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.
- 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.
- 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.
- 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
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.
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.