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 or intentional risk, (2) prevent duplicate coverage that belongs on another policy, and (3) control moral hazard. Coverage A carries roughly 15 lettered exclusions (a through q in CG 00 01); Coverage B carries its own set. Exam questions almost always probe the exceptions to these exclusions, because that is where coverage is quietly restored.

Coverage A exclusions you must master

• a. Expected or Intended Injury — excluded, except BI from reasonable force to protect persons or property. Trap: the act may be intentional while the injury is not.
• b. Contractual Liability — liability assumed under contract is excluded except the insured's own tort liability and liability assumed in an 'insured contract.'
• c. Liquor Liability — excluded for businesses in the alcohol trade (bars, restaurants); social hosts are not excluded.
• d/e. Workers Comp & Employers Liability — bodily injury to employees is excluded; that risk belongs on a WC and EL policy.

Pollution, Auto/Aircraft/Watercraft, and Care-Custody-Control

• f. Pollution — the 'absolute' pollution exclusion bars most pollution BI/PD. Narrow exceptions exist, e.g. BI/PD caused by heat, smoke, or fumes from a hostile fire, and certain products brought to a job by a contractor. Pollution at the insured's premises or work site is generally barred.
• g. Aircraft, Auto, Watercraft — these mobile exposures belong on a commercial auto or aviation/marine policy, except parking an auto on the insured's premises and certain non-owned watercraft under 26 feet.
• j. Damage to Property — Care, Custody, or Control (CCC) — damage to property in the insured's care, custody, or control is excluded; bailees and similar exposures need separate inland marine coverage.

The six 'insured contracts' that overcome the contractual-liability exclusion:

The 'Business Risk' Exclusions: Your Product and Your Work

The most heavily tested exclusions involve damage to the insured's own product or work, because they define the boundary between liability insurance and a performance warranty. The CGL is not a guarantee that the insured did the job right.

• k. Your Product — damage to the insured's own product is excluded; if the burger makes a customer ill, BI to the customer is covered, but the cost of the bad burger itself is not.
• l. Your Work — damage to the insured's completed work is excluded, except when the damaged work, or the work out of which the damage arises, was performed by a subcontractor on the insured's behalf. This subcontractor exception is the single most tested point: a general contractor's completed-operations coverage is preserved for damage to subcontracted work.
• m. Impaired Property — loss of use of property not physically damaged, arising from a deficiency in the insured's product or work, is excluded.

Solution: defective workmanship that damages other property is covered; faulty workmanship to the insured's own work is a business risk borne by the insured.

Common Endorsements That Modify the CGL

Endorsements broaden, restrict, or schedule additional parties onto the CGL. The most exam-relevant ones:

Trap: a Designated Construction Project Aggregate (CG 25 03) means losses on one project do not erode the limits available to other projects — a common source of exam math where candidates wrongly pool all projects into one $2,000,000 aggregate.

Additional Insured and Primary-and-Noncontributory Endorsements

The most commercially important CGL endorsements add other parties as insureds. An additional insured endorsement (CG 20 10 for ongoing operations, CG 20 37 for completed operations) extends the named insured's coverage to a landlord, general contractor, or client as required by contract. The primary and noncontributory wording makes the named insured's policy pay first and in full before the additional insured's own coverage, satisfying common contract requirements.

A waiver of subrogation (CG 24 04) gives up the insurer's recovery rights against a designated party, also commonly required in leases and construction contracts.

The Business-Risk Exclusions Explained

The "business risk" exclusions remove losses the insured can control and that are not the kind of fortuitous third-party liability the CGL is meant to cover. Exclusions j through n bar damage to the insured's own product, the insured's work, property in the insured's care, custody, or control, impaired property, and the cost to recall a product (sistership liability). The logic: the CGL pays for damage the insured's faulty work causes to other property or people, not for the cost of redoing the insured's own defective work — that is a business expense, not insurance.

The subcontractor exception restores coverage for completed-operations damage arising out of work performed by a subcontractor on the insured's behalf.