Form CG 21 44: Exclusion - Damage To Work Performed By Subcontractors On Your Behalf
1. What the form is
The CG 21 44, titled "Exclusion - Damage To Work Performed By Subcontractors On Your Behalf," is an endorsement to the Commercial General Liability (CGL) policy. Its primary purpose is to eliminate coverage for 'property damage' to 'your work' that arises out of the work performed by subcontractors hired by the named insured. The standard CGL policy (CG 00 01) typically includes an exception to the "Damage To Your Work" exclusion (Exclusion l.) that preserves coverage if the damaged work, or the work from which the damage arose, was performed by a subcontractor. This endorsement effectively removes that crucial exception. This means that if a subcontractor's faulty workmanship causes damage to the overall project (which is considered 'your work' as the general contractor), this endorsement would preclude coverage for repairing or replacing that damaged work. It's important to note that different editions of this form exist, and the scope of the exclusion can vary.
2. Classes of business it applies to
This endorsement is most relevant to businesses that heavily rely on subcontractors, particularly in the construction industry. This includes:
- General Contractors: This is the most common class of business affected. General contractors are responsible for the overall project and hire various subcontractors for specialized work (e.g., plumbing, electrical, HVAC). If this endorsement is attached to their CGL policy, they would have no coverage for damage to the project resulting from their subcontractors' errors. For example, if a plumbing subcontractor's faulty installation leads to a major water leak that damages drywall and flooring (all part of the general contractor's 'work'), CG 21 44 would exclude coverage for these damages.
- Developers: Real estate developers who subcontract construction work would also be significantly impacted.
- Artisan Contractors who subcontract portions of their work: While less common, an artisan contractor (e.g., a roofer) who subcontracts a part of their job (like gutter installation) could also see coverage gaps if this endorsement is applied.
Essentially, any insured who hires subcontractors to perform work on their behalf and could be held responsible for property damage to the completed project arising from that subcontracted work is a candidate for this endorsement, from the insurer's perspective, to limit its exposure.
3. Special considerations
The presence of CG 21 44 on a policy creates a significant coverage gap for contractors. Key considerations include:
- Shift of Risk: This endorsement shifts the financial burden of repairing damage caused by subcontractors back to the general contractor.
- Contractual Obligations: Many construction contracts require the general contractor to provide coverage for damage to the work, including work done by subcontractors. This endorsement could put the contractor in breach of such contractual requirements.
- Completed Operations Exposure: The exclusion applies to 'property damage' included in the "products-completed operations hazard." This means the gap primarily affects work that is already finished.
- Alternative Coverage Needs: To address the gap created by CG 21 44, contractors might need to seek specialized coverages, such as a "broad form property damage" endorsement that specifically buys back some of this excluded coverage, or rely on the subcontractor's own insurance (though this can be complex to manage and verify). Some contractors may need to explore project-specific policies or wrap-up insurance programs that are structured differently.
- State Variations and Legal Interpretations: While the form is intended for use in all states, legal interpretations of CGL policies and exclusions can vary by jurisdiction. The definition of "occurrence" and how it applies to construction defect claims can also impact the ultimate coverage outcome.
- Edition Dates: It is crucial to pay attention to the edition date of the CG 21 44 (and any related endorsements like CG 22 94 or CG 22 95 which have similar effects) as the wording and its impact can change between editions. Older versions might be less restrictive than newer ones. For instance, the 07 98 edition of CG 21 44 is titled "Limitation of Coverage to Designated Premises or Project" and functions differently than the "Exclusion - Damage To Work Performed By Subcontractors On Your Behalf." (It seems there might be a conflation in the prompt's "Form Information" regarding the title and function of CG 21 44 versus CG 22 94/95. CG 21 44 primarily limits coverage to designated premises, projects, or operations. The exclusion of damage to work performed by subcontractors is more directly addressed by forms like CG 22 94. ) Assuming the prompt's intent is to discuss the *concept* of excluding subcontractor's work damage, even if the form code CG 21 44 is more typically associated with premises/project limitations, the considerations about risk shift and contractual issues remain valid for endorsements that *do* exclude subcontractor work damage.
4. Key information for agents and underwriters
For agents:
- Identify the Gap: Clearly explain to contractor clients the significant coverage gap created by this type of exclusion. Use real-world examples to illustrate potential uninsured losses.
- Review Contracts: Advise clients to review their construction contracts to understand their liability and insurance obligations regarding work performed by subcontractors.
- Seek Alternatives: Explore options to mitigate this gap, such as negotiating the removal of the endorsement, seeking buy-back endorsements if available, or ensuring robust insurance and indemnification agreements are in place with subcontractors.
- Document Thoroughly: If the endorsement cannot be removed, document the discussion with the client about the existing coverage gap.
For underwriters:
- Risk Assessment: The use of this endorsement significantly reduces the insurer's exposure to claims arising from subcontractor negligence. However, it also increases the potential for disputes if the contractor was unaware of or misunderstood the endorsement's impact.
- Pricing Considerations: Policies with this exclusion should, in theory, be priced lower due to the reduced coverage. However, the actual premium impact will depend on the insurer's overall rating plan and the specific risk characteristics.
- Subcontractor Controls: When this exclusion is not used (meaning the subcontractor exception to the "Damage to Your Work" exclusion remains), underwriters should carefully assess the insured's practices for selecting, managing, and insuring their subcontractors. This includes verifying subcontractors' insurance coverage.
- Clarity in Wording: Ensure the policy language, including any endorsements like CG 21 44 (when used for premises limitation) or specific subcontractor work exclusions (like CG 22 94), is clear to avoid ambiguity and potential coverage disputes. Be mindful of the different impacts of various edition dates.
- Purpose of CG 21 44 vs. Subcontractor Work Exclusion: Underwriters should be precise in their use of endorsements. CG 21 44 is primarily designed to limit coverage to specific premises, projects, or operations. If the intent is to exclude damage to work performed by subcontractors, an endorsement like CG 22 94 ("Exclusion – Damage To Work Performed By Subcontractors On Your Behalf") is the more direct tool. Using CG 21 44 with the expectation of achieving the latter could lead to misinterpretation and unintended coverage outcomes.
It is important to reiterate the distinction: The form CG 21 44, particularly its 07/98 and 04/17 editions, primarily serves to limit coverage to designated premises, projects, or operations. The exclusion of property damage to work performed by subcontractors is more directly addressed by endorsements such as CG 22 94. While the prompt links CG 21 44 to this specific subcontractor exclusion, industry literature generally assigns that function to other form numbers. Agents and underwriters must be precise with form usage to ensure intended coverage outcomes.