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Commercial General Liability

The recent verdict of the Arizona Court of Appeal on Commercial General Liability (CGL) states that there would be no insurance coverage for any specified insured work. The ‘Your Work Exclusion’ directive will be common in most CGL policies.

The directive states that the CGL policy is liable to any extra damage caused to the other part of the property during or after the implementation of the specified insured work but definitely not responsible for the quality of the specified work.

The ‘Your Work Exclusion’ will not be applicable if the insured work has been designated to a subcontractor.

In such cases, the damage caused to the specified work will also get covered under ‘Subcontractors Exception’.

The policies seemed to be a bit ambiguous until a court case of a General Contractor Vs an Insurance company was concluded few years’ back

A general Contractor who was allotted a roofing construction in turn allotted the work to a subcontractor. The subcontractor obtained a commercial liability policy which stated it as the named insured and the general contractor as the additional insured. After the completion of the project by the subcontractor the roof had a leakage. On the request of the client, the general contractor replaced the roof and asked for a compensation from the Insurance Company. The trial court which initially went in favour of the general contractor got altered after the appeal of the Insurance Company. This was due to the fact that the ‘Your Works Exclusion’ literally adheres to the name ‘Your’. The Insurance Company was not held liable for the faulty work delivered by the subcontractor. Since in the books of the Insurance Company the general contractor was the additional insured and subcontractor was the named insured the ‘Subcontractors Exception’ became irrelevant. This would have gone in favor of the general contractor if the compensation was claimed for the other damages occurred due to the faulty roof.

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