Businesses that operate planes will need insurance to shield them from losses related to injuries or damage. Commercial general liability policies do not cover aircraft in most situations, so a business must purchase aircraft liability insurance and hull insurance. A business can purchase these types of insurance together or separately. Aircraft liability insurance covers injuries or death to passengers, injuries or death to third parties, and property damage sustained by third parties. Meanwhile, hull insurance covers damage to the plane.
Some liability insurance policies provide coverage for passenger injury or death, third-party injury or death, and third-party property damage in a single agreement. This means that a single limit per occurrence (a smooth limit) applies to all of them. In other cases, a business might get separate coverage for each of the three types of aircraft liability insurance. This means that a separate limit per occurrence applies to each type. A business that purchases a policy subject to a bodily injury sub-limit likely will prefer a per-passenger limit to a per-person limit. A per-passenger limit does not limit coverage for injuries to non-passengers, except to the overall per-occurrence limit. Thus, a business can be sued by a non-passenger only if they suffer damages beyond the per-occurrence limit.
Common Exclusions From Aircraft Liability Insurance
Injuries to employees of the business
Injuries covered by workers’ compensation laws
Intentional or expected injuries
Injuries covered by a contract in which the business assumed liability
Injuries or damage arising from crop dusting
Injuries or damage arising from noise or pollution
Aircraft Hull Insurance
Similar to aircraft liability insurance, hull insurance comes in three forms. The most limited form of insurance covers situations in which the aircraft is damaged while it is on the ground and stationary. An intermediate form of hull insurance covers damage when the aircraft is on the ground, regardless of whether it is stationary or moving. Finally, the broadest form of hull insurance covers any damage to the aircraft, regardless of whether it is on the ground or in the air. A business will need to pay a deductible in connection with its hull coverage. The deductible may be a set fee, or it may depend on the insured value of the aircraft.
Common Exclusions From Aircraft Hull Insurance
Wear and tear
Seizure by the government
War, terrorism, and hijacking
For ground-only coverage, fires or explosions due to collisions while the plane was in the air
The business and the insurer will agree on the value of the plane. The insurer will pay this amount to the business if the plane is a total loss. This means that the cost of repairs is greater than the value of the plane, so replacing it would be more cost-effective. If the damage does not rise to the level of a total loss, the insurer will pay certain costs related to repairs. If the business performs the repairs, the insurer will compensate the business for items such as labor, materials, overhead, and transportation. If the business does not perform the repairs, the insurer will compensate the business for repair or replacement costs and transportation costs.
Warranties in Aircraft Insurance Policies
Certain types of warranties apply to aircraft insurance. These may include:
Pilot warranty: The aircraft must be piloted by a person who is identified in the policy documents, or who otherwise meets requirements provided by the policy.
Use warranty: The aircraft must be used for the purpose stated in the policy.
Airworthiness warranty: The aircraft must have an airworthiness certificate, as required by federal regulations.
A business must comply with any warranties in its policy to preserve its right to coverage.