What is Completed Operations Insurance?

Completed operations insurance is a type of insurance coverage that is often utilized to cover the liability of a contractor in the event of an accident taking place during a project, or even after a project is completed, if the accident is caused by the results of the project itself. While liability of this type is often included in a general liability policy, contractors may purchase completed operations insurance as a means of broadening the level of protection associated with a given project. This strategy makes it possible to cover events that may or may not be covered under the terms of the general liability coverage.

The provisions within a completed operations insurance plan are usually focused on issues that may arise once the project is considered complete. It is not unusual for the text of the insurance contract to define what is meant by a completed operation or project. For example, the terms may specify that in order for an operation to be considered complete, both the contractor and the customer must consider all covered operations complete, and that the customer has taken possession of the premises. Many policies will also specify that in addition to being complete, the building has been utilized for its intended purpose and that the injury in question arose from what would be considered standard and reasonable use.

As with many types of liability insurance, a completed operations insurance policy can protect the contractor from losing a great deal of money in a lawsuit, or even in a class action suit. The scope of coverage will vary, but often includes provisions that address matters such as defects in the materials used to build the edifice. The policy provisions may also address the malfunction of the electrical or some other internal system that results in damage to the building or to an occupant of that building. Some policies will even cover the failure of the contractor to provide fair warning to owners of how to maintain and manage the building and its systems properly.

The underlying purpose of completed operations insurance is to ensure that the contractor is able to settle the claims without undermining the financial stability of his or her business. At the same time, the insurance coverage also makes it possible for any damages or injuries that result from the operations conducted by the contractor to be compensated at an equitable level. By carrying this type of indemnity insurance, any punitive damages assessed by a court may be settled, and the contractor can continue to operate the business. While completed operations insurance is expensive, one claim is typically enough to justify the expense.