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Aircraft Hangar Agreements

It goes with the territory. Airport territory, that is. If you want to have your aircraft in a hangar – and your insurance company certainly prefers it – then you will likely be looking at the business end of a tedious detail known as the aircraft hangaring agreement or hangar contract. There are several points worth remembering when it comes to contracts and the aircraft insurance policy.

Contracts are legal documents that deserve the attention of proper legal counsel and that’s exactly the type counsel you should seek. There are often two sections of many hangar contracts that also deserve the attention of your aviation insurance carrier. They are the “indemnity” and “insurance” sections, though they might be labeled something else, depending upon who authored the contract.

To indemnify someone means you will make them whole if they suffer loss arising out of the scope of the contract at hand. Many indemnities begin with a phrase such as, “Aircraft Owner agrees to indemnify, save and hold harmless Hangar Owner for any and all liabilities, demands, suits, claims, losses, and on and on…” But guess what “any” and “all” means? It means any and all! With or without insurance, you’ve just signed up to make the other party whole for pretty much anything.

The insurance section typically follows along after the indemnity because the party drafting the contract doesn’t just want your good intentions, they want the assurance of insurance money to pay for all those “liabilities, demands, suits, claims, losses, etc.” But all insurance policies have exclusions. An insurance policy will never actually pay for “any and all.” For example, if the hangar owner claims your aircraft has been leaking fuel for months and now the ground requires expensive environmental remediation, the hull and liability policy will not respond since pollution cleanup is excluded (unless arising out of an aircraft accident). That’s what a pollution policy is designed to cover.

The insurance section of a contract often has very specific requirements as to the type and scope of insurance you are expected to carry. In addition to of course having an aircraft hull and liability policy, some hangar agreements stipulate you are to also carry a commercial general liability (CGL) policy; property insurance; workers compensation; automobile liability (with approval to operate on airport premises); and maybe even pollution liability.

While many aircraft hull and liability policies have “CGL-like” coverages embedded within the policy language, it is still not an actual CGL policy, as technically required by contract. Your automobile insurer might run for the hills the minute you request a certificate of insurance be issued to an airport. And can you even afford to carry a pollution policy?

Other hangar contract provisions might include the demand that your insurance company provide the hangar owner with a waiver of subrogation. That means you or your insurance company cannot go back against the hangar owner for damages they might cause. Something to think about if the hangar owner is also providing push-pull service on your aircraft since the most frequent claims we see are ground-handling incidents.

So, what to do? Insurance companies understand hangar agreements can be tedious and often make some policy accommodations because, again, they prefer airplanes in hangars. But, after obtaining proper legal counsel and an insurance review, you should be prepared to negotiate contract terms with the hangar owner before you actually sign the agreement. It’s not uncommon for these agreements to be drafted by non-aviation personnel or are just boiler-plate contracts with provisions that simply might no apply for your use of the hangar.

Better to get all of this squared away on the front end with proper due diligence and have everyone – including your underwriter – on the same page, rather than gamble with the efficient but dangerous move of blindly signing hangar agreements.

For more information, read our other article entitled, “Contracts: Devil in the Detail.”

 

 

 

 

 

 

 

 

 

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