11.3 Key CGL Exclusions and Endorsements
Key Takeaways
- CGL Coverage A grants broad liability then narrows it with exclusions (a)-(q); the exam tests recognition of excluded losses and the separate policy/endorsement that restores them.
- Business-risk exclusions (j)-(n) bar the cost of redoing the insured's own defective work or product, but resulting damage to other third-party property remains covered.
- The absolute pollution exclusion bars most pollution BI/PD; genuine exposure needs a separate Pollution Legal Liability or Contractors Pollution Liability policy.
- An Additional Insured endorsement (CG 20 10 ongoing / CG 20 37 completed ops) grants insured status; a Waiver of Subrogation (CG 24 04) only surrenders the insurer's recovery right.
- The Per-Project/Per-Location Aggregate (CG 25 03/25 04) gives each project or location its own General Aggregate so one loss cannot exhaust coverage for the others.
Why Exclusions Drive CGL Exam Questions
Coverage A of the CGL grants broad liability protection, then narrows it through a long list of exclusions (a) through (q). The exam rarely asks you to recite letters; it tests whether you can recognize that a given loss is excluded and, often, which separate policy or endorsement restores it. Master the high-frequency exclusions below.
The Most-Tested Coverage A Exclusions
| Exclusion | What it bars | Where coverage is found |
|---|---|---|
| Expected or Intended Injury (a) | Intentional harm by the insured (self-defense excepted) | Not insurable - intent defeats fortuity |
| Contractual Liability (b) | Liability assumed by contract | Insured contract exception; CG 24 04 |
| Liquor Liability (c) | Liability of those in the liquor business | Liquor Liability policy (CG 00 33/34) |
| Workers' Comp / Employers Liability (d)/(e) | Injury to employees | WC policy + Employers Liability (Part Two) |
| Pollution (f) | BI/PD from release of pollutants | CPL / pollution legal liability policy |
| Auto/Aircraft/Watercraft (g) | Injury from owned autos, aircraft, large boats | Commercial Auto / aviation / marine |
| Damage to Your Product (k) | The insured's own defective product | Business risk - not covered |
| Damage to Your Work (l) | The insured's own completed work | Subcontractor exception may apply |
| Damage to Impaired Property (m) | Loss of use of property not physically injured | Business risk - not covered |
| Recall / Sistership (n) | Cost of recalling products | Product recall policy |
Business-Risk Exclusions: The Hardest Concept
Exclusions (j) through (n) are the business-risk group. The principle: the CGL covers an insured's liability to third parties for BI/PD, not the insured's own cost of doing the job over because the work or product was defective. Replacing a faulty widget or redoing bad workmanship is an ordinary business cost, uninsurable under liability.
Worked example. A roofer installs a roof that leaks. The cost to tear out and replace the defective roof (Your Work, exclusion l) is not covered. But if the leak ruins the homeowner's furniture and drywall, that resulting damage to other property is third-party PD and is covered. Distinguishing the defective work itself from resulting damage to other property is a frequent exam scenario.
Pollution Exclusion: The Absolute Standard
The modern CGL carries the absolute pollution exclusion, barring BI/PD arising from the discharge, dispersal, seepage, migration, release, or escape of pollutants at or from any premises the insured owns, occupies, or uses. Narrow exceptions exist (e.g., heat/smoke from a hostile fire). Genuine pollution exposure requires a separate Pollution Legal Liability or Contractors Pollution Liability policy.
High-Frequency Endorsements
| Endorsement | Effect |
|---|---|
| Additional Insured - Owners/Lessees/Contractors (CG 20 10 / CG 20 37) | Extends the named insured's coverage to a third party (e.g., a project owner). CG 20 10 covers ongoing operations; CG 20 37 covers completed operations. |
| Primary and Noncontributory (CG 20 01) | Makes the named insured's policy pay first, without seeking contribution from the additional insured's own coverage. |
| Waiver of Transfer of Rights of Recovery / Subrogation (CG 24 04) | The insurer waives subrogation against a party named, usually to satisfy a contract. |
| Amendment of Limits / Designated Premises | Adjusts or restricts limits to scheduled locations or projects. |
| Per-Project / Per-Location Aggregate (CG 25 03 / CG 25 04) | Provides a separate General Aggregate for each project or location, so one project's losses do not exhaust the shared aggregate. |
Additional Insured vs. Waiver of Subrogation
A common trap: an Additional Insured endorsement gives a third party status as an insured under the policy (it can make a claim and be defended). A Waiver of Subrogation does not make anyone an insured; it merely surrenders the insurer's right to recover from a third party after paying a claim. Contracts frequently require both, plus primary-and-noncontributory wording.
Per-Project Aggregate Numeric
A general contractor with three concurrent projects buys CG 25 03, giving each project its own $2,000,000 General Aggregate. A catastrophic claim exhausts Project A's $2,000,000. Projects B and C each retain a full, untouched $2,000,000 aggregate. Without the endorsement, all three would share a single $2,000,000 pool, and Project A's loss would leave nothing for B and C.
Contractual Liability and the Insured Contract
The Contractual Liability exclusion (b) removes liability the insured assumes under a contract - but it contains a critical carve-back for an "insured contract." ISO defines six categories of insured contract, including leases of premises, easement agreements, and the part of any contract under which the insured assumes the tort liability of another to pay for BI/PD to a third party (a typical hold-harmless/indemnity clause).
So liability assumed in a routine construction indemnity agreement is generally restored, while liability assumed in an unusual, non-listed contract is not. This carve-back is heavily tested - candidates must know that the exclusion has a large exception, not a flat bar.
The Subcontractor Exception to Your Work
The Damage to Your Work exclusion (l) has its own carve-back: it does not apply to damaged work or the work out of which the damage arises if that work was performed by a subcontractor. A general contractor therefore retains coverage for property damage caused by a sub's faulty work, even though it would have no coverage for the same defect in work it self-performed. This is why GCs require subs to carry their own CGL and name the GC as an additional insured - covered next.
Putting Exclusions and Endorsements Together
The exam reward is recognizing the chain: an exclusion removes coverage, then a separate policy (liquor, pollution, auto, recall) or an endorsement (insured-contract carve-back, additional insured, per-project aggregate) restores or reallocates it. When a scenario describes a denied loss, immediately ask whether a standard endorsement or companion policy is the intended fix.
A plumber installs piping that later bursts. The repair to replace the defective piping the plumber installed is denied, but water damage to the customer's hardwood floors is paid. Which CGL principle explains this split?
A project owner requires the general contractor's CGL to make the contractor's policy pay first and to grant the owner status as an insured. Which two endorsements satisfy this?