Regulatory fleet grounding

When an accident or a technical finding casts doubt on the safety of an aircraft type, civil aviation authorities may ground all aircraft of that type, in their country or worldwide, until the defect is fixed. For airlines, grounding causes considerable losses: flight cancellations, leasing replacement aircraft, passenger compensation, parking and maintenance costs. These losses escape insurance almost entirely. The hull policy covers only physical damage, and the grounded aircraft has suffered none. Non-damage business interruption is not insured in commercial aviation, or only marginally. Airlines' recourse therefore turns to the manufacturer, through commercial negotiations rather than lawsuits, and to the manufacturer's product liability insurance, whose triggering requires fault and runs up against coverage limits. The typical episode illustrates a particular kind of accumulation: a single design defect hits hundreds of aircraft at dozens of airlines at once, exactly as a software defect hits thousands of companies.