Insurance Crisis for Histo Presto Contractors in NY
We have been hit, like a shotgun wedding, with a 600% increase in our general
liability insurance. We found out about our increase on September 30, we had
until October 1 by 12 midnight to accept the increase, or else otherwise we
would be out of business on the morning of October 2, 2002. We are pissed. We
are determined to fight. We remain in business... though feeling for the time
being a bit shocked and imagining that we are working for the insurance
company, rather than the IRS. I am optimisitc that we will weather this
situation, though it does not look like an easy nut to crack.
We are not alone. For months now our associates and subcontractors, your
fellow BP preservationeers working in the NY region, have been asking us for
help in finding reasonably priced insurance. It is not only us that have
faced an increase, but all of our subcontractors and friends. There is an
incredible pressure for good and honest people to not want to be in the
contracting business in New York.
The Safe Place to Work Law sections 240-241, as I gather it, is that if a
worker is injured on a construction site that regardless of no fault or
negligence on the part of the contractor that the worker can sue outside of
Worker's Compensation. The crux of the matter is that a contractor in such a
liability case cannot present evidence of compliance with safe practice. You
cannot blame the insurance companies for running away as there is no limit to
their risk.
This insurance crisis is going to lead to a critical situation the
ramifications of which are not yet fully evident.
I am asking for your help if you can give it.
If you are an architect, conservator, contractor, building owner (residential
in particular) or design professional in New York State then please write a
letter and send it to your political representatives.
Following is a sample letter that I think explains the problem. If you would
like addresses for representatives then please contact me back channel. I
will be busy writing more letters.
Thanks,
Ken Follett, VP
Apple Restoration
10/03/2002
The Honorable George E. Pataki
Governor, New York State
Executive Chamber
Capitol Building
Albany, NY 12224
RE: Construction Liability Reform
Dear Governor Pataki,
We are a specialty contractor in the field of historic masonry preservation
in Kings County that employs 40 people and subcontracts work to 8
subcontractors that employ another 50 people. We have been in business since
1984 and since that time we have played a role in maintaining the buildings
of New York and keeping them from falling on people. For several years we
have been involved at the 42nd Street and Times Square area maintaining for
New York the stabilization of the existing theaters and buildings. At times
this was emergency work and we were on call to provide service at quick
notice. We continue to provide services to the state and the city in
maintenance of buildings. We played a crucial role in the maintenance of the
New Amsterdam Theater, a role that helped to prevent the structure from
collapsing from snow load prior to an agreement with the Disney Corporation
to take over the building. We have worked on several significant, and minor
projects in New York. One of our projects received a preservation award from
the state, and we are consistently called upon to provide advice to project
managers working on state properties. We were involved with the design phase
for the retail redevelopment of Grand Central Terminal. We have quietly done
service to New York and to our city.
Recently our liability insurance policy came up for renewal and we are faced
with a 600% increase in annual premium. We have no choice, if we wish to
remain in business, but to accept this increase, as only one insurance
company would make an offer -- and to hope that our customers will accept an
increase in our costs to them. We are not alone in this predicament as every
contractor that we know of in New York is facing a similar crisis. If we are
not able to survive this situation then we may be forced to close our company
and to let go of our employees, many of which have been with us from the
start of the company. I can assure you that if there is a need to rebuild
Manhattan then it is sensible that the contracting companies that have been
maintaining Manhattan for many years not be shut down and put out of
business.
One reason that we were given for the onerous increase in premium is the
state's construction liability law commonly known as the Safe Place to Work
Law. Because of this I am writing to express great concern regarding the dire
need for construction liability reform. We feel that a complete overhaul of
the state's liability laws found in sections 240-241 of the labor law is
needed.
We were also given the following reasons for the increase in cost of
liability:
1) Terrorism: no exclusion permitted and the government has not offered to
participate. Terrorism is silently effective if the result is that insurance
companies charge so much for liability insurance that small companies -- the
entrepreneurial spirit and backbone of our economy -- are put out of
business, jobs are removed from the workforce, and the city will see another
two decades of deferred maintenance of the building stock. Real estate owners
not wanting to pay for maintenance work resulted in decades of deferred
maintenance to begin with, eventually leading to buildings falling apart,
landing on people and killing them, and the enacting of laws to enforce
inspections and maintenance. If costs continue to increase for maintenance
work then owners will defer maintenance. There will also be an impact on the
architectural professions in a reduction of their market. And then there are
the sacred sites and non-profits that do not have money enough already to
maintain their properties. What are they going to do with a 20-50% increase
in costs?
2) A majority of construction insurance carriers have left the NY metro area,
which means that there is no longer competition between insurance carriers.
The insurance carriers that remain can charge whatever they feel like, as
there is no place for a contractor to go. The situation is made worse by the
fact that insurance carriers will not quote on costs until a few days prior
to the end of the current policy. In our case we had a choice to accept the
premium, or two days later shut down the business and halt all work. As we
are currently under contract with bonded work the situation is tantamount to
putting a gun to our heads and telling us to pay up.
3) Carriers do not want to offer insurance where there is residential
exposure. At first we thought this was not a problem as we do very little
work on private houses. It was explained to us that the insurance carrier
considers 'residential' as being any structure in which anyone lives,
including co-ops, condos, apartment houses, townhouses, and even a parish
house. Suddenly we see that 50% of our business is considered as residential
by the insurance company. If contractors cannot get liability insurance for
working on co-ops and condos then who is going to stop these buildings from
falling apart? The long-term costs of deferred maintenance are staggering
without even considering escalation of liability insurance. When all of the
residents and owners of these buildings find out that their maintenance costs
have drastically escalated then who will be blamed?
4) The general unprofitable insurance results and the lack of investment
income from the stock market. Well, we all suffer from the stock market when
our 401K and profit sharing programs evaporate… why do we need to get a
double hit from the insurance companies? If we want to encourage patriotism
and returning to living our lives with bravery in the face of international
terror, then what gives with the insurance crisis? Frankly, the insurance
crisis is an immediate and real threat to survival and to the well being of
employees and their families.
As you may surmise, on top of the Safe Place to Work Law there are compounded
several reasons that insurance has become a critical concern of our company
and others in the construction industry. This has an extremely negative
affect on our economy. Small businessmen and women myself included are
devastated by premiums skyrocketing out of control or becoming unavailable at
any price.
I beg that you attend to this crisis and that you give the citizens of New
York assurance that you will address this issue with haste. At the least we
urge you to strongly support legislation that would repeal sections 240-241.
We need your help and look forward to hearing from you.
Thank you for your attention to this very important issue affecting us all.
Sincerely,
Ken Follett, VP
Apple Restoration & Waterproofing, Inc.
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