5.6 Aviation Insurance
Key Takeaways
- Aircraft hull coverage is written on an agreed value basis and is graded by operational state: all risks ground and flight, all risks not in flight, and all risks not in motion.
- Aircraft liability separates admitted (passenger) liability from non-admitted liability for bodily injury to non-passengers and property damage on the ground.
- Pilot warranties and approved-use clauses are conditions of coverage, so a flight by an unlisted or unqualified pilot, or a use outside the declared purpose, can defeat the claim.
- Hangarkeepers liability covers the operator's legal liability for damage to aircraft of others in its care, custody or control, which the airport general liability policy excludes.
- The CGL and the personal auto policy both exclude aircraft, so an aviation exposure requires a dedicated aviation policy, and unmanned aircraft used commercially need specific drone coverage.
Quick Answer: An aviation program has two halves. Hull covers physical damage to the aircraft, written at agreed value and graded by operational state — all risks ground and flight, all risks not in flight, and all risks not in motion. Liability separates admitted (passenger) liability from non-admitted liability for third parties and ground property damage. Pilot warranties and approved use provisions are conditions: a flight by an unapproved pilot or for an undeclared purpose can void the claim. Airports add premises liability, hangarkeepers, and products coverage. Both the CGL and the personal auto policy exclude aircraft.
Florida's general aviation fleet, flight schools, agricultural aviation, air charter operations and tourism helicopter fleets mean an all-lines adjuster with a broad book will eventually see an aviation file — most often a hail-damaged aircraft parked on a ramp or a ground-handling incident, not a crash.
Aircraft Hull Coverage
Hull insurance covers direct physical loss to the aircraft, including the airframe, engines, propellers, avionics and installed equipment.
- Agreed value. The insured value is fixed at inception, and a total loss pays that figure without a depreciation or actual cash value argument. Getting the agreed value right at underwriting is the whole ballgame.
- Deductibles are commonly split: a smaller (or zero) deductible when the aircraft is not in motion, and a larger percentage deductible when it is in motion.
The Three Operational Grades
| Hull Coverage Grade | When Physical Damage Is Covered |
|---|---|
| All Risks — Ground and Flight | Broadest. Covers loss whether the aircraft is parked, taxiing, taking off, in flight or landing |
| All Risks — Not in Flight | Covers loss while the aircraft is on the ground, including while taxiing, but excludes loss occurring in flight |
| All Risks — Not in Motion | Narrowest. Covers loss only while the aircraft is stationary and not moving under its own power or momentum — hangar collapse, hail on the ramp, fire, theft |
For hull purposes, "in flight" usually begins at the application of takeoff power and ends at completion of the landing roll; "in motion" includes taxiing. Rotorcraft definitions differ, and helicopters are typically in flight whenever the rotors are turning.
Common Hull Exclusions
Wear, tear and deterioration; mechanical or electrical breakdown unless caused by a covered loss; damage to tires unless caused by fire, theft, vandalism or a covered loss elsewhere on the aircraft; conversion and embezzlement; and war, hijacking and confiscation unless bought back.
Aircraft Liability
Aviation liability is split by who is hurt, and the terminology is unusual.
- Admitted liability (passenger liability). Coverage for bodily injury to passengers aboard the insured aircraft. Written with a per-passenger limit and a per-occurrence limit. In some markets a true "admitted liability" endorsement pays a scheduled amount to an injured passenger in exchange for a full release, without proof of the operator's negligence.
- Non-admitted liability. Coverage for bodily injury to persons other than passengers and for property damage on the ground or to other aircraft.
- Single limit versus split limit. Many policies are written with a combined single limit subject to a sublimit per passenger, which is the figure that actually governs a multi-fatality loss.
- Medical payments. A small no-fault benefit for occupants, similar in function to Coverage F on a homeowners policy.
Warranties and Conditions That Decide Coverage
An aviation policy is a warranty-driven contract, and coverage disputes usually turn on one of these:
| Provision | What It Requires |
|---|---|
| Pilot warranty (open pilot clause) | The aircraft must be operated by a named pilot or by a pilot meeting stated minimums — certificate level, ratings, medical certificate, total time, time in type, and instrument currency |
| Purpose of use | Coverage applies only to the declared use: pleasure and business, industrial aid, commercial, special use such as agricultural application or flight instruction. A pleasure-and-business policy does not cover a charter flight for hire |
| Airworthiness | The aircraft must hold a valid, current standard airworthiness certificate and be maintained under the applicable FAA inspection program |
| Territory | Flights outside the stated geographic territory are excluded |
| Certificated airport | Some policies require takeoffs and landings at approved airports except in an emergency |
Exam Trap: A Warranty Breach Defeats an Otherwise Covered Loss
If an aircraft is destroyed in a landing accident and the investigation shows the pilot in command did not hold the instrument rating the open pilot clause required, the hull and liability coverages can both fail — not because of an exclusion, but because a condition of coverage was not satisfied. This is the aviation analogue of the marine implied warranty of seaworthiness.
Airport and Aviation Business Coverages
Fixed-base operators, flight schools, maintenance shops and airport authorities need coverages the CGL will not write for an aviation risk:
- Airport premises liability. Bodily injury and property damage arising from the ownership and operation of the airport premises — runways, ramps, terminals, fueling operations.
- Hangarkeepers liability. The operator's legal liability for damage to aircraft of others in its care, custody or control for storage, service or repair. This is the aviation analogue of garagekeepers coverage, and it exists precisely because premises liability forms exclude property in the insured's care.
- Products and completed operations. For manufacturers, repair stations and parts distributors, covering injury and damage arising from a product or from completed maintenance work after the aircraft leaves the shop.
- Aircraft chartering and management liability. For operators who lease aircraft to others or manage owner fleets.
- Non-owned aircraft liability. For a business whose employees rent or borrow aircraft.
Why Aviation Never Rides on Another Policy
Both mainstream forms shut aviation out, deliberately:
- The CGL (CG 00 01) excludes bodily injury and property damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, including loading and unloading.
- The Personal Auto Policy excludes liability arising out of the ownership, maintenance or use of aircraft.
- The homeowners Section II aircraft exclusion removes the exposure from personal lines.
Unmanned aircraft. Drones flown for a business purpose fall inside those aircraft exclusions on most current forms, so a commercial operator needs a specific unmanned aircraft liability policy or endorsement covering bodily injury, property damage, and often invasion of privacy and data exposures. Recreational drone use by a homeowner may be picked back up by an endorsement on some carriers' forms; the base form does not do it.
An aircraft owner carries hull coverage written as 'All Risks — Not in Motion.' A severe hailstorm damages the aircraft while it is parked on the ramp, and two weeks later the aircraft is damaged during a hard landing. How does the hull coverage respond?
A fixed-base operator stores and services customer aircraft in its hangar. A mechanic's error causes a fire that destroys two customer aircraft. Which coverage responds to the damage to the customers' aircraft?