Aviation Insurance 101

Question 1

The principal aviation insurance coverage purchased by the aircraft and component parts manufacturer is:

Answer 1

Products Liability

Question 2

Who is the Personal Non-Owned Aircraft Policy primarily designed for

Answer 2

Private Pilots, and those who rent, borrow, or lease aircraft

Question 3

A Fixed-Base Operator may be held liable for:

6

Answer 3

1. Negligence of student/renter pilots
2. Charter/Rental services
3. Aircraft Sales
4. Line Services
5. Maintenance/Repair Services
6. Premises Liability (fuel, product sales)

Question 4

What is a Fixed-Base Operator?

Answer 4

An organization granted the right by an airport to operate at the airport and provide aeronautical services

Question 5

What are examples of services a Fixed-Base Operator provides?

(6)

Answer 5

1) Fueling
2) Hangaring
3) Tie-down and parking
4) Aircraft rental
5) Aircraft maintenance
6) Flight instruction.

Question 6

When could an aircraft manufacturer be held liable?

3

Answer 6

1. Design-induced errors
2. Inadequate instructions
3. Defective parts

Question 7

Describe airport liability. Who uses it?

Answer 7

Where the airport takes full possession/control of an aircraft, a bailment is created which imposes a duty to use ordinary care in safeguarding the plane

Used by FBOs

Question 8

When a pilot is operating an aircraft on behalf of his or her employer on company business, the pilot’s liability can be imputed to the pilot’s employer

Answer 8

True

Question 9

Pilot liability can sometimes be established on a theory other than negligence

Answer 9

True

Question 10

What is Passenger Liability Insurance?

Is the coverage mandatory for all aircraft?

How is coverage often sold?

Answer 10

Passenger liability protects passengers riding in the accident aircraft who are injured or killed.

In many countries this coverage is mandatory only for commercial or large aircraft.

Coverage is often sold on a “per-seat” basis, with a specified limit for each passenger seat

Question 11

What is Premises Liability Insurance?

Answer 11

Protects you in respect of bodily injury or property damage caused by an occurrence arising in or about any premises used by you in connection with your business as airport service providers, within the Geographical Limits declared to your Insurers.

Question 12

When does a Spares deductible apply?

Answer 12

It only applies when the component is permanently detached from the aircraft.

Question 13

What is Non-Owned Aircraft Insurance?

Answer 13

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.

Question 14

When is Non-Owned Aircraft Insurance not provided to a corporation?

Answer 14

When an aircraft is partly or wholly owned or registered in the name of the corporation, its subsidiaries, etc.

Question 15

What is Airport Owners and Operators Liability?

Who does it provide cover to? (4)

Answer 15

Provides cover against claims resulting from injuries to
members of the general public or damage to their property while they are on the airport premises or its related facilities

Cover owners and operators of private, municipal or commercial airports, as well as fixed base operators.

Question 16

What is Hangarkeeper’s Liability?

Answer 16

Protects the insured against legal obligations for injury to or destruction of the aircraft of others in the custody of the insured for storage, repair or safekeeping.

Question 17

What does Aircraft War Risk cover?

Answer 17

Physical loss or damage to the aircraft caused by an act of war, confiscation, seizure, arrest and detention.

Question 18

List the 9 main categories of UAV?

Answer 18

1. Multi-rotor Helicopter
2. Single-rotor Helicopter
3. Aeroplane or Fixed Wing
4. Powered Lift
5. GPS
6. Photography
7. Micro
8. Submersible/Underwater
9. Ground

Question 19

What is a ‘named insured’?

3

Answer 19

A “named insured”:

• Is usually a party to the insurance contract (but not the ‘contracting party/insured’);
• Will receive and can give insurance notices (e.g. expiry/renewal or cancellation notices); and
• Can make a claim and enforce the policy directly against the insurer but the conduct of the contracting party/insured can affect whether a claim is paid (eg non-disclosure /misrepresentation).

Question 20

What is an ‘interested party’?

3

Answer 20

An “interested party”:

• Is not a party to the insurance contract;
• Does not receive any insurance notices; and
• Can make a claim and enforce the policy directly against the insurer if they are:
• listed or named as a beneficiary in the policy; or
• referred to in the policy as someone to whom the benefit of the policy extendsv, but the conduct of the contracting party/insured can affect whether a claim is paid (eg non-disclosure /misrepresentation).

Question 21

What is an ‘additional Insured’?

3

Answer 21

When the named insured extends protection to the additional insured under the named insured’ policy.

Coverage provided under the additional insured endorsement if often limited to liability arising out of operations performed by or on behalf of the named insured.

This means that coverage will typically only respond to damages incurred by the additional insured if there is some connection with the operations of the named insured.

Question 22

What are the four main sections of AVN 1C?

4

Answer 22

Section 1: Loss of or Damage to the Aircraft
Section 2: Legal Liability to Third Parties (Other than Passengers)
Section 3: Legal Liability to Passengers
Section 4: General Exclusions

Question 23

What is the Montreal Convention?

Answer 23

The Montreal Convention 1999 (MC99) establishes airlines are strictly liable for proven damages up tola specified limit and affirm their liability in the case of death or injury to passengers, as well as in cases of delay, damage or loss of baggage and cargo.

Question 24

What are the AVN 1C Section 1 Standard Exclusions?

4

Answer 24

1. Wear and tear, deterioration, breakdown, defect or failure howsoever caused in any Unit of the Aircraft and the consequences thereof within such Unit
2. Parts or engines detached as spares, unless not replaced as defined in spares extension
3. Nuclear Risks, War, Hi-jacking and Allied Perils
4. Consequential loss of use of aircraft

Question 25

What are the AVN 1C Section 2 Standard Exclusions?

6

Answer 25

1. Noise & pollution claims except in the event of crash, fire or explosion or in-flight emergency resulting in abnormal operation of the aircraft
2. Nuclear Risks, War, Hi-jacking and Allied Perils
3. Loss of or damage to any property belonging to or in the care, custody or control of the Insured
4. Injury or loss sustained by any member of the flight, cabin or other crew whilst engaged in the operation of the Aircraft
5. Injury or loss sustained by any director or employee of the Insured or partner in the Insured’s business whilst acting in the course of his employment with or duties for the Insured
6. Injury or loss sustained by any passenger whilst entering, on board, or alighting from the Aircraft

Question 26

What are the AVN 1C Section 3 Standard Exclusions?

4

Answer 26

1. Liability to pilots, crew, directors and employees of insured
2. Nuclear Risks, War, Hi-jacking and Allied Perils
3. Injury or loss sustained by any member of the flight, cabin or other crew whilst engaged in the operation of the Aircraft
4. Injury or loss sustained by any director or employee of the Insured or partner in the Insured’s business whilst acting in the course of his employment with or duties for the Insured

Question 27

What does Passenger Legal Liability cover?

Answer 27

(a) accidental bodily injury (fatal or otherwise) to passengers whilst entering, on board, or alighting from the Aircraft and
(b) loss of or damage to baggage and personal articles of passengers arising out of an Accident to the Aircraft.

Question 28

What does Legal Liability to Third Parties (excl. Passengers cover?

Answer 28

Insured’s legal liability in respect of accidental bodily injury (fatal or otherwise) and accidental damage to property caused by the Aircraft or by any person or object falling therefrom.

Question 29

What does Section 1 Loss of or Damage to Aircraft cover?

2

Answer 29

Loss of or physical damage to aircraft hull described in the schedule incl equipment and spares

If insured for Flight risks, payment of reasonable emergency expenses necessarily incurred for the immediate safety of the Aircraft consequent upon damage or forced landing, up to 10% of the Amount Insured.

Question 30

Structure of an Aviation Insurance Programme?

5 Core + 4 Additional Covers

Answer 30

1. Hull “All Risks” of loss or damage to aircraft.
2. Hull “War Risks and Allied Perils”.
3. Spares “All Risks” and “War Risks and Allied Perils”.
4. Aircraft Third Party, Passenger, Baggage, Cargo and
5. Mail Legal Liability.

Additional Coverages:
Hull Deductible insurance.
Aircrew Personal Accident insurance.
Aircrew Loss of Licence insurance.
General Third Party Legal Liability (Premises, Products and Hangarkeepers)

Question 31

What are the advantages of being an Additional Insured?

3

Answer 31

1. Accessing Someone Else’s Insurance.

Sidesteps the procurement process, avoids paying premiums and defense costs as well as disclosing their own loss history.

2. Backing Up a Promise of Indemnification.

Reassures the indemnitee that it may have protection even if the indemnitor is financially unable to comply with the indemnification obligation.

3. Prohibits an Insurer’s Subrogation Against the Additional Insured.

Question 32

What are the disadvantages of being an Additional Insured?

2

Answer 32

1. Misconceptions about Available Coverage.

Factors such as other additional insureds and prior claims can affect an additional insured’s benefits in that there are either more insureds going after the same pot of money, or else the pot of money is diluted from the beginning by payment of pre-existing claims.

2. Conflicting Defense Positions.

An additional insured’s best defense may not be the named insured’s best defense, especially if the parties are blaming each other for the loss. In such cases, the insurer may have to hire separate defense counsel for each insured that has a dispute, eroding the policy limits and leaving less money for indemnification.

Question 33

What is a ‘taildragger’ aircraft?

Answer 33

An aircraft whose two main wheels are positioned forward of the aircraft’s centre of gravity, with one small wheel or skid at the tail.

Or a tricycle undercarriage, with a nosewheel at the front of the aircraft and two main wheels positioned slightly behind the centre of gravity.

Question 34

What is a ‘narrowbody’ and a ‘widebody’ jet?

Answer 34

Refers to the fuselage width of an aircraft.

Narrowbody aircraft have one aisle whilst Widebody usually have two.

Question 35

What are Avionics?

Answer 35

All electronic systems on an aircraft, spacecraft or satellite.

Question 36

What is a Turboprop aircraft?

Answer 36

An aircraft that has a jet, turbine engine turning a propeller.

Usually bigger and fly higher than piston aircraft.

Question 37

What is a Piston aircraft?

Answer 37

An aircraft that has a piston (four stroke) engine.

Typically a heat engine that uses one or reciprocating pistons to convert high temperatures and pressure into a rotating motion.