Aviation Insurance Primer

Do you own or rent a plane for pleasure flying? Insurance can be expensive . . . until you need it. Consider the fellow who hand-propped his 172 with no one in the cockpit. With the throttle set too high, and apparently insufficient brakes, the Cessna made off on its own, and prop-chopped up a hangar, and the Baron inside. He was lucky the damage wasn’t much greater, and so the industry-standard million dollar coverage limit was enough to make everyone whole again.

One can purchase aviation insurance directly from an underwriter, a broker, or an agent. The differences are important. First, an agent is typically either captive or independent. A captive agent works directly for one company, and an independent works typically, for a few. They need not be licensed, and because they can offer a limited choice, one would have to query several agents to effectively, and efficiently shop for coverage. A Broker is arguably a more professional point of contact. Brokers are licensed, and have training, particularly in regard to helping clients select the right amount of coverage. The Aircraft Owners and Pilots Association (AOPA) acts as a broker for its members. Finally, a direct underwriter such as Avemco allows a pilot to buy a policy without a middleman.

When shopping for a policy, it’s a good idea to ask for a sample policy. The “typical” policy covers everything save enumerated exceptions, but ambiguity creeps in. One would think that the “boilerplate” policy would have worked out the grey areas of interpretation by now, but that’s not the case.

Consider United States Aviation Underwriters v. Fitchburg-Leominster, 42 F.3d 84 (1st Cir. Mass. 1994), where “both parties earnestly contend that [the] insurance policy is clear, unambiguous, with a fair and reasonable meaning exactly opposite to that advanced by their adversary.” The question was whether the woman who was injured when she walked into the spinning propeller was a “passenger” or not. The difference is that of coverage to a $100,000 limit, or a $1,000,000 limit.

In any case, it’s likely a good idea to ask your friendly aviation lawyer to review the contract, and explain the terms and exclusions.

Stanley Tupper