No matter the size of your small business or the industry you work in, you’re always exposed to some form of risk. Did you know that even after a job is finished, someone can file a claim against you, well after you’re done?
So how do you protect your small business from a third-party bodily injury or property damage claim that’s filed after a project is completed?
With completed operations coverage, a type of insurance that protects you from just that. But what does completed operations liability entail? And why is it included in most general liability insurance policies? Let’s find out.
What is completed operations coverage?
Most general liability policies or business owners’ policies (BOPs) bundle completed operations coverage with product liability coverage. This combination provides extended coverage against claims of property damage or bodily injury resulting from a finished product or a service.
Put simply, with products and completed operations coverage, the risks that were originally on the service provider or manufacturer are transferred to the third party (who purchased the service or product).
Although completed operations and product liability are similar, both types of insurance coverage provide protection from a different liability angle:
Completed operations – If you’re a contractor or provide a service, you may receive a completed operations claim months after a job is done. If a client claims that your service or work was the cause of their bodily injury or property damage, your insurance and liability policy could help cover the damages as well as your legal fees.
For instance, as a carpenter, you install a railing on the staircase of a home. Should it collapse (months later) after the homeowner leans up against it, they could incur an injury and hold you liable.
Products liability – If you sell or manufacture products, you’re at risk of a future product liability claim. If an individual alleges that you sold a defective product, which caused them injury or damaged their property, your insurance could help protect you from liability.
For example, you sell swing sets to families. Should one of the swing sets have a cracked chain, that could cause it to snap and injure the child who had been swinging on it. The child’s family may hold you liable for their medical bills.
Liability claims can cause significant harm for small businesses, especially if you’re found to be at fault. Products and completed operations coverage can help prevent a liability claim from hindering a business’ growth.
What needs to happen for a claim to be covered?
Products and completed operations coverage is commonly included as a subsection of a general liability insurance policy—that is, unless it’s specifically excluded via an endorsement. But not all claims or lawsuits will be covered by a completed operation. For a completed operations claim to be approved, (typically) three criteria must be met:
- The liability claim must allege that bodily injury or property damage occurred
- The claim must demonstrate a connection from the asserted loss or harm to the finished product or service
- The injury or property damage has to occur after you finished the service or relinquished possession of the product.
In all likelihood, your policy will contain a coverage limit that includes both per-occurrence limits as well as aggregate limits. In that case, a payment for a single claim incident cannot exceed the per-occurrence limit; nor can the total payout for all claims exceed the aggregate limit.
Common completed operations coverage exclusions
Damage to a completed service – If damage occurs to your finished work but not to another piece of property, the insurer will refuse coverage
Damage to the sold product – If the product itself is damaged, it won’t be covered. The product would have to cause injury to someone or damage another piece of property
Damage to impaired property – If a product is impaired or unusable because it incorporated your service or product, it will be excluded
Not all general liability policies or business insurance policies are the same. Thus, it’s critical that you review your policy carefully. You need to know exactly what’s covered and what’s not.
Benefits of completed operations coverage
Customer peace of mind – Customers who purchase your product or enlist your services can rest easy knowing that if it harms or damages their property, they will be protected
Closing deals – Having proof of insurance coverage can help you land deals by demonstrating that you’re financially secure
Guarding company assets – If your small business is sued, your assets would be protected from a litigious customer seeking compensation
Preventing bankruptcy – Even if you lack the assets to cover a legal finding, your insurance can help prevent you from having to declare bankruptcy
Satisfying the banks – Many lenders require that you have this type of liability policy before they take the risk of backing your business venture
Protecting your small business today and tomorrow
Not every insurance policy will include completed operations coverage. For instance, most claims-made policies (which only provide coverage if a claim is made while the policy is in effect) will exclude it.
However, general liability policies via Thimble include products and completed operations coverage, so long as the work was completed during the policy period and the claim was filed within the Exposure Period.
In addition to completed operations coverage, Thimble’s short-term insurance has all of the features you want from an insurance policy. Tailored to you, you can choose a policy term that goes by the hour, day, or month. It’s insurance that works when you do, then protects you for a year after (should a claim come through in the future).
In less than 60 seconds, you can go from exposed to risk to having coverage. Click “Get a Quote” or download the Thimble mobile app, breeze through a few details about your business, review your quote, purchase, and you’ll have a Certificate of Insurance in your email inbox.
But, most importantly, our policies come with completed operations coverage. This means that, even if you’re blindsided up to 12 months after the job finished, we’ve still got your back.
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.