Aircraft Coverage Under Your Liability Policy
Do you or your company own or rent an airplane to use in your business? If so, you may have wondered whether your firm's general liability policy will cover claims that arise out of your use of the aircraft. That is, if you accidentally injure someone or damage someone's property while flying your plane, and the injured party sues your firm, will your liability policy cover the suit? This article will answer that question.
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.
George owns Geotechnical Solutions, an engineering company that provides consulting services. George owns a small plane that he uses in his business. One day, George flies his plane to another state to meet with a client. He lands the plane at an airport. While taxiing to a parking area, George accidentally clips the wing of a small jet. The jet owner demands that George pay the cost of repairing the jet. George submits the claim to his general liability insurer. The insurer refuses to pay the claim, citing the aircraft exclusion.
The aircraft exclusion contains an exception that applies to contractual liability. Coverage is provided for liability assumed under any insured contract for the ownership, maintenance or use of any aircraft. That is, if you assume liability on behalf of someone else for claims arising out of your use of an airplane, those claims might be covered.
For example, suppose that George needs to travel to a business meeting 500 miles away. He decides to rent an aircraft from Rent-A-Plane, which operates at a local airport. The rental contract contains an indemnity agreement. The agreement requires George's company to indemnify Rent-A-Plane for any bodily injury or property damage George causes to a third party through his use of the rental plane.
George signs the agreement and flies off in the plane. An hour later he is attempting to land at an airport when he misses the runway. George accidentally crashes the plane into a building. Fortunately, no one is in the building when the crash occurs, and George isn't seriously injured. However, the building is damaged.
The building owner sues Rent-A-Plane for $50,000, the cost of repairing the building. Rent-A-Plane pays the property owner and then demands reimbursement from George's company, citing the indemnity agreement. George sends the claim to his liability insurer. Because the claim arose from liability George assumed under a contract, his insurer pays the claim.
No Coverage for Damage to the Aircraft
In the previous example, suppose that the aircraft is damaged when George crashes into the building. Under the rental agreement, George is liable for any damage he causes to the plane during the term of the contract. Rent-A-Plane demands that George pay the cost of repairing the plane. If George submits the claim to his general liability insurer, will the insurer pay the claim? The answer is no.
Most liability policies exclude property damage to property that is in the insured's "care, custody or control." At the time the rental plane was damaged, it was under George's control. Thus, the claim filed by Rent-A-Plane will not be covered.
Some insurers will add a "non-owned aircraft" exception to the aircraft exclusion. While the wording varies, this exception typically covers claims arising from your use of an aircraft that 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 after any other available coverage, such as an aircraft liability policy, has been used up.