What Are Completed Operations in General Liability Insurance?

by Kevin O'Flynn; Updated September 26, 2017
Completed operations insurance covers work that was incorrectly done.

Completed operations in a general liability insurance policy covers damage or bodily injury resulting from work not properly done by a company. For many businesses this insurance is a good idea because it protects the company from large losses that otherwise might cause bankruptcy or severe stress on a business. This insurance is a way for a business to reduce risk by paying an insurance company a premium.

Coverage Details

Completed operations coverage covers a business for work that was not properly done. There is usually a limit to the insurance coverage, a maximum amount the insurance company will pay. This amount typically includes a maximum amount per instance and a maximum amount for all claims for the year. This is known as an aggregate amount. For example, a company could have coverage for $1,000,000 per incident and an aggregate coverage of $4,000,000. If a claim resulted in damage of $900,000, then the entire claim would be covered, and the aggregate coverage would have $3,100,000 remaining after the claim.

Cost of the Insurance

The cost of completed operations insurance varies with the type and size of the business. Insurance companies factor in the expected frequency of claims as well as how potentially large the claims may be. Insurance companies will look at a business' claims history and industry trends in damages to set a price for the coverage. The coverage may be based on the company's revenues for the year. In addition, the insurance company may do an audit at the end of the year and adjust the price based on changes in sales volume.

Example

A company makes control rooms and sells them directly to consumers. The rooms are designed to store expensive wines. The company buys completed operations coverage. After shipping the control room to a customer, the room is assembled, and wine is stored in the room. However, because the room was built with several errors, the wine is ruined. Because the damage was caused by the company's faulty product and occurred off-premises, the claim would be covered.

Considerations

A business is usually covered for damage that occurs during the policy period. This is an important point because there could be a lag between the end of a policy period and when a claims event takes place. For example, a builder could complete a house during a policy period of January 1 through December 31. Then after the policy period ends, the builder might choose not to renew the coverage and sells the business. Meanwhile, in March of the following year, the house built during the policy period develops a major problem. This damage would not be covered even though the house was built during the policy period.

About the Author

Kevin O'Flynn began writing in 2008 with a background in private equity. He has written for MilitarySpot.com and lived and worked in the United Kingdom and Japan. O'Flynn holds a Master of Business Administration from Case Western Reserve University.

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