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Rather, 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, insurance company’s maximum exposure is $200,000, exclusive of any amounts it spends on your defense.
On other hand, smooth limit coverage of $1,000,000 per occurrence will provide up to $1,000,000 of coverage regardless of number of passengers. This coverage presents a greater risk to insurance company since it could have to pay full policy limits even if only one person is injured. As a result, greater risk means that premium for this coverage is going to be more expensive than premium for a policy containing sub-limits.
When you read an aircraft insurance policy, you need to pay special attention to definitions section. Many of terms used in policy have specific definitions that are different from a dictionary definition or common usage for that word.
Examples include definition of “accident” which is often defined as a “sudden and unexpected event resulting in bodily injury, death or property damage”. This is different than definition of accident contained in NTSB Rule 830 and is also more specific than a dictionary or common usage definition of word.
Another example is 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, FAA’s or IRS’s definition or a dictionary definition.
These are just two examples. However, remember that aircraft insurance policy is a contract between you and insurance company. Both you and insurance company agreed to policy definitions when you paid premium and insurance company issued policy. As a result, both you and insurance company will be bound by those definitions.
Your aircraft policy will also contain exclusions. Exclusions define circumstances in which 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 upon state in which 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 by policy, not necessarily 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 on policy and does not meet open pilot qualifications.
Who Is Covered
Assuming no exclusions are applicable, policy will provide coverage to each person named as an insured under policy and to pilots who meet “open pilot” requirements. As a threshold matter, each pilot operating aircraft, whether named insured or qualifying under open pilot provision, will need to possess appropriate pilot and medical certificates and meet all currency requirements for operation of your aircraft.
The open pilot provision extends 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 that unnamed pilot must meet in order for pilot to be covered under policy. Generally, if those requirements are met and 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 of 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 understand policy, make sure you abide by 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 of pages containing your satisfaction of FAR currency requirements and keep copies in a safe place.
This way, if something happens to your pilot logbook and your insurance company or 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 in airplane, make copies and keep them in a safe place. In this instance, you may want to make a full set of copies of logbook entries, rather than just pages showing aircraft’s current airworthiness. An aircraft that contains logbook entries for all of work ever performed on aircraft is worth more to a potential purchaser than if those records are incomplete or missing.
These simple steps can prevent potentially costly disputes down road. It’s been said that best insurance is 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 email@example.com or check out his website at www.aerolegalservices.com.