the liability burden on contractors, they have driven significant changes in New York’s construction insurance market.
1. Insurance Companies Are Leaving New York
The absolute liability imposed by the Scaffold Law makes insuring construction projects in New York extremely risky for insurance carriers. The number of multi-million-dollar injury settlements resulting from these laws has led to major insurers pulling out of the market.
Several well-known insurance providers have stopped offering general liability coverage for contractors in New York, leaving a limited number of carriers willing to underwrite policies. Those that remain charge significantly higher premiums to offset their risk.
2. Insurance Costs Are Skyrocketing
With fewer insurance companies willing to provide coverage, competition is reduced, leading to higher premiums for contractors. New York construction firms now face some of the highest liability insurance costs in the country.
• General liability insurance for construction contractors in New York can cost 2 to 5 times more than in other states.
• Some contractors pay over $1 million per year in liability insurance premiums, particularly for high-rise or infrastructure projects.
• Many smaller contractors are forced to work without insurance or use bare-minimum policies, putting them at significant financial risk.
3. Increased Litigation and Payouts
Because of the absolute liability standard in Labor Law 240, injury claims frequently lead to massive settlements or jury awards. Trial lawyers aggressively pursue Scaffold Law cases because they know the law favors injured workers.
• A single Scaffold Law claim can exceed $10 million in damages, even in cases where the worker’s own negligence played a role.
• In 2022, a New York court awarded $24 million to a worker who fell from scaffolding, despite allegations that he failed to use the provided safety harness.
• The growing number of high-dollar settlements makes it more expensive for insurers to operate in New York, which in turn increases premiums for all contractors.
4. Limited Availability of Excess Liability Coverage
In addition to rising general liability costs, contractors are also struggling to obtain excess liability (umbrella) coverage. Many projects require $5 million to $10 million in coverage, but insurers have significantly reduced the availability of excess liability policies in New York.
• Some carriers have stopped offering umbrella coverage for construction companies altogether.
• Those that still provide coverage have raised minimum premiums and tightened underwriting requirements.
• Contractors are often forced to buy policies from multiple carriers to meet project requirements, further driving up costs.
The Impact on New York Contractors
1. Higher Costs for Public and Private Construction
Because liability insurance costs are built into project budgets, higher premiums translate into more expensive construction projects. This affects both private developers and public infrastructure projects, making it more expensive to build in New York compared to other states.
• New York taxpayers end up paying millions more for public projects due to inflated insurance costs.
• Developers are increasingly choosing to build in other states to avoid the high costs of construction liability insurance.
2. Fewer Job Opportunities for Smaller Contractors
For small and mid-sized contractors, the cost of insurance can be the difference between staying in business and shutting down. Many small construction firms cannot afford the rising premiums and are either:
• Leaving New York for other states with more contractor-friendly laws.
• Operating without adequate insurance, exposing themselves to financial ruin if an accident occurs.
• Taking on fewer projects, limiting job opportunities for workers in the construction industry.
3. Subcontractors Face Higher Hurdles
Many general contractors now require higher insurance limits from subcontractors, making it even more difficult for smaller firms to secure work. Some subcontractors are forced to take on high-risk policies with extreme exclusions, leaving them vulnerable in the event of a claim.
Potential Solutions and Reforms
While some industry leaders have pushed for Scaffold Law reform, efforts to change the law have been strongly opposed by labor unions and trial lawyers, who benefit from the current system.
Possible solutions include:
• Introducing comparative negligence to Labor Law 240, which would allow courts to consider worker negligence in injury cases.
• Creating a state-backed insurance fund to help reduce premiums for contractors struggling to find affordable coverage.
• Encouraging alternative dispute resolution (such as arbitration) to reduce the cost of litigation and settlements.
Final Thoughts
New York’s Labor Laws 240 and 241 were originally designed to protect workers, but their unintended consequences have made liability insurance nearly unaffordable for contractors. With insurance companies leaving the market, premiums skyrocketing, and fewer opportunities for small businesses, the construction industry is feeling the pressure.
Without reform, construction costs will continue to rise, driving business out of New York and putting contractors at risk. Until lawmakers take action, contractors must navigate one of the toughest insurance markets in the country, finding creative ways to stay compliant while managing costs.
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