XCU Exclusion — Specified Operations Excepted

Introduction

Certain risks—such as excavation, tunneling, subway construction, landscaping, and demolition—carry with them exposures that present unique problems for an insurer. Among these are risks that relate to blasting and other explosion, collapse, or structural injury to property from various operations, and damage to certain underground property. The CGL form automatically provides coverage for the explosion, collapse, and underground property damage hazards. This is not necessarily the type of coverage that the CGL was designed to cover for the typical insured and thus was initially excluded; nonetheless the coverage is now included and as such this means that the burden of policing such exposures falls upon the insurer. If a potential insured engages in operations that might even remotely include the hazards of explosion, collapse, or underground property damage, the insurer must recognize the exposure and underwrite the risk accordingly. To do so, it is necessary to obtain more information than what is required on the standard ACORD application form. Whenever a construction risk is considered, the underwriter should require answers to additional questions, such as the following:

 1. Do you ever use explosives in your business?

a. If so, describe in detail.

b. If so, detail the number of times in the last twenty-four months you used explosives.

c. If so, detail the percentage of your earnings you attribute to use of explosives.

2. Do you ever demolish structures of any kind?

a. If so, describe your demolition activities in detail.

b. If so, detail the number of times you were involved in demolition in the last twenty-four months.

c. If so, detail the percentage of your earnings you attribute to demolition activities.

3. Do you do any type of underground work?

a. If so, describe your underground activities in detail.

b. If so, detail the number of times you were involved in underground activities in the last twenty-four months.

c. If so, detail the percentage of your earnings you attribute to underground activities.

4. Do you ever treat the earth in any manner?

a. If so, describe your earth treatment activities in detail.

b. If so, detail the number of times you were involved in earth treatment in the last twenty-four months.

c. If so, detail the percentage of your earnings you attribute to earth treatment activities.

5. Do you ever do any type of earth excavation?

a. If so, describe your excavation activities in detail.

b. If so, detail the number of times you were involved in excavation in the last twenty-four months.

c. If so, detail the percentage of your earnings you attribute to excavation activities.

 There are currently two standard endorsements that can be used by insurers to exclude explosion, collapse, and underground property damage hazards. CG 21 42 is an exclusion endorsement for specified operations and CG 21 43 is a general exclusion endorsement that allows specified operations to be covered. As a point of reference in the following discussion, the definitions these two forms add to the CGL are as follows:

 1. "Collapse hazard" includes "structural property damage" and any resulting "property damage" to any other property at any time.

2. "Explosion hazard" includes "property damage" arising out of blasting or explosion. The "explosion hazard" does not include "property damage" arising out of the explosion of air or steam vessels, piping under pressure, prime movers, machinery or power transmitting equipment.

3. "Structural property damage" means the collapse of or structural injury to any building or structure due to:

1. Grading of land, excavating, borrowing, filling, back-filling, tunneling, pile driving, cofferdam work or caisson work; or
2. Moving, shoring, underpinning, raising or demolition of any building or structure or removal or rebuilding of any structural support of that building or structure.

4. "Underground property damage hazard" includes "underground property  damage" and any resulting "property damage" to any other property at any time.

5. "Underground property damage" means "property damage" to wires, conduits, pipes, mains, sewers, tanks, tunnels, any similar property, and any apparatus used with them beneath the surface of the ground or water, caused by and occurring during the use of mechanical equipment for the purpose of grading land, paving, excavating, drilling, borrowing, filling, back-filling or pile driving.

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XCU Exclusion — Specified Operations

CG 21 42 can be used when an  insured may only occasionally engage in operations that could be included in the explosion, collapse, or underground property hazard category. For example, the activity of landscape gardening may once in a while include the collapse or underground property damage hazard, particularly with many new office buildings adding park-like settings to their grounds that incorporate manmade ponds. Irrigation or drainage system construction may call for the use of explosives in certain situations. If the insurer wants to insure the general operations of a company, but shy away from certain activities, then CG 21 42 can be endorsed onto the CGL form to exclude the scheduled hazard.

 The three hazards are defined by the endorsement as follows: