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ITIC IN THE NEWS - Are you covered? Article by Melanie Thomas in the latest edition of Regional International
To see the article as it appears in Regional International magazine, please click here. The article can be found on pages 10 - 11.
Melanie Thomas, account executive at International Transport Intermediaries Management (ITIM), managers of International Transport Intermediaries Club (ITIC), and ITIC’s aviation specialist, discusses the importance of professional indemnity insurance for aviation professionals.
Professional indemnity (PI) insurance provides cover for aviation professionals for claims which are brought against them for losses suffered by their customers as a result of their negligence, error or omission. The majority of professionals in regulated professions such as surveying, accountancy and architecture are required by their professional bodies to hold PI insurance. However, while PI insurance remains uncommon in the aviation sector, it is gaining importance. This is perhaps surprising in a sector which is as heavily regulated and safety-critical as aviation. When the accountancy, surveying and architectural professional bodies first introduced their PI requirements it was not aimed at resolving safety concerns but rather at protecting the end customers or clients of their members.
Your duty of care
Any party who acts as a professional providing advice, information, design, consultancy or asset management services, owes a duty of care to his or her customers, clients or principals. Examples in the aviation sector include continuing airworthiness management organisations (CAMO), aircraft charter and lease brokers, airframe and buyer-furnished equipment (BFE) designers and those carrying out and certifying supplemental type certificates (STCs). The standard of duty of care is the provision of ‘reasonable skill and care’.
In the event that the services provided by a professional fall below the standard of reasonable skill and care and cause customers, clients or principal a loss, he or she can seek to recover these losses. For this reason it is now commonplace for contracts used in many sectors to hold a specific requirement for PI insurance.
The world is becoming more and more litigious and not all claims have any merit. A PI policy is also there to protect the policy holder. Escalating legal fees mean that the cost of innocence has never been higher, and in the event that an unfounded allegation of negligence is made against you a PI insurance policy will pay for the valuable defence of your interests. ITIC has funded the defence of spurious claims against assureds in a variety of worldwide jurisdictions, including the US and Canada, and can also manage the claim on behalf of the assured. Put simply, any company providing advice, design, consultancy and asset management services should be covered by PI insurance. It is difficult for many professionals to imagine a claim being made against them but mistakes frequently occur. If an error or omission causes a loss to your customer or to a third party then you could be held responsible. You could even be sued when you have done nothing wrong, simply because you act as an agent for somebody else.
ITIC’s aviation experience
Examples of the range of aviation professionals that ITIC currently insures include many service providers whose clients are aircraft operators and owners and lease management companies. Aviation consultants who advise on air operator’s certificate (AOC) and operating license applications and AOC manual preparation can be drawn into a dispute with their clients if their AOC application is not successful. Regardless of whether the claim has any merit or not, it still requires defending and a PI insurance policy would fund the cost of this defence. Likewise, aircraft surveyors appointed by lessors or lease management companies to carry out mid-lease and lease termination reviews can be drawn into disputes between the lessor and the lessee regarding the condition of the aircraft, especially when his or her report was relied upon by either or both parties. It is not difficult to envisage how this could then escalate to an allegation of negligence against the aircraft surveyor. Aircraft charter, lease and sale and acquisition brokers who act as an intermediary only and do not sub-lease the aircraft are not protected under the aircraft’s liability insurance as this is designed to cover operational, and not professional, risks. They also rely on the information provided to them by the aircraft lessor. Brokers have been drawn into many claims for misrepresentation because the information supplied was not accurate.
Continuing airworthiness maintenance organisations (CAMO) play a vital role in ensuring an aircraft’s continued airworthiness. If the aircraft is flown when not airworthy, this could not only cause a serious accident but it could also have disastrous repercussions on the aircraft’s liability and hull insurance, with the potential to prejudice the provision of cover. In addition, CAMO, who are responsible for the storage
of an aircraft’s records, will benefit from a common extension to all PI insurance policies which provides cover for the costs incurred in replacing or restoring documents or computer records which are lost or damaged while in their custody.
Claims made basis
One interesting quirk of PI insurance is that unlike the vast majority of the other commercial and operational insurances available to those in the aviation sector, it operates on a ‘claims made’ basis. This means that claims need to be made during the period of the policy. In view of the claims made nature of the insurance, it is important to maintain continuity of cover and insurer. Claims have often been made against professionals many years after services have been completed and when the assured has relied on their insurance to assist.
The importance of PI
While the importance of a PI policy can be easily overlooked when trying to navigate through the complex web of regulation and insurance requirements in the aviation sector, it remains an essential form of cover for any professional who provides advice, information, designs, consultancy and asset management services. As an operator, by insisting that your service providers hold a PI policy you can be sure that they have the support of an insurer behind them should something go wrong. As a service provider, you can sleep a little easier in the knowledge that you have support in place to manage and fund your defence should your liability for your customers’, clients’ or principals’ losses be called into question.