How insurance could respond to Hell's Kitchen crane fire and collapse
Discover what perfect coverage looks like for these types of operations.
Fire broke out on the machine deck of a tower crane in Midtown Manhattan on July 26, 2023, as it was hoisting 16 tons of concrete up to the 36th floor of a tower development project. While the operator attempted to put out the blaze with a handheld fire extinguisher, the flames proved too much and eventually caused the boom fully collapsed and detached, striking an adjacent building as it fell alongside glass shards and concrete onto the street below, according to the New York City Mayor’s Office.
The crane operator was able to escape the blaze safely, but around a dozen people on the street suffered minor injuries, according to the NYC Department of Buildings.
“I think we’ve all seen the gut-wrenching videos of the incident showing the catastrophic collapse over one of our city’s busiest streets,” Jimmy Oddo, Department of Buildings commissioner, said at a briefing on the accident. “It’s truly nothing short of miraculous that no one perished and no one was seriously injured in the incident.”
While NYC officials have not made any final determinations as to what caused the fire, local media reports indicate hydraulic fluid leaking onto a hot plate near the engine might have played a role.
According to Sean Pender, senior vice president, construction, at CAC Specialty, NYC’s Department of Buildings requires any job involving a tower crane to carry at least $80 million in liability limits in the hopes of protecting against losses from these types of incidents.
While crane accidents do happen — around 42 people are killed in crane accidents annually, according to the Bureau of Labor Statistics — most incidents aren’t as dramatic as the scene of a crane burning high above Manhattan.
“We tend to see a high-profile crane collapse of this magnitude every few years,” Pender said. “There are a lot more incidents and accidents that aren’t as high profile; something is caught before a failure, or a load is dropped but there are no injuries or it happens on-site and isn’t visible from outside.”
In the instance of the New York City crane collapse, coverage might respond in at least three ways, according to Pender, who has worked as a broker for these types of projects as well as a risk manager for a hoisting and scaffolding contractor in Manhattan.
First, there is the liability for damages to the adjacent building and injuries to people on the ground. Pender noted that if any ground-level workers were injured by the falling equipment and debris, it would become a workers’ comp claim.
Next is the damage to the project, according to Pender. He said it appears the project itself was fairly unaffected physically based on the videos available online.
“It looked like there was damage to the façade of the building and some windows on the ground from the wreckage of the crane coming down,” he said. “If it had fallen the other way it would have been a different story, but the project itself did not appear to sustain a ton of damage.”
Finally, there is the damage to the crane. In this case, the equipment came from New York Crane, which generally makes any contractor renting one of their cranes responsible for any damage under an equipment policy, according to Pender.
Most costly part of claims
The most complex and costly parts of any claim of this nature are delays. Pender noted when third parties are involved, as in the NYC case, things become even more complex and, in turn, lengthy.
“Especially with New York and something as significant as this, you’re looking at even greater delays because everything is shut down until the authorities do full investigations to find out exactly what happened, could it have been prevented and what is going to stop it from happening again,” he explained.
In addition to ensuring that everything is safe to resume at the project site, authorities will also be checking the building across the street to make sure the damages were as superficial as it appears from the video, Pender said.
As it is, NYC officials have ruled that the portion of the crane still standing, the tower construction project and the adjacent building that was struck are stable and present no current risk to the public.
Ideal coverage
When it comes to coverage for these types of construction projects, Pender is a big proponent of “wrap-ups,” whether they are owner-controlled insurance programs or a program managed by a contractor on a project.
Wrap-ups are a type of liability coverage specifically focused on contracting risks that “attempt to manage in a single contract the broad interplay of exposures and interests among owners, general contractors, and subcontractors,” according to the FC&S Insurance Dictionary.
Pender explained that he favors wrap-ups because they allow a single entity that has skin in the game to take responsibility for the project from a safety and claims perspective.
“They are spending a lot of money on these premiums and there are potential savings for claim reduction by running a safe, well-maintained job site,” Pender said. “The best way to do that is to have a single entity controlling liability insurance for a site.”
The other important coverage component is a solid builders risk policy, which can help cover any potential delay costs and provide for immediate repair and replacement to help get a project back on track quickly.
Related: