The ISO Commercial General Liability (CGL) Coverage Form can feel like a map with a promising starting road that quickly narrows into a series of exceptions and dead ends unless certain conditions are met.
The form includes three coverages, but most business owners focus on Coverage A — Bodily Injury and Property Damage. The Insuring Agreement promises to pay amounts the insured is legally liable for, but only for occurrences "to which this insurance applies."
Immediately after the Insuring Agreement is an Exclusions section that begins, "This insurance does not apply to: ..." and then lists categories of excluded occurrences. Those exclusions limit coverage for things such as pollution, injuries to the insured's employees, ownership or use of vehicles, intoxication-related claims, damage to property the insured owns or possesses, and loss of electronic data.
Some exclusions include narrow exceptions that restore coverage in specific situations. For example, while damage arising from a contractor's completed work is typically excluded, the policy may still provide coverage if the damage was caused by a subcontractor's work on the contractor's behalf.
Contractors should review contractor-specific CGL issues and available endorsements; see Building Maintenance Contractors Insurance (Commercial General Liability) for more on contractor exposures and coverages.
In a claim, the insured first must prove that an accident qualifying as an "occurrence" during the policy period caused bodily injury or property damage to someone else. If the insured cannot prove any of those elements, the policy does not apply.
The policy defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions," so the insured must show an accidental event or exposure that produced the harm during the policy term.
After the insured meets that initial burden, the insurer must show that an exclusion applies. For example, the insurer might assert that damage to an installed HVAC system arose from a defect in the system and therefore is excluded.
If the insurer proves an exclusion applies, the burden shifts back to the insured to demonstrate that an exception to the exclusion applies. For instance, if the insured shows a subcontractor installed defective components that damaged the HVAC system, the subcontractor exception could restore coverage.
Because CGL can provide significant liability protection, businesses that may need higher limits or excess protection should consider additional policies; for example, review options like High Limit Umbrella Liability — Commercial Real Estate if higher limits are a concern.
Contractors and business owners should talk to an agent who understands the CGL policy and can answer coverage questions so the business has the protection it needs.
Frequently Asked Questions
How do I know if an accident is an "occurrence" under my CGL policy?
An "occurrence" is typically defined as an accident, including continuous or repeated exposure to the same harmful conditions; you must show the accidental event happened during the policy term and caused covered harm.
Who has the burden of proof in a coverage dispute?
The insured must first show the loss falls within the Insuring Agreement; then the insurer must prove an exclusion applies, after which the insured can attempt to show an exception to that exclusion.
Are subcontractor-caused damages ever covered if the contractor's work is excluded?
Some CGL exclusions for a contractor's completed work include exceptions for damage caused by a subcontractor, so coverage can apply when those exception conditions are met.
What steps should a contractor take to protect against gaps in CGL coverage?
Review the policy exclusions and exceptions with an agent, consider appropriate endorsements or higher limits, and document subcontractor work and contracts to support coverage positions if a claim arises.