Renters' Insurance

[spiderweb]

If one is renting mostly C172s and C182 worth between $100 - $200k (I would guess), what would be the best coverage to get? I am confused as to how this works. If an aircraft worth $200k were totaled, and one had insurance for half that, does it mean that the renter would have to pay $100k?

Thanks in advance!

 

[poadeleted20]

The answer depends on the insurer's willingness to spend time and money to subrogate versus the face value of your policy and whether or not they can show sufficient negligence on your part to make subrogation possible. Remember that subrogation doesn't mean they can automatically collect their losses from you -- they have to prove negligence on your part, and just the fact that something bad happened isn't sufficient for that.

 

[bbchien]

Ben, very simply, YES, it pays.

You rent an aircraft. An accident happens. The owner's insurance company pays out. Then they have the right to come after you for the damages as you were the operator. Not much more miserable than having to pay an attorney an hourly rate to write your response to the subrogation, to defend the lawsuit for subrogation.

$800 is very very cheap protection for your estate. In asnwer to your question, you would be paying the WHOLE $200,000, and even more if somebody got hurt. You would pay much more than if the subrogating company saw a law firm mounting an affirmative defense of you, rather than seeing that you are naked before them.

 

[spiderweb]

Thanks to both of you! I've carried renters' insurance for much of my flying years. Where I get confused is hearing that some say only to take out $5000, to cover the deductible.

 

[kevin7500]

The discussion here and also on the "Problems" thread have been both interesting and confusing to me. I am interested in opinions regarding my liability for the following scenarios.

1. Normal landing, nose gear collapse, prop strike.

2. Engine failure, off airport landing, significant structural damage.

3. Fuel exhaustion, off airport landing, significant structural damage.

Thanks in advance

 

[weilke]

1. Normal landing, nose gear collapse, prop strike.

Your fault, you pay (either up front or through subrogation*)

2. Engine failure, off airport landing, significant structural damage.

Owners problem. His insurance pays for the damage to the aircraft, the engine is on him. The insurance may try to subrogate you as the pilot but your insurance companies attorney will slap them around a bit until they see the error of their ways.

3. Fuel exhaustion, off airport landing, significant structural damage.

Your fault, you pay (either up-front or through subrogation*).

As running out of fuel is so grossly negligent, your own insurance company may decline to cover it under their 'gross negligence and wanton conduct' exemption to their policy.




*subro may not apply on a good day if the owner has a policy with no-subrogation rider for the renters, few do.

 

[jasc15]

Thanks to both of you! I've carried renters' insurance for much of my flying years. Where I get confused is hearing that some say only to take out $5000, to cover the deductible.

This is also what was recommended to my by 2 of the 3 FBO's I've rented from (one didn't even mention insurance). That is, I would be liable for their $5000 deductible, which would be covered by my policy. As for this subrogation business, how do you know if the insurance company can come after you for the full claim amount? And whats the point of insurance if they can do this??

 

[TMetzinger]

This is also what was recommended to my by 2 of the 3 FBO's I've rented from (one didn't even mention insurance). That is, I would be liable for their $5000 deductible, which would be covered by my policy. As for this subrogation business, how do you know if the insurance company can come after you for the full claim amount? And whats the point of insurance if they can do this??

What you have to ask for, and get in writing, is if the rental operator has a waiver of subrogation as part of their policy. That is an agreement (for a higher premium) that the insurer will NOT sue the renter in the event of a loss.

My flight school has it, and their rental agreement and policy state so.

I still have the non-owned insurance (through NAFI) to cover the liability, deductable, AND so that in the event of an accident THEY get to do most/all of the legal work.

 

[jason]

The discussion here and also on the "Problems" thread have been both interesting and confusing to me. I am interested in opinions regarding my liability for the following scenarios.

1. Normal landing, nose gear collapse, prop strike.

Unless they could prove you at fault (didn't put the gear down or didn't confirm three green) you would likely have no liability

2. Engine failure, off airport landing, significant structural damage.

Unless they can prove you at fault (didn't check the oil or ran it the engine in some way that caused it to fail) you would likely have no liability

3. Fuel exhaustion, off airport landing, significant structural damage.

Thanks in advance

Unless there was a fault with the airplane (leaking fuel line and faulty fuel gauges) you would likely be at fault and the insurance company could choose to bring suit for negligence.

 

[weilke]

how do you know if the insurance company can come after you for the full claim amount? And whats the point of insurance if they can do this??

Good question.

The reason they can come after you is that they are insuring the FBO and not you. From their perspective, you are a third party that damaged their customers plane.

 

[kevin7500]

The reason they can come after you is that they are insuring the FBO and not you. From their perspective, you are a third party that damaged their customers plane.

A renter using a rental plane insured as such is a third party? Are you sure about that? Wouldn't a "third party" be one that is not involved in an interaction or relationship? As the renter, I am clearly involved in both with the FBO.

The way I seen the situation is I am using a product exactly how it is intended to be used and for the use it is insured for. Without negligence on my part how can I be legally responsible?

 

[Matthew]

A renter using a rental plane insured as such is a third party? Are you sure about that? Wouldn't a "third party" be one that is not involved in an interaction or relationship? As the renter, I am clearly involved in both with the FBO.

The way I seen the situation is I am using a product exactly how it is intended to be used and for the use it is insured for. Without negligence on my part how can I be legally responsible?

No expert here, but:
The FBO has their own insurance to pay for damages to the airplane that you rent. If the airplane is damaged, the insurance company will pay the FBO for the repairs. Now, how does the insurance company get their money back? They come after whoever was responsibe for the damage in the first place (the third party - the renter pilot). It's a whole lot simpler, in their case, if it's easy for them to prove either negligence or violation of FARs. Some FBOs do have a policy that will protect a renter from this, but it costs them higher premiums that result in higher rental rates.

 

[TMetzinger]

A renter using a rental plane insured as such is a third party? Are you sure about that? Wouldn't a "third party" be one that is not involved in an interaction or relationship? As the renter, I am clearly involved in both with the FBO.

The way I seen the situation is I am using a product exactly how it is intended to be used and for the use it is insured for. Without negligence on my part how can I be legally responsible?

Without negligence on your part they won't be successful in subrogating you. What insurance is for is to cover you against ordinary negligence.

This is EXACTLY the same thing as when you rent a car. You either buy the coverage (Which is really paying for a waiver of subrogation) or you are responsible for damage.

 

[kevin7500]

...the insurance company will pay the FBO for the repairs. Now, how does the insurance company get their money back?

Get their money back? For what? Providing a service that what was purchased? Doesn't a rental policy cost about 10 times what an owner/pilot policy does? I thought that was to cover potential claims. In my opinion, the insurance company is getting their money "back" on the front end of the deal in the form of premiums. Ooops...started to transition into a rant about insurance.

When I inquired to the FBO regarding the insurance I was told that unless my actions were clearly negligent I am off the hook. Is it in writing? Nope. But, I do trust the integrity of the owner.

 

[TMetzinger]

Get their money back? For what? Providing a service that what was purchased? Doesn't a rental policy cost about 10 times what an owner/pilot policy does? I thought that was to cover potential claims. In my opinion, the insurance company is getting their money "back" on the front end of the deal in the form of premiums. Ooops...started to transition into a rant about insurance.

When I inquired to the FBO regarding the insurance I was told that unless my actions were clearly negligent I am off the hook. Is it in writing? Nope. But, I do trust the integrity of the owner.

Unfortunately his integrity means jack and squat about what his insurer will do. If you weren't negligent (i.e. engine failure) then you may still have to defend yourself and show that. That costs money.

The insurance an FBO typically carries covers THEM (and their employees) against THEIR negligence.

The simple answer is - never screw up and you'll never need insurance. But smart people realize that they WILL screw up, or that there will be a cost to prove that they DIDN'T screw up, and hedge their bets (which is all insurance is anyway) accordingly.

 

[AdamZ]

I can't recall but I dont' think you can get renter's hull coverage for 200K. Bruce is correct that they can come after you for whats referred to as the deficency ( the difference between what your carrier pays the owners carrier and the total loss) Many times but not always your carrier will obtain a release from the owner's carrier releasing you from futher liabiltiy in exchange for your carrier making payment to the owners carrier even it if is not for the full amount of the loss. There are of course no guarantees so if you want to assure your protected the best way to do that is as Bruce said get the full insurance.

 

[Matthew]

Get their money back? For what? Providing a service that what was purchased? Doesn't a rental policy cost about 10 times what an owner/pilot policy does? I thought that was to cover potential claims. In my opinion, the insurance company is getting their money "back" on the front end of the deal in the form of premiums. Ooops...started to transition into a rant about insurance.

This is an insurance company - they get their money 'back' on the front end with premiums that they have calculated/predicted/analyzed will be greater than any payouts. That's how they stay in business. But, if you run it out of gas (negligence), or decide to take a buddy for a night flight when you are not night current (FAR violation) and then bend something when you land, then they will see a way to get out of paying altogether. They do this by making you pay them back. But, they might threaten this anyway and then you'll have to prove you are innocent of negligence and FAR violations, that will cost you, too.

 

[TMetzinger]

Highest hull coverage I've seen so far is NAFI at $150K, at least as far as "off-the-shelf" policies go.

Now, you CAN go deal with an underwriter who will write a policy to your specs. I did that once for the ferry work, to get a quote for 1M smooth liability and a 750K hull on any single or multi engine airplane once I had 10 hours make and model. First year premium would have been just under $10,000.00. Hence my contract language requiring all owners to name me as an insured and hold me harmless for ordinary negligence. Bottom line if you hired me was that unless I was grossly negligent I wasn't on the hook for damage.

Generally, the more experience you can show, and the more disciplined and rigorous you operate your business, the lower risk you present and the insurance companies respond with lower premiums.

 

[brcase]

The discussion here and also on the "Problems" thread have been both interesting and confusing to me. I am interested in opinions regarding my liability for the following scenarios.

1. Normal landing, nose gear collapse, prop strike.

2. Engine failure, off airport landing, significant structural damage.

3. Fuel exhaustion, off airport landing, significant structural damage.

Thanks in advance

I can respond to #3 as it happened to an FBO I work for. Yes the Insurance company started subrogation proceedings for the aircraft that was totaled, but withdrew after the renter showed that the FBO's rental agreement stated that he was only liable for the the $1000 deductable.

So my take on it is it depends, read the rental agreement.

Brian

 

[weilke]

A renter using a rental plane insured as such is a third party? Are you sure about that? Wouldn't a "third party" be one that is not involved in an interaction or relationship? As the renter, I am clearly involved in both with the FBO.

The way I seen the situation is I am using a product exactly how it is intended to be used and for the use it is insured for. Without negligence on my part how can I be legally responsible?

Yes it stinks and it makes no sense.

From what I understand, subrogation claims against renters are not terribly common.


Theoretical Case:

- You rent a 182 150k value.
- You ball up the plane without doing something particularly stupid, the wrecks residual value is 20k.
- FBOs insurance (company A) pays FBO 130k
- companyA sends you a threatening letter demanding 130k.
- You forward the letter to companyB which you paid to cover you for up to 30k
- Company A and Company B talk back and forth, either arguing their clients case. In the end, companyB pays 30k to companyA and obtains a release for their client from the remainder of the claim.

Both you and the FBO now have to mark 'yes' in the 'did you in the past 24 months.....' question on your next insurance application.

 

[poadeleted20]

I can't recall but I dont' think you can get renter's hull coverage for 200K.

You can, but it costs a bundle -- on an order equal to what you'd pay if you owned the plane.

 

[N801BH]

I can respond to #3 as it happened to an FBO I work for. Yes the Insurance company started subrogation proceedings for the aircraft that was totaled, but withdrew after the renter showed that the FBO's rental agreement stated that he was only liable for the the $1000 deductable.

So my take on it is it depends, read the rental agreement.

Brian

This is highly suspect...
The insurance company representing the FBO, Its client, that had a signed agreement in their possesion between the FBO and the renter that clearly stated the renters responsibility was limited to the 1000.00 deductable and still started subrogation proceeding leaves itself open to a multitude of legal hurdles in which they will not prevail and are asking for trouble. Courts frown on stuff like this every day. IMHO.

 

[poadeleted20]

This is highly suspect...
The insurance company representing the FBO, Its client, that had a signed agreement in their possesion between the FBO and the renter that clearly stated the renters responsibility was limited to the 1000.00 deductable and still started subrogation proceeding leaves itself open to a multitude of legal hurdles in which they will not prevail and are asking for trouble. Courts frown on stuff like this every day. IMHO.

It may be the insurer had no idea the FBO put that in the rental agreement, would have blown a gasket if they had, was shocked to hear about it, and rescinded its payment to the FBO on the basis of violation of the insurance contract. Stuff like that happens every day, too. But if they proceeded after finding out about that agreement, then yes, they and their attorneys could be in real hot and expensive legal water.

 

[weilke]

It may be the insurer had no idea the FBO put that in the rental agreement, would have blown a gasket if they had, was shocked to hear about it, and rescinded its payment to the FBO on the basis of violation of the insurance contract. Stuff like that happens every day, too. But if they proceeded after finding out about that agreement, then yes, they and their attorneys could be in real hot and expensive legal water.

The FBO is not their agent, whatever they put into their rental agreement is between them and the renter. As you pointed out in the other thread, theoretically the renter could hold the FBO to that indemnification but I dont see how it would preclude the ins-co from subrogating.

Aviation insurance is a small market. Insurers at times wont go to the extremes of their legal rights to avoid getting a reputation.

 

[spiderweb]

I can't recall but I dont' think you can get renter's hull coverage for 200K. Bruce is correct that they can come after you for whats referred to as the deficency ( the difference between what your carrier pays the owners carrier and the total loss) Many times but not always your carrier will obtain a release from the owner's carrier releasing you from futher liabiltiy in exchange for your carrier making payment to the owners carrier even it if is not for the full amount of the loss. There are of course no guarantees so if you want to assure your protected the best way to do that is as Bruce said get the full insurance.

But that confuses me. You can't get full insurance for 200k, so what is best?

 

[poadeleted20]

The FBO is not their agent, whatever they put into their rental agreement is between them and the renter. As you pointed out in the other thread, theoretically the renter could hold the FBO to that indemnification but I dont see how it would preclude the ins-co from subrogating.

Why would the insurer spend the time, money, and effort to subrogate if it can simply avoid paying the claim due to the FBO's violation of the insurance contract?

 

[AdamZ]

But that confuses me. You can't get full insurance for 200k, so what is best?

Well according to Ron you can but the cost is similar to what you would pay if you own the plane. If your not willing to pay that much then evaluate the risk your willing to take and get what you can afford.

 

[jason]

Thanks to both of you! I've carried renters' insurance for much of my flying years. Where I get confused is hearing that some say only to take out $5000, to cover the deductible.

So, to ask Ben's question again, is the advice to only take out $5000 not only to cover the deductible, but because you're guaranteed a defense in case the renter's insurance company decides to subrogate?

By the way, this thread prompted me to do something that I've been putting off for way too long. I just applied for my first non-owned insurance policy.

 

[poadeleted20]

So, to ask Ben's question again, is the advice to only take out $5000 not only to cover the deductible, but because you're guaranteed a defense in case the renter's insurance company decides to subrogate?

$5K might not do that. If you carry so little coverage that the insurer can't even pay the legal costs to defend within the policy limits, you stand the chance of being written off without any more defense than $5K will buy, which ain't much. So, if the FBO has a policy which waives subrogation (and some do, but make sure you see it in writing), that might cut it, but otherwise...

 

[RyanShort1]

Hey guys, if anyone's reading this thread and wondering - don't wait too long to get some form of renters insurance. You may think it will never happen to you, but if it ever does, you certainly will regret not having done so... My current policy, based on some experience with this, is that no student pilot of mine is soloing without insurance to the tune of a reasonable coverage for the aircraft they are in, unless they own their own aircraft. Right now that means they probably need a minimum of $35K coverage. For those of you worried about the cost, remember if you finish up, you can always chose to cancel the coverage, and a lot of times, the insurance company will refund a portion of your money appropriate to the time remaining.

Ryan

 

[jesse]

My current policy, based on some experience with this, is that no student pilot of mine is soloing without insurance to the tune of a reasonable coverage for the aircraft they are in, unless they own their own aircraft. Right now that means they probably need a minimum of $35K coverage.

I inform my students of their risk, advise them to weigh that against their assets, and come to their own decision. I can't decide for them. Everyone's situation is very different.

Some folks will want and need a whole hell of a lot of insurance - for others it's nearly pointless. The key is making them understand.

 

[TedR3]

The FBO is not their agent, whatever they put into their rental agreement is between them and the renter. As you pointed out in the other thread, theoretically the renter could hold the FBO to that indemnification but I dont see how it would preclude the ins-co from subrogating.

This is a common misconception regarding subrogation. The insurance company does not have any rights of its own against the third party.

After the insurer pays a claim to its insured (the FBO), it steps into the shoes of its insured. In legal terminology, it becomes "subrogated to" the FBO. It has no greater rights than the FBO against the party that caused the damage.

If the FBO has waived its rights against the party that caused the damage (the Renter), then the insurance company will have no claim against the Renter regardless of what language is contained in the insurance policy.

 

[TMetzinger]

This is a common misconception regarding subrogation. The insurance company does not have any rights of its own against the third party.

After the insurer pays a claim to its insured (the FBO), it steps into the shoes of its insured. In legal terminology, it becomes "subrogated to" the FBO. It has no greater rights than the FBO against the party that caused the damage.

If the FBO has waived its rights against the party that caused the damage (the Renter), then the insurance company will have no claim against the Renter regardless of what language is contained in the insurance policy.

Correct. But I think most policies contain language that prohibit the insured from waiving their rights to third parties, so that the insurance company can refuse to pay out (or sue to recoup its payout) in the event that the insured violates that term.

Insurance companies are professional gamblers. They do not leave their bets unhedged. If there's a hook somewhere, they work very hard to ensure that someone else is hung on it.

 

[RyanShort1]

I inform my students of their risk, advise them to weigh that against their assets, and come to their own decision. I can't decide for them. Everyone's situation is very different.

Some folks will want and need a whole hell of a lot of insurance - for others it's nearly pointless. The key is making them understand.

I used to think that way... things have changed that. Even if you have lots of money and can self-insure, I think I'd go for that cheap $450 bit of insurance. The issue to me is a chain reaction that could get started with lawsuits.

Ryan

 

[jasc15]

I inform my students of their risk, advise them to weigh that against their assets, and come to their own decision. I can't decide for them. Everyone's situation is very different.

Some folks will want and need a whole hell of a lot of insurance - for others it's nearly pointless. The key is making them understand.

I understand that anyone's question of "how much insurance should I carry?" is met with an answer of "it depends.." My question is: depends on what? What parameters do I use to determine what is right for my situation?

 

[Dr. O]

Subrogation has real teeth... I was at a national chain store loading 16" cement blocks when a disc in my back spontaneously ruptured... I was immediately paralyzed and had emergency surgery followed by PT, etc... I'm doing fine now...

What is not fine is the insurance company (my employer's) demanding that I reveal where it happened so that they can sue somebody - I suspect that the name of the store is in the EMR record but that the insurer needs me to name them over my signature to give them legal standing... I have refused and continue to refuse their demands... That store did nothing wrong and I happen to be stubborn about principles... The insurer is now claiming they are going to sue me to get their money back - the hospital and the surgeon sure as hell aren't volunteering any refunds... Given that Medicare paid a significant portion of those bills, this could get real interesting... Any lawyers out there want to emulate F. Lee Bailey and take on a pro bono case that could go to the USSC? So far all I have done was answer the original questionnaire vaguely and then ignore their increasingly strident demands for "details"... Next I expect them to confiscate my first unborn child...

denny-o

 

[TMetzinger]

I understand that anyone's question of "how much insurance should I carry?" is met with an answer of "it depends.." My question is: depends on what? What parameters do I use to determine what is right for my situation?

You can't eliminate the risk and exposure - if you crash into a schoolyard and paralyze 6 kids, you WILL get hit with a suit for more than any insurer would cover, and if you lose, you WILL be on the hook forever, since in some states you can't get out of those obligations through bankruptcy. Of course, the same thing could happen in your car.

So let's leave out the extreme case - since you can't do anything about it other than NOT crashing, which you're already planning on.

Let's take a more realistic case - you're a little off your game and you damage the airplane. Now you owe somebody for the damage. The damage could be as simple as a blown tire and a new wheel pant for about $1500.00. It could be rebuilding/reskinning a wing panel for $5000-20000. It could be a new prop and engine for $45,000.00, or it could be a replacement airplane.

So that's the amount of money you COULD be asked to provide. If you've got a house and college savings and other assets to protect, then you can then pay a premium (lay a bet) with an insurance company for coverage. If you're super-rich, you could just self-insure and take the hit (but then why don't you OWN your own airplane?). If you've got no assets at all, then you might plan on declaring bankruptcy in the event of a judgement, and I believe that in SOME states you can do this if personal injury liability isn't involved.

The bottom line is that a responsible person looks at the potential threats to his wealth and takes measures to protect it. Renter's insurance is one way to do it.

I've flown "naked" as a renter back when I had few assets. Now with the house and the wife and the child (and other toys), I cover myself, either by only flying airplanes where there's a contract in place that limits my liability (when I ferry airplanes), or as a named insured on a policy (when I ferry or teach), or by providing my own coverage, at least for liability.

IF you rent from an FBO that has a no-subrogation policy, where your responsibility for aircraft damage is contractually limited, then I'd recommend you get a liability policy for whatever value you think is reasonable, to cover you in case a passenger is injured or you hit Farmer Bob's best heifer. If you don't have that aircraft damage covered through your contract with the FBO, then you should get your own hull coverage.

I hope this was helpful - you've given me a good idea for an article. Now I just need to find the time to write it.

 

[N801BH]

Subrogation has real teeth... I was at a national chain store loading 16" cement blocks when a disc in my back spontaneously ruptured... I was immediately paralyzed and had emergency surgery followed by PT, etc... I'm doing fine now...

What is not fine is the insurance company (my employer's) demanding that I reveal where it happened so that they can sue somebody - I suspect that the name of the store is in the EMR record but that the insurer needs me to name them over my signature to give them legal standing... I have refused and continue to refuse their demands... That store did nothing wrong and I happen to be stubborn about principles... The insurer is now claiming they are going to sue me to get their money back - the hospital and the surgeon sure as hell aren't volunteering any refunds... Given that Medicare paid a significant portion of those bills, this could get real interesting... Any lawyers out there want to emulate F. Lee Bailey and take on a pro bono case that could go to the USSC? So far all I have done was answer the original questionnaire vaguely and then ignore their increasingly strident demands for "details"... Next I expect them to confiscate my first unborn child...

denny-o

Can you expand a little...
It appears you were working for someone who sent you to a 'chain store' to buy and load cement blocks. Any injury resulting from that duty would be considered workmans compensation from your employer. I don't see how medicare got tied into the payment of the claim...

Oh, I give you several thumbs up, , for resisting in releasing info to some lawyers that will just fuel the fire of a frivilous suit.. I hope you come out ok in this..

Ben.

 

[poadeleted20]

Correct. But I think most policies contain language that prohibit the insured from waiving their rights to third parties, so that the insurance company can refuse to pay out (or sue to recoup its payout) in the event that the insured violates that term.

Insurance companies are professional gamblers. They do not leave their bets unhedged. If there's a hook somewhere, they work very hard to ensure that someone else is hung on it.

Tim is right, but as I said above, the insurer's remedy is to recover from the insured, not the third party.

 

[poadeleted20]

Subrogation has real teeth...

What is not fine is the insurance company (my employer's) demanding that I reveal where it happened so that they can sue somebody - I suspect that the name of the store is in the EMR record but that the insurer needs me to name them over my signature to give them legal standing... I have refused and continue to refuse their demands... That store did nothing wrong and I happen to be stubborn about principles... The insurer is now claiming they are going to sue me to get their money back -

They do have that right. One of the standard clauses is that the insured cooperate with the insurer in such cases. Refusal to do so violates the contract and gives them grounds to recover their payment to you, and you're unlikely to find an attorney willing to take your case on anything but a fee-for-service basis.