Frustrated and Unhappy

Please consider, when reading the Advisory Circular regarding Airport Minimum Standards that they are "optional." I intend to start a new non-profit association for aircraft mechanics; although, this is very time consuming process. I spoke to [a representative of a leading insurance brokerage] on May 28, 2008 in great length. He said, "As a 30-plus year veteran of the aviation insurance community, 15 years as an aviation insurance underwriter and 15 years as an aviation insurance broker, I can tell you that there is no insurance company that will offer a viable insurance policy to insure the professional liability of individual mechanics — at least not at any realistic premium level! Yes, of course, commercial FBO’s, MRO shops, etc., can obtain the necessary insurance, because they offer underwriters some "spread of risk" and a large enough premium base to attract their interest, but an individual mechanic, operating privately to repair/service aircraft, cannot obtain this type of insurance today. PERIOD! Let’s look at the reasons for this:

• An underwriter provides such an insurance product based on a number of factors, including the type of work being done and the annual revenues generated by the operator.

• Aviation insurance is viewed as a low frequency/high catastrophe class of insurance. We have few losses, but the ones we have tend to be large.

• You know as well as I, that following a crash, an attorney quickly reaches for the aircraft log book — what happened? were there any maintenance issues that could have impacted the crash? who worked on this aircraft in the past 12 to 24 months?

• Regardless of the ultimate more likely cause of loss (pilot error), all parties that had any contact with that aircraft — namely, any mechanic whose name appears in the log book, will be named in the law suit.

• Once the mechanic is named, the underwriter has an obligation to provide a legal defense to that mechanic.

• Even under the best of circumstances with no culpability whatsoever on the part of that mechanic, how much will that attorney charge for his defense work?

Now let’s look at the individual mechanic. If he/she works on weekends, part time, as a favor to friends etc., that is not a full-time operation with a staff and an owned/leased hangar facility, that mechanic likely does not generate more than say, $10,000 in annual revenues. How much can the insurance company reasonably charge this mechanic for the insurance? With 30 years experience, I know the answer — it will be too much! The underwriter has overhead costs, commissions to pay, claims to pay, etc. His minimum premium for this class of business is at least $5,000 annually. Now if the mechanic is grossing $10,000 in sales, can he afford to pay $5,000 premium? He can’t. And therein lies the problem. The underwriter is sympathetic to these mechanics. There must be 2,000 such mechanics working in this way throughout the country. Even if we could find a simple way for the underwriter to reach these mechanics and he charged each, say $500, that produces only $1,000,000 in premium. So technically, one crash could easily wipe out the entire book of premium and $1 million crash settlements are not too rare.

Bjorn Rafnar

A&P, FAA Inspection Authorization

Mr. Rafnar is unhappy about being told by a local airport authority that he cannot perform maintenance on the airport without insurance. Please see a continuation of his comments in the next edition of Aviation Maintenance. — Editor