Insurance claims - the "betterment" issue

[KS Arrow Pilot]

Group - I have a question for anyone who's ever had to file a claim with their aircraft insurance company. I landed a month ago without the benefit of a nose wheel and I'm working with my insurance company on the claim. Only the cowl doors, and prop were damaged, and the engine is being removed and torn down for inspection. The 3-bladed hartzel was installed in 2003 and has 250 hours on it. My estimate included a new propeller for roughly $9,500. My insurance company says they are not paying $980 of the prop cost because of "betterment". They explained it as " you had a used prop on your plane - we are giving a new zero time prop - so we are not paying you the full price of the replacement because what we are giving you is better than what you had." I suppose I understand their logic, but it still seems a little strange to me.. unless I can find an 8 year old 3-bladed hartzel as a replacement. Has any else experienced this? Or is my insurance company the only one with this clause? Overall, they have been great to deal with, and they are even paying for me to rent aircraft up to 90 days since the accident. But I had never heard of "betterment" until now. Thoughts?

 

[BillTIZ]

I think you'll find those words, or words to that effect in your policy.

It sounds like the have decreased the value of the prop based on recommended hours and residual value at the recommended overhaul time.

 

[LDJones]

Not unusual and probably not a bad deal for you to be able to knock 250 hours off your prop for one AMU.

 

[Let'sgoflying!]

Only problem I have with it is, where does it end?
Could they say the same about an engine (wrecked by fire or an accident etc) that had 5000 hours on it (but maybe a recent overhaul) "that is an aged engine, we are only going to give you $1000 towards it".
Or numerous other components - where does it end?
"Sorry, your airplane is 50 years old, basically worn out so we are only going to cover 10% of it."
I think it is just another deceitful tactic to include the owner in the loss and avoid what most people think is proper coverage.
I say an insurance company should do whatever is required to return your airplane to at least the condition it was before, or if that cost exceeds the stated value they ought to write you a check and take their parts away.

 

[poadeleted20]

Could they say the same about an engine (wrecked by fire or an accident etc) that had 5000 hours on it (but maybe a recent overhaul) "that is an aged engine, we are only going to give you $1000 towards it".

They generally knock off the prorated amount of the overhaul. Thus, if your 2000 TBO engine has 500 hours SMOH, they knock off 1/4 of the cost of an overhaul from what they pay. The fact that it has 5000 since new doesn't really play into it.

"Sorry, your airplane is 50 years old, basically worn out so we are only going to cover 10% of it."

They cover the market value of the plane today. So if your 50-y/o airplane is wrecked completely, you get Blue Book value of it now (or the "agreed" value on which you and the insurer agreed when the policy was written, if you have that option). FWIW, for a 1961 airplane, that's probably going to be a lot more than it sold for new, but a lot less than it would sell for new today.

I think it is just another deceitful tactic to include the owner in the loss and avoid what most people think is proper coverage.

I think that's a somewhat unrealistic opinion, and it's no different from what you get in any other insurance policy (unless you have a "replacement cost" policy, for which you pay extra).

I say an insurance company should do whatever is required to return your airplane to at least the condition it was before, or if that cost exceeds the stated value they ought to write you a check and take their parts away.

That is how it works. If that 2000 TBO engine has 500 hours on it, paying the full cost of an overhaul would not be returning it to the condition it was before, but would be making it better than it was, hence, the term "betterment."

 

[Let'sgoflying!]

How about this, then:
Sell me a policy in which, should the worst happen, I can fly again without a multi-thousand dollar hit to my pocketbook. That's what insurance was intended to do - prevent large losses to the purchaser of the policy. With betterment, the insurance industry is asking us to share the loss, instead of them covering it.

 

[dmspilot]

It sounds fair to me. If my 5-year old car was wrecked and totaled I would expect to receive a 5-year old replacement car from the insurance company, not a brand new one. Since it is impractical for them to scavenge up a 250-hour prop, they are giving you a new one and subtracting the difference in value.

 

[schmookeeg]

They generally knock off the prorated amount of the overhaul. Thus, if your 2000 TBO engine has 500 hours SMOH, they knock off 1/4 of the cost of an overhaul from what they pay. The fact that it has 5000 since new doesn't really play into it.

This has not been our experience. In our experience they will pay the going rate for a teardown (around here, appx $10k to include R&R), and you may opt to credit that against an overhaul if desired, regardless of TSMOH.

They cover the market value of the plane today. So if your 50-y/o airplane is wrecked completely, you get Blue Book value of it now (or the "agreed" value on which you and the insurer agreed when the policy was written, if you have that option). FWIW, for a 1961 airplane, that's probably going to be a lot more than it sold for new, but a lot less than it would sell for new today.

I have never heard of anything but stated hull value used in aviation claims. I have heard of then quoting blue book when setting the hull value (ie asking to justify an unusually high hull value), but I have never heard of an aviation company reducing a payout due to blue book value being less than stated hull value.

I'd be interested to know what company does this, as I'd like to avoid them. I rather like stated value coverage. It's predictable.

 

[LDJones]

How about this, then:
Sell me a policy in which, should the worst happen, I can fly again without a multi-thousand dollar hit to my pocketbook. That's what insurance was intended to do - prevent large losses to the purchaser of the policy. With betterment, the insurance industry is asking us to share the loss, instead of them covering it.

I suspect part of it is to prevent some of the moral hazard, so the guy with the 1,900 hour engine taxis "accidentally" into something solid, just enough to qualify as a prop strike but without bending aluminum. Under your interpretation he should get a new engine.

Now you're getting a brand new $9,500 prop for under a grand. Seems like a good deal.

 

[poadeleted20]

Sell me a policy in which, should the worst happen, I can fly again without a multi-thousand dollar hit to my pocketbook.

No problem, but a no-deductible policy is gonna cost ya, chief.

That's what insurance was intended to do - prevent large losses to the purchaser of the policy. With betterment, the insurance industry is asking us to share the loss, instead of them covering it.

No, that's not what it is. Betterment means the insurer isn't paying for what you've already used. Of course, replacement cost policies are available in some markets, like houses and household goods (but not, to my knowledge, airplanes or cars) but you pay extra to get back more than you lost. One automotive insurer is currently advertising their newly available option of paying for one model year better than your old car if it's totaled, but I suspect the premium reflects that.

 

[poadeleted20]

This has not been our experience. In our experience they will pay the going rate for a teardown (around here, appx $10k to include R&R), and you may opt to credit that against an overhaul if desired, regardless of TSMOH.

That depends on what happened. However, when that applies, that can be a good deal if you're near overhaul time.

I have never heard of anything but stated hull value used in aviation claims. I have heard of then quoting blue book when setting the hull value (ie asking to justify an unusually high hull value), but I have never heard of an aviation company reducing a payout due to blue book value being less than stated hull value.

Right, but the Blue Book is the basis of the policy hull value unless you get them to agree to a higher value based on appraisal of the actual aircraft being insured. My point was that I know of no insurer paying out new replacement cost on a totaled airplane.

 

[AggieMike88]

One automotive insurer is currently advertising their newly available option of paying for one model year better than your old car if it's totaled, but I suspect the premium reflects that.

Being in the auto/truck recycling business, and dealing with insurance adjusters as they source repair parts, this advertisement also caught my eyes/ears.

I too suspect that this increases the premium, and could be an "add on" like towing and rental car reimbursement. What I'm waiting to hear about is if they come through on this promise to an insured who was paying for it. And I'm curious just how much of an upward bump this could be.

 

[steingar]

Wow. When my 20 year-old roof needed new shingles because of wind damage, my insurer didn't blink.

 

[Dave Siciliano]

Ron has been right on in describing why the 'betterment' clause is in most policies and how it purportedly works, but different insurers use it differently. I'll have to look, but we had what was called an 'all clear' policy and I don't remember that clause being in there. Different insurers may apply it in different manners also. Some make it more difficult to collect, others, seem to be much faster and more reasonable as y'all know.

Best,

Dave

 

[Everskyward]

Wow. When my 20 year-old roof needed new shingles because of wind damage, my insurer didn't blink.

I had this done recently too, because of hail. The roof was 19 years old and they paid virtually the whole cost. However, as Ron said, many homeowners policies cover replacement.

When someone rear-ended my 10-year-old Toyota Celica the insurance company didn't give me the money for a new Celica, only the replacement cost for a 10-year-old Celica.

 

[SkyHog]

If I get into a car accident, and my right fender, which contained dents from before, is damaged, they pay to replace the fender...they don't start dinging me because it had previous damage.

I've never heard of such a policy in reference to cars. You get blue book value, not "new car value" yes, but you don't get nickle and dimed because some parts had use on them...

 

[timwinters]

If I get into a car accident, and my right fender, which contained dents from before, is damaged, they pay to replace the fender...they don't start dinging me because it had previous damage.

I've never heard of such a policy in reference to cars. You get blue book value, not "new car value" yes, but you don't get nickle and dimed because some parts had use on them...

Exactly.

And when they wipe out the entire right front end they don't say "well let's see, that strut had 50k miles on it and that tire had 20k on it...both were 50% used therefore we're only paying for 1/2 of the new ones.

Sure, Total a car and you don't get a new one but you get new parts when doing repairs and that's the appropriate comparison here.

 

[TripleZ]

Wow. When my 20 year-old roof needed new shingles because of wind damage, my insurer didn't blink.

I had this done recently too, because of hail. The roof was 19 years old and they paid virtually the whole cost. However, as Ron said, many homeowners policies cover replacement.

When someone rear-ended my 10-year-old Toyota Celica the insurance company didn't give me the money for a new Celica, only the replacement cost for a 10-year-old Celica.

I just got a policy change notice for this exact scenario. The insurance company will only replace the value of the roof based on remaining life. A 20 year roof, replaced at 19 years....... and they would only pay 1/20th. That's with ME paying for a wind / storm deductible which is 15% of the repair AND a "replacement cost" policy rider which costs me extra $$ every year.

But if the entire house goes down in the same storm, they will pay for the entire house to be rebuilt as new. Go figure.

 

[Dave Siciliano]

Chris: What is a 20-year life?
In the building industry, that doen't mean it's designed to last 20 years here in Texas. May be different where you are, but here, it's just a rating to compare to how others are made. There may be someplace those are designed to last 20 years; here, that' not the case.

Best,

Dave

 

[Dave Siciliano]

All I can say is read your policy. If you have things that wear out like an engine, prop. or other item that is periodically replaced, why would you expect to benefit from having an accident? If you do what full replacement coverage; so specify. I don't.
As a matter of fact, my partner and I have considered getting liability only coverage several times.

Best,

Dave

 

[Let'sgoflying!]

OK, I will accept that I am wrong about betterment, if the supporters will continue to be available to defend it, for the continuing complaints that arise from the practice!

 

[BillTIZ]

Automobile policies are the same way. They will only cover the book value of the car, not what it would take to replace it.

There is a car insurance company now offering that they will cover, "to one model year newer".

 

[SkyHog]

Automobile policies are the same way. They will only cover the book value of the car, not what it would take to replace it.

There is a car insurance company now offering that they will cover, "to one model year newer".

But do they discount the price of replacement parts because they were used? I've never seen that happen (see - tires, body damage, headlamps with sediment on them, wiper blades, fenders, rims, etc.).

I don't think anyone would expect to get the price of a new vehicle for insuring a used vehicle, but I would also not expect an insurance company discount the price of a replacement part because it was used.

 

[BillTIZ]

But do they discount the price of replacement parts because they were used? I've never seen that happen (see - tires, body damage, headlamps with sediment on them, wiper blades, fenders, rims, etc.).

I don't think anyone would expect to get the price of a new vehicle for insuring a used vehicle, but I would also not expect an insurance company discount the price of a replacement part because it was used.

No, they just don't authorize OEM parts.
Look closely in your auto policy. OEM parts cost extra.

 

[taters]

Betterment comes from the idea of indemnification. The purpose of insurance is to indemnify the insured or "put things back just the way they were." ...The insurance company takes precision aim on "the way things were" by making sure the value of your loss is compensated and not a penny more (excluding other boutique coverage etc.) Many auto insurance companies now offer new car replacement to get past the screwed feeling they are used to dealing to their insureds.

Boy writing this makes me remember how much I hated my insurance job out of college.

 

[Dave Siciliano]

OK, I will accept that I am wrong about betterment, if the supporters will continue to be available to defend it, for the continuing complaints that arise from the practice!

Dave, I didn't mean to state you were wrong about the concept. It's just what the policy states; contract stuff.

I'm pretty sure with USAIG that clause wasn't in a previous policy my partner and I had. I'll have to check our current policy. We really don't care, but should know what we're paying for.

Best,

Dave

 

[taters]

But if the entire house goes down in the same storm, they will pay for the entire house to be rebuilt as new. Go figure.

Check if it is insured at least 125% of the homes value, and with "new replacement furnishings" (or something to that effect) . Is sounds like it is and most mortgage companies demand this coverage anyway...but once in a while I would find policies that didn't have this....really made little difference in the premium...quoting 150% value is what started adding big bucks typically.

 

[Let'sgoflying!]

Dave, I didn't mean to state you were wrong about the concept. It's just what the policy states; contract stuff.

No sweat Dave; all is good. Even if someone were to say I was wrong, I accept that and understand! We are all friends here even if we have different thoughts about things.


To continue, I understand that the contract rules. The OP probably has no legal leg to stand on.

My issue is that, (imho) betterment is outside that which the average owner expects from their policy.

So I expect to continue to see these threads about betterment.

 

[weilke]

OK, I will accept that I am wrong about betterment, if the supporters will continue to be available to defend it, for the continuing complaints that arise from the practice!

The reason I have no problem with betterment is because I believe that it is a fair deal, helps to keep the premiums for everyone competitive and reduces the moral hazard of accidentally taxiing over a runway light with a 1900hr engine.

 

[TripleZ]

Chris: What is a 20-year life?
In the building industry, that doen't mean it's designed to last 20 years here in Texas. May be different where you are, but here, it's just a rating to compare to how others are made. There may be someplace those are designed to last 20 years; here, that' not the case.

Best,

Dave

That was the example the notice had. I'm waiting on written clarification, since they had some conflicting changes. I don't think it was well thought out on their end.

I agree, every roof ages differently. Depending on shade, weather, pitch, etc.

Check if it is insured at least 125% of the homes value, and with "new replacement furnishings" (or something to that effect) . Is sounds like it is and most mortgage companies demand this coverage anyway...but once in a while I would find policies that didn't have this....really made little difference in the premium...quoting 150% value is what started adding big bucks typically.

Yup, I'm insured for new replacement value. Loose a computer, I get money for a new computer, not depreciated value. 150% for structure (which I pay slightly more for). BUT, I take the highest deductible. Im not going to use the insurance unless the house is basically destroyed.

 

[gismo]

Group - I have a question for anyone who's ever had to file a claim with their aircraft insurance company. I landed a month ago without the benefit of a nose wheel and I'm working with my insurance company on the claim. Only the cowl doors, and prop were damaged, and the engine is being removed and torn down for inspection. The 3-bladed hartzel was installed in 2003 and has 250 hours on it. My estimate included a new propeller for roughly $9,500. My insurance company says they are not paying $980 of the prop cost because of "betterment". They explained it as " you had a used prop on your plane - we are giving a new zero time prop - so we are not paying you the full price of the replacement because what we are giving you is better than what you had." I suppose I understand their logic, but it still seems a little strange to me.. unless I can find an 8 year old 3-bladed hartzel as a replacement. Has any else experienced this? Or is my insurance company the only one with this clause? Overall, they have been great to deal with, and they are even paying for me to rent aircraft up to 90 days since the accident. But I had never heard of "betterment" until now. Thoughts?

Betterment is an issue for insurers but sometimes the adjusters are willing to let you come out a bit ahead on some things. You might be able to get them to reconsider due to the fact that now your plane has recent "damage history" and is therefor would be worth about 10% less than it was before the accident if nothing else changed (250 hr prop etc). They're not going to pay you for that loss in value but maybe that can offset some of the "betterment".

 

[PilotAlan]

The hard issue here is the prop.
If you have a prop strike on a 2300hr engine, they'll happily pay for the teardown, inspect, and reassemble. Then, it's in the same shape as when it was the accident happened. If you want an overhaul, pay the difference. That seems fair.

But with the prop, I dont think there is any equivalent to the engine teardown, it has to be replaced.

The closest I can think of would be a birdstrike that takes out the oil cooler and dumps oil overboard, and you have to run the engine without oil to make it to a safe landing spot. What happens then with your 2300hr engine which is hypothetically completely trashed (all bearings, crank, cam, everything)? I don't know the answer, does anyone here?
Maybe core value?

 

[LDJones]

Wow. When my 20 year-old roof needed new shingles because of wind damage, my insurer didn't blink.

Yep, mine, too. But since then my rate has gone from $345 per year to around $1,400 per year, so maybe I didn't fare as well as I first thought.

 

[Henning]

Group - I have a question for anyone who's ever had to file a claim with their aircraft insurance company. I landed a month ago without the benefit of a nose wheel and I'm working with my insurance company on the claim. Only the cowl doors, and prop were damaged, and the engine is being removed and torn down for inspection. The 3-bladed hartzel was installed in 2003 and has 250 hours on it. My estimate included a new propeller for roughly $9,500. My insurance company says they are not paying $980 of the prop cost because of "betterment". They explained it as " you had a used prop on your plane - we are giving a new zero time prop - so we are not paying you the full price of the replacement because what we are giving you is better than what you had." I suppose I understand their logic, but it still seems a little strange to me.. unless I can find an 8 year old 3-bladed hartzel as a replacement. Has any else experienced this? Or is my insurance company the only one with this clause? Overall, they have been great to deal with, and they are even paying for me to rent aircraft up to 90 days since the accident. But I had never heard of "betterment" until now. Thoughts?

Yeah, that's always been a foundation principle in insurance. Some companies hold to it, some don't. The economy plays a big role.... I have seen full engine overhauls on a prop strike. Remember, IT'S ALL NEGOTIABLE! You can play give and take with line items. While the adjuster may have to take that "Betterment" to get the deal past his File Examiner, he may have room to come up on other line items. If you see where he's low on or forgetting something, bring it up.

 

[poadeleted20]

OK, I will accept that I am wrong about betterment, if the supporters will continue to be available to defend it, for the continuing complaints that arise from the practice!

As far as I can tell, the only people complaining are those who don't read their policies when they purchase them, or don't ask about what they don't understand when they read it.

 

[steingar]

In a way, the insurance companies are utterly retarded about this. Like it or not, the big expense isn't when the airplane is damaged, it's when the occupants are damaged. Keeping the airplane in good repair can prevent the latter. Were I an insurer I would likely take the extra expense in the former to try and hedge the latter.

 

[weilke]

In a way, the insurance companies are utterly retarded about this. Like it or not, the big expense isn't when the airplane is damaged, it's when the occupants are damaged. Keeping the airplane in good repair can prevent the latter. Were I an insurer I would likely take the extra expense in the former to try and hedge the latter.

In singles, for every claim with personal injuries, there are probably 10 prop strikes, runway excursions and gear ups with damage in the 15-40k range. Reducing the payout on the most common type of claim will have an impact on the bottom line.

 

[Jaybird180]

If I get into a car accident, and my right fender, which contained dents from before, is damaged, they pay to replace the fender...they don't start dinging me because it had previous damage.

I've never heard of such a policy in reference to cars. You get blue book value, not "new car value" yes, but you don't get nickle and dimed because some parts had use on them...

But they can also exclude based on "prior damage"

No, they just don't authorize OEM parts.
Look closely in your auto policy. OEM parts cost extra.

In many states this is illegal. I once had a ~$3,000 loss and found out that my insurance company (whom I've had for years and really like BTW) steered me to one of their "vetted" shops for repair. These shops have already agreed to specific labor rates and the use of non-OEM parts. I declined and got a second opinion which included work the 1st shop's estimate didn't include and OEM parts for a total of ~$5,500. They paid it without question.

As far as I can tell, the only people complaining are those who don't read their policies when they purchase them, or don't ask about what they don't understand when they read it.

Ron, you're talking about 90% of the insurance buying public.

Nevertheless, I doubt we can use reasonable similies between auto, home, and aircraft insurance. They each have their nuances and it is the nuances that require insurance PROFESSIONALS to have a license to sell each.

 

[Let'sgoflying!]

As far as I can tell, the only people complaining are those who don't read their policies when they purchase them, or don't ask about what they don't understand when they read it.

Let's poll 50 people, you choose them and it can be any policy you'd like. The questions will deal with their understanding of their own policy. I will wager you 100$ that less than 90% of them will know, with any accuracy what their policy says. The documents are simply beyond the average person's capability. Then there is the issue of agents or brokers giving incorrect interpretations of the policies. If they can't read them, no way will the public be able to.

But that is not really my point. There is a generally accepted understanding of what folks are buying, and when an insurance company comes up with a scheme to reduce claims payments....you get threads like this one on betterment. Hang around, I guarantee there will be others where you will be needed to explain this to because this is an ongoing problem.

 

[steingar]

Lawyers writing documents to be read by John Q is a rigged game.