Your Commercial General Liability (CGL) policy includes Completed Operations coverage. That must mean that you have coverage if work you complete during the policy term results in a claim at some point in the future. Right? Unfortunately not.
What is Completed Operations Coverage?
Completed Operations coverage applies when work you’ve done results in an occurrence of bodily injury or property damage, known as a loss, during the policy period. It’s this loss that triggers coverage under the CGL, not performance of the work.
As an example, Joe is an electrician who did some wiring in a house in 2012. In 2014, a problem with the wiring caused a fire, damaging the home and its contents, and injuring a family member. Because the bodily injury and property damage occurred in 2014, it is the 2014 policy that covers the claim.
For this reason, it is important that a contractor not allow any lapse in his CGL coverage. If there is no policy in effect when the loss occurs, there will be no coverage – even if the contractor had a policy in place when the work was performed. If Joe doesn’t have a CGL with Completed Operations coverage in effect in 2014, he will have no coverage for the fire claim, even though he had a policy when he did the work in 2012.
Keep this in mind if you are considering canceling your CGL policy because business is slow, or you’re a seasonal business and it’s the off-season. If you are no longer in business, ask your agent about Discontinued Operations coverage so that you continue to have Completed Operations coverage for all of the work you’ve done in the past.
One Last Word of Caution
If you hire subcontractors to work for you, it’s a good idea to make sure that your contract requires them to carry Completed Operations coverage for a number of years after the work is complete. Continue to ask for certificates of insurance during that period. If your subcontractor’s work results in a loss after the work is complete, this will make it easier for you and your insurance company to turn any claim back to the subcontractor.
Understanding how Completed Operations coverage works is important in making sure your business is protected against claims resulting from work your business has done.