Clear on Top

I ended my last post – here – with a quiz.  So how did YOU do?  The temptation for many of us is to answer the coverage questions with what we think should happen.  But, unlike high school, insurance coverage quizzes are open book.  In fact, we should always make it a practice to answer such questions with specific reference to the policy in question, resisting our instinct to answer from the hip, based on our gut feelings.

Before we get into answering specific questions, some quick reminders on insurance policy reading:

1)       In the early days “hull” policies and “liability” policies were two separate entities.  Today, they are written as a one combined policy.  However, the two parts still contain very different terminologies as to who and what is covered by each.

2)      Policies specifically define certain terms – in BOLD – and leave other terms undefined. If a word is in bold, it’s because it means something different than what you think it means.  It means EXACTLY what the policy says it means.

3)      Policies giveth and taketh away.  In order to ultimately determine that coverage exists, we must establish WHO is covered, WHAT is covered, IF the policy extends this coverage, and then that the policy doesn’t EXCLUDE coverage for some reason.

Is there coverage for Burt and Danny for the loss of the airplane?

It would certainly seem so, based on what we know.  But let’s look closely at the Chartis OLAD11 policy, the contract in question.  Hull coverage is given in Part One – Insuring Agreements, #3 – Insurance for Physical Damage to Aircraft.  This agreement says that “We (the insurer) will pay for physical damage to your aircraft.” To verify that Danny and Burt are covered here, we need to verify that they are included in the policy definition of “your.”  In the Defined Words section of the policy, “You” and “Your” means the person or organization named in Item 1 on Page One.  This is what we call the “Named Insured.”  In our case, the Named Insured is R&Q Flying, LLC.  This is the entity to which payment will be made for physical damage to the aircraft.  The important thing for Danny and Burt is to make sure that they are proper and legal owners of the named insured entity – LLC members, in this case.  Often, “owners” fail to dot their i’s and find that they are not legally recognized with respect to their ownership stake.  If your airplane is in an LLC or other corporate entity, make sure your legal position matches your capital investment.

With that settled, let’s look for anything else that might cause problems – Danny is a named pilot, but our CFI is not.  Coverage is dependant on the pilots meeting the pilot requirements.  Does the CFI matter?

Danny was required to receive 2 hours of dual, but the policy goes on to require that the dual must be given by a CFI that meets certain criteria – namely, he or she must have at least 750 hours of total flying time and 25 hours in the Cessna 182.  Our CFI far exceeds the total time requirement, but falls short of the make and model requirement.

Too often, aircraft owners assume that because a pilot is well qualified and experienced, that they automatically meet the insurance company requirements.  While a 5,000 hour corporate pilot shouldn’t have any issues flying a 182, and would be easily approved when submitted to an underwriter – he lacks automatic approval in this case.  This issue jeopardizes coverage and potentially leaves everyone exposed.

ALWAYS verify that CFIs, or other non-regular pilots meet the experience requirements of the policy.  Never ASSUME that they are OK.

We’ll dig into the liability questions in Part III.