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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
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