Completed Operations Insurance: What it is, How it Works

Completed operations insurance protects a contractor from liability for third-party property damage or injury after contractual operations have ended. Construction products, as well as the manufacture of consumer goods and medications, are typically covered by completed operations insurance. Most general liability policies provide finished operations insurance. Contractors and manufacturers may also obtain supplemental or separate policies for loss and injury caused off the insured's property in amounts greater than the general liability limitations.

Completed Operations Insurance Explained

Purchasing completed operations insurance transfers to a third party the risks connected with a contractor's or manufacturer's final product. Even if a contractor completes the task, loss prevention and business insurance coverage are required to protect him from liability costs. 

Consider the three examples of contractor obligations below. Melting snow enters through the roof of a bank six months after a roofing contractor completes work and destroys many network servers. A metalworker-installed guardrail collapses as a person leans on it, causing the individual to fall 10 feet and suffer severe back injuries. An overhead door that was just built closes on top of a car. All parties are suing the contractors for compensation for their injuries and property damage. 

Importance of Completed Operations Insurance

A completed operations insurance policy assists contractors and manufacturers in settling claims while keeping their financial stability. It can shield you from contract and negligence claims. The coverage provides fair compensation for losses or injuries caused by the contractor's work or a product manufactured by the manufacturer. Punitive damages assessed by a court may be settled using this sort of indemnity insurance. Product recalls are not covered by completed operations insurance.

How Completed Operations Insurance Works

The insurance provider offers legal protection for the contractor and covers any settlement or judgment resulting from accidents linked to covered completed work. For example, if the contractor conducts the work badly, the corporation pays for the restoration, repair, or replacement of the property. The scope of coverage may include faults in the materials used to construct the structure or a malfunction of an electrical or other internal system that causes damage to the building or its occupants. Some policies cover the contractor's failure to offer adequate warning about proper building maintenance and management.