The CGL is the “workhorse” United States policy, providing the vast majority of business insurance coverage in the U.S. But the policy’s definitions contains a potential pitfall: because the policy indemnifies the insured for “property damage” and “bodily injury” arising from “general” liability, a skilled attorney could successfully argue the policy applies to risks not intended by the policy drafters. The standard policy contains a number of standard exclusions to prevent this outcome.
Because a CGL’s covers “bodily injury” it could potentially cover worker’s compensation claims. To prevent this outcome, the policy specifically excludes not only worker’s comp claims (Section 2(d) excludes claims for “worker’s compensation and similar laws”) but also “bodily injury related to an “employer’s liability.” (Section (2)(e)). The latter provision is probably overkill, but certainly doesn’t hurt.
The CGL’s coverage of “property damage” and “bodily injury” could potentially open the door to liability for damages caused by pollution (in fact, careless drafting in the late 1960s and early 1970s allowed insureds to successfully file such claims, leading to huge losses for insurers). Exclusion (2)(f) specifically precludes that possibility by excluding claims for property damage or bodily injury caused by pollution (some policies go so far as to have a rider called the “Total Pollution Exclusion).
The CGL’s coverage of “property damage” and “bodily injury” could lead to coverage caused by an auto accident. Exclusion 2(g) – for damage arising out of “the ownership, maintenance, use, or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured” – prevents this possibility.
Finally, the CGLs’ coverage of property damage could potentially force the CGL insurer to cover losses to physical property such as buildings and houses. Exclusion (2)(j), which excludes “property damage to property you won, rent, or occupy” prevents this outcome.
Ultimately, the insured should create an “insurance tapestry,” which would look like this:
Ideally, each insurance box only covers claims unique to the specifically named coverage.
Each policy applies to a specific risk. The language of each policy also specifically excludes its application to the other fact patterns (pollution excludes worker’s comp etc…). Weaved together, the policies protect the insured against specific catastrophic risks.