Faced with a serious insurance crisis, builders and re-modelers in New York are taking matters into their own hands.
The New York State Builders Association recently announced the formation of the Reciprocal Liability Insurance Company, which should have its license by mid-June. “It was time for us to take ownership and control of the situation,” says Philip LaRocque, executive vice president of the association.
The “situation” is the withdrawal of traditional insurance carriers from the New York construction market, due in large part to strict liability statutes in the state labor law. LaRocque says that it isn't even a price concern for his members like it is for so many contractors throughout the country. The problem in New York is availability; LaRocque says there just aren't any legitimate options. “Based on their loss ratios, I don't blame the traditional carriers for leaving New York,” he says.
Reciprocal insurance companies are made up of separate entities that undertake self-insurance, so members of the builders association have invested in the company. The association chose to set up the reciprocal company (as opposed to turning to self-insurance or other forms of alternative insurance) in part because of the level of control it affords and the small level of risk involved. They've retained risk specialist Marsh USA to manage their assets.
Association officials say that it is the first reciprocal insurance company set up for the building industry. LaRocque stresses that membership in the association does not guarantee a company issuance of insurance.
The builders association has worked to get the labor law changed and will continue to do so, according to LaRocque. However, that appears to be an uphill battle, and contractors in the Empire State are ready to fend for themselves for a long time, if need be. “This is a long-term program,” LaRocque says. “This is not a quick fix.”