Understanding the Pilots Requirements Clause

By John Gostinger

Every aircraft policy has a “Pilots” requirement clause that spells out exactly who can fly the aircraft in order for coverage to apply should a loss occur. There are two ways for a pilot to be approved under the policy. The first is under the Open Pilot Warranty (OPW), which states that any pilot can fly the airplane provided they have the permission of the Named Insured (usually the airplane owner). They must also meet certain certificate and experience requirements that are spelled out in the OPW.

The second way is to have the underwriter name the pilot in the policy as an approved Named Pilot. In this situation, the underwriter has reviewed the pilots experience and has agreed to approve him even though he may not meet one or more of the requirements of the OPW. Owner pilots and pilots that regularly fly the airplane are usually listed as Named Pilots even though their qualifications meet or exceed the OPW requirements.

We often get requests from aircraft owners to add a pilot friend as an approved named pilot. These are pilots that have no ownership or financial interest in the airplane. They will fly it for their own use, or in some cases they will fly the airplane on behalf of the owner. Many of these Named Pilots make the assumption that since their name appears on the policy they are fully insured under that policy. That assumption is not correct. The following points need to be understood with respect to pilots flying an aircraft that they do not own. These apply both to Named Pilots and those flying under the Open Pilot Warranty.

1. The policy owner (Named Insured) is fully insured for both liability claims and physical damage to his airplane.

2. The Liability coverage for Bodily Injury and Property Damage to others does extend to include the liability of the approved Named Pilot or the pilot flying under the OPW.

3. If the pilot is responsible for damage to the aircraft he DOES NOT HAVE COVERAGE FOR THAT DAMAGE. If an approved pilot damages the insured’s airplane the company will pay for that damage, but they keep open their right to subrogate against the pilot that caused the damage. This is the case even though the company has approved the pilot and they are providing that pilot with coverage for injury to others or damage to others property.  In some cases, at the request of the insured, the company will issue a Waiver of Subrogation to the Pilot which in effect insures that pilot for damage to the airplane.

4. If the pilot is not a direct employee of the Named Insured, and he is in any way being paid to fly the airplane by the insured or anyone else, he has no coverage under the policy even though he may be a Named Pilot on the policy.

5. The Named Insured should always remember that when he has additional insureds on his policy, he is sharing his limit of liability with those insureds. If he has a $1,000,000 limit of liability and both he and a Named Pilot are sued for something that the pilot does, they each will have a maximum of $500,000 coverage. The Named insured, the owner of the aircraft, could be giving up half of his coverage when he lets his friend fly his aircraft.

A good option for the pilot flying an airplane that he does not own is to purchase a Non-Owned Liability policy. This way he will have his own coverage for both bodily injury and property damage and liability coverage for physical damage to the aircraft.