Completed Operations Insurance: Definition & Meaning
The insurance coverage for completed operations liability is often included in liability policies. This contractor insurance covers damages resulting from your work after the job gets completed. Construction companies are the most common users of this coverage.
You don’t need to be present at the client’s location to activate operations coverage. This is in contrast to standard general liability coverage. Contractors need to have a completed operations liability insurance policy. Why? Because contractors are more likely to cause harm by their work as they do more jobs.
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- Operations insurance is a type of insurance that covers your business from certain natural or man-made hazards. Hazards that could cause damage to your business or its assets.
- This type of operating insurance is different from business insurance.
- It covers certain risks that are not covered by business insurance plans.
What Is Completed Operations Insurance?
The completed operations insurance coverage is tightly integrated into the general policy. It is also subject to many of the same exclusions and coverage triggers. Completed operations insurance differs from other insurance. It only covers liability for work that you have completed. Not work that is still in progress.
If you need other coverage, you will need separate product liability insurance. It’s best to speak with insurance agents to see which policy best fits your needs.
What Does It Cover?
Completed operations insurance covers the following in most cases:
- Your faulty work can cause damage to other property
- Your faulty work has caused a fatal injury to someone
- For a lawsuit that involves property damage or bodily injuries, you will need to pay legal bills
Your defense costs are not usually unlimited. But the amount of settlements or judgments that the insurance company requires has limits. These are to the aggregate per occurrence and completed operations listed on the declarations pages.
Moreover, completed operations coverage covers liability for damages to other properties. But it doesn’t replace the work that caused the damage. If your electrical work was defective, the coverage would cover the damages that resulted from the fire but not the work itself. You won’t get paid to complete the work again.
This exclusion raises concerns for subcontractors who use subcontracted labor. Is it your work or the subcontractor? Is the policy liable for subcontractor damage if one contractor performs faulty work?
This is how the policy would look from the perspective of a general contractor. These are the covered claims:
- Property damage to subcontractors’ work when it results from your work
- Property damage caused by subcontractor work
- Property damage to subcontractor’s works when it results from another subcontractor’s action
- Property damage to your work caused by subcontractors
Although it may seem like a small detail, this could mean millions of dollars for a large project. If a worker suffers bodily injury, they’re going to want compensation for damage.
But such damages can branch out into other avenues of business, as well. For example, if a customer gets injured by a faulty product or defective product. Although there are some liability limits in place, a product that causes bodily injury could warrant a lawsuit.
And back to examples of contractors getting injured, these are equally important. That’s why it’s important to have an insured contractor on the job. Most sustained injuries will have coverage to protect the business.
Other Important Considerations
Even if your business is sold or you decide to retire, your liabilities still exist for your projects. Positive news: With each passing year, the likelihood of anything happening decreases.
It is a good idea to purchase a policy that covers the operations coverage while you are winding down the business. If a project fails, this policy will be greatly appreciated.
General contractors and project owners may require that you carry completed operations insurance. You might need it for a specified number of years following the project’s completion. It is important that you know the coverages you are legally obligated to buy.
If you are certain that you will need this coverage for five years, then you may implement quality control. Risk management measures also apply to reduce the number of claims you submit. You still need to buy the coverage, even if your claims cause a substantial premium increase.
Operating a business is risky. Accidents can strike anytime and cause damage to your business. To protect themselves financially in the event of such incidents, most businesses have a business insurance plan.
Frequently Asked Questions about Completed Operations Insurance
Does CGL cover completed operations?
The insurance coverage for completed operations liability is often included. This applies to most commercial general liability policies. It covers damages resulting from your work after you have completed a job.
What is covered under products-completed operations aggregate?
The product-completed operations total is your general insurance or owner’s policy. This protects you against financial damages if your product injures persons or property.
What does products-completed operations hazard mean?
This covers liability for products and business operations. These are ones conducted outside of the insured’s premises.
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