Cheers BabyBear. I did think that I might have read Phil Space's post wrong but I wasn't certain.

Also just for the sake of flippancy; if you take someone to their grave, would this mean that the flight was an air transport flight and that the pilot would be subject to prosecution from the CAA? :p

On a more serious note, regarding the bad weather scenario. If the weather was forecast to be within the pilot's minima, and develops during the flight so that it is beyond the pilot's ability to cope. Would the insurer's pay out in the event of accident?

Your family is not liable for your debts.

As to these " several fatal accidents where the insurers will not be paying out.", can you supply details?

Jeez what a depressing thread - time for a brandy!

This AIUI was done on public policy grounds because many drivers drive without an MOT, a license, road tax, or some combination, or an unroadworthy car, overloaded, blind drunk, etc, and if this voided their insurance, the mandatory insurance requirement would be close to worthless.

And 3rd party motor insurance really is badly needed because 3rd party damage is very common.

I don't see anybody caring much about public policy in GA, which is why the insurers are not forced to maintain the 3rd party cover even on totally illegal flights, but given the 3rd party risk is negligible, why was insurance made mandatory in the first place??

Franchise Deductibles and Crown Imdemnity
 

I did think this might be worth opening a separate thread for, but decided against it because maybe it does fit in with this thread regarding what an insurer will pay out for, etc. However, I digress.

On a recent insurance quote, I have been offered a 'franchise deductible' which costs an extra such-and-such on top of the premium, but no real explanation regarding what the franchise deductible actually is.

What is a franchise deductible and would it be recommended to opt-in or to opt-out?

The quote also mentions 'crown indemnity' in the third party liability bit, which I presume means that I would be insured to fly onto British Government aerodromes. Is that suppostion correct?

:confused:

I was planning on asking these questions with the insurer before accepting the policy, but since the gang's all here...

While your family (AIUI) is not responsible for your debts, having your fraction of the estate wiped out often is a major problem for the family (replace half the equity in the house, all the savings that are in joint name are diminished by half, the business may need to be sold at short notice), etc.

It does seem to point to structuring your affairs to minimise 'your' asset base. The insurance risk is an even more compelling reason for joint owners to hold the aircraft in a company/trust structure.

In the UK it is possible to have an "excess" or a "franchise". Deductable is an american expression.

With an excess you have to pay the amount of the excess when a claim occurs. With a franchise you have to pay the amount of the franchise unless the claim exceeds the amount of the franchise when the claim is paid in full.

If anybody else was flying the plane, I would absolutely without doubt have the plane in a Ltd co.

But if I was the only pilot, I cannot see how this would work for 3rd party damage arising from a crash.

One can structure the family assets to protect the family from one's personal bankrupcy (whether one survives the bankrupcy or not :) ) . This is very simple: transfer all you can to your wife, or to a trustee. Then you have to wait for 7 years before doing anything risky.

No more burgers for another 7 years then, and last time I transferred anything to my wife she buggered off with another bloke and took it with her..:rolleyes:

Might that not be a sure fire way to bankrupt oneself, whether one has an accident or not !!! :};)

Having lost the lot 10 years ago in a divorce, my comment about the wife was tongue in cheek :)

Yes - if there was a way to protect one's assets from personal bankrupcy, while still totally controlling and enjoying them, half the world would be doing it :) It is a holy grail many have searched for.

Years ago, I heard of ways involving offshore trusts. The problem with an English trust is that after you have put the assets in, you can't just shut down the trust and have them back out again. But with some offshore trusts this is actually possible. I am sure the super wealthy have it all sussed.

The Ltd Co device still works for asset protection, as it has done for 200-odd (?) years, and without its protection few people with a brain would bother to start businesses of any significance. But in a situation where the proprietor is made personally liable through his presence (in this case as a PIC) it offers no protection I know of.

The position in the motoring world is different. The common law insurance position was the same but under section 148 of the Road Traffic Act any provisions which purport to void the policy because of:

"
(a)the age or physical or mental condition of persons driving the vehicle,
(b)the condition of the vehicle,
(c)the number of persons that the vehicle carries,
(d)the weight or physical characteristics of the goods that the vehicle carries,
(e)the time at which or the areas within which the vehicle is used,
(f)the horsepower or cylinder capacity or value of the vehicle,
(g)the carrying on the vehicle of any particular apparatus, or
(h)the carrying on the vehicle of any particular means of identification other than any means of identification required to be carried by or under [F1 the Vehicle Excise and Registration Act 1994]."

is void, but only in relation to those liabilites which are the subject of compulsory insurance, i.e. third party liabilities. The provision does not prevent the insurer avoiding a claim from the insured himself, eg for loss of the vehicle. Now that we have compulsory third party aviation insurance I would be interested to know whether a similar provision applies - I have not read the regulations.

Very interesting, if a little worrying, thread here.

In a group synidcate situation, who is deemed the "owner" exactly in terms of who would be the target of a 3rd party claim against the owner if one of group pilot's flew unlicensed into a 3rd party house (or whatever) in an aircraft which was deemed to be unairworthy (due to, for example, a technicality discovered by a loss adjuster)?

Would other owners be exposed to any claims if the insurer was able to avoid paying out?

I have no specialist knowledge in aircraft insurance, but I have been flying since 1984. In that time I have never had an incident which involved insurance, but I have been aware of many incidents involving other people. Even in cases involving £40k of cost to the insurance, with obvious get out options, the insurance has always paid up. I would not bet on this happening if / when I bend my aircraft, but it is hard to reconcile my experience with the comments on this thread. Perhaps if the amount was several million the insurance would be more likely to walk away, but it is the hull value that is most likely to be the issue.

If you assembled a team of legal experts and set them the task of finding a mistake in the maintenance records of your average spam can then I would expect them to win every time. Do the same on a permit machine and it would be harder to prove, but the result would probably be the same. I guess the question is, how much pain will an insurance company take before going to the trouble of finding an excuse not to pay? Any aviation insurance co that made a habit of walking away would very quickly loose its customer base.

Rod1

No similar provision applies in the compulsory aviation insurance legislation.

Also, don't forget that any third party injury in a motor vehicle accident will always be compensated, if necessary through the Motor Insurers Bureau. There is no equivalent to the MIB in aviation.

Each of you are the owner and are jointly and severally liable (i.e. a claim in will be made against all of you).


FL being able to quote two examples where there were relatively minor issues, not related to the accidents at hand, and insurance declined to pay is of some concern. It is inconsistent with a general 'view' that insurance companies are 'reasonable' in the application of the conditions precedent. I at the moment have no idea if this 'view' is wishful thinking or general practice.

However, it seems worth being extra dilligent to make sure there is no intrinsic illegality at takeoff (all docs are valid and correct and W&B is in limit) as these are easy to get right and easy to detect if you have failed to get it right. Of course we should all be doing this anyhow.

Rod1

IMO its NOT the hull value which is the issue.

Yes it would be painful to damage or wreck your aircraft and loose that value through insurance not paying up, but the BIG worry is some third party claim going into £millions where you and your family loose everything of value you own and are effectively ruined.

Even if you dont survive your family and dependants would be the ones that suffer in your absence.

Remember too its third party claims where the Lawyers make big bucks.

While I appreciate that insurance companies do play ball in relatively small claims even when the pilot appears to have been a complete To**er I am not that confident that the same would occur in £million plus claims.

In third party claims lawyers go to where they see the honey pot being so if your an impoverished pilot living in a caravan with no dependants you probably dont have much to worry about.

On the other end of the scale if your a Graham Hill get ready for months and years of legal battles while your lifes work is removed from in front of your eyes. That is presuming you still have them after the crash.:sad:

I really feel that regulations are needed to insure third party claims are met on a No Fault basis or as a minimum that the insurance companies have to prove without reasonable doubt that the reason they are declining payment is the reason for the crash.

Pace

I would like to believe that should the aircraft be issued with a CofA, should the pilot be correctly licensed, and should the aircraft have been airworthy on take off (i.e. not over mauw) then should the unthinkable happen then we can be grateful that we are insured up to hull value and x million in 3rd party liability?

Is that too naive?

How deep do they dig? What if they found a piece of paper missing from the logbook from 20 years ago, would that be a grounds not to pay out? What if the take off procedure required 1 stage of flaps, yet the flap switch was found in the UP position, would that be grounds not to pay out?

In past dealins with insurane companies (not in aviation) I have normally found them fair - My old "pitch fibre" drains (a 60's fad) collapsed a few years ago and we were worried that as it was "wear and tear" we'd have to pay for the lot to be fixed. But my insurance company stated that as we couldn't have been reasonably expected to know that these types of drains were liable to collapsing (I didn't ven know there was such a thing as Pitch Fibre drains) then they would class it as accidental damage and it only cost me fifty quid (as opposed to a share of a decent aeroplane!).....

Englishall

Surely what you are saying and hoping for gives more reason for regulation. what you are infact saying is there is NO uniformity between insurance companies some maybe "orfully Noice", others not so. All dependant on some guy in an office " do we pay? dont we pay? he seems such a nice fellow maybe we will? :rolleyes: but there again that other claim by Jack up the road? cannot stand the guy! We wont pay his". :E

There appears to be a gaping hole in aviation insurance and that really needs to be plugged and clarified.

Pace

"Years ago, I heard of ways involving offshore trusts. The problem with an English trust is that after you have put the assets in, you can't just shut down the trust and have them back out again. But with some offshore trusts this is actually possible. I am sure the super wealthy have it all sussed."


I have an ofshore trust that all my profit and some of my assets go into. Although it is a big leap of faith tranfering 7 fig. sums into an offshore account that you have no connection to!! I did try looking into self insuring using the trust as an asset but the risks are just to high, I pay my insurance premiums with gritted teeth but it is the only way to go.
Also once the trust is set up, you only borrow from it (your own money) so over years you build up a multi million debt, (to yourself) which dissapears when you kick the bucket!

My life assurance company recently asked me to provide details of my flying activities in the next year inc. how many times i am going to fly abroad, where and when and how many hours!! this sounds like a get out for them if i kill myself and i have popped to letoque once to many times!!

There is no corresponding provision.

Family Trusts
 

The Wealth Management folks can set up a Family Trust to hold your assets and disburse to the beneficiaries.

When your children marry, the trust can take a mortgage on their house. If they split up, the mortgage has to paid back to the trust:E Or the trust can buy the house and rent it to them:E

If a beneficiary does something stupid, the assets in the trust are beyond reach.

Yes, such trusts have been in use for many many years, for family owned businesses, otherwise as family members marry and divorce, the family wealth would be rapidly dissipated in the divorces. Every time the owner of a business divorces, anything up to half the valuation of the business would be blown away. You can do that only so many times - as any divorced man past age 40 or so will have sussed out ;)

But you don't need an offshore trust for that purpose. Any suitable trust will do. I think the current shareholder of the family business must not be a Trustee, though (if he intends getting married).

I looked into this a while ago. It is a very specialised area, and most high street solicitors are not capable here - it also involves tax issues.

If you faithfully declared your flying activities (or lack of them) as they were at the time the life insurance (the term policy) was taken out, the Insce Co has zero business enquiring about your subsequent lifestyle. You remain insured, as long as you pay the premiums.

IO540

Quote:

---

Insurance does cover negligence, fortunately :)

---

Insurance policies may or may not cover negligence.
It depends upon the terms of your policy.

If you are negligent and in consequence crash, have you complied with “all air navigation ….. orders and requirements ….. affecting the safe operation of the Aircraft”? In particular, articles 73 and/or 74 of the ANO?

Quote:

---

I want to see actual cases of where insurance was voided on the basis of alleged illegal flight conditions, or indeed on the basis of anything at all taking place after departure.

---

There is no significance in the fact that the two examples I gave related to ‘failures’ which existed at the moment the flight began, rather then during flight.
I used them simply because I happened to have easy access to the relevant documents from "actual cases" so could give precise details.
When I was at the Bar I was also involved in “actual cases” in which insurers refused to pay relying upon breaches of aviation legislation which occurred in flight.

It is correct to say, as some have, that insurers sometimes choose to pay claims notwithstanding breaches which, under the Condition Precedent clause, would entitle them to refuse. If they do, they usually do so in the form of an ex gratia payment. ie The payment is not an admission of liability to pay under the policy.
However, the fact remains, again as others have pointed out, that whether or not payment is made in such circumstances depends upon how the insurers choose to exercise their discretion.

________________


Re specific legal questions:
For reasons I don’t want to go into, I’m no longer in a position to answer them. Sorry. I did for many years when I was a barrister but I now have to keep my comments on legal threads very general.


FL

I don't know about the CAA, but the FAA routinely tacks on a 'reckless endangerment' charge onto almost every violation (the comparable sections to 73 and 74 of the ANO). This has included altitude deviations, poor fuel planning, continued VFR into IMC, operation with inoperative equipment, failure to divert on a timely basis, etc.

Even if you can't give precise details on these cases, it would be useful to get a flavour of the sort of breaches which the insurers used to deny payment.

Playing devil's advocate for the moment, surely it would be better to maintain the status quo?

At the moment the insurers are using technical breaches to wheedle their way out of some claims - let's say 20% by value, for the sake of argument. The insurers may be profiteering from this 20% windfall, but that seems unlikely given the small number of companies willing to underwrite GA risk. I understand that there is now only a single company underwriting all the risk in the London market. Although there are a number of companies offering insurance, it all goes back to this single underwriter. If the insurers aren't profiteering, then closing the loophole provided by the technical breaches will have to be made up by a proportional increase in premiums of 20%.

From my point of view, which would I prefer: my insurance premiums to increase 20% or to make sure my paperwork is in good order? I'm intending to keep it in good order anyway, so this is just a good incentive to make absolutely sure I do.

Even if you believe that paperwork breaches shouldn't form the basis for denying payment, surely you still have to draw the line somewhere? Would you be happy to pay a much bigger premium so that the insurance pays out even for accidents like the Solihull crash where there were numerous airworthiness and licencing lapses?

I'd be interested to hear about other cases, though, because I'm sure there are ways of getting caught out which haven't occurred to me. For the moment, though, we have to work with the system as it is, and the best solution for each of us would seem to be to make absolutely sure our paperwork is 100% correct so it never becomes a basis for the insurance company to refuse payment.

Of course, even with your best effort, it's still possible to make mistakes and overlook something. Perhaps, then, the best course of action is to find somebody knowledgeable to ramp-check you. Who fancies a fly-in somewhere to go through each other's docs and look for problems?

I have had similar worries, because of a question concerning my own paperwork, since resolved. I had the feeling that it was grossly unreasonable to deny cover for what was in my opinion at least, a trivial detail with absolutely no bearing on safety. As well as all that I was in a voluntary recurrent training program and reckoned by that alone I ought to have qualified for a reduced premium (wishiful)

So I get on the email and got a fairly stock reply. The gentleman who replied was the company principal and I called him. Our phone conversation ranged around a number of issues already discussed here. He did state however that they were known to have paid out in some instances where there was some illegality. I told him I was able to take some comfort from that, but old Groucho Marx left us in little doubt what a verbal contract is worth.

One suggestion was to do with a sliding scale of discount for breaches of paperwork Ts & Cs. I think they are looking at that.

I made it clear to him I did not want insurance with a sword hanging over my head. After all we are paying not to worry about bad stuff, and they with that legalistic attitude are in the business of undermining our confidence that an accident will have the least worst outcome. I want insurance that is very lenient on immaterial breaches of any kind, and that rewards people like myself who invest money in post PPL refresher courses, casual or otherwise. I think that's a sensible deal even from the POV of the insurer. He pays in the currency of fairness and gets our money for that reason. He rewards persons that continue to focus tangibly on safety awareness in the form perhaps of credits for training, seminars, books read, all of those good things.

Time to reword the policy, and especially away with the BS that is condition precedent. Some other poster suggested that keeping paperwork is a sign of a good approach to flying discipline. That may well be true, but I would prefer a higher priority being accorded to practical safety work by the insurer.

I think it would take a genius to invent a human attitude indicator/recorder, thereby separating negligence and bravado from genuine human error and misfortune.

thus endeth my 2c

I think that if at the time of the accident, the aeroplane is airworthy and the pilot licensed and holds a medical certificate then they should pay out and that insurance companies should discount any paperwork irregularity that has no bearing on the accident.

For example lets say someone fitted a new transponder without the correct paperwork, and this was uncovered by the AAIB during their investigation. As this had no bearing on the accident (as determined by the AAIB) then the insurance company should not be allowed to use this as an excuse not to pay out.

Otherwise this gives them unlimited scope to not pay out. What would happen say if some hypothetical person went for their medical renewal and forgot to mention that 6 months ago they were ill in hospital with pnumonia (for example - assume it is something that kept them ill for a month). During the time they were ill they didn't fly, yet should probably have declared this to the CAA, and should certainly have declared it on the medical renewal form...but they didn't.

Subsequently 6 months after the medical renewal they go and crash and cause a lot of damage and kill a few people, due to something unrelated. Could the insurance company use their episode 12 months ago as an excuse not to pay out? How deeply would they dig? I assume they would have access to medical records.

It is all very well saying "we should keep our documents in order" and I agree as far as possible, but I reckon that in the past 10 years I have probably been to see the GP for something like an ear infection, he has given me antibiotics, then I have totally forgotten to mention this at the medical renewal. It doesn't seem a big deal but if it can lead to invalid insurance, it could be a massive deal.

Englishal: Good post, I often wonder same. From reading this thread though it looks like they would dig very deep if the claim was a biggie (3rd party injury etc)...but in the case of a minor breach not related to accident they would probably payout if claim was limited to hull value or less...??

Last time I looked into this in any detail (c. 2003) there were four Lloyds underwriters, plus one insurance company with a name like AIG or BAIG.

There were of course many brokers, and there still are a fair few despite Haywards (a very good company which I insure through, BTW) having absorbed some.

If there was just one underwriter or insurer, we would see skyrocketing premiums, which is clearly not the case. They have been falling recently, which indicates competition.

The large # of brokers can confuse people, who contact multiple brokers thinking they will get competitive quotes!! But sometimes one goes through 2 or more brokers in a chain, when they split the commission between them.

I think it is right for insurers to not pay out on blatently illegal pilot or blatently illegal aircraft, otherwise people would take the micky.

What would greatly worry me is if they did e.g. a back to birth maintenance audit, because there is not one plane flying, not even those landing at Heathrow right now, which would pass that without any irregularities. So there is a grey area here, which presumably they have a corporate policy to not probe into. But there is NO evidence they are doing that - ever.

There is also NO evidence they are getting out due to alleged poor airmanship. I've never heard of it. Rumours, rumours, sure, but forums are full of them. Like the SR22s busted for illegal IFR without an ADF/DME (totally false).

I think that keeping the papers legal, and paying the premiums etc, one is covered.

For almost 7 years I have been somewhat spooked by FlyingLawyer's warning about the Condition Precedent clause. I note that the Insurance Act 2015 comes into force on 12 August 2016.

It includes

11 Terms not relevant to the actual loss
(1)This section applies to a term (express or implied) of a contract of insurance, other than a term defining the risk as a whole, if compliance with it would tend to reduce the risk of one or more of the following—
(a)loss of a particular kind,
(b)loss at a particular location,
(c)loss at a particular time.
(2)If a loss occurs, and the term has not been complied with, the insurer may not rely on the non-compliance to exclude, limit or discharge its liability under the contract for the loss if the insured satisfies subsection (3).
(3)The insured satisfies this subsection if it shows that the non-compliance with the term could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred.
(4)This section may apply in addition to section 10. [Breach of Warranty]

Does this eliminate or at least mitigate the concern about a Condition Precedent clause?

This, on the face of it, seems to be a very fair improvement on a situation which one might have supposed to have otherwise been covered by the unfair Contract Terms Act.

Interesting ruling today by the Supreme Court:

'Collateral' lies need not spoil insurance claims, rules Supreme Court - BBC News

I assume that this will prevent insurance companies from failing to settle claims where there are minor irregularities on the part of the insured party.