N.Y. Senate, Assembly Rejects Wrap-Up Proposal

March 28, 2001

The New York State Senate and Assembly introduced budget bills last week that omitted an Administration proposal that the Independent Insurance Agents of America, New York say would have proved costly for contractors and taxpayers alike.

The proposal, contained in the Administration’s budget legislation introduced in January, would allow authorities to require wrap-up insurance coverage for public construction projects in New York.

In effect, the proposal could have forced all contractors employed on a public construction or other building project receiving government funding to have their workers ‘ compensation and general liability coverage obtained through the same source. Currently, Section 2504 of the New York State Insurance Law prohibits any officer or employee of New York State or of any public corporation or public authority from requiring a bidder on a public building or construction project to obtain insurance from a particular insurer, agent or broker. The prohibition applies to contractors, as well as subcontractors, and includes such work as road construction and school or government building projects.

“The wrap-up proposal in the Administration’s budget bill would have created major problems for independent insurance agents and their contractor clients,” said IIAANY President Steven J. Spiro. “Our members would have lost the ability to ensure that their clients in the construction industry are properly covered when they are employed on these types of projects.”

Wrap-up insurance programs are the equivalent of buying insurance in bulk, explained Spiro, who is also president of Spiro Risk Management Inc., a Valley Stream insurance agency. “They eliminate competition, boost insurance costs and increase the potential for fraud.”

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