Broad Form Completed Operation

The insurance answer is that the usual or standard Commercial General Liability (CGL) exclusion in your business insurance policy excludes all of “your work”. This means all the insured contractor’s work that is part of the insured’s contract, and becomes completed operations, is excluded. So only property damaged as a result of the insured’s negligence, apart from the insured’s own completed work, is covered.

The Broad Form Completed Operations extension narrows the excluded portion of “your work” so it only exclude that portion of “your work” that was defective and caused the damage to other work that was not defective. With this addition the CGL will now cover all property damaged by the negligent work of the contractor including all parts of “your work” that were not defective or performed negligently.

The end result of using this extension is that you will see a significant coverage extension. There could be significant or severe exposure to losses arising out of negligent operations due to your performance or critical defective work that caused a major loss to other portions of your work that was not defective but was damaged as a result.

When you look at the resultant damage caused by faulty workmanship on the leaky condos in B.C. you see a strong example of the the effect of this coverage extension. There were millions paid out.

Some contractors that have the highest need for this Broad Form Completed Operations would include Air Conditioning and Heating contractors; Masonry/Concrete contractors; Finishing Contractors; Roofers; Mechanical Contractors; Plumbing Contractors; and Electrical Contractors.

Why are these types of contractors higher risk? The type of work they do blends with worth from others. It is very difficult to separate the non-defective work from the defective. The work can be of a permanent nature with structural components. These are contractors whose work includes coatings, finishing, coverings and work that is non-structural but covers up work that may have been defective.

Contractors that would be considered to be more of a mid-level risk would include Drywall Contractors and Carpentry Contractors. Their operation is not a specific but you can see identifiable defects upon completion such as cracks, ridges or fissures.

The lower risk for the Broad Form Completed Operations exposure is sub-contractors who have easily identified operations.

Your agent or broker should be able to assist you in obtaining the correct coverage for your operation but only if you are forthcoming with details of how/where and when you work. Take control of your risk and make sure that your business remains profitable and ongoing. Use insurance correctly to give you the protection you need from the losses you cannot avoid.