Clear on Top

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.

We tend to take our liability limits for granted. Seldom do we ask the question, “Are my defense costs included in my liability limit or are they paid outside the limit? “  We all know attorney fees and other defense costs can be enormous.  If you carry a $100,000 limit of liability and you spend $50,000 in defense costs, it is very important to know if this expense is included or covered outside your policy’s limit of liability.  Some aviation insurance policies specifically include defense costs in the limit the company will pay.  In the above example, we would have only $50,000 remaining in liability limit to offer for settlement.

Other companies set the cost to defend outside the policy’s liability limits.  Wording such as “the Company will pay with respect to such claim, in addition to the applicable limit of liability all expenses incurred by the Company . . .“   Obviously, with this more liberal wording, the cost to defend does not deplete the amount you have in your liability limit to pay a claim settlement.