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Businesses
that make or build or fix things have a continuing need for special liability
insurance coverage even after the business shuts down. This coverage is called
“discontinued products and completed operations liability” and it protects you
and your employees against lawsuits arising out of injury or damage caused by
the products you made or the work you completed while you were in business.
But wait!
You purchased commercial general liability insurance for years – including
products and completed operations liability –while you were making or building
or fixing things. If something happens after you shut down, why won’t the policy
that was in effect when the product was made or the work was done cover the
resulting injury or damage?
The
Commercial General Liability (CGL)
policy does not cover bodily injury and property damage unless the injury or
damage occurs while the policy is in effect. It doesn’t matter when you
manufactured the product or completed the work. The only thing that matters is
when someone is injured or some property is damaged because of your product or
your work. A liability insurance policy must be in force when that happens.
If you are
closing your business, ask your insurance agent about the availability and cost
of “discontinued products and completed operations liability insurance.” There
are laws – called “statutes of repose” – that dictate how long you may be
legally liable for injury or damage caused by your work or products, and thus
how long you may need to carry such insurance.
If you
operated your business as a corporation or some other form of limited-liability
entity, you may want to ask your attorney about whether you or your employees
can be sued personally for accidents caused by your work or products after the
business shuts down and the entity is dissolved.
This article was
prepared and made available to your agent by the Independent
Insurance Agents of Texas, which is solely responsible for its
content. Please read your insurance policy. If there is any conflict
between the information in this article and the actual terms and
conditions of your policy, the terms and conditions of your policy
will apply. The Independent Insurance Agents of Texas is a
non-profit association of more than 1,800 insurance agencies in
Texas, dedicated to helping its members succeed, in part by
providing technical resources that explain insurance policies sold
to their customers.
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