CGL Coverage Form -- Coverage A (from FC&S Legal: The Insurance Coverage Law Information Center)

The Insurance Coverage Law Information Center
The following article is from National Underwriter’s latest online resource,
FC&S Legal: The Insurance Coverage Law Information Center.
CGL COVERAGE FORM – COVERAGE A
This article analyzes coverage A, bodily injury and property damage coverages,
of the ISO CGL form CG 00 01.
June 25, 2013
Bodily Injury and Property Damage Liability
Summary: Coverage A of the current commercial general liability (CGL) coverage forms, both the
occurrence form and the claims-made form, provides bodily injury and property damage liability
insurance. This article discusses the features of coverage A that are common to both the occurrence
and the claims-made form.
Coverage A consists of two parts—an insuring agreement and a section of exclusions that shape the broad scope of
the insuring agreement; both parts of coverage A are described in the pages that follow. Provisions located in other parts
of the CGL coverage forms that apply to coverage A—such as limits of insurance, other insurance, etc.—are discussed
elsewhere on FC&S Legal.
Topics covered:
Insuring agreement
Exclusions
Exclusion A—expected or intended injury
Exclusion B—contractual liability
Exclusion C—liquor liability
Exclusion D—workers compensation and similar laws
Exclusion E—employer’s liability
Exclusion F—pollution
Exclusion G—aircraft, auto, watercraft
Exclusion H—mobile equipment
Exclusion I—war
Exclusion J—damage to property
Exclusion K—damage to your product
Exclusion L—damage to your work
Exclusion M—damage to impaired property or property not physically injured
Exclusion N—recall of products, work, or impaired property
Exclusion O—personal and advertising injury
Exclusion P—electronic data
Exclusion Q—distribution of material in violation of statutes
Fire damage coverage
Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or
“property damage” to which this insurance applies. We will have the right and duty to defend the insured against any
“suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking
damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion,
investigate any “occurrence” and settle any claim or “suit” that may result. But:
(1) The amount we will pay for damages is limited as described in Section III—LIMITS OF INSURANCE; and
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(2) Our right and duty to defend ends when we have used up the applicable limit of insurance in the payment of
judgments or settlements under Coverages A or B or medical expenses under Coverage C.
No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under
SUPPLEMENTARY PAYMENTS—COVERAGES A AND B.
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;
(2) The “bodily injury” or “property damage” occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II—Who Is An Insured and no “employee”
authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property
damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy
period, that the “bodily injury” or “property damage” occurred, then any continuation, change, or resumption of such
“bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the
policy period.
c. “Bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period,
known to have occurred by any insured listed in Paragraph 1. of Section II—Who Is An Insured or any “employee”
authorized by you to give or receive notice of an “occurrence” or claim, includes any continuation, change, or resumption
of the “bodily injury” or “property damage” after the end of the policy period.
d. “Bodily injury” or “property damage” will be deemed to have been known to have occurred at the earliest time when
any insured listed under Paragraph 1. of Section II—Who Is An Insured or any “employee” authorized by you to give or
receive notice of an “occurrence” or claim:
(1) Reports all, or any part, of the “bodily injury” or “property damage” to us or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the “bodily injury” or “property damage”; or
(3) Becomes aware by any other means that “bodily injury” or “property damage” has occurred or has begun to occur.
e. Damages because of “bodily injury” include damages claimed by any person or organization for care, loss or services
or death resulting at any time from the “bodily injury”.
Analysis
The opening sentence of the insuring agreement might cause alarm to some insurance buyers and their advisers. First, it
does not retain the promise of the insuring agreement on the 1973 comprehensive general liability policy to pay “all sums
which the insured shall become legally obligated to pay” (emphasis added). Second, it does not promise to pay these
sums on behalf of the insured, raising the possibility that the current coverage forms are on an “indemnify” basis; that is,
an insurer might not be required to pay until after the insured has paid the person making claim against the insured.
Alarm over either point is unfounded. The elimination of “all” is perhaps best compared to the elimination of “all” from
the “all risks of physical loss” wording of property contracts. In both cases, the purpose is not to lessen the intended
scope of coverage but to avoid creating unreasonable expectations among insureds that the coverage literally extends to
all sums, regardless of policy exclusions and conditions.
On the second point, it is most unlikely that the coverage forms would be construed to be on an indemnify basis instead
of a pay on behalf of basis. First of all, no effort is being made by any insurer to interpret the insuring agreement in such
a manner. And, the CGL insuring agreement does not use the word “indemnify”, nor does it express any requirement
that the insured must pay the injured party first; so, it is unlikely that any court would interpret the clause in that way. The
insurer’s promise to “pay those sums that the insured becomes legally obligated to pay” requires only that the insured
must have a legal obligation to pay.
The duty of the insurer to defend the insured is noted as a separate duty from the duty to pay damages. This duty
mentions defending the insured against any suit, which is a defined term that includes alternative dispute resolution
proceedings as well as the traditional lawsuit.

This brings up an incidental question concerning letters, known as PRP letters, sent to insureds by a governmental
environmental protection agency. These PRP letters designate the insured as a “potentially responsible party”, that is, a
party that may be responsible for the clean up costs of a site contaminated by pollutants. In many instances, an insured
will turn such letters over to the insurer and demand that the duty to defend clause in the CGL form be implemented; in
turn, the insurer will reject the demand by stating that no suit seeking damages has been filed against the insured. Are
PRP letters the equivalent of lawsuits, requiring the insurer to defend against a claim?
Putting aside any issue of coverage and concentrating solely on the question of whether a PRP letter is a suit demanding
a defense by the insurer, interested parties must look at court decisions to find an answer. Unfortunately, as is usual with
many disputes over insurance policy interpretation, courts stand divided on the question. Examples of court decisions
that have found PRP letters to be the same as lawsuits, triggering a duty to defend, are Aetna Casualty & Surety Company
v. Pintlar Corp., 948 F.2d 1507 (C.A. 9th 1991); A.Y. McDonald Industries, Inc. v. Insurance Company of North America, 475
N.W.2d 607 (Iowa 1991); and Michigan Millers Mutual Insurance Company v. Bronson Plating Co., 519 N.W.2d 864 (Mich.
1994). Examples of courts ruling in the opposite way: Ryan v. Royal Insurance Company, 916 F.2d 731 (C.A. 1st 1990);
Patrons Oxford Mutual Insurance Company v. Marois, 573 A.2d 16 (Me. 1994); and City of Edgerton v. General Casualty
Company, 517 N.W.2d 463 (Wis. 1994).
Note that, as an example of the unsettled nature of this question, these decisions have not been unanimously accepted
and followed by courts around the country. In fact, the City of Edgerton decision was overruled in 2003 by the Wisconsin
Supreme Court. In Johnson Controls, Inc. v. Employers Insurance of Wausau, 665 N.W.2d 257 (Wis. 2003), the court said
that PRP letters are the same as lawsuits and insurers have a duty to defend. The Michigan Millers decision was also
overruled, but this was on another point of law, not on the scope of PRP letters; the overruling decision is Wilkie v. Auto
Owners Insurance Company, 664 N.W.2d 776 (Mich. 2003).
The Ryan case (irrespective of the decision) presents an extensive and logical analysis of the matter, taking into
consideration the arguments put forth by courts on both sides of the issue. The Ryan court stated that the common
thread running through the legal reasoning of decisions that held PRP letters to be lawsuits requiring defense under
general liability policies and of those decisions that held the opposite was a search by the various courts for governmental
agency conduct that delivered “some cognizable degree of coerciveness or adversariness” to the recipient of the PRP
letter. The court also stated that “the duty to defend must relate to the seriousness of purpose which characterizes the
government role. If the government assumes an adversarial posture, making it clear that the force of the State will be
promptly brought to bear in a way that threatens the insured with probable and imminent financial consequences, then
the functional equivalent of a lawsuit may be in progress and the insured might reasonably expect the insurer to defend.”
In other words, a PRP letter may be a suit under the terms of a CGL coverage form, but this depends on the judicial
interpretation of the wording in the letter. If the letter is deemed as threatening the recipient with probable governmental
action, then it can be seen as requiring a defense; on the other hand, if the letter simply informs the insured of potential
liability and invites voluntary action on the part of the insured, there is no corresponding duty to defend.
In any case, in the 1973 general liability policy, the insurer’s duty to defend is stated to apply “even if any of the
allegations of the suit are groundless, false, or fraudulent.” There is no such explicit statement in the current CGL
forms regarding groundless, false, or fraudulent allegations. However, the forms do state that the insurer has “the
right and the duty to defend any suit seeking those damages” (emphasis added). If “any” is given its literal meaning,
the statement should encompass groundless, false, or fraudulent suits as well as legitimate ones. The absence of the
prior wording should not be interpreted to mean that the insurer is relieved of the duty to defend groundless, false,
or fraudulent suits against the insured. Of course, the complaint must contain allegations that are potentially within
coverage; it is not necessary that all of the allegations come within the scope of coverage. It is generally recognized
that if some part of the damages sought are not covered, the insurer still must defend, but it has no obligation to pay
those damages that are not covered.
The insurer can deny the duty to defend if the CGL form does not apply to the bodily injury or property damage. For
example, if the injured party claims the insured caused the damage by hitting him with a car, that is clearly excluded
under the terms of the CGL form. The general liability insurer could reasonably and legitimately deny coverage and deny
any duty to defend. But, courts look very closely at a situation such as this, and insurers would do well to be absolutely
certain of no coverage before categorically denying coverage or the duty to defend.
The insurer reserves to itself the right to investigate and settle any claim or lawsuit. The insured does not have the
right to prevent a settlement even if he or she does not like the terms.

The insuring agreement states that “the amount (the insurer) will pay for damages is limited as described in LIMITS
OF INSURANCE (SECTION III).” A key part of this statement is that it addresses only damages. As in the 1973 general
liability policy, all other covered costs in connection with a covered claim, including defense expenses, are payable in
addition to policy limits.
The agreement notes that the insurer’s “right and duty to defend end when (it) has used up the applicable limit of
insurance in the payment of judgments or settlements under Coverages A or B or medical expenses under Coverage
C.” As previously noted, the limits of the CGL forms (like those of the 1973 liability policy) apply only to damages; all
other costs, including defense, are payable in addition. But, once the applicable limit has been paid, the duty to defend
ceases. It is important to note that the limits have to be used up in the payment of judgments or settlements; the insurer’s
simply tendering the policy limits and walking away from the defense of the insured is not an acceptable way for the duty
to defend to end.
The last part of the insuring agreement requires that the bodily injury or property damage must be caused by an
occurrence that takes place in the coverage territory. An occurrence is defined as “an accident, including continuous or
repeated exposure to substantially the same general harmful conditions.” In other words, the insured cannot expect or
intend the injury or damage. (Note that the term “occurrence” appears in both the occurrence and the claims-made
versions of the current CGL coverage forms, and is not to be confused with the occurrence trigger of form CG 00 01 10
01. The insuring agreement of the claims-made version of the CGL form also requires that an occurrence take place in the
coverage territory, but follows this up with the reporting requirement found on the claims-made form as a clarification of
the claims-made trigger.)
The bodily injury or property damage must occur during the policy period. This requirement seems simple enough, but a
case from California has resulted in the current CGL forms including several paragraphs on prior knowledge and its effect
on liability coverage. The case is Montrose Chemical Corporation v. Admiral Insurance Company, 913 P.2d 878 (Cal. 1995).
In that case, the California Supreme Court ruled that the known loss rule does not bar liability coverage for claims
alleging continuous or progressive injury or damage as long as there remains uncertainty about damage or injury that
may occur during the policy period and the imposition of liability upon the insured. The court decided that if a party can
show that the insured may not have known about damage or injury that was occurring during the policy period arising
out of a known event, the CGL form will apply to a liability claim even if the insured knew that the event caused damage
or injury prior to the policy period. As an example, if the insured knew that its actions were causing BI or PD prior to the
inception date of a policy, that BI or PD is not covered by the policy; but, if the BI or PD continues during the policy period
and a case can be made that the insured did not know the BI or PD was continuing, liability coverage under the terms of
the CGL form is not barred for that particular BI or PD.
The current CGL forms now state that if the insured, or an employee authorized to give or receive notice of an occurrence
or claim, knew that the BI or PD had occurred prior to the beginning of the policy period, then any continuation of that BI
or PD is deemed to have been known before the policy began. And, this prior knowledge means that the CGL forms will
not apply to the BI or PD claims (due to the known occurrence) that arise after the inception of the policy. The known loss
rule, which holds that insurance coverage is not applicable when a loss is known or is apparent before the inception date
of the policy, is, in effect, written into and becomes part of the CGL coverage forms.
The prior knowledge clauses go on to describe three ways that an insured is presumed to know that BI or PD has
occurred. The first is that any insured or any employee authorized by the named insured to give or receive notice of an
occurrence or claim reports the BI or PD to the insurer. The second way is for one of these same individuals to receive a
written or verbal demand or claim for damages. The third way describes the insured becoming aware by any other means
that BI or PD has occurred or has begun to occur. This is a rather omnibus clause that would presumably include reading
about a loss in the newspaper or receiving a PRP letter or any other method of communication.
Exclusions
In many respects the coverage A exclusions on the current CGL forms are the same as the exclusions found on the 1973
comprehensive general liability policy, as amended by the broad form liability endorsement. For example, the broad
form endorsement’s liberalization of the usual watercraft exclusion to allow coverage for nonowned boats under 26 feet
in length is written into the current watercraft exclusion. On the other hand, some broad form provisions, although
incorporated into the current CGL exclusions, have been amended either to clarify or change coverage. Each of the
exclusions contained in the CGL coverage forms is discussed below. Naturally, additional exclusions may be added to
a CGL policy by endorsement, as underwriting considerations may require.

Exclusion A—Expected or Intended Injury
This insurance does not apply to “bodily injury” or “property damage” expected or intended from the standpoint of
the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect
persons or property.
Analysis
The important point here is that the expected or intended part of the exclusion has to be seen from the standpoint of the
insured; he or she is the entity being insured under the CGL form and so, his or her intention is the key. Now, some courts
have made a distinction between an intentional act and an intentional or expected result, holding that an intentional act
does not necessarily bring this exclusion into play. And, there are other factors that can affect the applicability of this
exclusion, such as the age of the injured person (a sexual assault on a minor is deemed in many jurisdictions to be an
automatic intentional injury); intoxication; mental capacity; and forseeability. However, the bottom line is that the action
or the inaction that causes the injury or damage has to be looked at from the standpoint of the insured.
The exception to the exclusion parallels the extended bodily injury coverage of the broad form liability endorsement.
Note that the exception, in either form, applies only to bodily injury and not to property damage. However, some courts
have held that even without such an exception the intentional injury exclusion does not apply to injury caused by the
insured’s acts in self-defense. So, depending on the law in a particular state, there may also be coverage under the
current CGL coverage forms for property damage resulting from the use of reasonable force to protect persons or
property. As to what is reasonable force, that is subject to a case-by-case analysis. This exclusion is meant to complement
the requirement that bodily injury and property damage be caused by an occurrence (as defined on the CGL form) in
order to be covered by this liability insurance.
Exclusion B—Contractual Liability
This insurance does not apply to “bodily injury” or “property damage” for which the insured is obligated to pay damages
by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) That the insured would have in the absence of the contract or agreement; or
(2) Assumed in a contract or agreement that is an “insured contract”, provided the “bodily injury” or “property
damage” occurs subsequent to the execution of the contract or agreement. Solely for the purposes of liability assumed
in an “insured contract”, reasonable attorney fees and necessary litigation expenses incurred by or for a party other than
an insured are deemed to be damages because of “bodily injury” or “property damage”, provided:
(a) Liability to such party for, or for the cost of, that party’s defense has also been assumed in the same “insured
contract”; and
(b) Such attorney fees and litigation expenses are for defense of that party against a civil or alternative dispute resolution
proceeding in which damages to which this insurance applies are alleged.
Analysis
Contractual coverage, under the current CGL forms is, in effect, defined by an exclusion, exclusion (b), which applies to
bodily injury or property damage “for which the insured is obligated to pay damages by reason of the assumption of
liability in a contract or agreement”; however, the actual coverage comes into play through exceptions to this exclusion.
The exclusion is specifically stated not to apply to: (1) liability assumed under an “insured contract” as defined in the
policy or (2) liability the insured would have in the absence of the contract or agreement. And, this contractual liability
coverage is concerned with liability that is assumed and has no applicability to the liability that results from a breach of
contract; the coverage under contractual liability is for those specific obligations of the insured wherein the insured has
contracted to be responsible for the legal liability of another entity.
The contractual coverage here is comparable in most respects to the blanket contractual liability coverage provided in
the broad form liability endorsement. However, a major difference is that contractual liability coverage under the current
CGL forms is subject to a separate exclusion of liability for the ownership, maintenance, or use of automobiles. (See the
discussion of exclusion (g) below.) In contrast, the blanket contractual liability coverage provided under the broad
form liability endorsement specifically deleted the automobile exclusion in the 1973 policy. So, while the broad form
endorsement’s version of contractual liability insurance covers liability assumed for the ownership, maintenance, or use
of automobiles, the current CGL forms do not. To fill this gap, ISO amended the business auto coverage form to provide
insurance for certain—but not all—types of agreements in which the insured assumes automobile liability.

There has been a question in some circles over whether the contractual coverage offered under the CGL form extends
defense cost coverage to the entity whose liability has been assumed by the insured through an insured contract.
Going further, if the defense costs are covered, are they included within the limits of insurance for bodily injury and
property damage or are the costs in addition to such limits, like supplementary payments?
The current CGL form, in discussing liability for damages assumed under an insured contract, states that “reasonable
attorney fees and necessary litigation expenses incurred by or for a party other than an insured are deemed to be
damages”. This would seem to answer the question about defense cost coverage in the affirmative since the word
“damages” is the key word. The exception to the contractual liability exclusion states that the exclusion does not apply
to liability for damages assumed under an insured contract; therefore, if the defense costs for the entity other than the
insured are damages, the CGL form will cover them. There are some conditions to be met before the defense costs are
deemed to be damages, namely, liability for the defense costs has to be assumed in the insured contract (just as the
liability has to be assumed), and the defense costs have to be for defense against alleged damages that are covered by
the insured’s policy.
As for the issue of whether the defense costs are included within the limits of insurance, one has to look at the
supplementary payments clauses on the CGL form. In those clauses, the insurer declares that payments for attorneys’
fees and litigation expenses for a party other than an insured—an indemnitee—will not reduce the limits of insurance if
certain conditions are met. Some of these conditions are, as noted in the previous paragraph, that liability for the defense
costs has to be assumed in the insured contract, and the defense costs have to be for defense against alleged damages
that are covered by the insured’s policy. Other conditions include the indemnitee asking the insurer to conduct and
control the defense (with the insurer assigning the same counsel for both the insured and the indemnitee), an agreement
by the indemnitee to cooperate with the insurer in the defense, and that there be no conflict of interest between the
interests of the insured and those of the indemnitee. It is important to emphasize that all of the conditions listed in the
CGL form must be met in order for the defense costs of the indemnitee to be paid as supplementary payments so as to
not reduce the limits of insurance.
An incidental note. This is one of the differences between an additional insured and the party whose liability the named
insured has assumed in an insured contract. An additional insured is an insured and as such, has his defense costs
automatically paid in addition to the limits of insurance; an indemnitee must meet all the enumerated conditions
before his defense costs are considered as outside the limits of insurance on the CGL form.
Exclusion C—Liquor Liability
This insurance does not apply to “bodily injury” or “property damage” for which any insured may be held liable by
reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution or use of alcoholic beverages.
This exclusion applies only if you are in the business of manufacturing, distributing, selling, serving or furnishing alcoholic
beverages.
Analysis
This exclusion basically has the same intent as the 1973 liquor liability exclusion, that is, to exclude liquor liability under
common law, as well as under statute, be it a dram shop act or an alcoholic beverage control act. The exclusion not apply
to an owner or lessor of premises used for a liquor business if the owner or lessor is not itself engaged in the liquor busi-
ness. For example, if the insured owns a building that is rented by A-1 Liquor Sales, and the liquor store sells alcohol to a
minor who promptly drives off and crashes into somebody causing injuries, the owner-insured’s CGL form will respond to
any claim made against the owner-insured based on his or her owning the building that housed the negligent liquor store.
This exclusion was revised in the 2013 edition of the CGL forms. In response to court decisions, ISO revised the liquor
liability exclusion to explicitly state that the exclusion applies even if the claims against any insured allege negligence in
the hiring or training or supervising of others (similar to the wording in the auto exclusion). So for example, if the insured
hires a bartender that is negligent in his duties about serving minors or a bartender that the insured has failed to properly
train when it comes to serving obviously intoxicated patrons, and this results in some injury or damage to an innocent

third party, the liquor liability exclusion will still apply. In addition, if any insured fails to provide transportation to an
intoxicated patron, and lets that person drive away, any resulting claim is going to be excluded.
The exclusion was also revised to provide that, for the purposes of the exclusion, permitting a person to bring alcoholic
beverages for consumption on an insured’s premises (BYO) is not by itself considered the business of selling, serving or
furnishing alcoholic beverages. This change is considered by ISO to be a broadening in coverage in that it contains an
express exception to the exclusion.
Exclusion D—Workers Compensation and Similar Laws
This insurance does not apply to any obligation of the insured under a workers compensation, disability benefits or
unemployment compensation law or any similar law.
Analysis
This exclusion simply states the obvious: the CGL form is not meant to cover a workers compensation claim.
Exclusion E—Employer’s Liability
This insurance does not apply to “bodily injury” to:
(1) An “employee” of the insured arising out of and in the course of:
(a) Employment by the insured; or
(b) Performing duties related to the conduct of the insured’s business; or
(2) The spouse, child, parent, brother or sister of that “employee” as a consequence of paragraph (1) above.
This exclusion applies:
(1) Whether the insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.
This exclusion does not apply to liability assumed by the insured under an “insured contract”.
Analysis
The purpose of this exclusion is to complement the workers comp exclusion and to preclude CGL coverage for bodily
injury to employees of the insured, an exposure that is handled under the workers compensation and employers liability
insurance policy (WC 00 00 00 A) or other forms of employment related insurance.
The CGL forms consider leased employees to be the same as regular employees for the purpose of being excluded from
coverage for their bodily injuries arising out of employment. To accomplish this, ISO made “employee” a defined term
that includes leased workers and has the phrase “performing duties related to the conduct of the insured’s business” in
the exclusion.
There are more points to make about the employer’s liability exclusion. First, it does not apply to liability assumed under
an insured contract as defined on the CGL forms. Second, the employer’s liability exclusion applies whether the insured
may be liable as an employer or in any other capacity, such as a producer of goods. Third, the exclusion applies to any
obligation on the part of the insured to share damages with or repay someone else who must pay damages because of
the injury. These items a part of the exclusive remedy concept that is meant to draw a definite line between workers
compensation coverage and general liability coverage.
Exclusion F—Pollution
This insurance does not apply to:
(1) “Bodily injury” or “property damage” arising out of the actual, alleged or threatened discharge, dispersal, seepage,
migration, release, or escape of “pollutants”:

(a) At or from any premises, site, or location which is or was at any time owned or occupied by, or rented, or loaned to
any insured. However, this subparagraph does not apply to:
(i) “Bodily injury” if sustained within a building and caused by smoke, fumes, vapor or soot produced by or originating
from equipment that is used to heat, cool or dehumidify the building, or equipment that is used to heat water for
personal use, by the building’s occupants or their guests;
(ii) “Bodily injury” or “property damage” for which you may be held liable, if you are a contractor and the owner or lessee
of such premises, site or location has been added to your policy as an additional insured with respect to your ongoing
operations performed for that additional insured at that premises, site or location and such premises, site or location is
not and never was owned or occupied by, or rented or loaned to, any insured, other than that additional insured; or
(iii) “Bodily injury” or “property damage” arising out of heat, smoke or fumes from a “hostile fire”;
(b) At or from any premises, site, or location which is or was at any time used by or for any insured or others for the
handling, storage, disposal, processing or treatment of waste;
(c) Which are or were at any time transported, handled, stored, treated, disposed of, or processed as waste by or for:
(i) Any insured; or
(ii) Any person or organization for whom you may be legally responsible; or
(d) At or from any premises, site, or location on which any insured or any contractors or subcontractors working directly
or indirectly on any insured’s behalf are performing operations if the “pollutants” are brought on or to the premises, site,
or location in connection with such operations by such insured, contractor, or subcontractor. However, this subparagraph
does not apply to:
(i) “Bodily injury” or “property damage” arising out of the escape of fuels, lubricants or other operating fluids which are
needed to perform the normal electrical, hydraulic or mechanical functions necessary for the operation of “mobile
equipment” or its parts, if such fuels, lubricants or other operating fluids escape from a vehicle part designed to hold,
store or receive them. This exception does not apply if the “bodily injury” or “property damage” arises out of the
intentional discharge, dispersal or release of the fuels, lubricants or other operating fluids, or if such fuels, lubricants
or other operating fluids are brought on or to the premises, site or location with the intent that they be discharged,
dispersed or released as part of the operations being performed by such insured, contractor or subcontractor;
(ii) “Bodily injury” or “property damage” sustained within a building and caused by the release of gases, fumes or
vapors from materials brought into that building in connection with operations being performed by you or on your
behalf by a contractor or subcontractor; or
(iii) “Bodily injury” or “property damage” arising out of heat, smoke, or fumes from a “hostile fire”.
(e) At or from any premises, site or location on which any insured or any contractors or subcontractors working directly or
indirectly on any insured’s behalf are performing operations if the operations are to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”.
(2) Any loss, cost or expense arising out of any:
(a) Request, demand, order or statutory or regulatory requirement that any insured or others test for, monitor, clean up,
remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”; or
(b) Claim or suit by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning
up, removing, containing, treating, detoxifying, or neutralizing, or in any way responding to, or assessing the effects of
“pollutants”.
However, this paragraph does not apply to liability for damages because of “property damage” that the insured would
have in the absence of such request, demand, order or statutory or regulatory requirement, or such claim or “suit” by
or on behalf of a governmental authority.

Analysis
The 1973 general liability policy, as originally worded, excluded bodily injury or property damage resulting from
pollution or contamination but excepted from the exclusion, and therefore insured, pollution incidents that were
sudden and accidental. This exclusion has been interpreted by some courts to include a wide range of accidents, wider
apparently than the scope of coverage that insurers ever intended to provide for pollution liability. As a result of these
interpretations, as well as the expanded potential for pollution liability under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, ISO has issued an almost absolute pollution exclusion.
Pollution liability that can be inferred to be covered is that resulting from certain off-premises exposures or within the
products-completed operations hazard. For an example of an off-premises exposure that could be covered, say that the
named insured temporarily has barrels of industrial chemicals (but not waste) at a location that is not owned, rented, or
occupied by the named insured. While at the location, the barrels are hit by a truck, causing a toxic spill that damages
property of an adjacent business. If the named insured is sued, the pollution exclusion should not stand in the way of
coverage for the named insured. For an example of a products-completed operations loss that could be covered, say
that the containers in the previous example were the product of the named insured and had been purchased by the
business on whose premises the containers were being used to store hazardous chemicals. If the containers leak because
of some manufacturing defect, causing a toxic spill, and the business sues the named insured for damage to its property,
the named insured should be covered under its CGL form.
The second part of the pollution exclusion dealing with clean up costs is meant to clarify the point that the CGL
coverage forms are not to apply to clean up costs imposed by various government acts or regulations, such as the
Superfund Amendment and Reauthorization Act (SARA) of 1986; or to costs as a result of non-governmental bodies,
such as a bank, demanding that the insured test for and clean up any pollutants, for example, prior to the sale of a
particular site.
There are several exceptions to the pollution exclusion that should be noted.
That part of the exclusion that deals with pollutants that seep from or escape from any premises, site or location owned
or occupied by any insured (f.1.a) does not apply to BI if sustained within a building and caused by smoke, vapor, fumes,
or soot from equipment used to heat, cool, or dehumidify that building. As an example, if carbon monoxide fumes seep
from a furnace and injure customers or visitors in the insured’s building, and the injured parties (or their estates) file a
lawsuit against the insured, the pollution exclusion on the CGL form will not prevent coverage for the insured. Note
that the current version of the CGL form has added language pertaining to equipment used to cool or dehumidify the
building. Since such equipment can emit fumes or vapors similar to equipment used to heat a building, and since the
intent of the CGL form is to apply to such an exposure, the language of this exception was revised.
Another exception to this part of the exclusion is for BI or PD for which the insured may be held liable if he or she is a
contractor and the owner of the site or location where the insured-contractor is performing operations is added to the
insured’s CGL form as an additional insured. Note that the exclusion itself prevents coverage for BI or PD arising out of
the release or escape of pollutants at a site or location owned or occupied by any insured. If the owner (or lessee) of the
site where the insured-contractor was working were to be made an additional insured on the contractor’s CGL form (which
is a very normal business practice), and a pollution spill occurred, the insurer could deny coverage, saying that pollutants
were released from a site owned by an insured. However, with this exception for insured-contractors, the insured now
has coverage for claims from such a loss. Remember, the insured has to be a contractor, the owner of the work site has
to be an additional insured on the contractor’s CGL form, and the site must not be and must have never been owned or
occupied by or rented or loaned to any insured other than the additional insured owner (or lessee).
The final exception to this part of the pollution exclusion is for BI or PD arising out of heat, smoke, or fumes from a
hostile fire. As an example, if the insured’s building caught on fire and smoke billowing from the building caused
damage to a neighbor’s building or injury to someone working in that other building, the insured’s CGL form would
apply to a subsequent PD or BI claim.
The other part of the pollution exclusion that has exceptions is that part dealing with BI or PD escaping from any site
or location on which any insured is performing operations (f.1.d).
One of the exceptions is for bodily injury or property damage arising out of the escape of fuels, lubricants, or other
operating fluids that are needed to perform the normal electrical, hydraulic, or mechanical functions of mobile
equipment. For example, if the insured has a bulldozer on a job site and gasoline leaks from the bulldozer onto the
location where the insured is performing his operations, any claim for property damage will be handled under the

insured’s CGL form. This simply complements the coverage that is given to the insured under the CGL form for damages
done by his or her mobile equipment. Of course, the exception does not apply if the pollutants are intentionally
discharged or released.
Another exception is for BI or PD sustained within a building and caused by the release of gases or fumes from materials
brought into that building in connection with operations performed by the insured. For example, if the insured is laying a
floor and brings a sealant for the floor tiles into the building and the sealant’s fumes make the building’s workers sick, the
CGL form will apply to subsequent claims against the insured.
The final exception is for BI or PD arising out of heat, smoke, or fumes from a hostile fire—the same exception as
described previously.
The clean up costs part of the exclusion also deserves some mention.
Note that the exclusion now applies to any statutory or regulatory requirement that the insured clean up pollutants as well
as any request, demand or order. The point here is that even if no one makes a demand or orders the insured to clean up
a pollutant spill, and the insured does it anyway just because there is a law on the books that the insured (as a contrac-
tor or other responsible party) is required to clean up the spill, the CGL form will not pay the clean up costs. There is no
coverage for clean up costs whether those costs are incurred as a result of an active demand for a clean up on the part of
someone other than the insured, or as a result of the insured wanting to be pro-active, taking the initiative and cleaning
up, with the knowledge that there is a statute or regulation that would force him or her to clean up the spill anyway.
The current CGL forms have a paragraph declaring that the clean up costs exclusion does not apply to liability for
damages because of property damage that the insured would have in the absence of any request or demand or order.
Sometimes there is a thin line between paying for property damage for which the insured is liable and clean up efforts.
Now, if the insured is liable for PD and the other parts of the pollution exclusion do not prevent coverage under the CGL
form, the insured will have coverage for the PD liability and the insurer will not use the clean up costs section of the
exclusion to deny any payments for fixing the property damage. The distinction between paying for property damage
and paying clean up costs will still have to be made on a case-by-case basis, but there should no longer be any confusion
about whether the clean up costs ban prevents payment for property damage; property damage costs will be paid.
Because of the broadness of the current pollution exclusion, it is inadvisable for many insureds to be without some form
of extra protection, even insureds whose chances of becoming liable for a pollution incident are remote. There are two
ways to provide the extra protection. Insureds without a substantial pollution exposure can purchase (if the underwriter
is willing to offer it) the pollution liability coverage extension endorsement (CG 04 22). The endorsement deletes the first
part of the pollution exclusion but does not affect the second part, which excludes governmentally ordered cleanup costs.
The other approach, more likely to be used for insureds with a pollution liability exposure, is a separate pollution liability
coverage part. ISO has prepared two different forms for this purpose, both on a claims-made basis. One of the forms,
designated CG 00 39, covers bodily injury and property damage arising out of pollution incidents, as well as cleanup
costs; the other form, designated limited form CG 00 40, does not include cleanup costs coverage.
Exclusion G—Aircraft, Auto, or Watercraft
This insurance does not apply to “bodily injury” or “property damage” arising out of the ownership, maintenance, use,
or entrustment to others of any aircraft, “auto”, or watercraft owned or operated by or rented or loaned to any insured.
Use includes operation and “loading or unloading”.
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision,
hiring, employment, training or monitoring of others by that insured, if the “occurrence” which caused the “bodily injury”
or “property damage” involved the ownership, maintenance, use or entrustment to others of any aircraft, “auto”, or
watercraft that is owned or operated by or rented or loaned to any insured.
This exclusion does not apply to:
(1) A watercraft while ashore on premises you own or rent;
(2) A watercraft you do not own that is:
(a) Less than 26 feet long; and

(b) Not being used to carry persons or property for a charge;
(3) Parking an “auto” on, or on the ways next to, premises you own or rent, provided the “auto” is not owned by or
rented or loaned to you or the insured;
(4) Liability assumed under any “insured contract” for the ownership, maintenance, or use of aircraft or watercraft; or
(5) “Bodily injury” or “property damage” arising out of:
(a)The operation of machinery or equipment that is attached to, or part of, a land vehicle that would qualify under the
definition of “mobile equipment” if it were not subject to a compulsory or financial responsibility law or other motor
vehicle insurance law in the state where it is licensed or principally garaged; or
(b)The operation of any machinery or equipment listed in Paragraph f.(2) or f.(3) of the definition of “mobile equipment”.
Analysis
This exclusion applies to entrustment of aircraft, autos, or watercraft to others, to avoid any possibility that claims for
negligent entrustment of an automobile, aircraft, or watercraft would be covered under the policy; some courts have
held premises and operations liability policies to apply to such claims in the past.
And, other court decisions have held that the CGL form applies to a claim against the insured for injuries arising out of
an auto accident because the insured had hired or trained the driver of the car. These courts made a distinction between
auto liability and general liability based on claims of negligent supervision or negligent hiring, and so, brought the CGL
form into what should have been an auto liability claim. In reaction to such legal decisions, the CGL form now has in its
auto exclusion a clause that has the exclusion applying to negligent supervision, hiring, or training claims arising out of an
occurrence involving an auto, watercraft, or aircraft.
An exception to the auto exclusion states that bodily injury or property damage arising out of the operation of any of
the equipment listed in paragraph f.(2) or f.(3) of the definition of mobile equipment is not subject to the exclusion. In
other words, operation of the equipment attached to certain self-propelled vehicles is not excluded here even though
operation of the vehicle is excluded. If, for example, a cherry picker attached to a truck were being used to cut down a
tree, there would be coverage for injury to a pedestrian struck by the cherry picker as it descends from the top of the
tree. However, there would be no CGL coverage if the vehicle to which the cherry picker is attached hit a pedestrian while
proceeding to the next job site.
This same exception makes reference to the operation of machinery or equipment attached to vehicles that would
qualify as mobile equipment as defined on the CGL form, but for the fact that the vehicles are subject to a compulsory or
financial responsibility law or some other motor vehicle insurance law. Such vehicles are considered as autos and the CGL
form strives to emphasize this point. These vehicles are autos and if they are the cause of any bodily injury or property
damage, the CGL form will not respond to a claim. However, if machinery or equipment attached to these vehicles cause
the injury or damage, the CGL form will apply. This is perhaps a confusing exception, but it is meant to reinforce the
separation between auto liability and general liability (mobile equipment) claims, and, in fact, it acts as a complement to
the exception paragraph about machinery or equipment attached to vehicles described in f.(2) or f.(3).
Exception (4) has important implications because of its omission of liability assumed under an insured contract for
the ownership, maintenance, or use of autos. This omission emphasizes the point that the current CGL forms do not
cover liability arising under automobile agreements, such as a car rental contract. Such contracts often include a hold
harmless agreement whereby the renter (the insured under the CGL form) agrees to assume the liability of the rental
company should an auto accident occur and a subsequent claim or lawsuit result. Exclusion (g) is declaring that, even if
the car rental contract pertains to the business of the named insured, the CGL forms will not provide coverage. The
business auto coverage form is the proper way to handle this type of exposure especially since ISO has written the busi-
ness auto coverage form to provide insurance for insured contracts which include “that part of any contract or agreement
entered into, as part of your business, pertaining to the rental or lease, by you or any of your employees, of any auto”.
It should be noted that, because the broad form liability endorsement’s contractual coverage as used with the 1973
general liability policy does not exclude such auto agreements, some insureds may have come to rely on their general
liability insurance to cover such assumptions of liability; since this liability is clearly not covered under the current CGL
forms, insureds should be made aware of the fact.

The term “loading or unloading” as used in exclusion (g) is defined on the coverage forms. The main point of the
definition of loading and unloading is that there is no coverage under the CGL forms for injury or damage arising out of
the transportation of property. And, in order to correspond with the wording on the business auto form and the truckers
form, and to attempt to clarify just which form would apply to a loss, the definition goes on to include the handling of
property for movement into or from an auto, unless the movement is by means of a mechanical device, such as a forklift.
As an example: the insured is loading property by means of a forklift onto a truck; the property falls off the forklift and
injures a passerby; the CGL coverage form would handle a resulting claim. On the other hand, if the insured is loading the
property into a business auto with the aid of a hand truck and the property falls off the hand truck and injures a passerby,
the business auto form will apply to the resulting claim.
Exclusion H—Mobile Equipment
This insurance does not apply to “bodily injury” or “property damage” arising out of:
(1) The transportation of “mobile equipment” by an “auto” owned or operated by or rented or loaned to any insured; or
(2) The use of “mobile equipment” in, or while in practice for, or while being prepared for, any prearranged racing, speed,
demolition, or stunting activity
Analysis
The second clause of the exclusion is so worded to clarify that the CGL forms do provide coverage for liability arising from
mobile equipment used just to prepare for such things as a prearranged race, as opposed to coverage being excluded
for the actual mobile equipment engaging in or preparing to engage in such an event. To illustrate: if a piece of mobile
equipment like a tractor is being prepared for a race at a county fair, the CGL form would not provide coverage if some-
one is injured by that tractor. On the other hand, if a particular piece of mobile equipment is being used to prepare the
tractor for its later use in a race, and someone is injured through the use of that particular equipment, the CGL form
would apply to a resulting claim.
Incidentally, clause (1) of exclusion (h) is ordinarily covered by automobile liability insurance (except, of course, for damage
to the mobile equipment itself; this is excluded by the care, custody, or control exclusion on the auto policy). Clause (2) is
an uncommon and especially hazardous exposure that must usually be insured on a specialty basis.
Exclusion I—War
This insurance does not apply to “bodily injury” or “property damage”, however caused, arising, directly or indirectly,
out of:
(1) War, including undeclared or civil war;
(2) 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; or
(3) Insurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending
against any of these.
Analysis
This exclusion has undergone quite a change under the 2004 version of the CGL form. The restriction on previous CGL
forms that this exclusion applied only to liability assumed under a contract or agreement is now gone. And, the exclusion
is expanded to apply to warlike action by a military force, by any government, or by other authority using military person-
nel or other agents. The prime example of this is, of course, the attack on the World Trade Center. That was a warlike
action taken by a military force or by some other authority using agents other than military personnel. Due to the high loss
of life and the extraordinary amount of property damage caused by the terrorist attacks, such actions were deemed to be
a risk exposure beyond the scope of a standard general liability policy; hence, the war exclusion as it now appears.
Exclusion J—Damage to Property
This insurance does not apply to “property damage” to:
(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization
or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including
prevention of injury to a person or damage to another’s property;

(2) Premises you sell, give away or abandon, if the “property damage” arises out of any part of those premises;
(3) Property loaned to you;
(4) Personal property in the care, custody, or control of the insured;
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on
your behalf are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired, or replaced because “your work” was incorrectly
performed on it.
Paragraphs (1), (3), and (4) of this exclusion do not apply to “property damage” (other than damage by fire) to premises,
including the contents of such premises, rented to you for a period of 7 or fewer consecutive days. A separate limit of
insurance applies to Damage To Premises Rented To You as described in Section III—Limits Of Insurance.
Paragraph (2) of this exclusion does not apply if the premises are “your work” and were never occupied, rented or held for
rental by you.
Paragraphs (3), (4), (5), and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.
Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations
hazard”.
Analysis
Exclusion (j) contains six parts, each of which could be viewed as a separate exclusion. These exclusions are modeled after
the care, custody, or control and alienated premises exclusions of the 1973 general liability policy and certain exclusions
from broad form property damage (BFPD) coverage.
Clause (1) of the exclusion parallels a similar exclusion in the 1973 policy, making it clear that the named insured cannot
rely upon its liability insurance to cover damage to its own property, whether real property or personal property. Moreover,
if the named insured has responsibility for damage to property it rents or occupies, it cannot rely on its liability insurance
for that responsibility, but must purchase the appropriate form of property insurance.
The CGL form has added clarifying language to this clause to emphasize the point that the CGL form is not meant to pay
for repair or maintenance costs for the named insured’s own property. As an example, if a third party wanted the named
insured to repair a certain piece of the named insured’s property in order to prevent damage to the third party’s property,
some may see that as a property damage liability claim against the named insured. This exclusion would prevent the
named insured’s CGL form from paying for the repair work.
Clause (2) parallels the 1973 general liability policy exclusion of property damage to premises alienated by the named
insured. Besides using language more easily understood by laymen, this exclusion also contains an important exception:
the exclusion does not apply if the premises were built by or on behalf of the named insured and were never occupied,
rented, or held for rental by the named insured. This means that contractors who build on speculation will have the same
extent of coverage for their work as contractors who build without ever actually owning the property. In the past, some
insurers have used the alienated premises exclusion to deny completed operations coverage for speculative builders
under circumstances that would otherwise have been covered by broad form property damage (BFPD) coverage. The
exception to the exclusion should avoid this controversy under the current coverage forms.
Clause (3) of exclusion (j) does not have an exact counterpart in either the 1973 policy or BFPD coverage. While “property
loaned to you” will in many cases also be excluded by clause (1) or (4) of exclusion (j), the specific language of clause (3)
should tie up any loose ends.
Clause (4) is a more up to date version of the usual care, custody, or control exclusion in that this current version applies
only to personal property. The reason for the modification is that real property is instead subject to other, less strict
exclusions that parallel BFPD exclusions.
The wording of this part of exclusion (j) should be noted not just for the specification of personal property as opposed to
any type of property, but also for the use of the term “the insured” as opposed to “your” (the named insured) or “an

insured”. By using “the insured”, the exclusion on the CGL forms applies to the particular insured holding the property,
but not to other insureds. If the term “your” were used (as it was in previous CGL forms), the exclusion could properly be
said to apply only to the named insured. If the term “an insured” were used, the exclusion would apply to any insured
deemed as such on the policy. This latter term, then, could be seen as an omnibus term, denying coverage to any and all
insureds regardless of which insured or how many insureds have custody or control of the property in question at the time
of loss.
Clause (5) of exclusion (j) is one of the exclusions derived from BFPD coverage. To illustrate the effect of this exclusion,
say that a plumbing subcontractor working for a home builder accidentally starts one of the builder’s projects on fire while
soldering copper pipes, and the entire structure is burned down. If the owner of the house sues the builder for the loss,
the exclusion in question will apply only to “that particular part” of the structure on which the plumber was working. Thus,
the named insured would be covered (on an excess basis over any builders’ risk coverage on the work) for damage to all
parts of the building other than the plumbing and all parts of the plumbing system other than the particular part being
worked on at the time of the loss.
The coverage forms do not define “that particular part,” and so disputes over its meaning seem as likely here as they
have been under BFPD provisions. However, in the final analysis, the use of the word “particular” indicates that the
exclusion should be applied narrowly. In the example above, the exclusion should then apply only to the two portions
of pipe being soldered together; the damage to the rest of the plumbing system should not be excluded.
Clause (6) of the exclusion is derived from the so-called “faulty workmanship” exclusion found in BFPD provisions.
However, it differs from the BFPD exclusion in that the current version contains an exception stating that it does not
apply to property damage included in the products-completed operations hazard. This exception should avoid disputes,
sometimes arising in connection with BFPD claims, over whether the faulty workmanship exclusion applies to completed
work. As will be discussed later, exclusion (l) of the CGL coverage forms is the exclusion that addresses coverage for
property damage to completed work performed by or on behalf of the named insured.
Following the six parts of exclusion (j) are exceptions to various parts of the exclusion. Two of these exceptions, those
relating to clauses (2) and (6), were discussed earlier. Another exception states that paragraphs (3) through (6) do not
apply to liability assumed under a sidetrack agreement. This exception parallels a similar one found in the 1973 policy
and BFPD endorsement. Finally, there is the exception to paragraphs (1), (3) and (4) for property damage to premises
rented to the named insured for a period of 7 or fewer consecutive days.
This exception takes note of a possible gray area in coverage and comes down in favor of coverage. Previous CGL forms
had given rise to a question of whether the exclusions for PD to property rented or occupied by the named insured and
for PD to personal property in the care, custody or control of the insured would prevent coverage for the businessman
who damaged a hotel room he was renting while on a business trip. Now, it is clear that if the named insured rents a room
for a period of 7 or fewer consecutive days (for example, a hotel room on a business trip), and then negligently damages
the room and its contents, the CGL form will apply to a subsequent claim.
If the insured is liable for damage by fire to premises rented to him or which he is temporarily occupying, that is another
item. Such liability is not handled by the exception discussed in the previous paragraph, but in the fire legal liability cover-
age that the insured has under the terms of the CGL form. Fire damage coverage is discussed at the end of this article.
Exclusion (j) does not, it should be noted, have an equivalent of the 1973 policy’s exception relating to property in the
insured’s care, custody, or control that is damaged by elevators on the named insured’s premises. If the named insured
under the current CGL coverage form has this exposure, an appropriate form of property insurance should be purchased.
Exclusion K—Damage to Your Product
This insurance does not apply to “property damage” to “your product” arising out of it or any part of it.
Analysis
This exclusion focuses on and has meaning through the definition of “your product”. Basically, if the named insured’s
product (as defined on the CGL form) suffers property damage, the named insured must look to sources of recovery other
than the named insured’s own CGL form.
“Your product” is clearly defined as not applying to real property. The definition of the named insured’s product under
the 1973 general liability policy did not address this question and as a result some insurers used the injury-to-products

exclusion to deny coverage for losses to real property that would otherwise have been covered by the BFPD coverage for
completed operations. The current clarification should avoid that problem.
“Your product” is defined as including goods or products manufactured, sold, handled, distributed, or disposed of by
“a person or organization whose business or assets you have acquired.” While such coverage might have been merely
inferred from the broad form general liability endorsement’s automatic coverage for newly acquired organizations, it is
perfectly clear under the current CGL coverage forms.
Exclusion L—Damage to Your Work
This insurance does not apply to “property damage” to “your work” arising out of it or any part of it and included in the
“products-completed operations hazard.” This exclusion does not apply if the damaged work or the work out of which
the damage arises was performed on your behalf by a subcontractor.
Analysis
There are a few points to discuss here. The extent of this exclusion depends on the meaning of the words “your work”
and “products-completed operations hazard”. Also, note that this exclusion applies only to work within the products-
completed operations hazard. Thus, exclusion (l) has no bearing on operations in progress. And, the exclusion does not
apply if the work was done by a subcontractor.
An example of how exclusion (l) could apply is as follows. The named insured is a general contractor who has built an
apartment house with the services of numerous subcontractors. After the building is completed and put to its intended
use, a defect in the building’s wiring (put in by a subcontractor) causes the building, including work of the general con-
tractor and other subcontractors, to sustain substantial fire damage. The named insured is sued by the building’s owner.
Although the named insured’s policy excludes damage to “your work” arising out of it or any part of it, the second part
of exclusion (l) makes it clear that the exclusion does not apply to the claim. That is because the work out of which the
damage arose was performed on the named insured’s behalf by a subcontractor. Note that clause (6) of exclusion (j) also
would not apply to the loss, since clause (6) is stated not to apply to property damage within the products-completed
operations hazard. Thus, barring the application of some other exclusion or adverse policy condition, the loss should be
covered, including the part out of which the damage arose.
Exclusion M—Damage to Impaired Property or Property Not Physically Injured
This insurance does not apply to “property damage” to “impaired property” or property that has not been physically
injured, arising out of:
(1) A defect, deficiency, inadequacy, or dangerous condition in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its
terms.
This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to
“your product” or “your work” after it has been put to its intended use.
Analysis
Exclusion (m) is a substantially reworked version of the so-called “failure to perform” exclusion from the 1973 general
liability policy; because the current version uses the term “impaired property,” it may come to be more familiar by that
name. The exclusion is aimed at the same types of losses as the 1973 version, but ISO has attempted to eliminate some
defects in the prior exclusion that allowed coverage in cases where none was intended.
Because the exclusion begins by excluding impaired property, that term must be understood. Impaired property, by defi-
nition, is restricted to tangible property that, on the one hand, cannot be used or is less useful, but, on the other hand,
can be restored to use. For example, assume that a product made by the named insured is incorporated into another
product made by another manufacturer. If the named insured’s product is defective or deficient and this results in the oth-
er product’s being made less useful or totally unusable, the first part of the definition of impaired property is met. Then, if
that other product can be restored to use by repairing or replacing the named insured’s product, the definition is satisfied
and exclusion (m) applies. Both parts of the definition have to be present. If the property has been damaged to the extent
that it is not only unusable but also cannot be restored to use, the impaired property exclusion does not apply.
Clause (2) of exclusion (m) speaks of a delay or failure by the insured to perform a contract in accordance with its terms.
For example, if the insured contracted with a party to deliver oil for engines and then fails to deliver so that that party can

not use the engines, the insured will not have coverage due to exclusion (m) for any resulting claim for loss of use of the
engines.
The exception to exclusion (m) states that the exclusion does not apply to loss of use of other property arising out of
sudden and accidental physical injury to the named insured’s product or work after it has been put to its intended use.
For example, if an apartment building became untenantable after being occupied due to an explosion of a steam boiler
that was defectively installed by the named insured, the exclusion would not apply to the owner’s claim for resulting loss
of use of the building.
Unlike the failure-to-perform exclusion of the 1973 policy, exclusion (m) makes no mention of warranties or representa-
tions of the named insured. The absence of such terminology should avoid the types of court decisions that have held the
failure to perform exclusion to apply only to claims based on contractual grounds and not to claims alleging negligence.
Exclusion N—Recall of Products, Work, or Impaired Property
This insurance does not apply to damages claimed for any loss, cost, or expense incurred by you or others for the loss of
use, withdrawal, recall, inspection, repair, replacement, adjustment, removal, or disposal of:
(1) “Your product”;
(2) “Your work”; or
(3) “Impaired property”;
if such product, work, or property is withdrawn or recalled from the market or from use by any person or organization
because of a known or suspected defect, deficiency, inadequacy, or dangerous condition in it.
Analysis
Exclusion (n) is the current CGL forms’ counterpart to the 1973 “sistership liability” exclusion. While the intent behind
the exclusion has remained the same, the current version has been reworded to be more explicit in some respects. For
example, the reference to any loss, cost or expense incurred by you or others makes it clear that such expenses are
excluded whether the named insured’s product or work is withdrawn by the named insured or by someone else, such
as a governmental agency or a distributor or seller of the named insured’s product.
Exclusion O—Personal and Advertising Injury
This insurance does not apply to “bodily injury” arising out of “personal and advertising injury”.
Analysis
This is meant to draw a distinct line between coverage A and coverage B. Coverage B (personal and advertising injury
liability) has usually been associated with other than bodily injury under the terms of the CGL coverage forms. However,
some judicial decisions have blurred the distinction between bodily injury and other than bodily injury, by equating mental
distress or emotional injury with bodily injury. And, a question has arisen whether someone who is physically hurt (for
example, a broken arm) due to the personal injury offense of false arrest or detention can seek coverage under the CGL
form for both personal injury coverage (B) and bodily injury coverage (A). This exclusion declares that such bodily injury
is not to be covered under coverage A. This exclusion’s intent is reinforced by the definition of “personal and advertising
injury” which now includes consequential bodily injury.
Exclusion P—Electronic Data
This insurance does not apply to damages arising out of the loss of, loss of use of, damage to, corruption of, inability to
access, or inability to manipulate electronic data.
As used in this exclusion, electronic data means information, facts or programs stored as or on, created or used on, or
transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROMS,
tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.
Analysis
This exclusion was added under the 2004 revision of the CGL form. The exclusion is meant to strengthen the point that
the CGL form does not cover damage to electronic data, an item that is not tangible property. The CGL form applies
to damage to and to loss of use of tangible property. While some court decisions have blurred the distinction between
tangible property and intangible property (for example, computer hardware and computer software respectively), the fact
remains that the CGL form was not meant to apply to damage to other than tangible property. The definition of “property

damage” was revised in an earlier version of the CGL form to note that electronic data is not tangible property for the
purposes of general liability insurance; this exclusion will complement that definition.
The 2013 edition of the CGL forms specifically notes that this exclusion does not apply to liability for damages because of
bodily injury, should for some reason that ever occur.
Exclusion Q—Distribution of Material in Violation of Statutes
This insurance does not apply to “bodily injury” or “property damage” arising directly or indirectly out of any action or
omission that violates or is alleged to violate:
(1) The Telephone Consumer Protection Act (TCPA), including any amendment of or addition to such law; or
(2) The CAN-SPAM Act of 2003, including any amendment of or addition to such law; or
(3) Any statute, ordinance or regulation, other than the TCPA or CAN-SPAM Act of 2003, that prohibits or limits the
sending, transmitting, communicating or distribution of material or information.
Analysis
This exclusion was originally conceived as an endorsement, CG 00 67. It was introduced in 2005 by ISO to exclude
bodily injury or property damage arising out of any action or omission that violates or is alleged to violate the TCPA,
the CAN-SPAM Act of 2003, or any other similar statute, ordinance, or regulation that prohibits or limits the sending,
transmitting, communicating, or distribution of material or information. The December 2007 revision of the CGL form
incorporated this endorsement wording into the CGL form itself. Endorsement CG 00 67 has now been withdrawn
from use.
The 2013 revision incorporated the recording and distribution of material or information in violation of law exclusion
from endorsement CG 00 68 into the CGL coverage forms. Endorsement CG 00 68 is now withdrawn from use.
Fire Damage Coverage
Exclusions (c) through (n) do not apply to damage by fire to premises while rented to you or temporarily occupied
by you with permission of the owner. A separate limit of insurance applies to this coverage as described in Section
III—LIMITS OF INSURANCE.
Analysis
This wording provides what the CGL coverage forms call fire damage coverage, which is the same thing as fire legal
liability coverage. Note that exclusions (a) and (b) are applicable to this type of coverage. Exclusion (a) applies to
expected or intended injury or damage and would, for example, eliminate fire damage coverage in cases of arson.
Exclusion (b) is the contractual liability exclusion, which has caused some misunderstandings in connection with fire
legal liability coverage. A question that often arises is if this contractual exclusion applies in the situation where an
insured as a tenant agrees in his lease to be responsible for any fire damage he might cause to the leased premises.
There are two points to be made on this issue.
First, the language of the exclusion of contractual liability coverage is concerned only with liability that is assumed (that
is, liability incurred when one promises to indemnify or hold harmless another) and does not deal with liability that results
from a breach of contract. The language in exclusion (b) is for those specific obligations of the insured wherein the insured
has contracted to be responsible for the legal liability of another entity. If the insured has agreed to be responsible to his
landlord for any fire damage, he has not assumed the landlord’s liability to another party; he has agreed to be responsible
for fire damage he has caused to the landlord’s premises or building. So the contractual liability exclusion language is not
relevant to the situation where an insured tenant agrees to pay for fire damage to leased premises.
Second, one of the exceptions to exclusion (b) states that the exclusion does not apply to liability for damages that the
insured would have in the absence of a contract or agreement. Therefore, if the insured tenant through his negligence
causes fire damage to premises he rents, exclusion (b) does not apply since the insured would be liable for the damage
regardless of what the lease says and regardless of whether a lease even exists. In summary, an insured tenant need not
be concerned that exclusion (b) is going to affect the fire legal liability that he has agreed to in a lease. The language of
the exclusion and the intent of the coverage form as represented by this fire damage coverage clause both present firm
support for such coverage.

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CGL Coverage Form -- Coverage A (from FC&S Legal: The Insurance Coverage Law Information Center)

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CGL Coverage Form -- Coverage A (from FC&S Legal: The Insurance Coverage Law Information Center)