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Approved Pilots and aircraft insurance |
by John S. Yodice (From AOPA Pilot, April 2002.)
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High on the list of ugly surprises is finding out,
after an
accident, that the insurance you have paid big bucks for doesn't
cover the damage to your
aircraft. Here is a recent case with an important lesson for aircraft owners and pilots. The lesson is to make sure that you understand who are considered to be approved pilots under the insurance policy on the aircraft.
This is what happened. Toward the end of an otherwise uneventful flight, a twin-engine Piper Seneca II made a normal touchdown and landing on a runway at a major airport in the Northeast. It was approaching a turnoff to a taxiway to exit the runway when, without warning, the nosewheel landing gear collapsed. Both propellers struck the ground and the nose of the airplane scraped along the runway, eventually coming to a crunching stop. There were no personal injuries, but the airplane was badly damaged.
It turned out that the cause of the gear collapse was the failure of a spring device called a link assembly lock within the nose gear of the aircraft. The spring failed to maintain pressure on the knuckle joint of the nosewheel support, making the support prone to folding up and collapsing. The failure was a purely mechanical malfunction. It had nothing to do with pilot technique.
The accident may have been an ugly surprise to the aircraft owner, but that's not the worst of it. The uglier surprise was that the insurance company refused to pay for the damage to the Seneca. The charter company that owned the aircraft had it insured with a major, reputable aircraft insurer. In due course, the charter company made a claim under the policy for $52,000 to repair the damage to the aircraft. The insurance company investigated, and lo and behold the insurance company learned that the pilot didn't have the flight time required by the policy. The insurance company denied coverage.
The insurance policy had a fairly typical form of pilot experience requirements for other than any specifically named pilots. As spelled out in this policy, the pilot requirements were stated as both a precondition of coverage and a coverage exclusion. It had as a condition of coverage an "approved pilot endorsement," which provided that "this policy applies when your insured aircraft is operated in flight by a pilot who meets all of the...requirements" specified in the endorsement. Among other things, the endorsement required that the pilot must have logged: "total hours 5,000; hours in similar aircraft 300; hours in make/model 10."
In addition to this approved pilot endorsement there was a specific exclusion in the policy stating: "This policy does not cover bodily injury, property damage or loss...when your insured aircraft is...operated in flight by a pilot who is not an 'approved' pilot." The pilot of the accident aircraft was an employee who, at the time, had logged approximately 2,000 hours of flight time, not the 5,000 required under the policy. But in all other respects the pilot was qualified by the FARs and the policy.
What made the situation disturbing is that there was no causal connection between the accident and the pilot's experience. The gear malfunction would have happened regardless of the pilot's flight time. It could just as easily have happened to a 5,000-plus-hour pilot.
And even more disturbing is the fact that had the nosewheel spring held its tension for a while longer, there would have been coverage under the policy. The pilot experience requirements applied while the aircraft was "in flight." Once the airplane exited the runway, which it was about to do, it would not have been considered "in flight." The pilot experience condition and exclusion would not have applied. (The policy defines "in flight" as "the time starting when your insured aircraft moves forward for takeoff and continues until it has landed. It has landed when it has safely stopped or left the runway under control.")The owner of the aircraft sued the insurance company, and fought through two appeals, but to no avail. The New Jersey Supreme Court upheld the pilot-experience requirements and the insurance company's denial of coverage.
The owner of the aircraft had argued that because there was no causal connection between the accident and the pilot's lack of the full 5,000 hours of experience, coverage should be extended to the owner. And there is some support for the argument. Some courts in other states, expressing what has been called the "minority view," have said that causality is a key element that an insurance company must show for the company to avoid coverage. The notion is that, as a matter of public policy, denial of coverage to the insured based on a "technicality" would be unfair.
This argument did not wash with the New Jersey Supreme Court because the owner knew that it could have paid a higher premium and obtained a policy that required fewer pilot flight hours. Actually, the insurance company had written such a policy for this owner on other airplanes. The court said that "requiring a causal connection between the cause of the accident and the unambiguous exclusionary clause would constitute an unbargained-for expansion of coverage," exposing the insurance company to greater risk. The court added that even though the accident had nothing to do with the pilot, the pilot's experience level did add to the risk taken by the insurer.
This could be an important reminder for many of us.
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