Do you know the difference between an endorsed Commercial General Liability (CGL) policy and an unendorsed CGL policy? If you don’t, you may find that your coverage will not have the support it needs to protect you when your need is dire. An unendorsed CGL policy is designed to cover claims if the insured is legally liable for certain types of injury or damage. The policy doesn’t restrict coverage to certain locations or types of operations and it does what it’s supposed to do; protect you. That is, as long as the applicant hasn’t misrepresented what he does (that’s called fraud), coverage applies to any type of work he may do.
Understanding the Ins-and-Outs of an Unendorsed CGL Policy
The problem is that many insurers don’t issue an unendorsed CGL policy. Why? Because it means they have to cover more, and more coverage is just bad business for insurance companies. So, they add endorsements designed to specifically exclude certain locations or operations or to restrict coverage to locations and operations that they consider risky (which could leave you exposed and vulnerable). Listed below are some of the most common exclusions that you’ll find when you don’t have an unendorsed CGL policy.
- Residential work
- Work in certain states (New York is a commonly excluded state)
- Work on projects higher than certain number of stories
- Bridge work
- Lead and Asbestos Abatement
- PEX Piping
Other policies take a different approach. Rather than listing the type of work not covered, they instead restrict coverage to operations and list a class code on the policy through the addition of a Designated Classification Limitation endorsement. It’s a much safer approach for both parties, but it’s still not foolproof. The problem with these endorsements is that a contractor cannot always tell whether a job he is considering is covered by a described classification. Descriptions are often general; Carpentry, for example, can include a variety of types of work.
It is important to review your policies for any type of endorsement that restricts the type of work that is covered. It is equally important to be honest about the type of work you are doing, have done in the past, and plan to do during the policy term. Honesty on both sides will help create a much stronger relationship and should help your insurance company find the protection that you need. An unendorsed CGL may be out of reach for some but that doesn’t mean you need to accept subpar insurance.