NU Online News Service, June 7, 3:06 p.m.EDT

Building contractors run into problems doing business in NewYork City after June 13 when a new set of insurance requirements isscheduled to take effect, says an independent agent group.

The city's Department of Buildings issued a rule earlier thisyear that imposes enhanced requirements for general liabilityinsurance.

Christopher A. Brassard, chairman of the Independent InsuranceAgents & Brokers of New York (IIABNY), explains that under thenew requirements contractors will need to obtain coverage for risksthat have been traditionally excluded by insurers.

IIABNY says the enhanced requirement prohibits insurance thatdoes not cover a contractor's legal liability for injuries orproperty damage resulting from:

• The contractor's completed work
• Explosions, collapses and work performed underground
• The contractor's agreement to pay for liability claims againstanother party
• Claims against another party for an injury to the contractor'semployee
• Work on residential properties
• The use of a controversial finishing system for buildings'exteriors

Insurers have good reason for these exclusions from practicalexperience, says Brassard.

Exterior Finish Insulation System (EFIS), for example, hasresulted in a number of lawsuits from rot and mold when acontractor fails to install an exterior finish properly. It isfaulty workmanship, says Brassard, something the rules would cover,but insurers don't.

Then there is the issue of absolute liability where a propertyowner is responsible for an individual contractor's injury from afall, despite any negligence on the part of the injured party.Insurers, says Brassard, are excluding that risk from policies.

The rules also require written notification of changes orcancellation of policies to the department, something insurers arenot prepared to do.

While the department has good intentions, Brassard says, themarket is not ready to write these risks, and that will create anenormous problem for contractors.

"This is a pretty big insurance nightmare for anyone who wantsto do work in New York City," says Brassard. "A lot of what isbeing required isn't as simple as it seems. The intent is notableand worthy with what they are trying to accomplish. But theregulation they are promulgating will require coverage notavailable in the marketplace."

IIABNY is working to meet with the New York State Department ofInsurance and Department of Buildings to discuss the reality of theinsurance situation and work out a solution, says Brassard.