Insurance Law Alert: California Court Recognizes the Distinction Between Completed Operations and Products

The California Court of Appeal recently held in Baker v. National Interstate Insurance Company, ___ Cal. App. 4th ___ (December 30, 2009), that “products” and “completed operations” are two distinct categories in the modern CGL policy. Thus, a “products-completed operations” exclusionary endorsement bars coverage for the insured’s post-sale inspection and maintenance of a school bus (completed operation), as well as its liability as seller of a product. The Court distinguished INA v. Electronic Purification (1967) 67 Cal.2d 679, which had a “products” (only) exclusion that internally mentioned operations. That court held that, given the title of the endorsement, and the internal positioning of the operations language, the exclusion would only apply to operations directly involving a product, and not the insured’s independent business operations. Thus, the Electronic Purification insured’s faulty repair of a swimming pool light was independent of its installation of sanitizing equipment and, thus, not excluded. The Baker court found that an exclusion for both products and completed operations would be effective to completely exclude coverage.

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January 12, 2010