James, a private pilot and airplane owner in South Carolina, writes: What happens if someone wrecks your plane while they are considering buying it?
That’s a great question for anyone thinking of selling or buying an airplane and the answer turns out to be waaaaaaay more complicated than I thought it would be.
Here’s the thing: Apparently, just like airplanes, no two airplane insurance policies are the same.
Kim Skipper, aviation underwriting manager for Avemco, the nation’s only direct writer of aircraft insurance, told me, “Aviation policies are not like automotive policies,” which are pretty much boilerplate (at least within a state).
Instead, when it comes to airplane policies, Skipper told me that each policy “is individually written,” and can vary a great deal depending on the complexity of the aircraft, its value, and the mission of the owner.
“Aviation policies are not identical. Not even close,” she adds.
So it’s already pretty clear that you need to be as intimate with your insurance policy as you are with your POH before handing anyone the keys for a friendly test flight.
But what are the ins and outs to be alert to?
Of course, your policy covers you. Well, at least it does as long as you fly the airplane for the mission you insured it for.
If you didn’t insure it for flight instruction, then bend it offering flight instruction, well, then there’s no reason for the insurance company to pay out. Likewise, if you are flying without a valid medical (if required), or outside of flight review, you’ve violated the terms of your contract.
Now, in addition to you, your policy can be written to include “listed pilots.” These are other pilots who are essentially pre-approved and pre-covered by the policy — sort of co-insured, if you want to think of it that way.
But on top of that, many — but by no means all — aircraft insurance policies contain an “open pilot provision.” This is seemingly blanket coverage for other pilots who have your permission to fly the airplane.
That said, the open pilot provision isn’t as open as it sounds. Generally, it will include wording requiring a minimum certification level for the open pilot, but it may also set total time requirements and, in some cases, make and model experience requirements, as well.
For some aircraft — the Bonanza comes to mind — policies set some “pretty hefty total time requirements,” says Skipper.
But it’s not just complex airplanes that can require a heavy logbook for an open pilot.
For instance, tailwheel airplanes also frequently require a lot of a pilot on the open provision, according to Stuart Hope, senior vice president of AssuredPartners, the Aircraft Owners and Pilots Association’s insurance partner. He says they might need 500 hours total time, 150 of tailwheel time, and at least 10 hours in make and model to be covered.
Of course, all of that applies to certificated aircraft. Hope points out that experimental, or rare aircraft, can have much higher bars on which pilots are qualified, adding many policies covering homebuilts only cover named pilots.
It’s worth noting that the insurance industry doesn’t define pilot in command the way we pilots (and the FAA) do.
From the perspective of insurance, the person manipulating the controls is flying the airplane — and is “pilot in command” — so riding along with the buyer and assuming you are the PIC might not keep you covered.
Given all of this, what on earth is the seller to do when a buyer with a fist full of cash is ready to go and all that’s holding the deal back is a test flight?
According to Skipper, at a minimum, the owner should verify that the pilot makes the grade required by the policy. Ask to see the potential buyer’s certificate, medical, and logbook. A quick camera phone snapshot might be a good idea.
Hope goes farther and advises owners to reach out to their broker or insurance company and ask for a copy of the current pilot form, have the prospective buyer fill it out, and then — as the owner — submit it to your insurance company to ensure the potential buyer qualifies.
Another option is to add the prospective buyer as a listed pilot, which depending on the policy, might entail an extra fee.
Hope also introduced me to the rather befuddling difference between an approved pilot and a covered pilot in the universe of airplane insurance.
A covered pilot will have all the benefits of the policy, including liability protection. An approved pilot, by contrast, might not.
As an example, let’s say you needed your airplane relocated and you hire a professional ferry pilot. The pilot has the right qualifications and so is approved, but is not listed. If he or she crashes your ride, you are covered, but the policy won’t extend liability coverage to the ferry pilot. The logic is that a professional you’ve hired should have his or her own liability coverage as a working pro.
Sort of in the same wheelhouse, while under the open pilot provision, if a prospective buyer crashes your airplane, while the airplane is covered, the policy won’t defend the accident pilot against liability claims — and everyone gets sued after aircraft accidents, according to Hope.
The insurance company might even sue the accident pilot to recover the loss, adds Skipper.
So there is risk to potential buyers in not being properly covered as well — something to think about when airplane shopping.
What if the buyer has a renter’s policy?
“That works great for the buyer,” says Skipper, but not, she says, for the seller.
The reason is that most rental policies only cover pilots for their own actions. If a mechanical failure brings down the airplane on a pre-buy test flight, the renter’s policy wouldn’t cover the airplane — and if the potential buyer didn’t meet muster on the seller’s insurance, then the airplane isn’t covered by either policy.
And in one final misunderstood element of airplane insurance policies, Skipper cautions that, in most cases, as soon as the paperwork on the sale is signed, the seller’s policy ends. Right there and then — even if you haven’t canceled it yet.
So if you sell with the intent of ferrying the airplane to the new owner at a later date, the airplane probably isn’t insured, and that, in Skipper’s words, is “financially risky.”
Skipper sums it up best: When it comes to coverage of a prospective buyer flying your airplane, “make sure all your ducks are in a row and lined up.”
