What Is Products-Completed Operations Aggregate?
Understand Products-Completed Operations Aggregate: a key commercial general liability term defining your business's financial coverage for products and completed work.
“Products-Completed Operations Aggregate” is a specific component within a commercial general liability (CGL) insurance policy. Businesses require an understanding of this term to help ensure adequate protection against potential liabilities. This coverage addresses claims that arise from products a business manufactures, sells, or distributes, as well as from work it has completed.
Understanding Products-Completed Operations Coverage
Products-completed operations coverage addresses liability for bodily injury or property damage stemming from a business’s products or completed work. This coverage includes “Products Hazard” and “Completed Operations Hazard.” Both parts are designed to cover incidents that occur away from the insured’s premises and after the business has relinquished control of the product or completed its work.
The “Products Hazard” component covers bodily injury or property damage from goods or products manufactured, sold, handled, or distributed by the insured. This applies after physical possession of the products has been relinquished to others. For example, if a company sells a food product that causes illness after consumption, or a defective electronic device causes a fire in a customer’s home, these situations fall under products hazard coverage. This also includes claims related to mislabeling or inadequate warnings.
The “Completed Operations Hazard” covers bodily injury or property damage from a business’s completed work. This applies if the injury or damage occurs after the work has been finished and away from premises owned or rented by the insured. “Your work” includes operations performed by the insured, or on their behalf, and materials, parts, or equipment furnished in connection with such work. For instance, if a contractor completes a plumbing installation, and days later, a faulty connection causes significant water damage, this is a completed operations claim.
The injury or damage must occur after the product has left the insured’s control or after the work has been completed. This distinguishes products-completed operations coverage from general liability coverage for ongoing operations, which addresses incidents occurring while work is actively in progress or on the business premises.
The Significance of the Aggregate Limit
The “aggregate limit” represents the maximum amount the insurer will pay for all covered claims under a specific coverage part during the policy period. For products-completed operations coverage, this means the insurer will pay up to this maximum for all claims arising from products or completed work within a policy year, regardless of the number of individual occurrences. This limit acts as a ceiling on the total financial exposure for the insurer.
This aggregate limit differs from a “per occurrence” limit, which is the maximum amount an insurer will pay for a single incident or claim. While a per occurrence limit applies to each separate event, the aggregate limit applies to the sum of all payouts over the entire policy period. For example, a policy might have a $1 million per occurrence limit and a $2 million products-completed operations aggregate limit. If a business faces multiple smaller claims, each within the per occurrence limit, they collectively reduce the remaining aggregate limit.
Once the products-completed operations aggregate limit is reached, the policy will not pay for any further claims under that coverage part for the remainder of the policy period. This can leave a business with significant uncovered liabilities if additional claims arise after the limit has been exhausted. For instance, if a business has a $1 million aggregate limit and pays out $750,000 for initial claims, only $250,000 remains for any subsequent claims that year. If a new claim for $300,000 then occurs, the business would be responsible for the $50,000 exceeding the remaining limit.
Businesses may consider higher aggregate limits or commercial umbrella insurance policies. Umbrella policies can provide additional layers of liability protection above the limits of underlying policies, including the products-completed operations aggregate.
Common Claims and Exclusions
Products-completed operations coverage applies to scenarios where a business’s products or completed work cause harm. Common claims include a manufactured food product causing widespread illness, or a defective product like a faulty appliance causing property damage. In the service sector, a negligently installed window that later falls out and injures someone, or a plumbing repair that fails and causes extensive water damage, represent typical completed operations claims.
Despite the broad scope of products-completed operations coverage, certain types of claims are generally excluded from standard policies. A key exclusion is for damage to “your own product” or “your own work.” The policy will not cover the cost to repair or replace the defective product or the faulty work itself. This is because a liability policy is not a warranty or guarantee of the insured’s work quality.
Other common exclusions include:
Damage to “impaired property” or property not physically injured, referring to property unusable due to a defect in the insured’s product or work without actual physical damage.
Product recalls, as coverage does not pay for costs associated with recalling defective products.
Punitive damages, which are often excluded from CGL policies.
Contractual liability, unless the liability would have existed without the contract or falls under an “insured contract.”
Professional services errors, such as medical malpractice or engineering errors, which are usually addressed by separate professional liability insurance policies.