New York Labor Law – The triad and the triumvirate

Handling claims under the New York Labor Law presents unique challenges even for the most seasoned among us. Since the obligations imposed under the statutes are generally not based on fault, owners, contractors, and their agents are often held absolutely liable even when they did not control or supervise the work or the construction site. Liability being absolute, risk transfer features prominently in these cases, requiring careful analysis of the various trade contracts and insurance policy provisions because the outcome often turns on a single phrase or word. Perhaps more frustrating is that in most cases, comparative negligence cannot be used as a defense to liability or to offset damages, even where the worker himself/herself was ultimately responsible. Another challenging aspect is the lack of consistency. For every case that supports one proposition, two others endorse the opposite view. One is often hard pressed to find consensus among the seemingly endless body of conflicting case law. For instance, the scope of work to which the statutes apply is uncertain because the Labor Law has been extended to activities not commonly associated with construction work. Further, a number of esoteric rules and subtle interpretations have given momentum to the § 240 “Scaffold Law,” obscuring bright line rules and making trends hard to predict.

Liability is often decided in the worker’s favor on summary judgment motions, which serves to enhance the value of these cases because the focus turns to damages and worse, interest is calculated from the date summary judgment is granted even though the verdict on damages comes at a later date, sometimes years later. The fact that the cases remain dormant long after summary judgment on liability is granted, with the interest continuing to run, adds significantly to the verdict value. Each of the foregoing characteristics could easily fill numerous treatises and we could not possibly give them all of the attention they deserve in a single article. The purpose of this article is to provide an overview of the statutory provisions, recent case law of note, some unusual dynamics faced in managing these claims, and recent verdict and settlement values.

Statutory provisions

Typically, the plaintiff will be an employee of one of the subcontractors on the project. When he/she is injured, the lawsuit will be filed against the owner, general contractor, and perhaps other subcontractors working at the site. Given the workers compensation bar, the employer will not be named directly in plaintiff’s complaint, but will be added in certain circumstances (discussed in more detail below) by way of a third-party action. Workers uniformly allege violations of Labor Law §§ 200, 240(1) and 241(6), so let’s briefly review each.

Labor Law §200, The Safe Place to Work Law
Section 200 codifies the common law duty to provide a safe place to work. Liability is imposed on the owner/general contractor (“GC”) under a “means and methods” and/or “dangerous condition” theory of liability. The owner/GC can be liable only if the injuries resulted from a dangerous condition created by them or of which they had notice, or if they supervised or controlled the work. There are two important things to keep in mind relative to § 200 claims. First, more than general supervisory duties are required. The owner/GC must control the manner of the work. If the owner/GC do not exercise control over the operation that causes the injury, they cannot be held liable. A contractual duty to oversee the work, inspect the site, and/or ensure compliance with safety measures does not constitute supervision and control. Even “stop work” authority alone is insufficient. Because the alleged defect, or dangerous condition, usually arise from the plaintiff’s employer’s (or another subcontractor’s) own methods, the owner/GC are often able to get the § 200 claim summarily dismissed. Second, liability is not strict, meaning plaintiff’s comparative negligence is a viable defense.

Labor Law § 240(1), The Scaffold Law
he New York Labor Law § 240(1) applies to gravity-related construction site accidents, and addresses accidents involving “falling workers” as well as those where objects fall on workers. The statute imposes absolute or One is often hard pressed to find consensus among the seemingly endless body of conflicting case law. 2strict liability without fault on the owner/GC, based solely on their status as such, for statutory breaches committed by their contractors. Also known as the “Scaffold Law,” § 240(1) states in relevant part:

All contractors and owners and their agents,...in the erection, demolition, repairing, altering, painting, cleaning or pointing of a building or structure shall furnish or erect, or cause to be furnished or erected for the performance of such labor, scaffolding, hoists, stays, ladders, slings, hangers, blocks, pulleys, braces, irons, ropes, and other devices which shall be so constructed, placed and operated as to give proper protection to a person so employed.

To prevail under Labor Law § 240(1), a plaintiff must prove that the statute was violated (i.e., an adequate safety device was not provided) and that the violation was a proximate cause of his injuries. Jurors must first determine whether there was a failure to provide one of the protective devices, and then whether the construction, placement and operation of the device was a substantial factor in causing the injury. The statute creates liability that is absolute in two respects: (1) the owner/GC is liable whether or not they supervise or control the work that caused the injury and (2) plaintiff’s comparative negligence is not available as a defense. Though plaintiff’s comparative negligence is not a defense¹, the cause of action may not stand where plaintiff’s own conduct was the sole proximate cause of his injuries.²

Though the wording of § 240(1) seems relatively simple, it has been the subject of significant case law over numerous decades such that its application remains an enigma. One of the most litigated issues in the context of the statute is whether a particular activity is protected. To give just a few examples, although inspection is not one of the 7 enumerated activities, accidents involving inspections have produced divided court decisions. Routine maintenance is not protected, but repairs are, and the distinction between the two is very fact sensitive and often a close call. Other cases have held that painting or cleaning need not even be in the construction context to be covered. Another strongly contested issue is minimum height requirements. As a result, many courts have dismissed § 240(1) claims based on the absence of a height differential, while others with similar facts have concluded that the § 240(1) claim is viable.

Labor Law § 241(6), The Safe Equipment Law
Labor Law § 241(6) helps protect workers from construction site hazards, provided the plaintiff can prove that a violation of the New York Industrial Code proximately caused his injuries. The Industrial Code sections relied on must be specifically related to the risk at issue and not a mere recitation of common law principles. Typical Industrial Code sections relied on by plaintiffs are those related to slipping/tripping hazards, personal protective equipment, safety railings, and illumination. The statute also imposes non-delegable strict liability on the owner/GC but, unlike § 240, plaintiff’s comparative negligence is admissible. The violation of an administrative regulation is only some evidence of fault which can be disputed by the Affirmative Defense of plaintiff’s own negligence.

Risk transfer and notable decisions

Since many of the duties under the New York Labor Law are non-delegable, such that the owner/GC may be liable even though they did not exercise supervision or control over the plaintiff’s work, risk transfer is so important, and often presents the only opportunity to avoid exposure on these claims.

The two methods of securing risk transfer are by Additional Insured (“AI”) coverage and contractual indemnity. These are separate, but not mutually exclusive, considerations which often require an extensive analysis of contracts, insurance policies and case law, combined with an equal measure of posturing. And, though the two methods can ultimately accomplish the same result, the differences are significant. Case law in New York has shaped how these two avenues of risk transfer are applied in practice. The usual scenario involves a tender on behalf of the owner/GC to the downstream subcontractors, including the plaintiff’s employer. A denial of the tender generally results in a third-party action being filed against the employer³.

AI coverage arises from an insurer’s assumption of a defense and indemnity obligation through its AI Endorsement. It is a direct coverage obligation assumed by an insurer under a policy endorsement. The insurance procurement clause in the trade contract must be read in conjunction with the AI Endorsement under which coverage is sought. The general rule is that coverage is determined by policy terms. The wordings of AI Endorsements can vary greatly and, as noted below, the scope of AI coverage is determined by the language of the AI Endorsement. AI coverage is, of course, subject to a priority of coverage analysis as well. In other words, if the subcontractor’s CGL insurer accepts the owner/GC as AIs, it must then be determined what coverage is triggered after that CGL policy exhausts—the subcontractor’s excess policy (vertical exhaustion) or the owner/GC’s own CGL policy(ies) (horizontal exhaustion).

New York courts had traditionally taken a broad approach when interpreting coverage under AI Endorsements. That changed in 2017 when the Court of Appeals⁴ in Burlington v. NYC Transit Authority took a more restrictive view of AI coverage under a commonly used AI Endorsement, CG 20 33 07 04. Pre-Burlington, AI Endorsements typically extended coverage for liability “arising out of” the Named Insured’s operations under Form CG 20 10 10 01, which has been interpreted very broadly to require only some causal connection between the Named Insured’s work and the injury, and not even negligence on the part of the Named Insured. But the Burlington Court held that the “caused in whole or in part by” verbiage in CG 20 33 07 04 requires that the Named Insured’s conduct be a proximate cause of the injury. As such, upstream parties such as owners and GC’s seeking AI cover from a subcontractor’s insurer must establish that the subcontractor’s negligence was a proximate cause of the injury. This is typically not that difficult if the subcontractor in question is the plaintiff’s employer, but can be tricky where it is another subcontractor at the project. As a result of Burlington, carriers for downstream contractors which are inclined to defend upstream contractors do so under a Reservation of Rights because proximate cause must be established to qualify the tendering party as an AI. This could give rise to a choice of counsel by the tendering party which should be exercised where possible to ensure that its interests are vigorously pursued.

In 2018, the New York Court of Appeals in Gilbane Building Co./TDX Construction Corp. v. St. Paul Fire and Marine Ins. Co. strictly interpreted the “Additional Insured-By Written Contract” Endorsement (CG 10 00 01 03) to require a written contract directly between the Named Insured and the party seeking AI cover. Thus, the putative AI must be in direct contractual privity⁵ in order for coverage to be triggered. Insurers whose policies incorporate this Endorsement often disclaim AI coverage. This can be an unintended and unfavorable outcome for the insurer of an owner or GC seeking AI status under the policy(ies) of a subcontractor or sub-subcontractor with whom there is no direct contract. However, as discussed below, if a downstream subcontractor owes contractual indemnity, it is critical that the tendering party move for summary judgment. If the court grants the motion, defense costs and indemnity is borne by the insurer that originally rejected the AI tender based on lack of privity.

Contractual indemnity is the transfer of defense and indemnity costs from one party to another through indemnity provisions in contracts. Because it is a contractual obligation assumed by the insured in a trade contract to which the insurer is not a party, it does not create a direct coverage obligation. And, even where the Named Insured owes contractual indemnity to another, the insurer does not owe a direct coverage obligation to the indemnitee, at least not until the Named Insured’s contractual liability has been adjudicated. Once it is adjudicated (and assuming of course the policy covers contractual liability) vertical exhaustion up the indemnitor’s (the subcontractor’s) coverage tower occurs.

Case studies

To be sure, each case under the New York Labor Law is unique. However, there are certain dynamics which insurance carriers regularly face that add additional layers of complexity to the equation, and which must be approached with the finesse of an acrobat.

In some cases, an excess carrier insuring a downstream subcontractor may deny a tender which its primary carrier has accepted. This may be because excess coverage was not required by the trade contract, or because the excess insurer disagrees with the tender acceptance. In these instances, the appointed defense attorney for the owner/GC, who is being paid by the subcontractor’s primary carrier, is actively trying to shift liability from the owner/GC to the subcontractor, trying to implicate the subcontractor’s excess coverage.

Conversely, carriers insuring an owner or upstream contractor such as the GC, often successfully tender to the insurer for the subcontractor. That insurer then appoints its panel counsel to defend the tendering carrier’s insured. In some cases, the attorney’s allegiance to the subcontractor’s insurer which retained him or her is so clear that the carriers (primary and excess) for the owner/GC must remain involved and actively press the attorney to secure a favorable contractual indemnity ruling to assure vertical exhaustion of the subcontractor’s coverage tower.

Another challenging situation occurs where a primary carrier is also the primary insurer for another subcontractor at the site, and tries to steer the defense so that only one of its coverage towers—not both—are exposed.

Each of the above scenarios, while technically not amounting to a conflict of interest, presents unique challenges ranging from difficulty obtaining the information necessary to evaluate exposure to having to actively influence the litigation. Either way, remaining actively involved in all aspects of the matter allows the insurer to continually assess exposure as circumstances warrant.

Verdicts and settlements

The best predictor of verdict and settlement values in New York is what the appellate courts⁶ are sustaining on appeal. The long tail nature of Labor Law claims coupled with unfavorable risk transfer often results in increased sustainable verdict values. By way of example, an insured was subcontracted by a GC to perform interior construction work at a well-known New York City high rise. The insured, in turn, verbally retained plaintiff’s employer. In May 2013, the 46-year-old plaintiff was taking down a wall when it fell on him, causing multiple injuries. Plaintiff filed suit against the GC and building owner, who filed a third- party suit against the insured for contractual indemnification. The court ultimately granted summary judgment on the contractual indemnity claims, resulting in risk transfer to the insured. Plaintiff’s damages increased over time. He underwent a 2014 single level cervical fusion, a 2016 arthroscopic meniscus repair, and a 2019 single level lumbar fusion. Plaintiff remained out of work, resulting in a large lost wage claim and substantial workers compensation lien. The claim was initially considered to have settlement value up to $2 million. However, in and around 2018, the First Department⁷ began sustaining significantly higher economic and pain and suffering verdict values. A surgical fusion injury that would have previously been sustained in the $750,000 to $1 million range for pain and suffering only, was now being upheld in the $1.5 million to $2 million range. Fortunately in this specific case, the court refused to grant plaintiff’s motion for summary judgment on Labor Law 240(1) and there were mitigating factors that resulted in a recent $2.85 million settlement.

The chart below illustrates the rising cost of disposing of New York Labor Law cases, particularly in “hot” venues such as the five boroughs of New York City.

New York Labor Law reported verdicts and settlements: 2018-2020⁸

Statewide New York Supreme Court new filings and disposition

• In 2018, 176,151 new civil cases were filed state-wide in the Supreme Court. In 2019, that number decreased to 172,102. Overall, civil filings continue to decline each year and are down 11% since 2015.
• The New York State Unified Court System does not keep statistics regarding the percentage of new filings involving New York Labor Law claims. Rather, these cases are included in the “other tort” category, which consists of all tort claims other than medical malpractice and motor vehicle cases. In 2018, “other tort” filings accounted for 11.5% of the new cases and 12.5% in 2019. As such, the New York Labor Law cases make up only a fraction of the “other tort” claims.
• Since 2015, only 2%-3% of civil cases have been resolved by verdict each year. Settlement accounted for 28% and 30% of case dispositions in 2018 and 2019, respectively, which was consistent with prior years.

As noted above, New York Labor Law cases represent a portion of the “other tort” claims. The verdict ranges are increasing, with the median verdict almost doubling between 2018 and 2019. There were 12 reported verdicts in 2018, and 11 in 2019. The 2020 figures to date show one reported New York Labor Law verdict, which resulted in a defense verdict. The 2020 figures are not demonstrative of current trends given the limited amount of time the courts were open prior to closure due to COVID-19.

The individual verdicts per case are listed in the chart, annexed as an Appendix, along with other pertinent information, such as venue, injury information, and when possible, the amount of damages awarded for lost earnings. If the two highest 2018 verdicts (both over $20 million) are removed, the median verdict value drops to $3,044,038. If the highest 2019 verdict (over $100 million) is removed, the median verdict value drops to $6,771,818. While the figures above represent a portion of the New York Labor Law verdicts rendered, they are indicative of the general trend of increasing verdict values. The impact on jury verdict values as a result of COVID-19 remains to be seen.

Thank you for reading and if you have any questions, please feel free to reach out to one of our New York Labor Law specialists:

Diane O’Neil
Director and Senior Counsel, Complex Claims
diane.oneil@markel.com
+1.732.450.8796

Sheri-Ann Marcinkiewicz
Director and Senior Counsel, Complex Claims
sheri.marcinkiewicz@markel.com
+1.732.450.8783

Belinda Skeen
Manager, Claims
belinda.skeen@markel.com
+1.732.391.8870

Luann Melillo
Senior Claims Examiner
luann.melillo@markel.com
+1.908.630.2764

Lisa Kim
Senior Claims Examiner
lisa.kim@markel.com
+1.480.905.5055

John Kuc
Senior Claims Examiner
john.kuc@markel.com
+1.732.450.8701

Appendix