Stuart Hope is a co-owner of Hope Aviation Insurance. His career as an aviation insurance broker... Read More
Game Changer!Offering politicians the use of your aircraft presents owners with additional liability exposure. Carefully examine your insurance coverage- warns Stuart Hope.
With the Citizens United decision by the US Supreme Court in 2010 came record campaign spending- even for elected offices once considered strictly local. Incumbents- candidates running for office- and the lobbyists who do their bidding were calling in “special favors” at a feverish pace. One of those favors is leaning on individuals or companies to donate the use of their aircraft in support of a campaign. It can be tough to say ‘no’- but do consider the consequences.
In October 2002- Senator Paul Wellstone of Minnesota- along with his wife- daughter- three staff members and the two pilots died in a small airplane crash. Wellstone was in a tough re-election battle and was traversing the state making campaign appearances. Estates for the late Sen. Wellstone and the five other passengers reached a $25 million dollar settlement—apparently the policy limit--with the charter company that operated the flight. Subsequent legal action on behalf of the co-pilot and possible lawsuits against the State of Minnesota- operator of the navigational aid thought to be related to the accident- followed.
As we approach Election Day- November 5th- campaign managers face the challenge of having their candidates appear in multiple locations in very short time periods. As companies that own aircraft already know- Business Aviation presents the perfect solution to that problem. If you chose to give your favorite candidates a “donation” by allowing them to use your aircraft in support of their campaign- do so only after thoughtful consideration.
Know the Facts
There are many governmental rules and regulations from the FAA and IRS regarding the aircraft owner’s right to provide air transportation to elected officials and candidates. While this article will concentrate only on the insurance and risk management ramifications- you should educate yourself in the other areas as well.
There are two primary areas of concern for owners. First and foremost- consider the high profile nature of the passenger(s) being carried. If an accident should occur while you are providing a candidate and their family or staff with transportation- it will make national headlines. As the aircraft owner- you and/or your company will be targeted by the media- the FAA- the Federal Election Commission and the legal community. In addition to the bodily injury and property damage liability claims you will face- also consider other risks that result from damages to a firm's reputation- lost revenue and possible destruction of shareholder value- even if the company is not found guilty of negligence. You will be fighting many fires at once.
Let’s look at a decision matrix: Yes or No to loaning your aircraft to the campaign. The first decision deals with risk management. If the probability of loss and the consequence of loss are high- risk avoidance is typically your best strategy. That is- don’t engage in the activity that is creating the risk. If the probability of loss is low but the consequence of that loss is high- risk transfer [insurance] is typically your best choice. Aviation falls into the latter category. So assuming your answer is ‘yes’- what is the next step?
Are you carrying an adequate limit of liability protection? In the Wellstone accident- as stated- it is believed $25M was the policy liability limit of the charter operator. Imagine if the passenger had been one of our wealthier Federal or State candidates- or there were multiple high net worth individuals riding in the aircraft. Since you won’t discover how much liability protection was enough until after a loss- you are best served buying higher limits. In the current soft aviation insurance market the premium difference between $100M- $200M- or $300M liability limits is very reasonable.
Does your insurance policy usage clause allow you to be reimbursed for flights in your aircraft at the amount prescribed by the Federal Election Commission? Does that reimbursement create an issue with the FAA with regards to Commercial vs. Non-Commercial flights?
Violating the usage clause is a quick way to void your aviation insurance coverage. Communication with your aviation insurance broker is imperative. Provide the precise terms of reimbursement for these flights- if any- and secure a response in writing that they are approved under your policy.
The political landscape is changing. The pressure is there to say ‘yes’. We all know how the game works. If you decide to donate your aircraft to a political candidate- at least take the necessary steps to make certain your insurance program is in order.