We often receive phone calls from clients and prospects asking for a general liability policy to satisfy an insurance requirement in a contract, such as an airport lease. Like most insurance products, clients buy an aviation general liability policy with little knowledge of what the policy actually covers. In today’s fast-paced world, it is difficult to find time to really understand a liability policy, which leads to confusion and frustration when a claim is denied. The following takes a deeper look at an aviation general liability policy.
An aviation general liability policy is typically purchased by the following types of aviation operations, to name a few:
- Fixed Based Operators
- Flight schools
- Aviation maintenance and repair operations
- Charter operators
- Corporate aircraft operators
The ‘Insuring Agreement’ section of the policy gives the insured an idea of the exposure the insurance company is intending to provide coverage for. A typical Insuring Agreement for an aviation general liability policy will say something similar to the following:
‘We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies resulting from your aviation operations.’
*The bold words are typically defined in the policy.
The aviation general liability policy starts by providing broad coverage noted in the insuring agreement, but like most insurance policies, the aviation general liability policy includes exclusions that limit or restrict coverage. Typical exclusions in an aviation general liability policy include the following:
- Bodily injury or property damage intended by the insured
- Contractual liability
- Liquor liability
- Bodily injury to employees that would normally be covered by Workers Compensation insurance
- Bodily injury or property damage arising out of the ownership, maintenance, or use of aircraft, auto’s, or watercraft that are owned, leased, or operated by the insured
- Property damage to property you own, lease, or rent
- Property damage to your product or the work you performed
- Employment related offenses such as wrongful termination, harassment, and discrimination
- Property damage to aircraft or aircraft parts that are owned by, leased to, or rented to the insured
- Pollution or contamination of any kind
- Conduct of any contest, exhibition, air meet, air race, air show, permitted, sponsored or participated in, by the insured
- War liabilities including acts of foreign enemies, strikes, riots, civil commotion, or any malicious act or act of sabotage
Many of the general exclusions noted above exist because those exposures are intended to be covered by policies that were created to handle that specific exposure – such as the air show, employment practices, and workers compensation exclusions; which all have separate policies available to handle those exposures.
There are a few scenarios that can lead to confusion regarding the intent of the aviation general liability policy
- The first area of confusion is often regarding what triggers coverage. The aviation general liability policy is typically an ‘occurrence’ based policy which means bodily injury or property damage, as defined by the policy, needs to occur in order to trigger coverage.
- An example would be a maintenance facility that completed an aircraft pre-buy inspection for a client. The client purchased the aircraft after the maintenance facility gave the aircraft a clean bill of health, but significant hidden damage was found in a subsequent inspection. The aircraft buyer may come after the maintenance facility alleging a poor pre-buy inspection. In this case, there has been no bodily injury or property damage to trigger coverage under the aviation general liability policy. This exposure is intended to be picked up by a professional liability policy, which is a separate type of coverage with its own policy form.
- The second area of confusion is regarding pollution liability. Many of our Fixed Based Operator clients provide aviation fuel to aircraft owners and operators. Our clients may store and pump the fuel, or simply make the fuel available via self-serve pumps. Regardless, the Fixed Based Operators have an exposure for pollution liability or environmental impairment. The aviation general liability policy excludes pollution liability exposures very simply by saying – this insurance does not cover claims directly or indirectly occasioned by ‘pollution and contamination of any kind whatsoever.’ Again, the pollution or environmental liability exposure is intended to be insured by a separate pollution or environmental impairment liability policy.
The aviation general liability policy can be complicated. We encourage you to reach out to your broker to discuss aviation ground-related exposures that may be of concern to you, preferably that discussion happens prior to a loss rather than after a loss. As aviation insurance brokers, we have a lot of experience providing coverage for a wide variety of aviation ground exposures. To learn more about the best way to protect yourself on the ground and in the air, contact our aerospace team of specialists.
Disclaimer: The above general list of exclusions is not intended to include all exclusions that may be part of an aviation general liability policy and this article is not intended to replace policy language. Please refer to your specific aviation general liability policy for coverage specifics.