Understanding Terms & Conditions of an Aviation Hull & Liability Policy (Part 1)
The terms and conditions of an aviation hull and liability insurance policy are rudimentary to some and a foreign language to others. It can benefit you to refresh yourself with the core components of your aviation insurance policy to be sure you understand what is and is not covered and how the policy will respond in the event of a claim.
And in this difficult market, it will help you prepare and respond to any changes in coverage when your policy renews or when seeking quotes from other carriers. Here are some basic coverage terms from a standard pleasure and business policy that we typically see for an owner-flown aircraft. In the next issue we will go deeper into the details on the more contested terms such as loss of use, diminishment of value, and war.
Named Insured: Person (or company) named on the policy and in charge of electing coverage amounts, paying the premium and any deductible, coordinating with the insurer on any claim, and requesting or responding to cancellation notices.
Coverage territory: The areas in which the aircraft can operate, such as the United States of America, Canada, Mexico, the Bahamas and the Caribbean Islands or enroute between points therein. In addition, compliance with all United States of America economic or trade sanction laws or regulations enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”).
Purpose of use: Be mindful that most pleasure and business policies specify that the aircraft cannot be used for hire or reward (access to private country clubs or fine wine for example). Those with lease agreements will need to pay particular attention to this clause if not being operated for the intended use.
Pilot Warranty: Clearly defines who may fly the aircraft whether they are individually underwritten and named to the policy or if it is at the discretion of the management company/chief pilot, then subject to minimum experience and training requirements outlined in the policy.
Liability for Scheduled Aircraft: Third Party bodily injury or property damage arising out of the ownership, maintenance, or use of the scheduled aircraft.
Liability for Non-Owned Aircraft: Third Party bodily injury or property damage arising out of the use of non-owned aircraft.
Passenger Voluntary Settlement: Irrespective of fault or admitting liability, good faith payments can be made to benefit passengers who sustain bodily injury arising out of the ownership, maintenance, or use of the scheduled or non-owned aircraft in exchange for a full and final release to pursue further action.
Damage to Hangars and Their Contents: Damages to any hangar not owned, rented, or leased by you.
Fire Legal Liability: Damage caused by fire which you are legally liable to premises you lease or temporarily occupy with the permission of the owner.
Cargo: Loss of property of others while on-board or being loaded or unloaded from the aircraft.
Contractual Agreements: Obligations you have assumed in a written contract or agreement.
Personal Injury: Libel, slander, copyright infringement, and violation of the right of privacy arising out of your operations excluding advertising, publishing, or telecasting.
Advertising Injury: Similar to Personal Injury but involving damages resulting from advertising of your aviation goods, products or services.
Alcohol Beverage Service: Serving or giving of alcoholic beverages at or from the covered premises or aircraft.
Incidental Medical Malpractice: The rendering or failure to render first aid and other basic medical services.
Use of Premises: Third Party bodily injury or property damage arising out of the ownership, maintenance, or use of the scheduled premises owned, operated, or maintained by the policy holder.
Sale of Aircraft and Aircraft Products and Services: Aircraft sold or relinquished from an exclusive written lease or products and services for aircraft of others provided on a not-for-profit basis, but only if damage occurs away from insured premises after physical possession of such aircraft, materials, parts, equipment, fuel or lubricants has been relinquished to others and any services have been completed.
Physical Damage to Scheduled Aircraft: Direct damage to your aircraft including disappearance of theft.
Spare Engines and Spare Parts: Direct damage to spare engines and parts including theft that are owned by you.
Automatic Insurance for Increased Value of Scheduled Aircraft/Engines/Parts: Accounts for an increase in value because of modifications or acquisition of new engines/parts.
Mechanics Tools: Loss of tools and other equipment in your care, custody, and control used to repair or maintain the aircraft.
Aircraft Medical Expense: Reasonable medical expenses for medical, surgical, hospital, ambulance, nursing, incurred one year from the date of injury by each passenger who sustains bodily injury provided the aircraft is being used by or with your the permission.
Aviation Premises Medical: Reasonable medical expenses incurred one year from the date of injury arising out of the ownership, maintenance, or use of the covered premises.
Additional Coverage as Applicable
Automatic Insurance for Newly Acquired Aircraft: Provides coverage to a new aircraft bought or leased during the policy period, subject to timely reporting and payment of any additional premium.
Temporary Replacement Parts: Reimburse expenses, including the direct cost of installation, removal, and transportation, incurred for renting or leasing aircraft parts as temporary replacements for aircraft parts being repaired or replaced.
Extra expense for renting substitute aircraft: The costs of leasing or renting a temporary substitute aircraft of similar or smaller size and weight which exceeds the cost one would have incurred had it not been damaged.
Search and Rescue: Expenses associated with rescue operations performed by you or at your request after all government and military efforts have been discontinued.
Runway Foaming and Crash Control: The cost of fire and crash emergency expenses for the purpose of minimizing losses.
Trip Interruption: Reasonable expenses of food, travel and lodging of passengers incurred from the place where an aircraft insured suffers physical damage to the intended final destination, or back to the place of original place of departure, if the trip is discontinued.
Personal Effects and Baggage: Loss or physical damage to the personal effects and baggage of a passenger while in your care, custody, or control.
As the aviation insurance market continues to harden, insurers are looking to restrict and remove coverage from their policies. Understanding how policy works will help ensure you and your assets are adequately protected. We recommend reading a copy of your policy for all the terms, exclusions, limitations, and conditions as coverage can vary from carrier to carrier, pilot to pilot and aircraft to aircraft. If you have any questions, need a second opinion, or if your coverage has been impacted please do not hesitate to contact AVIAA for help at firstname.lastname@example.org.
Disclaimer: This list is not meant to be comprehensive nor does it grant or deny coverage.