This is the first of a four-part series of risk management topics prepared by AAIRRG to help you
better manage your risks and thereby help reduce your cost of doing business.
This has been one of the most asked insurance questions and one which seems to create more
confusion than any other aviation insurance coverage.
The need for this insurance coverage hinges upon whether or not you take physical control of a
customer’s aircraft while rendering service to it.
In this first part, we will address the specific insurance issues for those of you who only take
possession of a part or component of an aircraft.
This difference between whether you take control of the aircraft has to do with exclusion in
almost all non-aviation policies, property and liability alike that contain an exclusion of coverage
for aircraft. Black’s Law Dictionary defines an Aircraft as “Any contrivance used, or designed for
navigation of or flight in the air”.
When you take possession of someone else’s property you owe them a degree of care under the law.
For an example of you borrow your neighbors rake or shovel you must exercise the highest degree of
care.
However, if you are running a business, whether it is a nightclub and you charge for checking a
coat or hat, or a drycleaner where you charge for services, a contract of bailment is created and
the law also holds you to the highest degree of care.
Bailment describes a legal relationship in common law where physical possession of personal
property is transferred from one person (the “bailor”) to another person (the “bailee”) who
subsequently has possession of the property. It arises when a person gives property to someone else
for safekeeping.
Considering these factors, in general you face legal responsibility if your customer’s components
are damaged, lost or destroyed while in your care, custody and control.
Here’s How To Best Protect Yourself
Now I want to address how you can best protect your company against this potential loss.
As stated previously, since almost all business property and liability policies contain exclusion
for losses arising out of an “aircraft”. However, if your shop only works on components from an
aircraft that does not constitute “an aircraft” as defined in the insurance policies exclusions.
With this in mind “Hangarkeepers Coverage” is really just an aviation term for “Customer’s goods”.
Understand that an aircraft component, from an insurance standpoint, is no different than a hat
being checked at a nightclub or your clothes being left at the drycleaner’s it is just that
“Customer’s Goods”.
Therefore, the least expensive method of protecting your liability as a “bailee” is to extend
coverage under your business property policy to include coverage for “Property of Others”. Most
policies automatically contain a sub-limit of coverage of $2,500 or so, but your exposure will
typically be much greater than that amount.
What you need to do is prepare an estimate of the maximum value of your customer’s property that
you might have on your premises at anyone time. Then have the insurance person that represents you
for your business property policy add that amount as coverage for “Customer’s Goods”.
By the way, the courts in most jurisdictions only hold you responsible for the Actual Cash Value”
of an article you hold as a “bailee”, not replacement cost. “Actual Cash Value” is determined by
what two independent parties would agree to buy or to sell that particular article without duress.
The cost of providing insurance coverage under your business property policy almost always is
much less expensive than securing this coverage through the aviation insurance market. If however,
that price should shock you please allow us the opportunity to provide AAIRRG’s price for comparison
purposes.
| 
