Page 19 - Jan 24

The named insured has an insurable interest because they have a financial interest in the aircraft, as well as a liability exposure associated with the responsibility of “owning, operating and maintaining” the aircraft. That language is stated in the first paragraph of your insurance policy under “Who is Covered.”
Policy basic definition: Who is Covered
= Any person who is a passenger with your permission.
= Any person or organization that uses or is legally responsible for your aircraft. But you must have given your permission for this use.
= Any of your employees who are performing work for you, regardless of the type of work.
To be clear, the policy goes on to state “Who is Not Covered”:
= Any person or organization that manufactures
or sells aircraft, aircraft engines or accessories, or that runs an aircraft repair shop, aerial applicating service, airport, hangar, aircraft sales agency, pilot training center, commercial flying or commuter air service or flying school, or any individual or organization providing pilot services or flight instruction, if the loss arises from these activities.
= Any officer, director or employee who, while in the course of his or her work, injures or kills another employee, officer or director who works for the same employer.
= Any person or organization with respect to bodily injury to you, or if you are a partnership, to any partner thereof.
If you are sitting in the pilot lounge right now reading this, you may be thinking, “Well, I don’t own the aircraft, but I operate it on behalf of the owner, am I covered?”
The answer to your question? It depends. If you are an employee of the “Named Insured,” the answer is yes. If you are an independent contractor who is paid as a 1099, the answer could be no. Your boss has coverage, but you may not.
In addition to the pilot(s) having an insurable interest from a liability standpoint, so do the maintenance technicians. The same answer applies: W2 compensation provides you with liability protection under the policy; 1099 compensation does not guarantee you coverage.
While reviewing the “Who is Not Covered” section above, your attention may have caught on the second bullet point regarding an employee who injures a fellow employee. This is a very valid concern and an example
of why “off the shelf policies” are not the best value. Review your policy for an endorsement titled “Fellow Employee Exclusion Deletion Amendment.” If included, this endorsement removes that specific bullet point exclusion.
If you are compensated via 1099 instead of W2, consider consulting with an aviation attorney for a pilot services agreement. The agreement can be put on file with the insurance company and extend coverage to protect you with respect to you operating the aircraft on behalf of the “Named Insured.” Setting this up can be complicated, but is worth putting in place to protect yourself. This agreement will delve into terms you may have heard over the years, such as “Named Insured,” “Additional Insured” and the rare use of the term in the aviation industry, “Additional Named Insured.” While similar sounding, each term is unique and plays an important part in setting up your insurance policy and coverage.
The “Named Insured” is frequently just a “shell” or “holding” company that the aircraft is registered in. Subsequently, there may be a “Holding Company Exclusion Amendment.” This means the policy will not pay for a claim for bodily injury, including death, to any officer, director, employee, owner, stockholder or member of the corporation. Essentially meaning, you can’t sue yourself for bodily injury.
There are other ramifications of just having the holding company as the “Named Insured.” You’ve really limited the “Who is Covered” under the policy. Multiple solutions are available to address this. One option is to extend the “Named Insured” section to include your other operating entities that can be tied to cashflow between them with respect to aircraft utilization. Or you can make the parent company the “Named Insured,” in addition to the holding company, and endorse the policy to have the holding company of the airplane as the “sole loss payee” for hull claims. There are a variety of ways to structure the “Named Insured” section. There may also be another endorsement for consideration in a complex environment with multiple sister companies or partners. Every carrier has a different name for it, but essentially what you want is for the policy to extend liability coverage to your wholly owned subsidiaries, including their subsidiaries and any other company that you control or actively manage. If you ask for “broad form Named Insured” language, your broker should understand what you are trying to accomplish.
If you are not tied to the aircraft as an owner or employee of the aircraft operator, but are dry leasing or chartering the aircraft, you are considered an “Additional Insured.” You have an insurable interest in the aircraft
JANUARY 2024
KING AIR MAGAZINE • 17