Put us all together and we pay insurance companies billions of dollars each year.

Hopefully, the majority of the premium payers will never have a loss. But, by God, when we do, we want that company to perform hand-springs in the settlement of the claim!

Isn't it true, we want to pay a small premium and transfer all of our risk to the insurance company? The company should settle the claim without regard to the how's, when's, where's or the who's of the loss! They are to pay the $1,000,000 in coverage and ask only that we pay our thousand or so dollars in premium to shift of our risk of loss to them! Many people would consider this a lop-sided, one-way, or a unilateral agreement. The courts generally throw out this type of contract but will uphold those of a bilateral nature; that is, a contract which is fair to both sides. Fairness to an insurance company means their acceptance of only a portion of the risk with the insured's agreement to minimize the exposure to loss by following certain rules of the contract.

When the agent says, "read your contract", he is actually saying, "You, the insured, have an obligation to operate within its guidelines for coverage to apply". Reading your contract will also enable you to avoid risks the insurance company has not agreed to accept. Some of the exposures aviation insurance companies will allow you to transfer are: third party liability or liability coverage, physical damage or hull coverage, bodily injury regardless of negligence, or medical coverage, and physical damage for trailers. (Note: for trailer third party liability, contact your auto agent.) Companies who insure gliders may write some or all of the following uses: Pleasure and Competition, Instruction and Rental for Hire also known as Limited Commercial, Flying Clubs, Flight Schools, and for those who do not own a sailplane but rent or borrow the Non-owned Aircraft Hull and Liability policy.

Insurance contracts attempt to explain the circumstances where coverage will and will not apply. Not too long ago, one had to be an attorney to understand the language of those contracts. As a result, many states have required policies to be written in plain language. It's not perfect, but it is a step in the right direction. Most of the insurers of gliders now offer this plain language policy so there is little excuse for not reading it. Policies are usually broken down into sections: liability, medical, hull protection, pilot requirements, definitions, duties, responsibilities and general rules. The following is a short list of items within these sections which are often misunderstood, forgotten, and violated:

1. Your glider must be airworthy at the time of the loss.

2. Only certain pilots can operate the aircraft.

3. Modifying your aircraft without complying with the FAR's and notifying your company could jeopardize your coverage (i.e., adding avionics or bladder tanks, or bolting on an engine.) Taking avionics out can also affect the weight and balance. Such modifications often require the FAA's 337 form for the aircraft to be airworthy.

4. Renting your glider when your policy approves pleasure uses only can void your coverage.

5. Wear and tear is excluded.

6. Insuring the sailplane below its replacement cost (which includes any instruments, avionics, or other components whether purchased subsequent to the aircraft acquisition or not) can cause the company to total a glider that may otherwise have been repaired.

7. Not reporting a loss to the company as soon as practicable can jeopardize coverage or the amount of a settlement.

8. Hull insurance includes the avionics whether attached to the glider or not.

9. Some carriers place a restriction on their limits of liability for suits brought by family members against another family member in order to avoid instant estates. Aviation policies are not designed to provide life insurance.

10. Aviation policies have no grace periods.

11. Any change of ownership, whether adding a partner or a bank, can void coverage unless the company is notified.

12. Some policies put restrictions on their liability coverage should any person inside or outside the aircraft be injured. Other contracts place the restriction on the passengers only (i.e., $1 million limiting each person to $100,000 vs. $1 million limiting each passenger to $100,000.)

13. Negligence! Were you solely at fault or did others help the situation along? Just after an accident with injuries and/or property damage to others, it is human nature to have tunnel vision and say, "I'm sorry" or "It was my fault". There are varying degrees of negligence. You may not be totally culpable. Certainly cooperate and help others. Tell the truth, but volunteer nothing. Refrain from admitting negligence. Call your agent as soon as practicable and let the professionals from the insurance company sort out the fault of it.

Some attention should be paid to the areas provoking the majority of questions and misconceptions by the policyholder. They are: When to turn in a claim; "Why shouldn't I insure the aircraft for half its value when I'm willing to assume the risk for the other half?"; "Is the insurance company entitled to my vario if the aircraft is totaled?"; "Why should I carry passenger liability if my glider has but one seat?"; "No coverage? I understand that I didn't meet the pilot clause, but Joe was pilot in command and he does."

WHEN SHOULD I FILE A CLAIM?
The soaring cadre of pilots are trying hard not to jeopardize their insurance. As a result, they may not call in a loss to their carrier soon after it happens. They assume it's something they can handle on their own. Four months later, they realize they need to turn in a claim. Had the company been notified as soon as practicable after the loss, they would have had the opportunity to identify and deal with potential areas of third party liability. The adjusters and attorneys working for insurance companies are better suited to make this kind of determination.

Early reporting can make a difference in the costs of a hull settlement, too. The price of a part at the time of the loss may be hundreds of dollars less expensive than five or six months later. Insureds often pay that difference. Some contracts exclude all coverage if the claim is not turned in within 60 or 90 days.

WHY INSURE FOR FULL HULL VALUE?
Insurance to value. It is very difficult to establish the proper value without a blue book for this industry. The value of the dollar against foreign currency and the addition and deletion of avionics also has an impact on the worth of a glider. Insureds should ask themselves, "What will it cost to replace my 1993 Grob if totaled tomorrow with another 1993 Grob?" The idea of insurance is not to make you better off than you were before a loss. Yet, it is common for a client to call their agent to increase the value of the glider, not due to the addition of a radio or vario, but to enable him to replace his '93 with a '98 model. Insurers will not agree to this kind of change in hull coverage.

Agents often receive requests to insure a glider at half and sometimes less than half of its actual value. The insured indicates a willingness to accept more of the risk in return for a premium savings. Sounds great, doesn't it? After all, "I'm never going to have an accident!" Then, as luck would have it, a loss occurs. His glider, worth $30,000 (consisting of the hull at $25,000 and avionics at $5,000), was insured for a meager $15,000. The company pays the $15,000 less the deductible, and, to the insured's amazement, takes the glider (including the avionics) as salvage. The insured, agent, and company should seek to avoid this type of settlement. It's bad business all around. As a result, your agent will not knowingly agree to such a request.

Seldom do we have an insured who intentionally tries to under-insure his glider. Instead, we see the client who unwittingly under-insures by a few thousand dollars. Sometimes the difference is the value of the avionics which were added after the policy was taken out.

This difference could be the deciding factor in the decision to repair or total a glider, especially in the lower hull values. Pay particular attention to this example. The insured purchases a glider without avionics or they are old and inoperative. The glider in this condition is worth $14.000 and is insured for that amount. Winter is gone and it's time to start soaring. He purchases new avionics worth $6,000 and neglects to call his agent to increase his hull coverage to $20,000. On landing off the airport, $10,000 damage is done. The aircraft is repairable. To the company, due to the low insured value and a salvage bid of $12,000, the glider is a constructive total loss. The math for the company is simple. Fix the aircraft and pay $10,000 or total the aircraft by paying the insured $14,000 and sell the glider, including avionics, as salvage for $12,000. By selling the glider as salvage, the company loses $2,000 as opposed to $10,000. Had the glider been insured to value, the company would have repaired the aircraft. A general rule of thumb is: If the cost to fix exceeds 70% of the insured value, the company will usually total the glider, pay the insured value less the deductible, and take the glider and its components (i.e., avionics) as salvage.

If an insured and a company disagree on the amount of settlement for a hull loss, the contract makes provisions for the insured's rights to be protected. The company and the insured, at their own expense, can hire independent appraisers who will submit their findings to a disinterested umpire. The umpire will make a decision. The company, however, will never pay more than the limit of coverage purchased.

WHO GETS MY VARIO?
Many years ago, a policy could be found that would allow insureds to exclude instruments when insuring the hull of a glider. Perhaps there is a company doing this now, but doubtful. If you read your contract, you will find a definition for aircraft or glider which will include all components of the ship whether attached to the glider at the time of the loss or not. The impact is all the avionics will belong to the company as a part of the salvage after a total loss. Of course, should they be stolen or destroyed they are covered, too. So, if you've upgraded or added new avionics, it is recommended that you contact your agent to increase the hull insurance.

PASSENGER LIABILITY IN A SINGLE SEAT GLIDER?
Every agent who has mentioned passenger liability to the owner of a single seat glider has heard the speedy retort, "I can't carry passengers. It has but one seat!" Usually, the customer is nice enough to leave the "you fool" off the end of that statement. Consider the action of loaning a glider. Should a permissive user have a loss not of his negligence but by the aircraft owner (i.e.: glider rigged incorrectly) he is going to sue the pants off the owner. Without passenger liability there would be no coverage. Enough said.

APPROVED PILOT' IN COMMAND?
The FAA makes reference to the "pilot in command" all through the regulations. But most insurance companies care very little about the pilot in command. They want to know who was actually operating the aircraft at the time of the loss. They want to know if the pilot was approved by their company to operate that glider while in flight. If he wasn't, then they are going to deny coverage even if a world champion was pilot in command. If you are going to allow someone to operate your glider or tow plane who does not meet or exceed your policy's pilot clause be sure to call your agent and ask for approval before the flight.

It is impossible for an insurance agent to read and explain each line of an insurance contract to his client. The coverage's are similar to those found in an auto policy. But, the terms and conditions are very different. The bilateral nature of the policy requires you to help prevent a loss and, should one occur, to understand that the company does not cover every exposure. Read your contract. Know where you stand. And, call your agent with any questions.

Remember, the ultimate responsibility is yours. If you live within the boundaries of your insurance contract, insurance will be there when you need it.

SOARING MAGAZINE APRIL 1988
(Updated 9/30/03)