Products and Completed Operations Coverage provides financial protection in the face of lawsuits claiming bodily injury or property damage that come as a result of work that you have completed or a product you have manufactured, sold, or distributed. This coverage is typically included within commercial general liability insurance and helps protect businesses from liability once their work is done.
Examples of products that are of higher liability risk include:
Bodily injury: Your business manufactures toys for children, and one of your latest gadgets, a plastic rocket ship with electric blast-off capabilities, is reported to have caused third-degree burns to an 11-year-old boy in Oklahoma. His father sues your company for damages. You receive coverage for the bodily injury lawsuit because you have Products and Completed Operations Coverage.
Property damage: Your company designs and manufactures windshield wipers for high-end sports cars. Customers are complaining that one particular model of wiper blade you sell has been causing scratches on car windshields. Eventually, you are sued by a few customers who claim property damage to their cars.
Products and Completed Operations Coverage covers damages as a result of property damage or bodily injury that are brought on by your products or completed operations.
It’s important to note that Products and Completed Operations Coverage is third-party insurance, meaning it covers claims brought on by third parties. This would not include anyone who is part of your business or who is an employee.
The following cases are commonly excluded from Products and Completed Operations Coverage:
You will not receive coverage if someone sues you because a product or service you sold them was defective but did not result in any third-party injury or damage.
Example:
You own a furniture store, and a customer sues you because a chair you sold them broke after one use. Products and Completed Operations Coverage would not provide coverage as there was no bodily injury or property damage claimed by the customer. Another chair you sold to a different customer ended up breaking as well, causing the customer to sprain her ankle.
Any bodily injury or property damage that occurs while you are still in the process of completing your work is not covered by Products and Completed Operations Coverage.
Example:
Your HVAC company is hired to install a new air conditioning system at a local office building. While your team is working on installing new ducting, an employee drops a large vent at ceiling height, damaging the office flooring. Products and Completed Operations Coverage would not apply because the work had not been completed. However, this damage would be covered by the property damage portion of your CGL policy.
Any damage to your own product or work is not covered by Products and Completed Operations Coverage. Your insurer will only cover you for lawsuits related to damage that your work or product inflicted on a third party.
Example:
Your company recently installed a hardwood deck at a residential property. Five months after installation, the deck collapses due to a faulty support beam. Products and Completed Operations Coverage would not apply because there was no bodily injury or property damage, aside from the damage to the deck itself.
If your product is used as a component in another item, and removing your product from the item would restore its functionality, then the damage is not covered.
Example:
You manufacture electronic circuit boards for smart doorbells. A group of customers sues your firm because your circuit boards have proven faulty, and their doorbells do not work with your defective boards. The customers claim property damage because the doorbells are not functional. However, only your circuit board is defective and the doorbells themselves would work if the boards were replaced. Moreover, no part of the doorbell was damaged due to your defective circuit boards. In this scenario, Products and Completed Operations Coverage would not apply.
Accidents that happen on your business property are not eligible for this type of coverage. The damage or injury must occur off your premises to receive Products and Completed Operations Coverage. However, the bodily injury and property damage portion of your CGL policy would typically cover damage that occurs on your business premises.
Products and Completed Operations Coverage does not cover any of the costs of recalling your product, i.e., removing your product from the market and rehabilitating your company’s reputation. Product recall insurance can help you in this scenario.
Any damage or injury that is inflicted that was expected or intended is not covered by Products and Completed Operations Coverage.
