Whether your products are homemade or you're reselling, despite best efforts there is always a chance that your products may fail to work properly, be defective, cause bodily injury, or cause property damage. This could lead to a lawsuit. These types of claims would fall under either the Product Liability or Products-Completed Operations part of your Commercial General Liability policy.
First, let's talk about Product Liability coverage.
Product Liability (PL) insurance covers claims arising from damages or injuries caused by a product sold or supplied by a business. PL coverage can apply to claims that arise due to defects in a product itself (including design defects and manufacturing defects), failure to work properly, or failure to provide adequate warnings or instructions.
Examples: You're a food vendor, and as such, you have high legal obligations to create and serve food safe for human consumption. If a patron gets sick from eating your products, there's a good chance you may be liable for the damages that result.
Another example: the infamous McDonald's hot coffee lawsuit: A woman accidentally spilled a cup of McDonald's coffee on her lap and suffered third-degree burns. She sued McDonald's for failing to warn consumers about the temperature of the coffee being served.
Next, we'll go over Products-Completed Operations coverage.
Products-Completed Operations (PCO) insurance is a broader coverage that includes Product Liability, but also extends to completed work or services that a business has provided. This coverage includes claims for bodily injury or property damage that occur after a product has been sold or a service has been completed. PCO is important for businesses that provide services or install products that could potentially cause harm or damage after they've been delivered or installed.
Example: You have a booth at a fair that provides henna services. After applying your henna design on a customer, they have an allergic reaction. This could be a covered claim of the Products-Completed Operations part of your Commercial General Liability policy.
Another example: You provided DJ services for a house party. A week later, the homeowner is setting their personal sound system back up and runs into electrical problems. They sue you for the damage. The claim would fall under the Products-Completed Operations coverage of your policy.
So, what's the difference? Product Liability (PL) specifically focuses on claims related to defects in products, while Products-Completed Operations (PCO) extends coverage to services and completed operations. PL covers incidents that occur while the product is in use or has caused direct harm, whereas PCO coverage covers incidents that may occur after the product or service as been delivered or completed. PL is more narrowly focused on tangible products and their defects, whereas PCO encompasses a broader range of completed services and operations that could lead to liability claims.
In closing, while Product Liability deals with the liability arising from defective products, Products-Completed Operations extends coverage to completed operations and services provided by a business or sole-proprietor.
Reminder: there is no Product Liability or Products-Completed Operations coverage for the following items:
- CBD products
- Firearms
- Fireworks
- Infant products
- Knives
- Marijuana products
- Nutritional products
- Supplements
- Swords
- Tobacco products
If you have any questions about what's covered in this blog, please reach out to our office at 715-246-8908 or email info@specialtyinsuranceagency.com.
