Understanding Products and Completed Operations Coverage

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Every business, regardless of size and industry, is always at risk for liabilities resulting from day to day operations. Luckily, there’s an insurance policy specifically made for commercial establishments to protect them against legal claims that may lead to financial troubles and damaged reputation.

Commercial General Liability or CGL is by far the most versatile and common type of insurance available for small to midsize businesses. And under the general liability policy comes products completed operations coverage which aims to safeguard businesses against bodily injury and property damage claims associated with manufacturing or selling tangible products, as well as providing goods or services to customers.

Products Liability If your business specializes in manufacturing or selling products, your company might be at risk for product liability claims. Someone can file a legal case against you stating that the products you’ve made or sold are defective, thus causing an injury to third party or damage to property.

Completed Operations If on the other hand, you are a contractor or service provider, your business might be vulnerable to a completed operations claim. Clients may file a lawsuit against you alleging that the service or work you’ve completed is the cause of bodily injury and property damage.

What is Products and Completed Operations Coverage?

Products and Completed Operations Coverage is a section found in every Commercial General Liability Insurance policy. Still, many do not understand its significance. This insurance element is one that goes the extra mile in protecting contractors. By offering protection for claims of bodily injury and/or property damage resulting from a contractor's completed work, Products and Completed Operations Insurance can provide additional support and coverage to independent contractors. The reality of being a sole proprietor or owner of a business is that there are many liabilities attached to providing products and services to the general public.

What does Products and Completed Operations Coverage Protect Against?

Bodily injury and property damage claims that arise from your products or completed services are usually covered under a general liability policy unless specifically excluded through an endorsement. However, CGL does not cover every claim or legal lawsuit involving your products and completed operations. For a claim to be covered, all three criteria must be satisfied:

  1. The claim must assert bodily injury or property damage. Without bodily injury or property damage, the claim is outside of this insuring agreement.
  2. The claimant must prove that the accused bodily injury or property damage came from your products or completed work. There must be a clear connection between the two – your products or services, as well as the alleged injury or damage.
  3. The property damage or injury must happen away from your place of business, and it must occur when the product is no longer in your possession, or after the work has been completed.

Also called Coverage A, products and completed operations coverage only applies when a product leaves your premises or when a service has been completed, and coverage doesn’t extend to you or to your employees.

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Does my business need to purchase a separate policy?

Products and Completed Operations can apply to a variety of situations within the realm of bodily injury or property damage resulting from professional services. In many cases, services or products may prove to be hazardous to a client or individual after the initial commercial exchange. These coverages can apply to anyone from a manufacturer of medicines to a construction contractor. Products and Completed Operations Insurance is an important means of ensuring that a third party can assume the financial, liability-related risks tied to a contractor’s completed work.

Products and completed operations coverage is most often automatically included on your Commercial General Liability policy. All claims from your products or completed work are subject to the occurrence limit and the aggregate limit declared within your policy.

The occurrence limit applies if the accident or damage occurs during the policy period. The aggregate limit is the maximum amount that an insurer will pay under your policy to cover damages or settlement claims resulting from your defective products or faulty services. You can think of the aggregate limit as the total of all occurrences. Once the aggregate limit is reached, no coverage is extended for additional occurrences.

There are notable exclusions under your CGL policy that might require that you purchase add-ons to your insurance policy to provide coverage for other types of risks.

  1. Damage to your product – this policy will not cover claims arising from your products, that caused a damage to your own product. For a claim to be covered, it must involve damage to another's property.
  2. Damage to your work – property damage to your completed work is also not covered by this policy, meaning if you built a structure and also later damaged that structure, it will not be covered by products completed operations.
  3. Damage to impaired property – this is the most confusing exclusion but in simple terms, if you caused damage to property making it impaired or unusable, the insurance company will not cover the losses even if your work that was incorporated was proven to be inadequate or defective.

Examples of coverage

Product Liability You own the business “Fashionable Seats and Chairs”, a company that specializes in ergonomic and stylish furniture. One afternoon, a customer named Joe purchased a chair from your shop and happily went home. One week later, he sued you for bodily injury alleging that while sitting on the chair he purchased, it unexpectedly tipped backward causing him to fall and sustain severe head injury. Joe wants $30,000 for the damages incurred. You didn’t make the chair, but product liability coverage applies for the items you sell.

Completed Operations You are the owner of “Monroe Concrete” and provide concrete work for contractors as well as commercial building owners. Six months ago, Avenue Properties hired you to construct an elevated walkway to connect one of their condominium buildings to the newly renovated shopping plaza. Three months after you completed the project, the pathway collapsed, causing damage to the building’s decorative patio and expensive antique collections. Avenue Properties is seeking $150,000 in total for all the damages. Completed operations coverage applies to the work you’ve completed, the elevated walkway.

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Running a business is challenging enough without having to worry about lawsuits, employee injuries or property damage. Having the right insurance gives you the peace of mind to focus on what matters - running your business.

The coverage you need depends on the type of business you run. A restaurant owner needs to be covered against customers possibly getting food poisoning while an accountant needs to be covered against calculation errors. CoverWallet's intelligent assessment system will identify the insurance you need based on your specific business, get you a policy that fits your budget, and do it all in less time than you think.

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