New York Court Upholds Carrier’s Cancelation, Shifts Injury Liability to General Contractor

In the case of Singh v. Atlas Construction Corp., a pivotal decision by the New York Appellate Division on February 15, 2024, has underscored the critical importance of maintaining workers’ compensation insurance coverage in the construction industry. The case originated from an incident where a worker sustained injuries after falling from scaffolding at a construction site. The worker was employed by a subcontractor working under Atlas Construction Corp., the general contractor.

The subcontractor’s insurance carrier denied liability for the worker’s injury claim, asserting that it had previously canceled the subcontractor’s workers’ compensation policy due to nonpayment of premiums. The case hinged on whether the carrier had effectively communicated the cancellation to the subcontractor, a responsibility it bore under New York law. For a cancellation to be deemed effective, the carrier must send a notice of cancellation by certified or registered mail, return receipt requested, to the employer’s last known place of business.

Following a series of hearings, a workers’ compensation law judge determined that the carrier had indeed fulfilled its obligation to effectively cancel the policy. This ruling shifted liability for the worker’s claim to Atlas Construction Corp., based on Workers’ Compensation Law Section 56. This section establishes that a New York contractor is liable for compensation to employees or their beneficiaries in cases of injury or death arising from hazardous employment if the subcontractor fails to secure compensation coverage.

The Appellate Division affirmed the judge’s ruling, noting substantial evidence supported the board’s finding that the carrier had sufficiently proven the policy’s cancellation. The carrier’s submission of a U.S. Postal Service certified mail barcode, tracking number, and the notice of cancellation was deemed credible evidence that the notice was properly sent and received.

This decision highlights the stringent requirements for insurance coverage cancellation and the potential repercussions for general contractors in New York. It serves as a cautionary tale for the construction industry, emphasizing the importance of ensuring subcontractors maintain active and adequate workers’ compensation insurance to mitigate liability risks.