MIND THE GAP: Common Policy Exclusions in Contractor's GCL Policies

Published On: August 22nd, 2015

Below are just a few of the many exclusions found in General Commercial Liability Policies. These exclusions highlight the importance of contract review, both by your insurance agent and by a construction attorney. Agents can recommend policy riders and endorsements to address these gaps, while a good construction attorney can suggest contract revisions to insurance and indemnification requirements to better protect the contractor

  1. The "wrap-up clause:" Wrap up insurance programs, whether Owner or Contractor controlled (OCIP or CCIP), have become prevalent in today's construction industry. However, most CGL policies exclude from coverage "bodily injury or property damage arising out of any project that is or was subject to a wrap-up insurance program." Genting New York LLC v. Navigators Ins. Co., 48 Misc. 3d 1211(A) (N.Y. Sup. Ct. 2015). A "gap" problem arises when the wrap-up policy disclaims coverage for any number of reasons (perhaps there was not a written contract between the sub and the contractor) and the sub looks to its own policy for coverage.
  2. Assumed Contractual Liability: This exclusion effectively denies coverage for claims arising out of liability assumed by the contractor for which it would normally have no common law or statutory obligation. As an example, if a contractor assumes a duty to defend and indemnify a third party architect for property damage that is not the result of the contractor's own negligence, this exclusion would likely be asserted by the insurance company to deny coverage. Consequential and liquidated damage clauses might trigger this exclusion as well.
  3. Completed Operations: The contractor needs protection not only from claims which may arise during its time on the job, but claims asserted years after the work has been completed. If your CGL policy does not have "completed operations" coverage, these post-completion claims will generally not be covered.