Aerospace and defense supply chain insurance

Why doesn't a standard general liability policy cover aerospace parts?

Most commercial general liability (CGL) policies sold to manufacturers either exclude "aircraft products" outright or are endorsed to exclude them, because a single in-flight failure can produce losses far beyond what a general manufacturing rate anticipates. Aerospace components are therefore placed in the specialist aviation insurance market under aviation products liability forms. If your parts end up on aircraft and your liability policy was written as general manufacturing, the gap may only surface after a claim.

The exposure is easy to underestimate in Michigan, where many shops cross over from automotive work. A bracket, fastener, harness or machined housing that ships to an aerospace customer — even through a distributor — can become an "aircraft product." Your policy's definition of that term, not your sales mix, decides whether you are covered.

What we review first:

• The aircraft products exclusion on your current CGL and umbrella, and whether the umbrella "follows form" to the same gap.
• Your part list against end use — which part numbers can reach an aircraft, a spacecraft or a defense platform.
• Grounding liability — whether the policy responds when an aircraft or fleet is grounded because of a suspected defect in your part, even before anything fails. This is often excluded or sublimited and is one of the largest uninsured exposures we find.

How does AS9100 certification affect aerospace insurance?

AS9100 does not earn an automatic premium credit, but it produces exactly the evidence underwriters and defense counsel rely on: traceability, configuration control, first article inspection records and counterfeit-part prevention. Certified suppliers with clean audit histories tend to be viewed as better-controlled risks, and those records become the core of your defense if a part is ever blamed for a loss. We map your quality system to your policy so each control has an insurance consequence you can see.

AS9100 is the quality management standard for aviation, space and defense organizations, built on ISO 9001 with added requirements for product safety, configuration management, prevention of counterfeit parts, and foreign object debris (FOD) control. Here is how specific clauses translate into risk placement:

Before marketing your account, we typically ask for your most recent AS9100 audit summary, escape and corrective-action log, and top customer quality agreements. Presenting those documents is how a supplier moves from a generic manufacturing class to an underwriter who understands aerospace.

What is hangarkeepers liability, and who needs it?

Hangarkeepers liability covers damage to a customer's aircraft while it is in your care, custody or control — on the ground, in your hangar, or being towed, fueled or worked on. A general liability policy excludes damage to property in your care, so any repair station, MRO, FBO, avionics shop or paint facility that touches another owner's aircraft needs this coverage. Limits should reflect the highest-value aircraft you could have on premises at one time, not the average.

Points to review on a hangarkeepers policy:

• "In motion" vs. "not in motion" — some forms cover only stationary aircraft; towing and taxiing for repositioning must be included explicitly.
• Per-aircraft vs. per-occurrence limits — a hangar fire can involve several aircraft at once.
• Loss of use — the owner's lost charter revenue or substitute-aircraft cost while theirs is repaired.
• Work performed — whether damage caused by faulty workmanship is covered, or only accidental damage unrelated to the work.

What are ground risks for aerospace suppliers and repair stations?

Ground risks are the exposures that exist while aircraft and aerospace parts are on the ground: airport premises liability, damage to aircraft not in flight, ramp and airside operations, and the indemnities in airport and hangar leases. Airport operators commonly require tenants to carry airport premises liability, name the airport as additional insured, and waive subrogation. These lease requirements often exceed what a standard business policy provides.

Common ground-risk gaps to review:

• Airside vehicle and equipment use — tugs, fuel trucks and lifts operating on the ramp are often excluded from commercial auto policies.
• Lease indemnity clauses that make you responsible for the airport's own negligence.
• Ground risk hull coverage for owned or leased aircraft used in testing, demonstration or ferry flights.
• Transit — high-value components moving between your facility, a heat-treat or plating vendor, and the customer.

What are the CMMC requirements for defense aerospace subcontractors?

Any subcontractor that handles Federal Contract Information (FCI) or Controlled Unclassified Information (CUI) on a Department of Defense contract is subject to the Cybersecurity Maturity Model Certification (CMMC) program: Level 1 for FCI, and Level 2 — the 110 security requirements of NIST SP 800-171 — for CUI. Phase 1 of the rollout, which requires annual self-assessments where a contract includes CMMC, has been in effect since November 10, 2025. The Phase 2 requirement for third-party (C3PAO) certification, originally set for November 10, 2026, was suspended by the Department on July 13, 2026 pending a program review (status as of October 2026).

Why this matters to your insurance program:

• Misstated compliance is a liability exposure. The Department of Justice's Civil Cyber-Fraud Initiative uses the False Claims Act against contractors that misrepresent their cybersecurity. Defense costs may be covered under some management liability or cyber policies; penalties generally are not.
• Your cyber application asks the same questions. Inconsistent answers between your SPRS score, your System Security Plan and your cyber insurance application create misrepresentation risk on the policy itself.
• Flow-down contracts carry indemnities. A breach of CUI at your shop can trigger contractual liability to the prime that a standard cyber policy may exclude.

See our Cyber Risk & CMMC Alignment page for how CMMC levels and the NIST Cybersecurity Framework 2.0 map to cyber coverage.

How do prime contract flow-downs change a supplier's insurance?

Prime contractors pass insurance, indemnity and compliance requirements down to every tier through purchase-order terms and supplier agreements. Typical flow-downs require specific aviation products limits, additional insured status, waivers of subrogation, primary and non-contributory wording, and broad indemnities that can exceed what any policy will pay. A supplier that signs without matching its insurance can end up personally funding the difference.

How we can help with your contracts:

1. Collect your top customer terms and conditions, quality agreements and any DFARS/FAR clauses incorporated by reference.
2. Extract the insurance requirements and indemnities into one summary.
3. Compare those requirements to your policy language, not just your certificate of insurance.
4. Discuss the differences with you: coverage changes we can request from your carriers, and contract points to raise with your attorney or the buyer.

Other contract-driven exposures to address: ITAR and EAR export-control violations (generally uninsurable fines, but relevant to management liability), warranty obligations (not insurance), and liquidated damages for late delivery (not insurance, but sometimes partially offset by business interruption planning).

How should an aerospace supplier insure against a product recall?

Product recall insurance pays the cost of locating, removing, inspecting and replacing your parts once a defect is discovered, and in third-party form can cover your customer's recall costs that you are legally obligated to pay. Your general liability policy specifically excludes recall expense, and aviation products liability responds only to injury or damage, not to the cost of pulling parts from service. For a supplier whose part sits across a fleet, recall cost — not an accident — is the most likely large loss.

The value of recall coverage depends on the traceability described above: a supplier who can isolate one heat lot has a recall measured in dozens of parts; one who cannot may be asked to account for every part shipped in a period.