Completed Operations Coverage is a type of liability insurance that protects businesses from claims or lawsuits arising after the completion of a service or product. This coverage is crucial for businesses where the work or product could potentially cause damage or injury after the project is finished.
Definition
Completed Operations Coverage refers to an insurance policy provision that covers liability for claims due to bodily injury or property damage caused by the insured’s work after the completion of the work. This type of coverage is typically included within a Commercial General Liability (CGL) policy.
Key Components
Bodily Injury
Bodily injury coverage includes medical costs, pain and suffering, and other related expenses if someone is injured due to the insured’s completed work.
Property Damage
Property damage coverage includes the costs to repair or replace property that was damaged due to the insured’s completed operations.
Coverage Trigger
The coverage is triggered when the bodily injury or property damage takes place after the completion of the insured’s work, provided the work was completed during the policy period.
Types of Completed Operations Coverage
Standard Completed Operations
This is included in most CGL policies and covers typical claims arising from completed work or products.
Extended Completed Operations
This extends the coverage period beyond the policy term, offering protection for claims made several years after the work was completed.
Special Considerations
Industry Specifics
Certain industries, such as construction, manufacturing, and contracting, have higher risks and typically require more comprehensive completed operations coverage.
Policy Limits
It is important to review the policy limits to ensure they are sufficient to cover potential claims. Limits state the maximum amount the insurer will pay for a covered claim.
Exclusions
Policies often have specific exclusions, such as wear and tear or intentional damage. It’s essential to carefully review these exclusions to understand what is and isn’t covered.
Examples and Case Studies
Example 1: Construction
A construction company builds a house, and two years after the completion, a defect in the electrical system causes a fire. Completed Operations Coverage would cover the legal and repair costs associated with the claim.
Example 2: Product Manufacturing
A manufacturer produces a batch of kitchen appliances. One year after the sale, a defect in one of the appliances causes property damage. The insurance would cover the claims related to this incident.
Historical Context
Completed Operations Coverage became more defined with the rise of industrialization and complex construction projects in the 20th century. The increasing size and scope of projects led to greater potential liability risks post-completion, necessitating more specialized insurance solutions.
Applicability
This coverage is relevant to any business involved in completing projects or delivering products that have a risk of causing damage or injury post-completion.
Comparison with Other Liability Coverages
- General Liability Insurance: Covers claims while the work is ongoing.
- Product Liability Insurance: Specifically for claims related to product defects.
- Professional Liability Insurance: Covers mistakes or negligence in professional services provided.
Related Terms
- Commercial General Liability (CGL): A broad insurance policy covering various general liability claims.
- Product Liability: Coverage for claims due to defective products.
- Contractor’s Liability: Coverage specific to construction and contracting businesses.
FAQs
Q1: What is the difference between Completed Operations Coverage and Product Liability Insurance?
Q2: Can Completed Operations Coverage be added to any insurance policy?
Q3: Is Completed Operations Coverage mandatory?
References
- “Understanding Completed Operations Coverage,” Insurance Information Institute.
- “Commercial General Liability Insurance,” National Association of Insurance Commissioners.
- “Risk Management in Construction Projects,” Journal of Construction Engineering.
Summary
Completed Operations Coverage is a vital insurance provision for businesses handling projects or products where potential liability might arise post-completion. This coverage safeguards the insured against financial loss from legal claims, providing peace of mind and financial stability for businesses across various industries.
