Construction is a lucrative business.
New York and neighboring states boast a strong construction market right now – no matter where you look, new buildings are popping up. But having construction jobs also means opening yourself up to the possibility of construction lawsuits.
While most businesses will have a problem on their hands as soon as or soon after the job is done, in construction, it can take years for a problem to be uncovered and a suit to be brought in.
This is why it is extremely important to have and maintain appropriate insurance coverage with a policy that will cover you not only during the job but also after the job is done.
Let’s look at a four of the common New York construction liability lawsuits –
Construction Defect – This is probably one of the costliest construction lawsuits a contractor can experience, especially on a large project. Imagine, that one morning, as you sip your coffee, you get a phone call from an owner of a 100 apartment building you built 4 years ago. The plumbing was not done right, water seeped into the walls and created mold and other issues. You have been officially notified of an impending lawsuit. Your General Liability policy will be the one to turn to for coverage. There are a couple of things to keep in mind when looking at your policy:
“Your Work” Exclusion – This exclusion will effectively deny any coverage for construction defect claims, as it excludes coverage for a structure built by an insured contractor. This exclusion does have a subcontractor exception. The best way is to negotiate the removal of this exclusion. It is well worth the extra cost since a defect claim on a large construction project can be financially devastating.
Claims Made vs. Occurrence – Pay attention if your policy is occurrence or claims made based. If you have a claims made policy, it is important to realize that you have to keep the coverage after the project is completed for the policy to respond. New York’s construction defect statue of limitations is 6 years which means the claims made policy needs to be in effect for at least that long. Do not cancel the policy without discussing the implications with your agent and the options you have to maintain your coverage for past projects.
Time delay – Another common construction lawsuit has to do with not completing the project on time. There is no such thing as a perfectly smooth construction job. Something always goes wrong – from problems with subs to supplier sending wrong material to the developer/owner changing their mind halfway through the project. Delays are inevitable and sometimes no matter how hard you work, completing the work on schedule is just not possible. While not all delays are insurable, Delay In Completion endorsement is attached to your Builders Risk policy and insures against additional expenses incurred or income loss due to completion delay that occurs as a result of a covered property damage to the property.
Bodily injury – This is another claim scenario that falls under General Liability portion of your insurance portfolio. This type of lawsuit comes about when a third party alleges bodily harm as a result of your work. For example, you installed siding which fell and injured a passerby. General Liability will help pay for legal fees and damages to the third party.
Third Party Action Over / Scaffold Law Claims – These types of claim scenarios happen only in New York State. They occur because New York State imposes absolute liability on contractors for gravity related injuries with Labor Law 240. Not all General Liability policies cover this exposure, but until the law is repealed all policies should. However due to the high cost not all contractors can afford this coverage. These claims are the reason New York Contractors pay 10 times what contractors in other states pay.
As you can imagine these lawsuits can be extremely costly to defend and settle. Even one lawsuit on a big construction project, can have devastating financial implications for your business. A well designed insurance portfolio will help anticipate the possibility of a loss and have a plan in place to protect your business. That is why we recommend working with the best contractors insurance companies.
Here at GRBM Insurance, we work daily with contractors and know the ever changing construction market in and out. Call us today to review your insurance portfolio.
