Demystifying Non-Owned Aircraft Liability Insurance

David Gourgues, Regional Manager, McLarens General Aviation AIA Director, Claims Division

At the recently concluded AIA Conference in Tucson, I had the pleasure of moderating a panel discussion about non-owned aircraft liability insurance. Carson Lyons of AIG and Jeff Sheets of Applied Underwriters Aviation drew upon their years of industry experience to help unpack the many questions surrounding this coverage from the perspective of underwriting and claims.

First, non-owned coverage is liability insurance coverage. Whether a standalone policy, which is sometimes called a renter’s policy, or coverage that is part of an aircraft policy, non-owned coverage is intended to protect the Named Insured from claims by others.

Most policies cover damage to the aircraft and for injuries to third parties such as passengers or persons on the ground. The policy also covers damage to other property. The premium for a standalone policy is relatively inexpensive. If you are a flight school or someone who rents aircraft to others, encouraging customers to obtain non-owned coverage is an easy decision; however, your client needs to understand that there are situations where the renter may not be liable for damage to the aircraft.

Quite often we see flight schools dropping their hull coverage because they think the non-owned policies maintained by students and renters will cover all damage to the aircraft. Unfortunately, this is not the case. A good example of a no-liability mishap would be a bird strike or unexpected weather event.

When renting or borrowing an aircraft, one must ask: What will I be responsible for if something happens? In most cases one only needs to review the aircraft rental agreement to find out. A properly drafted agreement should explain in plain language what will be expected of the renter or borrower and what can be expected by the owner and the owner’s insurer. The problem is that many renters or borrowers purchase a policy before reading the rental agreement. This often leads to insufficient coverage. Both parties to the agreement need to have a clear understanding of what is expected of each before an incident or accident. Transparency is key.

Regarding non-owned policies, one must also understand that you cannot own the aircraft in whole or in part. Some policies state that the non-owned aircraft cannot be provided to you for more than 30 consecutive days