“Am I covered to fly the aircraft?” is one of the most common questions we get from pilots and the answer is not as cut and dry as it might seem. There is a crucial difference between being covered to fly an aircraft vs approved to fly an aircraft. Let’s examine why it’s so important to understand this concept.
APPROVED PILOT
ALL pilots acting as pilot in command need to be approved under the insurance policy. In order for the pilot in command to be approved for a given flight, he/she must be specifically named on the pilot endorsement as an approved pilot OR meet the minimum pilot provisions in the policy, also known as the “Open Pilot Warranty”. Be careful – the FAA’s definition of pilot in command varies greatly from the insurance company’s. Most aviation insurance policies consider the pilot in command as the sole manipulator of the controls: in other words, the pilot who has his/her hands on the stick. Having an approved pilot in command operating the aircraft simply means if a loss occurs with said pilot at the controls, applicable coverage under the policy is valid (provided no other policy exclusions were triggered). Conversely, if the pilot in command at the time of the loss was NOT an approved pilot, the insurance company would have cause for a claim denial. However, you can be an approved pilot but at the same time, NOT a covered pilot. Let’s examine how.
COVERED PILOT
Being a covered pilot means you are provided protection under the aircraft owner’s
insurance policy. Whether a pilot is covered or not really boils down to one simple question; are you considered an employee pilot or an independent contract pilot for the flight in question? Insurance companies view employee pilots and contract pilots in a very different light. The definition of “insured” highlights the distinction. One insurance company’s policy definition states:
Insured means: Any person or organization while using such aircraft with the permission of the Named Insured (think policyholder) provided the actual use is within the scope of such permission and any other person or organization, but only as respects that person’s or organization’s liability because of acts or omissions of the Named Insured.
So far, so good. An employee pilot is protected under the policy liability coverage as an “insured” by definition and is therefore both approved and covered. But reading the definition further sheds some light on coverage provided for pilots that are not employee pilots:
However the insurance above does not apply to: Any person or organization, or agent or employee thereof (other than employees of the Named Insured) engaged in the manufacture, maintenance, repair, or sale of aircraft, aircraft engines, components or accessories, or in the operation of any airport, hangar, flying school, flight service, or aircraft or piloting service… In short, anyone engaged in commercial aviation!
As a pilot not employed by the insured, providing pilot service for hire, you are considered an independent business entity, and as such, responsible for your own insurance. What is the real exposure for a contract pilot or FBO providing contract pilot service? Let’s say the contract pilot lands long and the aircraft launches off the end of the runway, injuring a passenger and severely damaging the aircraft. The pilot could be held liable for bodily injury to the passenger and the resulting damage to the aircraft. In a perfect world, aircraft owners would have an insurance policy to provide coverage for themselves and the contract pilot would have an insurance policy to protect him/herself but alas, it is not a perfect world. Contract pilots can buy Non-Owned Aircraft Liability insurance policies to protect themselves for their negligent or alleged negligent operation of a non-owned aircraft, but these policies can be prohibitively expensive for individual contract pilots (much more reasonable for FBO’s providing pilot service).
The most common solution to protecting yourself as a contract pilot is to be added as an Additional Insured with Waiver of Subrogation status on the aircraft owner’s policy. The additional insured provides liability protection for bodily injury to passengers, people on the ground, or property damage. The downside is this dilutes the aircraft owner’s liability protection since you would be sharing their liability limit. If there’s a loss, it’s possible the owner could exhaust the liability coverage limit before you have your day in court, leaving you with no protection (the opposite is also true). The Waiver of Subrogation prevents the insurance company from paying a hull loss to the insured and then coming back against you to recover, if your negligence caused the damage to the aircraft. Best practice is to have the aircraft owner’s insurer issue a Certificate of Insurance with its corresponding endorsement to the policy confirming these two clauses have been added. It’s important to note a Certificate of Insurance does not contractually afford any coverage under the policy, the endorsement does. Some insurance companies will agree to this course of action, some will not allow it, and some will charge for it and other will not. It is important to consult with your broker to see what can be worked out for your particular situation. Now you are armed with enough information to answer the question: “Am I covered to fly the aircraft?” Be careful out there.
About the Author
Shannon Hope joined Hope Aviation Insurance as a producer in 2004. He is a graduate of James Madison University’s College of Business with a B.B.A. degree in Management with a concentration in Technology, Innovation & Entrepreneurship.
©2013 Shannon S. Hope, Hope Aviation Insurance