Fair warning: this column isn’t about ATC privatization, although it’s a hot topic right now within our community that deserves our attention and action. Instead, it’s about another cog in the aviation’s economic machine: the insurance industry. With more than a dozen underwriting companies competing for a limited number of aircraft, the market is soft. Good news if you’re buying insurance. You can get good coverage at a reasonable premium. However, for the market to be viable, premiums must cover the cost of claims. That means underwriters today are more likely to hold the line when you do have a claim. Fifteen years ago, when the insurance companies were raking in more profit, they took a much more liberal stance on paying claims.
In my April Editor’s Briefing, I shared the unfortunate result of Mother Nature’s fury. Straight-line winds destroyed dozens of hangars and aircraft at Johnson County Executive Airport (KOJC) in suburban Kansas City, including my own bird. Thankfully the plane that really mattered – my pristinely restored C172M that belonged to my mother – was completely undamaged. But my go-fast Monster was shrouded in twisted steel beams and metal from two hangar doors that had collapsed in on it.
In late May, nearly three months after the incident, I finally reached a satisfactory conclusion with my insurance company. The reason it took so long wasn’t entirely the underwriter’s fault. Because the plane was underneath and behind several tons of debris, it required a construction salvage operation to unbury it. Being your typical bureaucratic government entity, the County (which owns the hangar properties) slowed the process to a painful crawl. Outside engineers were brought in to evaluate. Lawyers were consulted. Finally, after much hand-wringing, the County had me sign a waiver that I wouldn’t sue if the plane was further damaged from the debris removal. As if.
The debris was easily removed, giving us our first real look at the aircraft. It wasn’t pretty: both forward and rear firewalls bent, propellers curled back, control surfaces crushed, wing structure damaged, nose gear smashed, tail cone flattened and just about every wing and fuselage skin needing replacement. During the violence of the storm, the plane was lifted up – inside the hangar – and slammed on its tail. Time to talk turkey about totaling the aircraft. Or was it?
After getting repair estimates from two reputable authorized service centers, the damage totaled about 80 percent of insured hull value. The underwriter took a look at the aircraft and thought he could do better and sought his own repair estimate from another shop. Many of the structures that we adamantly felt should be replaced due to the critical nature of their function, the underwriter suggested they could be repaired.
Look at your policy as I bet it looks like mine: there is no coverage for diminution of value. Thus, repaired or used parts can be covered by your policy, but not necessarily the cost of new parts. You can argue that a repaired aircraft will take a beating in the marketplace when you go to sell it, but that isn’t within the purview of the policy. Who would buy (or even fly) a late-model plane that had 80 percent of its value spent on repairs? Not you, and not me. But in the case of an insurance claim, that doesn’t matter.
Fortunately, the underwriter’s own estimate was in line with ours, and the underwriter contacted me with the news that he was willing to total the aircraft.
With time to reflect, my final takeaways are this:
- Review your policy each year and understand it;
- If you shop your policy, keep in mind the cheapest option isn’t always the best option, especially if you have a claim.
- Your broker should be on your “favorites” list within your contacts. If you don’t have a great relationship built on trust, experience and deep knowledge of the insurance landscape, find a different broker. Ours was clutch in a big way;
- Carefully consider your coverage limits and adjust each year at renewal. Discussing with your broker and any aviation advisors you trust;
- If you have a claim, start documenting from day one. Keep every email, make notes about every call, take extensive photos and gather all pertinent data. As the paperwork starts to pile up, keep it organized in a system that works for you;
- Keep track of associated expenses as they may be covered under your policy.
- After I hung up with the underwriter that day in late May, relief washed over me. But I had one more task that needed to be done: I packed up a FedEx with the Monster’s logbooks, records and our two sets of keys. A lump formed in my throat as I signed the Bill of Sale, turning ownership over to the insurance company. It was no long our dream ship, but just salvage.
To assuage my pain, I decided I needed some shopping therapy. A couple of quick clicks of the mouse, and I’m surfing Controller in search of a “new” dream ship. Maybe I should ask David Miller for advice…