As the owner of a successful aviation insurance business for over 30 years I encountered many occasions where pilots found themselves in difficult situations with respect to an aircraft owner and the owner’s insurance company. It is interesting how often a “good” friendship or flying job turns sour when you pilot their aircraft and an accident occurs resulting in damage to the aircraft. In fact, it not only happens when you damage a friend’s airplane, but even when you damage your bosses airplane!
The First Airplane I Ever Insured
I insured my first airplane back in the early 1970s – it was a Beech King Air A90 owned by a company in Indiana and flown by a professional pilot. As I got to know the pilot it became clear to me that he thought he knew more about flying than anyone else. I had met a number of pilots like these, and in those days professional training was not always required by insurance companies and aircraft owners; a pilot’s logbook and experience were good enough.
Then The Call Came
My aviation insurance business had literally taken off, and I was building a nice business by insuring aircraft owned by pilot friends and acquaintances. But before the end of the first policy period I received a call from the pilot of that King Air. During an approach to the home base airport in foggy conditions the pilot had broken out of the overcast to one side of the runway and while maneuvering to align himself with the runway managed to put a wing tip into the ground causing the aircraft to cartwheel before coming to a rest beside the runway.
Fortunately no one was hurt, so the pilot called and asked me to meet himself and the aircraft owner at the airport. I arrived shortly thereafter and as the three of us stood there looking at this crumpled aircraft I remember the owner turning to his pilot saying: “You broke my f…ing airplane!” So ended this pilot’s job.
The Most Important Clauses In An Aviation Insurance Policy
An insurance policy is an agreement between an insurance company and the policyholder in which the insurance company agrees to do certain things for the policyholder conditioned upon the policyholder meeting certain requirements. These requirements are spelled out in great detail in the insurance policy along with a section usually labeled “Who’s covered” which is often coupled with a section labeled “Who’s not covered”. From a pilot’s point of view the following four clauses are among the most important clauses in the insurance policy:
A Typical Liability “Who’s covered” Clause
Here is an example of the wording of a “Who’s covered” clause: “Besides you, the “Policyholder”, and your employees, while performing duties as part of their work for you, certain other people and organizations are also covered under “Your Liability Coverage”, they are:
- Anyone who is using or riding in your aircraft with your permission; or
- Any person or organization that is legally responsible for the aircraft.
Each person or organization is covered separately. But we won’t pay more for all injuries and damage in any one occurrence that the “Limits of Coverage” shown on the Coverage Summary Page.”
A Typical Liability “Who’s not covered” Clause
Here is an example of the wording of a “Who’s not covered” clause: “We will not cover any liability claim against the following persons or organizations, or their agents or employees, regardless of their inclusion under paragraphs 1. Or 2. Of the “Who’s covered” section, while acting in their capacity as:
- Manufacturer or seller of aircraft, aircraft engines or accessories; or
- Operator of an aircraft repair shop, aircraft sales agency, aircraft rental service, flying school, flying service or pilot service; or
- Operator of any airport, hangar, or other aviation facility; or
- A person whose services are paid for, contracted for or solicited from any of the operations listed in paragraphs 1., 2. Or 3.
- Nor will we cover any liability claim against any employee, including your own employees, who, while working within the scope of his or her duties, injures someone who works for the same employer.”
A Typical “Rights against third parties” Clause
Here is an example of a “Rights against third parties” clause: “This insurance is for your (the Policyholder’s) benefit alone and not for any other person or organization. Except for what you agree to do under an Airport Contract, you promise not to do anything that will take away our (the insurance company’s) right to collect damages caused by others”
This is the section which relates to subrogation. Subrogation is a process whereby one party gives their rights to another party. In this case, when the insurance company pays a loss any rights to recover those damages from another party now belong to the insurance company.
A Typical “Pilot Warranty” Clause
This is the one pilot’s usually concentrate on the most, and here is an example of a “Pilot Warranty” clause: “Any pilot holding an FAA Commercial Pilot Certificate with FAA Multi-Engine Land and Instrument ratings, each of whom shall have logged a minimum of 2,000 hours as Pilot in Command, at least 1,000 hours of which are in Multi-Engine Land aircraft, at least 250 hours in the make and model being flown.” Often times there may be an hour requirement over the previous 12 months, and sometimes the clause includes language about possessing a valid and current medical certificate.
A Word Of Caution
Very often the aircraft owner does not read his insurance policy despite the fact that we always stated in the policy delivery letter that the insured should read and understand the insurance policy. We also encouraged the policyholder to carry a copy of the policy in the aircraft, and to contact us with any questions they might have about the policy. Lastly, we would tell the policyholder that “The wording of the policy itself will determine precisely what is and is not covered in the event of a loss.”
To Be Continued…
Until next time keep your wings straight and level Hersch! JetAviator7
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