Thursday, April 1, 2004
Got Insurance? Are You Sure?
You may be as surprised as we were to discover that as many as half of America’s active pilots unknowingly fly without it
A pilot rents an airplane from a fixed base operator. After an hour of flightseeing, he returns to his home airport and is cleared to land behind an arriving biz jet. The pilot gets into a small bit of leftover wake turbulence, the rental aircraft wobbles just before touchdown and a wingtip catches the runway. Head in hand, the pilot taxis the aircraft back to the FBO. A mechanic looks at the damage and estimates $15,000 to $20,000, and almost at the same moment, the pilot learns the FBO’s aircraft insurance deductible is $10,000. Any guesses who gets to pay the 10 grand?
Or what about the pilot who smacked an electrical tower and knocked out the power grid for thousands of businesses and residences? Think he had some liability issues to deal with?
Consider for a moment the FAA’s numbers that there are approximately 600,000 active pilots in this country. Then estimate the number of pilots who do not own, but rent or borrow aircraft to fly. If half of America’s pilots are non-aircraft owners (that number may be conservative), a huge number of them fly with only the illusion that they’re covered by insurance, usually somebody else’s insurance—usually the FBO’s. Just how big is the problem? Avemco’s Jim Lauerman, executive vice president and chief underwriting officer, says, “Hundreds of thousands of renters and borrowers of aircraft fly without any insurance coverage.”
Why? Because they’re under the misconception that they’re covered by insurance purchased by the FBO.
“The great majority of FBO policies don’t include any coverage for the renter pilot,” says Greg Sterling, executive vice president and general manager of AOPA Insurance. “The majority of pilots out there don’t understand the insurance environment they find themselves in when they rent an airplane.”
While the reality of renter-pilot coverage varies from FBO to FBO, the overall trend in the industry is uniform. Operating and insurance costs have climbed over the years, and fixed base operators have been forced to operate more economically.
“In the old days, FBO deductibles were about $500. Now, FBOs, whether by choice or because they’re forced to, are carrying higher deductibles, sometimes $2,500, sometimes $5,000 or even higher,” Sterling says.
When the out-of-pocket expenses—the deductibles—were smaller, the FBO might have just absorbed the costs if there was an accident or incident. For many operators, that gesture is now just too expensive. Additionally, many owners and operators can no longer afford having the aircraft off line while repairs are being made. Pilots unfortunate enough to damage an aircraft may also find themselves on the hook for loss of revenue while the aircraft is being repaired.
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