11.3 Key CGL Exclusions and Endorsements

Why Exclusions Exist

The CGL is broad, so exclusions carve out exposures that belong elsewhere or that the insured should control. Two themes dominate: specialty-policy exposures (auto, pollution, professional liability) and business risk (the insured's own defective work or product).

Most exam questions ask you to recognize which loss is excluded and which separate policy should cover it instead. Memorize the exclusion and its alternative market.

Coverage A Exclusions to Know

Under Coverage A (Bodily Injury and Property Damage), the major exclusions are:

• Expected or intended injury — intentional harm by the insured is excluded; the policy covers accidents.
• Contractual liability — liability assumed by contract is excluded except under an insured contract (e.g., a lease or sidetrack agreement) or liability the insured would have anyway.
• Liquor liability — excluded only for those in the business of manufacturing or serving alcohol; host liquor is still covered.
• Workers compensation and employer's liability — employee injuries belong on WC and EL policies.
• Pollution — gradual or sudden release of pollutants is excluded; buy specialty environmental coverage.

Auto, Aircraft, Watercraft, and Care/Custody

The CGL excludes liability from owned or operated automobiles, aircraft, and watercraft — those belong on commercial auto or aviation/marine policies (small non-owned watercraft and parking of others' autos are limited exceptions).

The care, custody, or control exclusion removes coverage for property of others in the insured's control — that exposure is handled by bailee or inland marine forms.

Business-Risk (Your Work / Your Product) Exclusions

The CGL is not a performance warranty. Several exclusions push the cost of the insured's own faulty work back onto the insured:

• Damage to Your Product — the insured's product itself is not covered when it is defective.
• Damage to Your Work — the insured's completed work is excluded (with a subcontractor exception).
• Damage to Impaired Property — loss of use of property that is not physically injured is excluded.
• Recall (sistership) — costs to withdraw or recall a defective product are excluded.

Resulting damage to other property from the defect may still be covered — only the defective work/product itself is excluded.

Common Endorsements

Endorsements tailor the CGL. The most tested are:

• Additional Insured (e.g., CG 20 10 / CG 20 37) — extends coverage to another party such as a landlord or project owner for liability arising from the named insured's work.
• Waiver of Subrogation (CG 24 04) — the insurer gives up its right to recover from a third party the insured has agreed not to sue.
• Primary and Noncontributory language — makes the named insured's policy pay first without seeking contribution from the additional insured's own coverage.

Exam trap: an Additional Insured gains rights under the policy but does not increase the limits — they share the existing limits.

The Insured Contract Exception

The contractual liability exclusion is narrower than students expect because of the insured contract exception. The CGL still covers liability the insured assumes in six defined contract types, the most common being a lease of premises, an easement or license agreement, an obligation to indemnify a municipality, and a sidetrack agreement.

The broadest category is a hold-harmless agreement that transfers another party's tort liability to the insured. So a tenant who agrees in a lease to assume the landlord's liability is covered, because the lease is an insured contract.

Liability assumed outside those categories — such as a pure warranty of workmanship — stays excluded.

Expected or Intended: The Self-Defense Carve-Out

The expected or intended injury exclusion bars coverage for harm the insured expected or intended. The point is that liability insurance covers accidents, not deliberate acts.

There is one exam-favorite exception: the exclusion does not apply to bodily injury resulting from the use of reasonable force to protect persons or property. A shopkeeper who reasonably restrains a shoplifter and is later sued for injury can still be covered.

Distinguish this from a bar bouncer who beats a patron — excessive force is intentional harm and falls outside the carve-out, so the claim is excluded.

Putting Exclusions Together

For the exam, anchor each excluded loss to its proper home. Auto liability moves to commercial auto; pollution moves to environmental coverage; employee injury moves to workers compensation and employer's liability; property in the insured's care moves to bailee or inland marine.

The business-risk exclusions are about quality, not accidents — the CGL will not pay to redo bad work, but it may pay for the consequential damage that bad work causes to other property.

Finally, remember endorsements can add insureds and waive recovery rights but rarely add limits, so the additional insured shares the named insured's existing limits.

Reading the Key CGL Exclusions

The CGL exclusions in Coverage A follow a logic the exam tests: they remove exposures meant for other policies or that are uninsurable business risks. Workers compensation/employer's liability belongs to the comp policy; auto, aircraft, watercraft liability belongs to those lines; pollution is largely excluded (with narrow exceptions and a separate environmental policy as the fix); liquor liability is excluded for businesses in the alcohol trade; and the business-risk trio (your product, your work, impaired property) excludes the cost to redo the insured's own defective work.

Contractual liability is excluded except for liability assumed in an insured contract. Each exclusion typically has give-backs and exceptions, which is why the exam asks not just whether an exclusion exists but whether an exception restores coverage.

Endorsements That Tailor the CGL

The per-location/per-project aggregate endorsements are especially important for contractors, because they prevent one large claim from exhausting the single general aggregate that would otherwise protect every job. Matching the additional-insured form (ongoing vs. completed operations) to what a contract requires is a frequent E&O pitfall the exam highlights.

Exam Tip: CGL exclusions channel auto, comp, pollution, liquor, and faulty-work exposures to other coverages; additional-insured and waiver endorsements add parties and waive subrogation, while per-project/per-location endorsements add separate aggregates - they rarely raise the each-occurrence limit.