There are many terms and definitions used in aviation insurance which you need to know in order to read and understand your insurance policy. They should be contained in the definitions section of your policy and can vary from policy to policy. However, there are some terms and phrases not defined in your policy but are a part of the common language used in the aviation insurance business.
Declaration Page – The first page of the insurance policy which gives pertinent information about the Risk such as: the Named Insured, the policy period, aircraft number and description, limits of liability and hull value, territory, pilot clause. Sometime the declaration page is accepted as proof of insurance rather than getting a specific Certificate of Insurance.
Aircraft Hull and Liability Insurance – Aircraft Insurance in the U.S. comes in two parts, Hull and Liability, issued in the same policy. In other parts of the world they are issued as two separate policies for the same aircraft.
Aircraft Hull Insurance - Reimburses the insured for physical damage to the aircraft due to an accident or incident. Typically does not cover loss of use, diminished value or wear and tear.
Aircraft Liability Insurance - Protects the insured against claims for bodily injury and property damage caused by or arising out of the ownership, maintenance or use of the aircraft.
Medical Payments - Voluntary payments to passengers for direct medical expenses as a result of an accident or incident. Paid without regard to legal liability.
Purpose of Use - Defined in each policy, this spells out the approved uses of the aircraft under the policy. Some common uses are:
Pleasure and Business - Non-commercial use of the aircraft for personal or business travel where no charge is made for such use. Usually refers to “owner flown” piston aircraft but could include owner flown turbine equipment.
Industrial Aid - Non-commercial use of the aircraft for business travel where no charge is made for such use, but the aircraft is flown exclusively by professional pilots employed for that purpose.
Commercial - Commercial uses include but aren’t limited to operations such as instruction, rental, charter, aerial photography, banner towing, aerial spraying, logging and lifting.
OPW OR OPC - The Open Pilot Warranty or Open Pilot Clause sets forth the minimum requirements for a pilot to fly the aircraft under a policy without specific approval of the insurance company. Usually found on the page following the declaration page. Includes the Named Pilots and the training requirements of all pilots whether named or under the OPW.
Named Insured - The policy owner. The person or entity whose name appears on the Declaration Page of the policy and who has the authority to change or cancel the policy.
Insured – The party in the insuring agreement the insurance company agrees to indemnify. For example, an employee of the Named Insured.
Additional Insured - A person or entity with an interest to be protected, but who is not a named insured.
Breach of Warranty – An endorsement provided for the lien holder which guarantees the insurance company will pay for any damage to the hull even though the Named Insured may have done something to invalidate the insuring agreement such as violating the open pilot warranty.
Subrogation – Gives the insurance company (in lieu of the Named Insured) the right to pursue a third party for recovery of damages paid that they feel is responsible for the loss.
Waiver of Subrogation – The insurance company agrees to give up the right to pursue recovery from a third party, usually in conjunction with granting additional insured status. For example, it is common for a contract pilot to be asked to be named as an additional insured with a Waiver of Subrogation to defend him against third party liability and to protect him from being sued by the insurance company for mistakes he might make in the operation of the aircraft which may have contributed to the damage.
Combined Single Limit - A combined limit of liability applying to bodily injury and property damage. Usually stated as a limit per occurrence.
Smooth Limit – A single limit with no internal per person limits. The entire limit is available to satisfy a claim by one individual
Sub-limit - A single limit of liability for bodily injury and property damage per occurrence, which is further limited to a smaller maximum amount payable to one person or passenger
Premises Liability Insurance – Part of a General Liability policy that insures the policy holder against any third party damage or injury arising out of a faulty premises.
Products/Completed Operations Liability Insurance – Part of a General Liability policy that insures the policy holder from third party liability arising out of the use of the product they manufacture and/or install on the aircraft.
Hangarkeepers Legal Liability Insurance – A form of bailment and part of a General Liability policy that insures the policy holder against damage the policy holder does to a third party’s aircraft while in their care, custody, and control.