Even Small Jobs Can Lead to Big Claims

If a board hires a vendor to do roofing work and the vendor is injured, it could find itself on the hook, thanks to New York’s so-called Scaffold Law. Please explain.

New York is the only state with the Scaffold Law, and it’s designed to protect workers. The main gist is that it imposes liability on property owners, and that includes co-op and condominium boards. So if there’s a significant injury to a worker on your property, you could be held responsible.

How does workers’ comp play into this?

This is where it’s a little tricky, but it’s important to understand. If I’m a worker and I get hurt on a job, the only claim I can make against my employer is full workers’ comp. I can’t sue in a liability or a third-party action, because workers’ comp is statutory and very regulated in terms of compensation. However, I can sue and recover from the owner of the property under the labor law, even if there’s no negligence. 

So if a board hires a roofer and he has insurance, won’t that cover him if he’s injured on the job?

If the matter is handled correctly by the board, the liability carrier for the contractor will end up paying for the claim of the injured worker, but there are certain steps that need to be taken to reduce risk and liability to the co-op or condo board. First, make sure the contract has an insurance provision between the board and the vendor. And in that contract, you’re going to put terms of coverage, types of coverage and, most importantly, the types of exclusions that you will not allow. If a contractor has cheap insurance, there’ll be lots of exclusions. And one of the major exclusions is that the contractor can’t be responsible to indemnify or pay back the co-op or condo board in the event of a loss. So the first thing you have to do is make sure that your attorney drafts a well-crafted insurance contract, and I would always have your insurance professional make sure that the provisions and the limits that are put in there meet with his approval. Insurance terms and policies are another language, and you need to defer to an insurance expert to make sure you have the proper protection there.

The next major item I would put in is what they call an indemnification paragraph. And basically that says if the insured party sues the board for injuries on the job, the contractor’s insurance is going to take over the claim and pay for any losses. And in that scenario, you make sure that a.) there’s insurance in place that covers the loss, and b.) that the injured worker and the co-op or condo board’s carrier will tender the case to the contractor’s third-party or liability insurance.

And does it matter how big or little the project is?

Once in a while I’ll go to a building or hear that they’re doing a job, and I’ll say, “I didn’t see any papers.” And the board will say, “Oh, it’s a small job.” No. Small jobs could be big claims. We had a case where a worker got hurt in a hallway, and he had a million-dollar claim for like a $25,000 job. The labor law has more to do with the nature of the work. I don’t want to get too technical, but if it’s gravity related, it’s what they call strict liability, absolute liability, on the property owner. So you have to get together your team of professionals, whether it be your engineers, architects, insurance brokers, attorneys or property managers, to make sure that the liability is passed on to the contractor’s insurance. That’s the team’s job.

And what about shareholders who hire workers? If someone wants their painter to come and freshen up the walls, does the Scaffold Law apply? They may not be asking for the painter’s insurance. 

Even in that situation, the owner of the property is the co-op, so it’s not exempt from the Labor Law. So yes, you need to make sure you have an indemnification agreement with the contractor and the proper insurance, and then they can go ahead and do the job.

And who is going to review the painter’s insurance?

Usually it’ll come to the board, and the board will send it to their insurance carrier and their broker. Brokers have gotten much more involved, especially the last three or four years. I’ve spoken to a lot of them, and the labor laws have become very problematic in terms of claims, the number of claims and protecting against them. They will give you standard indemnification language, and they will review the policies, not just the certificates of insurance, to make sure that there’s proper coverage, because it could be a million-dollar issue very easily. And it has been.

Why hasn’t New York rescinded the Scaffold Law? 

It’s a consumer protection law. It’s a worker protection law. The insurance industry and the real estate industry have been trying to at least modify it so there’s some culpability or blame and the co-op or the owner has to do something wrong. Right now you don’t have to do anything wrong. It’s something I keep an eye on to see if there’s any movement afoot, but at this point there isn’t. But I feel it’s getting to critical mass, because the current law is actually cutting out a lot of smaller contractors who can’t afford A-plus, high-end insurance, and it’s detrimental for everybody.

FROM THE COURTS 

January 13, 2021

Paulino v. Verizon N.Y. Inc.

A temporary worker hired by a scaffolding company to work on the renovation of a condominium building was allegedly injured while helping dismantle the scaffolding from the building. He sued the property owner, condominium board and the scaffolding company for negligence and for damages under New York Labor Law §§200, which imposes a duty upon an owner or general contractor to provide construction site workers with a safe place to work; under 240(1), which imposes  a duty on contractors, owners and their agents to provide adequate safety devices in connection with work performed on a structure or building from certain elevations; and under 241(6), which requires owners, contractors and their agents to provide adequate safety and protection for workers and to comply with certain specific safety rules and regulations issued by the New York Department of Labor.