As a small business owner, did you know that you could be held liable for bodily injury or property damage resulting from your operations or products even if the injury or damage that occurs after your policy has expired? And if the damage happens after you have cancelled your insurance, you may not have coverage, even though it results from your operations you performed or products you sold during your policy term?
How can you protect yourself even if you go out of business, or don’t renew your general liability policy, for a claim related to work you previously completed comes your way?
There are two types of exposures: 1.) a premises/operations exposure and 2.) a products and completed operations exposure. The former includes risks associated within the physical location of your business or job site while your operations are taking place, whereas the latter exposure type focuses on the risks associated with your operations, products or services once they have been sold or completed. Premises/operations incidents usually occur during the policy period, so then typically the damage arising from them does, too. But when it comes to incidents that arise from your products or completed operations, an injury or damage could occur months after a policy expires; so then what?
Once a product has left your hands (or a project is completed), if something arises after that, it is considered a product and completed operations loss, exposing your small business to major liability. And as a small business owner, preparing yourself for these types of scenarios – or at least understanding what your policies cover and don’t cover – is critical.
After decades in the insurance industry, Terri Hitchcock, insurance industry attorney, was approached by an entrepreneur who wanted to make trustworthy short-term insurance for American small businesses a staple. Terri naturally had a lot of concerns about the long-term implications that many small business owners wouldn’t know to prepare for.
Most policies that small businesses purchase are known as “occurrence” policies. This means you must have a policy in force when the damage or injury occurs (irrespective of when the work was done).
Terri remembers her head spinning with hypotheticals, motivated to create something that she’d want if she were a small business owner. She recalls one specific conversation about what would happen when a contractor who completed building a beautiful patio deck, and 6 months after the policy was completed and the policy expired, a grandma falls and breaks her arm when the railing failed. The contractor purchased insurance for a policy term that matched the duration of the project. The contractor was still liable for the bodily injury claim, even though the insurance he purchased was no longer in force. Because the policy he purchased only covered injury or damage which happened during the policy term, the contractor went into panic. Was he going to be covered under his old (expired) general liability policy?
Terri used this (and other similar scenarios) as motivation as she began the work of designing a mechanism to automatically add an additional period of products and operations coverage for work that was completed during the active policy period for policy holders who qualify under the policy conditions. Just as personal injury is a type of coverage under a general liability policy, products and completed operations is a coverage type small business owners should look for, especially if they are purchasing a short-term policy.
While Terri’s idea was a first of its kind, now, 10 years later, the coverage type is still unique, and yet hundreds of thousands of small business owners have enjoyed this additional peace of mind, making it the staple Terri dreamed about. Still, many small business owners don’t know to look for this type of coverage, or what it really means.
How can you be sure you’re getting this coverage?
A small business owner should review for products and operations coverage in their general liability policy. More specifically, policy holders should review what is included during the policy term, and under which conditions. For example, the policy feature Terri created for Thimble, which appears as the Exposure Period in the policy, automatically incudes coverage for injury and damage that arise out of products or completed operation for an additional 12 months (with the exception of New York where it is 3 months) after the expiration of the last policy term if no other coverage is in place.* This is similar to the policy holder purchasing a separate products and completed liability policy once the policy holder has terminated general liability coverages for its business.
For more personalized insurance advice, find and consult with a licensed insurance broker near you.
*Policy terms and conditions and certain limitations apply. Please read the policy to understand the scope of coverage.
