Policy decision

What would you think if I said that experts in the insurance, legal, and airport fixed-base operations (FBOs) arenas with whom I have talked tell me that the majority of FBOs out there are "bare"? They're not unclothed; this means that they either don't carry, or offer, insurance that will cover renters of their airplanes. Interesting?

According to two estimates, as many as nine out of 10 FBOs don't provide any insurance coverage to their rental customers. That's quite a statement. It's impossible to verify that figure--I tried through several sources--but the assertion sure set me to thinking about pilots who rent airplanes.

If that situation exists--and every indication seems to confirm it--some questions need to be asked. If you're a renter, the most important is this: "Can I afford to have an aircraft accident?" Mishaps during flight training are rare, but even something like a prop strike--say you ran off a taxiway and hit a light or other obstruction--can cost several thousand dollars to repair.

Another is, "What am I risking if I fly without protection and something happens?" A little? A lot? Or haven't you given much thought to that?

That's an important point to consider. What kind of an estate do you have? Is it one you've built through a lifetime of hard work, sweat, and saving? Are you just now at the point when you are enjoying the fruits of decades of labor? Maybe you're 20 years old, just starting out, living from paycheck to paycheck without much to lose. All of us have different circumstances. But factors like these and many others all have to be considered in a risk analysis.

Now is the time to think about it--not after an accident happens.

Learning more about renter's insurance The AOPA Insurance Agency is a leading provider of aircraft insurance, both for pilots who own and those who rent the aircraft they fly. Its Web site provides articles and other information on renter's insurance, as well as a sample policy, coverage options, and current premiums. As an AOPA Member Products partner, coverage from the AOPA Insurance Agency is competitively priced, and the agency helps to support AOPA's advocacy, educational, and other activities that benefit general aviation. AOPA members receive a discount on renter's insurance premiums, and renewals are discounted an additional 10 percent if no claims are filed in the previous year. For more information, see the Web site or call the AOPA Insurance Agency at 800/622-2672.

Remember the "old days"?

Pilots who have been flying since the "good old days" may remember walking up to the counter at the airport, flashing a pilot certificate, renting an airplane (after a short "check flight"--or not--"just to satisfy the FBO's insurance company") and just leaping off into the blue.

Aviation is much more sophisticated and complicated now. Lawsuits are common.

A few years ago, the owner of what I considered to be pretty solid FBO in central Texas told me over the phone that he was "...out of the airplane rental business. The insurance premiums are more than I can stand."

There might have been more to the story, but I took his explanation at face value. Times are different. But the more I thought about the experience, the more interested I became in the plight of pilots who rely on rented aircraft.

When I began asking questions, I was surprised by the answers that emerged.

Some facts of life

Most pilots are handicapped by their lack of knowledge about aviation insurance. Consequently, we're pretty poor consumers. Most of us don't even know where to start asking questions.

To begin with, aviation insurance isn't very similar to the life, homeowner's, or auto insurance familiar to most of us. Aviation insurance isn't competitive, either. If you own an aircraft, you can't shop around for the best terms and prices. Once your name is "captured" by one insurance agent, companies will not provide quotes on insurance for you to other agents.

Unlike other types of insurance, aircraft insurance isn't generally required by law to be written in plain language, either. Nor are there uniform national standards with respect to wording or coverage. Only six of the 50 states even require aviation insurance.

Regardless of how complicated the subject might seem, the main reason many pilots are so poorly informed is that that they haven't taken the time to inquire--and most rental pilots ask no questions. That's a big mistake.

Nonetheless, lawyers and insurance agents agree that often there is an "illusion of coverage" that leads pilots to infer coverage when little or none exists. When the FBO asks you to "sign this form for insurance purposes," it is naive to assume that you have coverage. Often, your signature merely certifies that you are a certificated pilot with a current medical.

It's not that reputable FBOs don't have insurance. But FBO insurance is designed to cover the FBO and its property, not the renter. Think about insurance this way: Most of the time, it covers the party who pays for it.

The message is simple. Take time to read and understand any coverage before you fly. You don't have to be an aviation lawyer. But you do need to be able to understand an aviation insurance policy, so be sure to consult a qualified aviation insurance agent to translate it for you. Don't assume anything.

Aviation Insurance 101

Whether you own or rent, aviation insurance has two components. Hull insurance covers the airplane itself for loss or damage. Liability insurance covers injury or death to the pilot, passengers, persons outside of the airplane, and/or damage or destruction of property outside the airplane. I say "can" because the liability portion of a particular policy could cover all, none, or some of those categories. What's covered should be specified in the text of the policy and its exclusions, extensions, riders, and associated documents. Read them closely.

Hull insurance and liability are separate and distinct from each other. It is not uncommon for an FBO's or flight school's policy to cover only the business for loss or damage to the aircraft, with no coverage for the renter. It might even be possible for an insurance company to pay the FBO for loss of its aircraft and then attempt to recover its costs by suing the pilot who rented the airplane.

Both "coverage" and "protection" are important terms.

Regardless of whose fault an accident might be--usually sorted out in court--interests need to be protected. That means legal counsel. Renter's insurance usually provides legal representation (protection) for the renter.

I was told of a case in which a pilot had rented a Piper Arrow. Taxiing out, a landing gear collapsed. If someone else could bear the cost, the FBO's insurance company was not going to pay for the damage. The finger of guilt was pointed at the rental pilot. A trial ensued, and the legal fees alone amounted to $100,000. Fortunately, this pilot had renter's insurance. A mechanical error was determined, and the pilot was shown not at fault.

Could you have afforded a $100,000 legal bill to prove it wasn't your fault?

Every policy has a total limit of coverage not to be exceeded for a given accident or claim. That could be $1 million, for example. In addition, there might be subdivisions within a "smooth" limit, as it is called. A typical sublimit is $100,000 for each passenger, the pilot, and each injured person on the ground. In some policies there might even be further subdivisions for family members.

In the case of a rental airplane, the limit of liability coverage, if it is available at all, might be only $25,000 (not $100,000 per person, and certainly not $1 million).

Without intention to deceive, the unintentional "devils are in the details" and in the fine print. It's what the policy explicitly says that counts. Read it and ask questions about what you don't understand.

Call the AOPA Legal Services Plan, if you're a member, or an insurance agent and ask for a translation if there's something you don't understand...before you go flying.

When it comes to insurance, failure to ask questions is a big mistake. Attorneys tell me most aviation insurance cases that reach a courtroom invariably contain some big surprise. Something was misunderstood. That need not happen. But the only way to eliminate confusion and have the required answers up front is to read and understand the policy.

What questions do you need to ask?

Subjects involve professional pilot insurance, flight instructor insurance, borrowing an airplane from a friend, and other related topics. Some of what follows could bear on these subjects as much as to the FBO/flight school rental situation.

With rental aircraft two of the most important questions are, "Can I afford to have an accident?" and "What risk am I assuming here?" Satisfy yourself on those questions first.

Then, minimize your chances of having an accident in the first place. Here are some questions that might help with that and also help to bring any deficiencies to light.

"Is the airplane airworthy? How do I know? Have I done a good preflight, checked all the required inspection signoffs and completeness of the other paperwork, examined the airworthiness certificate, the registration certificate, and ensured all the other required documents are OK?" Part 91 of the Federal Aviation Regulations outlines what's required in this area. Don't fly a faulty or illegal airplane.

That (and some luck) is the best insurance you can have against a "pilot-caused accident." Proficiency and currency are givens here.

The next step is to find out if your FBO or flight school has insurance. Talk to someone with knowledge and the authority to speak for the business. Determine its coverage limit. Most important, find out if coverage applies to you--and if so, up to what amount(s).

Specifically ask, "If I have an accident in your airplane, whether or not it is my fault, what is my liability--and the extent of coverage--with respect to me, the aircraft itself, my passengers, people outside the aircraft, and other property?" Ask for the answer in writing.

Find out if the coverage limits--or pilot requirements--change for night flight, instrument flight, or other specific operations. If you plan to take the rental aircraft out of the country, ask that question as well--any coverage might not apply for foreign operations.

Be sure to check out other exclusions. Although unusual, the policy might contain an Open Pilot Warranty. An Open Pilot Warranty might stipulate that only pilots with 5,000 or more total flight hours, 100 flight hours within the last year, 10 hours in make and model, a current instrument rating, and a current flight review may be pilot in command.

The bottom line

If you conclude that no insurance exists or if it doesn't adequately apply to you, evaluate your personal exposure. Your best bet is to purchase renter's insurance--often called "nonowned insurance," because the pilot doesn't own the aircraft being flown--if you plan to rent airplanes. Make sure to ask the same questions about it that you'd ask an FBO or flight school.

If you already own an airplane, your coverage might extend to your proposed rental if there is a substitute aircraft clause in your policy. If that doesn't work, maybe you can obtain renter's insurance and fly tomorrow. It is available from several sources, including the AOPA Insurance Agency.

One last note. If you plan an overnight stop or simply pause for fuel, check to see if the FBO at which you park has insurance to cover your aircraft while it is in their "care, custody, and control." Most reputable FBOs have such coverage. But what if you find out you aren't covered by it? What if a departing transient jet were to blow your aircraft into another while your aircraft is on the ramp? That happened when a line steward forgot to tie an aircraft down while its pilot was grabbing a quick bite to eat.

Knowledge will keep you from being eaten up by unanswered questions about aircraft insurance.

Wally Miller is president of an aviation training, consulting, and marketing firm in Monument, Colorado. He is a Gold Seal CFI who has been instructing for more than 30 years and flying for more than 40.