Everything You Need to Know About Completed Operations Insurance

Building contractors face many risks when undertaking a complex project. These construction professionals utilize a range of insurance coverages to protect financial assets from loss and to reduce liability exposures. The foundation of risk management for contractors is general liability insurance, and within that coverage exists a unique solution known as products and completed operations insurance. In this guide, we will explore completed operations insurance, giving you the details you need to help your contractor clients protect their business assets.

General Liability Insurance: The Backbone of Risk Management

Contractors have relied on general liability insurance for many years. In fact, this is perhaps the most common form of insurance protection for the construction industry. General liability policies are designed to provide coverage for bodily injuries or property damage associated with construction projects. These policies also offer protection against products, operations, and personal or advertising injury.

The four main coverages in a typical general liability (GLI) policy are:

Premises/Ongoing Operations – coverage for bodily injury or property damage on a work site associated with a construction project while business operations are in progress.

Personal and Advertising Injury – coverage to protect insureds from claims against them, including libel, false arrest, slander, and other liabilities other than bodily injury.

Medical Expenses – covers reimbursements to others for medical treatment costs if the insured is found liable for bodily injuries.

Products/Completed Operations Insurance – coverage for bodily injury or property damage occurring as a result of the insured’s products or completed work.

It is this last coverage area that bears further scrutiny, as this insurance is often misunderstood within the construction industry.

Completed Operations Insurance 101

The critical difference between general liability insurance and its premises and completed operations coverages is when bodily injury or property damage occurs. Completed operations coverage is designed to protect against liabilities for injuries or property damage to third parties after work is done on a construction project.

To illustrate how completed operation insurance works, an example is a contractor who installs an observation deck on a structure. Months after the project is completed, the deck collapses, causing injuries to building guests and extensive damage to the roof of the building the deck was installed on. The contractor is found liable for improperly installing supports for the observation deck. Completed operations insurance provides financial protection against the expenses this incident causes – well after the project has been completed.

Limits to Completed Operations Insurance Coverage

There are four areas to consider when evaluating completed operations insurance coverages – specifically, the limits to coverages under these policies. First, completed operations insurance only applies to work that has been finished and signed off on by the building owner. It should not be construed as coverage for ongoing work; premises liability or ongoing operations coverage in the GLI policy protect against claims before the project is done.

Second, these policies only provide coverage for the losses associated with property damage or bodily injury to third parties. They do not cover the costs associated with repairs or replacement of structures.

Third, this insurance typically does not cover instances where a product recall takes place. Going back to the observation deck example, the structure does not collapse, but support struts used in the construction are defective and are recalled by the manufacturer. The expenses associated with removal of these recalled products and their replacement is not covered by a completed operations insurance policy.

Finally, completed operations insurance is time-limited. Each policy has specific language regarding the policy period. If an incident occurs during the period, it will be covered. If an incident occurs outside the policy period, bodily injury and property damage claims will not be covered.

About Coastal Oak Insurance Services

At Coastal Oak Insurance Services, we strive to protect your personal and business assets from coast to coast. When you work with us, you’re family. Contact us today at (949) 519-3738 to learn more about how we can provide you with comprehensive and tailored insurance coverage.