BILL NUMBER: S7997

SPONSOR: BAILEY
 
TITLE OF BILL:

An act to amend the insurance law, in relation to requiring insurance
policies obtained by contractors, subcontractors and owners to cover
injuries to and deaths of workers

 
PURPOSE OR GENERAL IDEA OF BILL:

CLIPA will require insurance policies obtained by contractors, subcon-
tractors and owners, the workers of whom are protected by article ten of
the labor law, to cover injuries and death for those workers. Such poli-
cies will no longer be permitted to exclude such workers.

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1 names the bill the Construction Laborer Insurance Protection
Act ("CLIPA").

Section 2 adds a new subsection (k) to section 3420 of the Insurance Law
              

to require every policy or contract of insurance issued to an owner,
contractor or subcontractor performing the work of erection, demolition,
repairing, altering, painting, or cleaning of a building, structure or
edifice to provide coverage for bodily injury and death, and prohibits
them from excluding or limiting such coverage to persons covered by
Article 10 of the Labor Law.

 
JUSTIFICATION:

Insurance policies issued to owners, contractors, and subcontractors on
a construction project covered by Article 10 of the Labor Law should
cover liability for the bodily injury or death for any person who is
injured because of violations of the protections and mandates of that
article.

The problem this bill seeks to address is the practice of insurers
adding, and employers accepting, a specific exclusion in such policies
that denies such coverage for their own employees or other persons who
need coverage.

CLIPA prohibits the deceptive industry practice by a minority of insur-
ance companies who issue policies purporting to cover risks associated
with construction site accidents but actually exclude coverage for inju-
ries to construction workers.

Since construction workers are virtually the only persons permitted on
construction sites, these policies essentially cover none of the risks
to workers associated with construction. These policies are the very
definition of "illusory coverage." The premiums charged are a windfall
to the insurance companies issuing these policies.

The victims of this deceptive insurance practice are not limited to
construction workers. They also include property owners and general
contractors who require subcontractors to obtain insurance policies
naming them as additional insureds. When the coverage proves to be illu-
sory, property owners and general contractors are put at great financial
risk.
The victims of illusory policies extend further to workers' compensation
insurance carriers. These carriers depend upon recoveries in third-party
personal injury cases to recoup their expenditures for an injured work-
er's medical care and lost wages.  When coverage is illusory, an
adequate third-party recovery may not be available to an injured worker
who received workers' compensation benefits and, likewise, the workers'
compensation insurance carrier may not recoup any of the benefits paid
to the injured worker. These payments can easily exceed millions of
dollars over the lifetime of a catastrophically injured worker.

The State of New York is the final and inevitable victim of illusory
insurance policies. Workers' compensation benefits are classified by
levels based upon severity and permanency of injury. Most workers'
compensation benefits are available for only a limited period of time.
When these benefits are exhausted and the injured worker cannot resume
gainful employment, municipalities must bear the costs of continued
medical care through Medicaid and other public assistance programs.

 
PRIOR LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This bill shall be effective ninety days after enactment.