Aircraft liability insurance is a crucial aspect of aircraft ownership and piloting in Canada. Under the Canadian Aviation Regulations (CARs), liability coverage is required for every aircraft in Canada, and you must always carry proof of liability insurance on board the aircraft at all times There are two types of liability — public liability and passenger liability. Below we have included an overview of liability insurance and explored specific considerations for aviators, highlighting their insurance impact.
Public liability vs. passenger liability
Public liability provides protection if your aircraft damages the property of others and covers bodily injuries caused to people outside of your aircraft, whereas passenger liability is designed to respond to costs associated with injuries or death to passengers.
As an aircraft owner or pilot, you are extremely likely to be held legally responsible for the damages arising out of these events. Costs associated with injuries, medical treatment, loss of income, and court-awarded settlements can make the financial value of your aircraft seem small by comparison.
Your liability coverage is also designed to respond to the costs of retaining legal defense counsel if you face legal action from third parties as a result of an aircraft accident.
Meeting the minimum
The minimum amount of liability coverage you need will vary based on a few factors. For public liability, the legal minimum limits required depend on the aircraft’s maximum take-off weight.
When you are debating how much passenger liability insurance to buy, you will first want to make sure you have at least as much as is required by the CARs. This amount is derived by the number of passengers aboard the aircraft. However, this value should be seen as merely a baseline.
Further insurance considerations
To decide on a more appropriate coverage amount, you should try to make sure the limit of insurance can pay for the costs of any injuries sustained by passengers flying with you, as you will likely be held liable to pay for these damages. You should think about out-of-pocket medical bills, loss of earnings, and amounts awarded by courts for pain and suffering or death. For life-changing injuries, you need to consider the costs of continuing care and loss of earnings. Taking all this into consideration, one can see how easily costs and awards can quickly rise well above the CARs minimum liability limit requirements.
The amount of passenger liability insurance you should carry will also be determined by the number of passenger seats your aircraft has installed. If you are flying with a maximum of one passenger, you may feel comfortable with a lower liability limit. However, you should contemplate higher limits when flying aircraft that carry more passengers, as a greater number of passengers translates to a greater potential for passenger injuries.
You may also want to keep in mind who will be flying in your aircraft has the potential to effect how high of limits you should consider buying, such as US citizens and high-net-worth individuals. With US citizens, the US courts can be brought into the suit, regardless of whether the accident occurs in the US or in Canada. Due to the litigious environment in the US, awards are typically much higher. With high-net-worth individuals, awards would be increased as well because of the higher potential income lost to their families.
Instead of having separate policies for public and passenger liability, many insurers will offer policies with a combined single limit of liability. On these policies, a specified maximum amount can be paid out from a covered occurrence in any combination of passenger bodily injury, third-party bodily injury, or property damage.
Understanding and evaluating how much liability insurance coverage to buy is something an aircraft owner must consider thoughtfully. There are a number of factors and issues to consider that will help determine what an appropriate limit is for your aircraft and situation. If you are not sure about the right liability limit for you, speak with a qualified aviation insurance professional.