As pilots we all need to be aware of, and understand, any aviation insurance policies we might find ourselves involved with. There are a number of aviation insurance policies that might impact our actions as a pilot, and being aware of them can save yourself a lot of grief! I was in the aviation insurance business for over 30 years, and during that time I discovered that many times pilots found themselves in a situation which left themselves, or their estate, in great financial risk. As pilots we love to fly airplanes, so every opportunity you get to go fly an airplane you jump at it. Friends offer you their airplane to fly, someone asks you to ferry their airplane somewhere, you take a test flight in an airplane you are contemplating purchasing or you are simply riding along and the aircraft owner allows you to fly the airplane. This might not be the wisest thing to do! Aviation Insurance Policies Provide Coverage For The Policy Holder There are many types of risk which aviation insurance policies provide protection for, and the insurance policy wording itself details exactly what risks are covered and who are covered for them. Never assume you know who is covered unless you have read and are familiar with the insurance policy itself. Often the owner of the policy assumes the policy coverage extends to third parties – like a pilot friend – when in fact the policy The protections provided by the policy may be modified or amended to extend those protections to third parties in some cases, but only when agreed to by the insurance company providing the policy. There Are Many Types Of Insurance Policies Most pilots are familiar with the aircraft hull and liability insurance policy as this is the policy most frequently purchased to protect the aircraft and the aircraft owner. The basic policy provides liability coverage only, while more comprehensive policies may provide not in motion and/or in motion physical damage coverage for the aircraft itself. But there are many more types of insurance policies and coverage you may encounter as a pilot. Here is a list of some of them: Aircraft Hull and Liability Policy Aircraft Liability coverage Aircraft Physical Damage coverage Airport Liability Policy Airport Premises coverage Hangarkeepers coverage Product coverage Aircraft Repair and Service Sale of fuel and lubricants Sale of aircraft Sale of parts and accessories Workers’s Compensation Policy Employer Liability Product Liability Coverage Aircraft Manufacturing While this is not a comprehensive or complete list, it is enough to start our conversation about how you and aviation insurance interact. Aircraft Hull and Liability Pilot Warranty Provision The pilot warranty section of an aircraft hull & liability insurance policy is probably one of the most misunderstood sections of an aviation insurance policy. A typical pilot warranty will include named pilots and an open pilot warranty. The open pilot warranty lists a number of requirements for an unnamed pilot to operate the aircraft, and will normally include such things as the type of pilot certificate required including aircraft category, airplane class and/or an instrument rating, total aircraft category pilot in command time, time in airplane class, make and model and/or instrument time. Coverage Provided Under An Open Pilot Warranty This is where it gets tricky. Just because you meet the open pilot warranty requirements it does not necessarily mean that you are covered for your personal liability as pilot of the aircraft. This will depend upon the precise wording of the insurance policy itself under the “Who’s Covered” section of the policy. If the “Who’s Covered” section of the insurance policy extends to anyone who is operating the aircraft with the permission of the Named Insured and meets the pilot warranty requirements, then you will have some protection for liability under the policy. However, not every policy includes this wording, so you must know how this provision of the policy reads before you fly the airplane. In other words, if you are involved in an accident and injury occurs to persons or property you may not be personally protected, nor afforded defense and indemnification costs, under the aircraft hull and liability policy. Physical Damage Coverage For The Aircraft The physical damage section of the insurance policy includes a provision which you need to be aware of –it is called “Subrogation”. Subrogation simply means that whenever the insurance company pays a loss under the policy that the insurance company acquires any rights the policyholder may have to recover that loss from a third party. For example, imagine you are flying a friend’s airplane, you meet the open pilot warranty, and you land on a snow covered runway but run off the end into a snow bank. The aircraft winds up on its nose, there is some damage to the prop and aircraft, and you hurt your back. Are You Protected As The Pilot? Because the insurance policy provides liability coverage for damage or injury to other persons or property, the injury to your back is not covered. The only place you can seek coverage for your back is probably your health insurance coverage, if you have any. The damage to the aircraft will be covered by the insurance policy, and the damage repaired and paid for by the insurance company. However, here is the kicker! The insurance company may come after YOU to recover the money they spent repairing the aircraft damage. Because the insurance company has paid to have the airplane repaired, any rights the policyholder had to collect from you now belong to the insurance company. This is what is called subrogation. The insurance company may decide to sue you to recover what they paid for repairing the aircraft. How Good Is Your Friend? Your friend may decide that you should pay for the deductible, if any, required by the insurance policy for damages to the aircraft as well. Note: I will continue this discussion in my next post on Thursday. Until next time keep your wings straight and level Hersch! JetAviator7 ps: Don't forget to sign up for our newsletter "All Things Aviation" here!
by John M. White •