Insurance Refresher Course (Part 1)
As the year draws to a close- it’s a good time to reflect on the risk management and insurance issues brought forth in this column over the first six months of 2011- Stuart Hope suggests. Following are some of the lessons flagged for your attention going forward.
LIABILITY INSURANCE:
Focus your closest attention here. This is your lawsuit protection. Although corporate aircraft travel is very safe- the potential liability arising from an accident is real. Carefully consider the corporation’s insurance/risk management defense.
The potential legal liability for bodily injury or property damage claims arising from an aircraft accident are extremely difficult to predict; you won’t know if you bought adequate liability protection until after a loss is settled. Generally speaking- since it is impossible to determine the exact coverage limit you need- it is best to buy as much as you can reasonably afford. Obtain quotes for alternative limits each year- as rating of this coverage can vary greatly year to year.
HULL INSURANCE:
In this case- the proper insured value to carry is the amount of money it would take to purchase another aircraft exactly like yours (similar year- equipment- condition) in today’s market. An aircraft sales dealer familiar with your make/model aircraft can give you the best estimate of its current value. In addition- your aviation insurance broker may have resources to assist.
The coverage limit should be reviewed at least annually on renewal and adjusted accordingly. Don’t forget to consider any loan or lease requirements. Also remember that you may be forced into over-insuring if you owe more than the aircraft is worth!
NOT ENOUGH MONEY IN THE WORLD:
When insurance types speak about the risk management principle of Maximum Possible Loss (MPL)- they are referring to the largest loss believed to be possible for a certain type of business or activity. It turns out there is enough money in the world to cover a worst case MPL in the aviation arena- and it is provided by insurance companies.
Liability coverage- which provides the aircraft owner lawsuit protection for bodily injury or property damage claims- is readily available in limits of coverage up to $500 million per occurrence for corporate aircraft flown by well qualified professional crews.
YOUR GREAT DEFENSE AND OFFENSE:
Somewhere north of 85 percent of all aircraft accidents result from pilot error. Doesn’t it make sense to prevent accidents by concentrating more resources on initial and recurrent training for our pilots?
Another critical component of a corporation’s “offensive” strategy is absolutely adhering to a no-compromise policy that all executives acknowledge; namely that your pilots will have final say on the safety of any flight. Safe flight operations is your pilot’s area of expertise. There must be “zero tolerance” for an executive override or pressure to launch a flight in the face of safety concerns.
INSURANCE CONCERNS FOR INTERNATIONAL OPERATIONS:
If you will operate your aircraft within a foreign country- be aware many countries have rigorous rules- regulations and limitations on the carriage of passengers and/or goods within their borders. Land your aircraft in one of these countries without having the required paperwork verifying compliance with that country’s rules and regulations - including insurance - and you risk a significant fine or penalty- and/or confiscation of the aircraft.
For operators of U.S. registered aircraft- it is an important insurance consideration to be familiar with the activities of the US Treasury Department’s Office of Foreign Assets Control (“OFAC”)- which administers and enforces sanctions policy.
INSURANCE FOR AIRCRAFT YOU DON’T OWN:
In the case of an aircraft accident- if you were in the “loop of commerce”- you will be brought into the lawsuit. A charter flight made on your behalf puts you squarely in the picture. While insurance is your best defense- you will also need to initiate a good offensive risk management plan.
Not all charter operators are created equal. They operate different types/categories of aircraft- and they can operate to different standards. Obviously your first task is to vet and establish a list of approved charter operators. As part of the vetting process you will want to establish how much liability coverage the charter operator carries and then determine what your minimum required coverage limit will be.
Prior to any charter flights- require that the charter operator add your company as an additional insured under its liability coverage and provide a waiver of subrogation with 30 days notice of cancellation.
Request and secure a certificate of insurance from its insurance provider- specifically identifying the aircraft that will be used- confirming the above requirements have been met.
Next month- we continue our refresher course in insurance issues we covered in this column during 2011. In the meantime- have a safe and meaningful Holiday Season.
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
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Stuart Hope
