Its got me worried enough that im considering not continuing with the course and going to another school.
I think you will find that clause is normal, at least when the pilot is at fault. There is not really much financial benefit to owners placing their pride and joy on line and if the worst does happen, then they will try to collect the excess from the negligent party, piilot or otherwise, because the insurance company won't pay it for sure.
PS Good on ya for reading the small print! That's the sort of thing that makes agood pilot!