The Politics of BizAv Liability
Offering politicians the use of your aircraft presents owners with additional liability exposure.
With the Citizens United decision by the US Supreme Court in 2010 came record campaign spending, even for elected offices once considered strictly local. Incumbents, candidates running for office, and the lobbyists who do their bidding were calling in “special favors” at a feverish pace. One of those favors is leaning on individuals or companies to donate the use of their aircraft in support of a campaign. It can be tough to say ‘no’, but do consider the consequences.
In October 2002, Senator Paul Wellstone of Minnesota, along with his wife, daughter, three staff members and the two pilots died in a small airplane crash. Wellstone was in a tough re-election battle and was traversing the state making campaign appearances. Estates for the late Sen. Wellstone and the five other passengers reached a $25 million dollar settlement—apparently the policy limit–with the charter company that operated the flight. Subsequent legal action on behalf of the co-pilot and possible lawsuits against the State of Minnesota, operator of the navigational aid thought to be related to the accident, followed.
As we approach Election Day, November 5th, campaign managers face the challenge of having their candidates appear in multiple locations in very short time periods. As companies that own aircraft already know, Business Aviation presents the perfect solution to that problem.
If you chose to give your favorite candidates a “donation” by allowing them to use your aircraft in support of their campaign, do so only after thoughtful consideration.
KNOW THE FACTS — There are many governmental rules and regulations from the FAA and IRS regarding the aircraft owner’s right to provide air transportation to elected officials and candidates. While this article will concentrate only on the insurance and risk management ramifications, you should educate yourself in the other areas as well.
First and foremost, consider the high profile nature of the passenger(s) being carried. If an accident should occur while you are providing a candidate and their family or staff with transportation, it will make national headlines.
As the aircraft owner, you and/or your company will be targeted by the media, the FAA, the Federal Election Commission, and the legal community. In addition to the bodily injury and property damage liability claims you will face, also consider other risks that result from damages to a firm’s reputation, lost revenue, and possible destruction of shareholder value, even if the company is found not guilty of negligence. You will be fighting many fires at once.
Let’s look at a decision matrix: Yes or No to loaning your aircraft to the campaign. The first decision deals with risk management. If the probability of loss and the consequence of loss are high, risk avoidance is typically your best strategy. That is, don’t engage in the activity that is creating the risk. If the probability of loss is low but the consequence of that loss is high, risk transfer (insurance) is typically your best choice. Aviation falls into the latter category. So assuming your answer is ‘yes’, what is the next step?
ARE YOU CARRYING AN ADEQUATE LIMIT OF LIABILITY PROTECTION?
In the Wellstone accident, as stated, it is believed $25M was the policy liability limit of the charter operator. Imagine if the passenger had been one of our wealthier Federal or State candidates, or there were multiple high net worth individuals riding in the aircraft.
Since you won’t discover how much liability protection was enough until after a loss, you are best served buying higher limits. In the current soft aviation insurance market the premium difference between $100M, $200M, or $300M liability limits is very reasonable.
DOES YOUR INSURANCE POLICY USAGE CLAUSE ALLOW YOU TO BE REIMBURSED FOR FLIGHTS IN YOUR AIRCRAFT AT THE AMOUNT PRESCRIBED BY THE FEDERAL ELECTION COMMISSION?
Does that reimbursement create an issue with the FAA with regards to Commercial vs. Non-Commercial flights?
Violating the usage clause is a quick way to void your insurance coverage. Communication with your aviation insurance broker is imperative. Provide the precise terms of reimbursement for these flights, if any, and secure a response in writing that they are approved under your policy.
The political landscape is changing. The pressure is there to say ‘yes’. We all know how the game works. If you decide to donate your aircraft to a political candidate, at least take the necessary steps to make certain your insurance program is in order.
Still not convinced? See a list of prominent politicians killed in plane crashes in recent years here.
Those Dang Insurance Forms
How do policy holders participate in sabotaging their own aircraft insurance program? Stuart Hope counts the ways.
The yearly letter from your insurance company arrives sounding the alarm for another approaching renewal–
Your aircraft insurance policy does not renew automatically, and we will require current and updated information from your broker. In the meantime, you are hereby notified that premium and/or coverage may change depending on the information we receive.
OK, we all know filling out these forms is about as much fun as having the proverbial tooth pulled, but we’re also talking about a system designed to protect all that you have worked so hard to build.
Part of that protection system is completing these forms in as much detail as possible. When you don’t complete them properly or fail to return them in a timely manner, you are creating a chink in your own armor. Consider the following three ways to be your own worst enemy when seeking insurance coverage:
1. PROCRASTINATE OVER COMPLETING THE REQUESTED UPDATES UNTIL THE LAST MINUTE
Most insurance brokers send the renewal update forms to their clients 60 to 90 days in advance of the policy expiration. As a broker, I find we are often required to follow up multiple times for the return of these important documents. If they are returned promptly, it gives the broker current information (read ‘ammunition’) and more importantly, time to properly market your account with other insurance companies. It takes time to negotiate with each underwriter on pricing and coverage. In this day and age where many firms are using a staff of five to do the work of 10 employees, getting a response can take weeks, not days. Waiting until the last minute hamstrings your agent.
Since the aviation risk probably represents one of the largest catastrophic loss exposures you or your company faces, continuing coverage absolutely should be identified as top priority and treated as such.
2. GIVING THE FORMS TO THE LEAST QUALIFIED PERSON FOR COMPLETION
Since aviation has its own vernacular, giving the form to someone in your office who doesn’t know a Cessna 150 from a Cessna 510, RVSM from TAWS, or an N-number from an airport ID, virtually assures that incorrect or incomplete information will be submitted on your behalf.
Missed details are the difference between writing a policy as bulletproof as possible and one that’s full of holes.
Generally, it will be a team effort with your pilot(s) completing the areas of the forms where they are experts and your finance/insurance department folks filling out the remainder.
3. LEAVING QUESTIONS BLANK, OR GIVING VAGUE OR HALF-ANSWERS
Many insureds leave questions blank or give half-answers because they are under the impression that if they answer ‘yes’ to a question querying whether they are engaged in a certain activity, they will be charged more premium. It is simply wrong to assume that not answering, or giving a half-answer will result in adequate coverage.
The questions on applications are designed to identify uninsured exposures.
If a ‘yes’ answer to a question identifies an uninsured exposure, you will want to know what it would take to plug this gap in your protection. Often coverage can be added at no additional premium. If there is a premium, you can decide whether to pay it, or possibly not engage in the activity. To not address an insurance company’s question is the wrong decision.
Not surprisingly, successfully renewing an insurance policy is all about ‘details, details, details’. Like it or not, underwriters are generally forced to get to know you (and judge you) through a piece of paper. And they love paper with plenty of details! If you’re doing all the right things but aren’t taking the time to document them or otherwise let your broker know what is happening, you lose the horsepower that works in your favor at renewal time.
Completely filling out applications, renewal questionnaires and pilot forms in a timely manner gives brokers much-needed ammunition when they go to bat for your coverage program and premium rates. Completeness and accuracy also sends a subliminal message to underwriters: ‘If you are this detail-oriented when it comes to paperwork, imagine how meticulous and safe your aviation department must be!’
Also, don’t forget to forward a copy of training certificates, including any events such as Engine & Ops Seminars or online safety courses that you or your flight personnel may have completed during the year.
Finally, if you have any questions when completing these insurance forms, pick up the phone and call your aviation insurance broker. If necessary, have their insurance specialists go over the renewal forms with you from start to finish. It’s why you pay them.
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“The team at Hope Aviation always goes above and beyond the call of duty to meet our ever changing needs”
John Mellette, SCANA Corporation
The entire Hope staff attended theSoutheast Aviation Expo on September 27 to continue to celebrate our 50th Anniversary.
Broker Shannon Hope gave a presentation on common insurance claims (and how to avoid them), and Broker Eric Barfield was presented an award by theSouth Carolina Aviation Safety Council for his work as past chairman. We’re so proud!
Eric will also be presiding over the 2013 Safety Town Hall Meeting at the NBAA Convention (Oct. 22-24) in Las Vegas. Brokers Marion Hope, Stuart Hope, andShannon Hope will all be attending the Convention as well.
Why We Ask For Pilot Forms
As an insurance broker, I often receive calls from clients who seek approval for a substitute pilot to make a flight in their aircraft. Their current pilot may be sick or has requested vacation days. Many will send me a resume or bio that the pilot has prepared; some simply send an email with cursory pilot information and ask for the OK to use him/her. Some clients appear irritated if we request they have the pilot complete a more detailed pilot experience form.
Let me assure you: when your aviation insurance broker asks for a fully completed pilot form, prompt compliance with that request should be considered best practice.
One of my clients—an aircraft dealer—sold a King Air 300 to a fairly large medical company.
The firm interviewed and selected a pilot, and their insurance broker submitted the aviator’s credentials to the underwriter for approval. The pilot provided military records showing he was qualified in the military equivalent of the King Air 300, was current in the aircraft and had completed recent recurrent training. Based on this information, the underwriter approved the pilot.
On the first flight, the pilot flew the aircraft into a mountain while attempting an instrument approach in bad weather, killing both himself and his wife. In the ensuing insurance investigation, it was discovered that he lied about his pilot experience to get the job. The claim was denied by the insurance company.
Clearly, completing an insurance form properly is important. Yes, it’s a hassle for the pilot to supply all requested information and for your admin team to review the submission. But don’t let inconvenience or workload get in the way of good business practice. Some clients go the extra mile and have all pilots submit a fully completed pilot form, a copy of their pilot license, medical certificate and recurrent training records each year.
We view unfamiliar airports as a significant risk particular to business aviation. Even the most prolific flyers will encounter an unfamiliar airport sooner or later, so remember:
(1) Unique Procedures – Procedures at a given airport may be unique for a variety of reasons that may include noise restrictions, curfews, geography, weather, or other factors.
(2) Unique Infrastructure – The infrastructure at smaller airports likely will not be as robust as the facilities at larger commercial airports.
(3) Unique Risks – Smaller airports may present unique or increased risks for things such as foreign object damage, added potential for wildlife and bird strikes, etc.