Flight to Quality

By Kelly, John | Risk Management, September 1995 | Go to article overview

Flight to Quality


Kelly, John, Risk Management


To risk managers who deal with myriad exposures, aircraft liability may seem to be a relatively unimportant issue. This is particularly true if the risk manager's company owns aircraft, since it is fairly easy to identify and manage the risks associated with the maintenance and use of owned aircraft.

But what about a company's exposure to non-owned aircraft? Organizations that rent or hire aircraft on an as-needed basis can be liable for accidents resulting from the operation of these craft. Examples of this "non-owned aircraft liability" include: a company that has an arrangement with several fixed base operators (FBOs) to charter aircraft to transport company personnel and clients; a real estate division of a large company hiring aircraft to photograph land sites it is interested in purchasing; a construction contractor that hires a helicopter to transport building materials to various project sites; and an agricultural cooperative that frequently hires aircraft crop dusters on behalf of its members.

Since the operation of non-owned aircraft can result in significant exposures, risk managers must identify and properly analyze their aircraft programs and develop an appropriate method for managing these risks. Accomplishing this requires a full understanding of the company's program for aircraft use.

As with automobile liability exposures, aircraft liability involves legal duties pertaining to ownership, maintenance and use. With respect to non-owned aircraft, the degree of exposure will depend on the total bodily injury and property damage exposure and the level of responsibility for the operation of the craft.

Identifying non-owned aircraft exposures is not always easy, particularly for global organizations that are engaged in many different types of business. In these organizations, the risk manager's ability to identify the company's exposure depends on his or her knowledge of company operations.

TECHNIQUES FOR MANAGING EXPOSURES

Once the risk manager has identified the loss exposure, he or she must choose an effective method to manage the risk. Contractual transfers may be an option. However, attempting to transfer aircraft liability risks by relying on the legal theory that the principal is not responsible for the negligence of an independent contractor can prove problematic since the courts may have a different viewpoint. Technically, a company could transfer this risk to the FBO or aircraft operator using a "hold harmless" agreement. However, this agreement is only valid if a court upholds the contract and the transferee (in this case, the FBO) is financially able to pay.

Should a company retain this risk? Due to the low frequency/high severity nature of the exposure, self-insured retentions are not likely to be an effective risk financing method. Retentions make sense if the losses are relatively low in severity and predictable -- which is not the case with aircraft exposures.

Insurance can be a more reliable method for transferring this type of risk. In most cases, FBOs will agree to include their customer as an additional insured under the FBO's insurance policy. Risk managers may decide to use this approach if they are comfortable with the coverages and liability limits provided and are able and willing to monitor the FBO's insurance program and subsequent policy renewals. This can become cumbersome, however, if the risk manager has to deal with several FBOs, each with a different insurance program.

Consider, for example, the case of a manufacturing company employee who is a licensed pilot and frequently uses his aircraft on company business. If his plane is being repaired, he may rent another aircraft. This can cause problems for the company if the employee is carrying inadequate coverage or is insured with an underwriter that is unwilling to add the company as an additional insured. Some FBO insurance policies do not provide additional insured status to renter pilots or provide only low limits. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Flight to Quality
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.