Non-Owned Aircraft Liability What You Don’t Know May Hurt You

Introduction • Doug Meyer, ARM • Gallagher Aviation Insurance Services A division of Arthur J. Gallagher Risk Management Services, Inc.

Aviation Clients Over 25 University aviation clients Including University of Texas Baylor University University of Southern California University of Colorado Purdue University University of Minnesota California Institute of Technology

Charter Aircraft Employee Business Travel Athletic Department Team Travel Coaches Recruiting Aerial Survey / Mapping RW Slung Load Move Equipment

Donated Aircraft Athletic Recruiting Team Travel Alumni Fundraising

Fractional Aircraft Fractionally Owned Aircraft

Employee Pilots  

Flying Owned Airplane Flying Rented Airplane

Aviation Training School provides classroom instruction and contracts with a third party to perform flight training.

Unmanned Aerial Vehicles (Drones) Design and Build Testing (install devices and then test) Atmospheric Research

Balloons Tethered/Non-Tethered Atmospheric Research

Miscellaneous Rockets / Satellites

Identify • Not always easy • Requires a full understanding of the University’s programs for aircraft use • Ability will depend on your knowledge of University operations

Helping Hand • Survey sent out to all departments -Request information on aviation exposures • Purchasing Department -Aviation expenses • Expense Accounts -AvGas -Aircraft Rental

Basic Principles of Liability • Law Administrative / Civil / Criminal

• Civil Tort Law / Contract Law

Tort Law • Act or omission that causes injury to another person by breach of a legal duty not arising out of a contract and subjects you to liability for damages in a civil lawsuit

Negligence Four elements of a negligence case 1. A duty to be reasonably careful 2. A failure to be reasonably careful 3. Which is the proximate cause of 4. Injury to another person or property

How Am I Negligent? Contingent Liability • Liability is incurred for acts other than those of your own employees

Airline Liability Important Distinction Common carrier represents to the public: 1. Carry for hire 2. Uniform price 3. Accept all persons applying

Degree of Care • Common Carriers Courts have held airlines and its employees to a highest degree of care standard to exercise Greatest Degree of Human Care and Foresight Possible to ensure the passenger’s safe conveyance

Degree of Care • Private and Contract Carriers Courts have held private and contract aircraft airlines and its employees to an ordinary degree of care standard to exercise • What does that mean?

Managing Exposures • Contractual Transfer -Hold Harmless -Can be problematic • Retention -Low Frequency / High Severity • Insurance -Recommended

Am I Covered? • General liability forms typically exclude aircraft related operations…….. With some exceptions

United Educators • Broad aircraft exclusion with exceptions -Regularly Scheduled Airlines -Model Aircraft (Defined) -A Lighter-than-air craft that is an unmanned balloon -Non-Flight related curriculum-related instruction

Lexington • Broad aircraft exclusion that does not apply to: An aircraft you do not own that is chartered by you and operated by a professional crew

Munich Re • Any liability arising out of the ownership, maintenance, loading or unloading, control, use or operations of any aircraft, airfields, runways, hangars, buildings or other properties in connection with aviation activities No exceptions

Texas Tort Claims Act • Governmental Immunity Texas Torts • Proprietary Activities / Governmental Functions • Future Decisions

Recommendations • Insurance Transfer (Aircraft Operator) • Travel Policy • Non-Owned Aircraft Liability Policy

Operator’s Insurance (Primary) • Always: -Require a certificate of insurance from aircraft operator naming the University as additional insured -Include a waiver of subrogation on the hull in favor of University

Operator’s Insurance Primary • Concerns: -Are limits adequate – (look for a minimum of $1mm per seat)

-Personal aircraft used on University business -Damage to rented aircraft

Aircraft Operator Loss Control • Know your charter company -Experience -Management -Financial Condition -Turnover -Condition of Aircraft -Quality of Pilots -Risk Management

Aircraft Operator Loss Control • • • •

Liability limit Personal visit Recommendations ARGUS Cheaper may not always be better

Travel Policy • Can be very detailed -Address and define approved air-travel -Detailed schedule of equipment, operations, weather and pilot qualifications • Can be very simple -Air travel must be on regularly scheduled airlines

Internal Policy • Should have a policy or directive that addresses the use of aircraft on University business -Aircraft use must be approved by a specific member of senior management -Risk management should be informed of the details so the exposure can be properly identified and conveyed

Why Gamble? • • • • •

Non-Owned Aircraft Liability Policy Excess over any other available insurance Provides defense Broad coverage Very affordable

Policy Terms • Limits available $1mm to $300mm • Aircraft defined excluding -Aircraft owned in whole or part -Seats 50 or less / Unlimited -Aircraft under long-term lease or service agreement • Broad Named Insured includes directors officers and employees

Exclusions • Third-Party Liability - does not cover for: Workers’ Compensation Unemployment Compensation Disability Benefits Law • War and Associated Perils • Terrorism Act

Underwriting • Will need to provide: -Estimate number of hours flown annually -Brief description of operations/equipment -Average passenger loads -Number and details on employee pilots operating aircraft -Certificates with additional insured

Final Note • Proper control of your non-owned aircraft exposures is critical -Keeping staff and students safe -Protecting University assets