New York City Fixes Contractor Insurance Rule After Agents Sound Alarm

June 23, 2011

New York insurance agents are welcoming a decision by a New York City government agency that they say will make it easier for contractors to meet the city’s insurance requirements.

The New York City Department of Buildings said that it will modify its general liability insurance requirements for contractors. The department also agreed not to enforce the advance notice of cancellation requirement beyond the standards contained in New York Insurance Law, according to the Independent Insurance Agents and Brokers of New York.

The agents’ group worked with lawyers and other insurance interests to change a new building department rule, which became effective June 13, requiring contractors seeking permits from the department to meet enhanced standards for general liability insurance. Among other things, this rule prohibited insurance that does not cover a contractor’s legal liability for injuries or property damage resulting from the contractor’s agreement to pay for liability claims against another party. It also required all policies to guarantee that the insurance companies would send written notices to the department should the companies cancel or change the policies.

Agents told city officials that almost all commercial general liability insurance policies contain language that removes coverage for liability assumed under some contracts. Also, insurance companies differ on their willingness to provide advance notice of cancellation to entities other than the policyholder.

IIABNY said it worked with the New York State Bar Association and others in the insurance industry to make city buildings department officials aware of these problems and learned yesterday that the department had agreed to modify its requirements.

According to a memo from the department to the NYSBA, the department will accept policies that exclude liability assumed under contracts if the policies make exceptions for certain types of contracts. Also, the department agreed not to enforce the advance notice of cancellation requirement beyond the standards contained in New York Insurance Law.

“The Buildings Department’s decision is great news for New York City contractors,” said IIABNY Chair of the Board Christopher A. Brassard. “Contractors will have a much easier time meeting the requirements now. We appreciate the department’s willingness to work with us on this issue.”

The regulation still requires contractors’ liability insurance to cover injuries or damage arising from things such as completed work, residential construction, third parties’ liability for injuries to the contractors’ employees, and a specified building exterior finishing system. Brassard noted that some insurance companies might be reluctant to provide some of these coverages, but said that the department’s action had solved much of the problem.

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