May 2015 Issue
Insuring Your Rental Blowtorch
As we researched this article, we heard about a turboprop owner who was renting a single-pilot jet. When asked how he was insuring the jet, he said that he paid a lot of money for insurance on his turboprop and it had better cover him in the jet. He then got concerned and called his broker. Fortunately, his particular policy covered him when he was flying other airplanes—but that’s not always the case. If you’re going to rent a jet, making sure that appropriate insurance coverage is in place is a huge part of the deal.
Jon Doolittle, an aviation insurance broker with Sutton James agency, told us that sorting out the insurance coverage is essential when entering into a jet rental agreement—when things go wrong, they tend to be very expensive things. Doolittle explained that sometimes a jet renter will carry non-owned insurance—also called renter’s insurance. That means the renter has one policy and there is another policy held by the aircraft owner. If something goes wrong in the big-money world of jet repair, that almost guarantees a fight between insurance companies and major delays in fixing the jet—not good for anyone.
Doolittle said that it’s much simpler if there is only one insurance policy involved—the policy carried by the owner. It usually has higher limits (more coverage) than a renter’s policy. The rental pilot should be added to the underlying policy as a named pilot with a written agreement that the insurance company will not subrogate (pursue for payment) against the renter pilot should there be a mishap when he or she is flying.
The insurance company will almost certainly require the renter pilot to have the appropriate ratings to fly the airplane as well as a certain level of experience or fly with a pilot the insurer approves for some period of time before acting as pilot in command. We think that’s reasonable—it’s consistent with what insurers require for renters who fly even complex piston singles.
Having one insurance company involved with the coverage of the airplane simplifies matters greatly should an inspection uncover foreign object damage to an engine after a renter pilot has flown the jet. The insurance company that insures the airplane simply pays the claim (which may be hundreds of thousands of dollars).
If the jet is normally flown by professional pilots, it’s common for the owner to be able to buy as much as $25 million in liability insurance. If the airplane is being flown by a pilot who doesn’t fly for a living—such as a renter pilot—as pilot in command, the maximum available liability limit is usually $5 million. The aircraft owner and the renter pilot need to fully understand if this is the case, and agree.
Above all, the renter pilot should have confirmation, in writing, from the insurer of the airplane that he or she is covered under the policy, the conditions that would cause that coverage to lapse and the dollar limits available should there be an accident.
Finally, if the renter pilot is going to be acting as second-in-command, even in a single-pilot jet, it’s essential that the insurance company knows about it and agrees in writing.