There are many terms and definitions used in aviation insurance which you need to know in order to read and understand your insurance policy. Many of these terms and phrases are contained in the definitions section of your policy in which the insurance company defines the terms as they relate to that specific policy. These definitions vary from policy to policy. They are not necessarily the same in all agreements even within the same insurance company.
However, there are some terms and phrases that are not defined in your policy but are a part of the common language used in the aviation insurance business.
The first page of the insurance policy which “declares” pertinent information describing pertinent information about the Risk such as the Named Insured, the policy period, aircraft number and description, limits of liability and hull value, territory, pilot clause. Sometime the declaration page is accepted as proof of insurance rather than getting a specific Certificate of Insurance.
Aircraft Hull and Liability Insurance
Aircraft Insurance in the US comes in two parts, Hull and Liability as defined below, issued in the same policy. In other parts of the world policies may be issued as two separate policies for the same aircraft.
Aircraft Liability Insurance
Protects the insured against claims for bodily injury and property damage caused by or arising out of the ownership, maintenance, or use of the aircraft.
Aircraft Physical Damage Insurance
Reimburses the insured for physical damage to the aircraft due to an accident or incident. Typically, does not cover loss of use, diminished value, or wear and tear. Also known as Hull Insurance.
Voluntary payments to passengers for direct medical expenses as a result of an accident or incident. Paid without regard to legal liability.
Purpose of Use
Defined in each policy, this spells out the approved uses of the aircraft under the policy. Some common uses are:
Pleasure and Business
Non-commercial use of the aircraft for personal or business travel where no charge is made for such use.
Non-commercial use of the aircraft for business travel where no charge is made for such use, but the aircraft is flown exclusively by professional pilots employed for that purpose.
Commercial uses include such operations as instruction, rental, charter, aerial photography, banner towing, and many more.
OPW OR OPC
The open pilot warranty or open pilot clause sets forth the minimum requirements for a pilot to fly the aircraft under a policy without specific approval of the insurance company.
The policy owner. The person or entity whose name appears on the first page of the policy and who has the authority to change or cancel the policy.
The party in the insuring agreement the insurance company agrees to indemnify. For example, an employee of the Named Insured.
A person or entity with an interest to be protected but who is not a named insured.
Breach of Warranty
In the event a Named Insured may have violated the terms of the agreement thus invalidating the policy, a breach of warranty endorsement guarantees the insurance company will make payment to the lienholder for any damage to the aircraft up to the outstanding balance of the loan or a percentage of the agreed value whichever is less. An example could be violating the open pilot warranty.
Combined Single Limit
A combined limit of liability applying to bodily injury and property damage. Usually stated as a limit per occurrence.
A single limit as above with no internal per person limits. The entire limit is available to satisfy a claim by one individual.
A single limit of liability for bodily injury and property damage per occurrence which is further limited to a smaller maximum amount payable to one person or passenger.
Gives the insurance company (in lieu of the Named Insured) the right to pursue a third party for recovery of damages paid that they feel is responsible for the loss.
Waiver of Subrogation
The insurance company agrees to give up the right to pursue recovery from a third party, usually in conjunction with granting Additional Insured status. Waiver of subrogation only applies to physical damage to the aircraft. For example, it is common for a contract pilot to be asked to be named as an Additional Insured with a Waiver of Subrogation to defend him against third party liability and to protect him from being sued by the insurance company for mistakes he might make in the operation of the aircraft which may have contributed to the damage.
Premises Liability Insurance
Part of a General Liability policy that insures the policy holder against any third party damage or injury arising out of a faulty premises.
Products/Completed Operations Liability Insurance
Part of a General Liability policy that insures the policy holder from third party liability arising out of the use of the product they manufacture and/or install on the airplane. This is not warranty insurance.
Hangarkeepers Legal Liability Insurance
Hangarkeepers Liability is a form of bailment and part of a General Liability policy that insures the policy holder against damage the policy holder does to a third party’s aircraft while in their care, custody, and control. This cannot take the place of the aircraft owner’s aircraft insurance. Hangarkeepers Liability pays only for the policy holder’s (FBO’s) mistakes. It does not cover the policy holder’s aircraft, pay for damage caused by the owner of the aircraft, or acts of god like the aircraft being destroyed by a tornado while in the policy holder’s hangar.
WAR & Related Perils Coverage
A group of perils which includes confiscation, nationalization, seizure, detention, hijacking, war, invasion, act of foreign enemies, rebellion, strikes, riots, civil commotions, sabotage, etc. that are normally excluded from the basic policy and can be purchased as an endorsement to the policy for additional premium.
Terrorism Risk Insurance Act – Provides coverage for a Terrorist Act as certified by the Secretary of Treasury, in consultation with the Attorney General and the Secretary of Homeland Security. This coverage is usually excluded in the basic policy and can be purchased as an endorsement to the policy for additional premium.
There are many more common terms and phrases which you may come across that are unfamiliar to you. If they are not defined within the policy itself, call your agent and broker and ask for an explanation. When you purchase insurance you are also purchasing the services of the agent to act as a knowledgeable adviser and consultant for the policy period.
Call or email any of our aviation service team with your questions. We would be happy to do a no cost, no obligation policy review with you. This is part of the service we provide our clients to help them understand their insurance policy and how it applies to their specific operation.
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