How Long Does Completed Operations Coverage Last?

Businesses performing work or providing products face inherent risks that extend beyond project completion. Even after a service is rendered or a product is delivered, liabilities can emerge, leading to claims of bodily injury or property damage. Understanding how long a business remains protected against such claims is a critical aspect of effective risk management. This protection is primarily offered through completed operations coverage, a type of liability insurance designed to address these post-completion exposures.

What is Completed Operations Coverage

Completed operations coverage provides protection for businesses against claims of bodily injury or property damage arising from completed work or products. This coverage activates once a project is finished and handed over to the customer, or after a product leaves the business’s possession. It is a crucial component for contractors, manufacturers, and service providers like plumbers or electricians. For instance, if a faulty installation by a contractor causes water damage months after the job is done, completed operations coverage would typically respond.

This type of coverage is usually integrated into a Commercial General Liability (CGL) policy, a common insurance for many businesses. It specifically addresses liabilities that occur away from the business premises and result from completed work or products. The coverage typically pays for damages to others’ property, bodily injury, and associated legal defense costs. However, it generally does not cover the cost to repair or replace the faulty work or product itself, but rather the resulting damage to other property.

Understanding Policy Duration

The effective duration of completed operations coverage depends on the type of insurance policy a business holds: occurrence-based or claims-made. These policy structures dictate when an incident must happen and when a claim must be reported for coverage to apply. Understanding these distinctions is fundamental to knowing how long protection lasts for completed work or products.

Occurrence-based policies cover incidents that occur during the policy period, regardless of when the claim is reported to the insurer. If an event causing bodily injury or property damage happens while an occurrence policy is active, coverage responds even if the claim is filed years later, after the policy has expired. Commercial General Liability policies, which typically include completed operations coverage, are most often written on an occurrence basis. This structure provides a “long tail” of coverage, offering enduring protection for past work.

In contrast, claims-made policies provide coverage only if the claim is first made against the insured and reported to the insurer during the active policy period or an extended reporting period. The incident causing the claim must also have occurred on or after a specified retroactive date. If a claims-made policy expires and no extended reporting period is purchased, coverage for claims reported after expiration will cease, even if the incident occurred while the policy was in force. These policies are more common for professional liability insurance rather than general liability.

For claims-made policies, an Extended Reporting Period (ERP), also known as “tail coverage,” can be purchased to extend the time frame for reporting claims. An ERP does not provide new coverage for new incidents, but rather extends the window during which claims can be reported for events that occurred during the original policy’s term. These extensions can be purchased for various durations, such as one, three, or five years, or even indefinitely, typically for an additional premium. This mechanism is crucial for businesses with claims-made policies to ensure continued protection after the policy’s expiration, especially considering that claims related to completed work or products can surface long after the work is done.

Ensuring Continuous Protection

Maintaining continuous and adequate completed operations coverage requires proactive management by businesses. Simply having a policy at the time a project is finished is often not enough, as liabilities can emerge years into the future. Businesses must regularly review their insurance arrangements to ensure they align with ongoing and potential future risks.

Timely policy renewals are fundamental to ensuring uninterrupted coverage for completed operations. Businesses should review their policy terms annually to confirm that coverage limits and conditions remain appropriate for their operations. This annual review assesses changes in business activities or exposure that might necessitate policy adjustments.

Changes in business operations, ownership, or cessation of business activities can significantly impact existing coverage. It is important to inform the insurer about such changes, as they may affect policy validity or scope. For instance, if a business ceases operations, maintaining some form of completed operations coverage for several years afterward is often advisable, as the risk of claims does not disappear with the business’s closure.

Understanding the specific policy terms, including limits, exclusions, and definitions related to completed operations, is also essential. Businesses should pay close attention to any clauses that might affect the longevity of their coverage. Additionally, maintaining thorough documentation of completed projects, client agreements, and insurance policy documents can be invaluable in the event a claim arises in the future. Some contracts may require businesses to maintain completed operations coverage for a specified period, often one to five years, following project completion.