Every contractor carries commercial general liability, and inside that policy sits a clause that quietly decides whether a construction defect claim is covered at all: the “your work” exclusion. Two contractors can face the identical defect — cracked slab, failed waterproofing, a wall out of plumb — and get opposite answers from the same policy language, depending on one fact that has nothing to do with the damage itself. Understanding why is the difference between a claim that is paid and a repair funded out of the contractor’s own pocket.
Start with the threshold question the insurer asks first: is defective work even an “occurrence”? For decades carriers argued it was not — the reasoning, traced to the 1979 Weedo decision, held that repairing faulty work is an ordinary business expense, not the fortuitous accident insurance is meant to cover. That view has eroded. As IRMI documents, state supreme courts have reached near-unanimity that construction defects can constitute an occurrence under the standard ISO CGL form, CG 00 01, when faulty work causes unexpected damage. The occurrence door, once largely shut to contractors, is now mostly open.
Then the exclusions decide what walks through it. Exclusion l. — the “your work” exclusion — bars coverage for property damage to the contractor’s own completed work once it has entered the products-completed operations hazard. The purpose is deliberate: the CGL is not a performance bond, and carriers will not underwrite the cost of a contractor redoing its own defective work. Left there, the exclusion would strip defect coverage from nearly every contractor. It is not left there.
The subcontractor exception is the clause that changes everything. Exclusion l. does not apply when the damaged work, or the work out of which the damage arose, was performed on the contractor’s behalf by a subcontractor. So a general contractor whose subcontractor’s defective compaction later cracks the building’s slab may find coverage restored, while a contractor who self-performed that same scope finds the loss excluded. The Black & Veatch decision put the point plainly — the subcontractor exception informs the very meaning of occurrence, and reading the policy as a whole prevents the exclusion from swallowing the coverage. One fact — who actually performed the work — can decide the claim.
Timing carries its own set of exclusions. While operations are still ongoing, exclusions j.(5) and j.(6) remove coverage for “that particular part” of property the contractor is actively working on, and for property that must be restored or replaced because the work was incorrectly performed on it. Exclusion m. reaches impaired property and defective-product claims. The practical effect is that the same defect can be treated differently depending on whether it surfaces mid-project or after the work is complete and put to its intended use. A contractor who does not know which phase a loss falls into does not know which policy language governs it.
The 2026 market makes reading this language less optional than ever. WTW’s Insurance Marketplace Realities projects construction general liability running flat to up ten percent, with excess liability anywhere from up seven to up forty percent and umbrella layers up five to thirty — pressure driven by nuclear verdicts and litigation funding that push carriers to tighten underwriting and broaden exclusions. IRMI has tracked the result directly: a growing wave of coverage-restricting endorsements, including breach-of-contract exclusions and “your work” language that can quietly remove the subcontractor exception altogether. A contractor who reads only the premium and signs the renewal can miss the endorsement that deleted the exact coverage a future defect claim would have needed. Workers compensation, at flat to up three percent, is the sole calm corner of the casualty program.
The discipline is to read the policy the way a claim will. Confirm that the subcontractor exception survives intact on the renewal and has not been endorsed away. Verify that products-completed operations coverage is in force and extends long enough to reach a defect that surfaces years later. And structure subcontractor agreements — indemnity, additional-insured status, and insurance requirements — so that risk rests where the work was actually performed, which is precisely where the “your work” exclusion and its exception will look when the claim lands.
This is the work of PFTN’s 4-Step Strategic Process. Strategic Discovery establishes which scopes a contractor self-performs and which it subcontracts — the fact pattern the exclusion turns on. Risk Assessment reads the CGL’s exclusions and endorsements against that reality, hunting the restrictive language before a claim does. Solution Design negotiates to preserve the subcontractor exception and completed-operations coverage, and aligns the subcontractor agreements that feed them. Ongoing Optimization re-reads the policy at every renewal, because the endorsement that changes the answer rarely changes the premium.
A contractor builds with discipline; the coverage behind the work deserves the same. Illuminating how the “your work” exclusion, its subcontractor exception, and the occurrence debate actually operate turns a defect claim from a balance-sheet event into a covered loss — decided long before the first crack appears.
— Ryan Mefford, President & Risk Advisor
Sources
- IRMI — Faulty Work and the CGL
- IRMI — Construction Defect Trend Produces Coverage-Restricting Endorsements
- IRMI — CGL Exclusions May Impact Coverage for Occurrences Involving Defective Work
- IRMI — The Evolution of CGL Coverage for Defective Construction in the Courts
- WTW — Insurance Marketplace Realities 2026: Construction
- IRMI — Best Laid Plans: How the Definition of Occurrence in CGL Cases Continues To Change