How do ISO CG 22 94 and Subcontractor Pay-if-Paid clauses combine to bankrupt contractors?

ISO Endorsement CG 22 94 deletes the subcontractor exception to the "Damage to Your Work" exclusion (leaving GCs uninsured for completed-operations property damage caused by subs), while a "Pay-if-Paid" condition precedent shifts 100% of Owner insolvency and dispute credit risk onto the Subcontractor.

How does striking CG 21 39 / CG 22 94 and capping retainage at 5% protect contractors?

Restoring unamended ISO CG 00 01 completed-operations coverage with CG 20 10 + CG 20 37 endorsements prevents uninsured back-charges, while converting Pay-if-Paid to a 45-day Pay-when-Paid outside date and 5% retainage cap unlocks half of withheld working capital.

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Subcontractor Pay-if-Paid, 10% Retainage & ISO CG 22 94 Exposure Calculator

Binding a Commercial GL policy with ISO CG 21 39 / CG 22 94 exclusions or signing a “condition precedent Subcontractor Pay-if-Paid” agreement with 10% retainage exposes your company to massive uninsured claims and working-capital lockups. Model your exposure below—then scan your GL binder or subcontract PDF free.

Subcontract / Agency SOW Inputs

Total Subcontract / Agency SOW Value ($)$180,000

Retainage Withheld by GC / Prime Agency (%)10% ($18,000 locked)

Owner / GC Payment Delay Window (Days)120 Days Float

Pay-if-Paid Default Loss

$186,510

100% unpaid if Owner defaults + $6,510 float

Working Capital Unlocked

+$15,510

5% retainage cap + 45-day outside payment date

Subcontract Protected

$180,000

Converted from Condition Precedent to Pay-When-Paid

Copy-Paste 45-Day Pay-When-Paid & 5% Retainage Cap Rider

“TIMING OF PAYMENT (PAY-WHEN-PAID OUTSIDE DATE) & 5% RETAINAGE CAP: Receipt of payment by Contractor from Owner shall govern the timing of payment only and shall NOT be a condition precedent to Contractor's obligation to pay Subcontractor. In all events, undisputed progress invoices shall be paid no later than forty-five (45) calendar days after invoice submission. Retainage shall not exceed five percent (5%) and shall be reduced to 2.5% upon 50% completion of Subcontractor's scope of work.”

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COMMERCIAL GENERAL LIABILITY (CGL) CONSTRUCTION BINDER & ENDORSEMENT SCHEDULE

THIS COMMERCIAL GENERAL LIABILITY BINDER ("Policy") is issued by VANGUARD SPECIALTY E&S INSURANCE CO. ("Carrier") to APEX BUILDERS & MECHANICAL CONTRACTORS INC. ("Named Insured") with limits of $1,000,000 Each Occurrence / $2,000,000 General Aggregate / $2,000,000 Products-Completed Operations Aggregate.

SECTION 1. ENDORSEMENT CG 21 39 — CONTRACTUAL LIABILITY LIMITATION (DELETION OF INSURED CONTRACT).
This Policy is modified by ISO Endorsement CG 21 39. The definition of "Insured Contract" in Section V (Definitions) of Commercial General Liability Coverage Form CG 00 01 is amended by deleting Paragraph f. in its entirety. Consequently, this Policy provides ZERO coverage for any tort liability assumed by Named Insured in any construction subcontract, Master Services Agreement (MSA), AIA contract, or hold-harmless indemnity agreement with an Owner or General Contractor.

SECTION 2. ENDORSEMENT CG 22 94 — EXCLUSION: DAMAGE TO WORK PERFORMED BY SUBCONTRACTORS ON YOUR BEHALF.
This Policy is modified by ISO Endorsement CG 22 94. Exclusion l. (Damage to Your Work) of Section I — Coverage A (Bodily Injury and Property Damage Liability) is replaced to delete the subcontractor exception. This insurance does not apply to "Property Damage" to "your work" arising out of it or any part of it and included in the "products-completed operations hazard," even if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.

SECTION 3. ADDITIONAL INSURED SCHEDULE — ONGOING OPERATIONS ONLY (OMISSION OF CG 20 37 COMPLETED OPERATIONS).
Blanket Additional Insured coverage for upstream General Contractors and Project Owners is provided exclusively under Endorsement CG 20 10 (Ongoing Operations). Coverage for Additional Insureds terminates the moment Named Insured's active operations at the jobsite cease. Endorsement CG 20 37 (Additional Insured — Owners, Lessees or Contractors — Completed Operations) is NOT attached, leaving Named Insured in breach of all post-completion subcontract insurance requirements.

SECTION 4. MANUSCRIPT ACTION-OVER / EMPLOYEE BODILY INJURY & LABOR LAW EXCLUSION (ENDT. GL-904).
Notwithstanding anything to the contrary in the "Employer's Liability" exclusion, this Policy does not apply to any claim, suit, contractual indemnity demand, or third-party "Action-Over" impleader brought by an Owner, General Contractor, or third party seeking contribution or indemnification for "Bodily Injury" to any employee, leased worker, temporary worker, or employee of any subcontractor of Named Insured (including any claim arising under New York Labor Law §§ 200, 240, or 241).

SECTION 5. MANUSCRIPT RESIDENTIAL, MULTI-FAMILY, MIXED-USE CONVERSION & SUBSIDENCE EXCLUSION (ENDT. GL-918).
This insurance does not apply to any "bodily injury," "property damage," or defense expense arising out of construction, remodeling, repair, or subcontracting work on any tract housing, condominium, townhouse, apartment building, dormitory, or mixed-use building containing residential units, or any structure converted to residential use at any time. Furthermore, all claims arising out of earth movement, soil settlement, underpinning, shoring, or subsidence are excluded in their entirety.

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