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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