Insurance can be defined as “peace of mind” (Wild, 2016). It protects an insured against a loss on their investment, whether this be a car, house, an aircraft, or even an airport. However, insurance does not just exist to protect assets or people – it can be argued that insurance offers social values as well. These social values integrate into our economy in a variety of ways including security for personal and business situations, a basis of credit for businesses, aid in the development of the economy, reduction of costs, and protection that is affordable to the insured (Wells & Chadbourne, 2007).
While insurance may be required for such assets such as automobiles, airports are not technically required to hold insurance coverage. The following section will discuss the legal requirements for airport insurance.
Airport Insurance Coverage Requirements
It is important to point out that while an airport is not required by the Federal Aviation Administration (FAA) to have insurance, the legal ramifications if an airport does not possess coverage are severe. The sheer cost of a slip-and-fall a passenger might experience on a premises including the medical bills, lawsuits, etc., are more than enough to convince an airport to purchase a variety of coverages for their premises. Slip-and-falls are not the only risk – the possibility of fuel spills, vehicle accidents, equipment malfunctions, aircraft accidents, and more are enough to lose many nights of sleep over.
When examining the rules and regulations put forth by the FAA, there is not specific wording that requires insurance for airports. However, airports that are planning to apply for federal aid through the Airport Improvement Program (AIP) would be remiss not to have insurance already on their premises. AIP money is usually given attached to several conditions precedent such as having a variety of insurance coverages.
Liability when an accident or incident occurs in addition to the possibility of losing federal grants are strong points when discussing why an airport should carry insurance. The types of coverage an airport can purchase are discussed in the next section.
Airport Coverage Types
Unfortunately, unlike automobile insurance, airports do not have a “one size fits all” type of coverage such as Full Coverage. Airports, by nature, offer a variety of services depending on the classification of the airport. If an airport is classified as Part 139, an airport offering scheduled commercial service, the coverage would range from aircraft operations on the field, fueling, to coverage for slips-and-falls.
One type of coverage an airport can purchase is that of Airport Premises Liability (APL). The purpose of this coverage is to protect the owner (or operator) of the airport from loss due to liability from the maintenance or use of the airport, operations at or away from the airport, elevators, and escalators (Wells & Chadbourne, 2007). According to Wells and Chadbourne (2007), this particular coverage includes all of the ordinary hazards on the premises including those caused by aircraft, except: “1) aircraft owned by, hired or loaned to the insured; (2) aircraft in flight by or for the account of the insured; and (3) air meets, contests or exhibitions” (p. 190). APL can be seen as a general liability coverage for an airport – there are other more specific types of an APL depending on the size of the airport.
The APL generally uses one of the two basic liability forms: owners’, landlords’, and tenants’ (OL&T) or comprehensive general liability (CGL). OL&T is considered the more restrictive of the two and is not used as often in the industry. Smaller airports, small and medium sized Fixed Base Operators (FBOs) and concessionaires usually purchase this type of APL. Besides OL&T, the more commonly used APL is that of CGL. CGL is more inclusive that OL&T because it covers new exposures that may have been acquired after the policy’s inception. Because it has a feature providing coverage for “unknown hazards”, it is distinguishable from OL&T and it is the most complete airport liability policy on the market. CGL itself covers product and completed operations liabilities, coverage for independent contractors for construction and demolition, liability coverage for contracts, liability coverage for personnel and advertising, and hangarkeepers’ liability – these will be discussed in the next section.
In CGL, each section of coverage covers a variety of operations at an airport, FBO, or concessionaire. Product and completed operations liabilities can be defined in two aspects. Completed operations cover aircraft repairs and services, which includes the installation of parts or accessories. Product liability covers the insured for liability that would result from an injury to consumers of a defective products or from completed operations.
Coverage for independent contractors for construction and demolition covers extension of runways, building new runways, demolition or alteration of existing structures, new hangars, buildings for administration, or maintenance shops. An underwriter will require information on the duration and extent of operations contracted as well as costs of the contract.
Contracts liability coverage is probably the most diverse type of coverage under CGL as any given FBO, concessionaire, or airport might hold a variety of contracts for services. Because of wide range contracts for gasoline, oil, fuel, etc., companies generally will not offer a blanket coverage and instead will only approve contracts specifically designated by the company.
The next type of coverage under CGL is that of liability coverage for personnel and advertising. Personnel injury liability protects against claims including intentional torts – this covers false arrest, detention, malicious prosecution, libel etc. In the past, this coverage was only available to major airports, but is now a part of the CGL form, or under the OL&T form with endorsement. Injury from advertising liability covers offenses from slander or libel for a person or organization in oral or written publication – this includes coverage for products or services or the violation of the right to privacy. Additionally, it protects from misappropriation of advertising ideas, style, or infringement of copyrights, titles, or slogans.
Lastly, hangarkeepers’ liability protects airport owners and operators, FBOs or maintenance and repair facilities. This coverage, in essence, a form of bailee insurance. It covers liability from loss or damage to an aircraft held by others, or in custody of the insured for safekeeping, storage, repairs, or while on the premises of the property of airport owners, FBOs, etc. It is important to note that the basic coverage of hangarkeepers’ liability does not cover the aircraft in flight. This can, however, be added to a policy through an endorsement.
Now that the most common coverages under CGL have been discussed, the author will discuss different companies that offer airport insurance.
Specialty Insurance Companies
As airport services is a complex field, there are a few companies that specialize in offering coverage for them. Two companies will be discussed: United Sates Aircraft Insurance Group (USAIG) and Aviation Specialty Insurance.
USAIG is company that is actually a pool of member firms (an example of spreading the risk). It has received high ratings over the last several years and has been using the pool arrangement for the industry since 1928. One of its coverages offered is that of Airport Liability which extends coverage for private and FBOs. The coverage they offer includes premises, products/completed operations, contractual, personal injury, premises medical payments, and hangarkeepers’ liability – these are essentially all of the coverages under a CGL. Additionally, if a client wants endorsements, the company will offer this on a case-by-case basis.
Aviation Specialty Insurance (ASI) is a company that has over 80 years to combined experience to offer its customers. Their coverage ranges from airports to drones and Unmanned Aerial Vehicles (UAVs). ASI offers much of the same airport coverage as USAIG, but with some unique additions. Workers Compensation, Fuel and Fuel Farm/Truck, Pollution, and Rental Car Coverage are just some of the things they offer that USAIG does not.
Just the Tip of the Iceberg
In closing, airport insurance is a complex subject. When examining liability, there are many liabilities an airport should consider when looking at insurance policies. While this post only covered a few aspects through CGL, there are several other coverages an airport or FBO can add depending on their organization. Insurance is very scalable which allows for each organization to find the best fit. Additionally, there are several companies that offer CGL including several specialty endorsements to fit each airport or FBO. Overall, airport insurance is a complex subject, however, the consequences are far greater than if an airport did not take the time to properly insure its premises.
Airport Liability. (2016). USAIG: United Sates Aircraft Insurance Group. Retrieved 21 November 2016, from https://www.usau.com/caf_coverages_airport_liability.php
Airports | Aviation Specialty Insurance. (2016). Aviationspecialtyinsurance.com. Retrieved 21 November 2016, from http://www.aviationspecialtyinsurance.com/airport-insurance/
Images retrieved from http://www.Google.com on 28 November, 2016.
Introduction to Aviation Insurance and Risk Management. (2007) (3rd ed., pp. 189-201). Malabar.
Introduction to Aviation Insurance and Risk Management. (2007) (3rd ed., pp. 68-69). Malabar.
Wild, Brandon, Assistant Professor, University of North Dakota, Aviation Insurance, Lecture, Fall 2016.