Completed Operations – Liability After Work Is Finished
Imagine working on a major construction project, only to be hit with a lawsuit months after the project is completed because of property damage or bodily injury. This is a real risk that contractors face, and it’s where completed operations coverage can provide invaluable protection.
TL;DR
- Completed operations refer to the liability insurance that provides coverage for bodily injury or property damage which occurs after a contractor has completed work but is due to that work.
- This is crucial for day-to-day agency work as it helps businesses manage their operation’s risk exposure after service/product completion.
- A common pitfall is assuming that General Liability Insurance covers completed operations fully, which may not always be the case.
- A quick win for agencies is to ensure all construction or contractor clients understand the importance of, and ensure they have sufficient completed operations insurance coverage
What Is Completed Operations in Insurance?
When you hear the term “completed operations”, it refers to a component of a commercial general liability policy designed to cover claims arising from completed work. Suppose after an electrical contractor finished their work, a fire occurred due to faulty wiring, leading to property damage. The completed operations coverage is meant to provide protection in such instances.
In insurance jargon, completed operations coverage is found within a CGL policy, typically within the product-completed operations hazard coverage section. It protects your business if someone files a claim or lawsuit against you for property damage or bodily injury occurring after a project has been completed.
Key Related Terms to Know
- General Liability Insurance – Coverage that can protect business owners and contractors from a variety of claims including bodily injury, property damage, personal injury, and others that may arise from business operations.
- Umbrella Insurance – Extra liability coverage that goes beyond the limits of the insured’s home, auto, or watercraft insurance, providing an additional layer of security to those who are at risk for being sued for damages.
- Indemnity Insurance – A compensation for causing loss or damage, or a commitment to compensation if loss or damage occurs.
- Statute of Repose – A state law imposing a final deadline by which a lawsuit must be filed.
- Construction Industry – An industry that involves planning, designing, and constructing buildings.
- Residential Construction – Aspects of construction related to the building and selling of homes or dwelling places.
- Commercial General Liability (CGL) policy – A broad business insurance coverage form that covers business against liability claims for bodily injury and property damage and advertising injury.
Common Questions About Completed Operations
What Does Completed Operations Insurance Cover?
Completed operations insurance, which is a part of the operations insurance, covers lawsuits over property damage or injuries that happen after you have completed your work and left the job site. For example, if a contractor finishes installing a furnace which later causes a fire, the damage could be covered by their completed operations coverage.
How Does Ongoing Operations Affect Insurance?
Unlike completed operations coverage, ongoing operations coverage applies to work that’s still being done. If an electrician causes a fire while still working, that would fall under their ongoing operations coverage.
Are Products/completed operations included in the general aggregate?
Yes, products/completed operations aggregate is the maximum amount an insurance policy will pay out during the policy period for all damages sustained from your products or completed operations.
What is Completed Operations Aggregate?
The completed operations aggregate is the maximum amount an insurance company will pay to cover claims arising from injuries or damage that occur after a project is completed.
Completed Operations vs. General Liability Insurance
While they are closely related, completed operations and general liability insurance offer different types of protection. Here’s how they differ:
Comparison Area | Completed Operations | General Liability Insurance
|
Primary use case | Can cover damages or injuries that happen after a contractor has finished a job | Typically covers damages caused while work is still in progress |
Coverage / concept type | Covers any post-project damages or injuries linked to a contractor’s completed work | Provides broader insurance for bodily injury, property damage, personal injury and others |
Typical exclusions | Not applicable for certain professionals, like lawyers, doctors, and architects | Worker’s compensation, liquor liability, war, pollution, etc. |
Who is most affected by errors | Contractors and businesses that provide products or services | All types of businesses |
Common mistakes | Assuming coverage is automatic or thinking it’s covered under general liability | Getting minimal coverage or not understanding policy limitations |
Real Claim Examples Involving Completed Operations
Scenario 1: A commercial construction company built a parking garage. A month after completion, the top floor collapsed due to structural defects. As the collapse occurred after the project completed, the defect claim was covered under the completed operations liability insurance.
Scenario 2: An electrician completed work on a residential building. Six months later, a fire ignited due to a faulty wiring job done by the electrician, damaging part of the building. With completed operations coverage, the electrician’s CGL policy covered the cost of the damage as it was a result of the completed work.
Scenario 3: A subcontractor installed HVAC systems in several units of a newly constructed apartment building. After the project was completed and the units occupied, several tenants reported respiratory diseases due to poor air quality. Upon investigation, it was discovered that the HVAC systems were contaminated. The claim was covered under the subcontractor’s completed operations policy.
Limitations and Common Mistakes
- Completed operations does not cover faulty workmanship, only the consequential damage.
- It does not apply to damages or injuries that occur while the contracted work is ongoing.
- Assuming it’s automatically included in a CGL policy.
- Misunderstanding the policy’s limits and overall coverage.
- Insufficient liability limits or gaps in insurance coverage.
- Failing to include subcontractors under the policy’s protection.
How to Explain Completed Operations to Clients
For a Personal Lines client: “Completed operations insurance is an important part of your contractor’s liability insurance. It covers claims for injuries or damage that occur after the contractor has finished the work. Imagine if a plumber finished a job at your home but the pipe later burst causing water damage, this coverage could step in.”
For a Small Business owner: “Think of completed operations coverage as your safety net. After you’ve finished a job or project, it can protect you from claims resulting from your completed work. For instance, if you manufacture a part that fails after delivery causing an accident, your completed operations coverage could protect you from potential lawsuits.”
For a CFO or Risk Manager “In managing our company’s risks, comprehensive insurance coverage is essential. This includes completed operations insurance which can protect us from claims related to a product failure that might occur after it’s been delivered or a project we’ve completed.”