CG 21 39: Contractual Liability Limitation

What CG 21 39 removes from the policy

The CGL coverage form excludes liability the insured assumes under a contract, then gives coverage back for liability assumed in an "insured contract". The standard definition lists a lease of premises, a sidetrack agreement, certain easement or license agreements, an obligation to indemnify a municipality required by ordinance, an elevator maintenance agreement, and, in paragraph f., that part of any other contract pertaining to your business under which you assume the tort liability of another party to pay for bodily injury or property damage to a third person.

Paragraph f. is what makes a construction indemnity clause insurable. CG 21 39 replaces the whole definition with paragraphs a. through e. only. Once it is attached, a subcontractor's agreement to indemnify the general contractor and owner for third-party injury claims is not an insured contract, the contractual liability exclusion applies, and the policy does not pay the indemnity.

The defense side is affected too. The CGL form's supplementary payments provision covers the defense of an indemnitee only in defined circumstances, including that the indemnitee's liability was assumed in an insured contract. With paragraph f. gone, the defense obligation you bargained for is uninsured as well.

How CG 21 39 shows up in a claim

CG 21 39 does not stop you from tendering as an additional insured. If the subcontractor's policy carries CG 20 10 or CG 20 37, your additional insured tender is judged under that endorsement. The damage happens on the second track. Most general contractors pursue both additional insured coverage under the subcontractor's policy and contractual indemnity from the subcontractor. When additional insured coverage falls short because of causation wording, limits or a completed operations gap, the indemnity claim is what covers the rest.

With CG 21 39 attached, the subcontractor's carrier will deny the indemnity demand under the contractual liability exclusion. The subcontractor still owes the indemnity under the subcontract, but a small or mid-size trade contractor rarely has the assets to fund a serious injury settlement and the defense bill. In practice, the loss lands in your own retention.

Edition history and the CG 24 26 comparison

CG 21 39 10 93 is the edition in circulation. The form is a single page, and it can sit quietly in the forms schedule of a policy whose certificate looks perfect.

Do not confuse it with CG 24 26, Amendment of Insured Contract Definition. CG 24 26 keeps paragraph f. but limits it to liability for injury or damage caused, in whole or in part, by the named insured or those acting on its behalf, which removes coverage for indemnifying another party's sole negligence. In states whose anti-indemnity statutes already void sole-negligence indemnity in construction contracts, CG 24 26 may cost you little. CG 21 39 removes the paragraph entirely, which is a different order of problem.

What to put in the subcontract

Require that the subcontractor's CGL policy include contractual liability coverage for liability assumed under an insured contract, with a definition no narrower than the ISO CG 00 01 coverage form, and prohibit CG 21 39 and any endorsement with similar effect. If you can accept CG 24 26 for some trades, say so; otherwise prohibit it as well.

Then require disclosure. Contractual liability limitations almost never appear on the ACORD 25. Ask for the policy's forms schedule, the list of every endorsement attached, along with the certificate, and make its delivery a condition of mobilization.

• Contractual liability for tort liability assumed under an insured contract, on a basis no narrower than ISO CG 00 01.
• No CG 21 39, and no carrier endorsement that deletes or limits paragraph f. of the insured contract definition, without written approval.
• Forms schedule delivered with each certificate and each renewal.

How Pikorua Security catches CG 21 39

Pikorua Security reads the forms schedule and every endorsement page in the packet, not just the pages that grant coverage. Rule EX-04 flags CG 21 39 by form number and also flags carrier endorsements whose text replaces the insured contract definition, so a manuscript form with a different number does not slip through.

A flag produces a deficiency notice to the subcontractor and its broker that states the problem in plain language: the policy does not insure the indemnity required by the subcontract. You decide whether to hold payment, require a replacement policy, or approve a documented variance for a low-risk scope.