What is products liability?
Products liability is the area of law in which manufacturers, distributors, suppliers, retailers and others who make products available to the public are held responsible for the injuries those products cause.
Major types of claims
There are 3 main types of claims for products liability resulting from the negligence of the manufacturers. They are: manufacturing defect, design defect and failure to warn. A basic negligence claim consists of proof of: a duty owed, a breach of that duty, an injury and that the breach caused the injury.
How can this apply in the Aerospace industry?
Any business or person involved in the design, manufacture, distribution, sale, repair, service or overhaul of: airframes, engines, component parts, sub-component parts, aircraft-related products, airport equipment, ground equipment, fuel, or any products used in the “aerospace environment” has a duty to ensure that his Product does not cause injury or damage to third Parties – i.e. anyone that can be foreseen to be exposed to the results of the use of that Product.
Why do manufacturers need specialist insurance?
Because of the following causes:
- Liability awards can be enormous
- Liability claims might not be made until several years after an occurrence
- Liability can arise anywhere in the world
- Many parties can be involved as co-defendants
- Manufacturers cannot limit their liability (as airlines may be able to under conventions)
- Most non-aviation Public&Products Liability policies specifically exclude aircraft-related liability.
Insurance market solutions: Aviation Products Liability Insurance
In this market, there are a lot of specialist underwriters and brokers. Policy covers broadly to: bodily injury/property damage, grounding, legal and defense costs and contractual liability.
Why are awards so high in the United States?
Because of:
US civil jury system
- Contingent legal fee (“no win, no fee”)
- Punitive damages
- Plaintiffs seek wealthy defendants – “deep pockets theory”
- Lawyers/attorneys seeking plaintiffs (“ambulance chasing”)
- More sophisticated and web-literate claimants.
Summary:
Aerospace manufacturers and service providers can find themselves liable for large liability awards many years after an occurrence. Claims can come from many diverse areas. The Aviation Insurance Market provides cover for these claims. Aviation underwriters require detailed information to set premiums. Unlike Airline Insurance, premiums have only recently started to reduce in this sector.
Source: Documents of Willis International Aviation Insurance Course 2010