CG 21 39: Contractual Liability Limitation
Current Edition: 04 13 · Full ID: CG 21 39 04 13
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What Is CG 21 39?
This endorsement severely limits the CGL policy's ability to cover liability the insured assumes through contracts and agreements. The standard CGL automatically covers 'insured contracts' like hold harmless and indemnification agreements. This endorsement restricts that coverage, leaving the insured unable to fulfill contractual risk-transfer obligations.
Technical Summary: Modifies the contractual liability coverage provided under the CGL by limiting the definition of 'insured contract.' The standard CGL (CG 00 01) includes broad contractual liability coverage via the 'insured contract' definition, which encompasses hold harmless agreements, indemnification clauses, and certain lease/easement obligations. CG 21 39 narrows this definition, typically restricting covered contracts to only those specifically scheduled or to a narrow subset of the standard insured contract categories. This undermines the entire risk-transfer mechanism that construction and commercial contracts rely upon.
What CG 21 39 Covers
- +May still cover a narrow subset of insured contracts (varies by edition and schedule)
- +Tort liability of the insured is unaffected — only assumed contractual liability is restricted
What CG 21 39 Does NOT Cover
- -Liability assumed under most hold harmless and indemnification agreements
- -Contractual risk transfer that is the foundation of construction contracts
- -Broad form contractual liability that the standard CGL would normally provide
- -Liability assumed under contracts not specifically scheduled (if schedule-based)
Key Provisions
- ●Restricts the definition of 'insured contract' in the CGL
- ●Does not eliminate the insured's own tort liability — only liability assumed by contract
- ●Additional insured endorsements become significantly less valuable because the contractual liability underpinning is weakened
- ●Often requires specific contracts to be scheduled to retain coverage
- ●The limitation may not be apparent from the declarations page — must read the endorsement
Edition History
- • Updated to align with 1993 CGL program restructuring of insured contract definition
- • Revised to reflect 2013 CGL program changes to insured contract and related definitions
Common Mistakes & E&O Warnings
This endorsement is often overlooked because its impact is not immediately obvious. Agents reviewing policies focus on limits, deductibles, and named exclusions — contractual liability limitations are buried in definition modifications. In construction, contractual liability coverage is the backbone of the entire risk-transfer chain. When CG 21 39 is attached, the insured cannot fulfill indemnification obligations required by general contractors and project owners, exposing the agent to E&O claims from both the insured and upstream parties who relied on the coverage being in place.
- ⚠Assuming the CGL always includes full contractual liability — CG 21 39 removes or limits it
- ⚠Not checking for this endorsement when issuing certificates that promise contractual liability coverage
- ⚠Believing additional insured endorsements are unaffected — they depend on contractual liability provisions
- ⚠Thinking this only matters for construction — any business that signs indemnification agreements is affected
- ⚠Overlooking this endorsement during policy review because it modifies definitions rather than adding a named exclusion
Frequently Asked Questions
What does CG 21 39 do to my contractual liability coverage?
CG 21 39 restricts or eliminates the CGL's automatic coverage for liability you assume under contracts. The standard CGL covers 'insured contracts' including hold harmless and indemnification agreements. This endorsement narrows that coverage significantly.
Does CG 21 39 affect additional insured endorsements?
Yes. Many additional insured endorsements rely on contractual liability provisions in the CGL to provide defense and indemnity. When CG 21 39 limits contractual liability, the effectiveness of AI endorsements like CG 20 10 is reduced.
Why is CG 21 39 especially dangerous for contractors?
Construction contracts universally require the subcontractor to indemnify the general contractor and project owner. Without contractual liability coverage, the subcontractor must pay those indemnification obligations out of pocket, which can be financially devastating.
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