Bit confused by this as it doesn't look as onerous as you seem to want to make out but I may be missing something.
The PL insurance cover extends to include third parties - ie passengers and third parties. It doesn't extend to include the pilot for Personal Accident.
To me this says if you hit a third party, something drops off or you have an accident and injure a passenger then the insurance will cover the legal liability to the third party should they make a claim. What it won't cover is the injury, hospitalisation etc of the pilot.
If you review the risks of such a policy i would assume that claims from pilots for injury are the highest risk, an aeroplane will always have a pilot i presume. The passangers LIabilty is next on the list but there won't always be passangers and thirdly hitting TP's would be low on the risk profile so it doesn't seem odd that insurers would limit or exlude Pilot injury.
The pilot could, if proven that the aircraft was faulty beyond the pre-flight inspection, ie faulty wing strut etc claim against the flying club, afterall the club can't completley avoid its legal liability. The flying club could then subrogate this against the engineering firm who carried out the inspection for example.
It doesn't say that the pilot is liable for the cost of the aeroplane in the event of an accident as appears to be suggested in earlier posts.
I may be wrong and am happy to be corrected.