Aviation, with its marvels of engineering and innovation, plays a crucial role in connecting the world. As the industry continues to evolve, so do the risks associated with aviation products. In the United Kingdom, aviation products liability insurance is a critical component for manufacturers, suppliers, and other entities involved in the aviation supply chain. This blog explores the nuances of aviation products liability insurance in the UK and its significance in an industry where safety is paramount.
Aviation products liability insurance is a specialised form of coverage designed to protect manufacturers, distributors, and suppliers of aviation products from legal and financial repercussions arising from defects or failures in their products. This type of insurance provides coverage for bodily injury, property damage, or financial loss resulting from the use or malfunction of aviation products.
Key Components of Aviation Products Liability Insurance
- Scope of Products: Aviation products liability insurance typically covers a broad range of aviation products, including aircraft components, engines, avionics, landing gear and other related equipment. Essentially, any part that flies qualifies. In fact, some policy wordings extend to incorporate ground handling tools and equipment. The scope may also extend to cover damages resulting from the use of unmanned aerial vehicles (drones).
- Legal Defence: In the event of a claim or lawsuit, the insurance policy usually covers the costs associated with legal defence. This includes legal fees, court costs, and settlements or judgments, up to the policy limits.
- Coverage: An aviation product liability policy protects the manufacturer against third party legal liability arising from damage or injury caused as a result of a failure of their product. Similar to all other aviation insurances, there has to be an ‘occurrence’ that results in either third party bodily injury or property damage. Cover provides protection against claims from external parties, such as passengers, airlines, or other affected entities.
- Grounding Liability: This extension provides third-party liability cover with quite extensive limits to defend and indemnify a manufacturer against claims for loss of use caused by grounding of a fleet. For cover to be triggered, there must be an ‘occurrence’ and a mandatory order by the Civil Aviation Authority or suchlike authority.
- Retroactive Date: Aviation products liability policies sometimes include a retroactive date, which specifies the date from which coverage begins. Claims arising from events before this date may not be covered.
- Limits and Deductibles: Policies come with cover limits and excesses that determine the maximum amount the insurer will pay and the amount the insured must pay before the cover takes effect.
Significance for the Aviation Industry in the UK
- Safety Culture: Safety is the holy grail in aviation. Aviation products liability insurance encourages a culture of safety within the industry by incentivising manufacturers to maintain the highest standards in design, production, and testing. Maintaining full traceability of manufacturing, supply, and documentation is key to defensibility in a claim*
- Risk Mitigation: In an industry where the potential consequences of product failure are severe, aviation products liability insurance serves as a crucial risk mitigation tool, providing financial protection and fostering responsible business practices.
- Contractual Compliance: Aviation products liability insurance is often a contractual requirement for businesses involved in the aviation supply chain in the UK. Contracts often impose waiver of subrogation rights and hold harmless clauses, requiring policies to be endorsed accordingly.
Aviation products liability insurance is a cornerstone of risk management in the dynamic and complex aviation industry. As technology advances and aviation products become more sophisticated, the importance of comprehensive insurance coverage cannot be overstated. In the UK, stakeholders in the aviation supply chain must navigate these insurance complexities to ensure the safety of their products and the continued growth and sustainability of the aviation sector.
*Many manufacturers wrongly assume because they are lower down the supply chain, they are by extension, removed from Aviation product liability claims. Some years ago, we had a client who supplied component parts into a major OEM in the South West UK. There was a claim following the failure of this suppliers bearings which resulted in an aircraft being downed and a consequent grounding of the fleet.
To obtain Indemnity, the supplier, amongst other things, had to demonstrate that these parts had been tested. This was done and the claim paid. No mean feat considering these parts had been supplied some 13 years earlier!
Castlemead Insurance Brokers are the appointed insurance brokers for West of England Aerospace Forum (WEAF). We are highly experienced in working within this industry and offer all WEAF members a Free Insurance Audit as standard. To speak to an expert, email info@castlemead.com
About Us
Founded in 1987, Castlemead Insurance Brokers is an independent commercial insurance broker, specializing in Corporate Insurance, offering a full insurance broking and risk management service to our clients. Offices in the South-West of England, with clients across the UK, including Scotland and Channel Islands. Castlemead are experts in International Insurance Programmes and are partner members of the GBN Insurance network. We also have an EU subsidiary to aid placing insurance policies with modest EU Insurance risk.
