As an attorney who works both sides of the insurance policies I have seen some strange things. As I tell clients, insurance is a “fire extinguisher” that puts out a “fire” or rather pays for damages both physical and bodily injury. To begin with, insurance companies have two duties, one to defend and one to indemnify. Defend is if you get sued for an accident or damages then they are required to intercede in the legal proceedings against you. They are only required to defend you under the language of the policy. If you get sued for something outside the policy or that is listed as an exclusion, which is the most important part of the policy, and no one ever reads them, then the insurance will issue a Reservation of Rights letter saying “yes we have to defend you but you may not be covered in the end.” As stated this happens when someone sues you outside of the coverage on the policy. Indemnification means they have to pay if you have coverage for the claim asserted,
Now what happens when you did not tell the insurance company the “truth” about your information or your aircraft when applying for the policy? Well, you may not be covered if you file a claim.
Recently I had an inquiry concerning an aircraft policy after working with the pilot on training. First, the pilot was very good at flying the sim and knowledge of the aircraft. When I asked him about issuing a recurrent training certificate he stated his insurance company did not require it. This was strange as all insurance companies require it even mine and I have thousand of hours in my aircraft(s). The pilot went on to tell me that he got his insurance through his FBO who said “if Iist your aircraft under my FBO policy it will be cheaper.” All of sudden a bell and whistle went off in my head and as I tell people “my belly button started twitching.” I asked the pilot “how does your FBO have an insurable interest in your aircraft?” I then explained an insurable interest. For instance I cannot get a life insurance policy on his life as I have no interest in his life but his wife could. He asked me to look at his policy and I freely agreed to do this without charge as I try to help people stay out of trouble. Most clients come to me after they get into trouble. Then they have to pay. What the pilot was trying to do was to save money but in the end if he needed the policy they could have denied coverage.
The Policy
Several days later the pilot sent me the policy. Sure enough his name was no where to be found on the policy. The insured listed on the policy was the FBO. So what are you telling me? I am telling you that if the plane is damaged the FBO gets the check and if there is a lien on the aircraft then the FBO would be listed on the check as well as the lien holder.
But it gets deeper. Let say you have five seats filled and there is serious accident. The policy pays, as most, one million dollars per accident. So if there were five passengers with loss of life then each person heirs would get $200,000.00 each. There would be a release issued on behalf of the FBO but not necessarily the pilot who really owns the plane. With my plaintiff’s hat on I told this pilot that after settling with the insurance company I would have filed a lawsuit against the pilot and go after his estate if he was deceased. This area gets a little tricky as most insurance carriers would want a release of the pilot but he is probably not with us. The bottom line is that the pilot who was flying the aircraft may have a better estate than $200,000.00 so I, as a plaintiffs attorney, would go after the estate. The policy the pilot thought he had would be worthless. He would have no protection or at best limited protection.
The “Kicker”
But it gets worse. When the insurance company found out the policy was “adjusted, rigged or whatever” to get a lower rate and not disclosing the “real” pilot and owner they probably would deny all coverage even property damage. Remember, the insurance company relies on the correct pilot information in order to issue coverage and to set the premium amount. If for instance the pilot who actually owns the plane has a DWI or other medical problem they, the insurance company, was “deceived” which is called insurance fraud.
What to Do, What to Do?
The bottom line is to make sure that any policy you purchase is covering you and your estate and family. When you purchase a policy on an aircraft you live by the terms of the policy. Even though these policies are called adhesion contracts (meaning one party to the policy is benefitted more than the other, that being the insurance company being benefitted as it is a “you take it or leave it contract”) false information is a reason for a company to not cover you. The other thing you need to be aware of is not all policies are the same. For instance, the open pilot coverage may or may not apply. I had a case recently where the pilot was not even insured as a pilot due to no multi engine rating and the CFI was only 85 hours into the 100 hours needed. They lost the plane, a 421, on a taxi out with a story I never believed and the insurance company initially denied coverage. It was not until I sent a letter pointing out a problem with the coverage that would help my client did they pay on the claim.
Finally, get an aviation insurance attorney to review the policy. It would not be expensive and you would then get pointed out to certain areas to pay attention to such as training. Let the attorney point out key areas and where you could get in trouble on the coverage. Know going in where you need to be aware of trouble.
Training
Finally, do your training. I get contacted with “are you approved for recurrent training?” Almost all CFI-MEI who have time in the aircraft can give recurrent training if they meet the pilot requirement. Not all training is the same. If you went to “BIG OLD TRAINING INC.” and you got a person who read you their manual and put about four hours into the sim that does not even mimic your aircraft then you come away meeting the policy obligations but with terrible training worth nothing. Training is NOT about the policy but it is about knowing how to save your butt in case of an emergency.
Bottom Line
Know your policy and train for safety. An insurance policy where you meet the training qualification but yet cannot fly a loss of one of the engines is not going to protect you if you lose control of the aircraft. Qualified as per the policy and qualified as per the safety of flying the plane are two different things. The passengers in the back only care about the later.