Products-Completed Operations Coverage: What It Is & Who Needs It

Cody Cromwell
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What Products-Completed Operations Coverage Is

A product completed operations is a coverage type under the product insurance plans that gives coverage, to a company’s products, if the products are damaged as a result of a third party or accessorial or operational error.

Some of the reasons why this coverage is required by a company are:

They might be utilizing a third party vendor or their own employees to handle a certain portion of the production process, but if something goes wrong and affects the product work in some way, they will want to make certain that it is covered.

A company may want to protect their products in case they fail to meet certain quality requirements or if they are not being produced with the same level of quality as expected.

Some companies may also want to cover the operational mistakes of their own employees, like if they make a costly error while operating one of the machines that is being used to make the company’s products.

The aim of the product completed operations coverage type is to provide coverage in the event that something goes wrong with the products that are being manufactured for the company. It is typically for one of the following:

  • For manufacturing defects
  • For any risk that causes without sufficient explanation damage for which repair is required for product malfunction

Product-Completed Operations Coverage vs Standalone Product Liability

The terms product-completed operations and standalone product liability policies (also known as both product coverage and stand-alone products policies) are often used interchangeably to describe liability coverages for products. But if you understand the differences, the right product liability policy could save you money, help you avoid additional risk, and allow you to pass on the savings to your customers or clients.

For decades, policyholders have believed that one policy covers both product-completed operations and completed operations operations. But the truth is that these policies often make a good fit for different coverage needs.

For years, insurance agencies, attorneys, and brokers have used the terms product liability and completed operations interchangeably without clearly defining the differences of the two coverage types.

Product-completed operations coverage is a liability policy to protect you and your customers or clients when a product malfunctions or is deemed unsafe and needs a repair or replacement. Product-completed operations coverage is a form of product liability coverage and is sometimes referred to as a product liability policy. Make sure that your client has the correct policy when a product malfunctions. If the coverage is missing, you’ll have to assume the risk and be responsible for expenses if your client can’t qualify for a claim.

How Products-Completed Operations Coverage Works

Products-Completed Operations Coverage (PCO) is exactly what it sounds like – an insurance policy that covers products and provides coverage for an additional period of time. The products it covers are products that are completed operations, such as a completed home, where the work already is done.

For example, a kitchen remodeling and renovation project is considered a product under PCO coverage. This means that the work is finished and ready to be used. If a claim is ever filed on your home, this kind of coverage would extend the time that a completed home is covered by the insurance company. Your completed home would have additional liability coverage on it after the claim, and that coverage would last a few more years.

This type of coverage can be helpful if you’re renovating a home or starting a new construction project, and you want to reduce the amount of risk you’re taking on by purchasing a covered policy. When you have additional coverage for your remodeling project, though, you’re usually required to pay a fee for the additional coverage. Shopping around for the right coverage for your budget and needs is important. Determining the coverage that you’ll need will take careful analysis and consideration of the services you’re going to use during the remodeling project.

What Products-Completed Operations Covers

This coverage protects your business against losses that may occur in the course of performing a product or service and that you would be legally responsible for, even if an action or the lapse of time causes you to be relieved of liability.

This is also called –Completed Operations Coverage.” It protects warranties, service contracts, workmanship, and even certain types of repairs you’ve completed unless you have specifically excluded those from coverage in your policy.

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What Products-Completed Operations Doesn’t Cover

One thing you’ll want to keep in mind when purchasing Products-Completed Operations coverage is whether or not it’s right for you. That’s because, like other insurance policies, it has its limitations, and not every business will want to be protected from certain types of losses.

First of all, Products-Completed Operations coverage is limited to just a few types of operations, specifically operations that are completed prior to the policy limit. So if the completed operations are similar to claims under your business interruption coverage, the threshold for determining when completed operations coverage kicks in will be just as low as the threshold for business interruption coverage.

However, it’s important to be aware that Products-Completed Operations must meet the following conditions in order to consider them covered:

They must be operations that can be completed without disruption of the business.

They Must Be Operations that Are Necessary to Complete the Basic Function of Your Business…

They must be operations that are necessary to complete the basic function of your business.

Finally, they must be operations that are necessary to complete the basic function of your business.

Who Needs Products-Completed Operations Coverage

Depending on the type of firm or organization, Products-Completed Operations coverage comes in several different forms. Regardless of what type of Products-Completed Operations coverage you have, coverage is a great way to address product liability risks where you have a little control over the operation but where you still have potential exposure. If you have operations supporting a product line or if you have any of the following, you may want to consider Products-Completed Operations coverage:

  • You perform a product’s manufacture
  • You conduct research or ongoing testing
  • You have control over the product’s design
  • You have control over the product’s labeling
  • You have control over the product’s marketing
  • You decide when and how the product is distributed
  • You control the product’s performance
  • You can provide the product’s infrastructure
  • You control the product’s modification
  • Your organization’s products or services rely on less or more volatile suppliers
  • You oversee the product’s delivery
  • You have a product liability exposure to third parties
  • You have a product liability exposure to suing consumers
  • You have multiple products that are similar

Products-Completed Operations Coverage vs Standalone Policy

Products-Completed Operations coverage was first introduced in the late 1970s to provide a financial incentive to the insurance companies to sell homeowners insurance on products that have been "completed operations." Unlike a standalone policy, the homeowner's policy does not pay claims for damages or loss caused due to the actual completion of the operations.

For example, if you are building a house and there are marble countertops installed in the kitchen, the home you will build will be covered by your builder's insurance policy. Your count concerns will be covered from the beginning of the build to the completion of the project. However, once the marble is installed in the house, it becomes a finished good just like a hi-fi system or a television. If you have an audio, television or computer, you are likely to have purchase standalone insurance coverage in order to protect against any potential damage.

Products-Completed Operations coverage is used in conjunction with the builder's policy to cover the actual physical building of the house. Although the operations of putting in the ceiling tile, laying the marble slab or building the roof have been completed, this coverage will help you pay for damages that occur inside the house.

If you want to ensure optimal protection for your home and secure the millions of dollars worth of operations, you will be required to obtain both a standalone insurance policy and the products-completed-operations coverage. Naturally, to get this coverage you will need to purchase it.

Products-Completed Operations Coverage Example

Products-Completed Operations Coverage Providers

How P.C.O.C. Works … Is It So Bad?

Property insurers have had products in the areas of businessowners coverage, employee only coverage and products-completed operations coverage for a long time (many decades).

They’ve traditionally provided these products for the self-insured employer, rather than for the actual policyholder.

They are then called products-completed operations coverage (PCOC) because they cover the risk of uninsured losses (like a fire, flooding or tornado) where a loss was not caused by the carelessness of the insured business.

If a Loss … Was Caused by the Carelessness of the Insured Business

Then the insured business (or its product) may partake in the covered losses.

If a Loss Was Not Caused by the Carelessness of the Business

Then the business is normally not allowed to partake in the loss.

If the Loss Is from a Covered Cause of Loss

Then the business can usually only recover a downside limit of the P.C.O.C. policy (unless the policy offers loss of use coverage or professional services coverage).

If the loss is from an uncovered cause of loss.

Then the business can recover for actual and consequential damages from the loss.

Top Products-Completed Operations Coverage Providers

Providers of Products-Completed Operations (PCO) insurance protect their policyholders against losses they suffer through the loss of eligible property under policies that include executed contracts and work in process. They also provide for expenses, costs, and damages that result when property is destroyed or damaged.

PCO insurance is a special form of commercial insurance that protects covered property against losses due to liability to other owners for faulty workmanship, the failure of suppliers to deliver quality products, product defects, and delays in the delivery of products. The coverage also pays for lost profits when a covered contract is found to be flawed or cancelled. The insurer sees the property as being damaged when the contract is not settled or ordered.

Ensuring that claims are promptly paid under most PCO policies has been a major objective of the industry over the past 20 years, and the insurance sector has responded. The interpretation of terms, limits, and exclusions under amended policy provisions has been overhauled. Insurance pools …

  • and the Uniform Commercial Code
  • have become mandatory for many business risks.

But even with these developments, the PCO line of insurance has remained an attractive choice for many businesses. As a special form of commercial insurance, PCO offers lower premium rates than standard commercial insurance, eliminating the emphasis on profits …

CoverWallet

Since coverwallet investors don’t need to cover any liability for any completed operations crime they are required to carry liability insurance.

The crime of completing an operation with the intent to defraud is punishable under California Penal Code §§ 215 and §§ 231. It is commonly referred to as a completed operation crime. It is simply another way of saying grand theft. In cases involving completed operation crimes the allegations are that the defendant with the intent to defraud operated a business without the permission of the owner or business’s owner.

For example, in the case of a health club, the owner allows franchisees to operate health clubs. The franchisee hires employees to work at the club. The employees are also called business’s employees. Side-note: ownership of a restaurant doesn’t mean you have ownership of the restaurant’s employees. The employees are called business’s (arm’s length…) employees.

The Hartford

The Hartford Underwriting Guide for Completed Operations Coverage (COC) sets out a series of tables for insurers to use when underwriting completed operations risks, which is the topic of this post. COC focuses on underwriting the risk of loss from business interruption and physical damage, rather than property damage or personal injury. Here are some of the reasons why:

There is a broad range of completed operations risks. As you would expect from completed operations coverage, there can be a very broad range of completed operations risks. The differences in the risks and the challenges in developing policies and underwriting the risks are significant.

Business interruption and physical damage are the most important risks. You may be surprised to hear that there are very few completed operations policies written specifically for business interruption and physical damage. Although COC does not focus on direct physical damage coverage, there are a number of ways that physical damage can lead to business interruption, which is why the two are often discussed together in COC.

Because there are two main areas that COC covers, there are two main ways to differentiate between the two types of coverage. Because you have to differentiate between business interruption and physical damage, you may have to look at additional factors to help you differentiate between the two areas.

Commercialinsurance.net

Product Risk/Complexity:

The product risk to your business is the inherent complexity and simplicity of each product that you’ve chosen to offer. If the product is complex and prone to failure, the product-related expenses are significant and there’s a high likelihood of product-related loss.

Products like automobiles or refrigeration units have extremely strict safety standards, or are –safety-critical” which means that in the event of a failure, the product poses a danger to the user and/or the environment.

Products such as electronics, medical devices, or even food products have necessary safety regulations – they must conform to certain specifications in order to pass inspection and be sold.

Services such as Graphic Design or landscaping are subject to many risks, such as a lack of adequate brochures/publications for your business and weather related delays.

Commercial insurance coverage is designed to protect your business should a product fail. Product risk is most often covered through the Product Direct Liability Coverage.

The Importance of Product Direct Liability Coverage:

Any business that has a product that has risks associated with a potential product-related loss that is not covered through other products/applicable insurance policies must carry product liability insurance.

Insurance Canopy

Anytime you contract a professional to complete an operation on your body or any type of services, you are paying a professional to take care of business for you. In many cases, you do not need to purchase the typical liability insurance that beneficiaries need to protect themselves. There are all kinds of payment plans that can help you cover the procedure you want.

Most procedures have an extensive set of pre-operation requirements, which make it expensive if you are not covered. Whether it is a single surgery, multiple surgeries, or a complete set of procedures ranging from cosmetic to reconstructive, a special insurance policy will help protect your patients. This type of coverage is surprisingly affordable and can be a significant cost saver for your practice.

Information about the patient coverage, benefits for practitioners and patient, and other aspects you need to know before you take insurance companies often do not have to buy a separate policy. It may be an option to form a separate policy of some sort so that you can take advantage of this benefit. Since these types of plans offer a broad array of protections, they are more likely to get approved.

Products-Completed Operations Coverage Costs

Risk Management Tool

One of the key features of the products-completed operations coverage element is that it can be tailored to the individual need of an insured.

This benefit is a part of a broad category of coverage known as completed operations coverage. This type of coverage can provide indemnity to the insured if a covered claim occurs; the purpose of this type of coverage is to cover expenses associated with the claim and reduce the risk of loss to the insured.

Products-completed operations coverage was developed due to the fact that some types of loss on a building are non-recurring losses, or losses that an insured is typically not made whole for via the contract of insurance.

The component is a benefit that is broad and is expanded to the specific need of each business. This coverage can be tailored to the insured need by the insurance broker. There are two benefits for the insured:

What a contractor pays a subcontractor to do a job, they typically are not reimbursed the majority of the expenses they assumed. These expenses are pass throughs from the contractor to the subcontractor for the labor and material they used to do the work.

In a business insurance policy, these expenses are typically passed through to the insured based on either a flat amount, a percentage of the contract or a percentage of the construction cost. This is usually depended on the facts of the claim.

Products-Completed Operations Industry Examples

Products-Completed Operations Limits

These limits provide coverage for losses that occur due to physical damage or theft to property within your home, including kitchen appliances, fireplaces, hot tubs and swimming pools as well as your garage or workshop, and must be specifically purchased to provide this coverage.

Products-Completed Operations coverage is not affected by any other Homeowners Liability coverage so it is important that you have a Product-Completed Operations policy to provide coverage for these items.

Tips on Getting Products-Completed Operations Coverage

The products-completed operations coverage can be an important step for any contractor and construction manager. It is, however, frequently overlooked by firms and contractors. But if underestimated, this coverage can prove costly and hazardous.

Products-completed operations coverage is a type of general liability insurance, and for many companies is a must have. This coverage can be valuable in a situation where a contractor has failed to provide adequate protection to his or her customer.

Why should your business have products-completed operations coverage?

The purpose of this type of insurance is to protect the customer from all claims arising from any defects in any product or products completed according to the plans or specifications furnished by the insured. This type of coverage is valuable for not only contractors, but for any type of business. Products-completed operations coverage may be required for any construction business.

Some businesses are not required to have products-completed operations coverage, and if your business is even remotely similar you cannot afford to overlook it. We take a close look at the details.

Definition and Coverage of Products-Completed Operations Coverage:

Products-completed operations coverage protects contractors working in the construction industry. This coverage is a type of general liability insurance designed to cover claims for defective products being used under contract. The two most common types of general liability insurance policies that are covered under this type of coverage are products-completed operations and products-under-contract.

Know Your Risks

Work With an Insurance Agent

What is a Completed Operations Coverage?

The Completed Operations Coverage is a type of Property Insurance but unlike your standard Property Insurance this coverage is unusual. It covers losses that occur after a product was manufactured or assembled, but before the product is sold to a consumer. Although this type of coverage is usually considered optional, some policies may specifically require it.

Why Should You Purchase a Completed Operations Coverage?

In the manufacturing or assembly process, there can be a large number of processes that, when completed, protect your product from losses that occur during the assembly process. This type of Property Insurance is often called Completed Operations Coverage because it covers expenses that occur after a product made or assembled is in a state ready for sale to a consumer.

If you want to use a product before it is sold to a consumer, the Completed Operations Coverage can protect you against losses that occur in the process of using the product. For example, if you want to use a product before it is sold, you would cover the product below the Completed Operations Coverage with a Purchase Proceeds Coverage.

Completed Operations Coverage is easy to understand. Completed Operations are those activities that occur after a product is manufactured or assembled, and before it is sold as a finished product.

Completed Operations are those processes that transform raw materials into finished products.

Completed Operations are also those activities that take place during the sale of finished products.

Keep Your Products-Completed Operations Coverage After Your Business Closes

Your business closing is a stressful time. One important part of protecting your business and your assets is to remain protected from claims after your business closes.

The products-completed operations coverage provides a claim against a claim after your business has closed. Compensation is available for losses related to the products manufactured, processed or assembled after the business closes.

Products-Completed Operations Coverage is an important component of many business owners insurance policies to ensure claims are compensated after the plans are filed. If you own a business, your product liability insurance policy is likely to include this type of coverage. However, you should still read the policy carefully to understand this coverage to ensure it is relevant to your situation.

This type of coverage offers a simple way for your business to maintain its protection after it has closed. A claim must occur out of business hours or business operations and be a covered loss. The following are products manufactured, processed or assembled covered with or without a loss:

  • Finished Goods
  • Work in Process
  • Raw Materials
  • Tools, Supplies, and Equipment
  • Pre-existing Product Constraints
  • Waste, Excretions, and Lubricants
  • Waste Sludge
  • Biological Products, Viral and Toxin
  • Man-made Adult and Child Implements
  • Utensils and Devices
  • Transportation of Goods

Products-Completed Operations Frequently Asked Questions (FAQs)

What is a products-completed operations policy?

A products-completed operations policy, also known as CPO coverage, is a business property & casualty insurance policy that safeguards your business against losses caused by missed or late shipments, theft, damage to products in transit, and other losses that are the direct result of the product reaching the customer.

A once- or twice-yearly statement of its coverage allows you to better keep track of how much you’ve paid for the policy, and that way you can make an informed decision about retaining your insurance and the level of coverage you want it to include, if any.

How is a products-completed operations policy different from standard commercial property & casualty insurance?

A products-completed operations policy pays for losses and expenses that are the direct result of missing or late shipments. It covers losses on inventory, products in transit, finished materials, and also work in progress.

A standard commercial property & casualty insurance policy might be an option if you only ship products in certain circumstances, i.e., you ship to a customer a few times a year, but the shipments take place at different times and are not likely to be affected by labor strikes or natural disasters such as earthquake, hurricane or fire.

What is the purpose of a products-completed operations policy?

What is the products-completed operations hazard?

Drywall products manufacturers insurance is Additional 1.1: Products-Completed Operations. This coverage protects the client from damages or injuries arising from products used in a building that are already completed.

This is not a reimbursable claim, meaning it cannot be paid by the insurance carrier, but it is a covered event. The policyholder’s claim assesses the amount of the claim and then pays the client who suffered the loss.

When a policyholder is building a new building, there are a few options for the amount of additional insurance to include when the building is finished. The client can choose to insure the building during the construction process, or the client can choose to add the coverage to a Completed Operations policy.

A policyholder can purchase additional insurance either from the same insurance carrier or from an additional company. If the same company handles both the construction and additional insurance, it's standard to only pay one deductible when a claim is made. If a policyholder adds additional coverage from an additional insurance carrier, the policyholder must pay the deductible twice.

We can illustrate this with an example to help explain each option.

A local contractor was building a new house and adding an additional 3.5% to the contract price to add the completed operations coverage.

What is product recall insurance?

Product recall insurance is a type of insurance coverage usually offered by a company to cover the expenses of any product recall that may happen.

The name is quite confusing because the word recall does not necessarily mean the product is dangerous to people; there are also product recalls for television sets, mattresses, and many other items that can be beneficial.

Recall insurance covers expenses associated with a recall, whether it’s handled at no charge to the customer or the company commits to paying expenses. Generally coverage is provided for the purchase price of the item, less shipping and handling charges.

If the product is returned to the company, the purchaser is basically out of luck. However, the company will certainly be able to claim the amount of the insurance coverage.

For instance, if you turn on your new television set and you’re greeted by flashing patterns, incessant beeping, and the screen shows nothing but a blank screen, the sounds are an alarm, and the image is a blue screen, then you have a defective television set – you’ll have a hard time convincing anyone otherwise.

However, if you purchased a television set via product recall insurance, the insurance has already paid for the purchase price and covered shipping and handling. If you ship the television set back to the company, the insurance will likely be worth the purchase price of a new television set.

What is extended completed operations coverage?

The Office of Insurance products help protect and defend you against lawsuits arising from business damage or property loss. Extended completed operations coverage (ECO) is one product that can help defend and protect you.

ECO provides you with financial protection when you return from a completed business trip to deal with unexpected damage, personal injury, or sickness. The plan covers all your un-reimbursed business expenses, such as wages, travel costs, equipment, and damage done while at the business premises due to business-related or slip and fall accidents.

Reimbursement for business-related personal injury and illness will usually be denied if you have not complied with conditions of a business trip insurance plan, such as not having purchased and maintained health or travel insurance.

The key benefits of extended completed operations coverage (ECO) are:

  • Provides coverage for business-related or slip and fall injuries that occur during business trips, even if the injury occurred after you returned home.
  • Covers payroll or salary that may be affected by the accidental injuries during a business trip.
  • Covers office rental expenses when you move your office to a new location.

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