Products and Completed Operations (PCO) insurance addresses liability that continues long after a product has been sold or a service has been rendered. The exposure from past work or products remains even after businesses manage the risk of accidents that occur during their daily operations. PCO coverage is a necessary protection for any business whose activities can cause injury or damage to a third party after the business has relinquished control. This coverage shields a company from the financial impact of lawsuits that can arise months or even years following an engagement or sale.
Defining Products and Completed Operations Coverage
Products and Completed Operations coverage is a type of liability protection designed to handle claims of bodily injury or property damage that occur away from the business premises and after the insured’s product has left their control or their work has been finished. The two distinct parts of this coverage address the liability exposure arising from manufactured goods and completed services. For coverage to apply, the injury or damage must be caused by the product or the completed work.
This protection covers the costs, including legal fees, settlements, or judgments. PCO coverage specifically addresses liability that can arise from allegations of negligence, breach of warranty, or strict liability related to the product or work. The policy is triggered by the occurrence of bodily injury or property damage, even if the claim is filed long after the policy period has ended, provided the policy was active when the damage occurred.
The “Products Hazard” Component
The “products hazard” component of PCO coverage is product liability insurance, protecting against claims arising from goods that a business has manufactured, sold, handled, distributed, or disposed of. A product includes any tangible goods or wares. This protection activates once the product is no longer in the physical possession of the insured.
Claims covered fall into three categories: manufacturing defects, design defects, and failure to warn. A manufacturing defect involves an accidental error during the production process, such as a faulty component in an appliance or accidental contamination in food. Design defects relate to an inherent flaw in the product’s blueprint, making it unreasonably dangerous even when produced exactly as intended. Failure to warn claims involve inadequate instructions or insufficient safety warnings on the product’s labeling.
The “Completed Operations Hazard” Component
The “completed operations hazard” focuses on liability stemming from work or services that have been finished and put to their intended use. This coverage is relevant for contractors and service providers whose work is performed away from their own business location. The work is considered “completed” at the earliest of several points: when all work called for in the contract has been performed, when the work has been put to its intended use by the client, or when the client formally accepts the work.
A common example involves a construction contractor whose poorly installed wiring later causes a fire, or a plumber whose faulty pipe connection causes a basement flood months after the job was done. The coverage protects the business against claims that the completed work was defective and subsequently caused bodily injury or property damage to a third party. Even minor repair work or maintenance is considered complete once that specific task is finished.
Essential Exclusions and Limitations
While PCO coverage is broad, it contains several exclusions that define the policy’s scope. A major limitation is the exclusion for the cost to repair or replace the defective product or work itself. The policy covers the resulting injury or damage to other property, not the financial remedy for the faulty item or service provided by the insured.
Claims arising from professional services, such as architectural design or engineering advice, are excluded, as these exposures require a separate Professional Liability (Errors and Omissions) policy. The cost associated with recalling a defective product from the market, known as the “sistership exclusion,” is not covered by a standard PCO provision. Furthermore, the policy excludes damage to “impaired property”—property that is unusable solely because it incorporates the insured’s defective work or product, but has not suffered actual physical damage.
Businesses That Need Products and Completed Operations Coverage
A wide range of businesses requires PCO coverage because their activities create a post-operation liability exposure. Manufacturers, wholesalers, distributors, and retailers of tangible goods need the “products hazard” protection, as they can be held liable for defects in items they sell, even if they did not manufacture them. Any business that puts a product into the stream of commerce faces this risk.
The “completed operations hazard” is relevant for all types of contractors and service providers. This includes general contractors, home builders, electricians, plumbers, HVAC installers, painters, landscapers, and maintenance service companies. Any business that performs work off-site and whose finished project could later cause injury or damage to a customer or their property needs this protection.
The Connection to Commercial General Liability
Products and Completed Operations coverage is not a standalone policy but is one of the fundamental components found within a standard Commercial General Liability (CGL) policy. This coverage is included as part of the CGL Coverage A, which addresses bodily injury and property damage liability. Standard CGL forms contain the PCO provisions as a core part of the policy structure.
The CGL policy addresses two distinct risk periods: ongoing operations and post-operations. Premises and operations coverage handles incidents that occur while work is actively being performed or on the business’s property, such as a customer slip-and-fall. In contrast, the PCO component covers the period after the work is finished or the product has left the business’s control.