BILL NUMBER: S7385

SPONSOR: SANDERS
 
TITLE OF BILL:

An act to amend the insurance law, in relation to exempting certain
public construction projects from certain restrictions

 
PURPOSE:

To expand the City of New York's ability to use owner-controlled and
contractor-controlled or "wrap-up" insurance.

 
SUMMARY OF PROVISIONS:

Section one of this act exempts the City of New York, the City School
District of the City of New York (often referred to as "DOE"), the New
York City Industrial Development Agency ("NYCIDA"), the New York City
Health and Hospitals Corporation ("H+H"), and the New York City Housing
Authority ("NYCHA") from the prohibition on using owner-controlled
insurance policies in connection with any contract the principal purpose
of which is construction, as well as exempting those entities from using
              

contractor-controlled insurance policies that have an estimated cost of
more than $5 million. It also provides that any contract undertaken
pursuant to this authorization that costs $5 million or more is only
authorized if undertaken pursuant to a project labor agreement.

Section two of the act includes reporting language requiring the author-
ized entities to report annually on the program, to provide updates on
MWBE and other small business participation rates and providing qualita-
tive analysis of the program's administration with respect to details
like safety incidents and dispute resolution.

Section three of this act provides that this act would take effect imme-
diately.

 
JUSTIFICATION:

Section 2504 of the Insurance Law generally prohibits the state and
public corporations and authorities from requiring bidders for a public
building or construction contract to make an application to a particular
insurance company, agent, or broker for a surety bond or contract of
insurance. This paragraph also prohibits such an officer, employee, or
person acting on their behalf from requiring such bidders to purchase
from a particular insurance company, agent, or broker such a surety bond
or contract of insurance. It also prohibits such an officer, employee,
or person acting on their behalf from negotiating, applying for, or
purchasing such a surety bond or contract of insurance, with limited
exceptions, where such surety bond or insurance could be obtained by a
bidder, contractor, or subcontractor. This has the effect of preventing
general contractors and subcontractors from collaborating to have one
umbrella insurance policy for construction projects.

However, small contractors, including many small businesses and MWBEs,
often struggle to find competitive insurance options that meet the stan-
dards required for public construction projects, and these contractors
particularly struggle to obtain insurance options that are affordable.
High insurance premiums make these businesses less competitive as prime
contractors and subcontractors because they pass along increased costs
to public owners in the form of higher bid prices. This legislation
would authorize, subject to certain conditions, New York City, DOE,
NYCIDA, H+H, and economic development entities working on their behalf
to use OCIPs and CCIPs, which are comprehensive wrap-up insurance
programs common in both private and public construction projects. This
legislation would also clarify NYCHA's ability to use OCIPs and CCIPs.

Under an OCIP, a single policy held by the owner covers the owner and
contractors of all levels for the entire project or group of projects.
Under a CCIP, the insurance policy is held by the construction manager
or general contractor and covers the owner as well.

In a conventional project structure, in which many contractors provide
insurance to the public owner, disputes between different carriers over
liability and coverage consume considerable time and resources, escalat-
ing costs. In contrast, an OCIP or CCIP can provide more efficient
coverage through a single policy. Further, when a public owner imple-
ments an OCIP or CCIP, the owner is relieved of the burden of monitoring
that each contractor maintains coverage if the project continues beyond
the length of an applicable policy.

The City argues that OCIPs and CCIPs also create safe worksites. In
contrast to a conventional project structure wherein contractors and
subcontractors hold multiple policies with separate safety requirements,
OCIPs and CCIPs typically harmonize safety standards across contractors.
Additionally, the City argues that OCIPs and CCIPs allow for an inte-
grated data platform to facilitate safety data collection and review.

City contractors voluntarily chose to implement CCIPs on three separate
projects: the Police Academy in Queens, Public Safety Answering Center
II in the Bronx, and Build-it-Back, the renovation of residential homes
after Hurricane Sandy. All three projects resulted in fewer incidents
and claims than average, no deaths, and no serious injuries. All three
projects progressed over multiple years with continuous coverage. Addi-
tionally, OCIPs and CCIPs are already successfully implemented by vari-
ous public entities in the State, including the New York City School
Construction Authority, the Port Authority of New York and New Jersey,
and the Metropolitan Transportation Authority. During the previous
legislative session, Chapter 225 of the laws of 2022 authorized the New
York City Housing Preservation Trust to implement OCIPs and CCIPs.

 
LEGISLATIVE HISTORY:

New bill.

 
FISCAL IMPLICATIONS:

No negative impacts to the state or local governments anticipated.

 
EFFECTIVE DATE:
This act shall take effect immediately.