DISCUSSION ON THE PRODUCTS-COMPLETED OPERATIONS HAZARD

At one time, manufacturers felt protected by a general rule that they were not liable to anyone with whom they did not deal directly. This rule has deteriorated to the point that products liability cases are often the most expensive cases litigated and paid. The Uniform Commercial Code–Article 2 provides a nationwide understanding of the relationship between the buyer and the purchaser. This change moved product lawsuits from occurring only when a product was inherently dangerous to a strict liability where the manufacturer must prove innocence.

This is not a problem only for manufacturers. Court decisions are holding servicepersons and repairpersons liable for failure to take steps that would have prevented accidents. Even a seller may be held liable for a defect in the goods it markets, even though the product is made up and packaged by a remote manufacturer and is sold in the original sealed container. Although the retailer may do nothing to the product except turn it over to the purchaser, it has been held that it makes an implied warranty that the goods are fit and proper for the purpose announced. The retailer’s liability is even clearer, of course, if it makes any statement regarding the safe or adequate or effective nature of the product it merchandises.

Coverage for products-completed operations is provided under Coverage A–Bodily Injury and Property Damage. It covers bodily injury and property damage arising out of the insured’s product or work. Coverage applies only to bodily injury or property damage occurring away from the insured’s premises or out of work the insured has already completed.

It is not required that the product be paid for. Coverage begins when the product has been relinquished to others and is away from the insured’s premises.

As an example, assume that a customer comes into the insured’s hardware store to purchase a lawn mower. While checking the equipment in the store, the customer is injured by a mower blade. The liability of the store owner for the occurrence would not come under the products-completed operations hazard, but under the basic policy. However, if the insured had delivered a lawn mower to the customer’s home and left it for the customer to try out, and a defect in the equipment caused an accident, the products-completed operations hazard would apply to the loss, even though the customer had not paid for the item, and it was still legally the property of the merchant.

By the same token, if an insured contractor is working for a customer at the customer’s premises but has not completed the contracted-for work, and an accident arises out of a condition in the work that the client contends is the liability of the contractor, the occurrence would not come within the products-completed operations hazard. If, on the other hand, the work had been completed and sometime later an accident occurred, which was claimed to be due to the faulty work of the contractor, the latter’s policy would respond under the products-completed operations hazard coverage.

Completed Work
The policy states that the insured’s work is considered to be completed at the earliest of the following:

·         When all of the work called for in the insured’s contract has been completed

·         When all the work called for at a particular site has been completed, even though the contract still calls for work at other sites

·         When that part of the work at a site has been put to its intended use by any person or organization other than another contractor working at the same site

Work that may need service, maintenance, correction, replacement, or repair, but is otherwise complete, is treated as complete.