Insurance Claim Denied?

Discussion in 'Aviation Mishaps' started by Grum.Man, Mar 3, 2020.

  1. Grum.Man

    Grum.Man En-Route

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    There aren't too many on here that have had a claimable mishap and those that have were genuine out of their control incidents. Per my usual Monday routine I brows accident/incident reports and despite this being a regular thing I am constantly floored by the stupidity or carelessness of some of these people. We keep talking about insurance rates climbing due to the payouts exceeding the incomes which brings me to my question. How many of these insurance claims get denied for having loose ends on maintenance or currency requirements or for any other reason like being outside the W&B? Just thought it would be an interesting statistic to know is all.
     
  2. bradg33

    bradg33 Pattern Altitude

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    Probably difficult to find actual stats on this, but the folks in the industry will tell you that denials are, historically, fairly rare.
     
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  3. kgruber

    kgruber En-Route

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    Not so rare.

    Insurance companies are NOT in business to pay claims.

    If you have an expensive claim, the first person to call is your attorney,.
     
  4. Grum.Man

    Grum.Man En-Route

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    Just to be clear, not claiming anything just curious.
     
  5. schmookeeg

    schmookeeg Pattern Altitude

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    This has not been my experience with aircraft/flight insurance at ALL. They send rip taylor down with a bag of cash and wallpaper the place. We did 9 or 10 claims in 7 years, all were this way, even when the renter's accident was egregious bad-pilot nonsense.

    Shop insurance, definitely matches what you describe.
     
  6. steingar

    steingar Taxi to Parking

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    I've never heard of anyone being denied so long as they had purchased a valid policy. I have heard of payouts of pilots out of medical and airplanes out of annual.
     
  7. Grum.Man

    Grum.Man En-Route

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    That's sad to hear.
     
  8. Bell206

    Bell206 En-Route

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    FYI: A number of jurisdictions apply a "contribute to loss" standard where the policy holder's claims can be denied due to a policy/FAR violation provided it can be proven the violation was part of the accident causation. For example, if the insured had an outdated medical but the accident was caused by a a mechanical engine failure then in some jurisdictions the claim will not be denied. However, if an accident is caused by faulty landing gear and the annual was overdue then there's better than a 50/50 chance the claim will be denied as the annual inspection "should" have caught the faulty gear. As I recall not all States follow the contribute standard so it is very subjective where the claim is adjudicated. But I've seen or know of claims being denied over those types of violations.
     
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  9. Clip4

    Clip4 Final Approach

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    A long time ago some insurance companies had language in their polices stating an accident resulting from a violation of an FAR wasn’t covered. Today I have not seen a policy with this language.

    If you violate the pilot training and experience requirements or misrepresent time in a make/model during the application, the carriers can and do deny coverage.
     
  10. OneCharlieTango

    OneCharlieTango Pre-takeoff checklist

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    After reading a binge of insurance company bashing, I started a thread on BT about the whole issue of "the insurance company will use that as an excuse not to pay." I asked for any first-hand experiences where someone had what he considered a bogus denial. Ignoring all of the "guy I used to know" stories, only one person stepped up with a personal story. Then he refused to tell it. OTOH, a couple of insurance brokers had stories of payouts in cases of aircraft out of annual, pilots without medicals, etc.

    Aircraft insurance isn't like health insurance.

    But, that Nashville tornado isn't going to do anything to help with the premium problem. . . .
     
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  11. DFH65

    DFH65 Pattern Altitude

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    Are you talking liability or hull? I would think it makes a difference but I don't know.
     
  12. tsts4

    tsts4 Cleared for Takeoff

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    Ditto. I've had two claims--one for $30K and another for about $2500. I had zero problems renewing with the same broker and underwriter and only had a modest premium increase (less than 10%) for the same coverage.
     
  13. midlifeflyer

    midlifeflyer Touchdown! Greaser!

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    I have seen claims refused because of lack of the pilot meeting currency requirements. Others will report claims paid in the same situation. One of the differences is how the policy reads. But a big difference is variation in the way state law deals with insurance policy conditions about pilot and aircraft currency.

    Take a common policy condition:

    Prior to acting as pilot in command of the insured aircraft must have a current medical certificate (if a medical certificate is required for the Pilot Certificate privileges being exercised) and must satisfy FAA flight review requirements.​

    There are basically two completely different rules. In most states, that language is treated as a condition which must be satisfied before there is any coverage at all ("condition precedent" in the jargon). In those states, not meeting the condition means there is no policy. Period. A minority of states are more pro-insured. In those states, the failure to meet the requirement must have contributed to the event in order to deny coverage.

    So, take that pilot whose medical expired July 31 and has a flying accident on August 1. In one group of states, there is no coverage. In the other group of states, there would be an inquiry whether the lack of a medical had something to do with the accident. Unless there is something wrong with the pilot which would have resulted in a medical denyal, I would expect the insured to win most of those. The answer to whether there is coverage or not may depend on in which state the accident happened.

    If you have a loan on your airplane and the bank is an insured under your policy, you will often find language in the "additional insured" endorsement specifically saying the lack of pilot or aircraft currency will not negate the bank's claim. The existence of the "condition precedent" rule is the reason for the language.

    Edit: I see @Bell206 talked about this earlier.
     
    Last edited: Mar 3, 2020
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  14. Geosync

    Geosync Pre-takeoff checklist

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    I'm a claims guy. Poor maintenance and wear and tear aren't insurable. Like you wouldn't file an insurance claim on your car if the engine seized up due to never changing the oil. Same applies for airplanes. It's spelled out in your policy, so as long as it fits the definition of an unforseen occurrence(birdstrike, you run your car into the wing, you gear up) it is usually covered(trying to speak in general terms since every company's policies are slightly different).

    Of course insurance companies don't want to pay claims but that is why you have insurance. But the burden falls largely on the underwriters to write good business with a low risk of claims, or adjust premium to cover those inevitable ones. The negative perception of insurance comes from health and homeowners insurance. Aviation is much different. If we deny claims without basis we get in trouble with the state commissions(don't have deep pockets and lobbyists to sway politicians) and lose customers. Why would we do that? It's cutthroat as it is, so bad claims services is a non-starter.

    I can't think of one legitimate claim I've denied. And I've paid from everything from dogstrikes, birdstrikes, lightning strikes, to smoking craters, to taxiing into a post on a car zipper lane, to ingested mats left on the wings of jets. I've handed over total loss checks for jets, helicopters, down to $300k pistons when the pilot balled it up due to leaving brakes on, gear up, ground looped, on and on. Human error is certainly covered. Now, if you were required per the policy to be typed/current/1000 hrs in type etc but you didn't meet those requirements and had an accident directly related to that, there could be an issue. But I've only seen that one or two times.

    And yes, I swoop in with a bag of cash in our company airplane and make it better.
     
  15. DFH65

    DFH65 Pattern Altitude

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    Let's say an engine well past TBO dies in flight. You get it to the ground but the plane it gets wrecked in the process? Do you pay on that? Or is the engine time the contributing factor?

    ETA: I assume yes although with consideration of the value of the engine at the time of the accident.
     
    Last edited: Mar 3, 2020
  16. Geosync

    Geosync Pre-takeoff checklist

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    Yes. Because of the RESULTANT damage caused by the engine failure. If the cost to repair the aircraft exceeds the insured value, we cut a check for that value and take the salvage. Since there would most likely be a propstrike during the dust filled crash landing, the cost to IRAN(not an overhaul) the engine is taken into consideration.

    In theory, if you made a perfect deadstick landing and sustained no damage, there would be no claim(seen it, in a farmers field, on a HP retract low wing, no less!). The policy wouldn't pay for the engine damage since it is considered mechanical breakdown which is excluded. Although most polices still pay for the recovery of the aircraft, IE: getting it back to your home airport/airport where repairs can be made.

    So in summary, the actual failed part wouldn't be covered, but if that failed part led to resultant damage, that damage IS covered. If that damage costs more to repair than the insured value on your policy, then you get a check for the whole airplane. Clear as mud?

    That's why it's key to have proper insured value on your policy. If you ball it up and are under-insured, you total out at less than the aircraft is worth, and if you over-insure, you may get stuck with a major repair, and insurance can't total it because the hull value is far higher than it should be.
     
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  17. DFH65

    DFH65 Pattern Altitude

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    Thanks I have just heard people say different things with regard to insurance and TBO engines. Personally if ever in that situation I would rather make the perfect dead stick landing, I kind of like my airplane the way it is. :D
     
  18. Geosync

    Geosync Pre-takeoff checklist

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    So, TBO as you know is merely a suggestion of the OEM for Part 91. It comes into play when there is a propstrike because prop governors get overhauled and now "0" time. We have to prorate it because your are now getting a better product due to the propstrike(betterment). It gets sticky when the engine goes in for inspection for the propstrike, which is covered by insurance. If the crankshaft or accessory gears are cracked due to the propstrike etc, it is covered. If it's an old engine that hasn't been overhauled in 3000 hours there will wear and tear like cams, lifters, the engine shop will want to address before the put it back together. That isn't covered by insurance.

    The argument is "hey, if it wasn't for the propstrike, I wouldn't have had to face all this wear and tear!" Then it becomes a discussion with the individual adjuster.

    Yeah no plane is as comfy as your baby. I've had many total losses that led to utter despair for the insured even with a check in hand.
     
  19. midlifeflyer

    midlifeflyer Touchdown! Greaser!

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    Great explanation.
     
  20. flyingron

    flyingron Touchdown! Greaser!

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    If it is a covered accident, they usually want to get it paid pretty quick. Mine was handled prompty by the insurer. On the other hand, I knew of a pilot using a non-approved pilot in a commercial operation and they refused to cover it because it was in violation of the policy. A couple of lawsuits later there was still no payout.
     
  21. hindsight2020

    hindsight2020 En-Route

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    That can get sticky real quick. Inspection forces to open the case, mx shop starts red tagging things like a kid with a hammer, and the insurance wants to claim it had nothing to do with the prop strike? Yikes.

    What I have heard is that once the component is open and the labor is covered by the insurance, the total cost to major overhaul gets subsidized by both the labor that was part of the R/R, and the component(s) replacement of those covered by the insurance. In theory making the total outlay for the overhaul "since the thing is open already" lower than it would be if the decision to OH was made by the owner in the absence of a claim. I guess it all comes down to the degree of ball the insurance is willing to pay towards the cost of tinkering with the affected engine.

    My only exposure to an insurance claim was handled by the FBOs insurance, since they did the damage, and my local AP handled the repairs in situ. The insurance claim billed was outrageous imo, but I was out of sight out of mind since I wasn't affected by the interaction (comprehensive claim in storage handled by a third party, not an in-motion or inflight claim) beyond the additional damage history my airplane now carries on a resale basis, which I'll never be made whole from, but one frankly I don't care about so it's all good. They were very receptive and prompt in communications, and seemed to have compensated the mechanic quite promptly. I would only hope my own insurance would be that receptive in the case of claim I had to make.
     
  22. Geosync

    Geosync Pre-takeoff checklist

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    This is correct. The covered loss proceeds, which is the IRAN inspection, can be put towards an overhaul. And the engine shops split the "wear and tear" from any propstrike damage. So it isn't the insurance company defining which is which(albeit, it's not really hard to distinguish corrosion and wear from cracks and fractures), it's the repair shop. But imagine if insurance covered your overhaul. What would everyone do come TBO? Have a propstrike, and then the whole concept of insurance falls apart.

    You own hull insurance should be even more prompt than a 3rd party insurer(FBO's insurance), since you have the contract(policy) with them. Hopefully you never have to use it!
     
  23. Palmpilot

    Palmpilot Touchdown! Greaser!

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    Probably not "everyone," but I wouldn't have any trouble believing that it could be enough people for it to become a real problem.
     
  24. PPC1052

    PPC1052 En-Route

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    I won't name the carrier, but I was asked to give a coverage opinion for a carrier on a loss. Our opinion was that there was no coverage because the aircraft was out of annual at the time of the loss, and there was nothing in the applicable law that required that that fact have a causal relationship to the loss in order to deny of the claim. (Some states have rules that require that such a failure be causally related to the loss in order to deny the claim on that basis.) The carrier paid the claim anyway.
     
    Last edited: Mar 9, 2020
  25. N747JB

    N747JB Final Approach

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    I have had 3 insurance claims in 36 years of flying:
    1. Windshield in my 414A cracked en route from Atlanta to New Orleans at 16,000, it was the pilot side, heated plastic one. I wasn't going to file a claim, but a friend said it couldn't hurt, so I did. I told the adjuster exactly what happened and a week later I got notification that they were paying the $25K to replace the windshield and upgrade it to glass! 2007
    2. I was at 5,000 going across Atlanta and struck a buzzard of some kind, a stinky ass buzzard! Caved in the baggage door, no real big damage, about $4000.00 no issue.
    3. July 2019, my son in law was lowering the door on the 425, which he has done on all the airplane since they started dating in 2006. The door cables hung on the door snubber and when he stepped on it, it gave way and not only pulled the cables out, it bent the door. Original estimate was $23,000, final bill was over $40K!
    Never once has an adjuster looked at a logbook or even asked for my medical or certificate. None of these were major losses and none involved serious injury.
     
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  26. Let'sgoflying!

    Let'sgoflying! Touchdown! Greaser! PoA Supporter

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    But that is exceedingly rare, because agents and brokers always explain the policy limits, exclusions and coverage in detail to every customer, right? (And the customer always listens and understands lol)
     
  27. ander681

    ander681 Filing Flight Plan

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    Depends on what your policy states and what it covers/doesn't cover. You can get a policy to cover absolutely anything and everything, but it will cost you an unbelievable amount of $$. If you go with the budget policy, maybe what happens isn't covered or there are clauses that void the coverage, etc.