Insurance Questions

[Bob Chilcoat]

Our 74 Archer is owned by a NJ Not-For-Profit Corporation that each of the
four partners owns a share in. Our insurance has the Corporation as the
named insured, and the four partners are named as the sole pilots, although
we do have an open pilot clause to cover flight by instructors, mechanics,
etc.

We have a $ million liability coverage, but it is not clear if we as
individual pilots are covered for liability or if only the Corporation is
covered. I've studied the policy in painful detail and I can't see anywhere
that we are insured. I seriously doubt that, if I was PIC and had an
accident where someone else was injured, the fact that the plane is owned by
a Corporation would provide much of a shield for my personal liability.
Furthermore, I don't see how I am protected from the insurer suing me for
loss of the airplane (subrogation) should I be flying and have an accident
that's my fault.

Thoughts?

We also have an exclusion to the coverage for damage or loss that says the
following:

THIS POLICY DOES NOT APPLY:



8. UNDER COVERAGES F & G (Damage to, or loss of, the aircraft when in
motion, and not in motion, respectively)



(C) TO LOSS OR DAMAGE DUE AND CONFINED TO WEAR AND TEAR,
DETERIORATION, FREEZING, MECHANICAL, HYDRAULIC, PNEUMATIC, STRUCTURAL OR
ELECTRICAL BREAKDOWN OR FAILURE, INCLUDING ANY SUCH LOSS OR DAMAGE CAUSED IN
WHOLE OR IN PART BY A DEFECTIVE PRODUCT OR THE NEGLIGENT ACT OR OMISSION OF
ANY PERSON OR ENTITY. FOR PURPOSES OF THIS EXCLUSION, DAMAGE CAUSED BY THE
BREAKDOWN, FAILURE OR MALFUNCTION OF ANY INTERNAL ENGINE COMPONENT, OR ANY
ACCESSORY, COMPONENT OF PART THAT IS ATTACHED TO THE ENGINE, IS CONSIDERED A
MECHANICAL BREAKDOWN OF THE ENTIRE ENGINE AND IS EXCLUDED.


I read this as providing the insurer a loophole whereby, should I total the
airplane in an emergency landing caused by an engine failure, the insurer
does not have to pay for the engine replacement. Am I reading this
correctly?

--
Bob (Chief Pilot, White Knuckle Airways)

[Robert M. Gary]

I have done the same set up before. As long as each person is listed as
a board member of the corp, they are covered for liability. The actual
benefit of being in a corp is probably not much and I would never do it
again. The paperwork requirement is annoying and in some states
(California for instance) you are charged $800/yr for the priv of being
incorporated until you completed their exemption process which takes
about a year.

You are correct that if you crash land because of an engine failure the
insurance covers the cost of the damage as a result of the landing but
NOT a new engine. If you think about it, keeping the engine running is
your responsibility, no the insurance co. However, in a partnership, if
the engine throws a rod or just needs new cylinders (discovered at
annual) you must have already put together a plan for who pays how
much, reserves, etc.

-Robert

[Private]

"Bob Chilcoat" > wrote in message
...
> Our 74 Archer is owned by a NJ Not-For-Profit Corporation that each of the
> four partners owns a share in. Our insurance has the Corporation as the
> named insured, and the four partners are named as the sole pilots,
> although we do have an open pilot clause to cover flight by instructors,
> mechanics, etc.
>
> We have a $ million liability coverage, but it is not clear if we as
> individual pilots are covered for liability or if only the Corporation is
> covered. I've studied the policy in painful detail and I can't see
> anywhere that we are insured. I seriously doubt that, if I was PIC and
> had an accident where someone else was injured, the fact that the plane is
> owned by a Corporation would provide much of a shield for my personal
> liability. Furthermore, I don't see how I am protected from the insurer
> suing me for loss of the airplane (subrogation) should I be flying and
> have an accident that's my fault.
>
> Thoughts?

Is there any reason why you would not demand to be personally covered as an
additional "named insured"

Does (or could if requested) your policy include coverage for "non owned
aircraft"?

Happy landings,


>
> We also have an exclusion to the coverage for damage or loss that says the
> following:
>
> THIS POLICY DOES NOT APPLY:
>
>
>
> 8. UNDER COVERAGES F & G (Damage to, or loss of, the aircraft when in
> motion, and not in motion, respectively)
>
>
>
> (C) TO LOSS OR DAMAGE DUE AND CONFINED TO WEAR AND TEAR,
> DETERIORATION, FREEZING, MECHANICAL, HYDRAULIC, PNEUMATIC, STRUCTURAL OR
> ELECTRICAL BREAKDOWN OR FAILURE, INCLUDING ANY SUCH LOSS OR DAMAGE CAUSED
> IN WHOLE OR IN PART BY A DEFECTIVE PRODUCT OR THE NEGLIGENT ACT OR
> OMISSION OF ANY PERSON OR ENTITY. FOR PURPOSES OF THIS EXCLUSION, DAMAGE
> CAUSED BY THE BREAKDOWN, FAILURE OR MALFUNCTION OF ANY INTERNAL ENGINE
> COMPONENT, OR ANY ACCESSORY, COMPONENT OF PART THAT IS ATTACHED TO THE
> ENGINE, IS CONSIDERED A MECHANICAL BREAKDOWN OF THE ENTIRE ENGINE AND IS
> EXCLUDED.
>
>
> I read this as providing the insurer a loophole whereby, should I total
> the airplane in an emergency landing caused by an engine failure, the
> insurer does not have to pay for the engine replacement. Am I reading
> this correctly?
>
> --
> Bob (Chief Pilot, White Knuckle Airways)
>
>
>

[Robert M. Gary]

There is no reason to be personally named. The policy should name the
corp which includes the board of directors. If you want, you can have
the insurance co sent you a letter stating that board members are
always covered, but making that many pilots "named' may cost you extra
for no extra coverage.
In my case, AIG says board members (my 1 partner and I ) are covered
when we rent but that is often times another one of the "costs"
associated with incorporating. Again, I would not recomend it to
anyone. I don't think it saved us much liability. Legally, if you don't
incorporate you are automatically a "partnership" (using the legal
term). As a stretch, if one partner were driving to the airport and
killed someone with the car, the "partnership" **could** be held liable
because he was driving his car as a member of the partnership. A
corporation could protect you from that liability. However, for a
corporation to afford that protection you MUST follow all the rules of
a corp, including minutes, votes, meetings, annual state officer
filings, NEVER mixing peronal money with corporate money, etc. If you
do any of that the corp no longer provides anything.

However, one benefit of a corp may be that you can sell the corp,
rather than the plane and not trigger the state use tax letter (yes,
you still owe the 8% state use tax but the state won't know to mail you
the letter). :)

-robert