Key CGL Exclusions and Endorsements
Key Takeaways
- Coverage A's broad insuring agreement is shaped by lettered exclusions (a-n); knowing what the CGL does NOT cover and which separate policy fills each gap is high-yield.
- Faulty workmanship that damages a third party's property IS covered; the cost to repair the insured's OWN defective work or product is excluded - the CGL is not a performance warranty.
- Exclusion g sends auto/aircraft/watercraft liability to Commercial Auto, Aviation, or Marine policies; the pollution exclusion (f) is broad and needs separate environmental coverage.
- The insured-contract exception to the contractual-liability exclusion is how hold-harmless/indemnity agreements obtain CGL coverage.
- Key endorsements: CG 20 10/CG 20 37 (additional insured), CG 25 03/CG 25 04 (per-project/per-location aggregates), with primary-and-noncontributory wording common in construction risk transfer.
Reading Coverage A Through Its Exclusions
Coverage A's insuring agreement is broad - "we will pay sums the insured becomes legally obligated to pay as damages because of bodily injury or property damage" - so the exclusions (lettered a through n in CG 00 01) do most of the real work of defining coverage. The exam expects you to recognize what the standard CGL pointedly does NOT cover and which separate policy or endorsement fills each gap.
| Exclusion (Coverage A) | What it removes | Where coverage comes from |
|---|---|---|
| a. Expected or Intended Injury | Deliberate harm (but self-defense exception preserves coverage) | None - intentional acts are uninsurable |
| b. Contractual Liability | Liability assumed in a contract... | Exception preserves coverage for an 'insured contract' |
| c. Liquor Liability | Only if the insured is IN the business of serving alcohol | Liquor Liability Policy/endorsement |
| d. Workers Compensation | Obligations under WC/disability laws | Workers Compensation policy |
| e. Employer's Liability | Injury to an employee in the course of employment | WC Part B / Employers Liability |
| f. Pollution | Most pollution release/cleanup | Pollution Liability / CPL policy |
| g. Aircraft, Auto, Watercraft | Liability arising from owning/operating these | Commercial Auto (BAP), Aviation, Marine |
| j. Damage to Property | The insured's own property and property in its care | Property insurance / installation floater |
| k. Damage to Your Product | The insured's own product that fails | Not a liability exposure - it is a business risk |
| l. Damage to Your Work | The insured's own completed work | (subcontractor exception may apply) |
| m. Impaired Property | Loss of use of non-damaged property due to the insured's defective work | None under CGL |
The Most-Tested Exclusion Logic
Auto vs. CGL boundary (exclusion g)
The CGL excludes liability from owning, operating, or using autos, aircraft, and watercraft. A delivery driver who rear-ends a car is a Business Auto claim, not CGL. But injury from loading/unloading or from equipment is a frequent gray area - read whether the auto was being "used."
The 'your work / your product' rule (j, k, l, m)
The CGL is not a performance warranty. If a contractor's faulty wiring damages the customer's building, that third-party property damage IS covered. But the cost to rip out and redo the contractor's own defective wiring is excluded (your work). This is the single most misunderstood CGL concept.
Trap: "Faulty workmanship that damages someone else's property" = covered third-party damage. "The cost to fix the insured's own defective work/product" = excluded. The CGL covers the consequences of bad work on OTHER property, not the bad work itself.
Contractual liability (exclusion b) and the insured contract exception
The CGL excludes liability you assume by contract - EXCEPT liability you would have had anyway (tort liability) and liability assumed in an "insured contract" (leases of premises, sidetrack agreements, easement agreements, obligations under municipal ordinance, and most importantly the part of any contract assuming another's tort liability). This is how indemnification/hold-harmless agreements get coverage.
Key CGL Endorsements
Endorsements modify the standard form; the most heavily tested are the Additional Insured endorsements and the Primary and Noncontributory wording.
| Endorsement | Effect |
|---|---|
| CG 20 10 - Additional Insured, Owners/Lessees/Contractors | Adds a party (e.g., a project owner or landlord) as an insured for ongoing operations |
| CG 20 37 - Additional Insured, Products-Completed Operations | Extends additional-insured status to completed-operations claims (paired with CG 20 10 on construction projects) |
| CG 25 03 - Designated Construction Project(s) General Aggregate | Gives EACH project its OWN separate General Aggregate, so one project's losses do not exhaust limits for others |
| CG 25 04 - Designated Location(s) General Aggregate | Provides a separate aggregate per designated location |
| CG 21 47 - Employment-Related Practices Exclusion | Removes coverage for employment-related claims (steers them to EPLI) |
Additional insured + primary/noncontributory
A contract often requires the contractor to name the project owner as an additional insured AND make the contractor's policy primary and noncontributory - meaning it pays first and does not seek contribution from the owner's own CGL. This combination is ubiquitous in construction risk transfer and a favorite exam scenario.
Why CG 25 03 matters - a worked example
A contractor with a $2,000,000 General Aggregate is running five simultaneous projects. Without CG 25 03, a string of claims on Project A could exhaust the single $2M aggregate, leaving Projects B-E with no aggregate limit left. With CG 25 03, each designated project gets its own $2,000,000 General Aggregate, so a loss on Project A does not strip protection from the others. Owners frequently require this endorsement in their contracts.
Other Frequently Tested Points
- Pollution exclusion (f) is broad ("absolute"); environmental exposure needs a separate Contractors Pollution Liability or Premises Pollution policy. A narrow exception preserves coverage for some BI/PD from heat/smoke/fumes from a hostile fire and certain off-premises situations.
- Liquor liability (c) only applies to insureds in the business of manufacturing, distributing, selling, or serving alcohol.
A company picnic where the employer serves drinks is generally NOT in that business, so 'host liquor' liability is typically covered by the base CGL.
- Damage to Premises Rented to You is carved BACK from the property exclusion: the CGL DOES pay for fire (and, in CG 00 01 04 13, certain other perils) damage to premises the insured rents, up to the stated limit (default $300,000) - this is the so-called 'fire legal liability' coverage tenants need.
An electrical contractor's faulty wiring causes a fire that damages the customer's building AND destroys the contractor's own newly installed wiring. Under a standard CGL (CG 00 01), what is covered?
A general contractor running six concurrent construction projects wants to ensure that heavy losses on one project cannot exhaust the General Aggregate available to the other five. Which ISO endorsement accomplishes this?