Very High Liability Limits

Stuart Hope once again examines the potential consequences that the “nightmare loss” presents for an aircraft owner- and he recommends caution.

Boardroom

Stuart Hope | 1st February 2013

Back to articles

Stuart Hope

Stuart Hope is a co-owner of Hope Aviation Insurance. His career as an aviation insurance broker...
Read More

Stuart Hope once again examines the potential consequences that the “nightmare loss” presents for an aircraft owner- and he recommends caution when planning your business aviation insurance.

In previous articles concerning protection for catastrophic loss- the discussion began with describing an actual accident in the hopes of getting your attention. One of those losses was the Challenger 600 that overran the departure runway at Teterboro- NJ during an aborted take-off- went through a perimeter fence- crossed a four lane highway and impacted a building. There were eight investment bankers on board the aircraft.

Another example was the Falcon 900 accident at Santa Barbara- CA. Again- the aircraft aborted takeoff- skidded off the end of the runway and impacted a berm- causing major damage to the aircraft. There were 15 passengers on board. Miraculously in both cases- there were no fatalities.

For purposes of this month’s discussion- let’s assume that the above accidents both resulted in “the nightmare loss-” and all passengers and crew perished. The lawsuits brought on behalf of the passengers by their families would come fast and furious. Attorneys know how to work this game. There would be alleged negligence on the part of the aircraft owner- the aircraft manufacturer- the last facility to pump fuel or repair the aircraft- etc. However- since roughly 85% of accidents are caused by pilot error- the most probable target would be the owner.

WALLET-BUSTING AWARDS

When these cases reached the courts the potential amount of economic and non-economic damages to be awarded by a “jury of your peers” for a wrongful death claim would be determined. First- the economic value of each deceased would be established based on the individual’s age at the time of death- his or her probable retirement age- and annual compensation adjusted for potential career moves up the ladder (think rising star). Then non-economic value- such as loss of consortium- etc. would be decided.

Summing both economic and non-economic values- the jury would arrive at a dollar figure. Given investment bankers routinely make annual salaries plus bonuses in the one to ten million dollar range- you can quickly see that for each passenger the amount of the potential verdict could be extremely large.

There is no joy in purchasing insurance. Most buyers don’t really understand what they are purchasing. Fewer ever take the time to actually read the policy- so it is no wonder many make the disastrous decision to exert a minimal amount of “due diligence” when renewing or placing their insurance.

Further- there is a misperception that $25m or $50m is a large amount of coverage- which I assure you is not the case when considering aircraft. Being a millionaire today is nothing like what it was when Howard Hughes was a young entrepreneur. Today a billionaire is the millionaire of an earlier time.

FACING REALITY
If you or your company own or operate a business aircraft- you or the passengers riding in your aircraft represent the top 1% of wage earners in the USA. You are nominally high-net-worth or ultra-high-net-worth individuals often carrying friends- partners or vendors who are in the same category. Your success places you in ‘rare air’- and along with that success comes the responsibility to protect all that you have gained.

In a word- liability insurance is your biggest friend. Coverage limits from $50m to $500m can easily be purchased for corporate aircraft flown by professional pilots. The marginal cost difference to increase your liability coverage limit in today’s soft insurance market is truly nominal. You honestly need the highest liability limit you can reasonably afford. Verdicts are not getting smaller; quite to the contrary- they are increasing every year. Sure the odds of the above losses happening to you are small- but that’s what the owners of those aircraft thought also. Mistakes happen- and we never know when our number will be called.

Is your protection sufficient? You’d better look again if you are in doubt. Now is the time to take action. Send yourself an email reminder now.

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

Read more about: Business Aviation Insurance