GBC Reports..., February 19, 2003

Special Report: Focus on 240
Labor Law 240 Reform Gains Momentum
With the Governor's Annual Message delivered and his 2003-04 State Budget proposed, Albany has now settled in for the long haul to adopt a budget and deal with other controversial issues. The whole issue of tort reform generally, and especially Labor Law 240 reform, is gaining steam. Many things have happened in recent days and weeks to give us hope. 

Senator Bruno Offers Tort Reform as Budget Issue
Last week in front of a New York City business gathering, Senate Majority Leader Joseph Bruno announced a broad array of tort reform measures as a partial solution to the staggering budget problems facing the State. We have confirmed it will include Labor Law 240 reform. "Tort reform can save a billion dollars by making common-sense changes to a system that costs state taxpayers more than $14 billion, more than any other state in the country," said Bruno. "The case for tort reform has never been more compelling."

GBC Third Party Liability Survey Results - Huge Increases
In a survey of GBC Members with almost half of the Members responding, we found staggering increases in liability and umbrella premiums over the last few years. 

Liability premiums rose in each of the last three years: 1999-00 - 15%; 2000-01 - 41%; and 2001-02 - 57%. Umbrella premiums rose: 1999-00 - 46%; 2000-01 - 65%; 2001-02 - 124%. The implications for your business and your costs are obvious. 

• In over 50% of the cases the Member's previous carrier refused to renew the coverage.
• In almost 50% of the cases Members had serious difficulty finding replacement coverage. 
• Over the last five years, Members averaged over twelve Section 240 lawsuits each. 

And we have a long list of very pointed comments about what happened to coverages and limits and the impact of all this on Members' specialty contractors. And all this from a group of the larger, most qualified contractors in New York State. Imagine the impact on others, especially the subcontractor and residential sectors! 

The Impact on One Insurance Carrier
One Associate Member broker provided us with some interesting information on one unnamed carrier who has left the market because of Labor Law 240 claims. Over the last six-plus years, this carrier had 790 Labor Law 240 cases. The sum of paid claims and reserves for these cases is $140 million. The average paid claim was over $220,000. In two years in the late 1990s this carrier lost upwards of 150% of premiums collected on these lines for 240 cases alone. No wonder they want out of the market. 

Alcohol on the Job - NYC Media at Work 
Twice in the last few months two NYC television stations have used hidden cameras to document that workers on major projects were consuming alcohol at lunchtime and then returning to work. While the contractors involved had zero tolerance policies, that did not stop the abuse. After the second report the building trades condemned the consumption on or off the site, before or during the work.

Carpenters' Publication Encourages Unsafe Workers to File 240 Claims
We came upon an article on Labor Law 240 in the Empire State Carpenters' publication to their members. It included a disturbing Q&A. "Question: An employee causes his own accident … in violation of safety rules, are the general contractor and owner still liable? Answer: Yes." Talk about encouraging lawsuits. Not a word in the two-column article about safety.

The Solution: Volker Introduces New Labor Law 240 Reform 
At the urging of the GBC and others, Senator Dale Volker of Western New York has now introduced a simplified version (S.1710) of the bill we have pursued in previous years to give contractors a chance to defend themselves in these kinds of cases. We are looking for an Assembly sponsor. 

The bill simply says the worker maintains the right to sue in the case of an accident and injury, but the amount of the recoverable damages shall be limited if the conduct leading to the accidents relates to: 

• A criminal act
• Impairment caused by drugs or alcohol
• Failure to use furnished safety devices
• Failure to comply with instructions on the use of safety devices
• Failure to adhere to safe work practices in accordance with safety training provided by the employer

The bill is designed to provide the employer who invests in training, equips his workers with safety devices and manages his projects safely with the advantages of a negligence standard. Those employers who do not do so will continue to suffer the status quo. 

Insurance Reform
GBC, along with a group of minority contractors, met with NYS Superintendent of Insurance Greg Serio recently to talk about the problem of skyrocketing insurance premiums in all industries including construction. The Superintendent announced the Governor would be introducing a comprehensive insurance reform bill to encourage the use of captive insurance companies and other techniques. He admitted, however, construction had a special tort problem because of Section 240 of the Labor Law that would not be easily solved with an insurance solution.

The Lobbying Effort Begins
The construction industry has done a good job of making Legislators aware of this issue. Most of them know about Section 240. Now we need to convince them to solve the problem. In the coming weeks, GBC and others will ask you to write legislators and attend local meetings with key legislators. We are making progress. With the poor budget environment, legislators will look for other ways to improve and maintain a positive business climate. Senator Bruno has fired the first shot. We must engage the fight. The trial lawyers and the building trades will not be easily overcome.

The First Step - Write Your State Senator 
We ask all GBC Members to do a simple thing. Author a simple, but forceful letter to your State Senator. Tell him or her the time for Labor Law 240 reform is now. Insurance premiums are rising by triple-digit percentages. Urge support for Senator Volker's bill, S.1710, which is now in the Codes Committee. It has a safety theme. The worker's right to sue is preserved. The employer will be able to defend himself if he manages safely. Those that don't will continue to be absolutely liable. It is a fair solution. 


Study: Nation's Tort Cost Reached 50-Year Record High in 2001
The nation paid $205 billion to defend and pay liability claims in 2001, $25 billion more than the previous year and a 50-year record, a new study has found. This cost is $721 per U.S. citizen and represents a 14.3% increase in tort costs, according to U.S. Tort Costs: 2002 Update, the report by Tillinghast-Towers Perrin, a consulting firm that serves the financial services industry. This information was provided by the Business Council. The Business Council also did a valuable study several years ago on this whole issue called "An Accident and a Dream," which provided good insight into New York's out-of-control tort system, including Labor Law 240.


Governor Vetoes Prevailing Wage Bills
The Governor finally acted on two bills that passed the Legislature last June. One would have given organized labor the opportunity and right to enforce the prevailing wage law. This was a ridiculous proposal that made no sense and delegated to a private party a clearly governmental function. The Governor issued a veto without comment. 

The other veto involved a bill that could have changed the definition of public work to apply prevailing wages to IDAs and other economic development projects. This was supposed to close some kind of loophole impacting developers doing public projects like roads and bridges associated with their otherwise private projects. The Governor felt the bill could have serious unintended consequences, but he invited the proponents to return with a narrowly drafted bill. This is often a Gubernatorial technique to soothe the anger of the losing party. Sometimes the invitation to help rewrite the bill is serious, sometimes not. We shall see in this case. 


Governor Proposes Changing the Way Prevailing Wages Are Determined - Is He Serious? 
Buried deep in one of his budget proposals, the Governor proposed to save money by changing the way prevailing wages are determined. He proposed to repeal the concept of "union wage - prevailing wage" in favor of an average system if one wage does not appear 75% of the time in a civil division, which is defined as the location of the project. This civil division could be as little as a village or town. The administrative difficulties with such a scheme are just too numerous to mention. This proposal is clearly an effort by the Governor to posture and leverage other budget solutions. The chance for such a change is nil, but it exhibits the lengths the politicians will go to.


State AFL-CIO President Outline Labor's Program
At the first Senate Labor Committee meeting of the year, Dennis Hughes, President of the NYSAFL-CIO (and a member of Local 3 of the IBEW in NYC), provided his organization's priorities for the coming year. The essential ones were: 

• Legislature must deal fairly with the budget gap. (A labor-affiliated think tank in Albany supported by the AFL-CIO and several other groups has called for income and other tax increases.)
• Opposition to any rollback in prevailing wage and labor standards.
• Using prevailing wages as a lead, he called for a review of the competitive bidding laws - a reference to making changes to the low responsible bidder standards.
• Workers' comp benefit increase. This is the 13th year without an adjustment. Labor will refuse to make any compromises or givebacks on other similar current benefits. 

AGC Meets with Top White House Advisor
Showing their ability to access the highest levels of the Federal Government, AGC recently met with Senior White House Advisor Karl Rove and Office of Management and Budget Director Mitch Daniels on the issue of highway reauthorization. (Mr. Rove is credited with engineering significant Republican victories in last fall's election.) The President's lieutenants acknowledged the positive impact of highway and transportation funding on the economy and jobs, but they cautioned that the war on terrorism and other domestic budget issues would limit the ability of the Administration to find new revenues. They clearly said the President was opposed to any increase of the gas tax. 


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