Clear on Top

We often have clients call wanting to add an instructor, lienholder, hangar owner, airport, city, etc., as an additional insured to their aircraft policy.  In most cases, the policy addition is needed because the insured is required to sign a contract in order to use a facility or service.  Many times the client has already signed a contract prior to placing a call to us to add the third party as an additional insured.  This can be a tough situation.  Just because the client agreed to a contract stating that they will add a third party to their policy does not mean the underwriter must abide by that agreement.  Most of the time, these contracts have been drawn up by a lawyer or individual who may not have any idea about the limits and coverages that are available in aviation insurance.  Frequently (after we had a chance to look at the contract), we find that the limits required are not available or simply do not exist in the aviation world.  Another common issue is the naming of multiple parties that must be included as additional insureds.  It is not uncommon to see wording such as Widgets & Wombles, Inc. and its shareholders, directors, officers, employees, agents, representatives, successors, and assigns.  Believe it or not, we have even seen heirs and beneficiaries included in the list.  That additional insured you thought was the only one you agreed to add just grew exponentially.

So what does this mean to you?  Be prepared to provide a copy of the agreement requiring the additional insured wording.  IF the underwriter agrees to add the “list” of additional insureds, it may cost you some additional premium.  Not only may it cost you more, it also dilutes your liability limit since the additional insured now shares your liability in the event of a lawsuit.  Your $1 million limit may have just been divided two (or more) ways.  Why does this matter to an underwriter?  If he agrees to add the additional insured, your insurance company is now obligated to defend the additional insured in the event of a lawsuit.

Bottom line: Read the contracts and discuss them with your insurance agent and attorney before you sign them.  This applies to all contracts whether it involves a lienholder, hangar rental, or landing permit.  Know what you are agreeing to do and make sure that what you are agreeing to is feasible.  Confirm with your agent that the limits required are available from the underwriter and find out if there are any additional costs.  You pay good money for your insurance coverage; do not just agree to let someone else share your coverage.  In most cases, they already have coverage of their own.

Clear Skies & Tailwinds!