Non-owned Aircraft Liability Insurance - Crystal & …...2014/12/02 · What limits of liability...
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The setting is common in our business environment. An important meeting requires senior executives to charter a corporate aircraft because the corporation’s airplane is busy flying or the corporation simply doesn’t own one. So you call the local aircraft charter company and make arrangements for the flight. This trip will facilitate the timeliness of the meeting and give the corporation an edge on it’s competition. Unfor- tunately, something goes terribly wrong and there’s an accident. The charter company secured insurance coverage for its operation but liability suits begin to overwhelm the charter company and you soon find out that it’s not enough to cover the claim. The claimants are now directing their legal recourse against the corporation. Why you ask? The existence of the flight originated from your meeting. Hence the need for non-owned aircraft liability insurance arises. Non-Owned Aircraft Liability insurance provides coverage in the event a corporation becomes legally liable for bodily injury (including passengers) and property damage to third parties as a result of a loss involving a corporation’s or employee’s use of a non-owned aircraft. Liability coverage would be provided to the corpo- ration as long as the aircraft is not partly or wholly owned or registered in the name of the corporation, its subsidiaries, etc. In order to fully protect the corporation when it charters an aircraft on company business, it is recommended that the corporation request additional insured status under the charter company’s insurance policy. Evidence of this coverage usually comes in the form of a Certificate of Insurance. The charter company’s policy would therefore protect the corporation up to the limits of liability of the charter company’s policy and the corporation’s non-owned aircraft liability insurance policy would apply as excess coverage. In this regard, if the charter company’s policy has sufficient limits, the corporation’s policy would not be affected. Similarly, when an employee uses owned or non-owned aircraft on company business, it is recommended that the corporation request additional insured status under the employee’s policy or the employee’s FBO policy if renting aircraft. Again, the employee’s policy or FBO policy will protect the corporation up to the limits of liability before the corporation’s policy will respond. Although the limits of liability carried by the employee on a personal aircraft or FBO policy will be significantly lower than a charter company, it is good operating practice to establish such requirements. An employee who operates a non-owned aircraft on company business would be provided the same coverage as the corporation so long as the aircraft is not owned in full or part by, or registered, in the name of such person or any member of his household. An employee who operates his owned aircraft on company business must rely on his insurance policy to properly provide insurance for himself. Non-Owned Aircraft Liability Insurance
Transcript of Non-owned Aircraft Liability Insurance - Crystal & …...2014/12/02 · What limits of liability...
The setting is common in our business environment. An important meeting requires senior executives to
charter a corporate aircraft because the corporation’s airplane is busy flying or the corporation simply
doesn’t own one. So you call the local aircraft charter company and make arrangements for the flight. This
trip will facilitate the timeliness of the meeting and give the corporation an edge on it’s competition. Unfor-
tunately, something goes terribly wrong and there’s an accident. The charter company secured insurance
coverage for its operation but liability suits begin to overwhelm the charter company and you soon find out
that it’s not enough to cover the claim. The claimants are now directing their legal recourse against the
corporation. Why you ask? The existence of the flight originated from your meeting. Hence the need for
non-owned aircraft liability insurance arises.
Non-Owned Aircraft Liability insurance provides coverage in the event a corporation becomes legally liable
for bodily injury (including passengers) and property damage to third parties as a result of a loss involving a
corporation’s or employee’s use of a non-owned aircraft. Liability coverage would be provided to the corpo-
ration as long as the aircraft is not partly or wholly owned or registered in the name of the corporation, its
subsidiaries, etc.
In order to fully protect the corporation when it charters an aircraft on company business, it is recommended
that the corporation request additional insured status under the charter company’s insurance policy.
Evidence of this coverage usually comes in the form of a Certificate of Insurance. The charter company’s
policy would therefore protect the corporation up to the limits of liability of the charter company’s policy and
the corporation’s non-owned aircraft liability insurance policy would apply as excess coverage. In this regard,
if the charter company’s policy has sufficient limits, the corporation’s policy would not be affected.
Similarly, when an employee uses owned or non-owned aircraft on company business, it is recommended
that the corporation request additional insured status under the employee’s policy or the employee’s FBO
policy if renting aircraft. Again, the employee’s policy or FBO policy will protect the corporation up to the
limits of liability before the corporation’s policy will respond. Although the limits of liability carried by the
employee on a personal aircraft or FBO policy will be significantly lower than a charter company, it is good
operating practice to establish such requirements.
An employee who operates a non-owned aircraft on company business would be provided the same coverage
as the corporation so long as the aircraft is not owned in full or part by, or registered, in the name of such
person or any member of his household. An employee who operates his owned aircraft on company business
must rely on his insurance policy to properly provide insurance for himself.
Non-Owned Aircraft Liability Insurance
When approaching the insurance underwriting community it is prudent to do your homework before
soliciting a quotation for non-owned aircraft liability insurance. The underwriter will want the following
information:
How many hours does your firm use non-owned aircraft annually?
Does the company allow employees to fly owned or non-owned aircraft on company business? If so,
how may hours annually and in what type of aircraft?
Does the firm get additional insured status from its charter vendor and/or employees flying on
company business?
What underlying limits of liability are maintained by the charter company or employee?
Is there a corporate policy restricting the number of executives flying in any one aircraft?
If employees are flying owned or rented aircraft, do you have a current pilot history form so the
underwriter can review his pilot qualifications? [What type of training does the employee participate
in for the make/model flown?]
Once an underwriter has a clear picture of the exposure, he will offer a quotation—usually with requirements
attached such as evidence of underlying insurance, recurrent training, or some other underwriting prerequi-
site. Requests for liability limits can vary from $5,000,000 to $100,000,000 or more depending on the
exposure.
Commonly asked questions:
Can a company that owns a fractional interest in an aircraft purchase a non-owned aircraft liability
policy or excess liability policy for their own protection?
Yes, a company can purchase an umbrella type cover but it is not the same as non-owned aircraft liability insurance. Example: fractional-share owners can purchase an excess or difference in limits policy for the furtherance of their own personal protection.
What is the greatest non-owned aircraft liability exposure to a company?
Employees flying owned or non-owned aircraft on company business without the knowledge and consent of their employer.
Should a company that charters aircraft purchase non-owned aircraft liability insurance?
Non-Owned Aircraft Liability Insurance
Absolutely, far too many companies have the exposure through chartering aircraft or employees piloting owned or rented aircraft on company business and don’t purchase the cover. It is highly recommended to review the necessity of this insurance policy. Depending on the exposure, if there is infrequent use of chartered aircraft and no employee piloting exposure in the company, it is possible to cover your tracks by getting a certificate of insurance from the charter operator naming your firm as an additional insured. You need to assess the adequacy of limits at that point (i.e.) does the operator carry enough liability insurance to protect everyone in this legal environment.
How do I minimize my cost of insurance for a non-owned aircraft liability policy?
The company should maintain an approved list of charter operators with certificates of insurance from each naming your firm as an additional insured (the minimum limit of liability should be $5,000,000 per seat). Any employee pilot exposure should be thoroughly outlined along with a pilot history form (resume). If the employee owns an aircraft and flies it on company business, a certificate of insurance should be secured with additional insured status in favor of the firm. Present all of this information to the underwriter for consideration. Your actions will demonstrate a coordinated effort and/or control of the subject matter, which will make your negotiation for coverage and price that much easier.
What limits of liability should the company purchase for a non-owned aircraft liability policy?
Depending on the exposure and underlying limits, the risk analysis can vary from company to company, however, a range of $10,000,000 - $100,000,000 is typical.
Non-Owned Aircraft Liability Insurance
This article was written by: Lou Timpanaro, Senior Managing Director at Crystal & Company. For more information please contact Lou at 212.504.5850 or [email protected]
