Property Damage
Physical injury to or destruction of tangible property, including loss of use of that property, as defined in the CGL insuring agreement.
What It Is
Property damage, as defined in the standard ISO CGL policy, has two parts: (a) physical injury to tangible property, including all resulting loss of use of that property, and (b) loss of use of tangible property that is not physically injured. Both parts are covered under Coverage A of the CGL policy.
The first part is straightforward — if the insured's operations damage someone else's property, the cost to repair or replace that property is covered. The second part is broader and more nuanced — it covers situations where the insured's actions prevent someone from using their property even though the property itself is not physically damaged. For example, if a contractor blocks access to a business, causing lost revenue, the loss-of-use component may respond.
Property damage does not include damage to the insured's own work or product (which is addressed by exclusions in the base form), purely economic losses unrelated to tangible property, or damage to intangible property like data or intellectual property.
Why It Matters for Brokers
The property damage definition is critical for construction and contracting accounts where third-party property damage is a primary exposure. Brokers must understand both the physical damage and loss-of-use components. The loss-of-use element significantly expands the potential claim value — a contractor who damages a retail tenant's storefront may face not only repair costs but also weeks of lost business income as property damage under the CGL. Brokers should factor this into limit adequacy analysis.
Real-World Example
A plumbing contractor working in a multi-tenant office building accidentally severs a water main, flooding the entire second floor. The physical repair costs to the building are $180,000 (property damage part a). Additionally, three tenants on the second floor cannot occupy their spaces for 12 days while remediation occurs, resulting in $95,000 in business interruption losses (property damage part b — loss of use). The contractor's CGL policy covers both components under the $1M per occurrence limit, for a total claim of $275,000.
Common Mistakes
- 1Not accounting for the loss-of-use component of property damage claims when advising clients on appropriate per-occurrence limits.
- 2Assuming that damage to the insured's own completed work is covered as property damage when the CGL contains a specific exclusion (Exclusion l) for this.
- 3Confusing CGL property damage coverage with commercial property insurance — CGL covers liability for damage to others' property, not the insured's own property.
How brokerageaudit.com Handles This
Policy Checker verifies the property damage definition and flags any endorsements that modify or restrict it. It identifies exclusions that affect property damage coverage, such as the care, custody, or control exclusion and the damage to your work exclusion. Submission Intake includes property damage exposure assessment as part of the standard submission workflow for contracting and manufacturing accounts.