How Insurance Costs Make NYC Construction So Expensive

Summary

Odd Lots Podcast Summary

Episode: How Insurance Costs Make NYC Construction So Expensive

Date: February 26, 2026
Hosts: Joe Weisenthal & Tracy Alloway
Guests:

• Elizabeth Crowley (President & CEO, Building Trades Employers Association - BTEA)
• Michael Capasso (President & CEO, CAC Industries, Inc.)

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Episode Overview

This episode explores why construction in New York City is so costly, with a particular focus on the impact of insurance costs. The discussion covers a range of factors—union labor, material and labor costs, regulatory and permitting delays, project management, and, most notably, New York’s unique “scaffold law,” which drives up insurance premiums. The guests break down exactly how these costs accumulate, why certain laws persist, and what avenues might exist for reform. The conversation is rich with concrete examples from major infrastructure projects, industry data, policy debate, and current trends in labor and technology.

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Key Discussion Points & Insights

1. The Many “Buckets” of Construction Costs

[01:37-04:18]

• Cost pressures in New York construction stem from multiple factors: materials, labor, insurance, regulations, and financing costs.
• NYC especially suffers from “no productivity growth” in construction, compounding problems (03:06, Tracy).
• “We don’t have robots building houses yet.”—Joe Weisenthal (03:19)

2. Union Labor: Costs, Perceptions, and Reality

[05:02-07:27]

• Union labor typically comprises 30-35% of construction costs (06:24, Capasso).
• Prevailing wage laws mean non-union contractors do not save much versus union rates; non-union often means cutting corners on pay and safety.
• “We’re proud that we’re union contractors. You know, we’re the good guys...We’re paying for benefits and wages and that’s just part of the cost of construction.”—Elizabeth Crowley (05:28)

3. Delays and Their Expensive Ripple Effects

[08:59-12:52]

• Delays stem from multi-layered land use processes, extensive environmental reviews, and project changes due to design/field mismatches.
• Delay example: Fully funded, simple park turf replacement took seven years due to unexpected subsurface repairs and review cycles (12:27, Crowley).

Memorable Dialogue:

• “Why would that cause additional expenses?” — Tracy Alloway (08:59)
• Indirect overhead (project management, safety, supervision) gets charged to the project regardless of productive work—these people can't be reassigned during delays (11:32, Capasso).

4. NYC’s Challenging Geography & Logistics

[13:30-14:47]

• Manhattan's density, reclaimed land (e.g., Battery Park City), limited material access, and the need for complicated utility work drive costs up.
• “Most of the manufacturing base is not within the five boroughs...The cost of that transportation into the five boroughs...” — Michael Capasso (14:06)

5. Insurance: The Scaffold Law’s Outsized Impact

[17:18-22:26]

• Scaffold Law: NYC contractors are 100% liable for any height-related injury regardless of worker negligence. Only state left with such a law (17:34, Crowley).
• In 49 other states, comparative negligence applies, dividing blame and reducing insurance costs.
• “If we were to put comparative negligence on [Penn Station], we can save over $500 million. That’s half a billion dollars.” — Elizabeth Crowley (18:14)
• Insurance can be up to 10-12% (even 15-20% for some subcontractors) of project costs, compared to 2% in other states (21:08, Crowley).

Notable Dialogue:

• Insurance carriers have fled the NY market; the few remaining demand high deductibles and offer poor terms (19:34, Capasso).
• “Contractors in New York are paying 10% of total construction costs to insurance, that’s 500% more than other states.”—Elizabeth Crowley (21:08).

6. Fraud, Litigation, and Political Inertia

[22:26-26:50]

• Surge in claims and payouts from third-party lawsuits, including staged accidents.
• Trial lawyers and lack of reform sustain the Scaffold Law (“cash cow” for litigation, 22:26, Crowley).
• Illinois repealed its scaffold law in 1995, and fatalities declined there afterward.
• Growing political awareness (Governor targeting insurance fraud in auto, but not yet construction insurance).

Notable Quote:

• “It’s all public information of just one building or a couple of buildings where multiple claimants from the same building with the same law firm utilizing the same medical practices filing these lawsuits.”—Michael Capasso (26:50)

7. Availability of Insurance and Effects on Market Competition

[27:24-29:41]

• Previously, there were many insurance options; now, contractors face minimal choices with steep deductibles and rates (27:49, Capasso).
• Insurance limitations also keep out-of-state contractors from bidding in NYC, reducing competition and likely driving up prices (29:41, Capasso).

8. Insurance Applies Even to “Non-Height” Projects

[30:58-32:09]

• “Scaffold law” can apply to injuries from falls of just a few inches—even in gravely, sewer, or non-high-rise works (31:14, Capasso).

9. Beyond Insurance: Are the Outrageous Construction Costs Real?

[34:07-36:04]

• High-profile projects (elevators, parks) may sound expensive due to necessary utility relocations and subsurface complexities, not merely the direct physical installation.
• But NYC is still the most expensive major city in the US for construction (35:46, Crowley).

10. Positive Reform Examples

[37:09-38:40]

• Progressive design-build contracting used successfully in recent projects (e.g., Shirley Chisholm Park) has reduced time and costs.
• “So there are ways we could work together, putting our minds together to bring about real reform.”—Elizabeth Crowley (38:40)

11. Safety and Outcomes: Are Strict Laws Making Things Safer?

[38:40-39:59]

• Despite some of the strictest liability laws, NYC has higher construction fatality rates (about 20% above national average) (39:34, Crowley).
• “We have nearly 12 fatalities per 100,000 workers, whereas the national average is under 10.”—Elizabeth Crowley (39:34)

12. Labor Pool Pressures and Technology

[39:59-43:28]

• Skilled labor shortage is persistent. Young people aren’t going into trades; industry faces an aging workforce (40:19-41:20, Capasso).
• Non-union jobs now dominate residential/affordable housing and see the most job site injuries (41:20, Crowley).

13. Tech & AI in Construction

[42:17-45:36]

• AI is mainly used for process and project management analytics, not robot labor (yet), but robot-aided tasks (like remote heavy equipment operation, rebars tying) are emerging.
• Insurers like Zurich deploy AI to analyze worksite footage, flag safety issues, and reduce claims and risks (44:32, Crowley/Capasso).

14. Materials Cost and Availability

[45:36-46:29]

• Material prices have not come down post-pandemic; “fuel surcharges never go away” (46:02, Capasso).
• No ongoing shortages, unlike the immediate COVID aftermath.

15. Consultants and Incentives

[46:42-47:53]

• Use of third-party “owner’s reps” (project consultants) has expanded, sometimes creating misaligned incentives—they may slow projects to continue billing (47:30, Crowley).

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Notable Quotes & Moments with Timestamps

• “We don’t have robots building houses yet.” — Joe Weisenthal [03:19]
• “We’re proud that we’re union contractors. You know, we’re the good guys...” — Elizabeth Crowley [05:28]
• “Insurance was an add on...maybe up until even 10 years ago. And in the last 10 years we’ve seen a significant rise in the cost of insurance.” — Michael Capasso [23:12]
• “[Scaffold Law] is a 140-year-old law. It’s antiquated, it’s broken policy. Even both the Democrats and the Republicans, when you speak to them one on one, they know this is bad policy.” — Elizabeth Crowley [21:47]
• “There are contractors based in other states that won’t work here because their insurance companies will exclude their policy from working in New York...That then may drive down competition.” — Michael Capasso [29:41]
• “Despite having such a strict liability on contractors, New York has a higher rate of fatalities...We’re 20% higher in New York.” — Elizabeth Crowley [39:34]
• “Employees who use AI will replace the employees who aren’t.” — Michael Capasso [43:16]

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Important Timestamps

• [05:28] Union labor cost perceptions debunked
• [06:24] Labor as % of construction costs
• [07:27] Delays and the high cost to projects
• [17:34-19:30] Scaffold Law defined and its financial impact
• [21:08] Insurance cost comparison to other states
• [22:26] Political obstacles to reform
• [27:24-29:41] Evolution of the insurance market
• [31:14] Scaffold Law’s reach to all types of projects
• [39:34] Safety rates—strict laws but higher NYC fatalities
• [43:16] AI's rising role in construction
• [46:02] Persistently high materials cost
• [47:30] Consultant-driven project delays

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Conclusion

The cost of construction in New York City is unmatched in the US, driven by a combination of union rates set by law, layered regulatory and approval processes, unique logistical headaches, persistent insurance premiums exacerbated by the Scaffold Law, and consultant bloat. Despite claims that stringent liability laws should lead to safer worksites, New York’s safety outcomes lag behind those of other states. Reform (particularly of insurance policy) is seen by guests as essential to kickstarting both productivity and abundance in New York construction, but faces entrenched opposition. Meanwhile, technology offers some hope for process improvements, but fundamental legal and regulatory changes will be required for meaningful cost reduction.

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Transcript

[Michael Capasso]

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[Joe Weisenthal]

Bloomberg Audio Studios Podcasts Radio News. Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Weisenthal]

So Tracy, everyone is like very into affordability these days and the cost of living and all that stuff, but I think, you know, there's all kinds of things you can do and whatever. But it seems like one fundamental thing which is probably true and is whatever we're talking about, whether it's building infrastructure for public transportation, whether it's building offices, whether it's building houses, like there's various costs involved, but one is like just the cost of construction. And if the cost of construction is very high, it's hard to imagine affordability improving much on anything, right?

[Tracy Alloway]

Yes, absolutely. I can't really debate that point. But it does seem like construction is this like one area where so many different things come into play. So you have the cost of basic materials, which have gone up, especially since the pandemic. You have the cost of labor, which has also gone up since the pandemic. You have the cost of insurance, which has also gone up since the pandemic. You have regulations, which we've done many, many episodes about the added costs from the permitting process for various things. It just seems like it's this bucket where you can throw all these different factors in and then get this kind of like reinforces itself and just makes it even more expensive.

[Joe Weisenthal]

Yeah, totally. And then, you know you sort of hit it with the insurance, but also just, like, cost of financing. Right. Because, like, as interest rates go high. Yeah.

[Tracy Alloway]

For financing, that, too.

[Joe Weisenthal]

That.

[Tracy Alloway]

It's a big bucket.

[Joe Weisenthal]

It's a big bucket. And, like, we know, like, construction is an area across the economy, not just in New York City, where we talked about it, with residential housing, there hasn't been a lot of productivity growth. Right.

[Tracy Alloway]

So, like, there's been, like, no productivity growth.

[Joe Weisenthal]

Yeah.

[Tracy Alloway]

According to at least one paper I read. I think it was a Richmond Fed paper. I will have to go back and check. But it's a really unusual industry in the sense that you haven't actually seen. You know, we. We don't have robots building houses yet.

[Joe Weisenthal]

We don't have robots building houses yet. So I don't know. You know, I think we need to learn more. You know, sometimes you see these viral statistics. They're like, oh, the MTA spent $60 million on building an elevator or cost $3 million to build.

[Tracy Alloway]

7 million installing those plastic fins on the subway turnstiles. I'm not even sure that qualifies as construction, but 7 million millions to build

[Joe Weisenthal]

a bathroom, which is not fun if, like, you have little kids. All kinds of things. Anyway, we should do more about why it costs a lot to build and maybe whether there's something that can be done about it.

[Elizabeth Crowley]

Absolutely.

[Tracy Alloway]

Let's do it.

[Joe Weisenthal]

Well, I'm very excited to say we really do have two perfect guests today. We're going to be talking about the high cost of construction, more infrastructure and stuff like that in New York City. We're going to be speaking with Elizabeth Crowley. She's the president and CEO of the Building Trades Employers association, also known as btea, as well as Michael Capasso. He is the president and CEO of CAC Industries, Inc. So, Elizabeth and Michael, thank you so much for coming on Odd Lots.

[Michael Capasso]

Thank you for having us.

[Elizabeth Crowley]

Yeah, thank you, Joe and Tracy. We are grateful for the opportunity to talk today. I represent over 1200 contractors in the BTA who are building our skyscrapers, our subways, building commercial buildings, hospitals, schools, about $65 billion worth of work annually.

[Joe Weisenthal]

And tell us about CAC Industries. What's your background, Michael?

[Michael Capasso]

CAC is a public works heavy highway contractor based in New York City. In Queens, we work for the public agencies. Port Authority of New York, Department of Design and Construction, Department of Environmental Protection, mta, Battery Park City.

[Tracy Alloway]

Did you see the High Line as well?

[Michael Capasso]

Yes.

[Tracy Alloway]

That's amazing.

[Joe Weisenthal]

Amazing.

[Michael Capasso]

How did you know that?

[Tracy Alloway]

I do some research before I come on this podcast. I know a lot of people don't think so, but you know, a little bit. Okay, let me ask you the first question. Let's just get it out of the way. But your organization represents unionized workers and I think your company is also unionized workers. A lot of people are going to hear high cost of construction in NYC and immediately go to the union factor. What is your response to that?

[Elizabeth Crowley]

Well, our members are employers, so they're really businesses. We're a business association and our members are employing over 100,000 workers and we're proud that we're union contractors. You know, we're the good guys and there are a lot of non union contractors out there that are racing to the bottom. We're paying for benefits and wages and that's just part of the cost of construction. Really what we're looking at doing is reforming costs that are more controllable. You know, the costs, the hidden costs that go into construction such as construction insurance.

[Joe Weisenthal]

Definitely want to talk about construction insurance and all this stuff. But again just on this point of like how much is quote hidden cost versus how much is just labor? Maybe Michael, you could like sort of break down or either one of you break down. How we should think about like in a given project when people see these big numbers, how much should people think about the labor component specifically versus measuring these, these other costs?

[Michael Capasso]

Yeah, I mean I would say typically labor ranges 30 to 35% of the total construction cost. But getting back to your original statements about union and sometimes people think that raises the cost of construction, I would actually take the counter argument to that. All the public works contracts in New York and the utility contracts are subject to the city or the state prevailing wage laws which the unions rates are in line with labor law to 20 which are in the city contracts. Those are wages and benefits you have to pay the employees. So it's not the union wages that are costing too much money. They're in line with all the rules and regulations of the city and state. When we think about union wages and why maybe there's this misconception. Yes. Compared to people that are not paying union wages, these people are paying good honest wages and benefits for the work they put in during the day. There are people who cut corners who don't pay that fair market rate which is where that kind of concept comes from.

[Elizabeth Crowley]

And look, there's a lot of cost to the delays. Yeah. When we look at our government leaders now we have a new mayor in the city of New York who believes that we should pay. Barista is $40 an hour. So when Mike talks about the cost of union labor, it's not much more an hourly rate. And these are inherently dangerous jobs. But we have a mayor that wants to build more abundantly, wants to cut the time it takes to build. So the land use process from two years down to under six months, and we support that. And the stars are aligning. Also with the governor, you know, she has an ambitious plan to build a new subway or railway from Brooklyn to Queens. We haven't built like that in, like, over 100 years. She's in her budget, going after environmental review. I mean, environmental review should only take a few months. You can see that process sometimes take well over a few years. Some bad cases, five years. And so what we're doing here as an industry leader at the bta, we're looking to reform and insurance costs so that we can not only build more abundantly, build faster, but bring down the cost. And this is a substantial cost. We found out from a recent report that nearly 10% of construction costs are wasted in New York, as opposed to any other state. Even expensive states like California, the cost of insurance is only about 2% for the total project cost. Well, we're spending upwards of 10, 12%.

[Tracy Alloway]

Definitely want to talk about insurance, but you said something interesting there that just reminded me you said delays add to the cost pressure. This might be a dumb question, but why is that? Because I think back to, like, my own home construction projects. If I have a contractor and he says this is going to take six weeks, but then he gets caught up on another project and it ends up taking eight weeks, the cost usually doesn't go up. It's just frustrating for me because I have to live in a construction site. Also, I want to say my contractor knows I have a podcast. He's a very good contractor. Delays rarely happen, so thank you very much. But why would that cause additional expenses?

[Elizabeth Crowley]

Well, just sheer time. I mean, what can be controllable? Certainly the land use process. Before representing the btea, I was a New York City Council member. So I served for nine years. And a quick case, by the time it goes through the local community board, the borough president's office, and then comes to the council with the best lobbyists, happens within two years. And so if. If the mayor could get that narrowed down, and the council speaker is also pledging to reduce the time to a window of less than six months, that's 25% of the average. And so that's significant time saved. That's something that we should be able to Control. And if our government leaders want to control it, that's real reform.

[Joe Weisenthal]

I'm not surprised at all to hear about, like, delays, particularly environmental review. People, like, talk about this. Let's actually talk about it a little bit more granularly. So you get some project that you want to do, I don't know, maybe something with a highway or something like that, and you have some time frame or some window that you think, like, you could get this done. And then we always hear delays, right? What drives the delays, who intervenes, and what are the processes by which, like these calendars get very extended.

[Michael Capasso]

There could be design errors or omissions in the bid documents.

[Joe Weisenthal]

Okay.

[Michael Capasso]

So when you actually go out to commence construction and do your preliminary work, the drawings don't match up with actual field conditions, which then result in changes to the contract. And that process can be very lengthy. So now we have to document the changes. You then, as a contractor with one of the public agencies, need to negotiate those changes, then get it approved. Depending on what the agency is, it could be with the controller's office in the city of New York, or if it's at the mta, with the board or whoever approves it at the mta. And all those steps take time. While those delays are being incurred, contractors are then experiencing indirect overhead costs that are assigned to the project while no productive work.

[Joe Weisenthal]

Explain that. What are these indirect overhead costs?

[Michael Capasso]

Project managers, project supervision, safety directors, quality assurance personnel.

[Joe Weisenthal]

So their salaries and their fees continue to run.

[Tracy Alloway]

You can't reassign them to another project while they're waiting.

[Michael Capasso]

Correct. They're assigned to a project. You don't know when those processes will come to an end. So it could go very expeditiously. It could be delayed longer depending on how complex the changes are, are. So that project staff sits there in theory, underutilized. And then, as is our contractual right, we will file a claim with that contracting agency for those additional costs coupled with that, and I don't know how these costs are calculated, the agency internally also has those same costs for the people on those projects, whether in house staff or through third party consultants, a combination of the two. So those costs all get compounded while these changes happen.

[Elizabeth Crowley]

I mean, one of the last projects I funded as a council member was to pay for turf in a park, like, just like a running athletic field. Replacement, simple replacement. It was funded fully in the budget. I left the council in 2017. They only cut the ribbon on that project being fully completed just in 2024.

[Joe Weisenthal]

So what happened to those seven years?

[Tracy Alloway]

Like what are they studying? You buy the turf, you stick it on the ground.

[Joe Weisenthal]

How would you describe what happened to those seven?

[Elizabeth Crowley]

Said it was going to be a $4 million field replacement. Then the contractor came out to the site. There was a lot of surface repair underneath that needed to happen. Underlying, just uneven surface or something like that. They sent it back. It had to go back before Design Review Council. It's something so small and so simple that shouldn't even cost as much as it does, gets to leave for far too long. And we need real reform in city government. I believe government leaders are finally addressing this as an impediment to building abundantly. Really?

[Tracy Alloway]

Yeah. So this just reminded me, this is something else I want to ask, but when you mentioned site reviews, is there something unique or sort of inherent about the way New York City is laid out and built and its geography that also makes it more expensive? I'm thinking like in Manhattan, obviously we have crowded buildings. Is some of Manhattan on reclaimed land? I can't remember now.

[Michael Capasso]

Well, Battery park cities, all reclaimed land.

[Tracy Alloway]

There we go, reclaim land. And it's mostly an island with few ins and outs. Right. So I imagine there are some restrictions on how much material you can actually get into the city. Does just the physicality of the city make it more expensive?

[Michael Capasso]

Yeah, all that's built into the contract costs. So when we're getting vendor quotes for different types of materials that will go into a construction project, most of the manufacturing base is not within the five boroughs. Right. So it's coming either from upstate out on Long Island, New Jersey, maybe Pennsylvania, southern New Jersey. You have the cost of that transportation into the five boroughs. Right. So this, if you're a vendor who's manufacturing somewhere in central Jersey, well, you probably can make multiple deliveries within the state of New Jersey where maybe that same freight carrier can only make one delivery a day into the five boroughs.

[Joe Weisenthal]

By the way, Ken Burns, his brother, he made a great documentary about New York. It's like a 10 hour, 11 hour documentary. And there's a whole section on the speed with which steel got from the Bethlehem Steel mill to build the Chrysler Building or something like that. It's just an unbelievable logistics. I imagine it would be a little bit slower today.

[Michael Capasso]

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[Joe Weisenthal]

Let's get to insurance and all of that stuff. You even brought us a nice report, scaffold law, Economic impact, which evidently, even though on the COVID of the report has a picture of a scaffold, is not about scaffold. Not just about scaffolds, not about scaffolds per se.

[Elizabeth Crowley]

Per se.

[Joe Weisenthal]

But what is the scaffold law and why is this like an important priority of yours?

[Elizabeth Crowley]

Well, look, if a worker was to fall off the scaffold, then the scaffold law would apply and it's to any height related injury. A New York contractor, a New York City contractor is held 100% liable. And in 49 other states it's comparable negligence. So what we found through that economic impact study was that every hundred million dollars that is wasted on frivolous claims, when you look at reinvesting that into the economy, there's $140 million output and that amounts to about $55 million in wages and over 600 jobs. And we look at big projects like the president wants to build Penn Station, that's estimated to be $7 billion in cost. If we were to put comparative negligence on that project, we can save over $500 million. That's half a billion dollars.

[Tracy Alloway]

So just so we understand the difference between comparative negligence and absolute liability. So if I'm a construction worker working on a skyrise or something and I'm not wearing my helmet and I fall off a 60 story building, I would be dead. But let's assume that I get injured.

[Michael Capasso]

You'd probably be dead if you were

[Tracy Alloway]

wearing a. I would probably be dead. All right.

[Joe Weisenthal]

If you're wearing a helmet.

[Tracy Alloway]

A 60 story building.

[Elizabeth Crowley]

Yeah. Okay.

[Joe Weisenthal]

Or one story.

[Elizabeth Crowley]

Okay.

[Tracy Alloway]

But I'm not wearing my helmet, even though my employer says I should be wearing a helmet and then I, you know, file a claim. The absolute liability rule basically says that you can't divide blame between the company and the worker. Is that right? So instead of being 90% at fault for my own injury because I wasn't wearing a helmet and I got a head injury, the company is now 100% at fault.

[Elizabeth Crowley]

That's absolutely right. And in other states they do comparative negligence and it's really driving up the cost of insurance. So much so that insurers don't even want to write insurance in New York anymore.

[Michael Capasso]

The market's limited.

[Joe Weisenthal]

Tell us about the insurance market for you because this is a good theme for us.

[Michael Capasso]

So, I mean, there's zero purchasing power. Contractors make a significant investment in safety. I promise you there's nothing more important to the contracting community than for every employee to go home safe to their family, loved ones, or whoever that may be at the end of the day. I know everybody cares about that. But when we go to renew our insurance every year and the large insurance carriers look at what this market for them is considered one of the, or the least favorable market to write insurance. So much so that carriers don't even want to write insurance in this market anymore. And if they do, deductibles are really high, rates are really high. So on a percentage base of revenue, we're talking about 5, 6, 10x other states with much higher deductibles. So now contractors carry the cost of those deductible payouts in their bids, which goes into these public work bid numbers. So that's where you exponentially see the higher cost of construction. But it actually take it a step further. All the subcontractors and vendors that are going to be working on our jobs also have the same problem. And typically the subcontractors are smaller contractors by either volume or revenue or employees. So they're typically paying a higher premium on a percentage basis. So those numbers are also baked into our contract pricing.

[Elizabeth Crowley]

Yeah, our report really, when we say contractors in New York are paying 10% of total construction costs to insurance, that's 500% more than other states, where in other states it's only about 2%. And then Michael mentioned the subcontractor. They get hit the worst. On average, if you're a concrete subcontractor or steel painting contractor, you're paying 15 to 20% of your total volume of work. And it's unsustainable.

[Tracy Alloway]

So New York is the only city or only state. City, state that still has this law in place, is that right? Yes. What happened in other states when we saw it go away?

[Elizabeth Crowley]

So the last state to reform the so called scaffold law, absolute liability standard was Illinois in 1995. So this is 140-year-old law. It's antiquated, it's broken policy. Even both the Democrats and the Republicans, when you speak to them one on one, they know this is bail policy. And the interesting thing, Illinois, the number of fatalities declined after they put a comparative negligence model in. So those that say it's a, you know, you have some trial lawyers, then they really, it is a catch count for the trial law.

[Tracy Alloway]

I mean, that was gonna be my next question. So if everyone agrees that this is an antiquated law, who's actually standing in the way?

[Joe Weisenthal]

We're definitely gonna get an email after this episode and they're like, your guests were totally biased. It's gonna be from some lawyer. And they're like, we wanna come on and do a follow up, maybe we will. But this raised the question, okay, the law has been around for over 100 years, so why not? I mean, like, I can understand that that might raise. Yes, okay, New York is going to be a higher cost state. That doesn't explain the surge per se. Has something changed in the last 5, 10, 28 years? I mean, New York used to do a lot more building or used to build a lot. Has something changed such that the law has more teeth or bites more than it did? I mean, again, you talk about the disappearance of certain insurance carriers. The law existed 50 years ago.

[Michael Capasso]

Right, Right when I was first started my business. Yeah, a little over 30 years ago. You know, insurance was an add on, on the bid where you didn't really focus about it. We're doing about 1 2% of the contract price. And that held true maybe up until even 10 years ago. And in the last 10 years, we've seen a significant rise in the cost of insurance. And I think it directly correlates with frequency of claims, third party claims, payouts of those claims, and how either a judge or jury awards damages in those cases. There's been well documented cases of staged construction accidents on sites.

[Elizabeth Crowley]

What Michael said is absolutely true in, in New York, for scaffold loss, the bodily injury claim settlements, for scaffold laws, six and a half times the average of other claim settlements. The sheer volume has been increased by tenfold. But we're talking about in 15 years. And that's why these insurers are leaving, you know, why now? Why do we think we have a real opportunity? Not just because we have this economic impact report that shows us exactly how much we're spending, because government leaders are finally talking about the fraud and abuse that's happening. Our governor and her state of the state last month called on insurance reform for the automobile industry. Now, half of the consumers in the state are car owners. They're driving. They could relate to us paying so much more, but we're paying 50% more in car insurance compared to every other state. But our contractors are paying 500% more. And the governor touched upon fraud and abuse, just like Mike said. The governor says we need to address that. We need to lower litigation costs. And mind you, these are auto insurance claims that are much, much less than the scaffold law claims. And we need to fix this. We need reform. So this is a step in the right direction and we're really focused on reform in Washington right now. There's movements there. There's a lot of support on this big federal infrastructure package that's a part of a surface reauthorization transit bill that gets reauthorized every five years. It pays for big projects like a second Avenue subway or major roads and highways, bridges. And it's a must pass bill. And we think that we'll see reform there first, and we're very hopeful that reform will come soon.

[Tracy Alloway]

In Albany, how would you actually go about reducing litigation costs? Because my assumption is as long as you're doing like a jury process, it's going to be pretty expensive unless you go to something like arbitration.

[Elizabeth Crowley]

Yeah, well, the litigated costs, one would say it goes to jury. But all of these insurance companies right now are just afraid to get that

[Tracy Alloway]

far in New York State, so they settle pretty quickly.

[Elizabeth Crowley]

One insurance company, Tradesman Insurance, they filed five different RICO cases in recent years, probably. I've heard them say that they invested over $16 million to do personal investigations to stop fraud and abuse. And they say that because they were able to get so many claims dropped by showing the Ford that there were bad actors, they saved over $2 billion. And the numbers keep growing. And one law firm, Subin associate that had like 300 different cases dropped apparently closed their doors last month. So it shouldn't get to that where insurance companies have to do the reform. This is bad public policy and we need our leaders in Washington and Albany to do reform now.

[Michael Capasso]

It's, I mean, I think it's well documented. It's all public information of just one building or a couple of buildings where multiple claimants from the same building with the same law firm utilizing the same medical practices filing these lawsuits.

[Elizabeth Crowley]

Yeah, and some of the doctors are losing their licenses and they're barred from workers comp cases. And so that is reassuring to see action happen. And we're reaching a critical mass at this point. So I think that's why now we're hopeful for reform.

[Joe Weisenthal]

Can you talk a little bit more about today versus mid-90s? You win a bid with the city or whatever, you have a project. You mentioned back then insurance was an add on. Okay, it was 1 or 2%. Now it's 10%. But setting aside the price going out and finding which carrier will take that. Can you just talk about what life was like, I don't know, again, 30 years ago versus today in terms of terms of going out into the market for finding that insurance available options negotiations and so forth?

[Michael Capasso]

Yeah, I mean, it was much easier and much more simple 20, 30 years ago than it is today.

[Joe Weisenthal]

All right, what'd you do?

[Michael Capasso]

You talk to your insurance broker, they would come back with three or four quotes, all roughly the same. What did you feel comfortable with? You would do your annual renewals. There would be incremental cost of living, inflationary adjustments to your annual rate. You signed on again for another year. Now it's a much more detailed, thorough process, thorough review. How much are you going to raise your deductibles where back then deductibles might have been? $25,000. I mean, I think we're at 750, 500 or 750,000 now per occurrence. I mean significant, significant changes where now the insurance company will dictate when you're going through your quotes. If you don't raise your deductible, we won't even write your insurance where that didn't happen back then. So there was much more purchasing power in the contracting community 20, 30 years ago in the marketplace than there is today. Yeah.

[Tracy Alloway]

This is what I wanted to ask. So if the scaffolding law goes away, are you confident that new insurance actors would actually come into the market? Because it feels like part of the problem here is a lot of people have exited. So you have limited insurers to actually choose from, which means they now have all the pricing power.

[Elizabeth Crowley]

Yeah, I think the free market will work itself. It's a competitive market right now for the limited that do do business in New York. I was just on the phone earlier today with Zurich, which is a worldwide insurer and they stopped insuring small contractors and they'll only do big wrap up projects in New York State. Our Department of Financial Services regulates the companies to make sure that they can't charge too much or too little. And again, it's the market. As long as they can prove they can make money here in New York, they'll come back.

[Michael Capasso]

It just dawned on me one other thing to consider which sometimes is good for the local contracting community. Yeah. But also not necessarily good for the overall city of New York. There are contractors based in other states that won't work here because their insurance companies will exclude their policy from working in New York. And then they would have to buy job specific or site specific policies which are also very uncompetitive rates. So it's easier for them just to stay out of the marketplace. That then in theory may drive down competition. Right. From a low cost bid analysis.

[Elizabeth Crowley]

I think an interesting, you know, to bring it back to what the governor has taken on in her state of the state or in her budget auto insurance. You know, we mentioned the trial lawyers and how this is really a catch cow for them. But you know, they like to paint the insurance companies as the bad actors. But we look in places like Florida for example, they had a similar no fault auto insurance policy like New York currently has and they changed the policies there and they've given ratepayers double digit refunds. So there is a situation, a scenario where we could see the same for our contractors if real reform happens here in New York.

[Tracy Alloway]

Just to be clear, does the high cost of insurance also apply to projects where heights presumably don't come into it very much? So, you know, if you're building a new subway tunnel or something like that, I assume there's, there's probably some scaffolding involved. But like maybe you're not falling too much.

[Michael Capasso]

You could be standing on a ladder in a sewer trench, 6 inches up on the ladder with the ladder secured in the bottom of the hall tied up all in conformance with OSHA regulations. And if the employee falls six inches to the ground, which typically we all think we would be okay falling 6 inches. But then some injury arises months later and ends up in a lawyer's desk and the contractor's then sued, there'll be some sort of payout and that would fall under the scaffold law. So even though you're not up on the heights of a building not building a superstructure, that law still applies.

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[Tracy Alloway]

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[Joe Weisenthal]

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[Joe Weisenthal]

I find this argument to be very compelling and the high cost of insurance on a per project basis in New York City versus every other state that seems like an issue Unquestionably. All that being said, some of the numbers you read about construction processes, okay, let's say we take only 30% for labor, or labor is 30% of the job, and then let's say insurance is 10% of the job. So we have this other part. And when you read about the cost of an elevator in a subway, it seems like even if we, like, knocked off a lot of it for insurance and labor, whatever, it still seems crazy expensive in New York. So can we just talk about, like, are these numbers real? Like, when we see, like, oh, it costs $60 million to build an elevator somewhere, is that real or is that clickbait? What's going on there?

[Michael Capasso]

I mean, I don't know where it costs 60 million to build an elevator, but look, remember, there are subsurface conditions in New York that you have to deal with, like relocating utilities and gas mains and steam mains and electric. That all may go into the cost of that elevator, but it's really not the direct cost of the elevator. So, like, when the MTA goes and puts a new elevator in on a corner.

[Joe Weisenthal]

Yeah.

[Michael Capasso]

Yes. Maybe the cost of that elevator project sounds enormous, and it is for the elevator project, but not all of it is directly tied to the elevator. It's clearing a lane.

[Joe Weisenthal]

But other cities have this, too, right? Like, I mean, yeah, absolutely. It's not all. There's going to be real estate acquisition costs and all the issues of materials and everything, but I get the impression that, like, building an elevator in New York City, like, should taxpayers be happy with, like, the numbers? They seem very high and they seem out of proportion with what we see in other cities.

[Michael Capasso]

Yeah. I don't know. The comparative data.

[Elizabeth Crowley]

Yeah. We are most expensive to build in comparison to other cities, like San Francisco, but it's still very expensive to build there, too.

[Joe Weisenthal]

Sure. So what are we paying for these numbers? I mean, again, let's go back to the turf example. $4 million for, like, turf on let's.

[Elizabeth Crowley]

And you did, and I laughed before when you mentioned the skyscraper, the Chrysler Building and the Bethlehem Steel and how that was probably put together in less than a year. The Empire State Building. And today we're building mega towers that are taking three, four years. And while they're important projects and they're very expensive projects, we were able to do it in such a shorter time frame back then. Of course, you save money when you reduce the time back to that. It was in Juniper Park. And it's funny that you mentioned that, but actually, I realized after you spoke about Battery park and how, you know, that was water before we expanded, that was a swampland once in Queens, that particular park. And so those are the constraints that we don't think about when we're building in New York. It's so hard to find schools, you know, places to build schools. I remember as a council member just having the most overcrowded school district and so many sites were contaminated and we couldn't find a good site. It's just these difficult things that happen in such a dense city. And part of the reason it's so expensive to build here.

[Tracy Alloway]

Does anyone have any good examples of building, like, efficiently at not so much cost relatively, in New York City or New York State speak, but still to a high standard. Like an example of a project that was done really well. Michael, surely you should be naming some of your own.

[Michael Capasso]

Yeah, no, we don't have. Unless there are major design flaws or errors. I feel like almost all of our projects do go extremely well. Right. It's a competitive marketplace. We're the low bidder. Right. Typically when you get the job, which means we're the cheapest price, the lowest responsible bidder. And more often than not, we don't have these major overruns or changes. They seem to go fairly well.

[Elizabeth Crowley]

And Michael introduced himself as the president of the company. But me and Michael worked together on the mayor's task force for Capital reform. And we went up to Albany as part of the reforms two years ago and pushed for progressive design bills or different ways of building projects that New York didn't use and other states used. And that actually decreased the timeline. And you were able to build for less by using these delivery methods. And I think that Shirley Chisholm park, they just. Mayor Mamdame cut the ribbon. But DDC is pointing to that project as coming in under budget and in a shorter amount of time that was estimated that it would take to build. So there are ways we could work together, putting our minds together to bring about real reform.

[Michael Capasso]

I think one area that we didn't touch on, which I think is important. I know you probably know the statistics, Right. If you look at the counterargument, like if you said the trial lawyers to what's driving these insurance costs, you would think if these stricter rules and laws are in place, it would make everything much safer or safer for the worker or less injuries. And do you want to touch on that?

[Elizabeth Crowley]

Yeah. I mean, look, there's nothing more important than safety. That's a cornerstone of the work that our contractors do. You know, they want their workers to go, go home as safe as they were when they came to work that day. We're, you know, even focusing on culture on the job site and total wellness. That's important. So we need to continue to be forward thinking and.

[Michael Capasso]

But the data, the data set, the results in New York are equal to other states.

[Elizabeth Crowley]

Oh on. In terms of our rate of fatalities. In fact, New York has a higher rate of fatalities despite this law in comparison to state like New Jersey or the average in the country. You know, when we have nearly 12 fatalities per 100,000 workers, whereas the national average is under 10. And so we're 20% higher in new York despite having such a strict liability on contractors.

[Joe Weisenthal]

Can we talk a little bit about current conditions? So one of the things that we heard a lot in like 2021, 2022, 23, this like intense scarcity of, of skilled tradesmen and various things electrical, etc, how is that, Is that still a big, is that a big issue? Still a major constraint right now, finding available labor?

[Michael Capasso]

I, I think an aging workforce, at least, I mean without me having any demographic data, just like visual context and we do have an aging workforce, I don't think the younger generations are so inclined to either go to a vocational school or some type of trade school. I would sit here and I, I would tell anyone. I think it would be a great industry with the disruption going on in the world right now.

[Joe Weisenthal]

Yeah.

[Michael Capasso]

With you know, the advent of AI and all these jobs, like for you

[Joe Weisenthal]

like right now is this like when you think of the various headaches that you have in your life is keeping a sort of steady. The available flow of labor that knows how to build things. Like one of the things that keeps you up at night.

[Michael Capasso]

Yeah, I mean available flow of labor is one of the things that's kept me up at night since I started my. Okay, we converted to 100% employee owned company a couple of years ago. So much so that I included the trades people. So the collectively bargained employees through the different unions in the city are part of that esop.

[Elizabeth Crowley]

That's very unusual and I applaud Michael and his team for doing that. But when we think about workforce needs, many of our contractors that are doing the infrastructure work, like Michael, are experiencing difficulties and often take talent from one another. So ESOP is going to stop that for sure. But when you look at the commercial buildings that are going up, which is more of a private market or residential, that is not happening. And we really didn't have a chance to talk much about affordable housing. But any of that building is much more likely to be non union today, which is a real shame because a lot of times sometimes those workers are not getting paid on the books. More likely, 80% of the injuries that happen on job sites are happening on non union job sites. So we really want to prevent that and help promote union employment as much as possible.

[Tracy Alloway]

Michael, you mentioned AI. So now I have to ask. We dug in a little bit into construction productivity at the beginning of this conversation and I think construction is largely done now as it was probably like 20 or 30 years ago. And there have been some technological advances like the nail gun. But beyond that, we don't have actual robots that are like putting shingles on our houses and things like that. But how confident are you that it's gonna actually stay that way forever? Because I mean, LLMs, ChatGPT, kind of.

[Joe Weisenthal]

I like how you're looking at me like, I'm gonna like, vibe code. I'm gonna vibe code a robot.

[Tracy Alloway]

It's the running joke. It's all Joe's fault. But it came out of nowhere for white collar workers. Could it come out of nowhere for blue collar?

[Michael Capasso]

I. I think so. And look, I don't think it's going to replace the workforce. I actually was at a construction a couple weeks ago and my biggest takeaway is AI isn't replacing employees, but employees who use AI will replace the employees who aren't.

[Joe Weisenthal]

Do you see that? Like, like are there in your firm? Are you getting value from it? Is anyone doing anything with like tech or anything? So is anyone using it for drawing?

[Michael Capasso]

We had our off site strategy session last week and one of our quarterly priorities. Yeah. Is all around implementing artificial intelligence in our processes and workflows. So really how can we get information sooner?

[Joe Weisenthal]

Yeah.

[Michael Capasso]

So instead of relying on maybe these incumbent software models, taking the data we have and using AI to give us analysis of that data much quicker.

[Tracy Alloway]

So not so much the physical process of like putting up drywall, but the

[Joe Weisenthal]

planning and well, look, that's coming.

[Michael Capasso]

I mean, I have friends who have robots that can tie rebars now with wire. Right. They've invested in these companies. I'm not utilizing those robots yet, but they're out there. Caterpillar has technology, the heavy equipment manufacturer, where someone can sit. Let's call it like what we grew up with, a video game. Like, it looks like a pole position. I don't know if I'm dating myself. And you can operate four different machines, not at the same time, but from one TV screen. Four actual Caterpillar machines at four different locations, just sitting in like, what I would call an arcade machine.

[Elizabeth Crowley]

Wow.

[Michael Capasso]

With no operator in the seat.

[Joe Weisenthal]

Yeah.

[Elizabeth Crowley]

Interestingly enough, you know, I mentioned Zurich earlier. Zurich Insurance will only insure a project in New York if there are cameras watching. Now they use AI after a day's work to study any movement that was dangerous. So it's not just like, like people believe it's for surveillance to stop fraud and abuse from happening, but it's really to correct workers too, and reduce risk. And they've seen that their incidents have gone down significantly and their job sites are much more safer.

[Michael Capasso]

I'm part of a Tri Venture group doing the east coast resiliency project on the Lower east side of this $1.3 billion project. And we're utilizing that exact system. The cameras are located on machines, on poles, and the data gets downloaded every night, analyzed by AI. So not only do we get like near misses or data, but we also use it for training the workforce. So the videos that it captures to make the job site safer.

[Elizabeth Crowley]

Yeah.

[Joe Weisenthal]

What about again, just talking about current conditions. What about materials cost? So we know that the cost of everything surged a lot immediately in the wake of the pandemic. Are you getting any relief? Have the pace of price increases gone, slowed at all? Are there any parts we've talked about, like transformers, like various key electrical parts that you can't get easily at any price? What are you seeing right now on just acquisition of materials?

[Michael Capasso]

Yeah, I have not seen prices come down.

[Joe Weisenthal]

Okay.

[Michael Capasso]

You know, it's no different when there was like a fuel surcharge. Right. The oil market spiked and every vendor would put a fuel surcharge on deliveries. Somehow those fuel surcharges never go away.

[Joe Weisenthal]

What about other, like, just other raw materials, like other things that are in like, scarcity that you like, have a difficult time finding at all, at any price right now?

[Michael Capasso]

No, I think we're pretty much getting everything we need. I know Covid, and coming out of COVID there was big issues.

[Tracy Alloway]

When you walk into a building like the Bloomberg offices, do you look around and you think like, what a marvel of structural engineering? Or do you think, I wonder what the insurance costs are?

[Michael Capasso]

No, I think I should have done something different in my career.

[Joe Weisenthal]

One last thing that you mentioned, and I've read people who talk about abundance, et cetera, they talk about how a lot of public projects, there's a big consultant element that many aspects of it have been outsourced from the public sector that these third parties and that that drives up. You mentioned consultants. Does that Resonate with you in terms of where you see potential cost, bloat and so forth?

[Michael Capasso]

Yeah, I mean, I. I don't know the value of the consultant contracts, but I can tell you, based on my experience, we used to work on a lot more contracts that were run in house by the agencies. Yeah. And now you see a lot of third party, like resident engineer and inspection services and other tasks that used to be performed in house that are now performed by third party consultants.

[Elizabeth Crowley]

And often they're called owner's reps. And we'll get complaints from our contractors that owners reps are delaying the project so they continue to get paid for the project. And that's something where we're interested in seeing some reform too. I've heard of that on more than one type of project. It could, you know, it could be a school being built or a bridge being painted.

[Joe Weisenthal]

Michael and Elizabeth, thank you so much for coming on Odd Life. That was a lot of fun.

[Michael Capasso]

Thank you.

[Elizabeth Crowley]

Thanks for having us.

[Joe Weisenthal]

That was great. Thank you so much.

[Michael Capasso]

Thank you for having us. We appreciate it.

[Tracy Alloway]

Yeah, that was super interesting,

[Joe Weisenthal]

Tracy. That was a fun conversation. I like it. Felt like we learned about the city in some way. You know what I'm saying?

[Tracy Alloway]

I learned a lot about absolute liability.

[Joe Weisenthal]

Yeah, absolute liability.

[Tracy Alloway]

That was interesting. Look, I also think the point about delays is very striking to me because again, that would seem to be an issue where you're still paying people to build something, but building it is taking 10 years instead of five years.

[Joe Weisenthal]

Yeah. Or especially at a time when interest rates are high because then they compound extra.

[Michael Capasso]

Right.

[Tracy Alloway]

And also it seems like there's a potential problem of incentives here. Right. Like if I am a consultant working on a project and I am still getting paid, but the project's not actually going, and I can spend a lot of time, I don't know, pointing out, like, individual issues and potentially delaying stuff like that's an incentive problem.

[Joe Weisenthal]

Absolutely. I guess I would say I find the point about insurance to be compelling and the point about, like, if 49 other states have gotten rid of these laws and they're not actually even making New York a safer workplace. I mean, it would be one thing, I guess, if like New York had like half the accident rate.

[Michael Capasso]

Yeah.

[Joe Weisenthal]

As the rest of the country. And then you say, okay, well, look like you could point to a law like this and say, this is clearly making. Causing everyone to take safety more seriously. If you can't point to that and if every other estate has gotten rid of it, I mean, I don't have any Opinion. But. And again, I'm sure we're going to

[Tracy Alloway]

hear from lawyers about to get make an enemy out of the trial bar.

[Joe Weisenthal]

Yeah, we're going to get emails from lawyers saying we want to do a rebuttal episode. But my gut is that there's probably definitely something to that.

[Tracy Alloway]

Well, the other thing I was thinking about on the insurance point is, you know, I have this pet theory that, like, insurers basically run the world.

[Elizabeth Crowley]

Yeah.

[Tracy Alloway]

I mean, they control a lot of money. They set, like not just safety standards, but social standards for a lot of things. It was really interesting hearing about using AI to monitor security camera footage, like for health and safety, because I can imagine, you know, if that helps the insurers. I can imagine them asking that to become standard practice everywhere.

[Joe Weisenthal]

It's super interesting to think like, okay, yeah, you want to have cameras because if there's an accident, then you could go back and review the footage. But this idea that like, oh, you could, like, see if there was a near miss or something like that and the AI can detect it directly, potentially. That's interesting. And then of course, there's going to be all these questions about surveillance and whether people like that. But this is going to be. It's going to be a big topic. Yeah, it's going to come on very fast.

[Tracy Alloway]

I know I keep saying this, but we really should do more on insurers. We'll figure out we're starting to do

[Joe Weisenthal]

more, you know, like, if we keep saying it like we are, you know.

[Tracy Alloway]

No, yes. But even more.

[Joe Weisenthal]

But even more. I agree, I agree.

[Tracy Alloway]

Shall we leave it there?

[Joe Weisenthal]

Yeah, let's leave it there.

[Tracy Alloway]

Okay. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alaway.

[Joe Weisenthal]

And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen, Armand, Dash O Bennett at dashbot, and Kale Brooks at Kale Brooks. For more Odd Lots content, go to bloomberg.comoddlots for the daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord Discord GG oddlots.

[Tracy Alloway]

And if you enjoy Odd Lots, if you want us to do even more on insurers, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Chat channel on Apple Podcasts and follow the instructions there. Thanks for Listening.

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