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Sad but True - Insurance Mistakes

By Bob Mackey
EAA Aircraft Insurance Plan

February 17, 2010 — Most stories about flying have happy endings. This is not one of them. I’ll use no names and avoid references that might embarrass those who were involved. As they say, we can all learn from our mistakes, and my hope is that airplane owners can avoid making these mistakes.

It was a beautiful day, perfect for a homebuilder to make his first flight after doing some minor maintenance. The homebuilder knew the homebuilt airplane very well, so this flight would fairly routine. There were a few close friends at the airport, one who was videotaping the homebuilder’s takeoffs and landings. Because there would be a documented recording of his flying, the homebuilder did a spectacular job of displaying his pilot skills. On the final landing - yet another masterful job - all was well, or so it seemed, until CRUNCH!

During that final roll-out, the homebuilder’s airplane was overtaken by a tailwheel airplane that was also landing. The homebuilder never even knew another airplane was in the pattern because the second airplane was no-radio. Unable to see forward, the tailwheel pilot airplane proceeded to “eat” the homebuilt’s tail for lunch. The good news was that both pilots walked away without a scratch. Unfortunately the same could not be said for the homebuilder’s airplane.

The tailwheel was being flown by a hired ferry pilot who apologized as both aircraft were removed from the runway. Information was exchanged and the two pilots started to secure their airplanes. The homebuilder took his aircraft to his rented hangar and the ferry pilot made arrangements with the FBO for hangar storage.

Damage assessment: The homebuilder’s airplane was severely damaged. The ferry pilot’s airplane had a sudden engine stoppage. Clearly the homebuilder’s airplane looked worse, but the engine damage to the ferry pilot’s airplane would no doubt be expensive.

The homebuilder reported the occurrence to his insurance agent, who in turn reported the claim to the insurance company. The ferry pilot reported the accident to the tailwheel owner, who in turn reported the accident to his agent, who also called in the claim to the insurer. Each company assigned an independent claims adjuster to gather the pertinent information.

So what information will the adjusters gather and what’s on the insurance policies?

  • The homebuilder’s airplane is insured for $30,000. (The homebuilder had just renewed the airplane insurance, lowering the aircraft’s insured value from $50,000 to $30,000 to save money.)
  • The homebuilder is the named approved pilot and was authorized to be flying the airplane.
  • The tailwheel owner had smartly added the ferry pilot as a named approved pilot, so the tailwheel owner did not have any concerns regarding coverage for the accident that was caused by the ferry pilot.
  • The ferry pilot was working independently and was not covered by any company and had no other insurance.

So what do you think will be the outcome of this scenario?

  • The homebuilder’s insurance is going to either pay to repair his airplane or the insurance company might declare the homebuilder’s airplane a “constructive total loss” because the airplane has significant damage and the airplane is insured below its value.
  • The homebuilder’s insurance company will endeavor to recover what it has to pay from the tailwheel owner’s insurance company.
  • The tailwheel owner’s insurance company will repair the tailwheel airplane as it is not anywhere near being declared a “total loss.”
  • Both the homebuilder’s insurance company and the tailwheel owner’s insurance company will endeavor to recover what they are paying out from the ferry pilot because he was the cause of the accident. (However, nobody can find the ferry pilot.)

Insurance issues:

  • The homebuilder’s agent never should have let his client reduce the insured value of the airplane. This was an invitation to disaster and sure enough, there was one. This is an example of professional error on the part of the agent.
  • The tailwheel owner was smart to have the ferry pilot named as an approved pilot on the airplane insurance. However, the tailwheel owner should have required the ferry pilot to show proof of insurance for the ferrying business. This mistake on the part of the tailwheel owner could impact the cost of future insurance - maybe, maybe not, depending on the attitude of the insurance company.
  • The ferry pilot is MIA, probably wondering when one or both of the insurance companies will catch up with him. The issue here is a pilot added to your insurance policy as a named approved pilot is normally also considered an “Insured.” But the definition of an Insured does not include a pilot who is conducting a commercial operation such as being a ferry pilot or an instructor.

Insurance Points! (Things you should take away from this article)

  • NEVER under-insure your airplane. It may reduce the cost of your insurance but it also increases the likelihood your airplane will be declared a “constructive total loss” in the event of an accident. You might save cash in the short term, but may lose big bucks in the long term.
  • ALWAYS make sure whoever flies your airplane is either a named approved pilot or meets the Open Pilot Warranty requirements, if your insurance policy has this extension.
  • ALWAYS make sure any ferry pilot you hire has insurance in case the pilot screws up. In having a ferry pilot properly named on your airplane insurance as a named approved pilot, a subsequent claim may impact the cost of your insurance, especially if the pilot goes underground.
  • MAKE SURE you are dealing with an aviation insurance professional who can arrange the right insurance for you at the right price - and who can support you by being able to assist with different insurance situations.

So, what have we learned? Airplane insurance can be confusing, but it doesn’t have to be if you have the right professional aviation insurance agent working for you.

Let’s all fly safe!

If you would like to learn more about the EAA Aircraft Insurance Plan or finding the right insurance for the type of flying you do, call 866-647-4EAA (4322), or visit the EAA Insurance website and complete the online quote request form. When you insure your airplane through the EAA Aircraft Insurance Plan, you’re helping support EAA member safety and youth education programs.

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