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Aviation Insurance; When And Where You’re Covered – Fourth in a Series

By Terry Miller

In a previous article, we discussed where you’re covered and mentioned briefly that, combined with the policy territory; the policy effective dates are perhaps two of the most important conditions of coverage contained in an insurance policy. Those two coverage conditions are so important in fact, that they’re typically the first two questions asked after a loss has occurred and are both prominently identified on the Declarations page of every insurance policy just below the Named Insured. For any occurrence based insurance policy to provide coverage, the loss must occur within the policy period and within the policy territory. If the policy is expired or has not yet gone into effect, coverage is invalid. If the loss occurs outside of the policy territory, coverage is invalid. The burden of proving that the loss occurred within the policy period and territory falls to the Named Insured. Sounds simple doesn’t it? The broader an insurance policy is worded, the more coverage it provides. Narrowing coverage or introducing conditions only serves to reduce coverage or unsettle the certainty of coverage. Requiring that a loss occur within a narrow geographic area or within a limited time frame are two excellent examples of coverage conditions that can easily result in a gap or denial of coverage. The Broadest Time and Place Conditions The broadest possible policy coverage conditions related to Aviation Insurance Policy Period and Policy Territory are as follows: Policy Territory: Anywhere In The World

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Policy Period: Any time within a 12, 24 or even 36 month period beginning at 12:01AM (midnight last night) at the location of the Named Insured on the date that coverage was placed.

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The Most Restrictive Time and Place Conditions The most restrictive possible policy coverage conditions related to Aviation Policy Period and Policy Territory are as follows: Policy Territory: Within .25 Statute Mile Of A Specific Coordinate

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Policy Period: One Hour (most often during daylight hours not at midnight) from the time of policy was placed at the location of the Named Insured. “This policy applies only to UAS opera tions during the time period beginning at 01/01/16 08:01 AM MDT and ending at 01/01/16 09:01 AM MDT”

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In Between In between the above examples are short term policies that are measured in days and weeks but still with Worldwide Territories. Examples of those types of policies are non-owned film production policies covering the hire of aircraft or space launches. Those types of exposures are easily recognized and coverage determined relative to when and where the loss occurred. Other policies that cover small pleasure and business aircraft or helicopters for example, may contain a coverage territory that is limited to a continent or country because of their limited operational range. If territorial extensions are required, most insurance companies will provide them however the Named Insured must understand the limitations and ensure that the extensions are requested and provided prior to operating outside of the coverage territory. The Burden of Proving When and Where The benefit of a long-term policy is that it covers a Named Insured anywhere in the world at any time during the policy period. Even in cases where losses or third party claims are presented months or years after the occurrence, coverage can be easily verified and proven. An Insured need only confirm that the occurrence was sometime in the previous 12, 24 or 36 months and that it occurred someplace in the world. If the Insured is not able to determine the exact date of occurrence, then the policy in place at the time of discovery will respond to cover the loss assuming that it also occurred someplace on earth. An example of a date of discovery loss would be Foreign Object Damage (FOD) to an engine or a third party arriving at their second home to discover a drone in their living room having broken through a window allowing rain, snow and sleet to cause substantial damage to the home over the past several months that the home was vacant. Sounding less simple isn’t it?

If no policy is in place at the time of discovery and the time of the occurrence is unknown, well that’s when the burden of proving the time of loss or occurrence becomes more difficult; and much, much more important. Most manned aviation insurance policies are placed on a long-term basis with a couple of unique situations as described above. Likewise, most manned aircraft renew or replace coverage each year so it would be unlikely for a manned aircraft to be without at least some type of insurance coverage in place at the time of virtually any occurrence or discovery someplace in the world. Such is not the case with hourly insurance within a .25 statute mile territory. With that in mind, most losses that would require proving when and where the loss occurred, would involve unmanned aircraft. Proving the hourly policy was in effect at the time of loss can be very difficult. Keeping track of the policy territory and ensuring that the UAV is within that territory could be even more difficult. When the process server shows up at the Insured’s door, they will not have a policy in force for a recently discovered loss if the coverage expired an hour after inception months or years ago. The burden of proof becomes for complicated at this point. Policy expiration while in flight is one major concern relative to hourly insurance and unmanned aircraft. An insured must always remain cognizant of the minutes of coverage they have remaining and be prepared to land prior to policy expiration. An hourly policy can, and will expire an hour from policy inception whether the aircraft is airborne or not. Because insured UAV operations occur during normal daylight hours, and not at midnight, it is more likely that an Insured will lose track of time or need to extend a particular flight. UAVs can and do fly-away. In the event that coverage is expiring in minutes and the aircraft does experience a loss of control, odds are that the UAV will out-fly the time left before policy expiration. Even if it doesn’t, the burden of proof showing that the loss occurred during the hour long policy period would be very difficult. If the UAV were to go through the window of an unoccupied building or automobile or strike a person causing bodily injury, the damaged party would not likely check the time down to the minute or perhaps even be present to look at clock. Territorial coverage breaches are another difficult gap to avoid. Even small consumer grade recreational UAVs have a flight range exceeding 4 miles. With no means of accurately tracking the UAV, knowing if the aircraft has exited the coverage area would be impossible to estimate. Again, fly-aways are another potential for uncovered loss relative to the coverage territory. If the UAV flies away and outside of the .25 statute mile territory, no coverage would be provided under the policy. Of course there are solutions to all of the challenges outlined above but most importantly, the Insured must understand their policy conditions and avoid breaching the policy warranties. Broad coverage is better, narrow coverage, not so much.