800.999.1109 - Aviation Insurance & Risk Management Magazine
800.999.1109 - Aviation Insurance & Risk Management Magazine 800.999.1109 - Aviation Insurance & Risk Management Magazine
Territorial Limitations Revisited Fall 2009 Limitations Revisited pg. 4
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- Page 6 and 7: Canada If you are planning a trip t
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Territorial<br />
Limitations Revisited<br />
Fall 2009<br />
Limitations Revisited pg. 4
<strong>Aviation</strong> <strong>Insurance</strong><br />
& <strong>Risk</strong> <strong>Management</strong><br />
4 Territorial<br />
Limitations Revisited<br />
by Thomas H. Chappell<br />
12<br />
Back to Basics – Do You<br />
Remember When ...?<br />
You Should.<br />
by Jeff Rhodes<br />
16<br />
Ah Yes, the Crew Car<br />
by Thomas H. Chappell<br />
18<br />
Don’t Be Like Mike or Mac<br />
by Allen Parker<br />
CONTENTS<br />
<br />
22<br />
<strong>Risk</strong> <strong>Management</strong> Planning<br />
for <strong>Aviation</strong> Maintenance<br />
Businesses<br />
by Jeff Rhodes<br />
27<br />
How to Jointly Own<br />
an Aircraft<br />
by Louis M. Meiners Jr., CPA, JD<br />
and Jonathan Levy, JD<br />
30<br />
Facts and Observations<br />
Fall 2009
<strong>Aviation</strong> <strong>Insurance</strong><br />
<br />
& <strong>Risk</strong> <strong>Management</strong><br />
Fall 2009<br />
PUBLISHER<br />
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ART DIRECTOR<br />
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Copyright © 2009 Next Dimension Publishing, LLC. All rights reserved. Reproduction in whole or in part without written permission is prohibited. Printed in the U.S.A.<br />
DISCLAIMER: <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong> (hereinafter "Publication") contains advice, opinions, and statements (hereinafter "Content") of Next Dimension Publishing,<br />
LLC's various contributors and employees. Next Dimension Publishing, LLC ("Next Dimension") and its contributors and employees do not represent or endorse the accuracy or reliability<br />
of the Content. Reliance upon the Content shall be at your own risk. Neither Next Dimension nor its affi liates, subsidiaries, licensors, contributors, employees, agents, offi cers, or<br />
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insurance or other decisions based upon, or the results obtained from, use of the Content.<br />
TM
Thomas H. Chappell<br />
Tom Chappell is the chairman<br />
and CEO of Chappell, Smith &<br />
Associates, Inc., parent company<br />
of CS&A <strong>Aviation</strong> <strong>Insurance</strong>. He is<br />
a graduate of Middle Tennessee<br />
State University and is a member<br />
of several local and national<br />
professional organizations, including<br />
the <strong>Aviation</strong> <strong>Insurance</strong> Association<br />
(AIA). His articles are published<br />
in numerous aviation trade<br />
publications dealing with aircraft<br />
operations and the changing trends<br />
in aviation insurance. He has served<br />
on various boards and insurance<br />
company advisory councils. He was<br />
honored to serve on an advisory<br />
panel for the National Academy<br />
of Sciences advising NASA on its<br />
“Small Aircraft Transportation System<br />
Initiative.” Tom is considered one of<br />
the industry’s foremost authorities on<br />
aviation insurance, having been in<br />
this specialized field for over 30 years.<br />
He has distinguished himself in the<br />
area of aviation risk management<br />
and in the placement of insurance<br />
for high performance aircraft. He<br />
works extensively with FBOs and<br />
maintenance, parts, training, and<br />
service organizations, as well as<br />
regional airlines. He is respected as<br />
a speaker in the area of aviation<br />
insurance and risk management<br />
and frequently participates in<br />
aviation seminars.<br />
CS&A<br />
<strong>Aviation</strong> <strong>Insurance</strong><br />
<strong>800.999.1109</strong><br />
www.aviationinsurance.com<br />
4 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
SM<br />
TERRITORIAL<br />
LIMITATIONS REVISITED<br />
In 2004, I published an article dealing<br />
with a clause found in every<br />
aviation aircraft hull and liability<br />
policy that defines the geographic<br />
area that the policy covers. The article<br />
cautioned each policyholder to fully<br />
understand their policy’s territorial<br />
limitations. It pointed out the subtleties<br />
in defining different areas of the<br />
world. For example, are the Islands of<br />
the West Indies and the Caribbean Islands<br />
interchangeable terms?<br />
Why would we rewrite an article? Five<br />
years ago when we discussed policy territorial<br />
limitations, we had eight full<br />
line general aviation insurance companies.<br />
Today that number has grown<br />
to 14. In addition, many policy series<br />
and policy forms have been changed.<br />
By Thomas H. Chappell<br />
Some have been broadened and others<br />
have become more restrictive. With<br />
an industry that has almost doubled in<br />
size in the past four years and policies<br />
that are constantly changing, a quick<br />
review may be beneficial.<br />
You will hear aircraft owners say,<br />
“All insurance policies are the same.”<br />
In the attached policy excerpts, you<br />
will see how wrong that statement is.<br />
Knowing how many of you hate reading<br />
your policies, I have attached an<br />
easy reference guide containing exact<br />
policy wording by company and specific<br />
to the various policy forms each<br />
company issues. Some companies issue<br />
as many as three to four different<br />
insurance policy forms. If you own a<br />
corporate managed aircraft, you may
have a broader policy form than a<br />
pleasure and business, owner flown<br />
aircraft policy. A charter aircraft<br />
may be issued on yet another form.<br />
Some companies use a basic policy<br />
form for all aircraft and broaden it<br />
by endorsement when appropriate.<br />
This change endorsement simply<br />
expands the territory of operation<br />
shown in the basic policy. The<br />
moral of this statement is that you<br />
should not form an opinion of an<br />
insurance company when reading a<br />
basic policy form. When the basic<br />
policy is too restrictive, ask for an<br />
expansion endorsement to be attached.<br />
This statement, of course,<br />
assumes the underwriter is willing<br />
to modify his basic policy form. The<br />
underwriter’s willingness to accommodate<br />
such a request depends upon<br />
the purpose of use, the pilot’s skill<br />
and experience, the type of aircraft<br />
you are operating, and the overall<br />
market condition.<br />
A territorial extension endorsement<br />
may have wording similar to the following<br />
taken from the U.S. Specialty<br />
<strong>Insurance</strong> Co. expansion form:<br />
“Where You Are Covered – You are<br />
also covered while your aircraft is<br />
within or enroute between the Additional<br />
Geographic Area, shown<br />
above, and the United States (excluding<br />
Alaska and Hawaii), Canada,<br />
and Mexico.” Some companies<br />
more simply state – You are covered<br />
anywhere in the world.<br />
Your insurance agent cannot read<br />
your mind nor can he anticipate your<br />
every travel need. It is your responsibility<br />
to discuss your usage and territory<br />
prior to binding coverage with<br />
any particular insurance company.<br />
Should an unexpected trip arise during<br />
the term of your insurance policy,<br />
call your agent and request that the<br />
underwriter endorse your policy to<br />
accommodate your travels. Underwriters<br />
usually try to cooperate with<br />
the insured when possible, assuming<br />
the pilot is qualified to<br />
make the trip.<br />
What about policy territorial<br />
limitations?<br />
There is no policy detail more important<br />
and more confusing than<br />
the territory of operation. I might<br />
also say there is no policy detail<br />
more poorly defined by the insurance<br />
industry than the territory of<br />
operation.<br />
In an effort to simplify the questions<br />
surrounding territory definition,<br />
CS&A <strong>Aviation</strong> <strong>Insurance</strong> has<br />
compiled the following information.<br />
We compared actual copies of each<br />
insurance underwriting company’s<br />
policy forms, reviewed standard<br />
policy expansion endorsements,<br />
and, in many cases, interviewed the<br />
respective underwriters seeking explanations<br />
of those areas we felt were<br />
ambiguous or poorly defined. The<br />
following information is offered only<br />
as a guide. We recommend that you<br />
review your own policy. If you find it<br />
confusing, call your agent for a specific<br />
explanation.<br />
So, where am I covered?<br />
If you operate your aircraft only<br />
within the 48 contiguous states, you<br />
are covered by every basic policy issued<br />
by domestic aviation insurance<br />
underwriters. This is where the<br />
universal similarities end. However,<br />
if you are getting ready to hop into<br />
your aircraft and pilot yourself and<br />
your family on that long anticipated<br />
winter Caribbean trip, you should<br />
stop and read your aviation insurance<br />
policy carefully. If you have changed<br />
underwriting companies recently or<br />
have never paid attention to where<br />
you are covered, you may be surprised<br />
to discover that the territory<br />
your policy covers has changed or it<br />
differs from what you expected. Different<br />
underwriters provide different<br />
territorial coverages, and the designa-<br />
tions<br />
they use<br />
for the same geographical<br />
location may vary among them.<br />
By examining each individual policy<br />
and the actual territories covered,<br />
you can obtain a better understanding<br />
of the geographical scope of your<br />
coverage.<br />
The 48 continental United States<br />
and Mexico<br />
The normal aviation insurance policy<br />
applies within the 48 contiguous<br />
states and Mexico. There is always<br />
the exception. AXA <strong>Insurance</strong> Co.’s<br />
basic policy only includes the 48 contiguous<br />
states. If expanded coverage<br />
is needed, the AXA policy must be<br />
endorsed. (AXA has discontinued<br />
accepting new and renewal business.)<br />
Although Mexico is included in<br />
most forms, there is one word of<br />
caution. When traveling to Mexico,<br />
the Mexican government does not<br />
recognize your policy issued by a<br />
U.S. aviation insurance underwriting<br />
company. (unless it’s written in<br />
Spanish.) As a result, you must have<br />
in your possession proof of Mexican<br />
Liability insurance written in Spanish.<br />
Some U.S. underwriters purchase<br />
these certificates from a Mexican<br />
insurance company and include<br />
them with your U.S.-issued policy at<br />
no additional cost to you. Some underwriters<br />
will sell this certificate to<br />
you at a premium that will just cover<br />
their cost. Others do not provide the<br />
service at all. Check with your agent<br />
if you are not sure about Mexican Liability<br />
coverage.<br />
Fall 2009 | 5
Canada<br />
If you are planning a trip to Canada, your policy’s coverage<br />
territory should be examined a little more closely.<br />
Most underwriters give blanket territorial coverage for<br />
Canada. Again, we have exceptions. London <strong>Aviation</strong><br />
Underwriters allows Canadian coverage but with restrictions.<br />
Those are shown below in the Reference Section.<br />
Alaska and Hawaii<br />
If you desire to travel further north to Alaska or west to<br />
Hawaii, you must not assume you have coverage just because<br />
these are a part of the United States. Some companies,<br />
including Phoenix <strong>Aviation</strong> Managers, W. Brown<br />
& Associates, and USAIG include Alaska and Hawaii in<br />
their basic policy forms, while others offer coverage only<br />
if your insurance is written on their broadest policies or<br />
by specific endorsement.<br />
The Caribbean<br />
One of the most confusing territorial extensions is the<br />
Caribbean. This is a popular destination for many of our<br />
clients and deserves a detailed discussion. If traveling to<br />
the sunny Caribbean, the definition of policy coverage<br />
territory becomes confusing and poorly defined. Several<br />
underwriters extend coverage in the basic policy or<br />
through endorsement to include the “Caribbean” or “Islands<br />
of the Caribbean.” The problem with the wording<br />
of such a coverage territory is that the geographic<br />
definitions in most policies are vague or nonexistent. In<br />
common usage, “Caribbean” is used to refer to a large<br />
geographic area or culture. The Caribbean area can be<br />
construed to be any geographic entity bordering on the<br />
Caribbean Sea. Does this include only the islands or<br />
are the coasts of Central and South America included as<br />
well? It is obvious that underwriters do not intend for<br />
the policy coverage territory to be so vague as to allow<br />
you to island hop your Baron all the way to Venezuela.<br />
By many textbook definitions, Venezuela and Colombia<br />
are in the Caribbean, although they are geographically<br />
part of South America.<br />
A policy that lists a coverage area as the “Islands of the Caribbean”<br />
is more defined. Obviously, the underwriter in<br />
this instance intends for the coverage territory to include<br />
only those islands that border on or are in the Caribbean<br />
Sea. This coverage territorial definition, if taken literally,<br />
would exclude the Bahamas, which are technically in the<br />
Atlantic Ocean. As a result, if not included in the basic<br />
6 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
policy,<br />
the<br />
Bahamas<br />
must be specifically<br />
included by endorsement.<br />
Many underwriters<br />
such as USAIG and Starr <strong>Aviation</strong><br />
Agency Inc. do include the Bahamas as a specific<br />
territory covered in their basic policy. Having said this, I<br />
must point out that coverage for the “Islands of the Caribbean”<br />
is still not specific enough. (I know I’m extremely<br />
picky). Technically, there are only a few islands, such as<br />
Jamaica and the Cayman Islands, which are totally surrounded<br />
by the Caribbean Sea. To state the territory of<br />
coverage as the “West Indies” is technically correct and<br />
more encompassing. I guess we are supposed to know<br />
what they mean.<br />
The West Indies<br />
Although seldom referred to as a territory, the West Indies<br />
would be a correct and a very specific coverage definition.<br />
The West Indies are a 2,000-mile-long group of<br />
islands that extend from the southern tip of Florida to<br />
the northern coast of Venezuela. Technically, they separate<br />
the Atlantic Ocean from the Caribbean Sea. Except<br />
for the Bahamas, the Cayman Islands, Jamaica, and a few<br />
smaller islands, they have the Caribbean Sea on their<br />
west side and the Atlantic Ocean on their east side.<br />
The West Indies are further separated into the Greater<br />
and Lesser Antilles. The Greater Antilles consist of<br />
Cuba, Hispaniola (Haiti/Dominican Republic), Jamaica,<br />
and Puerto Rico. The rest of the islands are considered<br />
the Lesser Antilles, from the Bahamas off the coast of<br />
Florida to Curacao north of Venezuela. The Lesser<br />
Antilles are further broken down into the Leeward and<br />
Windward Islands.<br />
AIG LAD (Light Aircraft Division), Allianz, and<br />
USAIG specifically cover the “West Indies” in their basic<br />
policy forms. This is certainly more specific than just<br />
referencing the Caribbean. Some companies’ basic coverage<br />
includes the Bahamas Islands but not the West Indies.<br />
USAIG’s basic coverage includes Puerto Rico, since<br />
it is a Commonwealth of the United States.<br />
Many underwriters freely extend their policy territory to<br />
include the Western Hemisphere. This territory expansion<br />
is very broad and, for most of general aviation, is far
tion.<br />
in excess<br />
of any desireddestina-<br />
Confused?<br />
If you are unclear as to the exact definition of<br />
the territory included in your policy, you should request<br />
confirmation of coverage to specific locations, especially<br />
if traveling to the Caribbean. This will ensure that there<br />
are no questions regarding coverage under the broad definition<br />
of “Caribbean” or “Caribbean Islands.”<br />
Central and South America or Western Hemisphere<br />
For trips to Central America or South America, a territorial<br />
extension for the Western Hemisphere is usually<br />
requested. The textbook definition of “hemisphere” may<br />
differ from what the insurance underwriters designate as<br />
a hemisphere. Geographically and geometrically, passing<br />
a plane through the center of a sphere creates a hemisphere.<br />
A plane passing through the center of the earth<br />
and Prime Meridian (0 degrees longitude) at Greenwich,<br />
England, creates the Eastern and Western Hemispheres.<br />
Geographically, the Western Hemisphere covers an area<br />
from 0 degrees latitude to 180 degrees West, or the International<br />
Date Line. The Eastern Hemisphere is from<br />
0 degrees to 180 degrees East.<br />
When an underwriter includes a territorial extension for<br />
the Western Hemisphere without a definition, technically,<br />
he is including part of Europe in the territorial extension.<br />
Some large, well-known cities, such as London,<br />
Madrid, Spain, Dublin and Belfast, Ireland, as well as a<br />
large portion of western Africa, lie west of the Prime Meridian.<br />
As a result, the more astute underwriters who issue<br />
coverage for the Western Hemisphere usually outline<br />
what constitutes the area of coverage, and most do not<br />
consider Europe or western Africa to be in the Western<br />
Hemisphere.<br />
As an example, USSIC expands coverage to the<br />
Western Hemisphere with the following wording:<br />
“Western Hemisphere means North America,<br />
Central America, South America, Hawaii,<br />
Bermuda, West Indies (Greater and Lesser<br />
Antilles), and all other islands and waters<br />
which are within 500 miles of the<br />
shore line thereof, and<br />
Greenland or while<br />
en route between<br />
these points, but excluding Cuba.” As you can see, this<br />
endorsement excludes coverage for Europe.<br />
Worldwide<br />
Large flight departments dealing in industrial aid, airline,<br />
or charter traffic may be operating with worldwide<br />
coverage. This coverage is either requested by your agent<br />
prior to binding coverage, is added as an endorsement<br />
during the policy period, or was issued automatically as a<br />
part of a very broad policy form usually reserved for large<br />
corporate aircraft. It definitely makes more sense for a<br />
Gulfstream V to have worldwide coverage than a Cessna<br />
182. Today, most worldwide coverage is offered without<br />
exclusion of territories.<br />
Specifics<br />
One of the most interesting basic territorial coverages<br />
offered is that of USAIG. Their basic policy territory<br />
includes the United States, its territories and its possessions,<br />
Canada, Mexico, Bahamas and the islands of the<br />
West Indies, or while en route between these places. You<br />
could theoretically fly your aircraft from the west coast of<br />
California, to Hawaii, to Wake Island, to the Northern<br />
Marianas, and on to Guam on the other side of the International<br />
Date Line since you are covered for the United<br />
States, its territories, and its possessions.<br />
Deductibles<br />
Be advised that some underwriting companies may increase<br />
physical damage (hull) deductibles for travel into<br />
certain countries. Check your policy or call your agent to<br />
confirm your deductibles.<br />
Remember<br />
The most important points to remember from this geographical<br />
exercise are 1) read your policy and 2) understand<br />
its coverage territory. If your coverage includes<br />
“Caribbean” or “Islands of the Caribbean,”<br />
check with your agent to see if your coverage<br />
extends to the exact location<br />
to which you want to travel.<br />
Fall 2009 | 7
If you are flying to Venezuela, Belize, or Honduras, don’t<br />
expect automatic coverage for an occurrence in any of<br />
those locations if your policy coverage territory simply<br />
says “Caribbean.” Get out your geography books and<br />
maps and contact your agent before that next trip.<br />
Reference:<br />
The following information was taken from our specimen<br />
file copies of each insurance company’s insurance policy.<br />
Policy content varies depending upon the policy form<br />
and filing date. Please read your own policy to be certain<br />
that you have the correct territory description.<br />
Aerospace <strong>Insurance</strong> Managers Inc.<br />
Aircraft <strong>Insurance</strong> Policy: When and Where the Policy<br />
Provides Coverage – This policy provides coverage during<br />
the policy period shown in Item 3 of the Coverage<br />
Identification Page while the aircraft is within the United<br />
States (excluding Alaska and Hawaii), Canada, Mexico,<br />
or while en route between these territories.<br />
American International Group (AIG) (AIU) (Chartis)<br />
The LAD Policy Form (OLAD001) (1/00) – Policy<br />
Territory means within the political boundaries of the<br />
United States of America, Mexico, Central America,<br />
Canada, the Islands of the West Indies (excluding Cuba),<br />
and while enroute between places therein.<br />
8 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
Policy<br />
Form CIAO3<br />
(5/94) – Policy<br />
Period, Territory: All<br />
Coverages: This policy applies<br />
only to bodily injury or property damage<br />
which occurs, and to physical damage losses to the aircraft<br />
which are sustained during the policy period, while<br />
the aircraft is anywhere in the world.<br />
Allianz <strong>Aviation</strong> Managers, LLC<br />
Aircraft <strong>Insurance</strong> Policy: Policy Form AGCS-AC-2001<br />
(07/06): Policy Period, Territory – Under All Coverages<br />
– This policy applies only if the Bodily Injury, Property<br />
Damage or Physical Damage is/are caused by an occurrence<br />
while the aircraft is within the United States of<br />
America, its territories and possessions, Canada, Mexico,<br />
Central America, or the West Indies or enroute between<br />
points therein and providing the Bodily Injury, Property<br />
Damage or Physical Damage occurs during the policy<br />
period.<br />
AXA <strong>Insurance</strong> Company<br />
Aircraft <strong>Insurance</strong> Policy – Policy Form – AIC200<br />
– Policy Period and Territory – All Coverages – This<br />
policy applies only to bodily injury or property damage<br />
which occurs, and to physical damage losses to the aircraft<br />
which are sustained during the policy period, while<br />
the aircraft is within the United States of America.<br />
Corporate Aircraft <strong>Insurance</strong> Policy – policy Form –<br />
AIC300 – Policy Territory – The insurance provided by<br />
the Policy shall be effective worldwide. Payment of loss<br />
under the Policy shall only be made in full compliance<br />
with all United States of America economic or trade sanction<br />
laws or regulations, including, but limited to, sanctions,<br />
laws and regulations administered and enforced by<br />
the U.S. Treasury Department’s Office of Foreign Assets<br />
Control (“OFAC”).<br />
International Aerospace (Inter Aero) Arch <strong>Insurance</strong><br />
Group<br />
Aircraft Hull and Liability Policy – Form 06 CAAD001<br />
00 11 06<br />
Coverage Territory: You are covered during the Policy
Period<br />
up to the<br />
limits shown in<br />
the Declarations with<br />
respect to your Aircraft anywhere<br />
in the world with the exception<br />
of any country or jurisdiction which is subject<br />
to trade or other economic sanction or embargo by the<br />
United States of America.<br />
Global Aerospace Inc. (formerly Associated <strong>Aviation</strong><br />
Underwriters)<br />
FHL policy Form - Policy Period, Territory: This policy<br />
applies only to occurrences and loss happening during the<br />
policy period and within the United States of America,<br />
Canada or Mexico or while the aircraft is dismantled and<br />
being transported between ports which lie within such<br />
limits.<br />
Golden Wing policy Form – Policy Period, Territory:<br />
All Coverages: This policy applies only to bodily injury<br />
or property damage, and to physical damage losses to the<br />
aircraft which are sustained during the policy period,<br />
while the aircraft is within the United States of America,<br />
Canada, Mexico or the Bahama Islands or while en route<br />
between points therein.<br />
Broad Horizon <strong>Aviation</strong> <strong>Insurance</strong> Policy: Where and<br />
When this Policy Applies: This policy applies to bodily<br />
injury or property damage which occurs and to physical<br />
damage sustained: (a) anywhere in the world; and (b)<br />
during the policy period.<br />
London <strong>Aviation</strong> Underwriters<br />
North American Specialty <strong>Insurance</strong> Company – Policy<br />
Period and Geographical Limits: This Policy applies<br />
only to occurrences or accidents which happen during<br />
the Policy Period stated in the Policy and within the land<br />
areas of the United States of America (excluding Alaska<br />
and Hawaii), Mexico, the Bahamas, and Canada (but<br />
not North of 54° North Latitude) and, in addition, to<br />
such other areas as are stated in the Policy. Furthermore,<br />
flights over water within 100 nautical miles (in the case<br />
of single engine aircraft) or 200 nautical miles (in the case<br />
of twin engine aircraft) from such land areas, or enroute<br />
between such land areas are included.<br />
Phoenix <strong>Aviation</strong> Managers Inc.<br />
Old Republic <strong>Insurance</strong> Co. – Policy Period, Territory<br />
– All Coverages – This policy applies only to bodily injury<br />
or property damage which occurs, and to physical<br />
damage losses to the aircraft which are sustained during<br />
the policy period, while the aircraft is within the United<br />
States of America, Canada, or Mexico, or while being<br />
transported between ports thereof.<br />
CORPORATE AMENDATORY ENDORSEMENT<br />
– It is agreed that the following changes are made to this<br />
policy:<br />
A. Under All Coverages: Insuring Agreement V.<br />
(Policy Period, Territory) is amended to include the following:<br />
This policy also applies to bodily injury or property<br />
damage which occurs, and to physical damage losses to<br />
aircraft which are sustained during the policy period,<br />
while the aircraft is within Alaska, Bahamas, Caribbean<br />
(excluding Cuba & Haiti), Central America, or while en<br />
route thereto; provided, however, that no coverage shall<br />
apply under this endorsement unless the aircraft is operated<br />
on or from airports designed as such by the proper<br />
governmental authorities having jurisdiction over civil<br />
aviation.<br />
CORPORATE AVIATION EXTENDED COVER-<br />
AGE AMENDMENT – The WHERE YOU CAN<br />
FLY YOUR AIRCRAFT section of YOUR POLICY<br />
AND COVERAGE is extended to include coverage<br />
while your aircraft is anywhere in the world.<br />
Starr <strong>Aviation</strong> Agency Inc. - Chubb<br />
Starr AV – Policy Period, Territory – All Coverages -<br />
This policy applies only to bodily injury of property<br />
damage which occurs, and to physical damage losses to<br />
the aircraft which are sustained during the policy period,<br />
while the aircraft is within the United States of America,<br />
Canada, Mexico, the Bahamas and the Caribbean Islands<br />
or enroute between points therein.<br />
Payment of loss under the policy shall only be made in full<br />
compliance with all United States of America economic<br />
or trade sanction laws or regulations, including, but not<br />
limited to, sanctions, laws and regulations administered<br />
Fall 2009 | 9
and enforced by the U.S. Treasury Department’s Office<br />
of Foreign Assets Control (“OFAC”).<br />
Starr Elite Comprehensive Corporate Aircraft policy –<br />
Policy Territory: The insurance provided by the policy<br />
shall be effective worldwide.<br />
Payment of loss under the policy shall only be made in full<br />
compliance with all United States of America economic<br />
or trade sanction laws or regulations, including, but not<br />
limited to, sanctions, laws and regulations administered<br />
and enforced by the U.S. Treasury Department’s Office<br />
of Foreign Assets Control (“OFAC”).<br />
The Travelers Companies Inc.<br />
“Coverage Territory” means anywhere in the world except<br />
any country or jurisdiction while any embargo, trade<br />
sanction or similar regulation imposed by the United<br />
States of America applies to, and prohibits the transaction<br />
of business with or within, that country or jurisdiction.<br />
USAIG - United States Aircraft <strong>Insurance</strong> Group<br />
managed by United States <strong>Aviation</strong> Underwriters Inc.<br />
360° All-Clear Aircraft Policy – When and where you<br />
are covered. You are covered for occurrences that take<br />
place during your policy period while your aircraft described<br />
on the Coverage Summary Page is in the United<br />
States and its territories and possessions, Canada, Mexico,<br />
the Bahamas and the islands of the West Indies, or<br />
while enroute between these places.<br />
400 All-Clear Aircraft Policy - When and where you are<br />
covered. You are covered for occurrences that take place<br />
during your policy period while your aircraft described<br />
on the Coverage Summary Page is in the United States<br />
and its territories and possessions, Canada, Mexico, the<br />
10 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
Bahamas and the islands of<br />
the West Indies, or while enroute<br />
between these places.<br />
U. S. Specialty <strong>Insurance</strong> Co. –<br />
USSIC – When and Where You are<br />
Covered – You are covered during the<br />
policy shown in Item 3 of the Coverage Identification<br />
Page while the aircraft is within the United<br />
States (excluding Alaska and Hawaii), Canada, Mexico,<br />
or while enroute between these points.<br />
W. Brown & Associates <strong>Insurance</strong> Services – Catlin<br />
<strong>Insurance</strong> Company Inc.<br />
Policy Period, Territory – All Coverages – This policy<br />
applies only to Bodily Injury or Property Damage which<br />
occurs, and to Physical Damage losses to the aircraft<br />
which are sustained during the policy period, while the<br />
aircraft is within the United States of America, Canada<br />
or Mexico, or while being transported between parts<br />
thereof.<br />
W.R. Berkley <strong>Insurance</strong> Co. – StarNet <strong>Insurance</strong> Co.<br />
Aircraft <strong>Insurance</strong> Policy – Policy Period, Territory – All<br />
Coverages – This policy applies only to bodily<br />
injury or property damage which occurs,<br />
and to physical<br />
damage losses<br />
to the aircraft<br />
which are sustained<br />
during the<br />
policy period,<br />
while the aircraft<br />
is within the<br />
United States of<br />
America, Canada,<br />
Bahamas Islands,<br />
Caribbean Islands<br />
or Mexico, or<br />
while being transported<br />
between<br />
parts thereof. �
EPLI<br />
Employment Practices Liability <strong>Insurance</strong><br />
EPLI provides protection against many<br />
kinds of employee lawsuits, including:<br />
• Sexual harassment<br />
• Discrimination<br />
• Wrongful termination<br />
• Breach of employment contract<br />
• Negligent evaluation<br />
• Failure to employ or promote<br />
• Wrongful discipline<br />
• Deprivation of career<br />
opportunity<br />
• Wrongful infl iction of<br />
emotional distress<br />
• Mismanagement of employee<br />
benefi t plans<br />
You Are A Target!<br />
Don't Become A Victim.<br />
We can help you protect yourself with EPLI<br />
as well as Directors & Offi cers <strong>Insurance</strong>.<br />
CALL CS&A TODAY!<br />
<strong>800.999.1109</strong><br />
www.aviationinsurance.com<br />
www.chappellsmith.com
Jeff Rhodes<br />
Jeff Rhodes is an aviation<br />
insurance specialist who has a<br />
rich personal and professional<br />
background in aviation. He<br />
has experience in professional<br />
aircraft management and<br />
flight school management. He<br />
is an instrument rated private<br />
airplane pilot and active glider<br />
pilot. Jeff earned a bachelor’s<br />
degree in management from<br />
Georgia Tech. Prior to joining<br />
CS&A <strong>Insurance</strong> as a sales<br />
executive, Jeff worked as an<br />
aviation insurance underwriter<br />
for Global Aerospace’s<br />
Southeast Regional office<br />
where he specialized in<br />
private, corporate, and<br />
commercial aviation; airports;<br />
and products liability risks.<br />
He has been approved<br />
by the Georgia <strong>Insurance</strong><br />
Department as an instructor of<br />
aviation insurance continuing<br />
education courses.<br />
CS&A<br />
<strong>Aviation</strong> <strong>Insurance</strong><br />
<strong>800.999.1109</strong><br />
www.aviationinsurance.com<br />
12 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
SM<br />
photo courtesy of Chris Cook<br />
BACK TO BASICS – DO<br />
YOU REMEMBER WHEN…?<br />
YOU SHOULD By<br />
Jeff Rhodes<br />
I<br />
release from the tow plane at 3,000 feet above the ground. Powerless in<br />
the Grob sailplane, I nail the airspeed at best glide and begin to search for<br />
rising air. After an hour of soaring in the summertime thermals, I fi nd myself<br />
in the airport pattern and getting low. At 800 feet AGL, midfi eld left down<br />
wind – time to land. Abeam the touchdown spot, the spoilers are deployed<br />
halfway. Airspeed 60 – left base. Airspeed 60 – turn fi nal. Th e touchdown<br />
spot appears stationary in my view through the windshield – not sliding up or<br />
down. Th at means I’ll hit it. In the fl are, inches above the ground the spoilers<br />
come out to kill the ground eff ect as my touchdown spot slides under the<br />
nose. Th e single wheel touches the grass, and I keep the wings level and stow<br />
the spoilers to extend the roll enough to get me to a parking spot clear of the<br />
runway. Th e sailplane rolls to a stop exactly where I want it, and I open the<br />
canopy and climb out. An hour-long exercise in energy management.<br />
Th e following accident happened at my hometown airport recently. Compare<br />
the energy management techniques below with the ones described above. A<br />
stark contrast.<br />
A Private pilot was attempting to land the FBO’s rental Cessna 172 SP at the<br />
airport on a VFR day. On rollout, the Cessna ran off the left side of the runway<br />
and struck a runway sign and its concrete base, damaging the right main landing<br />
gear. Th e pilot applied power and performed a go around from the grass<br />
adjacent to the runway. Noticing that the landing gear was signifi cantly damaged,<br />
the pilot entered the traffi c pattern and performed a number of fl y-bys
while he discussed the situation via<br />
Unicom with people on the ground.<br />
Th e pilot then landed the damaged<br />
aircraft in the grass next to the runway.<br />
Th e right wing and horizontal<br />
stabilizer struck the ground and<br />
the airplane veered to the right and<br />
came to a stop.<br />
Th e pilot, the sole occupant of the<br />
aircraft, was uninjured. Th e right<br />
main landing gear strut was bent up<br />
and touching the right side of the<br />
fuselage. Th e right horizontal stabilizer<br />
was bent upwards at mid-span.<br />
Presumably, there was also damage<br />
to the right wing where it contacted<br />
the ground during the fi nal landing.<br />
Th e NTSB report of this accident<br />
indicates that the Cessna 172 fi rst<br />
touched down more than 1,000 feet<br />
beyond the (displaced) approach<br />
threshold. Marks on the runway in-<br />
dicate heavy braking 2,000 feet past<br />
the threshold. Th e airplane left the<br />
runway 500 feet later and then hit a<br />
runway sign 100 feet beyond where<br />
it left the paved surface. Th ere was<br />
still enough energy left during the<br />
collision to severely damage the<br />
landing gear and then to get the airplane<br />
fl ying again fairly quickly after<br />
the go-around was initiated.<br />
Th e operating handbook for most<br />
Cessna 172 models lists the ground<br />
roll distance around 560 feet. During<br />
this landing, this Cessna seems<br />
to have consumed about three times<br />
that much pavement and 100 feet<br />
of grass, with the brakes locked and<br />
tires screeching for almost half of it.<br />
After that ground roll, the airplane<br />
must have still been traveling 25 to<br />
30 knots, allowing a quick go around<br />
on broken landing gear. What must<br />
this pilot’s approach and touchdown<br />
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simple. An instructor/student ratio of one-on-two provides a personal<br />
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Our training programs are flexible and can be customized to meet<br />
your schedule, needs and budget. Call today for complete details or<br />
to schedule your next training event.” 1-800-272-0211<br />
Wally David, President<br />
SIMCOM Training Centers<br />
speeds have been? Certainly they<br />
were far higher than the 63 to 68<br />
knots recommended in the operating<br />
handbook.<br />
In the aviation insurance business,<br />
we see many losses associated with<br />
poor energy management techniques.<br />
Stall/spins, runway overruns,<br />
bounced landings, and loss of<br />
control accidents lead to millions of<br />
dollars of hull insurance payouts every<br />
year. As new high performance<br />
personal and corporate airplanes become<br />
more and more automated and<br />
advanced, better equipped, and better<br />
performing, it is more important<br />
than ever to train and be profi cient<br />
in the basics of putting an airplane<br />
in the proper point in space at the<br />
right time and at the right speed.<br />
I speak to aviation underwriters frequently<br />
about underwriting trends<br />
w w w . s i m u l a t o r . c o m
for low-time pilots transitioning to turbine aircraft as<br />
well as veteran pilots going through recurrent training<br />
or moving to another model. Th ese days, simulator<br />
training rules, as it allows pilots to experience situations<br />
too risky to re-create in an actual airplane. Th e sims<br />
also allow pilots to quickly and effi ciently check off the<br />
maneuvers in which they are required to demonstrate<br />
profi ciency. Initial and (at least) annual recurrent training<br />
for turbine aircraft isn’t going anywhere, and I believe<br />
that it has contributed to a marked increase in the<br />
safety of corporate aircraft over the last two decades.<br />
But, like the Cessna driver described above, all too often<br />
we see aircraft lost and people hurt or killed because of<br />
approaches fl own way too fast or way too slow. Accidents<br />
during near-to-ground maneuvering (often<br />
in VFR conditions) seem to be the result of rusty or<br />
poor pilot technique and lack of basic airplane handling<br />
skills. Maybe part of our personal recurrent training<br />
plan should include some regular seat of the pants basic<br />
training.<br />
My suggestion would be to fi nd a school and go get that<br />
glider add-on. Or, take an aerobatics, a mountain fl ying,<br />
a seaplane, or a tailwheel transition course. Th ese<br />
kinds of activities help “250 knot straight and level”<br />
pilots brush up on – or maybe experience for the fi rst<br />
time – techniques like energy management and feel of<br />
the airplane in all corners of a performance envelope.<br />
We get to remind ourselves about stall buff et, the effects<br />
of torque, P-factor, low speed turning tendencies,<br />
and spins. Th ese things have all been engineered out<br />
of the airplanes we fl y on a regular basis. We only see<br />
them when something goes wrong and too often, we<br />
have forgotten the proper way to deal with them when<br />
it counts.<br />
14 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
In addition to this basic handling refresher, why not<br />
occasionally go rent a minimally equipped IFR trainer.<br />
You remember the type – with two VHF navcom radios,<br />
a transponder, and the basic six fl ight instruments.<br />
Th ese trainers have no autopilot, no ice protection, no<br />
GPS, and no glass cockpit display. Perhaps there would<br />
be an ADF. Go do an IFR cross country and practice<br />
some partial panel IFR fl ight including holding and<br />
perhaps a good ole NDB approach. I know – we have<br />
no use for NDB approaches anymore. But nothing<br />
teaches airplane control, instrument scans, and mental<br />
situational awareness better than the hand fl own partial<br />
panel NDB approach. Th is is certainly no-frills training,<br />
but modern avionics and systems have eroded modern<br />
pilots’ aptitude for IFR aircraft control. When you<br />
get back to the “big” airplane, the procedures and techniques<br />
that the “hard way” has reinforced will keep your<br />
muscle memory and mental awareness where it really<br />
needs to be all the time.<br />
When we see licensed pilots losing control of Cessnas,<br />
or corporate turboprops, or light jets, in good weather<br />
and with no mechanical problems, we know that they<br />
have been neglecting to maintain their profi ciency in the<br />
basics of aircraft control and energy management. As<br />
capable and modern as our airplanes are, we must remember<br />
to continually tune up the decidedly low-tech<br />
piece of “equipment” sitting in the front left seat.<br />
I’d like to know what you think and what some of you<br />
are doing to keep the basics at the front of the brain<br />
and at the tips of the fi ngers while fl ying your airplanes.<br />
Drop me a line at jrhodes@chappellsmith.com. �<br />
photo courtesy of Chris Davis
Is your current agent trying<br />
to fit you into a box?<br />
Let the <strong>Aviation</strong> <strong>Insurance</strong> Experts at CS&A <strong>Insurance</strong> help you<br />
negotiate a customized renewal strategy for your specific needs.<br />
<strong>800.999.1109</strong><br />
www.aviationinsurance.com
Ah Yes, the Crew Car<br />
By B Thomas HH. Chappel Chappell<br />
We all use the crew car when one is available.<br />
We fl y to the desired airport and taxi to the<br />
FBO planning only a short stay. As a professional<br />
pilot, our passengers are picked up by a prearranged<br />
source of transportation with a planned return in<br />
just a couple of hours. Lunch seems in order. Even pilots<br />
need to eat, you know. So we impose upon our host<br />
FBO for a ride to a local restaurant and the counter lady<br />
throws us the keys to their crew car. It may not be the<br />
greatest or newest car in the world, but it gets us where<br />
we want to go and it is free.<br />
Or maybe we are an owner/operator. A similar scenario<br />
develops, and we fi nd ourselves in a borrowed automobile<br />
in a strange city following poor directions just to have a<br />
light lunch. Sound familiar? It happens every day all<br />
over the United States. We have all done it, and there is<br />
nothing wrong with the practice of borrowing a crew car<br />
if we prepare for a possible accident.<br />
From the FBO’s view, they are loaning an “old” car to<br />
someone they don’t know. Rarely am I ever asked to<br />
show evidence of a driver’s license much less evidence of<br />
insurance. No determination is made whether I am borrowing<br />
the car personally or on behalf of my company.<br />
Often, I have kept the car overnight and returned it the<br />
next morning. In this case, dinner is in order and, of<br />
course, what is dinner without a couple of drinks and a<br />
glass of wine?<br />
16 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
From either perspective, we are setting up the perfect<br />
train wreck. As an FBO, they are risking the assets of<br />
the company if the “non-owned” driver is negligent and<br />
his actions result in a bodily injury accident. From our<br />
perspective as borrower, we could make a mistake resulting<br />
in an accident or we could be the victim of an accident<br />
caused by a poorly maintained crew car.<br />
Th e practice of borrowing or renting a car from an FBO<br />
is good if we plan and prepare for the unthinkable. First,<br />
declare who is borrowing the car. Is it you or your company?<br />
Th is is often determined by the credit card used to<br />
pay for the use of the automobile if it is a rental. Second,<br />
be prepared to off er evidence of insurance that includes<br />
both non-owned physical damage and non-owned liability.<br />
When traveling, the ability to show evidence of liability<br />
insurance is problematic. Many states require that<br />
evidence of auto insurance be carried in the automobile<br />
and available should it be requested by a law enforcement<br />
offi cer. But when we are on the road, we seldom think<br />
to carry our insurance cards with us, leaving us without<br />
proof of insurance. Th is could lead to big problems in the<br />
event of an accident in a non-owned vehicle. Th is step is<br />
absolutely imperative if the car is borrowed. If it is rented,<br />
the state’s insurance minimums may be provided in<br />
your rental agreement. But, why take the chance?
Does<br />
your policy include coverage for non-owned auto liability<br />
and non-owned physical damage? Th is coverage is very<br />
inexpensive and should be carried on both your company’s<br />
policy and on your personal family automobile<br />
policy. <strong>Insurance</strong> cards are often lacking in showing additional<br />
coverages such as the non-owned coverages.<br />
In most cases, the family automobile policy cannot be<br />
endorsed for this coverage. It is either included in your<br />
policy form or the coverage does not exist in the policy.<br />
Non-owned coverages can be a great comfort whether<br />
you are borrowing or renting a car. In commercial automobile<br />
policies, the coverage must be specifi cally included<br />
in the policy or endorsed if added after the policy<br />
issuance. In addition to the evidence of insurance, you<br />
The best insurance<br />
you can buy...<br />
is great training<br />
Lunsford Air Consulting, Inc.<br />
201 Airport Road, Suite 1<br />
Palm Coast, FL 32164<br />
386.586.6098 Phone Phone<br />
386.586.6029 Fax<br />
www.lunsfordair.com<br />
contact@lunsfordair.com<br />
contact@lunsfordair.com<br />
@l f d<br />
Specialized rotocraft rotocraft-helicopter helicopter<br />
and fixed-wing training/services<br />
may be asked for your driver’s license.<br />
Being able to provide evidence of insurance and a<br />
driver’s d license is only part of our recommendation.<br />
A little l risk management is also in order here. Make<br />
sure<br />
the car you are renting or borrowing does not have<br />
any ppre-existing<br />
damage. Do a walk-around of the ve-<br />
hicle before b you drive away. Confi rm with the FBO or<br />
rental<br />
agency any damage you fi nd. Upon the return of<br />
the h<br />
vehicle, confi rm with the FBO that the automobile<br />
has received no further damage.<br />
In review: Declare whether you are using the car as an<br />
individual or company.<br />
Be prepared to show evidence of insurance<br />
if asked.<br />
Do a walk-around in search of prior<br />
damage before accepting the vehicle.<br />
When you return the vehicle, confi rm with<br />
the FBO no additional damage has been<br />
done.<br />
Now you can drive with confi dence. �<br />
Agricultural<br />
Applications<br />
Initial & recurrent emergency training<br />
Safety audits, Accident reviews<br />
Low level autos from spray profile<br />
Mission specific syllabus<br />
Courses meet insurance requirements<br />
Law<br />
Enforcement<br />
Initial & recurrent emergency training<br />
Night Vision Goggle sales & instruction<br />
Diver deployment / Hoist operations / Search & Rescue<br />
Bambi Bucket / External load / Rappelling training<br />
Accident review, Safety audits, Advanced ratings<br />
Civilian<br />
Initial & recurrent emergency training<br />
Online ground training<br />
Aircraft transition / Turbine transition<br />
Commercial, Instrument, CFI, CFII & ATP ratings<br />
Training in most makes & models of aircraft<br />
Call<br />
(386) 586-6098 TODAY
Allen Parker<br />
Before joining CS&A, Allen<br />
worked in the financial services<br />
industry since 1984. He worked<br />
for one of the top 10 banks in the<br />
country for over 13 years and<br />
served as a Regional Manager<br />
for the Retirement Services<br />
Division. He has worked with<br />
every aspect of Retirement<br />
Plans [401 (k), Profit Sharing,<br />
Defined Benefit, etc.] including<br />
plan design, investments,<br />
employee meetings, daily<br />
consultation, and annual<br />
testing. He also has in-depth<br />
knowledge of nonqualified<br />
plans. Most recently he worked<br />
with a financial advisor firm<br />
and dedicated the majority of<br />
his time to helping companies<br />
set up group health plans, buysell<br />
agreements, and retirement<br />
plans. He is a graduate of<br />
Samford University with a<br />
degree in Human Resource<br />
<strong>Management</strong>.<br />
<strong>800.999.1109</strong><br />
800 999 1109<br />
www.chappellsmith.com<br />
18 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
DON’T BE LIKE<br />
MIKE OR MAC<br />
By Allen Parker<br />
Two very recent events, the deaths of pop star Michael Jackson and<br />
former NFL quarterback Steve McNair, highlight the need for proper<br />
estate planning.<br />
Jackson died just before his 51st birthday, with a will signed in July 2002.<br />
However, it does not appear he ever reviewed his will to make updates as his<br />
life changed. McNair died at the age of 36 without a will. Therefore, the state<br />
of Tennessee will probably decide how his estate will be divided.<br />
There may be many reasons why McNair did not have a will. However, the<br />
fact is he did not have a will at his death, which will cause his estate to pay taxes<br />
that may have been avoided and unnecessary legal expenses for his family.<br />
Conway Twitty was in the middle of rewriting his will when he died. His estate<br />
was finally settled in October 2007 after a 14-year battle.
With a lack of planning by McNair and lack of review and update for Jackson, the settlement of their estates could<br />
be a long and expensive process. In light of what happened in these two cases, there are a few questions you should<br />
ask yourself NOW:<br />
If I am not here tomorrow<br />
• Will my family be able to live the lifestyle to which they have become accustomed?<br />
• Will my children be able to go to college?<br />
• Will my spouse be forced to sell the house?<br />
• Are the people I want to receive a portion of my estate included in my will?<br />
• Do I have enough Life <strong>Insurance</strong>?<br />
• When is the last time I reviewed my will? Have I had any major changes in my life since then<br />
(marriage, divorce, children, job, etc.)?<br />
• How much will my estate pay in taxes? Is there a way to reduce these taxes?<br />
• Have I provided a list of the online services I use to manage my money, including sign-on information<br />
for every site, to someone?<br />
Now that you have thought about the above, ask yourself<br />
• Do I know the answer to all of the above questions?<br />
• Am I comfortable with these answers?<br />
If your answer is “yes” to both of these extremely important questions, then you are in the minority of people who<br />
have done a good job at planning their estates. A survey conducted by Harris Interactive in April 2004 showed that<br />
55 percent of Americans do not have a will. If you are in the 45 percent that have a will, were you able to answer<br />
“yes” to the last two questions? If so, CONGRATULATIONS! If not, on the next page, are a few tips to get you<br />
on track.<br />
Fall 2009 | 19
• Read Your Will – When is the last time you actually read your<br />
will, front to back? You should do this at least once a year. Set this<br />
task up as a recurring appointment on your calendar, and treat it as<br />
one of your most important appointments of the year. If something<br />
does not look right or you have questions, call your attorney. If your<br />
attorney does not answer your questions sufficiently, consult with another<br />
attorney. Which brings up a very important point: Make sure the<br />
aattorney<br />
you depend on for this service specializes in the area of wills and<br />
es estates. You should meet with your estate attorney every three to five years<br />
to re review the will and discuss any changes you may have in your life, as well<br />
as any<br />
changes in the law.<br />
• Is Your Estate Protected? – When people think about a will, they think about<br />
who will benefit and what they should receive. A factor many overlook is the exclusion of those whom you do not<br />
want to benefit. A few examples are excluding certain family members (Michael Jackson excluded his father from<br />
his estate), former spouses and stepchildren, business partners, creditors, or anyone else who may try to claim a<br />
portion of your estate. Be sure your will is clear about who should benefit and who should not benefit.<br />
• Business Continuation Planning – Are you part owner of a business? How will the portion of the business<br />
you own be settled with your heirs? Do you have a Buy-Sell agreement in place? When was the last time<br />
the agreement was reviewed? When was the last time you made a determination that the proper funding, usually<br />
life insurance, was adequate? As your business changes, you must determine the company’s worth, which will<br />
determine if additional funding is needed for the Buy-Sell agreement. A good time to review this document and<br />
determine proper funding is at the same time you are reviewing your will. Lack of an annual review could leave<br />
your family receiving a smaller portion of the business than was originally intended.<br />
• Pay Taxes, Again? – The amount of taxes an estate must pay to the government can be a very large percentage<br />
of the estate. In addition to estate tax, some states have an inheritance tax. You’ve already paid taxes on most<br />
of the dollars you’ve earned; are you willing to allow your estate to pay taxes on these dollars AGAIN, at rates that<br />
are usually higher than your income tax rate? How are you going to reduce the taxes your estate will pay? Have you<br />
thought about leaving a contribution to a foundation, school, or charity? There are ways to make a large donation<br />
to these types of organizations and reduce your estate tax liability, without reducing the estate left to your family.<br />
• Life <strong>Insurance</strong> – Do you have any? Do you have enough? How did you determine the amount of life insurance<br />
you purchased? Have you factored the amount you need into your estate planning? Many people think of life<br />
insurance as assets that will flow into the estate after their death, which will then be paid to their heirs. However,<br />
life insurance can be used to accomplish many different things in estate planning. Have you thought of life insurance<br />
as providing a way to pay your estate taxes? What about as a replacement for assets you donate to a charity?<br />
These are just two of the many ways life insurance proceeds can be used in your estate plan.<br />
There are many things that can be done so your estate is handled in the manner you want. However, it will take<br />
some planning and annual review to make sure your will continues to work in the manner you intended. Putting<br />
this process off until “tomorrow” could put your family in jeopardy of losing assets you have worked very hard to<br />
obtain. Step #1: Set the first annual appointment on your calendar now to review your will and Buy-Sell agreement.<br />
If you do not have a team to handle these complex issues, we can help you build your team. Let’s discuss what<br />
you can do today to protect your family tomorrow. �<br />
20 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong>
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Fall 2009 | 21
RISK MANAGEMENT PLANNING<br />
FOR AVIATION MAINTENANCE<br />
BUSINESSES<br />
By Jeff Rhodes<br />
<strong>Aviation</strong> mechanics are not the type of people to sit still. Th e nature of their aptitude and personality<br />
causes them to create, improve, and change. Th ey consistently look for opportunities and generally are<br />
not content to just let things happen.<br />
During times when airline jobs are drying up, we see many airline mechanics inquire about starting their own<br />
businesses. Many seek to off er specialized service back to the airlines, on a contract basis. Others seek to open<br />
their own shops, often leaving the airline world and making the move to the general aviation side of the aviation<br />
service industry. Anytime a career “employee” changes hats to become “the boss” as a business owner, they are<br />
required to consider aspects of the business that have never really been of concern to them before. When their<br />
business is responsible for repair and service of aircraft, liability and risk management issues should come very<br />
near the top on the list of concerns.<br />
<strong>Aviation</strong> maintenance shops diff er vastly, one to another. Large, independent, and FBO shops employ many<br />
personnel. Th ey do regular maintenance and heavy inspections on large, turbine-powered commercial and<br />
corporate aircraft. At any one time, these shops may house many aircraft, worth tens of millions of dollars,<br />
22 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong>
collectively. At the other end of the spectrum is the<br />
lone Airframe and Powerplant mechanic, working from<br />
a small building or even from a mobile vehicle at the<br />
local general aviation airport. Th ese shops focus on<br />
oil changes and scheduled inspections of light singles<br />
and the occasional twin. Th ey do minor repairs and<br />
removal and replacement of parts and components. In<br />
the middle are the countless medium-sized maintenance<br />
shops, overhaul facilities, paint shops, non-destructive<br />
testing technicians, and others. Although these shops<br />
diff er in size, scope of work performed, and revenue,<br />
they all share similar risk situations.<br />
Liability <strong>Risk</strong>s in <strong>Aviation</strong> Maintenance<br />
In a litigious society, all business owners, whether they<br />
operate a shoe store, a parking garage, or an aircraft<br />
maintenance shop, are at risk from liability for injuries<br />
to the general public or property damage caused by<br />
the business’s negligence – or alleged negligence. Th is<br />
generalized liability is not necessarily specifi c to the<br />
type of business and can include slip and fall claims,<br />
false advertising, libel and slander, claims for injuries,<br />
or damages from unsafe conditions, etc. A business’s<br />
exposure to these losses depends mostly on the extent<br />
of the business’s exposure to the public. Businesses with<br />
high levels of public traffi c, like a retail store or movie<br />
theater, have high exposures to injury or damage losses<br />
arising from their physical facilities. When businesses<br />
have little physical public interaction, like an Internet<br />
or offi ce-based service business, the general liability<br />
exposure may shift toward legal or statutory damages,<br />
like false advertising or copyright infringement.<br />
<strong>Aviation</strong> businesses are no diff erent. All have general<br />
liability exposure of some kind, depending on their<br />
interaction with the public.<br />
Th e largest and most potentially catastrophic exposure<br />
aviation businesses have is when there are claims that<br />
their workmanship or a product that they sold caused<br />
an aviation accident involving fatalities, injuries, or<br />
signifi cant loss of property. Aircraft accidents are<br />
usually high profi le and thoroughly reported. National<br />
Transportation Safety Board (NTSB) investigations<br />
of all aircraft accidents usually explore many potential<br />
mechanical and procedural issues in an attempt to<br />
assign a probable cause of the loss. Because of the<br />
scrutiny and the record keeping associated with aircraft<br />
maintenance, injured parties are often able to litigate<br />
against everyone involved with the aircraft prior to the<br />
loss. Businesses that have supplied parts or services to<br />
the accident aircraft are especially vulnerable to legal<br />
action. Many of these claims are ultimately dropped or<br />
dismissed but often not without signifi cant legal defense<br />
of the accused party. Many aviation service providers<br />
have been bankrupted by litigation and judgment<br />
awards when their negligence has caused loss.<br />
Another signifi cant component of the liability risk<br />
picture for aviation mechanics is accidental damage<br />
to aircraft that have been left in their care, custody,<br />
or control. When an aircraft is turned over to a shop,<br />
the shop assumes responsibility for the safekeeping of<br />
that aircraft. Even small shops may handle aircraft<br />
worth hundreds of thousands or millions of dollars,<br />
especially if more than one aircraft is present at one<br />
"Many aviation service<br />
providers have been<br />
bankrupted by litigation<br />
and judgment awards<br />
when their negligence<br />
has caused loss."<br />
time. While it is rare that aircraft are destroyed while<br />
in the care of a maintenance shop, it is not uncommon<br />
to see signifi cant damage from “hangar rash,” dropped<br />
tools, errant equipment, or careless employees. Even<br />
seemingly minor damage to an aircraft can be quite<br />
costly to repair and may aff ect the future potential<br />
resale value of the aircraft.<br />
Fall 2009 | 23
<strong>Risk</strong> <strong>Management</strong> Th rough <strong>Insurance</strong><br />
Th e risks described above are insurable by a commercial general liability insurance policy tailored specifi cally<br />
to aviation businesses. Th e basic framework of the policy protects the shop from general liability exposures.<br />
Products and Completed Operations coverages are added to protect the policy holder for their negligent work<br />
or their sales of faulty products. It is important to note that the coverage does not pay for the breakdown of the<br />
product itself or the failure of the work to accomplish its purpose, but rather to protect the policy holder in the<br />
case that its product or work causes injury or damage after the aircraft leaves the shop. Hangarkeepers coverage<br />
is added to protect the shop in the event that it damages aircraft in its care, custody, or control.<br />
Th ese policies – commonly called products policies or premises, products, and hangarkeepers policies – are written<br />
with a limit of liability requested by the policy holder. General liability and Products / Completed Operations<br />
coverage are written on a “per occurrence” basis as well as an “aggregate” basis. Per occurrence limits are the<br />
maximum amount that the insurer will pay as a result of any one event or loss. Th e aggregate limit is the maximum<br />
amount that the insurer is obligated to pay during any policy period, regardless of the number of occurrences.<br />
Often, the policy limit is both per occurrence AND aggregate, meaning that a claim that consumes the entire<br />
coverage limit will end the insurer’s future obligations. Hangarkeepers coverage is written with a “per aircraft”<br />
limit and a “per occurrence” limit. Should more than one aircraft be damaged in one incident (i.e., one aircraft<br />
colliding with another), both limits are in play limiting the coverage available. Business owners should carefully<br />
consider the limits necessary to protect their assets based on the size and scope of their business’s activities. On<br />
most policies, the insurer provides a legal defense to the policy holder in addition to the policy limits. Th is feature<br />
may well be the most important aspect of a liability policy to an aviation business.<br />
Premium pricing on these coverages is based on several important factors:<br />
1) Th e limit of coverage requested by the policy holder (or the<br />
limits off ered by the insurer). Limits are available as low as<br />
$1 million and up to tens or hundreds of millions of dollars.<br />
Like most insurance, the premium increases with the limit but<br />
on a diminishing rate – the higher limits are less expensive<br />
per dollar of coverage than the lower limits. Most small to<br />
medium-sized shops carry limits between $1 million and $5<br />
million each occurrence.<br />
2) Th e type of product or service sold and to whom it is sold.<br />
Some aviation maintenance activities have more inherent risk<br />
than others. Engine overhaul, critical instrument work, and<br />
control system maintenance will carry higher premium ratings<br />
than operations that only work on non-critical airframe components. Likewise, shops that work on<br />
airliners, which routinely carry hundreds of commercial passengers, will receive higher rates than shops<br />
that only touch private aircraft.<br />
3) Within the two categories above, premium is determined primarily by the revenue that the business<br />
generates from its business activities. Revenue is used as an indicator of the amount of work or product<br />
being put into the marketplace during a defi ned time period. Underwriters will ask for historical<br />
revenues and estimated future revenues. Premiums will be based on the estimated revenues for the<br />
period to be covered. Th ese estimates are subject to audit at the end of the coverage period.<br />
24 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong>
Other insurance products are available as well. Th ere<br />
are many ancillary liability exposures present in<br />
conjunction with the operation of a business. Workers’<br />
Compensation <strong>Insurance</strong> is required for all businesses<br />
that employ people. Specifi c state regulations apply, but<br />
generally this insurance pays to treat employees who are<br />
injured in the course of their employment. Employment<br />
Practices Liability <strong>Insurance</strong> (EPLI) covers the business<br />
for a host of employee issues, including sexual harassment,<br />
improper terminations, discrimination allegations,<br />
etc. Additionally, many businesses put employees<br />
on the road engaging in company business activities,<br />
either in the employees’ vehicles or in company-owned<br />
vehicles. Business Auto coverage protects the business<br />
from liability exposure in conjunction with the use of<br />
automobiles for business purposes.<br />
In addition to liability protection, the aviation business also<br />
needs to protect the property that it owns or leases. Th is<br />
property may include: buildings, fi xtures (items attached<br />
to or inside the building), tools, equipment, furniture,<br />
computers and data, cash, cars and trucks, personal<br />
property, artwork, books, fi les, and records. All of these<br />
items have varying values and are protected on a Property<br />
<strong>Insurance</strong> Policy either on an agreed value (stated value) or<br />
a cash value (market value) basis. Th ese policies should also<br />
include coverage for business interruption or temporary<br />
shutdown following the loss of a valuable business tool.<br />
Other <strong>Risk</strong> <strong>Management</strong> Strategies<br />
Not all risks can be or should be eff ectively mitigated by<br />
insurance. In addition, signifi cant premium may be saved<br />
on insured risks by employing various risk management<br />
and risk reduction strategies.<br />
Clean shop – Many risks can be minimized by maintaining<br />
a clean and orderly workplace. Unnecessary slip and fall<br />
hazards are eliminated, as are hazards that may lead to<br />
damage of property owned by the business or in its care. A<br />
clean shop also fosters the attitude that the business owners<br />
care about quality and professionalism, often creating a selffulfi<br />
lling condition.<br />
Fall 2009 | 25
Written policies and procedures – When the business’s<br />
activities are thought out in advance, procedures can<br />
be put into place to minimize risk and loss. Th e<br />
standardization of doing a job the same way each time<br />
improves quality and consistency and reduces the risk<br />
of an error or omission.<br />
Employee training – After the policies are written,<br />
the employees must be trained – both initially and<br />
on a recurrent basis – to properly execute their duties<br />
and responsibilities. Knowledgeable, competent, and<br />
profi cient workers are key to a quality product. Th is<br />
training should be documented and records should be<br />
available showing when and how each employee was<br />
trained. Th ese records can demonstrate regulatory<br />
compliance, refute claims of negligence, and lower<br />
insurance premiums.<br />
Th ere are many issues facing both new and established<br />
aviation maintenance business owners. A well thoughtout<br />
risk management plan is as important to a business’s<br />
success as the appropriate licenses and tools. Plan your<br />
risk management and insurance strategy in advance and<br />
Specializing In TBM 700/850 Training<br />
on purpose. Buy the appropriate insurance products<br />
at adequate limits. Take extreme care in everything<br />
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Louis M. Meiners, Jr. CPA, JD<br />
Louis M. Meiners, Jr. is an attorney<br />
and CPA who serves as<br />
president of Advocate Aircraft<br />
Taxation Co. Advocate's practice<br />
is limited to serving the<br />
needs of owners and operators<br />
of aircraft. Services include aircraft<br />
operational analysis, sales<br />
and use tax management on<br />
aircraft acquisitions, income<br />
tax planning, federal excise tax<br />
planning, and representation<br />
before taxing authorities.<br />
loum@advocatetax.com<br />
888.325.1942<br />
Jonathan Levy, JD<br />
Jonathan Levy is the Legal Director<br />
of Advocate Consulting Legal<br />
Group, PLLC. In this capacity,<br />
Jonathan assists aircraft owners<br />
across the country with tax planning<br />
and Federal <strong>Aviation</strong> Administration<br />
(FAA) compliance matters<br />
and manages the firm’s training<br />
program. He is admitted to practice<br />
law in Tennessee and Florida,<br />
as well as before the United States<br />
District Court of the Third Circuit<br />
and the United States Tax Court.<br />
jonl@advocatetax.com<br />
888.325.1942<br />
This article is designed to provide information<br />
of general interest to the<br />
public and is not intended to offer<br />
specific legal advice. You should<br />
consult Advocate Aircraft Taxation<br />
Company or your tax and aviation<br />
advisor if you have a matter requiring<br />
attention.<br />
How to Jointly<br />
Own an Aircraft<br />
By Louis M. Meiners, Jr. CPA, JD and Jonathan Levy, JD<br />
FORM OF OWNERSHIP IMPACTS INCOME TAX, SALES TAX,<br />
LIABILITY, AND FAA REGULATORY REQUIREMENTS<br />
Tax and regulatory authorities generally provide wide latitude in structuring<br />
joint ownership of aircraft. Generally, co-owners have the opportunity to choose<br />
between a number of alternatives for the manner of ownership and operation. Th eir<br />
ultimate choice should be guided not only by tax outcomes but also by liability and<br />
regulatory considerations.<br />
Th e most common ways to jointly own aircraft are co-ownership, partnership, corporate<br />
ownership, and limited liability company ownership. Co-ownership refers<br />
to listing multiple owners on the registration fi led with the FAA in Oklahoma City.<br />
Partnership refers to ownership governed by a partnership instrument or under a<br />
state’s Uniform Partnership Act. Corporate ownership can be through either a C<br />
corporation, a stand-alone taxpayer, or an S corporation, which has fl ow-through<br />
tax characteristics similar to a partnership. A limited liability company is a relatively<br />
recent hybrid method of ownership that combines both corporate and partnership<br />
characteristics.<br />
If an aircraft is being owned and operated by a group of individuals strictly for<br />
personal use, the form of co-ownership has little impact on the income tax consequences.<br />
Generally, operations will not result in deductions, depreciation will not<br />
be allowed, and an ultimate loss on disposition will not result in a tax deduction.<br />
If the aircraft is ultimately sold at a profi t, it will be subject to capital gains tax to<br />
the extent that ultimate proceeds exceed both the original cost and improvements.<br />
When one or more users of the aircraft intend to devote it to business use, the<br />
income tax consequences of the form of co-ownership become critical. Co-owners<br />
of business property are generally taxed as partners in a partnership, regardless of<br />
whether or not they have a formal partnership agreement. Like partners operating<br />
under a formal agreement, co-owners may generally allocate income or deductions<br />
for income tax purposes as they see fi t, provided that such tax allocations accord<br />
with the economic deal struck between the partners. Generally stated, the partnership<br />
rules of Subchapter K of the Internal Revenue Code provide signifi cant<br />
fl exibility—although this is limited by certain anti-abuse rules which can apply<br />
Fall 2009 | 27
egardless of lack of abusive intent. Another important characteristic of partnerships is that treatment of property as<br />
business or personal is determined at the partnership level, not the individual partner level, which means that personal<br />
use by one partner may result in disallowance of deductions to other partners who use the aircraft only for business.<br />
Th e sale of an interest in a partnership that holds an aircraft will generally result in ordinary income treatment to the<br />
extent that the tax depreciation claimed on the aircraft exceeds its economic depreciation. Subject to certain partnership<br />
elections, the purchaser of a partnership interest will generally be entitled to step up the basis of the underlying<br />
purchased aircraft interest and begin depreciating his proportionate cost, regardless of the remaining bases of the other<br />
partners.<br />
A corporation taxed under Subchapter S provides for fl ow-through taxation to the owners rather than entity-level<br />
taxation. Although, in this regard, S corporations are similar to partnerships, an important diff erence is that S corporations<br />
cannot allocate specifi c elements of income and loss among the shareholders/co-owners; all elements are allocated<br />
proportionately. Th e sale of stock of an S corporation that holds an aircraft will generally result in capital gain<br />
tax, rather than ordinary-income recapture by the seller. Th e purchaser, however, will not generally be allowed to step<br />
up the basis of the underlying aircraft to his new purchase price.<br />
A co-owned LLC is normally taxed as a partnership. However, the LLC may elect to be taxed as a corporation, either<br />
under Subchapter C, or Subchapter S.<br />
CO-OWNERSHIP BY ELECTING OUT OF SUBCHAPTER K OF THE INTERNAL REVENUE CODE<br />
Aircraft co-owners utilizing a co-ownership, partnership, or a limited liability company often have an opportunity<br />
for an alternate method of taxation accomplished by electing out of Subchapter K. Th e election out of Subchapter<br />
K, eliminates the problem of one co-owner’s personal use creating disallowance to the other partners, as well as certain<br />
anti-abuse provisions that may result in unintended adverse tax consequences. Th e decision should be made in<br />
close consultation with your tax adviser, but if an entity or co-ownership is formed merely to hold title to property<br />
for the benefi t of its owners, by electing out of Subchapter K it may be possible to treat each partner as holding an<br />
undivided interest in the aircraft itself. Such treatment requires an election under Regulation §1.761-2 of the Internal<br />
Revenue Code and prohibits the joint conduct of a trade or business. Th is treatment will be particularly appropriate<br />
28 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong>
when one co-owner chooses to use his share of the aircraft for business<br />
and another co-owner uses the aircraft personally. Th e business partner<br />
would be entitled to depreciate his share of the aircraft, while the<br />
personal user will preserve his income tax basis to minimize any gain<br />
upon ultimate sale.<br />
SALES TAX CONSEQUENCES<br />
Th e sale of a co-ownership interest in property is treated as a sale of tangible<br />
personal property and generally is subject to state sales or use tax. x.<br />
Each time a portion of the aircraft is sold, a taxable event occurs, and sales ales<br />
tax may be due at least on that portion of the property. Several states have<br />
exemptions for casual sales of aircraft, but the majority will tax each individual dividual<br />
transfer. If the ownership interest is held in an entity, then it is the partnership artnership<br />
interest, corporate stock, or membership interest that is sold, not the underlying derlying asset.<br />
When sold, entities are generally considered intangibles exempt from sales l tax.<br />
LIABILITY ISSUES RELATING TO JOINTLY OWNED AIRCRAFT<br />
Individuals are always subject to liability for their own negligence. Under the Uniform Partnership Act, they are also liable<br />
for the negligence of their partners. If the aircraft is held in a general partnership (whether the underlying partnership<br />
agreement is written or unwritten), partners generally hold themselves responsible for one another. Co-ownership<br />
may be treated as a partnership operation as well; therefore, it provides little if any increase in liability protection. Both<br />
limited liability company ownership and corporate ownership do provide signifi cant protection from a joint owner’s<br />
negligence. Because adequate liability insurance is generally unavailable for aircraft operations, except in the case of<br />
professional fl ight departments, liability should play a major factor in the design of aircraft joint ownership.<br />
BE WARY OF FAA LIMITATIONS<br />
Although joint owners of aircraft may make reasoned choices within a wide selection of vehicles, the FAA does impose<br />
some surprising, if not totally irrational, limitations on co-ownership. Consider the following:<br />
1. A nonresident alien can own an aircraft individually, or as a co-owner, but not as a partner in a partnership.<br />
2. A nonresident alien can be a signifi cant shareholder in a corporation within certain limitations but not a member in<br />
a limited liability company.<br />
3. A corporation can be a member in a limited liability company but not a partner in a partnership.<br />
4. A foreign corporation can own an aircraft within certain limitations but not a foreign LLC.<br />
Of course, there are other limitations as well, so when deciding among alternative arrangements, FAA regulations are<br />
often determinative.<br />
MERELY AN OVERVIEW<br />
Th e outline above represents only a cursory overview. Due to the interaction of federal and state tax laws, liability considerations,<br />
and FAA regulations, it is essential that you receive professional legal advice before entering into a joint<br />
ownership transaction involving an aircraft. �<br />
Advocate Consulting Legal Group, PLLC is a law fi rm whose practice is limited to serving the needs of aircraft owners and operators<br />
relating to issues of income tax, sales tax, federal aviation regulations, and other related organizational and operational<br />
issues.<br />
IRS Circular 230 Disclosure. New IRS rules impose requirements concerning any written federal tax advice from attorneys. To<br />
ensure compliance with those rules, we inform you that any U.S. federal tax advice contained in this article is not intended or written<br />
to be used, and cannot be used, for the purpose of (i) avoiding penalties under federal tax laws, specifi cally including the Internal<br />
Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.<br />
Fall 2009 | 29
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30 | <strong>Aviation</strong> <strong>Insurance</strong> & <strong>Risk</strong> <strong>Management</strong><br />
FACTS AND OBSERVATIONS<br />
<strong>Insurance</strong> Premium Tax<br />
So, you think if you pay your federal and state income tax and any necessary state and local sales<br />
tax, that is the extent of it. Oh, that’s right, we still have the death taxes and a little hidden tax on<br />
gasoline, but that is about the size of it. Wrong. Don’t forget one of the most obscure taxes, the<br />
state insurance premium tax.<br />
Most states require insurance companies to pay a tax on the gross insurance premium they charge<br />
for insurance products sold in your state. These taxes vary by state but can be quite substantial.<br />
In Tennessee, for example, each company is required to pay 2.5 percent on all premiums except<br />
workers’ compensation. Workers’ comp is taxed at 4 percent. In addition, they charge a fi ling fee<br />
just for accepting the money.<br />
The next time you pay your insurance premium, just remember that some signifi cant portion of it<br />
will be paid over to your state in taxes.<br />
<strong>Insurance</strong> Company Notice of Cancellation or Non-renewal<br />
Most states require the insurance companies to notify policy holders a minimum of 60 days (varies<br />
by state) prior to policy expiration if their intent is to non-renew the policy or to increase the<br />
premium more than 25 percent (varies by state).<br />
If the company is unsure of its renewal intentions concerning price, it often sends out the mandatory<br />
letter just to be sure it complies with all state requirements. Usually, this practice is most<br />
prevalent when underwriters are backlogged.<br />
Unfortunately, an insured receives the letter directly from the insurance company and the agent<br />
often is not copied on the letter or receives it after the insured’s copy is delivered. If you receive<br />
such a letter, a quick phone call to your agent can clear the whole matter up. �<br />
Next Hard Market<br />
The last few months in the aviation insurance world have been quite exciting. Prior to 2006, our<br />
industry consisted of eight domestic aviation insurance underwriting facilities. From 2006 through<br />
the summer of 2009, the number of aviation underwriting facilities grew to 16. During this time, due<br />
to the underwriting overcapacity, premiums and rates plummeted. Losses continued both in general<br />
aviation as well as in the commercial airline sector. Due to premium inadequacy, many underwriting<br />
facilities will close 2009 with significant losses.<br />
Historically, during significant soft market cycles, underwriting facilities have gotten some financial<br />
relief from their investment portfolios. In this case, due to the current recession, the insurance<br />
company investment portfolios are performing poorly.<br />
With the stars aligned and insurance company profits suffering, we are seeing the beginning of the<br />
next hard market cycle. Underwriters are becoming somewhat less cooperative and are beginning<br />
to push for rate increases. AXA insurance company and Travelers <strong>Insurance</strong> have both withdrawn<br />
from the general aviation insurance marketplace. Additionally, rumors are beginning to fly about<br />
other companies withdrawing from certain aviation insurance sectors.<br />
Stay tuned for future developments. �<br />
Have questions about your<br />
<strong>Aviation</strong> <strong>Insurance</strong> policy? Give CS&A a call.<br />
<strong>800.999.1109</strong>