If a firm is involved in any product manufacturing and sale, it could 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 damaged to the property.
In another situation, the firm may not be involved in making or selling a product itself but performs work for someone else. In this case, the company could be subjected to 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.
A commercial general liability insurance involves a product completed operations aggregate that covers the liability incurred by insured for property damage or injuries that happens to some third-party once contracted operations are completed.
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 the claims arising out of specified hazards. Now it is vital that the specified hazards are described in the products completed operations hazard section of the policy, which are again limited to bodily injury or property damage. It 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 defence 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
Shardul was a well-known contractor and was involved in 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.
One of Shardul’s customers, Janaki was seriously injured when the roof she was standing below collapsed. Later it was found that when Shardul built the roof, he forgot to fasten it to the wall properly. The collapse was a direct result of Shardul’s failure, and Janaki’s injuries were found to have been caused by the roof’s collapse.
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 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 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 defence cost involved in the settlement and repair of the roof.