How the CG 22 94 Impacts Coverage for Contractors and Subcontractors

An agent notices more carriers regularly adding the CG 22 94 endorsement to the commercial general liability policy to exclude losses arising out of subcontractor-caused damage to a contractor’s work.

Q: When did this start becoming a regular exclusion? Is there a way to add this cover back, either partially or fully? Any advice on how to argue against it?

Response 1: This is becoming a very common practice among carriers writing general contractors. The CG 22 94—or a company-specific endorsement that accomplishes the same purpose—is used in almost every state. In many states, companies offer the option to buy back the coverage; buy-back premiums vary greatly. In a few states, coverage cannot be bought back for any price. 

You have two choices: Sell the product as it is issued by the company, or find another carrier that will give you what you want.

Response 2: This has been going on around the country for several years, especially in the excess & surplus market. Standard carriers seem to apply the exclusion on an individual account basis for underwriting purposes. Some carriers remove the subcontractor exception in exclusion “L." in the ISO CGL policy, then provide a buy-back. Usually the buy-back is not quite as good as the original ISO coverage, but its quality depends on the specific language of the carrier's form.

If you have carriers that exclude completed operations claims for subs on pretty much everything, you might want to start looking for company appointments with carriers that don't remove the subcontractor exception. In the construction industry, this guts CGL coverage and opens the agency up to an errors & omissions claim, unless you explain the exclusion very carefully and in writing.

Response 3: The definition of "your work" includes work done on your behalf by others. The ISO CGL “damage to your work" exclusion modifies the definition for completed operations by providing coverage for work done on your behalf by a subcontractor.

Many carriers have been forced to pay losses on a general contractor’s policy when subs are either uninsured or underinsured. As a result, they’ve been revising the exclusion for a few years now. For an additional premium, some carriers will remove the exclusion or modify it for specified work.

Response 4: I’ve seen these exclusions for many years among the smaller contractor programs, which often focus on low cost and low coverage. You either must buy back the coverage or move to a different insurer who does not apply such exclusions.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.