When talk turns to insurance in the aftermarket industry, you might assume your peers are discussing liability insurance. But there are several different types of insurance that apply to our industry, with significant differences among them.
There are many types of policies in the aviation insurance market but the ones that most affect the aftermarket are aviation general liability, aviation products liability, and hangarkeepers.
Aviation general liability, or AGL, is very similar to your commercial general liability policy, or CGL. AGL policies cover you if a third party is injured on your property or by your actions. AGL policies are necessary because most commercial general liability policies will not cover aviation-related exposures. These AGL policies are mainly sold to companies that operate on airport property; they do include products liability coverage and completed operations, but do not typically cover grounding.
A straight products liability policy is necessary for businesses that are located away from airport property and already have a commercial general liability policy in place. This type of insurance gives you the aviation products liability coverage that is excluded by your CGL policy. This policy also often includes grounding coverage.
Grounding coverage comes into play if a product you supply causes the FAA to issue a grounding order for a fleet. You may be found liable if it is determined your product did indeed cause the grounding. Remember that this coverage, by definition, only applies to FAA grounding orders, not other grounding issues. For example, some contracts with airlines mandate large amounts of penalty money if you delay one of their aircraft by failing to supply a part on time. Grounding coverage will not help you in that instance.
Hangarkeepers insurance applies to companies that have the care, custody, and control of other people’s aircraft. This coverage is necessary in case you should damage an aircraft while it is in your control.
What’s more, while most aviation insurance carriers offer these policies, the underwriting companies that provide these types of insurance can vary dramatically in their appetite for risk.
As we’ve discussed before, the aviation insurance market is separate from the general commercial insurance market, due to the specialized and significant nature of aviation risk. While a more limited number of insurance companies provide aviation insurance, compared to general commercial markets, we still see plenty of competition. At last count, 20 insurance companies write aviation policies. Of those 20, not all will write aviation products liability insurance policies. However, for the ones that do there is a great deal of competition between those companies for your business, which means savings for you once you determine which types of coverage are appropriate for your business among the options of AGL, CGL, products, grounding, and hangarkeepers.
These are just a few of the policies available in the aviation insurance market. As always, a skilled, knowledgeable broker will help you navigate both the differences between these policies and the differences between the underwriters that offer them, and determine the best fit for your aviation risk.
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Jamie Benthusen is the director of aviation products liability for NationAir Aviation Insurance, one of the country’s oldest and largest aviation insurance specialty brokerages. Benthusen has more than 15 years’ experience in sales and manufacturing for airframe and engine products and test equipment.
