One of the most complex and, as a result, misunderstood exclusions in the commercial general liability policy is exclusion j, which limits coverage with respect to damage to property in the insured's care, custody, or control or on which the insured is working when a loss occurs. This exclusion is designed to eliminate coverage for liability exposures that are better handled through some form of first-party insurance, such as an inland marine policy (e.g., jewelers block or builders risk) or commercial property policy, but there are gray areas in its application. The discussion of exclusion j has recently been updated in Commercial Liability Insurance.
j. Damage to Property
"Property damage" to:
(1) Property you own, rent, or occupy including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;
(2) Premises you sell, give away or abandon, if the "property damage" arises out of any part of those premises;
(3) Property loaned to you;
(4) Personal property in the care, custody or control of the insured;
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.
Paragraphs (1), (3) and (4) of this exclusion do not apply to "property damage" (other than damage by fire) to premises, including the contents of such premises, rented to you for a period of 7 or fewer consecutive days. A separate limit of insurance applies to Damage To Premises Rented To You as described in Section III-LIMITS OF INSURANCE.
Paragraph (2) of this exclusion does not apply if the premises are "your work" and were never occupied, rented or held for rental by you.
Paragraphs (3), (4), (5) and (6) of this exclusion do not apply to liability assumed under a sidetrack agreement.
Paragraph (6) of this exclusion does not apply to "property damage" included in the "products-completed operations hazard."
© ISO Properties, Inc., 2006