Liability Education Part 3: General Liability Policy Exclusions = Coverage Gaps - Koppinger & Associates

A commercial general liability policy doesn’t cover everything. In some instances, different types of liability insurance is needed to provide your business more protection.

A commercial general liability (CGL) policy protects your business from financial loss against liability claims for bodily injury (BI) and property damage (PD) arising out of premises, operations, products, and completed operations; and advertising and personal injury (PI) liability. The CGL policy is broad by design and does not provide the unique protection needed in specific areas. CGL exclusions define boundary lines.

The reasons for exclusions vary. An exclusion may take away coverage that is better provided by another policy (i.e. workers compensation or commercial automobile), or require the purchase of another policy (i.e. pollution, directors & officers, employment practices, cyber liability.) Some exclusion are added because claims are considered uninsurable or might be against public policy.

Exclusions can be included in a CGL policy or added by endorsement.

Some of the most common exclusions built into a CGL policy include, but are not limited to the following:

• Expected or Intended – Intentional acts causing property damage or bodily injury are excluded.
• Contractual Liability – No bodily injury or property damage is covered for an insured held liable for damages by virtue of assuming the liability of another in a contract or agreement.
• Liquor Liability – If the named insured is in the business of making, selling, serving, or furnishing alcohol, the CGL excludes any liability the insured may have because of bodily injury or property damage resulting from the alcohol.
• Workers Compensation – Statutory workers compensation benefits required to be paid by any insured are not covered by the CGL.
• Employers Liability – If an employee is injured while working for the insured employer, any suit against the employer brought by the employee, employee’s family, or by an unrelated party claiming the employer must share in payment of damages for the employee’s injuries, is not covered.
• Pollution – Bodily injury or property damage caused by any of the following is excluded:
  • release or discharge of pollutants from the premises of an insured
  • release of waste regardless of where the release occurs
  • release or discharge of a pollutant at any site at which the insured is working
  • the cost of cleanup of pollutants is excluded
• Aircraft, Autos and Watercraft – Bodily injury or property damage resulting from the use of aircraft, watercraft, or autos that are owned, operated, or rented or loaned to an insured is excluded.
• Mobile Equipment – Bodily injury or property damage that results when mobile equipment is being transported or while the mobile equipment is being used is excluded.
• Damage to Property – Property damage to property owned, rented to, or occupied by the named insured is excluded. Exceptions to this exclusion:
  • exclusion does not apply to damage to premises occupied or rented to the insured if damage is caused by fire.
  • If premises are rented to the named insured for 7 or fewer consecutive days, exclusion does not apply to the premises and the contents of the premises.
  • In these cases, the Damage to Premises Rented to You sublimit applies.
• Damage to Your Product – If the named insured’s product damages itself, the property damage to the named insured’s product is excluded.
• Damage to Your Work – If the named insured’s completed work damages itself, the property damage to the completed work is excluded.
  • Exclusion does not apply if the named insured’s subcontractor’s completed work suffered property damage or if the completed work that suffers property damage is the result of the named insured subcontractor’s completed work.
• Damage to Impaired Property or Property Not Physically Injured – Applies to property damage to property that has not suffered actual physical injury to or property that is considered impaired property (property of another that cannot be used because of a problem with the named insured’s product or work that was made a part of the impaired property or if the named insured did not complete the job on time.)
  • Exclusion does not apply if the loss of use is caused by sudden and accidental physical injury to the named insured’s property or work, and then only if the physical injury takes place after the product or work has been put to its intended use.
• Recall of Products, Work, or Impaired Property – Costs or damages claimed against an insured for recalling known or suspected defective products or work are excluded. Excluded costs include the costs of inspecting, adjusting, or removal of the defective products or work.
• Personal and Advertising Injury – If bodily injury is caused by a personal injury offense, it is excluded.
• Electronic Data – No coverage is provided for loss of electronic data as such data is not tangible property and therefore not considered property damage.
• Distribution of Material in Violation of Federal, State or Local Statutes – If an insured violates certain statutes, no coverage is provided for damages that may result from such claims.
• Errors and Omissions – Damages caused by committing an error or omission in performance of professional duties are excluded on a CGL policy.
• Directors and Officers – No coverage is provided for directors and officers for claims made against them while serving on a board of directors and/or as an officer.
• Employment Practices Liability – The CGL policy excludes claims resulting from employee disputes alleging wrongful employment practices such as harassment, discrimination, wrongful termination, or a hostile work environment.
• Cyber Liability and Cyber Crime – The CGL policy excludes claims associated with the loss of electronic data or data breach.
• War – Bodily injury or property damage is excluded arising directly or indirectly out of:
  • War, including undeclared or civil war
  • Warlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents.
  • Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.