Insurance And Liability As Structural Cost Wedge
Sources: 1 • Confidence: Medium • Updated: 2026-03-02 13:17
Key takeaways
- New York contractors report spending roughly 10% to 12% of total construction costs on insurance versus about 2% in other states, and some subcontractors report insurance at 15% to 20% of their work volume.
- A contractor reports that labor availability has been a persistent operational risk for their business, not just a post-2020 issue.
- Higher interest rates increase construction costs by raising financing costs, making delays more expensive.
- A guest argues that unionization is often used as a scapegoat for NYC construction costs and that reforms should instead focus on hidden costs such as construction insurance.
- Transporting materials into New York City increases costs because suppliers outside NYC have reduced delivery productivity, described as one NYC delivery per day versus multiple deliveries elsewhere.
Sections
Insurance And Liability As Structural Cost Wedge
- New York contractors report spending roughly 10% to 12% of total construction costs on insurance versus about 2% in other states, and some subcontractors report insurance at 15% to 20% of their work volume.
- New York's scaffold law imposes absolute liability on contractors for height-related injuries, while other states use comparative negligence that can apportion fault.
- Construction insurance procurement in New York has shifted toward much higher deductibles, described as increasing from about $25,000 to around $750,000 per occurrence as a condition for coverage.
- Scaffold-law bodily injury settlements in New York are claimed to be about 6.5 times the average of other states and the volume of such claims is claimed to have increased about tenfold over roughly 15 years.
- Insurers view New York construction as an unfavorable market, resulting in fewer carriers willing to write coverage, higher premiums, and very high deductibles that contractors price into bids.
- The scaffold law can apply even to low-height incidents, described as including a worker falling a few inches from a ladder in a trench, which can still lead to litigation and payouts.
Input Cost Stickiness Labor Capacity And Technology Channels
- A contractor reports that labor availability has been a persistent operational risk for their business, not just a post-2020 issue.
- Since the pandemic, multiple major construction cost inputs have increased, including materials, labor, and insurance.
- Construction has experienced unusually low or no productivity growth compared with other industries.
- A NYC heavy highway public-works contractor converted to a 100% employee-owned ESOP structure that included union-represented tradespeople, described as unusual in NYC construction.
- Construction materials prices are described as not having come down, and surcharges introduced during spikes tend to persist even after underlying costs ease.
- Robotics and remote-operation technologies are described as already available in construction, including rebar-tying robots and remote operation of heavy machinery.
Time And Process Delays As Cost Multipliers
- Higher interest rates increase construction costs by raising financing costs, making delays more expensive.
- Design errors or omissions discovered after construction begins can trigger change orders whose documentation, negotiation, and governmental approvals create lengthy project delays.
- Project delays raise costs because fixed overhead staff remain assigned and paid while productive work is paused, and contractors later file claims for added indirect costs.
- Public agencies are described as outsourcing roles once performed in-house to third-party consultants and owner's representatives, which is said to delay projects and inflate costs due to weak incentives.
- Shirley Chisholm Park is cited as a New York City project that finished under budget and faster than estimated.
- Using alternative project delivery methods such as progressive design is described as able to shorten timelines and reduce total costs compared with traditional NYC methods.
Limits Of Union Wage Explanations On Public Works
- A guest argues that unionization is often used as a scapegoat for NYC construction costs and that reforms should instead focus on hidden costs such as construction insurance.
- On New York public works projects, labor typically accounts for about 30% to 35% of total construction cost.
- The Building Trades Employers Association is described as representing over 1,200 contractors performing roughly $65 billion of construction work annually and employing over 100,000 workers.
- On New York public-works contracts, prevailing-wage laws require comparable wages and benefits regardless of union status, limiting wage-based savings from shifting away from unions.
Urban Delivery Logistics And Site Constraints
- Transporting materials into New York City increases costs because suppliers outside NYC have reduced delivery productivity, described as one NYC delivery per day versus multiple deliveries elsewhere.
- Some New York City public construction projects face hidden site constraints, described as including former swampland and contamination, that raise costs and complicate siting.
Watchlist
- Higher interest rates increase construction costs by raising financing costs, making delays more expensive.
- NYC infrastructure anecdotes circulate suggesting extremely high unit costs for routine items such as elevators, turnstile modifications, and bathrooms.
Unknowns
- What is the verified breakdown of NYC public-works project costs (labor, materials, insurance, financing, overhead, remediation, consultant/management fees) across a representative sample of projects?
- How many carriers currently write key construction coverages in New York City, how has that count changed over time, and what are the observed premium and deductible distributions by trade and project type?
- What is the empirical relationship between scaffold-law liability rules and claim frequency/severity, insurer participation, and project bid pricing when controlling for project type and safety practices?
- If comparative negligence were adopted for relevant projects, what is the observed change (if any) in insurance line items, deductibles, and total bid prices on comparable scopes?
- Are safety outcomes in New York construction better, worse, or comparable to peer states when measured by standardized injury and fatality rates adjusted for industry mix and project type?