The impact of staged construction accidents on New York insurance premiums

Staged construction accidents have become a growing concern in New York, significantly affecting the property/casualty insurance sector. This fraudulent activity undermines the integrity of the construction industry and leads to substantial financial repercussions for insurers and policyholders.

The mechanics of staged accidents

Typically, staged construction accidents involve elaborate schemes in which individuals, or those in collusion with unscrupulous contractors or organized crime groups, fake or exaggerate injuries on construction sites. These fraudulent claims can range from minor injuries to severe cases, including spinal surgeries, to maximize insurance payouts.

Financial impact on insurers

Insurance companies face massive financial burdens due to these fraudulent claims. The cost of investigating and settling these claims, along with the legal expenses associated with litigating fraudulent activities, can run into millions of dollars annually. This financial strain often is passed on to policyholders in the form of higher premiums.

Increased premiums for policyholders

As insurers grapple with the financial fallout of staged accidents, they are compelled to increase premiums to offset the losses. This results in higher insurance costs for all policyholders, including honest contractors and construction companies.

The increased premiums can make it challenging for smaller construction firms to afford necessary insurance coverage, potentially shutting them out of many jobs and driving them out of business.

PIANY’s efforts

PIANY has a long history of advocating for tort reform to increase consumer protections and minimize the impact of fraudulent insurance schemes, like those occurring at construction sites around the state.

This upcoming legislation session will be no different.  Here are few issues PIANY will be advocating for:

• Combating staged construction accident. PIANY was a strong supporter during the 2024 legislative session of a bill that would have would have classified staging a construction site accident for insurance fraud as a Class E felony.  Unfortunately, the Legislature failed to pass the measure, but PIANY will continue to advocate for this important reform.
• Scaffold law reform. PIANY supports reforming New York’s Scaffold Law, which imposes absolute liability on contractors and property owners for height-related injuries. This law drives up insurance costs, and reform could reduce the financial burden on the construction industry. New York remains the only state in the country with such a law.
• Lawsuit Lending reform. PIANY advocates for stricter regulations on lawsuit lending to prevent frivolous lawsuits and excessive litigation costs that contribute to higher insurance premiums.
• Combating staged auto accidents. PIANY also is focused on addressing staged auto accidents, which are another form of insurance fraud. By pushing for enhanced fraud detection measures and tougher penalties for offenders, PIANY aims to protect both insurers and policyholders from the repercussions of fraudulent claims.

Staged construction accidents present a significant challenge to New York state’s p/c insurance sector, driving up costs and undermining industry integrity. These fraudulent schemes impose hefty financial burdens on insurers, resulting in increased premiums for all policyholders, which particularly impacts smaller construction firms.

PIANY continues to advocate for legislative reforms to combat this issue as other forms of insurance fraud.  This includes tougher penalties for staging accidents, Scaffold Law reform, and stricter regulations on lawsuit lending.

Addressing these concerns is crucial for protecting the interests of both insurers and policyholders, ensuring fair and affordable insurance coverage for the construction industry in New York state.