Aircraft Coverage Under Your Liability Policy
If your company owns or rents an aircraft for business, you may have wondered whether your firm's general liability policy will cover claims that result from accidents you cause while using the plane. That is, if you inadvertently injure someone or damage someone's property while flying your company plane, and the injured party sues your firm, will your liability policy cover the suit?
The answer is likely no. Most general liability policies contain a broad exclusion that applies to aircraft (as well as autos and watercraft). The exclusion eliminates coverage for any bodily injury or property damage that you (or any other insured) cause while owning, maintaining or using an aircraft. The exclusion also applies to aircraft that you rent, borrow or entrust to someone else. Here is an example of how the exclusion might apply.
Fred owns Flying Fotos, a photographic company that captures aerial images on behalf of clients. Fred takes pictures from a small plane that is owned by and registered to his business. Both Fred and his employee (Steve) are licensed pilots.
One day, Steve is flying the plane while Fred takes pictures. Fred is leaning outside the plane when he accidentally drops his camera. The camera falls and crashes onto a crowded sidewalk. Before its hits the ground the camera strikes a pedestrian (Susan) in the shoulder. Susan sustains a shoulder injury and demands compensation from Flying Fotos. Fred submits the demand to his general liability insurer, which denies the claim based on the aircraft exclusion.
Exception For Contractual Liability
The aircraft exclusion contains an exception for contractual liability. Coverage is provided for liability assumed under an insured contract for the ownership, maintenance or use of any aircraft. That is, if you assume liability for claims filed against someone else as a result of your use of an airplane, those claims should be covered.
For example, suppose that Fred takes on an assignment that requires three additional camera operators. His company plane is too small to accommodate four photographers so Fred rents an aircraft from Rent-A-Plane. The rental contract requires Flying Fotos to indemnify Rent-A-Plane for any bodily injury or property damage Fred causes to a third party through his use of the rented plane.
Fred signs the agreement and he and his camera crew fly off in the plane. Later that day, Fred is landing the plane at an airport when he accidentally runs into a helicopter parked on the runway. No one is hurt but the rental plane and the helicopter are damaged.
The helicopter owner sues Rent-A-Plane for $25,000, the cost of repairing his aircraft. Rent-A-Plane pays for the damage and then sues both Fred and Flying Fotos, demanding reimbursement. Fred sends the demand to his liability insurer. Because the claim arose from liability Fred assumed under a contract that qualifies as an insured contract, his insurer pays the claim.
No Coverage for Damage to the Aircraft
In the previous example, the rental plane was damaged when it collided with the helicopter. Fred is liable under the rental agreement for any damage he causes to the plane during the term of the contract. Rent-A-Plane demands that Fred pay the cost of repairing the plane.
If Fred submits Rent-A-Plane's demand to his liability insurer, his insurer will deny coverage. This is because most liability policies exclude property damage to property in the insured's care, custody or control. At the time the rental plane was damaged, the aircraft was under Fred's control. Thus, the claim filed by Rent-A-Plane will not be covered.
In some liability policies, the aircraft exclusion contains an exception for non-owned aircraft. While the wording varies, this exception typically covers claims arising from your use of an aircraft you don't own or operate, if you have hired the aircraft with a paid crew.
The coverage afforded for non-owned aircraft applies on an excess basis. This means that your policy will pay claims after any other available coverage, such as an aircraft liability policy, has been used up.
You can protect your business against aircraft-related claims by purchasing aircraft liability coverage. This coverage often consists of three parts: third-party liability coverage that excludes passengers, bodily injury coverage for passengers, and property damage coverage. These coverages may be available separately or in combination. Aircraft physical damage coverage is called hull insurance. It can be purchased alone or in combination with aircraft liability coverage.
If your company doesn't own a plane but borrows or rents one, you can purchase non-owned aircraft liability coverage. The latter may cover both third-party bodily injury and property damage liability and physical damage to the aircraft.
What About Drones?
Many companies use drones in their business operations. The Federal Aviation Administration (FAA) defines a drone as a type of aircraft. Consequently, drones are subject to the aircraft exclusion described above. You can insure a drone for liability and hull damage under a special policy designed for unmanned aircraft.