Welcome back to the Aviation Insurance Blog!
When an agricultural aviation operator gets an angry call from a customer, the last thing he wants is to worry about whether he has the proper liability coverage for the potential loss. There are different types of liability coverage available, so it is essential to understand which coverages are on your policy. This article will outline the basic types of liability coverages, some of the key exclusions and several available endorsements for an agricultural aviation insurance policy.
Liability is the condition of being legally liable to a third party for damages caused in whole or in part by you. Insurance policies respond in two ways when you become legally liable: 1) the policy pays the damages you are legally obligated to pay up to the coverage limit, and 2) the insurer provides a legal defense, until the limits of liability are exhausted. The legal defense costs are separate from the liability limits in agricultural aviation policies and can often incur much higher expenses than paying the actual claim.
There are two basic types of liability coverage on an agricultural aviation insurance aircraft policy: 1) Non-Chemical (Aircraft) Liability, for third-party bodily injury and property damage not by chemical application, and 2) Chemical Liability for damage resulting from the aerial application or chemicals. Many refer to Chemical Liability in slang as “drift insurance.” Chemical Liability has several options and unique exclusions.
The three chemical liability category options:
- Comprehensive Chemical – provides coverage for liability incurred out of the aerial application of seeds, fertilizers, or any chemical except Picloram. * (some policies also add after “except Picloram,” “or any defoliant or desiccants applied in dust form; or any inorganic arsenical compound, except arsenic acid used in liquid spray form as a cotton desiccant or defoliant.”)
- Restricted Chemical “RC”—provides coverage for liability incurred out of the aerial application of seeds, fertilizers, insecticides, or fungicides only (sometimes rodenticides are also included in the RC definitions).
- Excluding Chemical “XC”— provides coverage for liability incurred out of the aerial application of seeds and fertilizers only.
*Operators can purchase a write-back endorsement providing coverage for liability incurred out of the aerial application of Picloram (Tordon, Grazon).
In some situations, a farmer or contract issuer will require the operator to name them as an additional insured to the operator’s insurance policy. A Farmer, Owner, Grower endorsement is available to satisfy this requirement. This is not recommended unless it is required since the operator is sharing the same limit of liability with the additional insured. Since separate limits are not provided for each insured adding an additional insured dilutes the coverage.
Stay tuned for our next installment where we look at some key exclusions found in an aerial application insurance policy.