8.5 CGL Exclusions

Why the CGL Excludes So Much

The CGL is a broad grant narrowed by exclusions that (1) bar uninsurable risk, (2) prevent duplicate coverage that belongs on another policy, and (3) reduce moral hazard. Coverage A has roughly 15 exclusions (lettered a–q in the form); Coverage B has its own set.

Coverage A Exclusions to Master

a. Expected or Intended Injury

BI/PD the insured expected or intended is excluded. Exception: BI resulting from the use of reasonable force to protect persons or property.

Trap: the act may be intentional while the injury is not. Swinging a hammer is intentional; accidentally striking a bystander is not an intended injury, so coverage may still apply.

b. Contractual Liability — the Insured-Contract Exception

Liability the insured assumes under a contract is excluded, except:

1. liability the insured would have without the contract (i.e., its own tort liability); and
2. liability assumed in an "insured contract."

c. Liquor Liability

Excluded for businesses in the alcohol trade (manufacture, sale, serving) — bars, restaurants, liquor stores. Social hosts are not excluded. Solution: separate Liquor Liability coverage.

d–e. Workers Comp & Employer's Liability

Excludes any obligation under workers compensation law and BI to an employee arising out of employment. Employee injuries go to WC / Employers Liability; wrongful-termination and harassment go to EPLI.

f. Pollution — the Hostile-Fire Exception

The pollution exclusion is very broad (cleanup, discharge, dispersal of pollutants). Key exception: BI/PD caused by heat, smoke, or fumes from a hostile fire (a fire that breaks out from where it was intended to be) is covered. Other pollution needs Environmental/Pollution Liability.

g. Aircraft, Auto, Watercraft — and the Mobile-Equipment Line

BI/PD from owning, operating, or using aircraft, autos, or watercraft is excluded (use Aviation, Business Auto, or Watercraft policies). But mobile equipment is covered by the CGL.

j. Care, Custody, or Control (CCC)

Excludes PD to property the insured owns, rents, occupies, sells, loans, or has in its care, custody, or control, and to that particular part of property the insured is working on. Exception: the Damage to Premises Rented to You grant covers fire (and short-term rental) damage up to a separate limit (typically $100,000).

k–n. Damage to Your Product / Your Work / Impaired Property / Recall

• Your product — PD to the insured's own product is excluded (business risk, not insurance).
• Your work — PD to the insured's completed work is excluded, except when the damaged work or the cause was performed by a subcontractor (the subcontractor exception is heavily tested).
• Impaired property — loss of use of property not physically damaged, when caused by a deficient product/work.
• Recall ("sistership") — costs of withdrawing or recalling products are excluded.

Coverage B Exclusions (Recap)

Exclusion-to-Solution Cheat Sheet

Reading an Exclusion the Way the Exam Tests It

Exclusions are tested less on memorizing names and more on applying exceptions. A typical question gives a fact pattern that looks excluded, then rewards the candidate who spots the exception that restores coverage. Train yourself to ask, for each major exclusion, "Is there an exception, and does it apply here?"

Mobile Equipment vs. Auto — the Classic Crossover

The auto exclusion and the mobile-equipment definition interact in a way the exam loves. A vehicle is mobile equipment (covered by the CGL) if it is land machinery used at a job site or premises and not subject to motor-vehicle registration. The same physical machine can flip to being an auto (excluded, needs Business Auto) if it travels public roads under its own power and carries permanently attached equipment.

Worked example: A self-propelled crane working inside a fenced job site is mobile equipment under the CGL. The same crane causing damage while driven on a public highway is treated as an auto and is excluded — the contractor needs Business Auto coverage for that exposure. Always check where and how the machine was being used.

Business-Risk Exclusions (Your Product / Your Work)

The "your product" and "your work" exclusions reflect a core insurance principle: the CGL covers liability for damage to others, not the cost of redoing the insured's own defective work or replacing its own defective product. Those are business risks the insured controls through quality and warranty, not insurable fortuities. The narrow but vital subcontractor exception to the your-work exclusion recognizes that a general contractor cannot fully control a sub's workmanship, so damage caused by a sub's faulty work can remain covered.