What does the Impaired Property and Property Not Physically Injured exclusion cover or exclude?

• A. It excludes coverage for property that does not have its use, value, or function affected by the insured's work.
• B. It excludes coverage for property that cannot be physically damaged but has its use or value affected by the insured's work.
• C. It excludes coverage for property that is physically damaged.
• D. It excludes coverage for intangible losses only.

Answer: (B)

Impaired Property and Property Not Physically Injured excludes coverage for property that hasn’t been physically damaged but has its use, value, or function impaired because of the insured’s work. This means if your products or your work cause property to lose usability or value without any actual tearing, breaking, or other physical injury, that loss isn’t covered under this exclusion.

For example, if faulty workmanship renders a machine unusable at a customer site, the machine itself may not show physical damage, but its function is impaired. That scenario fits the exclusion because the property hasn’t been physically damaged, yet its use has been affected by your work.

This isn’t about property that is actually physically damaged (that would involve other coverage) and it isn’t only about intangible losses. The focus is on impairment without physical injury.