Why Is Construction Insurance in NYC So Expensive?

If you build things in New York City—like houses, buildings, or even just fix things—you have to follow a very old rule called the Scaffold Law (Labor Law § 240).

This law says that if a worker falls or gets hurt because they were working up high (like on a ladder or scaffolding), the builder or owner of the building is always responsible, even if it’s not their fault.

Sounds crazy, right? But that’s how the law works in only New York—it was made in the 1800s and hasn’t changed. And because of it, insurance for construction in NYC is 10x more expensive than in other states.

Let’s break it down so it’s easy to understand!

What is the Scaffold Law?

Imagine you’re playing on a jungle gym. If you fall, whose fault is it? Maybe you weren’t being careful, or maybe the playground was broken.

But in NYC construction, it doesn’t matter—if a worker falls, the person who owns the project or hired the worker has to pay for everything, even if the worker wasn’t being safe.

That means construction companies and building owners get sued a lot—and that’s why insurance companies charge way more money to cover them.

What is a Hard Hammer vs. Soft Hammer?

When a company gets sued, the insurance company has to decide:

1. Should they settle and pay the worker?
2. Should they go to court and fight?

Since NYC has this strict law, insurance companies don’t like to fight—they want to settle fast. But some companies don’t want to pay if they think they’re not at fault. That’s where Hard Hammer and Soft Hammer come in.

Hard Hammer: If the insurance company wants to settle but the construction company wants to fight and they lose, the construction company has to pay a big part of the bill.

Soft Hammer: If the construction company wants to fight and loses, they only have to pay a small part of the bill.

Because NYC courts almost always side with the worker, these cases cost millions of dollars—which is why insurance is so expensive.

What is "Action Over" Coverage?

Here’s a simple story:

Let’s say a worker gets hurt on a construction site. They can’t sue their boss because of workers’ compensation laws.

So instead, they sue the building owner or the general contractor—because Scaffold Law says they must pay no matter what.

Then the general contractor sues the worker’s actual boss (the subcontractor) to get the money back.

This is called “Action Over”—and because it happens all the time, insurance for it costs a fortune.

If a construction company doesn’t have Action Over coverage, they can lose their entire business in one lawsuit.

How Does This Affect Building Owners?

If you own a building and hire someone to work on it, you better be careful.

• If a worker falls, YOU can get sued even if you didn’t do anything wrong.
• If your contractor doesn’t have good insurance, you might have to pay millions of dollars.
• Even small jobs—like fixing a window—can lead to huge lawsuits.

That’s why property owners should always check that their contractors have the right insurance coverage.

Why NYC Contractors and Property Owners Need a Special Insurance Broker

Because NYC is the only state with this crazy law, insurance here is different from other states.

You need an insurance broker who understands NYC construction and knows how to:

 Find the right insurance to protect you from lawsuits.

 Make sure you have Action Over coverage.

 Help budget for these high costs so you don’t lose money.

At www.serheydavidson.com, we help:

• Contractors get the insurance they need.
• Property owners protect their buildings.
• Developers understand how to budget for NYC’s high costs.

Final Thoughts: NYC Construction is Expensive—Be Prepared!

The Scaffold Law is not going away anytime soon. As long as it exists, insurance will stay super expensive.

If you’re a contractor or property owner, you need to make sure you’re covered.

 Want to talk about how to budget for NYC’s expensive insurance?

 Contact me at www.serheydavidson.com, and I’ll help you stay protected!