Posted by: Sean Kerr | April 28, 2011

Liability Doesn’t End With The Sale

Selling of airplanes has been on the minds of many aircraft owners in the current economic situation.   Are you concerned if you have any coverage for bodily injury or property damage arising from an accident? Some of you may be thinking; “wait, you said I sold my airplane and my hands are clean” Are they?

There is a lesser known liability coverage for former owners who sell their airplane that may be endorsed onto your policy. Why would I need it and what does it cover?

Consider the following:  You have signed the bill of sale and the new owner and his child walk out to the airplane. Fast forward, they are in the airplane and are ready to take off. You watch them take off. Later that evening – or even weeks or months later –  you find out there was an aircraft accident involving “your” aircraft. Did you know you could potentially be liable for bodily injury to the passenger? Again, you may be saying; “ But, I sold the aircraft, and I have the bill of sale to prove it”.

If an attorney could prove the cause of the accident was due to your negligence, when you owned the aircraft, then this coverage may come in to play. For example, what if it was due to a maintenance issue or even as far-fetched as the child has an allergic reaction to the snack he received from you. Though these may seem silly, claims have occurred and several carriers can provide a liability coverage endorsement for the “Sale of Aircraft and Aircraft Parts”.

What does it cover and not cover? As always, it depends and read your policy and endorsement. Several policies will provide such wording as:

  • Liability coverages for bodily Injury and property damage are extended when caused by an occurrence arising from:
    • The sale of the insured aircraft which was from exclusive written agreement.
    • Providing to others (without intentional profit) maintenance, services in connection with the aircraft, food or beverage, and other possible examples.
  • Many carriers will have this coverage extension applicable when the bodily injury or property damage occurred away from the airport premises which the transaction occurred.
  • Some carriers may specifically state the aircraft must have a Standard Airworthiness certificate in effect.
  • Some provide coverage up to a year after it is sold or pro-rate the number of days for the policy was in effect. As ridiculous as it may seem, some carriers provide this coverage only while the policy is in effect. Typically after a year, the new owner will have had the annual completed and other maintenance items attended too.
  • The limit of insurance is often the occurrence limit on your policy declarations page. The limit will definitely be defined on the endorsement.
  • Endorsements will specifically state they will not cover damage to the aircraft. Again, this is liability coverage and addresses your LIABILITY to other people.
  • Some endorsements state they will not extend coverage if you are “in the business of manufacturing, distributing or selling aircraft”. In essence, if you buy, sale, manufacture or distribute aircraft for a living, you should have your own policy.

In many ways, relinquishing control of an aircraft that we have owned, operated, and maintained can increase our exposure to liability.  Good risk management practice says to identify potential hazards, and what you can not mitigate, you may want to transfer to an insurance policy.


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