Engineering Machine Shop and Precision Machining Insurance

Pricing a machining job takes minutes. The exposure it creates can run for years and reach somewhere you will never see.

A component goes into an assembly, and the assembly goes into service. If the part was out of tolerance, machined from the wrong material, heat treated incorrectly or left with a stress raiser, the failure happens under load in use. What breaks is a gearbox, a pump, a press, a lifting attachment or a vehicle component, and what stops is a production line or a vehicle fleet. A part worth forty pounds can stop a factory, and the claim is the stoppage.

So two things carry the weight. Inspection and traceability, so a suspect part can be bounded to a batch rather than a year: material certificates retained and matched to jobs, inspection records with actual measurements rather than a pass stamp, and first off inspection on every setup. And the limit of indemnity, which has to be set against what your parts go into rather than your turnover, because a shop with modest sales serving heavy industry carries a very large exposure.

On subcontract work the customer usually supplies the drawing, and the distinction between two kinds of failure is where these disputes live.

A part machined outside the tolerances on the drawing is your error. A part machined exactly to the drawing, where the drawing itself was wrong for the application, is the customer's design error, and you made what you were asked to make. The difficulty is that customers rarely see it that way after a failure, and an experienced machinist who noticed something odd about a drawing and said nothing has weakened the position considerably.

So the protections are documentary and cultural. Work to the issued drawing revision and record which revision was used, query anything that looks wrong in writing rather than assuming the customer knows, record concessions where a customer accepts a deviation, and never make a quiet adjustment to a drawing because it seemed sensible. Where you also design or offer design for manufacture advice, that is advisory rather than workmanship and should be insured as such, because then the drawing is yours.

Free issue material is normal in subcontract machining and it is excluded by standard liability wordings.

A customer sends a casting, a forging, a billet or a part machined assembly for further operations. Scrap it, crash the machine into it, or machine it wrongly beyond recovery, and the loss is not the metal: it is a casting with a twelve week lead time, a forging from a tooling pattern, or a part that has already had three operations and a heat treatment done to it. On a long lead item that can stop the customer's programme entirely.

So confirm the cover rather than assuming. A standard public liability wording excludes damage to property in the insured's care, custody or control, which is every piece of customer material in the shop. Set a limit against a bad week rather than an average, including anything part processed and anything awaiting collection. And handle the commercial side at quotation: establish whose risk free issue material is, how much spare is supplied, and what happens on a scrapped part, because that conversation is far easier before the first job than after a crash.

The property and interruption exposure in a machine shop is concentrated in a way that general commercial insurance underestimates.

A CNC machining centre or a multi axis lathe is a very high value item with a long lead time and a long commissioning period, and a small shop may have two or three. Lose one to a fire, a crash, a flood or a power event and the shop does not produce less; the work that machine did stops entirely, customers go elsewhere for it, and some of them do not come back. Tooling, fixtures and the programs themselves are part of the loss and frequently uninsured, because they are not thought of as plant.

So the exercise is to value what is actually at risk and set the indemnity period honestly. Machines at replacement cost rather than book value, tooling and fixtures included, programs and setup sheets backed up off site because recreating them is weeks of work, and an indemnity period reflecting order, delivery, installation and commissioning rather than a default twelve months. It is also worth asking what subcontract capacity genuinely exists for your work, because the answer frequently is less than an owner assumes.

Products liability and customers' material are the two gaps. We are an FCA regulated broker and will not tell you we are the best choice. These are the questions that decide it.