Insurance Premiums are Driving Scaffolding Cost – Why?  

Insurance Premiums are Driving Scaffolding Cost – Why?  

In New York City, construction costs are at unprecedented levels, and they got there quick. We saw seemingly weekly increases during covid and since the hikes have not stopped. It’s a perfect storm of antiquated labor laws, fueling personal injury scams, that are are adding to the soaring insurance premiums, and owners are left to pick up the tab. Even routine façade maintenance is a sticker shock event, with scaffolding and other soft costs running into the hundreds of thousands, if not millions.

New York’s antiquated Scaffold Law known by industry insiders, and officially known as Labor Law § 240/241. There is a ton of information on google for and against this law. Enacted in 1885, it holds property owners and contractors absolutely liable for gravity-related injuries, regardless of any contributing negligence by the worker. This means falling from any height, or if something falls on to someone, whether the people involved are sober or not. While its original intent was to enhance worker safety, today it stands as a singular relic that is being exploited. New York is the only state that has such an uncompromising liability standard. 

Insurance premiums for construction projects in New York can be multiples of those in neighboring states. According to CRC Group the Tappan Zee Bridge replacement, where some estimates believe the Scaffold Law tacked on an additional $400 million in costs. 

Adding another layer are the fraudulent schemes exploiting the Scaffold Law which have proliferated, and have in turn caused both contractor and property insurance to skyrocket. These are elaborate schemes orchestrated by shady lawyers, doctors, and even MS-13 and Russian crime syndicates. Over the past four (4) years on jobs I have been overseeing I have seen a spike in these claims. In 2023, I know of five (5) claims on projects I was working on. It later came out that they all were giving addresses located in the city including Upper East Side and East Village, which is not typically where the work force lives and pointed to something suspicious. 

As reported by the NY Post migrant workers are being used as pawns in staged construction accidents and having procedures they don’t need. These fraudulent claims not only contribute to the overall increase in premiums, they do not make workers safer, and add unnecessary bureaucracy when hiring and vetting contractors insurance policies. 

Property owners find themselves ensnared in a costly web. Contractors are transferring their insurance burdens downstream, owners are left footing exorbitant bills for even the most routine maintenance. This financial strain can be particularly acute for co-op and condos, which often operate on tight budgets. The unexpected surge in maintenance costs can lead to increased fees for residents or special assessment, which is never popular within a building or deferred maintenance, potentially compromising building safety. Lately, we have seen several large commercial buildings defer facade maintenance, and opt to keep a shed in place without performing work. Recently, we were working next to 475 Fifth Ave, and one day the contractor disappeared, but not the bridge. One has to assume they ran out of money based on this Commercial Observer article.

In NYC, scaffolding isn’t just a nuisance it’s almost a running tax. Sidewalk bridges or scaffolding as most people refer, are the protective measures required by the city to keep the public safe either because the facade is in poor condition, and/or there is work taking place at the building that requires the sheds.

Needless to say many choose to live with a bridge, but that has a ripple effect. A study commissioned by NYC.gov and conducted in cooperation with Mastercard revealed that sidewalk sheds and scaffolding cost Manhattan businesses thousands of dollars each month in lost revenue. Restaurants and bars are hit hardest, experiencing a 3.5% to 9.7% decrease in weekly transactions in the six months following the installation of a shed. 

The call for reform is increasingly growing louder. The industry argues that the Scaffold Law is outdated, thereby inflating construction costs and stymieing progress. They advocate for a comparative negligence standard, which would consider the actions of all parties involved, rather than imposing absolute liability on owners and contractors. Such a shift would reduce premiums and help the city build new buildings and better maintain existing buildings.

The Scaffold Law stands as a costly anachronism of yesteryear when workers were more vulnerable. Its rigid liability standards combined with rampant fraud, enriching the doctors and lawyers, while causing the costs of doing business to go up precipitously. Routine maintenance jobs that used to be paid out of an operating budget, now require financing. Will the city embrace reform? Probably not…and if they do will everyone do the work to remove the scaffolding.

Ryan H.