Risks in Air: An Aviation Insurance Overview

The majority of our clients spend a good deal of time traveling from place to place, high above the clouds. Some charter a private jet, others fly their own single engine aircraft, and many hop a helicopter to the Hamptons or LA to skip traffic. Almost all of these trips are uneventful, but as risk-management experts we know that often enough the friendly skies are not so friendly. In fact, the lawsuits and payouts resulting from crashes and other midair incidents have become so extreme that they have actually scared off some insurers. In the spirit of better-safe-than-sorry, we’ve created this brief of aviation’s inherent risks and the precautions and policies we recommend to minimize them.

When you fly private
Though COVID-19 has caused havoc on commercial airline travel, it has been a boon for private charter companies. To reduce contact with the virus, travelers are flocking to charters. A majority of those bookings are being made by new customers, and industry experts believe that once those flyers experience the ease of this type of travel—check-ins only 15 minutes before boarding, no taking off shoes, direct flights, privacy—many of them will be hooked. From a risk-management perspective, however, there is a downside, and it’s one that should be addressed before one pulls up to the airport: You could be held liable should something go wrong on the trip because private flyers select aircraft providers and determine flight paths as well as schedules with the aircraft operating company. Don’t worry—there are ways to counter this concern, depending on your connection to the plane.

If you are chartering:
Ask for additional insured status. Once the charter company lists you in its insurance policy, you will be protected to the limits of its liability (ideally, a minimum of $25M for helicopters, $50M for turboprops and $100M for jets). This will lessen the burden on your own umbrella liability policy. If you fly private regularly, you might want to consider sticking with one charter company that will give you ongoing additional insured status.

Request a waiver of subrogation. After payouts, insurance carriers often seek reimbursements from “responsible parties,” and as a charterer that could include you. Obtaining this protection limits a charter company’s insurer from going after your assets.

If you own a jet—or a share of one:
Make sure you are properly protected: Whether you own a piece of a plane, or all of it,—you’ve entered a higher realm of liability risk. Ownership means signing lots of contracts. Before you do, consult an aviation attorney and insurance professional to ensure you are aware of the risk and have mitigated the potential damage.

When you charter a helicopter
Autorotation notwithstanding, helicopters defy many of the laws of flight. If an airplane malfunctions, chances are it will glide, slowing its descent. Helicopters, which are traveling at lower altitudes to begin with, fall stone-like to earth. All of which is to say, even a minor accident in a helicopter can be very serious—causing broken backs and necks at best, disfiguring fires and death at worst. Obviously, underwriters know this, so insurance solutions are both significantly more expensive and somewhat limited. For example, one client of ours recently insured a six-passenger turboprop with $50 million in liability coverage for less than $30,000 a year; insuring a seven-seat helicopter in the same market cost a second client $130,000 annually, for a maximum liability of $25 million. So, if you’re thinking about purchasing a helicopter, you’ll likely need to consult a team of experts to get the maximum protection. If you’re chartering a flight, treat it as you would a jet: 1) get named as an additional insured and 2) request that waiver of subrogation.

When you are the pilot
If you don’t get paid to fly, the insurance market considers you a hobbyist. And that means that, regardless of your training, you will be placed in a high-risk category. In other words, you’re looking at high premiums and low liability limits. A recent series of serious accidents and expensive settlements have made the market even tougher. But that doesn’t mean you can’t pursue your passion. Here’s what we suggest:

If you own—or want to own—a small plane:
Talk to trusted advisors first. Insurance professionals and trust and estate attorneys will make sure you and your “bug smasher” are adequately covered. It’s important to note that it will be quite a challenge to protect yourself with insurance policies alone. Your team will need to get creative to fully insulate you against potentially massive payouts.

Make sure you are insured when you’re grounded too. Fire, wind, heavy snowloads, hangar collapse, accidents during handling ... there are plenty of risks attached to planes even before you get up in the air. To park your plane, airports require you to sign a contract and show proof of insurance. Some plane owners may wish to self-insure, which will necessitate providing financial statements and written commitments.

If you’re learning to fly or flying someone else’s plane:
Choose a flight school carefully. When you hire someone to teach you to fly, you’re hiring their plane too, and the problem with that is you can’t know how well that plane is being maintained. Once you get in the cockpit, you could be liable if something goes wrong and causes an issue. The lack of control you have in this situation can argue for a more radical solution: It may be worth buying your own small plane and learn to fly it. That gives you oversight over the insurance, so you can rest easier knowing you have the proper coverage.

Consider non-owned aircraft coverage. These policies are available to pilots who borrow or rent small planes and to corporations that charter private flights or have employees and executives who fly or would like to fly themselves on business trips. Essentially, they cover bodily injury and property damage that may occur as you operate or use third-party-owned aircraft.

If you want to fly a vintage or experimental plane:
Prepare yourself for an even more challenging insurance market. Seaplanes, home-built, vintage models and the like are treated quite particularly by the industry. Can you obtain coverage? Sure. Will it be quite expensive? Definitely.

Obviously, and rightly, there are many factors at play when it comes to protecting yourself in the air. All of them make finding sufficient aviation insurance a challenging task. Challenging, but not impossible—especially if you work with a team of dedicated experts. Should you have more specific concerns, we are always available for a more targeted discussion.