1. Forms
2. CG
3. CG-40-08

What the form is

The CG 40 08 endorsement is used with Commercial General Liability (CGL) policies. Its primary function is to exclude coverage for specific, designated operations of the named insured that are otherwise covered by a controlled insurance program (CIP), commonly known as a "wrap-up" insurance program. Crucially, this endorsement carves out a limited exception to this exclusion. This exception preserves coverage for entities that are additional insureds on the named insured's policy but are not enrolled in the wrap-up program for the specified project or location detailed in the endorsement's Schedule.

Classes of business it applies to

This endorsement is predominantly used in the construction industry, particularly for large-scale projects where a wrap-up insurance program is implemented by the project owner or general contractor. Such programs provide centralized insurance coverage (often general liability, workers' compensation, and excess liability) for most or all contractors and subcontractors working on a specific job site.

Real-world examples include:

• Large commercial building projects (e.g., skyscrapers, shopping malls).
• Major infrastructure developments (e.g., bridges, highways, airports).
• Significant industrial or manufacturing plant construction or expansions.

In these scenarios, a subcontractor's standard CGL policy might need this endorsement to clarify how it interacts with the master wrap-up policy covering the project.

Special considerations

• Specificity is Key: The endorsement requires the designated operations and the specific location covered by the wrap-up program to be clearly described in its Schedule. Ambiguity can lead to coverage disputes.
• Avoiding Coverage Duplication: The primary aim is to prevent redundant coverage between the subcontractor's individual CGL policy and the project-specific wrap-up policy, which can streamline claims and reduce overall insurance costs for the project.
• Protecting Non-Enrolled Additional Insureds: The "limited exception" is a critical feature. It ensures that if the named insured (e.g., a subcontractor) has contractually agreed to name another party (e.g., a material supplier or a consultant not involved in the wrap-up) as an additional insured, that additional insured can still find coverage under the subcontractor's CGL policy for liability arising out of the subcontractor's work on the wrap-up project site, even though the subcontractor's own work is largely excluded by this endorsement due to the wrap-up. For instance, if a specialized equipment lessor is an additional insured on a contractor's policy but is not part of the site's wrap-up, this endorsement allows the contractor's policy to potentially cover the lessor for claims stemming from the contractor's operations at that site.
• Interaction with Wrap-Up Program Terms: The scope and adequacy of the wrap-up program itself are vital. This endorsement doesn't fill gaps in the wrap-up; it merely clarifies the CGL policy's response in light of the wrap-up.

Key information for agents and underwriters

• Risk Assessment: Underwriters must carefully review the nature of the designated operations and the terms of the wrap-up program. The endorsement signals that a significant portion of the insured's liability for the specified project is intended to be covered elsewhere. The underwriter's focus shifts to the insured's operations outside the wrap-up and the potential liability for additional insureds who fall under the exception.
• Pricing Implications: The exclusion of operations covered by a wrap-up can result in a premium credit for the named insured, as the insurer's exposure for those operations is significantly reduced.
• Contractual Obligations: Agents should review construction contracts to understand the insurance requirements imposed on their clients, especially concerning wrap-up projects and obligations to additional insureds. This endorsement helps tailor the CGL policy to meet these contractual needs.
• Potential Coverage Gaps: It's important to ensure that the additional insureds intended to be covered by the exception are genuinely not enrolled or covered by the wrap-up program. Misunderstanding their status could lead to an unintended gap in coverage.
• Comparison with Similar Endorsements: The CG 40 08 is similar to endorsements like CG 21 31 (Exclusion – Designated Operations Covered By A Controlled Insurance Program) and CG 21 54 (Exclusion – Designated Work). However, the key differentiator in CG 40 08 is the explicit limited exception for additional insureds not enrolled in the wrap-up. If CG 40 08 is used to replace an endorsement like CG 21 31, it may broaden coverage for these specific additional insureds.