Shutting Down Your Insurance – Commercial Liability Insurance

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.