11.3 Key CGL Exclusions and Endorsements

Why the CGL Excludes So Much

The CGL grants broad coverage and then narrows it with exclusions that (1) bar uninsurable risk, (2) prevent duplicate coverage belonging on another policy, and (3) reduce moral hazard. Coverage A of CG 00 01 carries roughly 15 exclusions, lettered a through q, and Coverage B has its own set. The exam expects you to know the high-frequency exclusions and the narrow exceptions that restore coverage.

Coverage A Exclusions to Master

a. Expected or Intended Injury. BI/PD the insured expected or intended is excluded, except BI from the use of reasonable force to protect persons or property. Trap: the act may be intentional while the injury is not - swinging a hammer is intentional, but accidentally striking a bystander is not an intended injury, so coverage may apply.

b. Contractual Liability. Liability assumed under contract is excluded except (1) liability the insured would have without the contract (its own tort liability), and (2) liability assumed in an 'insured contract.'

c. Liquor Liability. Applies only to insureds in the business of manufacturing, selling, serving, or furnishing alcohol; a host-liquor exposure for an ordinary business is generally not excluded.

The Six 'Insured Contracts'

The contractual-liability exclusion is restored for liability assumed in any of six defined 'insured contracts.' Memorize this list - it appears often:

Pollution, Auto/Aircraft/Watercraft, and Workers' Comp

f. Pollution. The 'absolute' (now 'total') pollution exclusion bars BI/PD arising from the actual or threatened discharge of pollutants - one of the broadest exclusions in the form. A separate environmental/pollution policy is required.

g. Aircraft, Auto, or Watercraft. Excluded because these belong on commercial auto, aviation, or marine policies (preventing duplicate coverage). Narrow exceptions exist for parking and certain small watercraft.

d/e. Workers' Compensation and Employer's Liability. Obligations under workers' comp law, and BI to an employee in the course of employment, are excluded - they belong on the WC and employer's-liability policy.

The 'Business Risk' Exclusions (j-n) - Your Work and Your Product

A cluster of exclusions removes the insured's own defective work or product - the cost of redoing or replacing it is a business risk, not an insurable fortuity. The CGL pays for resulting damage to others, not the repair of the faulty work itself.

• j. Damage to Property - includes the 'care, custody, or control' bar.
• k. Damage to Your Product - the product itself.
• l. Damage to Your Work - your completed work; the exception for work performed by a subcontractor can restore coverage.
• m. Damage to Impaired Property - loss of use of property not physically injured because your product/work is defective.
• n. Recall of Products ('Sistership') - the cost to withdraw or recall a defective product is excluded; a separate product-recall policy is needed.

Trap: A defective bolt that fails and damages the customer's machine is covered PD (damage to others' property); the cost to replace the bolt itself is excluded under k.

Common Endorsements That Modify the CGL

Trap: A Per Project Aggregate endorsement is highly tested - it gives each construction project its own General Aggregate, so a loss on Project A does not erode the aggregate available to Project B.

Coverage B Exclusions and the Knowing-Violation Trap

Coverage B (Personal & Advertising Injury) has its own exclusion list, separate from Coverage A. The most tested Coverage B exclusions bar injury arising from:

• Knowing violation of another's rights (intentional wrongdoing).
• Publication of material the insured knew was false.
• Material first published before the policy period (prior publication).
• Breach of contract, other than misappropriation of advertising ideas under an implied contract.
• Infringement of patent, trademark, or trade secret - though copyright, trade dress, and slogan infringement in the insured's advertisement remain covered.

Trap: Patent and trademark infringement are excluded, but copyright infringement in an advertisement is covered - a distinction questions exploit constantly.

Reading an Exclusion: Exception Restores Coverage

The structure of every CGL exclusion follows the same logic the exam rewards: a broad grant in the Insuring Agreement, an exclusion that removes a category of risk, and often an exception that gives a slice back. Master the three carve-backs most likely to appear:

1. Insured-contract exception restores assumed tort liability (the six insured contracts).
2. Subcontractor exception to the 'your work' exclusion restores completed-operations damage caused by a sub.
3. Reasonable-force exception to the expected/intended exclusion restores defense-of-persons-or-property claims.

When a question describes an excluded scenario, scan for an exception before concluding there is no coverage - the test writers frequently bury the carve-back in the fact pattern.