Steven Potolsky, Managing Director
North Shore Risk Management
The Lay of the Land
Local Law 11 requires that buildings over six stories be inspected every five years by a licensed engineer or architect and then certified as safe. Serious deficiencies need to be corrected in a timely manner. The so-called Scaffold Law – Sections 240 and 241 of the New York State Labor Law – requires that building owners and contractors provide a safe place to work with proper protections for the workers, specifically with respect to falls from heights. This can be as dramatic as falls from scaffolding high on a building, or as mundane as a fall from a low ladder. A worker is entitled to sue for pain and suffering and any other damages not covered by workers’ compensation benefits.
A number of years ago, a waterproofing contractor was hired by a building owner to handle facade repairs on a high-rise building. The contractor used drop scaffolding. The assistant to the foreman reminded the foreman to put on his safety harness, and his response was that he didn’t need the harness for a simple evaluation of the site work. The foreman fell from the scaffold to his death.
In a different situation, a general contractor was hired by a building owner to handle facade repairs on a high-rise building. That contractor, in turn, hired a subcontractor to handle the actual work. Scaffolding was erected on the site and an employee of the subcontractor was severely injured in a fall from the scaffolding.
My advice to owners of buildings, including co-op and condo boards, is to make sure that you employ proper risk-management techniques that transfer your risk to the contractors working at your buildings. This will take the form of properly worded “hold harmless” and indemnification clauses, requirements for additional insured status on liability programs, and insurance coverages to be provided that do not contain any “third party over” exclusions and/or restrictions on falls from heights. “Third party over” exclusions are restrictions placed on insurance policies that are sold to contractors so that the insurance carriers do not have to pick up any liability, defense, or indemnification brought via contractual obligations. The significance of these “third party over” exclusions cannot be stressed enough, as a large majority of construction contractors hired for relatively small jobs have purchased inexpensive insurance policies that will typically contain these exclusions.
In the first situation, the building owner was sued by the estate of the deceased foreman. Since the owner had a proper risk transfer with the waterproofing contractor, the insurance carrier for the waterproofing contractor settled the claim with the estate for $5 million.
In the second case, the building owner had a contract with the general contractor with proper risk transfer. The general contractor had a similar contract with the subcontractor, who failed to purchase adequate insurance. The subcontractor’s program had a “third party over” exclusion so insurance would not protect either the owner, the general contractor, or the subcontractor. The attorneys for the building owner tendered the claim to the general contractor, whose insurance carrier was ultimately responsible for the payment of damages to the injured employee of the subcontractor.
In conclusion, hire an experienced insurance agent to help guide you through this complicated process. Insurance claims not transferred by building owners can result in poor loss experience, limit the potential number of insurance companies willing to underwrite your risk, and ultimately result in much higher costs. n