Every pilot’s bad dream of having an accident as pilot in command turns into a full-fledged nightmare thinking about their insurance claim being denied for some fine-print “gotcha” reason. First off, the good news - this very rarely happens! When someone purchases insurance, they are signing a contract – in this case, one that risk voluntarily transfers from one person to the other. If the purchaser abides by the contract, then the insurance carrier is also obligated to adhere to the contract. Similarly, the purchaser (aircraft owner), must also follow the rules of the policy.
This means that if an aircraft owner breaks the contract in any way, for what is called a “material nonconformity,” that’s potential grounds for a claim not being honored. With that said, aircraft insurance providers want to fulfill their obligations and serve the aviation community. They understand that accidents happen and if claims are unjustly denied, the entire industry suffers, shrinks, and eventually does not exist in the way it does today…and that’s not good general aviation.
Here are some reasons – in plain English – that your aviation insurance policy may have an issue.
#1 You fibbed on your application
The application has many key areas in which – well, let’s say are “stretched." Here are a few examples.
Here’s a simple, but very real example. You just bought an airplane, but this type of aircraft is relativity new to you, and the broker asked your hours in the make/model…be honest. Insurance carriers need to know if you have only 10 hours in the airplane – yes, the rate will likely change and they may require some training prior to solo, but these requirements aren’t put in place to make things difficult, they are efforts to prevent a loss. So be honest, say 10 hours and don’t round up. Problems can arise when a log book is reviewed after a claim and the application stated 100 hours, when in fact only 10 were factual.
How about another example – “home base.” Part of the application process asks where your airplane will be based. Again, please don’t mark the application as Kansas when the plane is actually located in a hurricane area. Moreover, it’s generally not a problem if the airplane is on a grass strip – just tell your broker, “it’s turf…not pavement.”
When asked if you have had any accidents, incidents, or claims – or DUIs within the past five years, and you say no, but the answer is really yes, the insurance company just may investigate to be sure. If it turns out you omitted this information, your claim could have an issue or your policy might be canceled for this material misstatement.
How is this even possible? Well, not unheard of, but it goes something like this – an applicant’s update on their insurance application will all a sudden go backward…say starting at 500 total hours in year 1, but now in year two, it’s down to 300. Small differences due to estimations are just fine, and true-ups when you “audit” your logbook are also expected, but when pilots reduce hours by a significant amount, it’s called “flying backward” and carriers might simply not offer renewal terms. They deem a significant reduction in hours as a red flag. What’s the largest I’ve ever seen – somewhere in the neighborhood of 800 hours.
#2 Your airplane is out of annual
Here’s an insider’s tip: if your airplane is out of annual a few days when an accident occurs and you make a claim, the insurance company may honor your claim. The circumstances, type of claim, and guidelines of each respective carrier will come into play, but when those few days turn into a few months, or sometimes even a few years, that’s grounds for a problem.
#3 You’re out of annual
You must keep up your BFR, medical (or BasicMed, if approved by your carrier). If one of those gets skewed, your claim may be denied. Now, this only applies to carriers that require you to maintain a BFR or medical/BasicMed.
#4 You violate the Open Pilot Warranty
Your insurance policy is written to cover you and pilots like you, meaning those folks with similar pilot credentials (if you allow someone other than yourself to fly your airplane that is). Your claim may be denied if you let anyone fly your airplane who is not named on your policy or who does not clearly meet your Open Pilot Warranty. Read the Open Pilot Warranty language carefully - it’s typically short, being only a sentence or two and could read as simple as “Any Private Pilot,” but read it and know who you are lending the keys to. And an important note: if you lend your airplane to another pilot, your policy is designed to protect you--it will do nothing to protect your friend--they should highly consider renters/non-owner’s coverage.
#5 Your aircraft is being used for an unapproved activity
A great example of this occurrence is when a pilot purchases what is commonly known as Pleasure & Business coverage (commonly known as “P&B” - when the aircraft is used for personal transportation) and then the pilot uses their aircraft for other purposes such as a little freelance flight instruction or aerial photography. These activities aren’t a problem, just tell your agent so they can make sure you have the appropriate coverage. An accident while performing an unapproved activity is the most frequent cause for a denial of coverage.
In exchange for your paid premium, all the insurance carriers ask for is an honest, wholehearted effort to follow the contract. Are there times when a pilot inadvertently violated a small term of the agreement (insurance policy) and the claim was still paid? Of course yes, but I wouldn’t bet on that happening every time. Pilots must carefully read their policy, follow any pilot requirements, and let your agent know if you have any questions. Do not use the aircraft for any other reason than allowed in the policy. And one last thought, it’s our responsibility as aviators to make all efforts to reasonably protect our aircraft from damage – no pulling it out of a hangar before a hail storm.