§ 24.4 Coverage Issues Related to Aircraft and Airworthiness
Library | Insurance Law in Oregon (OSBar) (2020 Ed.) |
§ 24.4-1 Aircraft Lacking Current and Valid Airworthiness Certificate
Virtually all policies exclude coverage unless the airworthiness certificate is in full force and effect. A standard airworthiness certificate remains valid as long as maintenance and inspections are performed as required under 14 CFR parts 43 and 91. 14 CFR § 21.181(a)(1).
The most frequent policy violations arise from the failure of the insured to have an annual inspection as required or to comply with certain mandatory airworthiness directives. Operation without the required annual inspection constitutes a violation of the policy's airworthiness certificate requirement and results in denial of coverage. Ochs v. Avemco Ins. Co., 54 Or App 768, 774, 636 P2d 421 (1981), rev den, 292 Or 450 (1982); accord Potter v. Ranger Ins. Co., 732 F2d 742, 744 (9th Cir 1984) (whether insured knows that airworthiness certificate expired may be immaterial); Old Republic Ins. Co. v. Jensen, 276 F Supp 2d 1097, 1102 (D Nev 2003), aff'd sub nom Old Republic Ins. Co. v. Griffin, 185 F App'x 588 (9th Cir 2006); Threlkeld v. Ranger Ins. Co., 156 Cal App 3d 1, 202 Cal Rptr 529, 532-33 (1984) (failure to have annual inspection was basis for denial of hull coverage); O'Connor v. Proprietors Ins. Co., 696 P2d 282, 285-86 (Colo 1985) (failure to have annual inspection invalidated airworthiness certificate); Sec. Mut. Cas. Co. v. O'Brien, 99 NM 638, 662 P2d 639, 641 (1983) (failure to have an annual inspection caused the airworthiness certificate to lapse, which suspended policy coverage).
Failure to have the required annual inspection violates the policy and the regulatory requirement for a current and valid airworthiness certificate. Monarch Ins. Co. of Ohio v. Polytech Indus., Inc., 655 F Supp 1058, 1066 (MD Ga), aff'd, 833 F2d 1020 (11th Cir 1987) (relying extensively on O'Connor, 696 P2d 282).
Installing hand controls to control the rudder was a major modification that invalidated the airworthiness certificate, and therefore coverage denial was upheld. Bill Hames Shows, Inc. v. J.J. Taylor Syndicate No. 173, 642 F2d 179, 179-80 (5th Cir 1981), cert den, 454 US 1145 (1982).
A company pilot took a helicopter on a midnight joyride with fellow employees and companions at a time that it was still undergoing maintenance; incomplete maintenance and consequential lapse of the airworthiness certificate precluded coverage. Coren v. Puritan Ins. Co., 184 Ga App 667, 362 SE2d 380, 382, cert den (1987).
However, operations in excess of the permissible gross weight have been held not to invalidate the airworthiness certificate. United States v. Eagle Star Ins. Co., 196 F2d 317, 321-22 (9th Cir 1952), on reh'g on other grounds, 201 F2d 764 (9th Cir 1953); Thompson v. Ezzell, 61 Wash 2d 685, 695, 379 P2d 983, 989 (1963).
Most policies also exclude coverage for flights conducted under an FAA "waiver." The FAA grants a waiver when appropriate if a flight operation will fail to comply with the general terms of the regulations. Coverage under a specific waiver is normally available for a premium surcharge. If the underwriter has not approved the operation, the language is effective to deny coverage. Underwriters at Lloyd's of London v. Cordova Airlines, Inc., 283 F2d 659, 665 (9th Cir 1960); Jarman v. Exp. Ins. Co., 59 Tenn App 245, 439 SW2d 785, 790 (1968) (FAA ferry permit was a special permit within the meaning of the exclusion clause such that a crash during a ferry flight was not covered).
Insurance policies for amateur-built aircraft usually require the aircraft to be certified for flight by the FAA as a condition of coverage. In Avemco Ins. Co. v. Davenport, 140 F3d 839, 841-42 (9th Cir 1998), the FAA initially certified the insured's homemade aircraft for flight but required recertification approval if a major change was made to the aircraft. The insured made a series of changes to the fuel system, but eventually decided to reconfigure the system to its original state. The Ninth Circuit held that the insured violated the policy by failing to receive FAA approval after making changes to the fuel system. Davenport, 140 F3d at 842-43.
§ 24.4-2 Damage Due to Mechanical Wear and Tear
Aircraft hull policies exclude coverage for losses "due and confined to wear and tear and mechanical breakdown." There are few semantic problems with the interpretation of "due," but there is a split of authority over when a loss is "confined" to wear and tear and mechanical breakdown. Two cases have held that an engine failure is excluded from all-risk coverage. Little Judy Indus., Inc. v. Fed. Ins. Co., 280 So 2d 14 (Fla Dist Ct App), cert den, 284 So2d 220 (Fla 1973); Nashua Corp. v. Federal Insurance Co., 13 Av Cas (CCH) 17,363 (NH Dist Ct 1972) (absence of a locking device, which caused the failure of solenoid valve retaining screws, was a mechanized failure that was excluded from coverage).
In Cobb v. Home & Auto. Ins. Co., 86 Cal App 3d 673, 150 Cal Rptr 370, 372 (Ct App 1978), a jet turbine engine was destroyed due to the failure of one compressor blade on one stage. The blade traveled through the entire engine, damaging the rest of it. The insured sought coverage for the rest of the engine on the basis that the engine was modular in design and thus the policy exclusionary language should be construed to limit the denial of coverage to the failed disk, rather than the entire engine. The court rejected this argument. Cobb, 150 Cal Rptr at 374.
In Arawak Aviation, Inc. v. Indem. Ins. Co. of N. Am., 285 F3d 954, 955 (11th Cir 2002), a pilot negligently failed to secure an oil cap, which subsequently caused the engine to overheat. The engine was damaged. The insurer denied coverage because the policy excluded coverage for wear and tear to engines. The insured argued that the "efficient cause" of the overheating was the pilot's negligence in failing to screw on the oil cap properly, the policy provided coverage. Arawak Aviation, Inc., 285 F3d at 957. The court rejected this argument. It concluded that if the insured's contention was accepted, virtually any wear and tear to an engine could be attributed to poor maintenance and effectively render the exclusion meaningless. Arawak Aviation, Inc., 285 F3d at 957-58.
§ 24.4-3 Aircraft Used for Unapproved Purpose
Aviation policies always specify a purpose of use. Coverage may be lost if the aircraft is used for some other purpose, such as when the purpose of use for the aircraft was the "business or pleasure of [the named insured]" and the aircraft was used by an unrelated party to transport business associates to a trade show. Ideal Mut. Ins. Co. v. Limerick Aviation Co., 550 F Supp 437, 440-41 (ED Pa 1982).
Pleasure and business usage typically excludes coverage for any operation "for which a charge is made." In Cammack v. Avemco Ins. Co., 264 Or 287, 292, 505 P2d 348...
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