Agents Warn of Insurance Complications for NYC Contractors

Insurance agents are warning contractors in New York City that they may not be able to obtain increased coverage requirements called for by city regulations set to go into effect next week.

Many of those new coverages are difficult or in some cases impossible for contractors to obtain, the Independent Insurance Agents and Brokers of New York said.

Those enhanced general liability coverages — mandated by the city’s Department of Buildings, as of June 13 — prohibits insurance that does not cover a contractor’s liability for completed work, explosions, collapses and work performed underground, the contractor’s agreement to pay for liability claims against another party, claims against another party for an injury to the contractor’s employee, work on residential properties and the use of a controversial finishing system for building exteriors.

“Virtually every general liability insurance policy contains provisions excluding coverage for liability a business assumes under some contracts,” said IIABNY Chair Christopher A. Brassard. “Policies typically make exceptions so that they cover liability assumed under construction contracts, but the basic exclusion is still there. This regulation will make the vast majority of policies unacceptable to the Buildings Department.”

In addition, the regulation requires all policies to guarantee that the insurance companies will send written notices to the department should the companies cancel or change the policies.

The problem, Brassard said, is that many insurers refuse to promise advance notice of cancellation to those who are not parties to an insurance contract.

“The Buildings Department is protecting New York City taxpayers by putting insurance requirements in place, and we support that,” Brassard said. “However, some of the terms they require are simply unavailable in the marketplace. Good contractors may decide that seeking permits from the department is not worth the trouble. In addition, the inability to meet their clients’ needs in this area places insurance agents and brokers in a bad position.”

IIABNY is urging the city to work with the insurance industry to develop more feasible coverage requirements.