Editorials
A First Step to Fix NY's Unsustainable Insurance Environment
There is some hope for improvement in New York state’s awful insurance coverage environment, but it’s unlikely to come from state lawmakers. Decades of attempts to reform New York state Labor Law 240(1) have failed to go very far legislatively. By conferring 100% negligence on employers for most fall-related injuries, workers involved in jobsite accidents can rely on the law as a basis for workers’ compensation claims and negligence lawsuits against companies. Any type of trip and fall is covered. Unlike most other states,
in New York, there is no opportunity for defendant employers to ask a court or jury to assign a fraction of fault for an accident to a worker who breaks with safety training, which would decrease an employer’s exposure and cost.
Slowly developing changes in construction and finance now have helped drive Empire State insurance costs higher. Immigrant workers perform many of the tasks in key trades. Also, lawsuit lending—outside investments in liability lawsuits in exchange for an interest that pays off in a settlement or verdict—has become part of a multibillion-dollar third-party legal funding industry. The plaintiff is likely to hold out for the highest possible settlement.
One building restoration contractor told ENR recently that his annual insurance premium rose to $2 million from $500,000 within the span of a few years. In the words of one big lender, “the trend toward normalizing litigation finance continues” (ENR 2/3 p. 24).
To fight back, some contractors and an insurer have released videotapes of staged accidents. After initial media reports that immigrant workers had been recruited and groomed for the insurance fraud, one of New York state’s most active personal injury law firms sought to hand off at least 165 cases it was handling to other attorneys—a sign of concern. It’s not clear how many of those cases will be continued.
Don’t count on state lawmakers to do anything. One small hope to improve the New York insurance environment—and lower costs for customers of construction and maintenance contractors—rests with the New York State Supreme Court Administrative Board. It sets rules for lawsuits, and since last spring, has proposed requiring a plaintiff to disclose if a lawsuit loan is backing a claim. Five states already require disclosure of third-party lawsuit loans.
The board started collecting comments on the proposed change last spring, with the New York County Lawyers Association also proposing some workable amendments and exceptions that would leave largely intact the main provisions of the disclosure rules.
We urge the board to press forward with its proposed changes. Lawsuit loans have opened the door wider to exploitation of the legal system in a way that harms both construction employers and the public. Disclosure requirements are a reasonable small step toward a fairer system that may also lower insurance costs in New York.
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