Increase of Limit of Liability per passenger - Insurance Implications

[FokkerInYour12]

Just got a notice from my insurance broker that QBE are increasing the per passenger legal liability to $725K (up from $500K).

QBE are charging per passenger seat an additional $125 per annum for this.

Money grab or realistic price increase due to additional risk taken on by the insurer?

[C82R]

QBE aren't increasing the passenger limit, that was done by the Australian Government when they increased the limit under the Civil Aviation Carriers Liability Act. AOC holders have a legal obligation under the Act to have appropriate insurance in place to continue to excercise their privileges under their AOC for charter or RPT operations. The insurnce companies are now carrying a higher automatic liability limit on behalf of the AOC holder.

I would imagine that the other insurance companies will probaly do the same and adjust their premiums accordingly.

[FokkerInYour12]

What happens if your aircraft isn't use for passenger charter or RPT?

Have they mis-interpreted it?

[tail wheel]

What happens if your aircraft isn't use for passenger charter or RPT?

From memory the Carriers Liability Act requires an AOC holder to provide passenger liability insurance cover for the number of seats the aircraft is certified to carry, regardless of whether the seats are installed or not.

[43Inches]

Carriers liability Act only applies to commercial passenger transport operators, in aviation only charter and RPT benefit. It is there to provide some certainty for insurance in case of mishap, it also provides a limit to the amount any one passenger can claim against a commercial operator. Private and airwork operations are not covered (by the act) and any action against an individual/aircraft owner can lead to an unlimited payout based on the courts decision.

[FokkerInYour12]

I have raised the issue with my insurance broker who will get back to QBE and ask why a pvt/awk only insurance needs the additional liability.

So, if you have pvt/awk don't pay your fresh bill - query it first!

Also, given the comments on action against individual/aircraft owner - put your aircraft into a shell Pty Ltd company and have that as the operator, not yourself.

[LeadSled]

----- put your aircraft into a shell Pty Ltd company and have that as the operator, not yourself.

Folks,
In the real world of litigation that provides only very limited protection.
Tootle pip!!

[43Inches]

As long as you have the appropriate insurance it should not be an issue. In the case of Private aircraft you are no more liable for damages than if you are responsible for a road accident in your car. As with the car the owner is still part liable if he lends or hires his car to another driver/pilot and it has an accident. Under current laws any business you set up to cover high liability the director is still responsible as if they were the owner. There is very little way to escape this unless you find someone willing or stupid enough to take legal responsibility for the vehicle, this would not be cheaper than just paying for appropriate insurance. Ways to avoid big personal payouts, insure, maintain to the highest reasonable standard and don't hire to idiots.

[Old Akro]

Its only an issue if you have a crash:)

Insurance is a difficult issue. In the past I've had advice that you (or your estate) typically get sued to the insurance amount. But in the current environment $500k is not very much. I would have thought $1m per seat was about the territory.

[Aussie Bob]

The whole insurance thing is starting to get to me. I for one am thinking of letting the policy lapse come renewal time. My plane has been written down to not much, I am seldom over a built up area and it is only ever me and Mrs Bob in it anyway. I am seriously thinking hte 3K is better off in my pocket.

[Andy_RR]

Insurance is there to keep the legal fraternity in bread and water (Perrier). Hence it is a Very Important Thing.

:ugh:

[Tomahawk38]

I a rather wise old fella once said to me if you can't afford to insure it (referring to liability cover) you can't afford to own it. The more savvy amongst us don't complain about insurance premiums but realise it's a necessary evil to move risk from our balance sheets to the insurers. The not so wise treat the buying power of our C172 as a B747 when expecting 'cheap' insurance.

Those who are suggesting 'self insurance' (read no insurance) best familirise themselves with the relevant legislation i.e. damage by aircraft act and realise its implications.

To answer the OP; yes, it's probably just a money grab. I'm sure if the insurers took $125 per passenger seat x10 (assuming it applies to a Chieftain or similar) x 1000 (assuming there are 1000 aircraft of this size used for charter), they'll almost have enough premium to pay for two passenger claims each year.

[Old Akro]

Aussie Bob. Try this scenario. You & Mrs are flying somewhere. Lets say you're going to Temora for the fly-in. Nice over country areas route. But, something happens en-route. Heart episode, fuel issue, engine running rough, cloud closes in. You decide to divert to somewhere big-ish with good facilities. Albury, Wagga, Griffith, take your pick. Something else goes wrong and you don't make the strip, but crash 2 or 3 mile short in a house. You are killed, but Mrs is OK, but in hospital needing really expensive treatment. There was a single mother in the house who was killed and her 3 YO daughter is on life support in a hospital.

This is pretty extreme & horrific, but in our health / legal system, the only way that the girl on treatment (and possibly even your wife) is going to get money to pay her bills plus get compensation from having lost an arm is to sue you (or rather your estate). You're happily playing the harp, but Mrs, who is in hospital and coming to grips with your death and struggling with rehab each day, will end up wearing it all. This is the territory where people lose houses.

Pay the insurance. Write the value of the aircraft down to $1 if you want, but get the 3rd party.

[Aussie Bob]

Old Acro, the master of the sob story, were you an insurance salesman? Let me give you another scenario. All of the above happens just like you told it but there is no insurance. A hotshot lawyer looks hard at Mrs Bob, discovers there is no insurance and sees that Mrs Bob has a 50% stake in a rural house worth 200K. He declines the job because he would make no money. A young lawer fresh from law school takes on the case and it gets to court. The judge sagely listens to all sides but deciedes ( as seems to be the case these days) that taking the house of a widow serves no real purpose and would simply add to Australias welfare bill.

Insurance was the first form of ursuary, and has lead to outrageous payouts and overpaid laywers.

[43Inches]

http://www.hcourt.gov.au/assets/publications/judgment-summaries/2009/hca28-2009-08-5.pdf

In short a crop duster dislodges a transformer and the repair worker attending later gets an electric shock. Worker successfully sues crop dusting company and owners for just under $1million. Even though the worker did not follow the agreed work practices it was found the primary cause of him being in the situation was the aircraft hitting the transformer.

I hope they had good insurance.

The point is that even though the aircraft did not directly cause the injury, it set in motion the series of events that led to it. This is why liability insurance is so important. You never know when you may do something by accident that leads to injury.

[Old Akro]

Aussie Bob

I dislike the insurance industry intensely. Insurance is my business single biggest cost. I'm looking to move the major elements of it offshore because Australia is expensive. However, my experience is that the system is merciless. And its not just the value of the house, its your superfund, life insurance and every other asset. Not to mention the stress your wife would suffer trying to deal with it. And frankly, the lawyer may be an experienced one doing it on a contingency basis who doesn't care that his fee will be larger than the money that flows to the client.

[Andy_RR]

Aussie Bob is right. Wherever there is an insurance policy, there you will find the lawyers milling around. Wherever they smell blood, they smell money

Insurance is my business single biggest cost.

I don't know what business you're in Old Akro, but what does this say about our economy and business environment? If you think it is going to fix itself or get better, you're delusional. The system is broken and needs to be written off.

All you guys out there slaving away to build your personal pile of wealth, stop it right now! It won't belong to you when you need it anyway (see Cyprus, coming to a country near you soon...) so why make it in the first place? This current system needs to disappear up its own arse and die. Make as little money as you can bear and pay as little insurance and tax as you need to. This is how to kill it, and swiftly please!

Then something can eventually be established based on personal responsibility.

I can only hope.

[Tomahawk38]

All you guys out there slaving away to build your personal pile of wealth, stop it right now! It won't belong to you when you need it anyway (see Cyprus, coming to a country near you soon...) so why make it in the first place?

What an interesting view point... If everyone took this view and no one was prepared to take risk there would be no flying schools, manufacturers, operators etc... :ugh:... I must say I usually respect the opinions of others, in this case you're simply wrong.

[Old Akro]

I don't know what business you're in Old Akro

One that is groaning under the weight of insurance. Phones / internet was traditionally my single biggest expense. Now its insurance.

In March April my car insurance (x8), building insurance, equipment insurance, public liability Insurance, Professional indemnity all come at once. Not a happy time. I am an engineer, but my PI is twice my wife's as a GP. Go figure. Australia is too small a market for anything that is not mainstream.

[Andy_RR]

What an interesting view point... If everyone took this view and no one was prepared to take risk there would be no flying schools, manufacturers, operators etc... :ugh:... I must say I usually respect the opinions of others, in this case you're simply wrong.

right and wrong have not a lot to do with opinion, but never mind this point.

I have at least history on my side. If you think it was Ronny Reagan and Maggie who tore down the Soviet Union government, you've been hoodwinked by the Western propaganda. The real reason was that their centrally organised economies with massive inefficiencies and lack of personal incentive were stoney broke - exhausted of resources and the willpower of the people to keep the elite in the manner to which they had beome accustomed.

It will happen again elsewhere in the world. The EU might be first in line and the US won't be far behind as they disappear up their own legal kazoo. Australia is too drunk on mineral wealth to notice, but this could also disappear in a twinkling, leaving a huge crater of incapability

Have you not asked yourself why much of what we fly has its origins in the mid 20th century and is not a product of the 21st?

[43Inches]

One that is groaning under the weight of insurance.

This is what has put GA in the position it is now. Even maintaining an airstrip is a legal minefield so many just closed. Piper was sued out of existance (the current company only is Piper in name), Cessna was sued to the verge of collapse. This led to the demise of the cheap light aircraft in the early 80s, since then new aircraft have been overpriced relative to the construction/components to cater for the cost of insurance for future law suits. Consider how much a new car costs relative to just the cost of a new (old) aircraft engine.

Lycoming 0-320 160hp engine $50,000 new (pretty much the same 1950s technology)
Average modern Sedan or SUV $30,000 new (2000 era modern technology)

I'm sure if you were to take a PA28 or C172 and re-arange the materials into a car it would be barely worth $30,000 yet they cost $300-$400,000. Does it really cost $50,000 to forge/cast the pieces of an 0-320 lycoming? There's no development costs as they are the same build as the 1970s machines.