Understanding Aircraft Insurance Policies

Written by Greg Reigel

Continued from page 1

Rather,repparttar insurance company will pay a maximum of $1,000,000 per occurrence, but will only pay each passenger up to a maximum of $200,000. Thus, for an accident in which only one passenger is injured,repparttar 119260 insurance company’s maximum exposure is $200,000, exclusive of any amounts it spends on your defense.

Onrepparttar 119261 other hand, smooth limit coverage of $1,000,000 per occurrence will provide up to $1,000,000 of coverage regardless ofrepparttar 119262 number of passengers. This coverage presents a greater risk torepparttar 119263 insurance company since it could have to payrepparttar 119264 full policy limits even if only one person is injured. As a result, greater risk means thatrepparttar 119265 premium for this coverage is going to be more expensive thanrepparttar 119266 premium for a policy containing sub-limits.

Policy Definitions

When you read an aircraft insurance policy, you need to pay special attention torepparttar 119267 definitions section. Many ofrepparttar 119268 terms used inrepparttar 119269 policy have specific definitions that are different from a dictionary definition or common usage for that word.

Examples includerepparttar 119270 definition of “accident” which is often defined as a “sudden and unexpected event resulting in bodily injury, death or property damage”. This is different thanrepparttar 119271 definition of accident contained in NTSB Rule 830 and is also more specific than a dictionary or common usage definition ofrepparttar 119272 word.

Another example isrepparttar 119273 definition of “commercial operations” or “commercial purpose.” An insurance policy’s definition of this term is usually different from, and in some cases may be broader than,repparttar 119274 FAA’s or IRS’s definition or a dictionary definition.

These are just two examples. However, remember thatrepparttar 119275 aircraft insurance policy is a contract between you andrepparttar 119276 insurance company. Both you andrepparttar 119277 insurance company agreed torepparttar 119278 policy definitions when you paidrepparttar 119279 premium andrepparttar 119280 insurance company issuedrepparttar 119281 policy. As a result, both you andrepparttar 119282 insurance company will be bound by those definitions.

Coverage Exclusions

Your aircraft policy will also contain exclusions. Exclusions define circumstances in whichrepparttar 119283 insurance company will not provide you with coverage for operation of your aircraft. An aircraft insurance policy usually includes both specific and general exclusions.

Specific exclusions arise when you assume additional liability (e.g. you sign a contract that indemnifies or holds someone else harmless for damage they cause), damage occurs to your own property or injury occurs to members of your family. The policy may also specifically exclude coverage for your own medical expenses or for your operation of an aircraft that you do not own.

Depending uponrepparttar 119284 state in whichrepparttar 119285 aircraft is based, general exclusions can result in denial of coverage regardless of whether they directly caused a particular claim. These exclusions will preclude coverage for operation of your aircraft in commercial operations (as defined byrepparttar 119286 policy, not necessarilyrepparttar 119287 FAA or IRS), using your aircraft to commit unlawful acts, damage caused by war or terrorism or if your aircraft is operated by a pilot that is not named as an insured onrepparttar 119288 policy and does not meetrepparttar 119289 open pilot qualifications.

Who Is Covered

Assuming no exclusions are applicable,repparttar 119290 policy will provide coverage to each person named as an insured underrepparttar 119291 policy and to pilots who meetrepparttar 119292 “open pilot” requirements. As a threshold matter, each pilot operatingrepparttar 119293 aircraft, whether named insured or qualifying underrepparttar 119294 open pilot provision, will need to possessrepparttar 119295 appropriate pilot and medical certificates and meet all currency requirements for operation of your aircraft.

The open pilot provision extendsrepparttar 119296 coverage of your aircraft insurance policy to a pilot operating your aircraft who is not a named insured on your policy. The provision sets out total time, time in type and training requirements thatrepparttar 119297 unnamed pilot must meet in order forrepparttar 119298 pilot to be covered underrepparttar 119299 policy. Generally, if those requirements are met andrepparttar 119300 pilot is operating your aircraft with your consent, your insurance coverage should extend to that pilot.

What You Can Do

The complexities of aircraft insurance can seem daunting. But, what can you do to protect yourself? The first, and one ofrepparttar 119301 most important things you can do, is to read your insurance policy. If you have questions regarding terms or coverage talk to your insurance agent or contact an aviation attorney who is familiar with aviation insurance matters.

Once you understandrepparttar 119302 policy, make sure you abide byrepparttar 119303 policy and comply with its terms and requirements. It makes little sense to spend substantial amounts of money on insurance premiums and then place your coverage in jeopardy by doing or allowing something your policy prohibits.

Next, document your operations. What do I mean by that? Simple: Keep good records. Make sure your pilot logbook is up-to-date and current. If you take your pilot logbook with you when you fly, make copies ofrepparttar 119304 pages containing your satisfaction ofrepparttar 119305 FAR currency requirements and keeprepparttar 119306 copies in a safe place.

This way, if something happens to your pilot logbook and your insurance company orrepparttar 119307 FAA later question your currency, you will have back-up proof that you were current for your flight. Although not as critical, you may also want to keep a photocopy of your pilot certificate(s) along with your logbook records.

Finally, you should use this same procedure for your aircraft and engine logbooks. If you must take them with you inrepparttar 119308 airplane, make copies and keep them in a safe place. In this instance, you may want to make a full set of copies ofrepparttar 119309 logbook entries, rather than justrepparttar 119310 pages showingrepparttar 119311 aircraft’s current airworthiness. An aircraft that contains logbook entries for all ofrepparttar 119312 work ever performed onrepparttar 119313 aircraft is worth more to a potential purchaser than if those records are incomplete or missing.

These simple steps can prevent potentially costly disputes downrepparttar 119314 road. It’s been said thatrepparttar 119315 best insurance isrepparttar 119316 insurance you never have to use. That may be, but if you take these steps, you should have greater peace of mind that your insurance will be there if you need it.

Greg is an aviation attorney, author and holds a commercial pilot certificate with instrument rating. His practice concentrates on aviation litigation, including insurance matters and creditor’s rights, FAA certificate actions and aviation related transactional matters. He can be reached via e-mail at greigel@aerolegalservices.com or check out his website at www.aerolegalservices.com.

Aircraft Purchase Agreements

Written by Greg Reigel

Continued from page 1

Documents. The agreement should include a statement about which documentsrepparttar seller will sign and deliver torepparttar 119259 buyer at closing. Usually this includes a Bill of Sale (FAA Form 8050-2) and a signed current Registration Form (FAA Form 8050-3).

Pre-purchase inspection. In most transactions,repparttar 119260 buyer will want to have a pre-purchase inspection performed onrepparttar 119261 aircraft. The purchase agreement can specify who will performrepparttar 119262 inspection, what qualifications that individual must possess and whererepparttar 119263 inspection will take place. Also,repparttar 119264 buyer should makerepparttar 119265 agreement contingent uponrepparttar 119266 buyer’s satisfaction with results ofrepparttar 119267 inspection. Althoughrepparttar 119268 buyer is usually responsible forrepparttar 119269 expenses associated with a pre-purchase inspection,repparttar 119270 agreement should address which party is responsible for what expenses related torepparttar 119271 inspection.

Warranties. It is possible to include a variety of warranties inrepparttar 119272 purchase agreement representing certain conditions ofrepparttar 119273 aircraft (e.g. warranties of airworthiness, merchantability, fitness for a particular purpose etc.). However, due to space limitations most of these warranties will not be discussed here.

From a buyer’s perspective,repparttar 119274 warranty of title is probably most important. This warranty ensures thatrepparttar 119275 buyer receives title torepparttar 119276 aircraft free and clear of any liens or mortgages. Althoughrepparttar 119277 buyer will still want to obtain a title search ofrepparttar 119278 FAA Registry’s records forrepparttar 119279 airplane, havingrepparttar 119280 warranty of title included inrepparttar 119281 purchase agreement will help to minimizerepparttar 119282 risk of any unrecorded liens or interests inrepparttar 119283 aircraft.

Most sellers will want to include a disclaimer inrepparttar 119284 purchase agreement stating thatrepparttar 119285 buyer is purchasingrepparttar 119286 aircraft "As-is". This language is intended to limitrepparttar 119287 seller’s responsibility for any defects or unknown conditions inrepparttar 119288 aircraft. Ifrepparttar 119289 buyer is having a thorough pre-purchase inspection performed by a qualified mechanic familiar withrepparttar 119290 specific aircraft, inclusion of this disclaimer inrepparttar 119291 purchase agreement is probably not a great concern forrepparttar 119292 buyer.

Choice of Law/Venue. Ifrepparttar 119293 transaction involves a buyer and seller from different states, it may be prudent to include language inrepparttar 119294 purchase agreement that governs what law applies torepparttar 119295 transaction and where any disputes would have to be resolved.

Waiver and Release of Liability. The seller will want waiver and release of liability language inrepparttar 119296 purchase agreement to limit potential liability for injury or damage sustained byrepparttar 119297 buyer arising out ofrepparttar 119298 buyer’s use ofrepparttar 119299 aircraft. The language should be in bold, all caps letters to make sure it is obvious and not buried inrepparttar 119300 fine print ofrepparttar 119301 purchase agreement.

Waiver and release of liability language will not release a seller from responsibility forrepparttar 119302 seller’s intentional acts or gross negligence. Nor will it prevent possible claims from third-parties who are injured or damaged by buyer’s use ofrepparttar 119303 aircraft or fromrepparttar 119304 buyer’s minor children. However, it will preventrepparttar 119305 buyer, andrepparttar 119306 buyer’s spouse ifrepparttar 119307 spouse has signedrepparttar 119308 purchase agreement, from suingrepparttar 119309 seller if a defect inrepparttar 119310 aircraft causes an accident that results in injury or damages.

What Remedy Does An Aircraft Purchase Agreement Give You?

First, an aircraft purchase agreement is not a 100% guarantee that a buyer or seller will not be sued. In this litigious world, I don’t know that such a guarantee is possible. Further,repparttar 119311 purchase agreement alone does not make anyone do anything. If a buyer or seller does not want to comply with his or her obligations,repparttar 119312 purchase agreement will not change that. However,repparttar 119313 purchase agreement will give yourepparttar 119314 ability to go to court and have a judge makerepparttar 119315 non-performing or “breaching” party comply with his or her obligations.

Ifrepparttar 119316 purchase agreement is drafted clearly and with sufficient detail, it may be possible to haverepparttar 119317 court specifically enforcerepparttar 119318 agreement (e.g. makerepparttar 119319 breaching party do whatrepparttar 119320 purchase agreement says he or she is supposed to do). An example would be where a buyer refused to complete a transaction even thoughrepparttar 119321 seller andrepparttar 119322 aircraft complied with all ofrepparttar 119323 terms ofrepparttar 119324 purchase agreement. In this case, a court could forcerepparttar 119325 buyer to purchaserepparttar 119326 aircraft.

Alternatively,repparttar 119327 court may award money damages for losses incurred byrepparttar 119328 non-breaching party. An example of this is when a seller refuses to return a deposit even thoughrepparttar 119329 buyer has complied with all ofrepparttar 119330 terms ofrepparttar 119331 purchase agreement and has a right to return ofrepparttar 119332 money. In this situation, a court could enter a judgment againstrepparttar 119333 seller inrepparttar 119334 amount ofrepparttar 119335 unreturned security deposit.


An aircraft purchase agreement is a valuable tool to ensure that each party to an aircraft purchase transaction receives what is expected. It prevents confusion and misunderstanding and provides security that a party will have recourse ifrepparttar 119336 other party torepparttar 119337 transaction fails to perform as required. With minimal up-front time and expense, both buyers and sellers can protect their interests and maximizerepparttar 119338 likelihood of an uneventful closing and purchase.

Greg is an aviation attorney, author and holds a commercial pilot certificate with instrument rating. His practice concentrates on aviation litigation, including insurance matters and creditor’s rights, FAA certificate actions and aviation related transactional matters. He can be reached via e-mail at greigel@aerolegalservices.com or check out his website at www.aerolegalservices.com.

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