Aviation, Australia and ITIC

ITIC is a leading provider of professional indemnity insurance to aviation and aircraft industry professionals in every specialist field of the industry. ITIC currently insures over 300 professionals, and companies internationally who work in the aviation sector, and 20% of this membership are based in Australia, including: air charter brokers, designers, CAMOS, surveyors, registries and aircraft managers. With over 10 years of expertise, ITIC offers detailed insight into the risk environment in which these professions operate, often helping clients to identify problems before they become issues.

ITIC’s aviation business in Australia has been growing substantially over the past five years, with ITIC’s assured’s most notably facing design, consultancy and air charter broking risks. The following claims are two real life examples ITIC has paid and offered support with, highlighting how you can mitigate loss as a result of negligence, error or omission.

Manufacturing problems always end up on the designer’s desk

A designer of light aircraft was asked by an aircraft builder to design a single turbo prop aircraft, which was to be used for an air ambulance service between small islands off a coastal area. The aircraft was designed and then built by aircraft manufacturers.

Following delivery, the end user discovered small cracks in the hull of the aircraft. The aircraft was repeatedly returned to the builder for repairs, but the cracks continued to reappear on the hull. Eventually, the end user decided to claim against the manufacturer for supplying a defective product.

In turn, the manufacturer claimed that there was nothing wrong with the build quality of the aircraft, but rather that it had been designed badly. The designer was therefore brought into the proceedings as a third party defendant (along with various other parties including the propeller manufacturers and the hull manufacturers). Upon investigation, it became apparent that the cracks were caused by excessive vibrations in the hull.

Various theories for the vibrations were considered, but the most likely explanation was that the propeller was at fault due to unforeseen frequency resonations. This was something that the designers had considered and tested for, and they provided their calculations. However, as the hull was a completely new design, it did not resonate as had been predicted. Therefore, it was clear that the designer had not been negligent in the provision of his service to the manufacturer. Furthermore, there were certain reservations concerning both the weld quality of the hull by the manufacturer and the actual build quality of the hull material itself.

Right job, wrong man

An aviation technical consultant and asset manager were insured, amongst other activities, for the provision of aircraft engine borescope inspections. They entered into a contract with a lessor for the borescope inspection of 37 engines. The engines were attached to a commercial widebody aircraft which had been re-delivered back to the lessor from a major aircraft operator. They were then put into storage in “as is where is” condition.

Upon completion of the inspections, but prior to the inspector issuing any “Release to Service” paperwork, the lessor became aware that while their inspector did have qualifications to perform borescope inspections generally, he did not have the specific qualifications needed for these engines.

They were therefore unable to issue the “Release to Service” of the engines. This meant that the lessor would have to have inspections performed again, and that all the substantial costs of carrying out these inspections were wasted. There was also the potential that the lessor could lose a potential sale of an asset due to the delay.

As the aircraft and engines were kept “preserved” in storage, the lessor incurred various costs getting them ready for inspection and putting them back into storage after the inspections.

These costs included: the rental of an inflatable tent in which the inspections would be carried out, the transportation of the tents from Ireland to France (and vice versa), the un-preservation and re-preservation of the engines (engines that are not being used must be stored in corrosion preventive materials) and project management costs.

The lessor’s claim against the inspector was originally US$641,071. ITIC was able to negotiate this down to US$417,878 in full and final settlement of the matter.

If you would like to discuss cover, or are not currently a client and wish to receive a no obligation quote, please contact Robert Sniffen at itim@thomasmiller.com. Alternatively, you can complete a proposal form by clicking here.