OGC Op. No. 09-08-08
The Office of General Counsel issued the following opinion on August 31, 2009, representing the position of the New York State Insurance Department.
RE: Public Construction Contract
Does the New York Insurance Law require a contractor that bids on a public construction contract to obtain insurance from an insurer that is authorized to do business in New York?
No. The Insurance Law does not require a contractor that bids on a public construction contract to obtain insurance from an insurer that is authorized to do business in New York. However, N.Y. Ins. Law
An inquiry was made as to whether “a contractor who bids on a New York City Housing Authority project must provide coverage from a carrier [that is] licensed and authorized to do business in New York.” With reference to the New York State Insurance Department’s Office of General Counsel opinion dated November 1, 2004, (“OGC Op. 11/1/04”), which concluded that “the New York Insurance Law does not prohibit a municipality from requiring a contractor that is bidding on a public project to use an insurer that is authorized to do an insurance business in New York,” the inquirer questioned whether “the public owner is legally compelled to require the contractor to provide insurance from a carrier authorized to do business in New York.”
(a) (1) No officer or employee of this state, or of any public corporation as defined in section sixty-six of the general construction law, or of any public authority, and no person acting or purporting to act on behalf of such officer, employee, public corporation or public authority, shall, with respect to any public building or construction contract which is about to be, or which has been, competitively bid, require the bidder to make application to any particular insurance company, agent or broker for or to obtain or procure therefrom, any surety bond or contract of insurance specified in connection with such contract, or specified by any law, general, special or local.
(2) In paragraph one hereof, “public corporation” and “public authority” shall not include:
(A) a public corporation or public authority created pursuant to agreement or compact with another state, or
(B) the city of New York, a public corporation or public authority, in connection with the construction of electrical generating and transmission facilities or construction, extensions and additions of light rail or heavy rail rapid transit and commuter railroads.
(b) No such officer or employee, and no person, firm or corporation acting or purporting to act on behalf of such officer or employee, shall negotiate, make application for, obtain or procure any of such surety bonds or contracts of insurance (except contracts of insurance for builders risk or owners protective liability) which can be obtained or procured by the bidder, contractor or subcontractor.
(c) This section shall not, however, prevent the exercise by such officer or employee on behalf of the state or such public corporation or public authority of its right to approve the form, sufficiency, or manner of execution, of surety bonds or contracts of insurance furnished by the insurance company selected by the bidder to underwrite such bonds or contracts. Any provisions in any invitation for bids, or in any of the contract documents, in conflict herewith are contrary to the public policy of this state.
Neither Insurance Law
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.