Demand for new construction both in and outside New York City is robust, with renewed confidence in the aftermath of the pandemic. In 2021, builders throughout the city — Manhattan, Queens, Brooklyn, Staten Island and the Bronx — filed permits for 2,017 structures ranging from single-car garages to towering skyscrapers, a 14% increase compared to 2020.*

New York is also set to receive an infusion of federal aid from the Bipartisan Infrastructure Investment and Jobs Act to fund road and bridge repairs, water infrastructure upgrades, subway accessibility, airport expansion and other projects.

This is all good news for the construction industry throughout the state and city. However, there are also roadblocks that the industry continues to face.

Supply Chain Delays and Inflation Continue to Cause Trouble

"The industry continues to experience ongoing supply chain delays of key materials and supplies such as lumber, appliances and windows — which in turn cause project delays," says Mike Mulvey, executive vice president and leader of the Northeast Construction practice for Risk Placement Services (RPS).

"Inflation is another concern with the cost of labor and materials going up, which has a direct impact on the cost of claims and insurance."

The Impact of New York Labor Laws on Insurance Availability and Capacity

The New York labor laws make insuring the construction industry challenging. Provisions in the laws allow certain injured workers to directly sue companies (property owners) on whose land and facilities the workers are operating, even if the workers are employed by an independent contractor hired by the corporation that owns the job site. Workers can sue a property owner for contributing to their injury.

"The laws place ultimate responsibility for a safe place to work on the property owner," explains Mulvey.

"With very few exceptions, these laws impose absolute liability on property owners for breach of certain safety duties that lead to gravity-related injuries, regardless of whether the owner actually controlled or supervised the work being done by the contractor's employees while on-site."

The laws and resulting claims have driven up insurance costs and limited the number of carriers willing to write coverage in the state.

"We have seen a lot of movement in the insurance space," says Mulvey. "This movement includes new entrants as well as evolving carrier appetites from those who have been in the market for a while."

On the excess side, capacity continues to be reduced.

"Depending on the attachment points, where carriers once put up between $10 million to $25 million in limits, they are now writing $5 million. On a specific placement, today you need five carriers to reach $25 million of limits in lieu of two or three. Managing capacity and determining how best to place excess coverage is critical," Mulvey explains.

NY Construction Trends: What to Watch and How to Proceed

Mulvey notes several issues the insurance industry should keep its eye on, including how the backlog of claims will play out.

"Now that the courts have reopened post-COVID, the backlog of claims will begin to be addressed over the next one to two years, and we'll see the type of losses the industry will experience."

He's also watching the potential rise in construction defects in new residential construction, thanks to operations impacted by COVID during the last two years with reduced labor and the availability of quality materials.

The push towards "green," environmentally friendly construction is a trend to watch in terms of how the materials used will impact claims and insurance costs.

Mulvey strongly recommends keeping communications open with clients, beginning discussions and meetings early. Discuss what the insurance market looks like so that you can manage expectations. Get submissions in early and make sure they are detailed so that underwriters prioritize your accounts.*

Ogorodnikov, Vitali."YIMBY's 2022 Construction Report Reveals 45,019 New Residential and Hotel Unit Filings In New York City," New York YIMBY, Apr 4, 2022.

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