How Insurance Costs Make NYC Construction So Expensive

What It Covers

Elizabeth Crowley of the Building Trades Employers Association and Michael Capaso of CAC Industries explain why NYC construction costs are 500% higher than other states on insurance alone, examining the 140-year-old scaffold law, absolute liability rules, project delays, and the shrinking insurance market driving up public infrastructure costs.

Key Questions Answered

• •Insurance cost disparity: NYC contractors pay 10–12% of total project costs on insurance versus roughly 2% in other states, including California — a 500% premium. Subcontractors in concrete or steel painting pay 15–20% of total revenue on insurance alone, making bids unsustainable and reducing the number of carriers willing to operate in New York.
• •Scaffold Law reform target: New York's 140-year-old absolute liability scaffold law holds contractors 100% liable for any height-related injury regardless of worker negligence. Reforming it to comparative negligence — the standard in all 49 other states — could save over $500 million on a single $7 billion project like the proposed Penn Station redevelopment.
• •Delay costs compound rapidly: Project delays force contractors to keep full site staff — project managers, safety directors, quality assurance personnel — on payroll with no productive output. These indirect overhead costs accumulate while change orders are negotiated and approved, and both contractor and agency consultant costs compound simultaneously, inflating final project totals significantly.
• •Fraud drives insurance market exit: Staged construction accidents and coordinated fraudulent claims have caused bodily injury settlements under the scaffold law to run 6.5 times the average of other states, with claim volume rising tenfold in 15 years. One insurer spent $16 million investigating fraud, filed five RICO cases, and claims it saved over $2 billion by exposing bad actors.
• •AI cameras reduce incidents and insurance risk: Zurich Insurance now requires job site cameras as a condition of coverage in New York. AI analyzes footage nightly to flag near-misses and unsafe movements, enabling targeted worker training. One $1.3 billion Lower East Side resiliency project uses this system, and Zurich reports measurable reductions in incidents on monitored sites.