Exclusion – Damage To Work Performed By Subcontractors On Your Behalf – Designated Sites Or Operations (CG 22 95)
1. What the form is
The CG 22 95 endorsement is a modification to the standard Commercial General Liability (CGL) policy. Its primary function is to alter Exclusion (l), commonly known as the "Damage To Your Work" exclusion. Standard CGL policies typically include an exception to this exclusion, stating that the exclusion does not apply if the damaged work, or the work from which the damage arises, was performed by a subcontractor on the insured's behalf. The CG 22 95 endorsement removes this subcontractor exception, but only for specific sites or operations that are listed (designated) in the schedule of the endorsement. Consequently, if this endorsement is attached and a subcontractor's faulty workmanship on a designated project causes damage to the insured general contractor's completed work, the CGL policy will not provide coverage for that damage.
2. Classes of business it applies to
This endorsement is predominantly used in the construction industry. It directly impacts:
- General Contractors: This is the most common class of business affected. Insurers may use this endorsement for general contractors who subcontract a significant portion of their work, especially on large or complex projects.
- Developers: Developers who also act as general contractors or who hire multiple subcontractors for specific ventures.
- Artisan Contractors: In some instances, larger artisan contractors who subcontract portions of their specialized work on designated projects might also see this endorsement.
Real-world example: A general contractor is building a multi-story office building (the "designated site" listed in the CG 22 95). If a subcontractor installing the HVAC system performs their work negligently, leading to a fire that damages other completed portions of the building constructed by the general contractor, the general contractor's CGL policy with this endorsement would exclude coverage for the damage to their own work, even though it was caused by the subcontractor. The insurer's intent is to avoid paying for repair of the general contractor's work due to a subcontractor's error on that specific, scheduled project.
3. Special considerations
- Significant Coverage Reduction: This endorsement creates a substantial coverage gap for the insured general contractor by eliminating coverage for damage to their work caused by subcontractors on the specified projects. This is a critical point of discussion for agents with their clients.
- Specificity is Key: The "designated sites or operations" must be clearly and precisely described in the endorsement schedule. Ambiguity can lead to disputes at the time of a claim.
- Comparison to CG 22 94: Unlike its counterpart, CG 22 94 (which applies a blanket exclusion to all work performed by subcontractors), CG 22 95 is project-specific. This allows an insurer to target the exclusion to higher-risk projects rather than all of the insured's operations.
- Risk Transfer Implications: Insureds with this endorsement should ensure their contracts with subcontractors on designated projects have strong indemnification clauses and require subcontractors to carry adequate insurance, including naming the general contractor as an additional insured.
- Completed Operations: The impact of this endorsement is particularly felt in "products-completed operations hazard" claims, as it removes a key source of coverage for construction defect claims arising from subcontractor work on the designated projects.
Real-world example: A developer is constructing a new condominium complex and the insurer applies CG 22 95 specifically to this development. If, after completion, a defect in the roofing work performed by a subcontractor leads to extensive water damage throughout several units (damaging work performed by the developer/GC and other subcontractors), the developer's CGL policy with this endorsement would not cover the cost to repair the damaged work of the developer/GC on this specific project. The developer would need to pursue the subcontractor or rely on the subcontractor's insurance.
4. Key information for agents and underwriters
- Pricing/Premium Impact: Attaching the CG 22 95 may result in a premium reduction for the insured because it curtails coverage and reduces the insurer's potential exposure on the designated, often higher-risk, projects. However, agents must counsel clients that this premium savings comes at the cost of a significant coverage restriction.
- Risk Assessment & Underwriting Intent: Underwriters utilize this endorsement as a tool to manage exposures on specific projects they identify as having a higher potential for construction defect claims stemming from subcontractor work. It allows them to provide coverage for an insured contractor while carving out a problematic exposure on one or more named projects. This is often seen with types of construction known for defect litigation, such as residential projects (condominiums, townhomes).
- Coverage Gap Awareness: Agents have a critical role in ensuring their clients fully understand the implications of this endorsement. It shifts the financial responsibility for repairing the insured's own work damaged by their subcontractors (on the scheduled projects) back to the insured general contractor.
- Alternative to Non-Renewal or Declination: For underwriters, this endorsement can be an alternative to declining coverage entirely or non-renewing a policy for a contractor undertaking a high-risk project. It allows the insurer to maintain a relationship with the insured while managing specific project risks.
- Claims Handling: In the event of a claim on a designated project, insurers will scrutinize whether the damage falls under the reinstated "Damage To Your Work" exclusion due to this endorsement.