Reviewing Aviation Insurance Options For Pilots
This is the second part of a two-part article exploring the available aircraft and aviation insurance options available to pilots. Click here to read part 1.
Dr. Mary Ann O’Grady
Approved Use Insurance
Approved-Use insurance covers reimbursement by non-owners who use an aircraft. Approved-Use insurance is similar to the approved-pilot clause since no specific premium is assigned to the approved-use clause, but as anticipated, commercial operations are confronted with higher premium rates than non-commercial operations.
Approved-Use clauses are included in all insurance policies, but because it is considered to be a “sleeper,” most aircraft owners erroneously assume that they can do anything they want with their aircraft.
Caveat: Just as with the approved-pilot clause, the approved-use endorsement varies greatly among insurers where each insurer maintains several versions it can use with varying degrees of [broad] coverage. Since the insurance broker negotiates the wording, it is wise to retain an experienced aviation insurance broker for representation in an effort to avoid being placed at a disadvantage when negotiating terms with the insurer.
In the event that subsidiary companies, business associates, friends, etc. have access/use to an aircraft, it is necessary to be sure that the broker is aware of exactly what compensation is changing hands, such as money, a case of wine, a week at a time-share, and so forth since it all converts back into a dollar amount. If an aircraft is involved in an accident, and the U.S. Federal Aviation Administration determines that due to the reimbursement you received, the flight was actually commercial in nature and should have been operated under Part 135 charter regulations instead of Part 91, the insurance claim could be denied.
Additional Aviation Insurance Coverages and Clauses
There are several other types of aviation insurance coverages and clauses that are also available:
Broad Form Names Insured Clause – This extends the insurance coverage to a subsidiary or affiliated companies of the named insured and other companies the named insured controls or actively manages.
Contractual Liability Coverage – To some extent, this insures against liability that is assumed under contract but this coverage requires vigilance so that any or all contracts or agreements related to the aircraft are submitted to the insurance broker. These documents include hanger agreements, dry-lease, time-share and interchange agreements, purchase/lease agreements, and leased/loaner engine agreements.
Non-Owned Aircraft Liability – This extends coverage under the policy for the use of non-owned aircraft which includes chartered and rental aircraft; however, it is wise to review any known or anticipated use with the aviation insurance broker.
Diminution of Value – This reimburses the aircraft owner for depreciated value caused by damage history that is due to a physical-damage claim; however it is rarely purchased due to the cost and the complexity of the formula that is employed to determine coverage.
Garagekeepers Liability – This covers the insured for his or her negligence to a non-owned auto in his or her care, custody or control, such as cars in hangars.
Helicopter Insurance – This consists of coverage that can protect the insured if:
- He or she owns a helicopter and rents it out to other helicopter pilots
- He or she is a helicopter pilot and flies for fun or recreation
- He or she is a helicopter pilot and flies rescue missions and/or medical evacuations
- He or she is a helicopter pilot and works in the firefighting division of the U.S. Forest Service
The aviation insurance coverage required will depend upon the risks involved in the particular use of the helicopter, where it is flown, and other factors, such as requiring personal helicopter insurance when flying for fun in contrast to needing business insurance when flying as part of a commercial operation. Because the policy is tailored to address the insured’s use and risk factors, it is imperative to work with a knowledgeable agent who can conduct an accurate needs assessment to formulate the best aviation insurance coverage.
Helicopter insurance covers a variety of risks including the following:
- Liability coverage addresses the insured’s legal responsibility in the event that he or she causes another person’s personal injury or property damage while flying or landing the helicopter.
- Passenger liability is required if the pilot carries passengers in the helicopter; however sometimes general liability or public liability will be packaged with passenger liability which offers an overall coverage limit that applies to public liability claims, passenger liability claims, or a combination of both.
- Hull insurance or property damage insurance for airplanes and helicopters can insure the helicopter when it is on the ground or when it is in flight. However, it is necessary to verify that the coverage offers protection from a range of risks, such as theft, vandalism, severe weather, and/or damage or a total loss due to an accident.
Private and business helicopter insurance coverages differ due to the wide variety of jobs and contracts that pilots perform ranging from flying for fun to medical evacuations, firefighting, traffic patrol, news reporting, business transportation, charter rides, and search and rescue. Although liability and property damage coverage is required for any of these uses, specialized endorsements or additional policies may also be necessary especially when flying commercially. Some additional coverages that may be required include:
- BOP or business owner’s policy insures other business property and equipment in addition to one or more helicopters in the fleet as well as provide loss of income protection in the event of a covered business interruption.
- Equipment coverage protects the use of specialty equipment or medical supplies depending on the nature of the work performed. This additional coverage often in the form of a rider covers the insured’s investment in the specialized equipment and supplies.
- Business interruption coverage provides coverage in the event of a covered loss that interrupts business operations by bringing in money to pay bills and employees’ wages.
- Workers compensation is required when employees are present to cover them in case of work-related injuries or illness. WC also provides a percentage of pay to employees if they are unable to return to work but laws vary, so access state regulations to ensure that the required coverage is in force.
- Medevac insurance, medical equipment insurance, and other specialty coverages can mitigate the additional risks that can be encountered by medical helicopters, air ambulances, and Medevacs which often perform risky flights to transport critically injured patients or organ donors to medical centers. Increased risky conditions, such as night flights, inclement weather, mountainous terrain, and elevated stress levels can serve to increase the likelihood of a mishap.
- Cargo insurance or inland marine coverage insures the cargo, mail, parcels, and/or equipment that is transported on a helicopter while it is in the care, custody or control of the insured. Note that each of these policies has certain exclusions so it is important to review the policy to determine if there are any gaps in the coverage which may require the purchase of additional coverage as needed.