As published in World Aircraft Sales Magazine, June 2013
Many companies that own an aircraft also use what aviation cognoscenti call ‘supplemental lift’ (i.e., utilize a non-owned aircraft to transport company personnel when their own is not available). A Board must have a true understanding of the risk exposure they take on when they select such an option, cautions Stuart Hope.
Non-owned aircraft can take the form of a charter aircraft, an aircraft accessed through a dry lease or time-share agreement, or possibly a rental aircraft.
You might think there is coverage for such flights under your Commercial General Liability policy or somewhere in your Business Insurance program, but you would be wrong.
Such policies almost universally exclude the aviation peril. Insurance coverage IS available under a Corporate Non-Owned Aircraft Liability policy, however, which can cover non-owned fixed-wing or rotor-wing aircraft, piston or turbine powered.
Such a policy may stipulate the total seating capacity, what the approved use is, and who the approved pilots are in order to be valid. If your company owns an aircraft, you may already have this coverage under your policy – you can certainly add it for an additional premium if you don’t.
Perhaps your company never charters aircraft so you don’t feel you needed to purchase this coverage. Imagine, however, that you have an employee who happens to be a licensed pilot and who (with or without your knowledge) decides to rent an aircraft (maybe he/she even owns an aircraft) and fly it on company business. Alternatively, an emergency could surface at any time that requires you or another executive of your company to suddenly charter an aircraft. Corporate Non-Owned Aircraft Liability coverage would automatically extend to protect the company in the event one of these employees is involved in an accident.
RISK MANAGEMENT TOOLS
In addition to carrying Non-Owned Aircraft liability insurance, there are other offensive measures you can take to mitigate this risk.
You could practice risk avoidance by having a clearly-stated and communicated policy prohibiting the use of any mode of air travel other than Airlines when the company aircraft was not available. Keep in mind, however, that this will not relieve you of liability. If you have a rogue employee who either ignores the policy or “didn’t get the memo”, you still have the exposure.
In any case, in today’s super competitive business arena, companies are using private aircraft as tools to gain an advantage over their competitors. Why handicap your company with policy or procedure that limits use of Business Aviation?
If your company decides it will allow employees to operate employee-owned aircraft on company business, you should have a two-pronged insurance approach:
1) Have a written policy in force detailing exactly what coverage the employee-owner must carry. The firm’s policy for employee-owned or provided aircraft should prescribe a minimum acceptable liability limit, mandate the employer’s company be named as an additional insured, and specify that the insurance contract of the employee be primary, without right of contribution from any insurance the employer may carry.
2) Coordinate this information with the insurance underwriter (and agent) that provides your company’s Non-Owned Aircraft Liability policy.
If your company owns an aircraft, you will already have some form of coverage for use of non-owned aircraft. Whether you purchase a standalone policy or already have coverage under your owned aircraft insurance policy, the important point is that the structure of the non-owned coverage must match the exposure.
Consult with your aviation insurance broker throughout this process. Be sure to purchase as high a liability limit as you can reasonably afford. Like all liability policies, you only find out if you bought an adequate limit after the loss has been settled. The average aviation wrongful death claim per person is now somewhere north of $5M USD.
If you charter aircraft, inquire about the charter operator’s insurance limits to ensure the coverage is adequate. Many prospective jet charter clients look for a minimum of $50 million combined single limit, bodily injury to passengers and property damage liability. However, you might require more insurance coverage or, depending on your situation and the operator’s needs, less insurance might be appropriate.
Have the charter operator list your company, and any other appropriate parties, as an additional insured with waiver of subrogation status on their aviation insurance policy. In addition, have the charter operator endorse their policy to state it is primary without any right of contribution from any insurance your company may carry.
Last, request 30 days’ notice of cancellation or material change and obtain a certificate of insurance/ endorsement verifying compliance with these insurance requirements before riding in the aircraft. By doing all of the above, you should be well protected to fly non-owned aircraft on company business.