(Excerpt from an article in Aviation Magazine 2019, with the kind permission of the author, Sandy Odebunmi, Aviation Insurance Specialist, Ontario)
Note: This article is of particular relevance to incorporated commercial for-profit HG/PG operations/businesses, which may be seeking liability coverage for these business entities and their assets, property, tour-guiding activities, etc.; in contrast, the Third-Party Liability coverage carried by HPAC/ACVL is specific to non-profit associations and covers individual current members of the Association for the activity of hang gliding and paragliding and the instruction thereof, as well as covering landowners allowing HG/ PG on their property.
THE AVIATION EXCLUSION IN INSURANCE
Aviation is a specialty industry, especially in insurance.
The aviation exclusion can be found in every type of automobile, property, and liability insurance policy.
The exclusion is embedded in the treaties and wordings insurance companies file with governing bodies. These documents lay out what they can and canít sell, and for nearly every insurance company, Aviation is on the Ďcanítí list.
Liability, Automobile, and Property Insurance
To be blunt a standard Commercial General Liability insurance policy offers no coverage for any business operation related to aviation. An Aviation General Liability policy is designed for this specific reason. If you have a Commercial General Liability policy and work in aviation, I highly suggest calling your broker and going over the terms and conditions of the policy.
While any commercial business, including aviation, can get a standard automobile insurance policy, itís important to remember that automobile insurance is not designed to cover your vehicle airside.
As someone who often visits airports I always stop and consider, ďDo I really need to drive where aircraft are present?Ē and as good as being cautious is, I know that the only real answer is to be covered airside through a Premises Liability policy from an aviation insurer.
Over the years Iíve had clients whoíve had their hangars, fences, and aircraft all struck by the vehicles of other tenants and visitors to the airport. Iíve also had clients transport their tools and equipment in work trucks only to have them stolen or destroyed in accidents and fires.
In my experience approximately half of the time, the claims are denied just because the incident took place on an airport or the equipment was used on aircraft.
When it comes to your tools, equipment, spare parts, and customerís goods there is a simple way around the aviation exclusion to make sure they are covered. There are a select few property insurers who are able to endorse their wordings; removing the exclusion.
These few companies are only able to do this because they have broadly written policy wordings, but they are not likely to do it automatically; a broker needs to request it.
A property policy with the exclusion removed can also cover your Property in Transit, so even if you are in an accident and your tools are destroyed you can still be covered outside of your automobile insurance policy. Just be sure to always provide full information about what goods you are insuring so there can be no doubt on an insurerís side in the event of an incident.
My Experience with the Exclusion
Throughout my decades as an Aviation Insurance Broker Iíve come across far too many clients where, through negligence or ignorance, another broker had set up standard commercial and automobile insurance policies that excluded nearly every aspect of the insuredís business.
In every one of these cases, the insured was year after year, paying for nothing.
A few years ago, I had a meeting where a prospective client had a $3,000 liability policy in place but the policy was functionally useless due to the aviation exclusion. They are a big company so $3,000 a year didnít seem like a lot to some of the attendees, but the CFO brought silence to the room when he pointed out they had had this policy in place for more than 10 years. They had wasted over $30,000 on an insurance policy that offered them nothing.
Unfortunately, these types of scenarios arenít rare. I once was asked to critique a popular hangar insurance programís policy (by the broker selling it, I might add) and found that anything related to aviation liability was excluded. The policy continued to be soldÖ.
Like all financial sectors, insurance is in flux right now. Rates are going up and underwriting guidelines are getting stricter. Aviation has been hit particularly hard with the reduced number of insurers able to write aviation policies.
In the past, many companies were willing to write some standard policies for aviation businesses on occasion, such as Products Liability for their non-aviation work. Now with the market in its current state, underwriters are becoming warier of anything related to aviation and there may be parts of an aviation operatorís business that are no longer insurable.
Many customer contracts require types of coverage that an aviation operator would have extreme difficulty in getting. Professional Liability is a particular difficulty right now, as there is only one Aviation Insurer willing to quote it, but at a cost that may make it impractical for smaller businesses to justify.
This is why it is so important to work with someone who specializes in Aviation Insurance and knows how to get you properly covered.
Instead of missing out on potential business, an experienced broker can look at the insurance requirements in a contract and advise you on what coverages and limits you should request to be reduced or removed entirely to satisfy both you and your clientsí needs.
A good and knowledgeable aviation broker would also know the current state of the market, reasonable rates for your policies, and would have access to every potential insurer for you.
The regular insurance markets offer plenty of premade packages with dozens of throw-in coverages to entice brokers into pushing their products to their clients. These packages are usually quite similar and are designed to fit everyone. Aviation Insurance policies are very different; they are tailored to the individual policy holderís needs.
Where an accountant or realtorís office can purchase a single Commercial Multi-Peril (CMP) policy, which would cover their property and liability airing from their operations, an aviation operation would need at least three separate policies to obtain similar coverage; an Aviation General Liability Insurance policy, a Property Insurance policy, and possibly a Non-Owned Automobile Liability policy.
As stated earlier, addressing the property portion isnít too difficult with a few companies able to remove the aviation exclusion, but these companies can be counted on one hand whereas non-aviation businesses have dozens of more options.
Contingent Employers, Personal Injury, Medical Expense, Tenants Legal Liability, and Contractual Liability are liability coverages whose inclusion non-aviation policyholders can take for granted. These coverages need to be requested specifically by your broker to be included on an Aviation General Liability policy and can sometimes incur a charge.
An important liability coverage found in some provinces that canít be added to an Aviation policy is, thankfully, still available to aviation operations. A standalone non-owned automobile insurance policy can be purchased for little cost. This coverage is important because it covers you when you and your employees are held responsible for damage done when using automobiles on company business that are not covered by a company automobile insurance policy.
In Aviation, we can count ourselves as fortunate to actually have a few coverage packages available for aircraft policies. They offer around a dozen or so Ďfringeí coverages meant to address the concerns of covering avionics and baggage, expenses for emergency landings, and others in addition to the limits insured for the aircraftís hull and liability, and although these coverages need to be specifically requested for corporate and commercial aircraft policies they are widely available for private aircraft policies.
Working with the Exclusion
Aviation is a specialty industry, especially in insurance.
We are excluded from most insurance company offerings and written out of their wordings. There are more applications, endorsements, and exclusions in aviation insurance. Our frequency of loss may be lower, but our severity rates tend to be higher and our premiums reflect this.
It can be complicated, even a little discouraging, but having a good Aviation Insurance Broker can simplify it.
We know how to arrange the right policies with the right endorsements, which coverages are unnecessary and which limits are too high or low. We can provide essential recommendations on contract insurance clauses and risk management strategies that can help save you time, money, and headaches.
More than that though, a good broker goes past the declaration pages of the policy and into the wordings and exclusions.
Sandy Odebunmi has been an aviation insurance broker for over 30 years during which time she has specialized in General Aviation and creating affordable solutions for her clients and aviation associations across Canada.