NYC’s Local Law 97 Creates New Insurance Challenges That Property Owners Can’t Afford to Ignore
New York City’s Local Law 97, the cornerstone of the Climate Mobilization Act, is fundamentally transforming how property owners approach risk management and insurance coverage. This groundbreaking legislation, enacted in 2019 as one of the most ambitious building emissions regulations in the country, affects buildings over 25,000 square feet beginning in 2024, creating unprecedented insurance considerations for property owners across the five boroughs.
Understanding Local Law 97’s Insurance Impact
Buildings that exceed emissions limits face substantial penalties of up to $268 per metric ton of CO₂ emissions over the applicable threshold, with a cap on fines of $5 million per year per covered building. However, the financial implications extend far beyond these direct penalties. The law could have unintended consequences, such as increased rents and insurance costs, forcing property owners to reassess their entire risk management strategy.
Property owners should re-evaluate their property and commercial general liability insurance to avoid additional risks when hiring energy efficiency contractors to comply with LL97. The compliance process often involves significant construction work, including HVAC system upgrades, building envelope improvements, and electrical system modifications – all of which introduce new liability exposures.
Construction and Contractor Insurance Considerations
The retrofit requirements under Local Law 97 create specific insurance challenges that many property owners haven’t anticipated. Buildings may be exposed to claims under New York Labor Laws 240 and 241, which impose strict liability on landlords doing any work in NYC where contractors are exposed to heights, even using a ladder. This strict liability standard means property owners can be held responsible for contractor injuries regardless of fault.
Property owners need energy auditors to prepare reports and may require commercial attorneys to prepare Energy Consulting Agreements to cover building owners from future liability. These professional services add another layer of potential exposure that requires careful insurance consideration.
Property Value and Market Implications
Local Law 97 has the potential to reshape the entire New York City real estate market, with high-performing buildings with lower emissions becoming more attractive to investors, lenders, and tenants. Conversely, buildings with high emissions and significant compliance costs could see decreased valuations.
This market shift affects insurance considerations in multiple ways. Properties requiring extensive retrofits may face higher premiums due to construction risks, while energy-efficient buildings might qualify for green building insurance discounts. The leasing market will also be impacted, as landlords must decide whether to absorb compliance costs or pass them along to tenants.
Timeline and Compliance Requirements
Property owners must submit their first annual LL97 compliance reports by May 1, 2025, with a 60-day grace period through June 30, 2025. The NYC Department of Buildings has provided this grace period to allow submissions without financial penalties, and building owners who retained a registered design professional by February 1, 2025, may request an additional extension until August 29, 2025.
Based on 2023 energy performance data, approximately 8 percent of properties emit more greenhouse gases than their 2024 cap, while about 57 percent exceed their 2030 limits. This means the majority of covered buildings will need to undertake significant improvements over the next decade.
Working with Experienced Insurance Professionals
Given the complexity of Local Law 97’s insurance implications, property owners need experienced guidance from professionals who understand both the legislation and the New York City market. Max J. Pollack & Sons Insurance, a family business serving the New York Metropolitan community for over 75 years, brings the deep local knowledge necessary to navigate these challenges.
Based in Park Slope, Brooklyn, the company serves clients throughout the entire greater New York City area, providing the personalized attention that complex LL97 compliance issues require. The company’s success stems from extensive insurance industry knowledge coupled with old-fashioned, personalized attention to customers’ needs – exactly what property owners need when facing unprecedented regulatory challenges.
For property owners seeking comprehensive nyc property insurance coverage that addresses Local Law 97 compliance risks, working with an experienced, locally-based insurance professional is essential. Commercial property and commercial general liability insurance are among the most important types of coverage necessary to protect the financial security and physical assets of any business.
Preparing for the Future
The law aims to reduce emissions by 40% by 2030 and achieve net-zero emissions by 2050, meaning the current requirements are just the beginning. By 2030, emission limits will tighten, and fines will likely increase, with the pressure to retrofit buildings continuing.
Property owners who proactively address their insurance needs now – before undertaking major compliance projects – will be better positioned to manage costs and protect their investments. The key is working with insurance professionals who understand both the technical requirements of Local Law 97 and the evolving risk landscape it creates.
As New York City continues to lead the nation in climate legislation, property owners must adapt their risk management strategies accordingly. Local Law 97 represents just the beginning of a new era in building regulation, making comprehensive insurance coverage more critical than ever before.