What Is Products and Completed Operations Coverage?

Products and Completed Operations (P&CO) insurance addresses specific risks that arise after a product has been sold or a service has been rendered. It is a component within commercial general liability (CGL) policies. This coverage protects businesses from claims stemming from their goods or work once they are no longer in direct control.

Defining Products and Completed Operations Coverage

Products and Completed Operations coverage is a specialized type of liability insurance integrated into a Commercial General Liability (CGL) policy. This coverage is for claims and lawsuits that emerge from injuries or damages caused by a business’s products or services. It distinctly covers incidents occurring after a product has left the insured’s possession or after work has been completed and put to its intended use.

The “Products” component addresses bodily injury or property damage arising from goods manufactured, sold, handled, distributed, or disposed of by the insured. This includes claims related to defectively manufactured or designed products, or a failure to provide adequate warnings or instructions for product use. For example, a manufacturer of children’s toys would rely on this part of the coverage if a toy caused harm after being sold.

The “Completed Operations” portion covers bodily injury and property damage claims that occur away from the insured’s premises and arise out of their work, after that work has been finished. This applies to businesses in contracting and service fields where incidents might arise long after a project is deemed complete. General liability covers ongoing operations, while P&CO steps in once the business has relinquished control.

Scope of Coverage

Products and Completed Operations insurance provides protection against claims involving bodily injury or property damage that arise from a business’s products or completed work. Bodily injury encompasses physical harm, sickness, disease, or death. Property damage refers to physical injury to tangible property, including the loss of use of that property. This coverage applies even if the incident occurs months or years after the product was sold or the service was completed.

This coverage applies to incidents that happen away from the insured’s premises, after the product or work is no longer under their direct control. The policy covers the legal defense costs associated with such claims, along with any settlement or judgment amounts, up to the limits specified in the policy. These limits address the potentially high costs of serious claims and legal proceedings.

Common Scenarios and Examples

Products and Completed Operations coverage applies when an incident occurs after a business has finished its direct involvement with a product or service. For example, a company manufactures and sells electric kettles. Months after purchase, a defect in the wiring of one kettle causes a short circuit, leading to a kitchen fire that damages the consumer’s countertop. The P&CO coverage would address the property damage claim arising from the faulty product.

For completed operations, a plumbing contractor installs new pipes in a client’s home. Weeks after the project is completed, a connection in the newly installed plumbing fails, resulting in water damage to the client’s basement and personal belongings. The P&CO coverage would respond to the property damage claim, as the incident occurred due to the completed work. If a construction company builds a deck that collapses months later due to a structural flaw, causing injury to guests, the P&CO policy would cover the resulting medical bills and legal defense costs.

Key Exclusions

Products and Completed Operations coverage has specific limitations and exclusions. A common exclusion is damage to the insured’s own work or product. The policy covers resulting damage to other property or bodily injury, but not the cost to repair or replace the faulty product or work itself. For example, if a contractor’s faulty wiring causes a fire, the policy would cover the fire damage to the building but not the cost to fix the wiring itself.

Contractual liability is another exclusion, unless specific conditions are met within the policy. This means the policy does not cover liabilities a business assumes under a contract that it would not otherwise have under general law. Product recalls are also excluded, meaning the costs associated with withdrawing a defective product from the market are not covered. P&CO does not cover professional liability, which addresses errors in advice or design, nor does it cover intentional acts or fraudulent conduct. Businesses might need separate policies, such as professional liability insurance, to cover these distinct risks.