Aircraft insurance policy requirements and Federal Air Regulations are not interchangeable

Don’t confuse your aircraft insurance policy requirements with Federal Air Regulations. This is a common mistake made by many people, but remember they are two very different things.

Recently, we received a call from a client advising us that his Cessna 150 was involved in an accident. There was extensive damage to the airplane, but fortunately no injuries. Our insured had allowed a Student Pilot friend to use his airplane for initial training. On his first solo the student lost control on landing, damaging the aircraft. The student had not been added to the policy as a Named Pilot because LL Johns was never advised that he would be flying the airplane. The Open Pilot Warranty in the insured’s policy states that any person could fly the airplane provided they held at least a Private Pilot certificate and they had the permission of the insured.

Concerned about the student flying the airplane solo, our insured asked the instructor if there would be any problems if things did not go well before the flight. The insured told the instructor that his policy required the pilot to be a licensed pilot, but he forgot it said, “Must hold a Private Pilot certificate.” The instructor assured him that as long as he, the CFI, trained the student and signed his Student Pilot Certificate and logbook for solo flight, the Student Pilot would be a “legal pilot”. At that point, they both assumed that because the Student Pilot was a “legal pilot” there should be no problems, insurance or otherwise, if something bad occurred.

The insured asked the wrong person. He was really concerned about his insurance coverage, but he received an answer based on the requirements of the Federal Air Regulations. The carrier denied the claim. When the policy was issued there was no understanding on the part of the underwriter that the airplane would be used for student training. If the insured had called LL Johns first, the student could have been added as an approved Named Pilot. There would have been a premium charge for the additional exposure, but the policy would have covered this loss. There would not have been any problem making this happen, as Student Pilots and Cessna 150s are made for each other.

There are a few things that insurance policies and the FARs do have in common. They both require that the person flying the airplane hold a Pilot Certificate. In most cases, they both require that the pilot also hold a current FAA Medical Certificate. Usually they both require that the airplane have a current and valid Airworthiness Certificate. However, similarities end there. In the Cessna 150 loss no regulations were broken, but the policy in place was not written to cover the additional exposure presented by the Student Pilot operation. It works both ways. There may be losses resulting from one or more FAR violations, but these losses will be covered because the policy requirements have been met by the insured. An example would be a VFR Pilot, that due to a lack of pre flight planning or continued flight into IMC, has an accident that is the result of one or more FAR violations. Unless he has violated a specific requirement or warranty of the policy, the company must cover the resulting claim.

Remember, if you have a question about regulations talk to your CFI or the FAA. If you have a question about insurance coverage, read your policy and call your agent.