Page 10 - Volume 11 Number 7

Lessons Learned
from Recent
Spring Storms
Spring 2017 kept insurance adjusters busier than usual. Storms arrived earlier in the season due to the mild winter in much of the United States. In some areas it seemed Mother Nature was specifically seeking airports as direct targets, similar to mobile home parks frequently falling into the path of storms accompanied by tornado sirens.
Unsurprisingly, when the sky clears and the paperwork starts being processed, emotions can run rampant. We all know our King Airs aren’t just an asset sitting on our balance sheet; they are our magic carpets keeping us safe with the confidence of Beechcraft quality at FL250. Your King Air is your pride and joy, and you no doubt give it a great deal of care, respect and attention to keep it in the best condition possible. So, when the cold air tangles with the warm, moist air creating towering cumulonimbus which will eventually produce hail, straight line winds, and sometimes tornados, are you confident you are positioned to deal with the aftermath if your King Air gets damaged?
In Boy Scouts one of the first things we learned was in order to be a good scout, you must “be prepared.” This has proven to be a great “motto” throughout life. The first step in being prepared to deal with a storm- damaged King Air is to have a solid hangar contract/ agreement with the airport authority or Lessor of your hangar. The recent spring storms revealed many old and inadequate hangar leases. Some airport authorities operate on a “month-to-month” basis with lessees. This means there is no hangar agreement in place. While this may initially sound appealing, it is actually a very dangerous and expensive way to do business. Without a hangar agreement in place, there is no clear outline of which party is liable for damages that may occur to your aircraft while inside the airport authority’s hangar. Now attorneys are added to the equation, making an already expensive situation, even more so.
8 • KING AIR MAGAZINE
Specifically, if not addressed properly through a well- conceived hangar lease and insurance policies, you are going to be faced with diminution of value as a result of damage history, having an aircraft repaired that you may want totaled, loss of use, and getting immediate access to your property (the King Air) after immediate removal of the hangar owner’s property (the hangar door sitting on your King Air).
I’ve written about loss of use in a previous King Air article, so I won’t spend much time on that. What we haven’t delved into is contractual liability (hangar lease), over- or under-insuring your King Air, and damage history, which results in diminution of value. Every year you should contemplate what an appropriate value to insure your King Air would be. You should insure it for the current cost to replace it with “like, kind, and quality” in today’s market, which means some years the value of your aircraft will go up and some years it will go down. It is just as important to not over-insure it, as it is to not under-insure it. In the event of a total loss, the insurance company will write you a check, less any deductible, for the exact amount on your insurance policy. This is called the “agreed value.”
If you under-insure your aircraft, it is more susceptible to being totaled, as opposed to being repaired. Even minor damage could create a situation in which the insurance company is better off to write you a check for the agreed value and then sell the aircraft as salvage. By doing so, they minimize their loss/out of pocket expense. However, you are left holding a check for $1,000,000, but your trusted aircraft broker may tell you it will cost $1,500,000 to replace your King Air with one of similar “like, kind, and quality.” You just unintentionally self- insured $500,000.
On the other hand, if you over-insure your aircraft, the situation isn’t any better. The claims adjuster will assess the damage and figure out a way to have it repaired
By Kyle White
JULY 2017