Property Damage

Overview

Property Damage is one of the two primary coverage triggers in Commercial General Liability (CGL) insurance, alongside bodily injury. It encompasses both physical damage to tangible property and the loss of use of property that may not have been physically harmed. Property damage claims are among the most frequent in commercial real estate and construction, making this coverage critical in COI compliance.

How It Works

Under the standard ISO CGL form (CG 00 01), property damage is defined as:

1. Physical injury to tangible property, including resulting loss of use of that property.
2. Loss of use of tangible property that is not physically injured.

This two-part definition is broader than many people realize. It covers not only direct physical damage (a contractor's equipment breaking a window) but also situations where property becomes unusable without physical harm (a contractor blocking access to a tenant's space, preventing business operations).

Property damage coverage under a CGL policy provides:

• Defense costs: The insurer defends the insured against property damage claims.
• Indemnity payments: The insurer pays for repair, replacement, or loss of use damages up to policy limits.

Property damage claims are subject to the same limit structure as bodily injury — the Each Occurrence Limit applies per incident, and the General Aggregate Limit caps total payments in a policy period.

Compliance Relevance

Property damage coverage has several important compliance dimensions:

• Your work exclusion: CGL policies typically exclude property damage to the insured's own completed work (the "your work" exclusion). This can be removed with a Products/Completed Operations endorsement, which is often contractually required.
• Care, custody, or control exclusion: Standard CGL policies exclude damage to property in the insured's care, custody, or control. Contractors working on or with a client's property may need additional coverage (such as installation floater or bailee's coverage).
• Damage to rented premises: A separate sublimit applies to damage the insured causes to premises rented to them — typically $100,000 to $300,000 unless increased by endorsement.
• Loss of use claims: These can be substantial. If a contractor's work renders a retail space unusable for weeks, the lost rental income constitutes property damage.

Example

An HVAC contractor accidentally severs a water main while installing ductwork in a commercial building. Water floods three floors, damaging flooring, drywall, and a tenant's inventory. The building owner and the affected tenant file property damage claims against the contractor. The contractor's CGL policy covers the physical damage to the building (Part 1 of the definition) and the tenant's lost business income during repairs (Part 2 — loss of use).