What distinguishes products, completed operations and professional liability?
A product is a tangible good sold to consumers; think "things" when you think about products. Products liability protects a business that manufactures or sells a product from claims for injury, illness, or property damage caused by that product.
Completed operations refers to work that has a clear start and finish, typically part of a larger system rather than a standalone item. For example, installing an HVAC system is a completed operation, while the outdoor compressor unit itself is a product.
For construction-specific guidance about how these coverages interact, see Products, Completed Operations & Professional Liability in Construction.
Professional liability insurance covers service-oriented businesses such as designers, architects, dentists, doctors, and hair stylists. The central distinction is service (professional liability) versus a manufactured product (products) or an installation task (completed operations).
That distinction matters in claims negotiations because a professional liability claim often implies poor professional judgment or incompetence, which can harm a practitioner's reputation. A paid claim can be perceived as an admission of dereliction of duty.
Insurers evaluate claims as a business decision: they weigh the long-term cost of settling against the benefit of denying a claim. Reputation and professional standing typically don’t factor into that calculation from the insurer’s perspective.
To address the perceived conflict of interest, many policies now allow the insured professional to veto a settlement offer. If the professional rejects a proposed payment, the insurer’s remaining limit is usually reduced to the agreed claim amount plus any legal and claims costs incurred up to that point.
Consider this example: an architect with a $1,000,000 professional liability policy inspects a structure and determines it’s unsafe for renovation. If the contractor persuades the owner to proceed and the building later collapses, the owner may sue the architect for "allowing" work to start before safety issues were fixed. If the insurer offers to settle for $100,000 after spending $25,000 on legal costs, the architect must decide whether to accept the settlement.
If the architect refuses the settlement, the policy’s remaining limit may be reduced to the settlement amount plus costs (in this example, $125,000 inclusive). That makes the choice a difficult reputational decision for the professional rather than a straightforward business calculation.
For practical guidance on contractor and design-builder liability interactions, see Contractor and Professional Liability in Design-Build Construction.
If you want to review how these coverages apply to your work, talk to an agent.
Frequently Asked Questions
How do I know whether a claim is covered as a product, completed operations, or professional liability?
Coverage depends on the nature of the loss: a defective tangible item points to products coverage, work performed and finished points to completed operations, and negligent professional services point to professional liability.
Can a professional veto every settlement proposed by their insurer?
Policy language varies, but some professional liability policies include a veto right; refusing a settlement typically reduces the insurer’s remaining limit by the settlement amount plus costs already incurred.
Will vetoing a settlement increase my out-of-pocket exposure?
Yes. If you veto a settlement, you may be responsible for any additional defense costs and damages that exceed the reduced policy limit if the case proceeds and results in a larger judgment.
Should I involve my insurer early when a potential claim arises?
Yes. Prompt notice helps ensure coverage defenses and claims-handling obligations are preserved and lets you benefit from the insurer’s claims resources and legal defense.