As times get increasingly tougher I find increasing evidence of aircraft insurance companies looking for any excuse not to pay.
There are good insurance brokers – and underwriters – and er… some not so good ones. This is a story of good insurers not paying – and how things went downhill from there.
Aircraft insurance is usually a grudge purchase – and in the end it becomes an article of faith that the underwriter will pay if you have a claim. I dare say most pilots do not even bother to read the small print of their insurance contracts – and yet they are contracts that cost aircraft owners thousands of Rands a month.
So we chose what we hope is a decent broker, we pay our premiums, and then just hope for the best. Under Covid-19, premium income for the insurers has fallen off a cliff, so we should have every expectation of insurance underwriters wriggling hard to repudiate every claim they can.
Insurers have plenty of opportunity to wriggle: What if you do not have the right documents on board? – or you forgot to renew that irritating little yellow form that is the CofA? What happens if your radio licence has expired – or even more absurdly, the headache pills in your First Aid kit have expired? In all of these cases the aircraft is not strictly airworthy and so the insurer can wriggle out of a claim.
And what about pilot negligence? What happens if you run out of fuel and bend the plane? What happens if you takeoff out of centre of gravity envelope? – and I discovered to my chagrin that most of my flights in the C182 and the Saratoga were out of C of G. If you are just two up and half fuel – the chances are that, while you may be well within the max all up weight, you are out of the forward CofG range. That would almost certainly void your insurance cover.
But as I mentioned – there are good brokers out there who will go to war if required to fight for your claim if you are being done in by the underwriter – and there are underwriters out there who know that no matter how much it may hurt their bottom line – their job is to pay claims.
A recent spat between a pilot, his broker and the underwriter is very illuminating in how insurance works – or doesn’t.
A pilot was flying his taildragger across the big wide empty spaces of the Kalahari when he began to feel, let’s say somewhat unsure of his position. A low fuel level was adding pressure, but he had two spare jerry cans full of fuel in the plane. So he decided to land and put the fuel in the cans into the tanks. He found a nice big open field – which is not hard to do in Botswana – and pulled off a successful precautionary landing. Doc Mark Holliday would have been proud of his ‘outlanding’.
He hopped out the plane and emptied the two jerry cans into the tanks. So far so good. But then he made the first of many mistakes – and I have to admit – I would have done the same.
He was expected to know that a precautionary landing is ‘an incident’, so he should have phoned his insurance broker – even though the plane was undamaged. I chatted to the broker involved and he was at great pains to assure me that he is happy to be phoned at any time – day or night – by a client who has had any sort of incident. The broker says that if there was any doubt about the suitability of the field for take-off, he would have advised the pilot to rather have the plane dismantled and trucked out.
Naturally our intrepid pilot felt that with another hour’s fuel in his tanks he could find his way back to civilisation. The pilot verified the field’s length by pacing it out and checking the surface for holes. He reckoned the field was 600 metres long and his plane only needed 400 metres to get airborne. So all was good, except the grass and scrub might be a bit long, and the Kalahari sand a bit soft.
He started up and taxied back to the beginning of the field. Pre-flight vital actions done, he ran it up against the brakes and as he started to move he pushed the stick forward to get the tail up out of the scrub. Speed was building – but a bit slowly. He decided the best thing to do would be to get it off the ground and hold it down in ground effect to build up to best rate of climb speed. After about 400m on the ground, at fifty mph, he pulled it off and duly held it down, letting the speed build. The end of the field came up surprisingly fast as, still in ground effect, he began to turn onto heading. So far so good.
Then it all went bad. The undercarriage leg and wing strut hit a fence post he hadn’t seen and the plane slewed round, hit the ground sideways then slid backwards before coming stopping in a cloud of dust. Our intrepid pilot climbed out unharmed and surveyed the mess. He called his partner in the plane and then his insurance broker. The broker was more sympathetic than his partner.
A nearby friend was called to rescue our unfortunate aviator and after a while he was back home. He duly completed a detailed report and description of the accident and sent it off to his broker. When the broker received the report, he sucked his teeth and told the pilot, “we’re going to have a problem with this one.”
“Why?” the pilot asked. “I did a precautionary landing and then had an accident when I was taking off again. That’s what the insurance I was paying you for is supposed to cover – accidents.”
“If you crashed – then it was unsuitable.”
“Yes – but you tried to takeoff from a runway that was unsuitable – and it’s the pilot’s responsibility to make sure that the runway is suitable. The insurance contract specifically says that – have a look at page 10 – Clause 5 of the policy document.”
“But I told you – I paced out the runway to check it for length and holes!”
“Sure, but at the end of the day the only test an insurance company has as to whether a runway is suitable is if you crash – or not. If you didn’t crash it was suitable. If you crashed – then it was unsuitable.”
“But it was suitable! – I took off fine, and only crashed after takeoff because I was holding it down in ground effect.”
“Mmmmn maybe I can argue that point – but in the meanwhile you have another problem – your plane’s Authority To Fly had expired.”
I sent all the docs to the CAA – and the new ATF was in the post!
“Oh come on!” It only expired the week before. I had sent all the docs to the CAA – and the new one was in the post! You know what the CAA has been like under Covid – it’s taking weeks or even months to get basic documents back!”
“Maybe – but not actually having the ATF meant that your plane was by definition not airworthy. And insurance will only cover you if your plane is airworthy.”
“But it was in perfect flying condition! All the maintenance was done and up to date. I have it all stamped in the logbooks! I don’t need a piece of paper from the CAA to tell me that!”
“I understand – and will argue with the underwriter that not having the ATF certificate was not the ‘proximate cause’ of the crash. Listen, I have a great relationship with the insurer and I place a lot of business with them. Give me a day or two and I will chat to the underwriter and hopefully have some good news.”
Before the broker called the insurance underwriter, he phoned three aircraft accident assessors and told them the circumstances of the crash. All were sympathetic but reckoned that they would not approve the claim for payment, even though it was a relatively small claim, as the taildragger was only insured for R500,000.
Undeterred, the broker set up a meeting with the insurance underwriter. At first the underwriter flatly refused to pay. But the broker was persuasive. He argued that the accident had happened after the plane was airborne so the field must have been suitable. He also pointed out that not having a valid ATF did not cause the accident. Finally, he pointed out that the plane was owned by a company with just the two pilots as owners, and the owner who wasn’t flying should not be prejudiced by the actions of his partner – so the insurer should at least pay half the claim.
Reluctantly the insurer agreed to pay half, being R250,000 less the R20,000 excess. The broker pushed some more and got the insurer to agree to waive the excess and increase the payment to R300,000 and for good measure throw in the wreck – which probably had a scrap value of at least R50,000. So now the pay-out was worth R350,000.
He called the pilot and told him the good news.
“That’s not good enough! We were paying you for a R500,000 plane, so I need the full claim paid!”
The broker tried to make his client see reason, but it was not to be. The irate client took matters into his own hand by pitching up at the underwriter’s office – without an appointment. Barging into the underwriter’s office and closing the door behind him said, “We are going to sort this thing out between us – before I leave.”
The underwriter calmed him down and told him that he would have to check with his re-insurer. What he didn’t tell the client was that the reinsurers measure each underwriters loss ratio, and will not re-insure an underwriter who pays unjustified claims.
When the client had left the underwriter got the broker on the phone; “Your client stormed into my office and gave me a hard time. So I’ve changed my mind – I’m withdrawing my offer of R300,000. I am not going to pay a cent.”
When the broker told the client, the response was predictable. He threatened all sorts of dire consequences – including litigation. The broker assured him that he had every right to sue the underwriter – but that he had serious doubts he would succeed.
Reluctantly too, the broker told the client that he was going to have a real problem renewing the cover on his other – more expensive plane when it came due. It was the same underwriter, and he would understandably be reluctant to take on a troublesome client. And the client would have to disclose that he had had a claim repudiated, and that would deter most, if not all, of the other reputable brokers. The broker went so far as to recommend that the client approach another specialist insurer, as they were the only ones that would take on the other plane.
This naturally made the client even more angry – as it was not even his fault that his plane had been wrecked – but his partner’s fault. He said that if he had done a wheels-up in his other plane the insurance company would have paid because it was an honest mistake – so why not this claim?
At time of writing the client is still looking for a hard charging lawyer to fight this battle.
Meanwhile some hard lessons about the actual coverage of insurance are doubtless being learned.