Renter's insurance and rental agreement

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DrunkenWoodpecker

Well-Known Member
Hello. I would like to raise couple of dim and obscure (at least for me) questions about airplane rentals.

Majority of aircraft rental agreements include a statement like this:

5. RETURN THE AIRCRAFT ... IN THE SAME CONDITION I RECEIVED IT, NORMAL WEAR AND TEAR EXCEPTED.
Here is example from a popular flying club in SFBA: https://docs.google.com/viewer?a=v&...vcmd8dGVtcGxhdGUtMnxneDo3ZGE2ZWUwYjg5MDhkMDVk
Question 1: legally, does this statement alone (without additional elaboration) create a renter's liability for all possible damages including bird strikes, hail, theft, perhaps even mechanical breakdown, or it applies to
renter's negligence (aka at-fault accident) only?

Question 2: if the former is true, many popular renter's insurance policies contain exclusions like this:
EXCLUSIONS
This Policy does not cover:
...
2. Bodily injury, property damage or aircraft damage:
a. liability you assume by contract or agreement
E.g. Avemco sample policy: https://www.avemco.com/Forms/NOPolicy.pdf
Does signing a rental agreement containing "IN THE SAME CONDITION" clause create an assumed liability
which the renter's policy doesn't cover? If yes, how to mitigate that? Does anybody have experience
in making the insurance companies remove the "assumed liability" exclusion from the policy?

Thanks
 
First, understand that the owner's insurance insures the owner. Unless you are named as an additional insured or the policy includes a waiver of subrogation - both of which are rare in rental situations - you can generally be held liable for any damage that is the result of your negligence. The language you quote above is a bit troubling. Non-owned insurance is only intended to kick in if you are at fault; hence, they include the exclusion for any liability you assume by contract or agreement - which could include damage that was not your fault. I would expect a court to attach the "IN THE SAME CONDITION" wording to the "NORMAL WEAR AND TEAR" provision. Under that circumstance, I don't think a non-owned policy provider would be able to deny coverage by stating that you assumed liability by contract or agreement. However, the operative part of this answer is "court." If you are in court there is obviously an issue and someone is going to decide what the contracts were intended to mean - after the fact. The paragraph creating the problem could be easily reworded to make it more clear. The rental companies should be willing to do this. I would think the last thing they would want to do is have you sign an agreement that could potentially negate your non-owned coverage (doing so might even violate some provision of their primary coverage). Plus, trying to collect from some poor renter pilot personally may not be worth the effort. So, the final word is, I can't say for sure. I don't think the clause as written would create more liability than is already there - but it could (it is possible). It is certainly worth having a discussion with the rental company and trying to get them to clarify their wording and intent. You should also send the agreement to your non-owned insurance carrier (before something happens) and get them to give you an interpretation - in writing. Good luck.
 
Yes, it's unfortunately a common provision in rental agreements to place responsibility for damage to the aircraft on the renter, without regard to fault, although many rental agreements limit the renter's no-fault liability to the deductible. Your examples are good ones.

The Avemco language is also very common in liability policies. Generally, the "liability you assume by contract or agreement" means liability you would not have without the contract.. So in your example, chances are that you renter policy would not cover the bird strike or other no-fault damage.

But notice that the Avemco policy specifically says it will cover up to $1,000 of the owner's deductible without fault. That's probably due to the very common practice of rental contracts to limit the liability of its renters to the deductible. But it's also a pretty good clue to what the exclusion means.
 
Thanks a lot for your detailed answer. The suggestion to send the agreement to the underwriter sounds
really helpful! I guess most renters have already heard about subrogation in at-fault accidents and protect
themselves with renter's insurance. However, more subtle things like liability in not-at-fault accidents may
be surprising, and I believe that open discussion of these issues will benefit flying public, that's why I'm
bringing it here.
There is even more interesting case of rental agreement I found at AeroDynamic Aviation in SFBA
(http://www.aerodynamicaviation.com/documents/AeroDynamic Renters Agreement.pdf)
In particular, on page 4:
"If damage occurs to the rented aircraft, renter will be liable for the first US $20,000.00 in damages
however caused, unless caused by renter’s negligence or by breaking the terms of this Agreement in
which case renter will be responsible for all the damage."
Based on what I learned so far, the renter's insurance won't pay for not-at-fault accidents and the
renter will always be liable to pay for something like a bird strike out of pocket, up to 20k. Doesn't
sound like a good deal to me.
However, there is even more interesting provision in rental agreements which I would like to bring up:
7. Indemnify and hold SCFC harmless from any and all loss, damages, and attorney’s fees resulting from
operating SCFC aircraft in my possession and control.
(taken from San Carlos Flying Club agreement at http://sancarlosflight.com/pdfs/SCFC_Membership.pdf,
but other nearby clubs contains exactly the same wording)
Clearly, the intent is to deflect any lawsuit against the club back to the renting pilot. I wonder how dangerous
this is for the renter pilot? And more specifically, if somebody sues the club for damages and wins, and the
club in turn request the pilot to compensate whatever it paid (even if the club 100% at fault!), will the renter's
insurance decline coverage because this is exactly a liability assumed by the agreement?
 
Your exactly right when you say it doesn't sound like a good deal. Remember, you need to read these rental agreements because they are just that - agreements. If you agree to something in such a "contract" your options for avoiding liability - that you freely agreed to assume - are going to be much more limited. The better option is to go somewhere else or have the provision changed to one you can live with. In your final question, I tend to agree that the renter may be assuming liability that will not be covered by renter's insurance. That said, if there is an event, each and every one of the clauses in these agreements would need to considered in light of the facts of the case and the jurisdiction under which the contract is going to be interpreted. For instance, most indemnification and hold harmless clauses are not absolute. There are some things you generally cannot waive such as damage as the result of gross negligence and/or willful/wanton conduct. So, again, read your agreement. If you don't like it, don't sign it. And, just as an aside, don't automatically toss in the towel on bird strikes. I have seen insurance companies pay for bird strikes and, generally, they do not seek to subrogate.
 
The perhaps surprising thing with some of these is that sometimes the FBO/school/club owners have no idea what they mean either. You might very well get a "deer-in-the-headlights" look if you turned to the manager of Aerodynamic and said, "you mean if there's a bird strike, you expect me to pay for it isyaed of your insurance?"

BTW, I don't think the bird strike would be subject to subrogation; stranger things have happened but I can't imagine an insurance company successfully suing a pilot on a fault theory in the typical bird strike scenario)
 
I agree, in case of a bird strike its unlikely that the insurance subrogates (but they will still have the right since the renter explicitly promised to cover not-at-fault losses!)

The problem is FBO who self-insure or have high deductibles. If there is no insurance, there will be no deductible to cover. Also, Avemco convers only 1k in deductible (AOPA is better, up to 5k).

Anyway, its good to understand such pitfalls; perhaps I'll be able to point out to the club managers such issues, in case they have different expectations about rental insurance.
 
DrunkenWoodpecker said:
I agree, in case of a bird strike its unlikely that the insurance subrogates (but they will still have the right since the renter explicitly promised to cover not-at-fault losses!)
Click to expand...
Technicality - it would not be "subrogation" in that case; it would be a suit by the FBO to recover it's deductible under the contract.
 
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