What distinguishes products, completed operations and professional liability?
A product is a good sold to consumers. Think about "things" when you think about products.
Products liability covers the business that manufactures or distributes a product for injuries, illnesses, or property damage caused by that product.
Completed operations usually describe contracted services with a clear start and end, such as installing an HVAC system. The installation work is an operation, while a manufactured part like an outdoor compressor is a product.
For construction-specific guidance on how these coverages interact on job sites, see Products, Completed Operations, and Professional Liability in Construction.
Professional liability insurance covers service-oriented businesses — designers, architects, dentists, doctors, or hair stylists are common examples. The key distinction is service versus a tangible product or an installation operation.
Professional liability claims are often about alleged poor performance or negligence, and a paid claim can imply dereliction of duty or incompetence, which directly affects reputation.
The insurer’s decision on whether to settle is a business calculation of long-term cost versus benefit; reputational harm to the professional typically is not part of that calculation. In many markets, insurers now offer policy features that give the insured a say in settlement decisions.
When a professional vetoes a proposed settlement, the insurer’s remaining exposure may be limited to the amount the insurer has already spent plus the negotiated settlement amount up to the policy limit; this changes the insurer’s maximum future exposure.
For information about professional liability programs tailored to specialized service firms, see R&D Firms Professional Liability Program.
Example: An architect inspects a building and determines it is unsafe for renovation. If the owner proceeds and the structure collapses, the owner may sue the architect alleging the architect allowed work to continue. If the insurer has spent $25,000 on legal fees and offers a $100,000 settlement, the architect can accept it or refuse; refusing can limit the insurer’s remaining coverage to the combined total already spent plus the offered settlement.
That decision forces the professional to weigh reputational consequences against the insurer’s business judgment, which can make settlement choices more difficult for service providers.
If you need help understanding how these coverages apply to your situation, consider talking to an agent.
Frequently Asked Questions
What is the main difference between products liability and completed operations?
Products liability applies to manufactured goods sold to consumers, while completed operations covers work performed or services completed as part of a contract.
When does professional liability apply?
Professional liability applies to claims arising from professional services, advice, or design work where the allegation is negligence, error, or omission.
Can a professional stop an insurer from settling a claim?
Some policies include a veto or consent clause allowing the insured to refuse a settlement, but doing so can change the insurer’s remaining exposure and how legal costs are handled.
Should I report all incidents to my insurer right away?
Reporting promptly is generally recommended so the insurer can investigate and preserve evidence, but check your policy for specific reporting requirements.