FAR Violations and Insurance Exclusions

There is a common misconception among aircraft owners that in the event of an accident, insurance companies can deny a claim if there was a violation of any of the Federal Air Regulations (FAR’s). While this is not true, one should be aware there are some instances when violation of an FAR related to an accident can be grounds for a claim denial by the insurer.

FAR’s

The Federal Air Regulations are a body of rules specified and enforced by the Federal Aviation Administration (FAA) which govern all aviation activities in the United States. The FAR Airman’s Information Manual (AIM) is roughly 1200+ pages long. If insurance companies were able to deny a claim anytime there was an accident in which it was found an FAR had been violated, they would rarely be required to pay a claim. The truth is, it is very hard on any given flight NOT to violate some FAR.  An example regulation:

“CFR 91.171 VOR equipment check for IFR operations.

(a) No person may operate a civil aircraft under IFR using the VOR system of radio navigation unless the VOR equipment of that aircraft—

(1) Is maintained, checked, and inspected under an approved procedure; or

(2) Has been operationally checked within the preceding 30 days, and was found to be within the limits of the permissible indicated bearing error set forth in paragraph (b) or (c) of this section.”

It continues for another seven paragraphs, but you get the picture. This FAR is an example of a regulation that if not complied with would NOT exclude coverage under an aircraft insurance policy.

So what FAR’s if violated will void insurance coverage?

Aviation insurance policies are not created equal. Each insurer issues their own unique insurance contract, with some policies much broader than others. 

The pilot clause in many insurance policies is rife with opportunity to violate an FAR and the insurance policy at the same time. Consider the following wording direct from the pilot section of one such policy:

“When in Flight this aircraft will be piloted by the following pilot(s) provided each has a valid pilot’s certificate including a current and valid medical certificate appropriate for the flight and aircraft being flown:”

What constitutes a valid pilot’s certificate? If it’s an IFR flight and the pilot has not complied with the IFR currency requirements of FAR Part 61.57 (434 words long), it is technically a policy violation that could invalidate coverage in the event of an accident. The requirement for a “current and valid medical certificate appropriate for the flight and aircraft being flown” could present an opportunity for a FAR violation and claim denial. There are different classes of FAA medical certificates required for each type of Pilot Certificate (Airline Transport Pilot [ATP], Commercial Pilot, Private Pilot). Each medical certificate has a different expiration date and must be renewed to remain in compliance (ATP – every six months, Commercial every 12 months, etc.) 

Violation of an FAR involving the approved use of the aircraft is another example of a common FAR/Insurance Policy combination that can result in invalidation of coverage under your policy. Certain insurance policies contain approved usage clauses that can be restrictive. Under these policies, unless the policy has been endorsed to recognize it, an aircraft owner allowing a subsidiary company to utilize the aircraft and then gets reimbursed for full operating expenses - including reserve for overhaul, maintenance reserve, annual insurance premium, home base hangar fees, etc. - could unknowingly negate coverage in the event of a loss. Other common areas where the FAR/Insurance Exclusion combination can result in claims issues include an airworthiness certificate not in full force and effect, unlawful use of the aircraft, airworthiness inspections not current, etc.

Contrary to popular belief, insurance companies are not looking for ways to avoid paying claims. Quite the contrary, most try to find a way to pay even if it is a gray area. But stray far enough and they are left with no choice.  Most corporate aircraft policies if negotiated properly are very broad and will not contain many of the “gotcha” examples above. That doesn’t mean you won’t have to pay attention to compliance with the FAR’s. If you are one of the rare aircraft owners who has an accident, the legal eagles will use any violation of the FAR’s as “evidence” to a jury that you run an unsafe flight department.

Your insurance partner at AssuredPartners can advise you on these policies and help with your questions around FAR’s and other requirements. Contact AssuredParters Aerospace to discuss questions you might have and create a plan for those instances. Remember the time to ask questions is before a loss, not after.