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Insurance for the Planes You Do Not Own

Article featured in World Aircraft Sales Magazine

You’ve worked hard to get the insurance coverage just right on your company jet. Well done! But, just as my drivers’ education teacher always warned, “watch out for the other guy,” you too need to watch out for the “other guy” who owns or operates a plane that might impact your liability protection program. 

20For example, one of your employees at a remote office earned his wings and accumulated good experience flying around in search of the infamous $100 hamburger. He recently however realized the true utility of flying and decided to take the family airplane to the next sales meeting. In the event of an accident, what do you think will happen when an injured party’s attorney discovers the flight was conducted on behalf of your company?

Or consider the implications when you need temporary use of a plane while your jet is down for maintenance. Whether you charter from an outside company or the flight department has access to another aircraft, will the insurance coverage be “just right” for those trips too? There are steps you can take to help protect your business in all of these scenarios.

Employee Use of Personal Aircraft on Company Business

When it comes to employee use of personal aircraft on company business, the first line of defense is the fundamental risk management strategy of risk avoidance. In other words, “don’t do it.” This is the advice most companies receive since viable business enterprises typically have more assets to protect than what an individual aircraft owner’s insurance policy covers – if it even covers the employer at all.

Many companies that carry appropriate non-owned aircraft coverage still prohibit employees from operating private aircraft on company business because the liability risks often outweigh the rewards. Having a formal prohibition may help mitigate liability in the event an employee breaks that official policy.

Other reasons not to allow this use include the difficulty in keeping up with an employee’s personal aviation insurance program and the lack of operational control over his or her personal flying habits (experience, currency, training, etc). Some businesses also fear their employees may inadvertently void their own insurance coverage, leaving the company completely exposed.
What if risk avoidance is not an option – is there an effective solution? Well, maybe. It involves a collaborative effort on the part of the employee, the company, insurance advisors and perhaps others. Here is the ideal scenario for an employee-owned aircraft:

  • Employee places primary coverage with an insurance carrier satisfactory both to the employee and the employer. A limit of liability is selected on this primary policy acceptable to all parties, including the employer’s own aviation insurance underwriter (assuming the employer carries separate non-owned aircraft liability coverage for additional protection).
  • The employer is named as additional insured under the employee’s policy. This is confirmed via a certificate of insurance along with a copy of the endorsement evidencing the coverage, including a provision to notify the employer in the event of policy cancellation. Keep in mind the employee’s primary limit is shared between the two parties! If the liability coverage is $1,000,000 then the aircraft owner shares that limit with the employer for any given occurrence – it’s not $1,000,000 for the aircraft owner and another $1,000,000 for the owner’s employer. 
  • The employee’s aircraft insurance policy properly addresses any cost reimbursement flowing to the employee from the employer. 
  • An effective process of follow-up is implemented to assure proper coverage arrangements remain in place going forward on future insurance policy renewals. 
  • Operational safety parameters are established (in writing) to govern under what conditions a flight will be allowed to take place on behalf of the company. This can be developed with the employer’s own flight department personnel or through the guidance of an aviation safety consultant. These conditions should be specific between the employee and the employer and should also function as part of the employer’s published corporate policy on the use of aircraft. 
  • The employer attains additional liability coverage through an extension of its owned aircraft policy or through the purchase of a specific non-owned aircraft insurance policy. The use of rented or borrowed airplanes by employees on company business presents additional challenges because the employee has little or no control over the primary insurance coverage on the rented or borrowed airplane. It is difficult to verify coverage particulars and often impossible to coordinate coverage among the aircraft owner, employee and employer.

Temporary Use of Other Aircraft on Company Business

Chartering a plane is perhaps the most common, straight-forward exposure and one of the main reasons non-owned aircraft coverage is part of many corporate aircraft policies. The National Business Aviation Association has developed an excellent resource entitled, Aircraft Charter Consumer Guide, which includes insurance requirements and recommendations. This guide is available for free download under the Products & Services page at www.nbaa.org   (NBAA Publications Store).

If your flight department has temporary access to another plane that is not an outright charter, both the exposure and the appropriate coverage is a bit more complicated. Since the devil is in the details and each policy has varying degrees of non-owned protection for this particular use, it is very important to discuss this exposure in depth with your aviation insurance broker for proper protection.

In Conclusion…

Watching out for the other guy goes a long way in helping to make sure your coverage is indeed just right – even on the planes you don’t own!

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