If you’re an Umbrella Insurance Carrier how many accounts do you have to write to pay a $20 million dollar claim? The answer is not enough, which is why the pricing on NY Construction Umbrella Insurance policies have doubled since the January 1st . The biggest drivers are the reinsurance treaties that have been renewed at much higher insurance rates.
The problem stems not just from the two high profile crane accidents that occurred in Manhattan back in 2009, but from the NY States Labor Laws 240 & 241 , also known as the Scaffold law. In most other states large claims that would pierce the underlying general liability insurance policy would be a rare event. “ In NY the Labor Law claims start at $ 1 million and usually settle for between $ 2 & $ 3million almost routinely , imposing absolute liability on Building Owners, General Contractors, and Developers” stated Howard Klar, general partner of Gallo, Vitucci, and Klar.
Adding to this troublesome dynamic is the fact that base general liability costs for construction firms are up a minimum of 25% to 100% contingent on scope of work and geographic work location. This too effects the cost of umbrella insurance as the premium is usually priced as a % of general liability costs. Further the NYC Department of Buildings new liability insurance mandate that stipulates certain projects must maintain a higher project specific liability limit ; ranging from $5 million up to $80 million of additional liability insurance limit.
Prior to January 1st the industry would see $10 million of additional umbrella liability insurance priced typically at approximately 40% of the price of the construction general liability insurance premium. Post January 1st clients that used to seek a $10 million limit are now seeking $15 million thanks to the new NYC DOB ruling. The cost is 75% to 100% of the now higher general liability insurance premium, contingent on scope of work, and project location. Additionally it typically would take 2 to 3 days to underwrite , quote , and bind. Now it's upwards of 5 to 10 business days contingent on size and complexity of the project.
What’s the answer? The macros are the macros, that said focus on the cost of your primary construction general liability insurance. The cost of your umbrella liability insurance or excess liability insurance is predicated off your primary construction general liability policy. For tips on managing your insurance costs read our previous article 7 Tips To Position Your Business During a Hard Insurance Market.Need further clarification call a Risk Advisor to help manage your cost, get quotes and boost your profit margin.