You’re a PUNC - Part 4 of 4 – CONTRACTS
Remember this acronym and nail down 85% of insurance coverage questions.
This is the last part of our 4 part series ‘PUNC’ (Pilots, Use, Named Insured and Contracts) capturing the four most important areas of aviation insurance that result in the largest percentage of claims denials. This month, we examine why it’s imperative to review all Contracts related to your aircraft.
The Importance of Contract Review
Many of us routinely sign rental car agreements, bank loan documents, and internet site use clauses without even a cursory review. Don’t make that same mistake when addressing contracts relating to your aircraft. The financial consequences are exponentially higher.
Here are some common agreements an aircraft owner might encounter:
- Purchase agreements
- Hangar leases
- Bank financing documents
- Aircraft leases [dry lease, time share]
- Replacement engine or parts leases
- Maintenance agreements.
Almost without exception, all these contracts contain clauses requiring you to meet certain insurance conditions. Ignore these or simply fail to act and you may find yourself in a nasty breach of contract lawsuit. Also, most of these agreements contain an indemnity clause which regardless of any insurance coverage you have, makes you responsible for all losses, covered or not.
Lawsuits are filed against you as owner of the aircraft. You may vaguely remember reading about insurance requirements in your contract. If you didn’t comply with the contractual requirements, you could be sued for breach of contract. If the agreement also contained an indemnification clause (which is common) you could be exposed to even greater liability.
Careful review of any indemnity clause along with the entire contract or agreement in question with a good aviation attorney is worth every penny. He/she can guide you through the process and suggest wording based on fair benchmark language common to the industry. The money you saved not taking this step is obviously never worth it after a loss.
When evaluating any contract related to your aircraft, contact your AssuredPartners Aerospace broker and your attorney during the contract review process (if not earlier). Remember the devil IS in the details, and contract review is an integral part of your risk management strategy.
Don’t wait! Email us or call 800.622.2672 today to help you navigate the aviation insurance market.
