In this continuing series we are discussing some of the more common misconceptions of the often misunderstood aircraft insurance policy. We welcome any discussion regarding aviation insurance matters. Keep in mind, the only truly stupid question is the one that is never asked.
When discussing needed limits of aircraft liability with new clients, it is not unusual for a prospect to tell me his company only needs a small primary or underlying limit of liability. Usually he will nonchalantly ask for a limit of $1,000,000. He will usually say his company’s commercial umbrella liability policy applies over this primary layer and carries his total limit of liability up to some satisfactory level.
It is a common misconception of business executives that a commercial umbrella policy covers everything. I want to go on record now and state, “THERE IS NO POLICY THAT COVERS EVERYTHING.” In most cases, commercial umbrella policies contain exclusions for aircraft and watercraft. You will see restrictive wording that may say:
“This policy does not apply to any liability arising out of aircraft;” or
“This policy does not apply to personal injury or property damage arising out of the ownership, maintenance, operation, use, loading, or unloading of any aircraft owned by the Insured or rented to the Insured without a crew,” or
“This policy does not apply to liability from the ownership, maintenance, operation, use, loading, or unloading of any aircraft/watercraft owned by the Insured or leased by any Insured for a period greater than thirty consecutive days, unless the Company has been notified of the existence of such aircraft/watercraft and the Insured has agreed to pay any additional premium and has agreed to accept such terms as may be required by the Company.”
Although the exclusions in umbrella policies and in excess liability policies vary in wording, most completely exclude coverage for aircraft liability. I might add, personal umbrella policies also exclude aviation exposures.