We sub out part of our scope. What does the “your work” exclusion, and endorsement CG 22 94, mean for us?

What does exclusion l say?

The exclusion is two sentences. The first removes “‘Property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard’.” The second gives part of it back: “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.”

Two definitions carry the weight. “Your work” means work or operations performed by you or on your behalf, plus the materials, parts and equipment furnished with it. So for this purpose a subcontractor’s work is your work. The products-completed operations hazard covers damage that happens away from your premises after the work is completed, and the form treats work as completed when the contract is finished or when that part has been put to its intended use.

The exclusion therefore applies after completion. Damage while the job is still in progress is dealt with by a different exclusion, j, which removes damage to the particular part you are working on.

What does CG 22 94 change?

Why does this matter to a trade contractor?

The exception is usually discussed for general contractors, because nearly everything a general contractor delivers is built by subcontractors. Attorney Mark Malloy notes that for a general contractor the “work” is arguably the entire project, so removing the exception can leave almost no completed operations property damage coverage. He cites Builders Mutual Insurance Co. v. Kalman, a 2009 federal district court decision in South Carolina. The court described itself as apparently the first nationwide to analyze CG 22 94 10 01, and held that with the subcontractor exception removed, the exclusion barred coverage for a general contractor’s defect claim.

The same logic runs one tier down. A mechanical contractor that subs out insulation, controls or water treatment, or an electrical contractor that subs out fire-stopping or fiber, has a scope made partly of other firms’ work. Writing for the San Diego County Bar Association, Danielle Ward notes that CG 22 94 on a subcontractor’s policy also precludes coverage where that subcontractor subbed out its work to another contractor.

Without the endorsement, a failure in the sub-tier’s work that damages the rest of your completed system is not caught by exclusion l. With it, that damage is excluded.

Does the exception guarantee coverage?

No. An exception to an exclusion does not create coverage. The claim still has to be property damage caused by an occurrence, and no other exclusion may apply. Malloy summarizes the Wisconsin Supreme Court’s reasoning in American Family v. American Girl in those terms: the subcontractor exception does not create new coverage, it restores coverage that the exclusion would otherwise remove.

Whether a particular defect claim meets those tests is a question for coverage counsel in the project’s state.

• Look in the forms schedule for CG 22 94, for CG 22 95, which Malloy and Ward describe as the project-specific version, or for an insurer form with “subcontractor” and “your work” in the title.
• An answer in Independent Agent magazine notes that some insurers remove the exception with their own wording and then offer a buy-back, which is not always as broad as the original.
• Check what your subcontract promises upstream, in particular any requirement for completed operations coverage or any bar on non-standard exclusions.
• Check your own sub-tier agreements for additional insured status and limits, since their policies become the first source of recovery if yours excludes the loss.

Related questions

Does general liability pay to redo my own defective work?

No. After completion, exclusion l removes property damage to your work arising out of it. During the job, exclusion j removes damage to the particular part you were working on. The subcontractor exception applies only to exclusion l.

Is CG 22 94 a standard part of the policy?

No. It is an optional ISO endorsement, edition 10 01, that an insurer chooses to attach. Agents writing in Independent Agent magazine describe it as common on policies for general contractors.

What is the difference between CG 22 94 and CG 22 95?

Both remove the subcontractor exception to exclusion l. CG 22 94 does so for the whole policy. CG 22 95 does so for designated projects.