Stuart Hope is a co-owner of Hope Aviation Insurance. His career as an aviation insurance broker... Read More
Business Jet Insurance Coverage
Year-end is always a good time to look back on lessons learned from Business Aviation's hot insurance topics over the prior 12 months, notes Stuart Hope…
The following paragraphs offer a brief recap of “take-aways” from the hot BizAv insurance topics we covered within AvBuyer’s Boardroom section during 2016.
War Risk and TRIA
Purchase of the insurance coverage known as War Risk Perils is a no-brainer. For a small premium, you have protection for roughly 25 excluded war perils. If the premium to include TRIA coverage is not expensive (and it usually isn’t), I would certainly recommend buying coverage for the advantages it offers (e.g., occurrence basis, coverage trigger and cancellation provisions).
Insurance Issues for Dealers & Their Clients
As a general rule, best practice dictates that each party to a transaction be responsible for their own insurance. Occasionally there are circumstances when it makes sense to insure a seller’s aircraft under the dealer’s insurance policy. If you are going to take this route, be certain both parties understand the insurance ramifications clearly to avoid an unpleasant conversation after a loss.
Rotary-wing aircraft are much more complex and have many more moving parts than the typical business jet. An engine or part failure in a helicopter usually is a much more critical event. Helicopters can be, and are operated safely and efficiently, but their operating regime presents a much larger exposure for insurance underwriters—a fact that is reflected in considerably higher premiums and deductibles.
The lay-up credit is a fairly standard coverage on policies for business aircraft. Keep this coverage in mind and be sure to notify your broker if your aircraft will be down for an extended period due to a maintenance event. Once the aircraft is returned to service you will be eligible to receive a premium credit based on the number of days it was out of service and not flying.
The real deterrent to flying your aircraft to Cuba is not your insurance policy but the governmental rules that have to be followed in order for your insurance company to respond and pay for a claim that occurs while in Cuba. Call your aviation insurance broker and have them confirm to you in writing what coverage would apply under your policy for a trip there.
Insurance Time Bomb
Unfortunately, the only available test to discover if your policy was constructed properly is to actually have a loss. That’s when the counter on the time bomb may hit zero. What is your defense?
First, since all aviation insurance brokers are paid exactly the same commission, hire the best.
Second, when it’s renewal time, don’t give short shrift to the process. Take the time to think deeply about your exposures, whether you have adequate liability limits, if the hull insured value is appropriate, are your pilots approved and properly trained, have contracts related to your aviation operation been reviewed, and is the named insured clause adequate?
These are just a few of the many critical areas that need to be considered.
FAR Violations & Insurance
There is a common misconception among aircraft owners that in the event of an accident, insurance companies can deny a claim if there was a violation of the Federal Air Regulations [FARs]. Most corporate aircraft policies if negotiated properly are very broad. That doesn’t mean you won’t have to pay attention to FAR compliance. If you are one of the rare aircraft owners who has an accident, the legal eagles will use any violation of the FARs as “evidence” to a jury of your peers that you run an unsafe flight department.
Per Occurrence War Coverage
For a reasonable additional premium, by purchasing the per occurrence War coverage, your liability limit no longer contains any sub-limit for bodily injury claims to persons outside of the aircraft or any property damage claims. Because the added premium for this additional coverage is normally reasonable, I recommend purchasing it.
Insurance & Aircraft Management
Most management companies run a professional shop and produce benefits for their clients. Nevertheless, you have a large investment exposed and should not blindly relinquish control of your asset to even the best management firm; you must consider the multiple exposures that you have. You would be smart to involve your own aviation insurance broker to help you navigate the complex wording of a management contract and help verify that all the insurance bases have been covered.
Lending Your Aircraft to Friends
Letting someone use your aircraft is a whole lot different than tossing a friend the keys to your car. The stakes are exponentially higher. Unfortunately, part of being successful is protecting what you have been able to build or acquire over time. I don’t mean to imply you should never do it, only that you at least consider the potential consequences of your generosity before saying ‘yes’.