Ignore Ancillary And Optional Coverage At Your Peril
While it is crucial that an aircraft owner resolve the proper hull and liability coverage limits to be carried under their aircraft insurance policy- several ancillary coverages also deserve particular respect- cautions Stuart Hope.
More than 40 different ancillary coverages are available to expand protection under any given turbine aircraft or helicopter insurance policy. A dangerous mistake is to focus exclusively on the primary coverages (Liability- Medical Payments- and Physical Damage/Hull) with little or no thought given to negotiating ancillary protection until a loss occurs - at which point it's too late. In particular- let’s look at three types of ancillary protection:
WAR RISK RELATED PERILS COVERAGE
Did you realize that when you purchase War coverage- you remove thirty two (32) perils normally excluded in your aviation insurance policy? In addition to the War peril- you add coverage for some other significant risks- including: Terrorism- Hijacking- Riots- Revolution- Sabotage- Confiscation- Seizure and Appropriation- just to name a few.
A general rule for insurance is this: If you can buy a lot for a little- you should. Often the cost of adding War Risk-related Perils Coverage is nominal. As an aircraft owner and operator- I always elect to purchase this coverage option on our aircraft. I strongly recommend you do the same. Given the current state of the world- this should be a no-brainer.
GUEST VOLUNTARY SETTLEMENT (GVS) COVERAGE
This protection is very similar in scope to Accidental Death and Dismemberment coverage. It allows the Named Insured to offer a stated amount of monetary compensation to passengers for specific injuries arising from your aviation operations- regardless of negligence. It’s basically no fault coverage.
GVS amounts normally range from $250-000 up to $1-000-000 for each passenger. In exchange for receiving this compensation- passengers must relinquish their right of recourse (think lawsuit) against you- the operator- for the bodily injury they suffered. The loss of one eye or one limb results in the option to offer payment of half the GVS coverage limit- while the loss of life- permanent disability- or the loss of two eyes or two limbs (or a combination thereof) results in the ability to offer the full coverage limit to the injured party.
You’re probably thinking- “If a passenger is that severely injured- given the American legal environment- why would anyone exchange their right to sue for $250-000 to $1-000-000 when there is potential for a much higher reward if they sue?” Most wouldn't- but Guest Voluntary Settlement Coverage can be a valuable added benefit for employees allowing them to ‘double dip’.
A properly structured Workers’ Compensation policy would normally be the sole remedy for employees injured on the job- however if the employee is injured during the company’s aviation operations while acting within the scope of their employment- the employer may also be able to offer compensation via GVS Coverage. Often this coverage can be greatly increased for little or no premium as an added benefit for your employees.
EXTRA EXPENSE FOR A TEMPORARY SUBSTITUTE AIRCRAFT
This coverage pays the extra expense for renting/chartering a substitute aircraft while your aircraft is out of service due to a covered loss (e.g.- Dulles hangar collapse). This coverage does not respond like your auto policy- which typically pays the full cost of renting a substitute vehicle while yours is being repaired.
Rather- it pays the difference (or extra expense) between the normal operating cost of your aircraft and the replacement aircraft you are chartering or renting. Let’s say- for example- your normal operating costs are $1-500 per hour and the costs for the replacement aircraft are $2-500 per hour. Under Extra Expense for Temporary Substitute Aircraft- the insurance company would pay $1-000 per hour for the excess cost you incurred. There are maximum daily benefits- a maximum time period that coverage applies- deductibles- and an approved pilot clause- all of which can (and should) be negotiated.
In closing- it is imperative to fully review your policy from time-to-time making sure the ancillary coverages are tailored to match your unique requirements. The aviation exposure simply represents too large a risk to receive anything less than your full attention.
We are currently in the softest aviation insurance market in history. Underwriters are willing to offer broad coverage endorsements- reduce or eliminate deductibles- and increase coverage limits for little or no additional premium. If you haven’t done so already- consult with your aviation insurance broker to make sure you don't leave any stone unturned.
Do you have any questions or opinions on the above topic? Get them answered/published in World Aircraft Sales Magazine. Email feedback to: Jack@avbuyer.com