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Fake Construction Falls Contribute to Rise in Rent

TV News Program reveals ways that the long-outdated Scaffold Law is being co-opted by insurance scammers faking falls at construction sites and contributing to even more prohibitive liability insurance rates, passed down to renters and homeowners.

Video footage showed workers faking accidents including one where the worker had been dismissed from the job a month ago and had no reason to be at the site.

The Scaffold Law, long a bane to construction companies and building owners, is now being co-opted by insurance scammers faking falls and reaping benefits from fraudulent claims which is causing insurance rates to skyrocket even higher than the already onerous rates.

New York Labor Law 240 and 241, known widely as The Scaffold Law, is an outdated law dating back to 1885 that holds contractors and property owners absolutely liable for any worker trip or fall – any “gravity-related’ incident – even if it is clear that the worker was grossly negligent. It has long been passionately lobbied against by the building industry. New York is the only state in the nation to retain the law resulting in a mass exodus of insurance companies. Smaller construction companies are also often forced out of business or out of state as the rates charged by the few remaining insurance companies are prohibitive to many.

An article in SKYlines issue #38 explained that, while the law was originally designed to protect workers, changing times and circumstances have rendered it obsolete. Workers Compensation, OSHA and safety legislation enforced in New York City by the DOB have “turned what was intended as a shield of protection into a sword of abuse.” SKYlines issue #37 reported on efforts from the construction and real estate industries to have then Governor Andrew Cuomo grant a moratorium on the law. The efforts failed as have all such initiatives.

Now, apparently, claims from fraudsters claiming worker injuries that aren’t just exaggerated but actually non-existent have become increasingly prevalent as scammers feel they’ve discovered a ‘get rich quick’ scheme. This crime is hitting New Yorkers in their pocketbooks across the board –not just the construction and real estate industries. As the cost of liability insurance rises it is passed on to construction companies who pass it on to building owners until eventually it compels rises in rates for renters and homeowners.

WABC-TV Eyewitness News reporter Kristin Thorne recently covered this development in her “7 on Your Side Investigates” segment. An article derived from the news show, “Fake construction falls in New York contributing to rise in rent, home costs,” is online on the station’s website.

Thorne interviewed several contractors including Steve Katz, owner of K. Restoration & Roofing, a Manhattan-based firm, who said that his annual cost for liability insurance has grown exponentially from around $300K to $2M- roughly a seven-fold increase. He reported receiving about one or two claims a year. Katz said, “We never have these accidents in New Jersey or Connecticut where we do probably the same amount of work.”

James Fenniman, an adjunct professor at St. John’s University School of Risk Management and area executive vice president, senior director – Construction Practice with A.J. Gallagher & Co., was quoted to say, “It’s a silent tax that they don’t know about. So, when you have that rent increase or maintenance increase and it goes up 12%, 4% may have come from the insurance.”

The article quoted other contractors who pointed out that claims don’t occur in states spared of a Scaffold Law. Video footage showed workers faking accidents including one where the worker had been dismissed from the job a month ago and had no reason to be at the site.

Over half of the State’s county governments have passed resolutions supporting reform or repeal of the Scaffold Law. Perhaps if more attention is brought to this recent revelation of fraud and how some use the law to benefit while hurting all New Yorkers, long overdue action may finally occur. Such a change would be a great boon to the renters, homeowners, and the construction and real estate industries in the City and the State.


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