9.5 Aviation Hull Coverages & Aircraft Liability Coverages

Aviation Hull Coverages & Aircraft Liability Coverages

Exam Focus: Aviation appears on the Series 17-70 as two separate 3% domains — Aviation Hull (3%) and Aircraft Liability (3%) — so together they are worth as much as the Homeowners conditions or the whole Surety and Fidelity set. The New York general adjuster license does not include aviation (11 NYCRR 26.3(c) is a separate line), but the examination still tests it because 26.4(b) requires the exam to cover the principles and practices of the enumerated kinds of insurance. Learn the three hull coverage bases and the five liability coverages.

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Why Aviation Is Written Separately

Every property and casualty form you have studied so far excludes aircraft. The Homeowners policy excludes aircraft liability; the CGL excludes bodily injury and property damage arising out of the ownership, maintenance, use or entrustment of any aircraft; the Business Auto form covers autos, not aircraft. Aviation is written by a small group of specialist markets and pools on manuscript forms, and it is licensed in New York as its own adjuster line — independent adjuster, aviation under 11 NYCRR 26.3(c).

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Aviation Hull Coverages (3%)

Hull insurance is physical damage coverage on the aircraft itself — the airframe, engines, propellers, avionics and installed equipment. The whole of hull underwriting turns on when the aircraft is covered.

The Three Coverage Bases

Definitional Trap. “In flight” generally begins when the aircraft moves forward in the take-off run and ends when it completes the landing roll; for rotorcraft it typically means whenever the rotors are turning. “In motion” means taxiing under its own power or moving from a prior application of that power. A question that puts an accident on the taxiway is asking you to separate “not in flight” (covered) from “not in motion” (not covered).

Named Perils

Smaller or older aircraft, and some ground-risk-only placements, are written on a named-peril basis: fire, lightning, explosion, windstorm, hail, theft, vandalism, riot, and collision with another object while not in motion. Anything not named — notably in-flight mishap — is outside the cover.

Deductibles

Aviation hull deductibles are keyed to the operating state:

• In-motion deductible — typically a percentage of the insured value, applied when the loss occurs while the aircraft is taxiing, taking off, in flight or landing.
• Not-in-motion deductible — frequently nil, because a parked aircraft presents a very different exposure.
• Ingestion deductible — a separate, often larger deductible for foreign object damage drawn into a turbine engine.
• Disappearance — most hull forms cover an aircraft that disappears and is unreported for a stated period (commonly 60 days) after the flight on which it was last reported.

Valuation

Hull is normally written on an agreed value (stated amount) basis. In a total loss the insurer pays the agreed value without depreciation argument, which is why the schedule must be reviewed at each renewal — and why partial losses are settled on a repair-cost basis with the agreed value as the ceiling.

Common Hull Exclusions

Wear, tear, deterioration, mechanical or electrical breakdown (unless resulting fire or other damage ensues); damage confined to a tire unless caused by fire, theft or vandalism; conversion or embezzlement by a person in possession under a lease or sale agreement; use for an unlawful purpose; operation outside the purpose of use stated in the declarations (pleasure and business, industrial aid, commercial, flight instruction, rental); and — critically — operation by a pilot who does not meet the pilot warranty in the declarations.

The Pilot Warranty is the aviation adjuster's first coverage question. The declarations name the approved pilots or state minimum qualifications — certificate level, total hours, hours in make and model, instrument rating, current medical and flight review. An otherwise covered loss with a non-approved pilot at the controls is a coverage denial, not a damage negotiation.

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Aircraft Liability Coverages (3%)

Aviation liability is written as a set of separately scheduled coverages, and the tested skill is knowing which one responds and what its limit structure is.

1. Bodily Injury Liability — Excluding Passengers

Covers bodily injury to persons other than passengers — people on the ground, occupants of another aircraft, line personnel. It is written per person and per occurrence.

2. Property Damage Liability

Covers damage to property of others — the hangar struck on landing, the parked aircraft clipped while taxiing, the crops destroyed in a forced landing. It excludes property owned by, rented to or in the care, custody or control of the insured, which is why an FBO needs hangarkeepers liability for the customer aircraft in its hangar, exactly as a garage needs garagekeepers coverage (Section 8.4).

3. Passenger Bodily Injury Liability

Covers bodily injury to passengers. It is normally written with a per-passenger limit and a per-occurrence limit, and the per-occurrence limit is often expressed as the per-passenger limit multiplied by the number of seats.

4. Medical Payments

Pays reasonable medical expenses, regardless of fault, for injury sustained while in, entering or leaving the aircraft. It is usually split between passengers and crew, and crew medical payments are frequently excluded or separately sub-limited because the crew's injuries are expected to run through workers' compensation.

5. Admitted Liability (Voluntary Settlement)

A distinctly aviation coverage. Admitted liability offers a stated sum to an injured or deceased passenger or their representative in exchange for a full release, without proof of the operator's negligence. It is used to resolve passenger claims quickly and privately, most commonly on corporate flight departments where the passengers are employees or guests of the insured. Any admitted liability payment accepted is credited against the passenger bodily injury limit.

Limit Structures

Liability Exclusions

The insured's employees (workers' compensation territory); property in the insured's care, custody or control; contractual liability assumed beyond the policy's terms; use for an unlawful purpose or outside the stated purpose of use; operation outside the territorial limits; noise, pollution and electromagnetic interference on most forms; and war, hijacking and allied perils unless bought back by a war risk extension.

Adjuster Cue on Territory. Aviation policies state a geographic territory — commonly the United States, Canada, Mexico, the Bahamas and the Caribbean. A flight that ends in an accident outside the stated territory is a coverage problem before it is a damages problem, and the adjuster's first three questions on any aviation loss are always: Was the pilot approved? Was the purpose of use as declared? Was the flight within territory?