Professional Insurance Agents of New York State Inc. last Friday commended Superintendent Gregory Serio for addressing New York state’s diminishing market for contractors commercial liability insurance.
However, the association said, its members are worried about the creation of a residual market in for New York Property Insurance Underwriting Association to provide commercial liability insurance coverage for contractors. The underlying issue, PIANY said, is a need for Labor Law reform.
PIANY Director Richard Savino provided comments at a public hearing in Albany, held by the New York State Insurance Department. PIANY was asked to give testimony on a potential need for NYPIUA to ease an availability crisis of commercial liability insurance.
“We commend the Superintendent for reaching out for input to help make this difficult decision. Clearly, as our data shows, (contractors) is a troubled line of commercial liability and the market condition appears to be getting worse rather than better,” Savino told the Department. “However, a residual market creates its own problems. Only 4 percent of our members believe a residual market to provide liability coverage, including for Labor Law, would provide a permanent resolution to the problem.”
PIANY surveyed its members the week prior to the hearing to determine their opinion on the issues.
“Our members are torn on the issue of whether a residual market should be established at this time, and even some who support it have reservations. Sixty-three percent of our survey respondents say that if this were done, voluntary markets would withdraw from New York, and 43 percent say the residual market losses would soon become unsustainable,” said Savino. “We believe the residual market would become a band aid that would mask the underlying problem without providing a lasting solution. By the nature of such coverage, it would take a long time for the ‘tail’ to catch up with the pool, but when it did the results would quickly prove disastrous.
“Moreover, the precedent of tapping NYPIUA for the first time would have ramifications throughout world insurance markets in terms of the regulatory perception of New York among carriers,” continued Savino. “They will think twice about entering or increasing their exposure in New York if they believe they will be sharing in our unique Labor Law losses according to their market profile for commercial liability writings in general. Particularly if the loss-sharing were limited to admitted markets, competition in other market sectors in the commercial liability realm could begin to crumble.”
PIANY reportedly has long been a proponent of reforming New York state Labor Laws 240 and 241(a), also known as the scaffold laws, and the association again indicated they are the driving problem behind the availability crisis.
“Labor law is definitely the problem; yet there would be difficulties with separating out labor-law related coverage from the rest of liability coverage for a residual market,” said Savino.
The association reportedly weighed other solutions, including the creation of a single judicial forum specializing in scaffold law cases or a Market Assistance Program limited only to those most distressed cases. However, it said, it would he hard to provide help to some and not others.
PIANY also noted that NYPIUA, with its recent annual “sunset” uncertainty would be a problematic vehicle for such a residual market. The association called for making NYPIUA a permanent legal entity, like the New York Automobile Insurance Plan, for just this reason. However, the association noted, it is not wise to turn to NYPIUA to provide insurance for what arguably is an uninsurable risk.
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