Insurance for Airport Risks
The Devil is in the Details
Three recent cases involving insurance for airport or aviation risks demonstrate that, as with insurance coverage generally, small details in insurance policies can have a big impact on coverage in the event of a claim. The best time to review your coverage? Before a loss happens.
Hallmark American Ins. Co. v. Broyles, 2016 WL 4951079 (N.D. Cal. 2016). The insured, Tom’s Aircraft Enterprises, operated an aircraft repair business on property it leased from Lake County in California. The lease required Tom’s Aircraft to have $1 million in liability coverage. After a plane repaired by Tom’s Aircraft crashed, causing serious injuries, Tom’s Aircraft discovered that its policy had a $100,000 per person sublimit for its service operations. Tom’s Aircraft argued unsuccessfully that it reasonably expected to have $1 million in coverage for its service operations, since its lease required $1 million in liability coverage. The court held that the $100,000 sublimit applied to the crash. The court did not decide whether the policy satisfied the lease requirement that Tom’s Aircraft have a $1 million liability policy, since the injured plaintiffs did not name the county as a defendant.
U.S. Specialty Ins. Co. v. Estate of Earley, 680 Fed.Appx. 767 (10th Cir. 2017). Earley owned three airplanes, including a 1944 North American P-51D Mustang that had been modified to add a rear seat for an instructor with limited controls. Earley was not listed as an approved pilot on the policy he bought insuring the aircraft, and there was no coverage unless the aircraft was operated by an approved pilot with current medical and pilot certificates. Earley and a flight instructor died when the Mustang crashed during an instructional flight, with Earley in the front seat and the instructor in the rear seat. The court held that there was no coverage for any claims arising from the crash. Although the flight instructor was listed as an approved pilot on the policy, he was in the rear seat, and only the front seat contained all the controls and instruments necessary to operate the Mustang. Because Earley was operating the Mustang, the crash was not covered.
Indianapolis Airport Authority v. Travelers Property Casualty Co. of America, 849 F.3d 355 (7th Cir. 2017). The Authority’s terminal construction project was delayed six weeks after two shoring towers failed, causing damage to the terminal’s roof structure. The Authority made a claim under its property policy for the project for bond interest in incurred during the delay and for costs it incurred after the loss to reduce the delay. The court addressed two coverage issues. First, with respect to the bond interest, the court rejected the insurer’s argument that the Authority had waived recovery for the bond interest under the policy’s “soft costs” coverage by characterizing this claim in its proof of loss as a claim for “expenses to reduce the amount of loss” (ERAL) rather than soft costs. However, the court held that the ninety-day deductible applicable to the soft costs coverage barred any coverage for bond interest during the delay. Second, the court held that expert testimony was not required to prove that certain engineering inspection costs were due to the shoring tower failure and were covered under the policy’s ERAL provision. The court held that, while the Authority might come to regret its decision not to retain a damages expert, the principal of the Authority’s technical consultant and the project manager for the Authority’s construction management contractor could provide testimony on this issue as hybrid fact/expert witnesses.
These cases highlight the importance of understanding your risks and the coverage provided by your policies, and making sure they are aligned, before a loss. The Indianapolis Airport Authority risked a finding that it waived coverage for one element of its claim by claiming it under the wrong coverage in its proof of loss; Earley insured his Mustang, but not when he was at the controls; and Tom’s Aircraft’s $1 million policy provided only $100,000 in coverage for its service operations even though it expected $1 million. Each of these problems could have been avoided by a careful review of the coverage purchased.
Posted In: Policy Construction