If it feels like liability insurance premiums keep rising year after year, you’re not imagining it. Whether you’re a condo board member, co-op board member, or property manager, you’ve likely seen increased costs, reduced carrier appetites, higher deductibles, and more underwriting scrutiny.
A recent report discussed by the Empire Center for Public Policy argues that New York’s legal environment significantly contributes to these rising costs. According to the report, New York’s liability laws expose businesses and property owners to greater liability than most other states, which ultimately translates into higher insurance premiums and increased costs for everyone.
One of the biggest factors impacting liability insurance in New York is the state’s litigation environment. Carriers price insurance based on risk, and New York presents a unique challenge because claims tend to be more severe and more expensive than in many other states. The report points to several factors, including expansive liability laws, high-value verdicts and settlements, and legal standards that can make it easier for claims to proceed. According to the report, these factors contribute to higher insurance costs not only for businesses but also for housing, construction projects, healthcare, and everyday consumer goods.
For residential buildings, these costs don’t exist in a vacuum. When insurers pay larger settlements and verdicts, they eventually recover those costs through increased premiums. We’ve seen this firsthand in the New York habitational insurance market over the past several years.
This can result in:
- Higher general liability premiums
- Increased umbrella and excess liability costs
- Stricter underwriting requirements
- Reduced capacity from certain carriers
- More exclusions and coverage restrictions
Even buildings with favorable loss histories can feel the effects because insurers often evaluate broader legal and economic trends when determining pricing.
One issue frequently cited by insurers is New York Labor Law Sections 240 and 241, commonly known as the Scaffold Law. According to the report, New York remains the only state with a form of absolute liability that can hold property owners and contractors responsible for certain gravity-related construction injuries even when a worker’s actions may have contributed to the accident. The report also notes that Scaffold Law claims often result in settlements exceeding $1 million, with some cases reaching several million dollars.
Whether you agree or disagree with the law, carriers pay attention to these exposures when pricing policies for buildings that regularly hire contractors.
Many board members understandably focus on property claims, water damage claims, and everyday maintenance issues. However, some of the largest losses affect buildings during construction, renovation, façade projects, roofing work, elevator modernization, and other contractor activities.
A single serious bodily injury claim can create significant exposure for a building if proper risk transfer is not in place. When contracts, indemnification provisions, additional insured endorsements, and insurance requirements are inadequate, the building, board, and managing agent may find themselves defending claims that should have been transferred to the contractor and its insurers. This is another reason why liability insurance has become such a significant expense.
While boards cannot control New York’s legal climate, they can control their own risk management practices through strong contractor risk transfer. That means:
- Requiring written contracts with robust indemnification language
- Verifying that the building and managing agent are properly added as additional insureds
- Requiring sufficient general liability and umbrella limits
- Confirming contractors carry valid workers’ compensation coverage
- Reviewing exclusions that could eliminate coverage for the work being performed
- Ensuring insurance requirements are actually met rather than simply accepting a certificate of insurance at face value
Whether liability reform eventually reduces insurance costs remains to be seen. Until the legal climate changes, the best defense for co-ops, condos, and property managers is proactive risk management. Learn how our Contractor Review program can help, and reach out to us with questions anytime.
