What You Donít Know Can Hurt You!
By Bob Mackey, representative for the EAA Aircraft Insurance Plan, Administered by Falcon Insurance Agency
January 15, 2009 — Have you ever heard someone say they had a minor “fender bender” but decided not to tell their insurance agent or insurance company? When I hear this, I always ask why? The usual answers are “I don’t want my insurance to go up”…“I don’t want to lose my discount for no claims.”…“I don’t want my insurance to be canceled or non-renewed.”
People just don’t like to talk about insurance because of one or more of several reasons, including:
- I don’t like insurance. I pay for insurance, which is just a piece of paper and I never plan to use it anyway.
- I don’t understand insurance. The insurance companies make it so difficult to understand with all of their legal “mumbo jumbo.”
- I don’t trust insurance or insurance people. It seems they are always using terms I don’t understand and they won’t explain anything - and on top of that, the insurance company will use any little loophole they can find to not pay a claim.
- I don’t need insurance. What’s it going to do for me anyway?
Insurance isn’t something we feel all warm and fuzzy about, and we generally don’t like paying for something we can’t see and don’t particularly understand. But here’s a situation that occurs every couple of weeks or so.
I’ll get a call from an EAA member asking if they may add their flight instructor to their airplane insurance because they are planning on doing some additional training, getting a Flight Review, or maybe just brushing up on their flying skills. (I’ve written several articles about why it’s important to plan annually to get some level of recurrent training.) In the great majority of these cases, the instructor is qualified, so adding them as a named approved pilot usually isn’t a problem. In a worst-case scenario, if the airplane is a homebuilt, the owner may be required to give the instructor a couple of hours of orientation prior to the instruction.
What happens next is interesting. After we’ve gotten the details for adding the instructor as a named approved pilot, I ask the airplane owner if the instructor has insurance, and almost 100 percent of the time, the owner says the instructor asked to be a named approved pilot to get additional protection from the owner’s airplane insurance.
Here’s where the misunderstanding starts. You see airplane insurance policies generally state that an “Insured” is the Named Insured and anyone else that is flying the airplane with the Named Insured’s permission, using the airplane for an approved use, and either meets the Open Pilot Warranty or is a named approved pilot. The definition of an “Insured” goes on to say: “If the named pilot or person meeting the Open Pilot Warranty is in the business of commercial aviation, and it specifically mentions flight instruction, then the extension of insurance coverage to the pilot does not apply.”
The usual reaction is, “Whoa! You mean the flight instructor would not be covered?” My answer: “Yes, if the instructor is providing flight instruction or a flight review, very likely the extension of insurance coverage does not apply. So what’s the answer? How does the Flight Instructor get coverage? And, what does the airplane owner need to do to make sure their insurance is still valid?
First, to make sure the airplane owner’s insurance is valid and intact we must make sure the flight instructor is a named approved pilot. This only works to the benefit of the airplane owner, but it is important so the airplane owner’s insurance is not impaired in any way.
Second, the Flight Instructor can obtain insurance protection by being named as an Additional Insured on the airplane owner’s insurance. This only extends liability insurance, though, and does not address the potential of subrogation (legal recovery action) for physical damage (hull) insurance by the insurance company.
Example; the flight instructor says, “I’ll show you how to do a short-field take-off,” and the airplane drifts off the centerline and into parked airplanes. If the instructor is an Additional Insured then the airplane owner’s insurance will offer protection. But the airplane insurance company may also go back to recover what they paid to settle claims.
The Waiver of Subrogation is like a “Get Out Of Jail Free” card, meaning the insurance company agrees to not pursue the flight instructor for recovery of what they paid in claims. Most of time, the airplane insurance company will charge the airplane owner for these extensions of insurance for the instructor. How much? It varies - usually more than $500 - but it can be more for higher-valued airplanes and higher limits of liability insurance.
There is another option, keeping in mind that the instructor still needs to be a named approved pilot on the owner’s airplane insurance unless meeting the Open Pilot Warranty. If the owner does not wish to add the instructor as an Additional Insured with a Waiver of Subrogation, or the instructor will not reimburse the airplane owner for the expense of extended coverage, then the next option is for the instructor to secure their own insurance…and there’s an option for this too!
The National Association of Flight Instructors (NAFI) has an insurance plan exclusively designed for flight instructors. This insurance provides coverage for use of an airplane the flight instructor does not own and insurance for the instructor’s professional services of instruction, flight review, flight check-ride, or flight exam. The NAFI Plan is easily accessible at www.nafinet.org or you may call and speak to an insurance specialist at 866-243-6234 (NAFI).
If you would like more information about the EAA Aircraft Insurance Plan and all the extended insurance coverages available to EAA members, you can submit an online quote request at www.eaainsurance.org or contact one of the aviation insurance specialists with the EAA Plan at 866-647-4EAA (4322).
Whatever you do…don’t dislike insurance just because no one will take the time to explain it to you. Also, don’t be caught without insurance just because other so-called experts told you that you don’t have a need or that you should be covered. If you want to know for sure, all it takes is one phone call. Thanks! Happy and safe flying.
Bob Mackey is a Senior Vice President with Falcon Insurance Agency and he works with the EAA Plan and NAFI Plan. If you would like to see a specific topic addressed in a future article you may send your recommendation to Bob at firstname.lastname@example.org