Costello Insurance Associates Aviation Insurance

 Costello Insurance
 Associates, Inc.
 Tel: 800.528.6483
 Tel: 480.968.7746
 Fax: 480.967.3828

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Renter Pilot Liability Insurance

By Pat Costello, Costello Insurance Associates, Inc
Never a renter or borrower be, except when it comes to airplanes! Of course, in my business I need to add, "If you do use a non-owned aircraft be sure you're properly insured!"  Each week Costello Insurance receives a number of calls for an explanation of Renter Pilot Liability Insurance. Who needs it? How am I impacted if I own an airplane?  What if I belong to a club? Why is it needed? What coverages are available? What are the typical limits of liability? What aircraft are approved? What does it cost? Can a flight instructor acquire it? 

Before we get started let me provide the customary disclaimer. This article is designed to provide general instructive information pertaining to Non-Owned Aircraft Liability Insurance aka Renter Pilot Liability Insurance.  It is not designed to supersede any insurance policy in any way. It is the obligation of each policyholder to rely on the wording within their policy and not this article for coverage after a claim. In short, read and rely on your policy.

What's the difference between Non-Owned Aircraft Liability Insurance and Renter Pilot Liability Insurance?
None. Each title will be used interchangeably throughout the article.

Who needs it?
How am I impacted if I own an airplane?
What if I belong to a club?
Anyone renting or borrowing a airplane they don't own, whether they have their own ship or use their club's, has a need for Non- Owned Aircraft Liability Insurance.

Most Pleasure insurance policies for owned aircraft include a special section which provides some coverage for the use of non-owned aircraft.  It typically applies only if the policyholder is an individual. It may not apply if the policyholder is a partnership or a corporation. The use of non-owned aircraft section of the policy may also spell out what kinds of aircraft coverage will apply to.  If you own a plane and occasional rent or borrow a non-owned aircraft be sure to review the Use of Other Aircraft section of your insurance policy to see what non-owned aircraft liability coverages may already exist for you.

At one time many insurance carriers considered the operation of a club airplane by a club member to be the operation of an owned aircraft thereby not covered under the Non-Owned policy. Some carriers may still structure their policy this way. A number of years ago some insurance companies expanded their Renter's policy to say coverage would apply so long as the club member had no more than 20% ownership in the aircraft. Now, from some carriers, a club member can purchase their own non-owned policy to augment the protection they receive from the club's insurance.  I say "augment" as non-owned insurance is a form of excess coverage.

Excess coverage is insurance protection that kicks in once all other valid and collectable insurance has been exhausted.

If you operate non-owned aircraft you need Renter Pilot Liability insurance.

Why is it needed?
When operating any equipment whether it is a car, boat, or airplane there is the potential to negligently cause bodily injury or property damage to others as well as physical damage to the equipment. Such losses can be pretty expensive if you have to pay for defense and settlement out of your own pocket. It's better to transfer as much of your risk of loss to an insurance carrier if you can.

What coverages are available?
There are generally two sections to a Renter's policy. Both pay only if the policyholder was found negligent in the operation of an approved non-owned aircraft. Section one is for aircraft liability. It covers bodily injury to persons outside the aircraft and to passengers within the aircraft. It also covers damage to other people's property. I.e. cars, buildings, other aircraft and more. This property damage coverage does not include the aircraft being operated. Carriers will not sell a policy without this section.

Section two is optional. It affords coverage should the renter pilot negligently damage the approved airplane being rented or borrowed. It also provides coverage for the loss of revenues sustained by the aircraft owner while the aircraft is down for repairs. It pays up to the limit selected. It's recommended that the amount of Non-Owned Hull coverage purchased be equal to the value of the aircraft being operated plus a little extra for loss of use.

A very important item that is included with a Non-Owned policy is "free defense". This means the carrier will provide an attorney, if needed, at their expense to defend the policyholder. Lawyers cost a great deal of money. It's better to have their expenses come out of the carrier's pocket instead of yours.

What are the typical limits of liability?
Part one of the policy is the aircraft liability. The usual limit is $1,000,000 combined single limit of bodily injury and property damage limiting each passenger to $100,000 per passenger seat. We're often asked if any of that limit would apply to the policyholder's injuries. The answer is no. It's coverage for what is done to others only.

Part two is called Non-Owned Aircraft Physical Damage Liability. It's often referred to as non-owned hull coverage. Just like the aircraft liability it only pays should the policyholder negligently damage the rented or borrowed aircraft.  No negligence no payout.  The limits available typically range from $5,000 to $150,000.

Either part activates only when any other valid and collectable insurance is exhausted and pays only if the policyholder is found negligent. But if you have a loss don't wait to see if other coverage will apply. Put your carrier on notice right away to avoid the potential of voiding certain sections of your policy.

What aircraft are approved?
It differs by insurance carrier. Costello Insurance uses the AIG insurance policy which allows for the following:
Your personal and non-commercial business use of Non-Owned, fixed wing, non-pressurized, land aircraft having non-turbine single engine of 450 horsepower or less (including non-powered sailplanes) which are
Standard, Experimental or Light Sport,
Have a Maximum 7 seats
Aircraft are considered to be non-owned provided the policyholder has no more than 20%  ownership in them.

What does it cost?
Premiums vary based on the pilot's qualifications and the limits needed.  It's not that expensive.

Can a flight instructor acquire non-owned aircraft liability insurance?
Yes. The premium is higher. The aircraft liability also extends to provide Professional Liability coverage for negligent instruction for no additional premium.

Let's see how a non-ownership policy might work.

Mr. Pilot Error rents a two seat airplane from his local fixed based operator Taped Together Flight Service. Pilot lands short hitting a fence causing bodily injury to himself and his passenger. Upon investigation it was determined Mr. Error crashed due to his negligent operation of the aircraft.  Mr. Error erred big time!

Pilot is on the hook for the following damages.
$10,000 damage to the rented aircraft.
$3,000 loss of revenue to the flight school while the aircraft was down for repair.
$300 for the fence.
$25,000 for injury to the passenger including pain and suffering.
$5,000 for his own injuries.

Like most insurance for commercial flight schools, Taped Together Flight Service had insurance for themselves, but the coverage did not extend to renter pilots. Mr. Error was fortunate in that he had Renter Pilot Liability insurance. He purchased aircraft liability in the amount of $1,000,000 limiting each passenger to $100,000 and non-owned physical damage liability in the amount of $20,000.  The carrier paid for everything except for $5,000 of Mr. Error's injuries. Without insurance he would have paid $43,300 out of his own pocket instead of $5,000.

If operating non-owned aircraft is your passion protect your peace of mind and your pocketbook by having Non-Owned Aircraft Liability Insurance!

Pat Costello