A type of insurance coverage known as products-completed operations protects you from consumer lawsuits alleging property damage or injury as a result of your product or finished service.
What is a completed operation?
Completed Operations work of the insured that has been done as specified in a contract, or work completed at a single job site under a contract including several job sites, or work that has been put to its intended use, as defined under a general liability insurance.
What is ongoing and completed operations?
We will learn the distinction between ongoing and completed operations in this video.
Contractors must present proof of insurance when engaged for a task, and they must usually list the individuals hiring them as additional insureds on their commercial general liability (CGL) policies.
Because both the contractors and the individuals who hire them are covered if someone is injured or something breaks while executing work on site, or even if some type of harm is discovered after the work has been done.
But what exactly do the terms “ongoing and completed operations” imply? Let’s start at the beginning: “ongoing” is defined by the dictionary as “still in progress” and “continuous.”
The term “ongoing operations” refers to work that has not yet been completed. “Completed operations,” on the other hand, refers to work that has been completed on the job site.
Consider the case of a property owner who hires an electrician to install an inside light. While working, the electrician leaves his toolbox in the corridor. A worker at the office trips over a toolbox, collapses, and injures his knee. That would be an example of bodily injury caused by the electrician’s continued actions. If property damage occurs while the electrician is on the job site, it may be covered under the ongoing operations coverage provision.
What happens if a contractor’s work causes bodily injury or property damage days or even years after the job is finished? If the owner of the property is named as an additional insured for completed activities on the contractor’s insurance, the owner of the property may be covered.
The CG 20 10 is the most frequent supplementary insured endorsement for contractors, and it only applies to current operations. The CG 20 37 only covers the additional insured for operations that have been performed.
If the word “your work” appears, make sure it applies to both ongoing and completed operations or solely ongoing operations. Although the phrase “your work” normally refers to both, the endorsement may contain excluding language that excludes completed operations. To discover out, carefully read the testimonials!
How long does products-completed operations coverage last?
While a general contractor’s liability insurance policy (often known as its “practice insurance program”) is undoubtedly in place, they can also buy project-specific liability insurance. The extended completed operations coverage endorsement is a non-standard endorsement that indicates the general contractor’s completed operations coverage will continue beyond the policy’s expiration date and for a period of ten years after the construction project is substantially completed. In other words, if a completed operations claim occurred after the project was completed, the general contractor’s project-specific CGL policy would have expired but the extended completed operations coverage would remain in effect, covering certain types of bodily injury or property damage that occurred up to a certain number of years after the school project was completed.
What is a completed operations exclusion?
If your General Liability policy has the Products and Completed Operations Exclusion, you won’t be covered for any bodily injury or property damage that occurs after the job is finished and accepted by the owner or purchaser. The following are some examples of lawsuits that would not be covered:
- Three years after construction, a fire caused by defective wiring causes the destruction of the house and its contents, as well as the deaths of three people.
- Wall supports and wood sheathing deteriorate as a result of water damage caused by a lack of appropriate flashing.
In other words, you’d only be covered for mishaps that occurred on your property while it was being built. The following are some examples of litigation that would still be covered:
- During construction, a worker inadvertently sparks a fire, which burns down a neighbor’s home.
Does general liability cover completed operations?
Completed operations insurance protects a contractor against claims for property damage or injuries to third parties after the contract has ended. Completed operations insurance is typically required for construction items, consumer goods production, and pharmaceutical manufacturing. Completed operations insurance is frequently included in general liability insurance. For loss and injury incurred off the insured’s property, contractors and manufacturers can acquire extra or independent policies in amounts greater than the general liability limitations.
What is additional insured completed operations endorsement?
Additional Insured Owners, Lessees, or Contractors Completed Operations (CG 20 37 04 13). Covers the additional insured for any liability that may arise as a result of an injury or damage that occurs after the work has been finished. The building has been damaged, and members of the public have been injured.
What is CG2033?
- A third party may claim that the project owner is responsible for the activities of a contractor working on the project. Consider the case of a project contractor who is erecting scaffolding over a sidewalk. Pedestrians are allowed to pass through the scaffolding. Three pedestrians are injured when the scaffolding collapses. The pedestrians have filed a lawsuit against the contractor and the project owner. The scaffolding was not erected by the project owner, and the contractor was not told how to install it. Despite this, the project owner is accused of being held vicariously accountable for the contractor’s activities.
- There are indemnity clauses in commercial contracts. An indemnification clause is a condition in a contract that compels one or both parties to pledge to compensate the other for any loss, harm, or responsibility coming from the contract. Indemnification clauses are included in contracts by project owners. Because the project owner is unsure whether the contractor will have the cash without insurance, the project owner requires insurance to assist fund the contractor’s commitment to pay.
- Some project owners prefer to transfer some (or all) of their risk to the contractor’s insurance policy. The capacity to delegate this type of risk to a contractor varies by state.
Project owners demand additional insured status and other insurance coverage on a contractor’s casualty program for these and other reasons. Contractors will also be required to provide equivalent coverage to contractors in lower categories.
Additional Insured Endorsements
In the insurance industry, there are many different forms of supplementary covered endorsements. However, the focus of this paper will be on four popular ISO supplementary insured endorsements for contractors’ commercial general liability policies. Despite the fact that the endorsements stated are widely available, insurance firms may decide to give their own version of these endorsements. The following are some of the extra insured endorsements that will be discussed:
- Scheduled Person or Organization – Additional Insured Owners, Lessees, or Contractors (CG2010 4/13)
- Completed Operations – Additional Insured Owners, Lessees, or Contractors (CG2037 4/13)
- When required in a construction agreement with you, Additional Insured Owners, Lessees, or Contractors Automatic Status (CG2033 4/13)
- When required in a written construction agreement, Additional Insured Owners, Lessees, or Contractors Automatic Status For Other Parties (CG2038 4/13)
Specific information on the additional insured and the project is required for the first two ISO endorsements. The third and fourth ISO endorsements are “blanket” additional insured endorsements, meaning they don’t require specific information about the additional insured or project information to be included. Instead, they demand the existence of a written contract requiring the additional insured status. In this essay, we’ll refer to the endorsement form numbers.
CG2010 4/13
Since the 1980s, this support has shifted dramatically, and not for the better. The following are some of the key features of the CG2010 supplementary insured endorsement:
- The additional insured (for example, the project owner or general contractor) is not covered if they are solely responsible for their own negligence. Before the extra insured can seek compensation under this endorsement, the insured/contractor must be liable in whole or in part for a loss.
- The additional insured is only covered for active operations. In other words, this supplementary insurance endorsement expires after the contractor’s work on the project is completed. Any future purported claims by the extra insured under this endorsement must have occurred while the insured/contractor was working on the project.
- Coverage under the endorsement is only allowed to the degree that it is permissible under the law (which can vary by state).
- The endorsement does not necessitate the existence of a written contract requiring this enhanced insured status.
- If a contract exists, however, the coverage offered by this endorsement will not be more than the contract’s requirements. Furthermore, the endorsement will pay the smaller of the contract’s required amount OR the policy limit.
While the coverage may be fairly comprehensive and advantageous to the additional insured, the endorsement is full of terms, limitations, and exclusions. A savvy project owner or general contractor may try to circumvent these criteria and limitations by informing the contractor that they are not permissible. However, most insurance companies are unlikely to (or even able to) change the endorsement. As a result, all the project owner or general contractor has accomplished is potentially putting the contractor in a breach of contract situation since he or she is unable to meet the demand.
CG2037 4/13
This endorsement has the same limitations and conditions as the CG2010, with the exception that it covers the additional insured for the contractor’s finished operations rather than ongoing operations. This endorsement is in addition to the CG2010.
As a result, if an extra insured requests additional insured status for a project, the contractor will need BOTH the CG2010 and CG2037 endorsements to comply.
ABC University, for example, is seeking contractor bids to construct a new student facility. ABC University requests that each contractor on the project adds ABC University as an additional insured on the commercial general liability policy, which will cover ABC University both during and after the construction phase. In this case, the CG2010 (or its equivalent) would be necessary to insure ongoing operations as well as the CG2037 (or its equivalent) for completed operations once the work was finished.
CG2033 4/13
The following limitations and conditions apply to this additional insured endorsement, which is a blanket additional insured endorsement:
- The additional insured (for example, the project owner or general contractor) is not covered if they are solely responsible for their actions. Before the extra insured can seek compensation under this endorsement, the insured/contractor must be liable in whole or in part for a loss.
- The additional insured is only covered for active operations. In other words, this additional insured endorsement expires after the insured/work contractor’s on the project is completed. Any future asserted claims by the additional insured must have occurred while the insured/contractor was working on the project.
- When a party’s additional insured status is required by a written contract, the additional insured status is automatically granted. The designated party who enters into a contract with the contractor receives additional insured status.
- The coverage provided by this endorsement will not exceed the contract’s requirements. Furthermore, the endorsement will pay the smaller of the contract’s required amount OR the policy limit.
Despite the fact that an endorsement automatically covers additional insureds, there are still a number of conditions, limitations, and exclusions. Furthermore, because this endorsement excludes finished surgeries, a second endorsement is required to cover completed operations for the extra insured.
CG2038 4/13
This endorsement looks a lot like CG2033. The most significant distinction between these two endorsements is that CG2038 pertains to a party or parties requesting supplementary insured status within a construction agreement who are not the original contracting parties with the contractor. In other words, the parties are mentioned in the building contract but not precisely named. “Upstream parties” refers to these “quiet” celebrations. Additional insurance coverage for these upstream parties, such the CG2033, is only for ongoing operations. As a result, if the contract requires it, a second endorsement should be provided that covers finished operations.
Conclusion
Additional insured endorsements are not as broad as they were years ago, whether they are issued by ISO or by insurance firms using their own equivalent endorsements. Limitations, conditions, and other exclusions are included in these endorsements that were not previously included. Project owners may ask for more coverage in their construction contracts than can currently be provided through supplementary insured endorsements. As a result, the contractor may not always be able to secure the desired insurance coverage, producing irritation for both parties. It is critical for all contractual parties to be aware of the additional insured endorsements available in the market and to manage their expectations accordingly.
Jennifer Walker’s paper was first published by AmWINS Group, Inc., and was later edited and adopted by Paperless Insurance Services. Disclaimer: The opinions presented here are not legal advice. The material provided here is for general information purposes only and is not intended to be legal advice. The following discussion of insurance policy terminology is purely descriptive. Each policy has its own set of policy jargon. Individual policy terms and conditions govern the coverage provided by any insurance policy issued. For exact language, please refer to your policy.
What is primary and noncontributory endorsement?
Primary and non-contributory endorsements or policy language designate a specific insurance policy as PRIMARY, meaning it takes precedence over other insurance policies of a specified party; this party is often an additional insured.
This phrase is important because it is frequently used in contract insurance requirements that specify the order in which several policies triggered by the same loss must respond. When we say a policy is triggered, we’re talking about its ability to provide a defense and pay for a judgment.
For example, a contractor may be obliged to offer primary and noncontributory liability insurance to a property owner. This means that the contractor’s policy must respond before any other policies that apply. In other words, the contractor’s policy gives benefits on a first-come, first-served basis, without relying on other policies for help.
Let’s take a closer look at both sections of this to better understand it. In the case of a claim, the “PRIMARY” component indicates that this insurance will be invoked FIRST. This determines which policy must pay the claim in which order. Please bear with us for a moment while we explain this in a real-world scenario later in the film.
The NONCONTRIBUTORY component of the insurance means that it will not seek contributions from other policies to cover the claim. As a result, to the extent that the policy’s insurance coverage allows, this policy is responsible for paying the claim. Only after the claim’s limits have been reached might the remainder of the claim be assigned to another party.
Assume that the proprietor of a hotel chain has purchased land in downtown Chicago for the construction of a new hotel. The hotel’s construction is overseen and managed by the owner, who hires a general contractor. To construct the hotel, the general contractor will recruit other contractors and subcontractors.
The construction contract will include agreed-upon insurance requirements, which will require the general contractor and all subcontractors to list the owner as a primary and non-contributory additional insured.
Using a crane, a subcontractor injures a bystander while working on the building site.
The materials were not correctly fixed by the subcontractor, and they fell to the ground, causing flying debris to hurt passers-by. The owner, the general contractor, and the subcontractor are all being sued by a passerby who was injured owing to illegal rigging. When the owner receives the claim, they forward it to the general contractor, who then forwards it to the subcontractor. The subcontractor’s insurer replies to the claim on behalf of all parties, naming the Owner and the GC as additional insureds on a primary and non-contributory basis. The subcontractor’s insurance responds first, without requesting assistance from the Owner’s or GC’s insurance plans. If the subcontractor’s insurance limits are totally depleted by the claim, the GC and Owner’s policies will respond in accordance with the contract conditions.
The contract often stipulates that the GC’s insurance responds on a main and non-contributory basis for the Owner who is an Additional Insured, providing the Owner with an additional layer of protection.
We hope that this example demonstrated the significance of Primary Non-Contributory Endorsements.
Remember that main and non-contributory endorsements can be applied to different policies, and they specify which parties and policies must respond to claims first, without financial assistance from other parties.
What is the difference between CG2010 and CG2037?
In this case, the CG2010 (or its equivalent) would be necessary to insure ongoing operations as well as the CG2037 (or its equivalent) for completed operations once the work was finished.
What does products-completed operations hazard mean?
One of the risks covered by a general liability policy is Products-Completed Operations. It covers liabilities deriving from the insured’s products or business operations that are carried out outside of the insured’s premises after they have been completed or abandoned.