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Aero-Tips 08.06.06

In yesterday's Aero-Tips I mentioned a turn that bears elaboration -- the Open Pilot Warranty on an aircraft insurance policy.

Insured Parties

Where aviation insurance is concerned, there are three kinds of pilots-with a huge distinction between pilots of each type.

Type 1: Owners

Owners are those who have a financial interest in the airplane, i.e., someone whose name is on the aircraft's FAA registration (or an owner of a corporation to which the airplane is registered).

This/these person(s) have an insurable interest in the aircraft, meaning he/she/they would be out money if the airplane is damaged or destroyed. Insurance rates are set in part by the experience level of insured pilots; all owners who will fly must be listed as "approved pilots" on the policy (and the cost of insurance adjusted accordingly) for the policy to be in effect…even when the pilot is receiving instruction from a higher-time pilot.

Type 2: Other approved pilots

Persons who are not owners of the airplane may be "approved" by the insurance company with the policy still in effect. Other approved pilots can be added if they:

• are specifically "named" to the policy, if they don't meet minimum requirements; or
• meet an Open Pilot Warranty.

The Open Pilot Warranty is a minimum level of pilot experience spelled out in the insurance contract. A common "OPW" for a four-seat, fixed gear airplane might be something like "Private pilot with valid FAA medical and Flight Review, with 200 hours total time and five hours in make-and-model". A four-seat retractable might have an OPW like "Private pilot with Instrument rating, valid medical and Flight Review, with 250 hours total time including 100 hours retractable gear time and 25 hours in make-and-model". The more complex the airplane (including the "complexity" of tailwheel configuration), the higher the OPW limits. Any pilot meeting the OPW can fly the airplane with no additional insurance premium charged the owner, and the policy is still in effect.

If a nonowner pilot does not meet the OPW he or she may still be an approved pilot by being specifically named to the policy. The named pilot, by virtue of his/her lesser experience, will usually drive a higher insurance premium for the owner. Note: Some airplane types or ownership structures result in a policy with no OPW-all pilots must be named.

IMPORTANT CONCEPT: A "named" pilot, or a pilot flying under the OPW, is not him/herself usually covered by insurance. If there's an accident and the airplane is damaged, the insurance will pay the owner because the provisions of the policy were met. The insurance company reserves the right, however, to sue the named/OPW pilot to recover money it paid out-a process called subrogation. Others may sue the pilot and the owner's policy may not cover defense costs or a judgment. This is why there's a market for non-owned aircraft policies-to provide insurance protection to pilots who fly airplanes they do not own.

Type 3: Unapproved pilots

Any person who flies who is not listed as an owner or "named" pilot (and the rate adjusted), or does not meet the OPW, invalidates the insurance policy.

Is it legal for such a person to fly the airplane? If appropriately certificated, rated and current, yes. Is the insurance company obligated to pay if such a person is flying and something goes wring? Absolutely not. An insurance policy is a legal contract between airplane owners and the insurance company. Both parties are required to adhere to the stipulations of the contract for coverage to be in effect.

Aero-tip of the day: As owners and as non-owner pilots, know when your flight is covered under the aviation insurance policy -- and when it, and you personally, are not.

FMI: Aero-Tips