Handheld avionics product liability

[peter-h]

I am based in Europe and would be interested in input from somebody who is actually in the business of making and selling some "widget" which is sold in the USA.

How easy is it to get product liability insurance, and what are the main risk factors which insurers look at?

For example, take the whole Aircraft Spruce catalogue. 500 pages or so. Each packed with widgets, any one of which could potentially cause a fatal accident.

Now, it would be stretching things immensely if the maker of say wirelocking pliers could get sued, but that's only because the A&P doing the work is supposed to inspect the finished job visually.

Now take a spark plug tester. It could fail to diagnose a spark plug which has a defect which causes an engine stoppage, and it kills somebody. How is that handled? I do not frankly believe the maker pays say $1000 for insurance.

And the same goes for loads of other stuff. An oil filter is about $10, and could definitely stop an engine.

An OAT gauge which reads 10F out (don't the cheap ones do that?

) could kill somebody too.

Yet it is obvious (from the pricing of many of these parts) that there are no significant insurance premiums involved.

I am not talking about high end avionics e.g. re a GTN650 Garmin would be a prime target for any lawyer working on a percentage - regardless of fault. But then Garmin don't make anything cheap, and they have plenty of money to fight stuff with.

Let's say one wanted to make something like an OAT gauge - like Davtron etc do. What sort of product liability issues could be expected there?

I am assuming that disclaimers e.g. "use at your own risk" are virtually worthless. But that may not be completely correct.

Feel free if you prefer to email me directly - peter@peter2000.co.uk

 

[Jim Logajan]

I suspect the smallest firms and startups incorporate or form under other limited liability business laws and "go naked" because no one will sell them insurance or it is simply too expensive relative to their sales. Then if their business becomes a target at least their personal assets are (hopefully) safe, though the business is expected to fold.

When I started consulting years ago I bought general liability insurance - it wasn't that expensive. Errors and omissions (professional liability) insurance was more expensive but still not that bad (decided I didn't need it.) I don't know how costs for E&O insurance compares to product liability insurance, but some of the numbers I see mentioned on the net suggest they have similar premium costs.

 

[midlifeflyer]

I'm not in the business of manufacturing but have consulted as a lawyer with a manufacturer of aviation equipment-the kind of stuff that definitely exposes one to suit.

Best advice: make inquiries of such companies or hire an industry consultant to answer your questions rather than ask some guys on the internet who likely have limited experience in the issues you face.

 

[Old Geek]

I design, manufacture and sell embedded computers. Devices similar in function to the Arduino. We are a small company with less than 6 employees and we usually do about $600,000-$800,000 in business each year. We've been in business for about 17 years.

We are incorporated and have carried product liability insurance for all but the first year. The insurance is not expensive. I don't know how much it is, but it's trivial compared to employee health insurance. Maybe $1500 a year. It's bundled in with all the other miscellaneous insurance that a company needs such as fire, inventory, employee dishonesty, broken glass, etc. We've never had a claim or even a threat of a lawsuit in the 17 years we've been in business.

The problem you might have is getting a company to write you a policy. My understanding is that the insurance companies want to see two years of selling a product without a claim before they will sign you.

If you are in the UK and are importing product into the US, you have already significantly increased your protection from lawsuits by the shear difficulty of getting and collecting a judgement against you. We have some real lawyers on the board that might be willing to give you some advice on that.

 

[peter-h]

That's useful input - many thanks.

I have a business in electronic manufacture - since 1991. We don't make anything to do with aviation, but have always exported a lot to the USA - maybe 20% of our sales whicha re currently about $1M/year.

We have product liability insurance, which is included in our commercial insurance policy which costs $2k/year i.e. peanuts. This covers our US sales.

So it is quite possible that we could diversify into this "aviation gadget" I have in mind, disclose the new product, and they won't be bothered. If it is disclosed fully, then we are covered - that's how insurance works here in the UK. Everything not excluded is included.

The reason for asking here is to get some pointers. I suppose I could ask Aircraft Spruce for example but they would not be a representative example because they have been around for decades and have a huge range of stuff.