CGL Exclusions
Key Takeaways
- CGL exclusions route exposures to other policies: liquor, pollution, auto/aircraft/watercraft, workers compensation, and care-custody-control losses.
- The damage-to-your-product and damage-to-your-work exclusions treat faulty products and workmanship as uninsurable business risks.
- The contractual liability exclusion has a carve-back for an 'insured contract,' covering tort liability assumed in hold-harmless and lease agreements.
- To answer, confirm the occurrence and BI/PD, then test the exclusion list and the carve-backs, identifying where the excluded exposure is properly insured.
The CGL Exclusions Define the Coverage
Coverage A's broad insuring agreement is shaped by a long list of exclusions that the exam tests because they route specific exposures to other policies. Knowing the major exclusions, and the coverage that picks up the excluded exposure, is essential.
| Exclusion | Where the exposure is insured instead |
|---|---|
| Expected or intended injury | Not insurable (intentional) |
| Contractual liability | Carve-back for an 'insured contract' |
| Liquor liability | Liquor liability policy (for those in the business) |
| Workers compensation / employers liability | WC and employers liability policy |
| Pollution | Environmental/pollution liability policy |
| Auto, aircraft, watercraft | Commercial auto, aviation, marine |
| Mobile equipment (transport) | Commercial auto for licensed transport |
| Damage to your product / your work | Professional/warranty; business risk |
| Damage to property in your care | Bailee or property coverage |
| Recall of products (sistership) | Product recall policy |
Business-Risk Exclusions
The CGL excludes damage to your product and damage to your work, because faulty workmanship and defective products are normal business risks the insured controls, not insurable accidents; the CGL covers the resulting injury to third parties or other property, not the cost to repair the insured's own defective product or work. The sistership (recall) exclusion bars the cost of recalling or withdrawing products. The damage to property in your care, custody, or control exclusion sends bailee exposures to other coverage.
These business-risk exclusions are heavily tested because candidates expect the CGL to pay for the insured's own bad work, which it does not.
Contractual Liability and the Insured Contract
The contractual liability exclusion removes liability the insured assumes under a contract, but a major carve-back restores coverage for liability assumed under an insured contract, a defined category including leases, easements, and the part of a contract where the insured assumes the tort liability of another (a typical indemnification/hold-harmless agreement). So a contractor that agrees to indemnify a project owner for the contractor's own negligence generally has coverage through the insured-contract carve-back.
The exam tests recognizing when assumed liability falls within an insured contract.
Pollution, Liquor, and Auto Exclusions
The pollution exclusion is broad and removes most pollution-related liability, pushing it to a separate environmental policy. The liquor liability exclusion applies to insureds in the business of manufacturing, selling, serving, or furnishing alcohol (a bar or restaurant needs separate liquor liability), while a host who is not in the liquor business generally retains coverage. The auto, aircraft, and watercraft exclusions route those exposures to commercial auto, aviation, and marine policies, with carve-backs for parking valet operations and certain watercraft.
Using the Exclusions on the Exam
When a CGL scenario seems covered under the broad Coverage A grant, scan the exclusions next. Damage to the insured's own product or work? Excluded as business risk. Liability assumed in a hold-harmless agreement? Likely covered via the insured-contract carve-back. A bar over-serving a patron? Excluded; needs liquor liability. A pollution release? Excluded; needs environmental coverage. An auto accident? Excluded; needs commercial auto.
The reliable method is to confirm the occurrence and BI/PD, then test the exclusion list and remember the insured-contract and other carve-backs, because the exam writes scenarios precisely to trigger one major exclusion, and naming that exclusion, and where the exposure is properly insured, is what produces the correct answer.
A general contractor's defective work damages the very portion of the building the contractor installed. Why does the CGL generally NOT pay to repair that work?
A subcontractor signs a hold-harmless agreement assuming the tort liability of the project owner. How does the CGL treat this assumed liability?
Routing Exposures Through the Exclusions
When a CGL claim seems covered, the exclusions decide the answer by routing exposures to other policies. The business-risk exclusions, damage to your product and damage to your work, treat faulty products and workmanship as uninsurable risks the insured controls; the CGL pays resulting injury to third parties or other property, not the cost to repair the insured's own defective work. The sistership (recall) exclusion bars product-recall costs, and the care, custody, or control exclusion sends bailee exposures elsewhere.
The contractual liability exclusion removes assumed liability but carves back an insured contract, which includes leases, easements, and assuming another party's tort liability in a hold-harmless or indemnification agreement. So a subcontractor that agrees to indemnify a project owner generally has coverage through this carve-back.
| Excluded exposure | Insured instead by |
|---|---|
| Insured's own product/work | Warranty; business risk (not insured) |
| Pollution | Environmental policy |
| Liquor (those in the business) | Liquor liability policy |
| Auto/aircraft/watercraft | Commercial auto, aviation, marine |
| Care-custody-control property | Bailee or property coverage |
The pollution, liquor, and auto/aircraft/watercraft exclusions push those exposures to specialty policies, with carve-backs (such as valet parking and certain watercraft). The reliable method: confirm the occurrence and BI/PD, then test the exclusion list and recall the insured-contract carve-back. A bar over-serving a patron needs liquor liability; a pollution release needs environmental coverage; an auto accident needs commercial auto; defective work the insured installed is excluded as business risk.
The exam writes each scenario to trigger one major exclusion, so naming that exclusion, and where the exposure is properly insured, produces the correct answer.