Aerospace liability insurance guide

A highly technical insurance environment

Companies working in the aviation sector operate in a particularly demanding environment, where technical, contractual and operational issues meet.

Maintenance, handling, production, inspection or training: these activities carry liabilities that may be triggered in complex situations, often involving many parties and an extended value chain.

In this context, insurance is not merely a risk-transfer tool: it is an instrument for structuring and securing the business.

An exposure defined by low-frequency, high-severity claims

One of the main features of aviation risk is the gap between the frequency and the severity of claims.

Although loss events remain relatively rare, their consequences can be particularly significant:

damage to high-value aircraft
impact on flight safety
significant bodily injury
indirect economic consequences

Added to this is the possibility of delayed claims, particularly in connection with technical services or defects that cannot be detected immediately.

A structuring link between professional liability and product liability

The cover structure rests mainly on two complementary pillars, and the way they fit together is essential to understanding the risk.

Professional liability covers damage caused in the course of operations, whether a handling error, an incident during a job or a failure in the service provided.

Product liability applies after a product or component has been put into circulation. It relies on specific mechanisms, particularly as regards its trigger, which is often conditional on the occurrence of an aviation accident.

This is a major point to watch, since some costs arising from a defect may not be covered where no actual loss event has occurred.

The decisive role of cover extensions

Beyond the basic cover, the real effectiveness of an insurance programme depends on its ability to include extensions suited to the actual situations companies face.

Some operations, although common in practice, may fall outside the scope of standard cover.

This is particularly true of:

removal and refitting of parts
product recall campaigns
fleet grounding situations
post-maintenance test flights
extension for motor vehicles (complementing a motor insurer)

These extensions cover exposures that would otherwise be excluded, and are often decisive for the overall relevance of the cover.

The weight of contractual environments

In the aviation sector, liability is not limited to the technical side of operations. It is also strongly shaped by the contractual frameworks in which the activities take place.

Standard contracts, particularly in the IATA environment (such as the SGHA), allocate liabilities between the parties, with limitation and even exemption mechanisms.

This frequently results in a gap between:

the actual value of the damage (for example, that of an aircraft)
and the level of liability that can actually be called upon

This gap requires contracts and insurance cover to be read together.

A chain of liability involving multiple parties

The complexity of the sector also stems from the number of parties involved in a single operation.

An incident may involve:

a maintenance provider
an airport operator
a parts supplier
an operator

This interconnection creates a “chain of liability”, in which identifying who is liable can be lengthy and legally complex.

In this context, the structuring of cover must take this operational reality into account.

Structuring relevant cover

Building an effective insurance programme relies on a methodical, context-based approach.

It involves:

a detailed analysis of the activities
an understanding of the interactions between parties
a thorough reading of contractual commitments
identification of critical scenarios

The aim is not only to cover the identified risks, but to ensure the overall consistency of the arrangement.

The value of specialist expertise

Given the complexity of the mechanisms involved, working with a specialist is a key factor in securing the business.

Sector expertise makes it possible to:

anticipate gaps in cover
adapt cover to operational realities
structure programmes consistently with contractual constraints

Conclusion

Aviation liability for companies cannot be approached through standard templates.

It requires a comprehensive approach that takes in the technical, contractual and operational dimensions of the risk. It is this capacity for analysis and adaptation that determines how relevant and effective the cover is.

Professional liability

There is frequently a gap between the actual amount of damage and the contractual liability actually applicable. This gap can leave your company exposed to claims that are only partially covered if your insurance programme has not been structured to take these specifics into account.

A fundamental cover for any company working on or around aircraft

Aerospace professional liability insurance is the essential base cover for any company whose activity involves direct or indirect interaction with aircraft, aviation equipment or airport operations.

Unlike standard professional liability, aerospace professional liability is designed to address the unique nature of the sector's risks: the extremely high value of damaged aircraft, the complexity of liability chains involving several parties at once, and the specific regulatory requirements imposed by civil aviation authorities (EASA, DGAC, FAA).

What aerospace professional liability covers

Damage caused during interventions

Any operation carried out on an aircraft, a part or an aviation sub-assembly (maintenance, repair, inspection, modification) can engage the liability of the party involved in the event of damage to the aircraft, the part being worked on or third parties. This liability is assessed in the context of the services performed, and its coverage depends on the legal status of the item at the time of the work. When the aircraft, part or sub-assembly has not been legally entrusted to the Insured, for example during work carried out at the customer's premises, the damage falls under Operational Liability cover. When it has been legally entrusted to the Insured, in particular when it is placed in its custody in its workshops or hangars, Liability for Entrusted Property cover applies.

Finally, the liability of the party involved can also be engaged once the service has been fully completed and the item returned to its owner: if damage occurs later as a result of defective work, Completed Operations (Post-Delivery) Liability cover takes over, covering the consequences of services delivered and completed.

Ground incidents

Collisions, impacts during towing, damage during parking or refuelling: ground incidents are frequent and can generate significant claims.

Maintenance errors

A technical error in carrying out a maintenance operation can have dramatic consequences in flight, with liability potentially exceeding several tens of millions of euros.

Handling errors

Incorrect positioning of equipment, an incorrect loading or unloading procedure, or a refuelling error can engage the operator's liability.

Activities concerned

MRO
Handling

MRO (Maintenance, Repair & Overhaul) centres and airport handling providers operate at the heart of high-risk environments. Constant proximity to high-value aircraft, the multiplicity of parties involved and operational pressure create conditions conducive to accidents, even among the most rigorous operators.

Aviation maintenance (MRO)

MRO centres are exposed to specific risks linked to the very nature of their activity:

Maintenance errors leading to an in-flight incident or accident
Material damage caused to the aircraft during operations
Liability linked to post-maintenance test flights
Risks during the removal and refitting of components
Liability of certified technicians and engineers

Airport handling, IATA conventions and the SGHA

Handling operators face recurring claims linked to ground operations:

Damage caused during pushback or towing
Collisions between ramp vehicles and aircraft
Incidents during baggage loading or unloading
Liability during refuelling operations
Damage to boarding bridges

Aerospace companies operate within a highly structured contractual framework, governed by international conventions that precisely define the liability of each party. These conventions have direct implications for the structure of your insurance cover.

SGHA / IATA agreement

The SGHA (Standard Ground Handling Agreement) is the standard contract governing relations between airlines and handling providers. Its particular liability structure requires your insurance programme to be adapted accordingly.

Liability limitations for the handling provider
Mutual waivers of recourse between parties
Minimum insurance obligations imposed
Indemnification clauses specific to aircraft damage

Aerospace contractual liability

Beyond sector-wide conventions, every commercial contract in the aerospace sector may contain specific liability, indemnification or waiver-of-recourse clauses. These clauses must be analysed and factored into the structuring of your insurance programme to avoid any coverage gap.

Products liability

Protect yourself against the consequences of a defect after delivery

Aerospace products liability covers the financial consequences resulting from a design, manufacturing or warning defect affecting an aviation product or component delivered to a customer, after the customer has taken possession of it.

In the aerospace sector, a product defect can trigger a chain of liability involving manufacturers, subcontractors, equipment suppliers and operators. The amounts at stake can reach several hundred million euros when a defective component is implicated in an aviation accident.

Operations liability, liability for property entrusted, and post-delivery liability

A company can take out an Operations Liability cover for damage it might cause during an intervention at a customer's premises, for example; the same applies to the Property Entrusted Liability cover, which is intended to cover damage caused to property entrusted to it and damage resulting from that entrusted property.

Operations liability: it covers the financial consequences of the liability that may fall on the insured in the course of its aviation activities, excluding liability relating to entrusted property and to aviation products (product risk).
Liability for property entrusted: this cover addresses the financial consequences of the insured's liability when engaged in the course of its aviation activities following bodily injury or consequential material or immaterial damage caused to entrusted property, or to third parties as a result of that entrusted property, including to occupants of entrusted aircraft.
Post-delivery liability: it covers the financial consequences of the insured's liability when, after the delivery of an aviation product or the completion of a service, bodily injury or consequential material or immaterial damage attributable to product risk occurs, due to a fault, omission or technical or professional defect.

One point common to these three covers is worth highlighting: the notion of liability. These covers can only be triggered if the insured's liability is established; failing that, the insurer has no role to play and will not indemnify the third parties concerned.

An important exclusion applies to the Property Entrusted Liability cover: it excludes damage caused to entrusted property — or by it, including aircraft or their equipment — of which the insured and/or its staff are the owner, tenant, lessor, borrower or occupant, or which they use for their own activities or needs.

How a products liability claim unfolds

The cover is triggered even after the product has left your premises, as soon as a causal link is established between the defect and the damage that occurred.

Indemnification of bodily injury and material or immaterial damage caused to third parties following a defect in your product or component.

When a defect affects a series of products or components, the cover can extend to all the consequences, including recall actions and replacement costs.

The cover applies in the context of an aviation accident, subject to the terms of the policy.

Grounding and aviation product recall

Extensions of cover that are often necessary

Among the most critical extensions of cover in the aerospace sector, grounding (suspension of flights) and product recall are frequently absent from standard insurance policies. Their absence can expose companies to considerable financial losses.

Suspension of flights (grounding)

Grounding occurs when a defect identified in a component or system requires one or more aircraft to be grounded, pending inspection or modification.

Grounding of an aircraft following an airworthiness directive
Grounding of an entire fleet in the event of a series defect
Business interruption losses linked to the suspension of operations
Costs linked to mandated inspections and modifications

Product recall

Product recall covers the costs generated by the withdrawal from the market of an aviation component or system recognised as defective, whether or not it has caused an accident.

Costs of withdrawing defective components
Replacement and reinstallation costs
Recall management logistics
Crisis communication and administrative costs
Following an official decision by an administrative authority

Also covered: the removal and refitting of defective parts, the extension of test flights for MRO workshops, as well as war and allied risks (sabotage, terrorism, malicious acts).

Industrial aviation risks

A comprehensive approach for manufacturers and equipment suppliers in the sector

Aerospace manufacturers and equipment suppliers face specific risks linked to the production and certification chain. Unlike service providers, their liability can be engaged several years after a product is delivered, on the basis of a design or manufacturing defect not identified during quality checks.

Manufacturers and builders

Design, manufacturing and certification liability cover for players in aerospace production.

Equipment suppliers

Protection against risks linked to placing components and on-board systems on the market.

Subcontractors

Cover tailored to tier 1, 2 and 3 subcontractors involved in the aerospace production chain.

International operations

Cover for companies operating across several geographic markets with varying regulatory requirements.

War and terrorism risks

Extension of cover for sabotage, terrorism and malicious act risks affecting your facilities or products.

Regulatory compliance

Taking EASA, FAA and national regulatory requirements into account when structuring cover.

Standard cover is not enough to address aerospace risks

Secure your company with an expert, tailored approach: we analyse your risks, your contracts and your obligations to offer you a perfectly suited insurance programme.

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Aviation liability: understanding, structuring and controlling high-stakes risks