Shop Liability: How Risk Management Can = Premium Savings
An aviation mechanic’s career changes course often. Many mechanics will change employers, move to a different sector of the business, or start their own maintenance shop. A small sub-set will offer very specialized services to general aviation or airlines as contractors. When the decision is made to become “the boss,” risk management and insurance become more important than ever before.
My article in the September issue provided insight into the present aviation insurance climate, the availability of limits and the “buyers’ market.” This article will address the importance of a personalized approach when it comes to purchasing shop insurance, and how knowing your exposures is crucial to your operation.
1. Work with a broker who has seen your operation
Since no two maintenance shops are identical, it is extremely important to have your insurance broker pay a personal visit to your location. The visit will allow your broker an inside look at what hazards that insurance may protect against. A good broker will identify practices that your company does well, and suggest ways to improve. On many visits, I find hazards that can’t be conveyed on a paper application. The more knowledge your broker has about your operation, the better they can go to bat for you with the underwriter. If the actual underwriter can see the shop, all the better. This personal attention and approach becomes invaluable when it comes time to shop for premium quotes.
2. “Hangar Rash” and other exposures
Every business has general liability exposures. One of the greatest exposures for a maintenance shop is aircraft service, or parts sold. The most catastrophic exposure aviation businesses can encounter are claims that their workmanship or product caused an accident involving significant injuries, death, or damage to property. It is important to carry the proper limits and incorporate risk management strategies in order to minimize the impact on your business. Working with an experienced and knowledgeable broker that has seen your operation can minimize your risk of exposure.
Another common area of claims is “hangar rash,” in which an aircraft left in the care, custody, and control of the maintenance facility is damaged. Typically, a repair facility will hangar several different airplanes with significantly different values while performing routine maintenance duties. Whether a $30,000 Piper Cherokee, an $800,000 Cirrus SR22T, or a $4,000,000 Pilatus PC12, it is critical that the business has the correct level of protection. Even what appears to be minor damage can become a large claim when Loss of Use and Diminished Value is factored in.
3. But … I thought I was covered…
Know the coverage triggers. For example, let’s say that you use an uncalibrated tool and the work comes back to you to do again. Don’t assume that you are covered by insurance in this scenario. Your broker should be able to explain specific scenarios and examples of covered and uncovered claims.
Shop owners must wear many hats: mechanic, general manager, human resources, and IT to name a few — it is important to add the hat of “Risk Manager” to the rack. Managing risk will pay off in numerous ways: reduced exposure, proper coverage in the event of a claim, and reduced premiums. Schedule plenty of time with your insurance broker to review your policy limits and coverage. Be familiar with the coverages and ask questions before a claim. The long-term benefit of having insurance protection when you need it will far outweigh the few extra minutes (or hours) you spent with your broker and underwriter.
Steve Bruss is president of Wings Insurance, an independent aviation insurance broker headquartered in Minneapolis, MN. Steve has 22 years' experience in aviation insurance, and is also a licensed commercial pilot and flight instructor. He can be reached at [email protected] or by calling (952) 641-3140, www.wingsinsurance.aero.
