1. Forms
2. CG
3. CG-26-39

What the form is

The CG 26 39 is an endorsement to the Commercial General Liability (CGL) policy specifically for use in Texas. Its primary function is to add an exclusion that eliminates coverage for liability arising from 'bodily injury' or 'personal and advertising injury' to a person due to employment-related practices, policies, acts, or omissions. This includes actions such as refusal to employ, termination of employment, coercion, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination, or malicious prosecution directed at that person. The exclusion also extends to 'bodily injury' or 'personal and advertising injury' to the spouse, child, parent, brother, or sister of the person at whom the employment-related practices were directed, if their injury is a consequence of the injury to that person.

Classes of business it applies to

This endorsement applies to virtually any commercial entity in Texas that carries a Commercial General Liability insurance policy and has employees. It is not specific to any particular industry but rather addresses a type of liability exposure common to all employers. Real-world examples include:

• A retail store in Houston that is sued by a former employee for wrongful termination.
• A tech company in Austin facing a lawsuit from a current employee alleging discrimination and harassment.
• A restaurant in Dallas where an employee claims defamation following a disciplinary action.

Special considerations

It is crucial to understand that the CG 26 39 removes coverage from the CGL policy for these types of employment-related claims. Businesses in Texas with this endorsement on their CGL policy will not have coverage under that policy for lawsuits stemming from the excluded employment practices. Therefore, businesses with employees should strongly consider purchasing separate Employment Practices Liability Insurance (EPLI) to cover these exposures. This endorsement underscores the intent that the CGL policy is not designed to cover employment-related disputes. The standard ISO CGL form (CG 00 01) has an exclusion for bodily injury to employees (Exclusion e. Employer's Liability), but the CG 26 39 broadens the exclusion of employment-related claims beyond just bodily injury to employees, to also include personal and advertising injury and to apply to any person (not just an employee) subjected to such practices.

Key information for agents and underwriters

• Risk Assessment: For underwriters, this endorsement clarifies the scope of the CGL policy, ensuring that risks associated with employment practices (which are often volatile and complex) are not inadvertently covered. It helps in maintaining the underwriting integrity of the CGL.
• Coverage Gaps: Agents must clearly communicate the impact of this exclusion to their clients. They should highlight the significant gap in coverage for employment-related claims and recommend appropriate EPLI coverage. Failure to do so could lead to errors and omissions claims against the agent.
• Pricing: While this endorsement clarifies the CGL's scope, its direct impact on CGL pricing might be less significant than the emphasis it places on the need for a separate EPLI policy, which will have its own premium based on the employer's specific risks (e.g., number of employees, industry, claims history).
• Underwriting Guidelines: Underwriters should confirm that Texas insureds with employees understand this exclusion. It is a standard form in Texas for many insurers to ensure that employment practices liability is handled under specific EPLI forms rather than the general liability policy.