Revisiting contractual liability
Just because you agree to something doesn’t mean your insurance policy follows suit.
As commercial operations go, it’s part of the day-to-day business to bid on jobs. For every job, there inevitably exists a laundry list of insurance requirements that the vendor wants you to comply with. Often, compliance with these requirements means coverage modifications are necessary. What if I sign a contract that obligates me to things outside the scope of my insurance policy? We’ve seen a significant increase in the need for contract/insurance provision review, and it’s something we don’t mind doing at all. In some cases, we can even negotiate the requirements down so you don’t have to incur any additional cost to comply!
Most contracts relating to your aircraft contain insurance and/or hold harmless indemnification clauses. Signing these agreements contractually obligates you to comply with the provisions they contain. If the insurance-related stipulations fall outside the scope of your coverage, the assumed risk becomes yours. Not good. All agreements, including Purchase Agreements, Bank Loan Agreements, Maintenance/FBO contracts, Hangar Agreements, Charter Agreements, etc., should be reviewed by appropriate legal counsel with a copy sent to your insurance agent to review from an insurance perspective.
Hold harmless agreements can be particularly troublesome. Part of our job as agents is to make sure your coverage is compliant, and if it’s not, to point out the deficiencies so there aren’t any unknowns, gaps, or gray areas. As always, it is best to send a copy of EVERY lease and contract to your agent. The last thing anyone wants is voided coverage on a technicality.