Commercial General LiabilityExclusions K & LBUSINESS RISKS, NOT COVERED LOSSES• YOUR PRODUCT • YOUR WORK

The Commercial General Liability Policy

THE FIRST STANDARD CGL WAS DRAFTED IN 1940 BY THE INSURANCE INDUSTRY TO ADDRESS MISUNDERSTANDINGS WITH COVERAGE.

THE CGL WAS DESIGNED TO PROTECT BUSINESSES FOR OCCURRENCES THAT RESULT IN BODILY INJURY OR PROPERTY DAMAGE TO THIRD PARTIES.

1986 RevisionsTHE CGL POLICY WAS REVISED IN 1986 WITH NEW PROVISIONS AND EXCLUSIONS, INCLUDING THE “PRODUCTS-COMPLETED OPERATION HAZARD” AND “YOUR WORK” EXCLUSIONS.

THESE EXCLUSIONS ARE PART OF THE “BUSINESS RISK” DOCTRINE.

INSURERS SHOULD NOT BE HELD LIABLE FOR RISKS WITHIN THE DIRECT CONTROL OF THE INSURED

Products and Completed Operations (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" did not occur before the policy inception date or after the end of the policy period; and

(3) A claim for damages because of the "bodily injury" or "property damage" is first made against any insured during the policy period.

Business RisksSome risks are just part of doing business, and are not insured in a General Liability Policy.

Exclusion K – Your Product

The General Liability policy excludes property damage to your product

Your Product is, any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by you, others trading under your name, or a person or organization whose business or assets you have acquired.

Exclusion K Court Cases

Tradin Organics, USA, Inc. v. Maryland Casualty Company

Tradin Organics v. Maryland Casualty Company

Tradin Organics sold it’s raspberry crumble to Crofters Foods

After delivery was accepted by Crofters, the crumble was discovered to contain plastic, pits, stems, glass and other materials

Tradin agreed to compensate Crofters $214,444.32 for the contaminated crumble

Tradin filed a claim with it’s General Liablity insurer, Maryland Casualty to recover those costs

Maryland Casualty denied the claim based on the “Your Product” exclusion in the CGL.

Tradin Organics v. Maryland Casualty Company The district court held that “similarly defined “your

product” exclusions unambiguously precluded coverage for losses caused by contaminated or defective product sold by the insured.”

The policy explicitly defines “your product” as any goods or products…manufactured, sold, handled, distributed or disposed of by Tradin or others using Tradin’s name

The appellate decision went further, saying, the exclusion is intended to exclude coverage for damage to the insured’s product, but not for damages caused by the insured’s product

The liability policy does not insure Tradin’s warranty of quality because it is not a performance bond, it is a liability policy

Exclusion L - Your Work

Damage to Your Work Property damage to your work is not covered under the Commercial General

Liability policy Your Work means:

1. Work or operations performed by you or on your behalf 2. Material, parts or equipment furnished in connection with such work or operations

This exclusion does not apply if the damaged work was performed on your behalf by a subcontractor

Covered or Not Covered? A General Contractor hires a subcontractor to install cabinets

at a client’s home. A month after the client moves in, the kitchen cabinet falls on

the homeowner’s arm and breaks it and damages the granite countertop. Bodily Injury – broken arm Property Damage – granite countertop Repair and re-installation – faulty cabinet

The Homeowners Injuries?As the Cabinet Installer - Subcontractor

Covered Not Covered

The Homeowners Injuries?As the Cabinet Installer - Subcontractor

Covered This insurance applies to bodily injury if it was caused by an

occurence

Damage To The Countertop?As the Cabinet Installer - Subcontractor

Covered Not Covered

Damage To The Countertop?As the Cabinet Installer - Subcontractor

Covered This insurance applies to property damage if it was caused by

an occurrence

Re-installation of Cabinet?As the Cabinet Installer - Subcontractor

Covered Not Covered

Re-installation of Cabinet?As the Cabinet Installer - Subcontractor

Not Covered Exclusion L: The policy will not cover property damage to

“your work” arising out of it, or any part of it and included in the products-completed operations hazard

The Homeowners Injuries?As the General Contractor – subbed out the installation

Covered Not Covered

The Homeowners Injuries?As the General Contractor – subbed out the installation

Covered This insurance applies to bodily injury if it was caused by an

occurrence

Damage To The Countertop?As the General Contractor – subbed out the installation

Covered Not Covered

Damage To The Countertop?As the General Contractor – subbed out the installation

Covered This insurance applies to property damage, if it was caused by

an occurrence

Re-installation of Cabinet?As the General Contractor – subbed out the installation

Covered Not Covered

Re-installation of Cabinet?As the General Contractor – subbed out the installation

Covered Exclusion L Carve Back: “This exclusion does not apply if the

damage work or the work out of which the damage arises was performed on your behalf by a subcontractor

Examples

Your Work

Your Product

Your Work

Your Product

Your Work

Your Product

Your Work

Your Product

Your Work

Your Product

Your Work

The End