1. Forms
2. CG
3. CG-22-94

Form CG 22 94: Exclusion - Damage To Work Performed By Subcontractors On Your Behalf

1. What the form is

The CG 22 94, titled "Exclusion - Damage To Work Performed By Subcontractors On Your Behalf," is an endorsement to the standard Commercial General Liability (CGL) policy, such as the CG 00 01. Its primary function is to eliminate an important exception to the "Damage To Your Work" exclusion (often referred to as exclusion 'l') found in the CGL. Standard CGL policies typically exclude damage to the insured's own work. However, there's an exception: this exclusion doesn't 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 94 endorsement removes this subcontractor exception entirely. This means that if this endorsement is attached, property damage to any part of "your work" is excluded, even if that part of the work was performed by a subcontractor. This significantly curtails coverage, particularly for construction defect claims.

2. Classes of business it applies to

This endorsement is predominantly used in the construction industry. It has a significant impact on:

• General Contractors: General contractors who rely heavily on subcontractors for most or all of the physical construction work are severely affected. For example, if a general contractor (GC) builds a house using various subcontractors for plumbing, electrical, and roofing, and faulty workmanship by the plumbing subcontractor leads to extensive water damage throughout the house after completion, the CG 22 94 could allow the insurer to deny coverage for the damage to the entire house, as it is all considered the GC's "work".
• Homebuilders and Remodelers: These businesses frequently use subcontractors for specialized tasks. If this exclusion is in place, they bear the financial responsibility for repairing defective work done by their subcontractors. For instance, if a homebuilder hires an electrical subcontractor whose faulty wiring causes a fire that damages the house years later, some insurers might use CG 22 94 to deny coverage for the entire house.
• Developers: Similar to general contractors, developers who oversee projects and subcontract the labor will find their coverage for completed operations significantly reduced.
• Artisan Contractors who subcontract portions of their work: While they might perform some work themselves, if they subcontract parts of a job, this exclusion would apply to the work done by those subcontractors.

3. Special considerations

Several critical considerations apply to the CG 22 94 endorsement:

• Significant Coverage Gap: This is the most crucial point. The endorsement creates a substantial gap in what would otherwise be covered under the subcontractor exception to the "your work" exclusion. This means the insured (e.g., the general contractor) effectively self-insures the risk of property damage to their completed work arising from their subcontractors' faulty workmanship.
• "Business Risk" Rationale: Insurers often add this endorsement based on the principle that damage to the contractor's own work, regardless of who performed it, is a "business risk" (i.e., a cost of doing business or a quality control issue) rather than an insurable fortuitous event. They argue the CGL policy is not a warranty for the contractor's work product.
• Impact on Completed Operations: The exclusion specifically applies to "property damage" to "your work" that is included in the "products-completed operations hazard." This means it's particularly relevant for defects that manifest after the project is finished and handed over.
• Varying Carrier Interpretations: The interpretation of what constitutes "other property" (i.e., property that is not "your work") can differ among insurance carriers. In the example of faulty wiring by a subcontractor causing a house fire:
  • Majority View: Some carriers will deny coverage for the entire house, as the entire house was the homebuilder's "work."
  • Minority View: Others might only deny coverage for the faulty wiring itself but cover the resulting damage to the rest of the house, arguing the rest of the house is "other property" damaged as a consequence of the faulty wiring.
• State Law Variations: How courts interpret "occurrence" and "property damage" in the context of construction defects can vary by state, which can further complicate coverage scenarios when this endorsement is present.
• Negotiability and "Buy-Back" Options: In some cases, it may be possible to negotiate the removal of this endorsement, potentially for an additional premium. Some carriers might also offer a "buy-back" endorsement that restores some or all of the coverage removed by the CG 22 94, though the terms of such buy-backs can vary and may not be as broad as the original subcontractor exception. In certain states or with particular carriers, buying back this coverage may not be an option.
• Alternative to CG 22 95: ISO also offers form CG 22 95, which is similar but applies the exclusion only to designated sites or operations, rather than on a blanket basis like the CG 22 94.

4. Key information for agents and underwriters

• Risk Assessment: For underwriters, this endorsement significantly reduces their exposure to construction defect claims, particularly those arising from subcontractor negligence. It shifts more of the financial burden for poor workmanship back to the contractor. The quality control measures, subcontractor selection processes, and contractual risk transfer practices (like requiring subcontractors to carry adequate insurance and name the GC as an additional insured) of the insured become even more critical in risk assessment.
• Pricing: Adding this endorsement typically results in a lower premium for the CGL policy because it restricts coverage. Conversely, removing it or adding a "buy-back" will likely increase the premium.
• Coverage Gaps and E&O Exposures for Agents: Agents must clearly explain the significant impact of this endorsement to their construction clients. Failure to do so, especially if a claim is later denied because of this exclusion, can lead to Errors & Omissions (E&O) claims against the agent. It is crucial to document that the client was made aware of this coverage restriction.
• Market Practice: The use of CG 22 94 or similar proprietary endorsements has become increasingly common, especially in the excess and surplus lines market and with insurers offering lower-cost policies. Some standard carriers may apply it on an individual account basis based on underwriting considerations.
• Subcontractor Insurance Requirements: When the CG 22 94 is present, it becomes even more vital for the general contractor to ensure their subcontractors carry adequate insurance, including naming the GC as an additional insured on the subcontractor's policy. However, even this may not fully cover the GC if the subcontractor's policy also contains a CG 22 94, as this would preclude coverage for their sub-subcontractors.
• Underwriting Guidelines: Underwriters may be more inclined to use this endorsement for contractors with a poor loss history related to subcontractor work, those working on high-risk projects (e.g., residential construction like condos, townhomes, or EIFS installations), or those with weak subcontractor management protocols.
• "Business Risk" vs. Fortuitous Event: The core underwriting philosophy behind this endorsement is that faulty workmanship by subcontractors is a business risk the general contractor should manage, rather than an insurable fortuitous event. This perspective is key when discussing the endorsement's rationale.