Aviation Insurance
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Chapter 6
Aviation Insurance
Chapter Six
Aviation Insurance
In law and economics, insurance is an essential component of risk management
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- Equitable transfer of risk or loss,
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- From one entity to another,
- In exchange for payment
Aviation Insurance
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- Determine insurance needs
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- Acquire appropriate coverage
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- Ensure insurance meets your needs
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- Does not set you up for failure
- Changing circumstances: update coverage
Aviation Insurance
Fundamentals
- Sales
Agents:
represent companies, and
receive commission on sales
Broker:
not bound to one company,
represents the buyer,
receives commission on sales
Aviation Insurance
Fundamentals
- Insuring and Underwriting the Risk
Insurance Companies
In GA,
Most policies issued from a single insurance company
Covers entire risk
Aviation Insurance
Fundamentals
- Insuring and Underwriting the Risk
Underwriters
Airlines spread the risk over several underwriters
Clearing house offers a “package” deal made up of several underwriters
Aviation Insurance
Fundamentals
- Insuring and Underwriting the Risk
Aviation Managers- insurance company employee
Review applications
Decide whether customer is insurable
Determine price of coverage
Aviation Insurance
Fundamentals
- Claims
Report immediately to your insurance company
Insurance adjuster will be assigned
Works for the insurance company
Investigates claims
Makes settlement offer
Aviation Insurance
Fundamentals
- Principles of insurance
Spread the risk and/or minimize the risk
Insurance spreads the risk
Use several underwriters
Diversify coverages
Reinsurance, insurance for insurers
Aviation Insurance
Fundamentals
- Principles of insurance
Insurance minimizes the risk
Selective coverage
Incentive for safe operations
Assist safety programs
Policies may be cancelled
Aviation Insurance
Coverage
- Aircraft insurance
Liability coverage
Passengers, persons and property on the ground,
Other aircraft and their occupants
Does not cover crewmembers
Aviation Insurance
Coverage
- Aircraft insurance
Policy limits
Single limit
Per person
Aviation Insurance
Coverage
- Liability insurance
Single limit
$1M policy
Covers up to $1M
Total paid for all injuries
Aviation Insurance
Coverage
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- Liability insurance
Per person
$1M policy, total limit
Sublimit of $100,000
Per person, passenger
Aviation Insurance
Coverage
- Aircraft insurance
Hull Coverage
May not include engines
All risks, operable aircraft
While not in flight, non-operable aircraft
While not in motion, non-operable aircraft
While rotors are in motion/not in motion (helicopters)
Aviation Insurance
Coverage
- Aircraft insurance
Valuation
Stated value, the amount the insurance will pay
Careful consideration
Cost of a comparable aircraft
Re-evaluate on an annual basis
Aviation Insurance
Coverage
- Aircraft insurance
Valuation
Current market value
Based upon aircraft market
Condition of the aircraft prior to an accident
Complicated, rarely used
Lenders require hull insurance
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Pleasure and business
Personal, pleasure flying incidental to or in direct connection with a business
Excludes “for hire or compensation”
Does not cover any commercial operation
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Industrial Aid
Personal and pleasure flying, as well as
Transportation of executives, employees, guest, and customers
Excluding any commercial operation
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Commercial, excludes Instructional or Rental
Pleasure and business
Industrial aid
Transportation of passengers/cargo for hire
Does not include flight instruction/rental
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Limited commercial
Pleasure and business
Industrial aid
Commercial flight instruction/Rental
Excludes carrying passengers/cargo for hire
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Commercial
Full commercial
Every kind of operation
Excludes “special use”
Aviation Insurance
Coverage
- Purpose of use, flight operations covered
Special use
Agriculture, operations requiring waiver,
Aerial firefighting, helicopter external load
Helicopter flight instruction
Banner towing
Fish spotting
Powerline/pipeline patrol
EMS
Aviation Insurance
Coverage
- Pilot qualification
Do not allow unqualified pilots operate aircraft
Review insurance policy whenever a company change occurs
Logbooks should carefully record all flying time
Aviation Insurance
Coverage
- Murphy’s Law: an accident will occur:
Before insurance is effective
After insurance has expired
Within a policy exclusion or endorsement
During a purpose that is not covered
When an unqualified pilot is in command
Aviation Insurance
Coverage
- Endorsements and exclusions
Fine tune the policy
May require additional premiums
May be used by the insurer to deny coverage
Aviation Insurance
Coverage
- Endorsements and exclusions
Lienholder’s interest endorsement
Loss payee=the bank
Breach of warranty endorsement
Ensures the lienholder is paid
Even if the owner-operator would not be paid due to circumstances of the loss
May require continued payment to insurance company
Aviation Insurance
Coverage
- Endorsements and exclusions
Waiver of Subrogation endorsement
Allows insurance company to
Sue anyone other than the insured
That has contributed to the accident
Proximate cause
Aviation Insurance
Coverage
- Endorsements and exclusions
War Risk Exclusion and Insurance
Relieves insurer from making restitution as a result of:
Aviation Insurance
Coverage
- Endorsements and exclusions
FAR Violation Exclusion Clause
Operations in violation of an FAR
Excluded from coverage
Carte Blanc to insurance companies
“14 CFR §91.13-careless operation” is a catch-all
Avoid policies with this endorsement
Aviation Insurance
Coverage
- Ordering the Policy
Agent/broker with authority to “bind” coverage
If so, a binder locks in your insurance
If not, your policy will undergo a review by the insurance company before it goes into effect
Aviation Insurance
Coverage
- Reviewing the Policy
Sit down and read it, cover to cover
Verify you got what you paid for
Get clarification on anything you don’t understand
What will be covered
How much will be paid
Aviation Insurance
Coverage
- Your policy is dynamic, things change:
Are special flight permits covered?
Geo-political, flights into foreign countries, riot zones, natural disasters
Warning of Policy Expiration, don’t let your policy lapse because you forgot
Aviation Insurance
Coverage
- Unmanned Aircraft Insurance
Aircraft in the eyes of the law and insurers
Insurance companies are prepared to serve
sUAS may be covered through membership in Academy of Model Aeronautics, et al.
Some homeowner’s insurance covers UAS
For commercial UAS operations liability and hull insurance is available
Aviation Insurance
Coverage
- Spacecraft Insurance
Required by Commercial Space Launch Act 14 CFR §440.9
Cover injuries to persons or property on the ground
U.S. Government indemnifies launch operations
Provides up to $1.5 Billion for claims above and beyond the amount covered by insurance
Aviation Insurance
Coverage
- Airport Liability Insurance
Premises Liability covers:
Injuries to nonemployees at your place of business
Slips, trips, and falls
Hangarkeeper’s Liability covers:
Damage to aircraft while they are in your care
Flight check, ground handling, etc.
Aviation Insurance
Coverage
- Product Liability-maintenance performed
Repair, overhaul, paint, inspections
Supplemental Type Certificates (STCs)
Supplies/parts
Petroleum, oils, lubricants
Products and completed operations
Aviation Insurance
Coverage
- Aircraft Title Insurance
Protects against discrepancies in the title
Defects that were not discovered in title search
Typical in sale/purchase of business aircraft
Aviation Insurance
Coverage
- Prepaid Legal Services/Lost License Insurance
Memberships include or offer legal services
Covers part of legal expenses
Pay part of monetary fines
Provides income during suspension/revocation
Cost of learning another trade
Aviation Insurance
Coverage
- Excess liability insurance
Purchase enough insurance to cover worst case scenario
Excessive cost may require supplemental coverage
Applied after all other liability policies are exhausted
Aspect of Risk Management
Aviation Insurance
Claims
- Duties of the Insured to insurance companies
Pay premiums on time
Truthful in all circumstances
Cooperative
Aviation Insurance
Claims
- Insurance Companies duties for liability claims
Indemnify (compensation/cover) the insured
Court defense (except negligent or strictly liable)
Pay resulting judgements
Settle the claim
Aviation Insurance
Claims
- Insurance Companies duties for hull damage
Pay for repairs
Pay off the aircraft
Pay for replacement or some part of it
- Insurance companies may take possession of the wreckage
Aviation Insurance
Claims
- Investigation and determination of coverage
Insurance adjuster
Purpose of use
Pilot qualifications, endorsements, exclusions, et al.
Facts and circumstances of the accident
Determine if the claim is covered
Aviation Insurance
Claims
- Subrogation
An insurance company pays a claim, and
Assumes the role of the insured, then
Has the right to pursue claims, against
Any person the insured may have a claim against
Waiver of subrogation endorsement may protect those that rent aircraft
Aviation Insurance
Uninsured Risks
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- Skydiving
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- Hot Air Balloon Bungee Jumping
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- Exculpatory contracts may offer some relief
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- However, why tempt nature
- Could be time to clean the gene pool
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