Any firm involved in product manufacturing and sale can be the subject of a product liability claim. When a firm receives a product liability claim, it means that someone has filed a claim against the firm alleging that a product it made and sold is defective. The claim can say that such a defective product has caused bodily injury or damage to the property. The products-completed operations aggregate is a coverage provision that protects the insured against liability for property damage or injuries caused by completed operations.
Key Takeaways
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The “Handover” Trigger: Coverage only begins once the work is “completed” or the product is no longer in your physical possession. If an accident happens while you are still working on the site, it falls under a different section of the General Liability policy.
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Beyond Manufacturing: This isn’t just for factories. As seen in Shardul’s case, contractors (plumbers, electricians, roofers) need this to cover “faulty workmanship” that causes damage after they have moved on to the next job.
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Fixing the Mistake: While the policy pays for the damage caused by the error (e.g., medical bills for a person injured by a collapse), it often also assists in the restoration or repair of the faulty work itself to prevent further liability.
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Separation from Advertising Injury: It is important to remember that this specific aggregate limit does not cover libel, slander, or copyright issues. It is strictly for physical harm—either to a person’s body or their tangible property.
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Maintaining Financial Stability: In an era of high court-awarded punitive damages, having this aggregate limit ensures that a business can survive a major judgment while still fulfilling its duty to compensate the injured party.
In another scenario, if the firm performs work for someone else, it may face a completed operations claim. In such a situation, someone could claim that the completed work is faulty, and it injured them or damaged their property. Hence businesses these days have their commercial general liability in place to take care of such claims.
Commercial general liability insurance includes a product-completed operations aggregate that covers the insured’s liability for property damage or injuries to third parties after completion of contracted operations.
Thus, a product completed operations aggregate in a commercial general liability includes all bodily injury and property damage occurring away from premises that the insured person owns or rents and arising out of his work, except:
- Products that are still in the physical possession of a business or a company
- Incomplete work by a business or a company
As personal and advertising injury claims do not fall within the products-completed operations hazard, this aggregate limit applies only to bodily injury and property damage.
It can also apply to claims arising out of specified hazards. It is now crucial to describe the specified hazards in the products-completed operations hazard section of the policy, limiting them to bodily injury or property damage. This includes the hazards that have:
- Occurred away from the insured’s premises
- Arisen out of the insured’s products that are no longer in the insured’s possession, i.e. completed work
Uses of product completed operations aggregate:
- The product completed operations aggregate helps the insured to settle claims while maintaining the financial stability of his business
- This coverage ensures compensation at a reasonable level for the damages or injuries resulting from the insured’s work
- Helps to settle the punitive damages assessed by the court
- Pays the contractor with legal defense fees and any settlement or judgment resulting from accidents related to his completed work
- Helps to pay for the restoration, repair, or replacement of property when the contractor performs work incorrectly
- Addresses the defects in the materials used to build the structure
- Addresses the malfunction of the electrical or other system resulting in damage to the building or its occupants
Read more: Who is Insured under Commercial General Liability Insurance?
Case Study:
Shardul, a well-known contractor, had been installing high-quality residential roofs for the past ten years. For the past decade, he had purchased through his insurance agent commercial general liability insurance. Shardul’s commercial general liability policy always included coverage for the products-completed operations aggregate.
Shardul’s customer, Janaki, suffered serious injuries when the roof she was standing under collapsed. It was later discovered that Shardul had failed to properly fasten the roof to the wall during construction. The collapse directly resulted from Shardul’s mistake, and Janaki’s injuries were attributed to the roof’s collapse.
Summary: Products-Completed Operations Aggregate
Janaki filed suit against Shardul who in turn submitted the complaint to his insurer. The insurer investigated the situation and found that:
- The collapse of the roof included a completed operation hazard
- The wreck took place away from Shardul’s premises
- Shardul had the commercial general liability in place along with the product-completed operations aggregate
After taking into consideration of all the above points, the insurance company settled Shardul’s claim by paying for the bodily injury caused due to the collapsed roof and also the defense cost involved in the settlement and repair of the roof.
Frequently Asked Questions (FAQs)
Q1: What is the difference between “General Aggregate” and “Products-Completed Operations Aggregate”?
A) The General Aggregate is the limit for claims occurring during your operations (like someone tripping over your tools). The Products-Completed Operations Aggregate is a separate “bucket” of money specifically for claims arising after the work is done or the product is sold.
Q2: If a customer is injured by a product while still inside my shop, is it covered here?
A) No. This coverage only applies to incidents occurring away from your premises. If the injury happens inside your owned or rented shop, it would typically be covered under the “Premises Liability” section of your General Liability policy.
Q3: Does this policy cover me if I used “Defective Materials” supplied by someone else?
A) Yes. If you installed a system using faulty materials and that system later malfunctions and causes damage, the policy addresses the liability. However, your insurer may later pursue the material manufacturer through a process called Subrogation.
Q4: Will the policy pay for “Punitive Damages” awarded by a court?
A) Yes. If a court awards punitive damages (damages intended to punish the business for negligence) in addition to compensatory damages, the products-completed operations aggregate helps cover these costs up to the policy limit.
Q5: What happens if I finish a project in 2024, but the accident happens in 2026?
A) This is why Continuous Coverage is essential. You must have an active policy at the time the “occurrence” (the accident) happens. If you let your insurance lapse after finishing a project, you will have no protection for any future “Completed Operations” claims.
About The Author
Rajesh Mehta
MBA Finance
Rajesh has become a distinguished expert in liability insurance with over 8 years of extensive experience in the insurance industry. As a dedicated writer for SecureNow, he crafts insightful and informative blogs and articles that help businesses and individuals understand the nuances of liability insurance, from policy details to industry trends. Throughout his career, Rajesh has developed a profound knowledge of various types of liability coverage, including professional, general, and product liability insurance. Their expertise enables them to break down complex topics into accessible content, making it easier for readers to make informed decisions about their insurance needs.
