VOL. 41 NO. 4 - winter 2016
THE BINDER 2017 annual AIA conference in beautiful San Diego at the hotel del coronado
Introducing a new
Aviation Insurance Core Principles and Concepts
how to create satisfied customers
ARE YOU? AOG Protect is an insurance policy which indemnifies the aircraft owner or operator, covering part of the additional cost of a replacement aircraft in the event of an AOG incident.
Protect customer relationships Maintain operating profit Stand out in a competitive market
IN THIS ISSUE Editor Nigel Wright
XL Catlin email@example.com
claims division HOW TO CREATE SATISFIED CUSTOMERS
Agent/broker’s division report INSURING OLDER PRO PILOTS: HOW OLD IS TOO OLD?
AIA BOARD OF DIRECTORS
aia EDUCATION OPPORTUNITY UPDATE
Attorney’s division report
AVIATION INSURANCE CORE PRINCIPLES AND CONCEPTS WEEKEND COURSE
2017 AIA CONFERENCE INFORMATION
aviation history BIRTH OF AN INDUSTRY
AIA CII EXAM AWARD WINNER
CONGRATULATIONS TO LAWRIE CAPP
The ideas and opinions expressed by authors of articles published in The Binder are wholly their own and do not necessarily represent those of the Aviation Insurance Association. The articles are not provided as legal advice.
Published by the Aviation Insurance Association 7200 W. 75th St. Overland Park, KS 66204
david sales - Ed Broking LLP
am hoping there will be more aircraft accidents in 2017!!â€™ I heard that bizarre and alarming comment uttered recently at a social event in the City of London. Who would say such a shocking thing? A terrorist? Some deranged maniac? A psychopath? Actually, none of these, it was someone that makes their living from the aviation insurance industry; it could have been an underwriter, a broker, a lawyer or perhaps an adjuster. Of course, I should make it absolutely clear that the aircraft accidents hoped for would be large hull losses where everyone involved walks away unscathed!. The assumption being that a series of sizeable hull losses would immediately see large amounts of cash exiting the market and this could potentially lead to the market turning, bringing, at last, an end to the soft aviation insurance market conditions. In the meantime, those market conditions continue to benefit greatly the insurance buyers, but represent an ongoing and significant challenge for underwriters and brokers alike. Itâ€™s all a bit worrying, as a market participant. I get lost in the varying amounts of global premium estimates and loss figures. But the one thing that all commentators seem to agree on is that the profitability of the market is being squeezed. Insurers are seeing their loss ratios worsen and the brokers are seeing their commissions markedly reduce. In London, we are now just emerging from our busy period. In the last quarter of 2016 many major risks renew and the premium volume represents roughly two-thirds of the annual market premium. What happens during this time tends to define the direction of the market for the following year. In the lead-up to this period, there were a number of negative articles published about the apparent dismal state of the market.
‘Turbulent times for aviation sector’ said one in an influential insurance journal. This article kindly made reference to our 2016 AIA conference and in particular quoted XL Group CEO Michael McGavick telling our conference that the ‘rates currently being charged for risk are not sustainable’ Another one had the headline ‘More casualties expected in aviation market as rates and underwriting discipline remain ‘uncorrected’’ Anyway, the impression given to the world at large is that the worldwide aviation market, is hell-bent on self-destruction. So, if all eyes were not already on the health of the aviation market they certainly are now and even the most aloof and uniformed management or capital provider cannot fail to be aware of the substantial challenges that lie ahead. Yet still more new entrants are coming into the market! What opportunities do they see that the rest of us are blind to? What light do they see at the end of the tunnel? What pot of gold do they see at the foot of the rainbow? When asked, most new markets will talk about their differentiator as being their innovative and flexible approach. Well good luck to them, I wish them all well!
fully we will have something positive to announce shortly. It’s not just networking that we are focusing on, we are constantly looking for ways we can improve the benefits of membership. To this end, we are currently undertaking a thorough review of all aspects of the membership value proposition. Leading this initiative is Matt Rowley of Berkley Aviation and his working party and I thank them for all of their hard work and deliberations. However, this is not a closed discussion and we all welcome input from you. So please feel free to contact me or any other AIA Board member. I am pleased to say that arrangements for our 2017 conference in San Diego are well advanced. The venue, the iconic Hotel Del Coronado, is magnificent. I am delighted that our program of keynote speakers is shaping up to be as impressive as ever. We have had some truly enthralling and inspirational lunchtime speakers over the past couple of years and the bar continues to rise. I am delighted that at our conference in San Diego, our lunchtime speaker, will be Burt Rutan, the legendary aerospace engineer and entrepreneur. In the past, whenever the Board has had a brainstorming session regarding who we could approach to speak, Burt Rutan is always at the top of the list. For one reason or another he has been unable to appear previously so we are delighted that we have finally got our man!
I personally think that one of the key secrets of success is the strength of relationships, particularly, in challenging times such as these.
I want to close by wishing everyone a Happy and Prosperous New Year.
It is easy in the London market to ‘network’ as we can’t help but fall over one another within the insurance location of the City, as most of us work in or around Lloyd’s.
I know that this is a time when many people are contemplating making New Years’ resolutions. To keep my doctor happy, mine for 2017 are exactly the same as every other year. Lose weight, exercise more and cut back on any nonhealthy activities! Hopefully, my resolve in 2017 will, this time, last until at least the second week in January!
But I guess that it is not quite so easy to nurture strong relationships elsewhere. The AIA Board is aware of this and we are actively looking at ways to provide more networking opportunities outside of the main conference. Hope-
Insuring older Pro Pilots how old is too old?
dan lundy - LUNDY & CLARK INSURANCE GROUP
s the long predicted pilot shortage has arrived, more and more professional pilots are flying well beyond traditional retirement age. While these older pilots possess invaluable knowledge, experience and wisdom, at what point do the inevitable physical and pyschological changes associated with aging become a concern for aviation underwriters? This is a question not easily answered. The well publicized mandatory retirement age increase for U.S. airline pilots from 60 to 65 is telling to some degree. People are generally living healthier lives than before, life expectancy is increasing, and the mental acuity of 60+ year old pilots can be quite sharp. In FAR part 91 and 135 operations there are no regulations that require retirement at any certain age. As long as a pilot can maintain an FAA first or second class medical certificate and successfully complete the required training and proficiency checks, there is absolutely no regulatory limit to how long they can fly in the U.S. It is noteworthy, however, that ICAO rules do not permit pilots age 65+ to conduct international commercial operations, including part 135. Regulations aside, what are the insurance underwriting guide-
lines for approving older pilots? Based on underwriter feedback it appears that while there is no real consistency in what age a pilot will be approved or disapproved, age 70 and above will certainly result in additional scrutiny. Several underwriters commented that pilots who have been flying for an insured account a number of years will typically maintain their approved status into later years than the same aged pilot on a “new business” account. As an industry, should we consider some level of standardization? What is expected of the broker community with regard to the insured’s versus the underwriter’s expectations? It is not a pleasant conversation when advising a valued insured that his/her trusted “senior” pilot must now fly as second in command only, or worse yet, not at all. Some corporate flight departments have established mandatory retirement ages for flight crew, but this does not appear to be the norm. The issue of possible age discrimination for employers can also complicate the situation where there is no regulatory basis to mandate a specific retirement age. The EEOC has long taken the position that age is not an appropriate mea-
agent/broker division report
sure of a pilot’s qualifications, and that a mandatory retirement age not required by law violates the federal Age Discrimination and Employment Act. That said, in 2014 the EEOC’s lawsuit against ExxonMobil for discriminating against pilots for forcing them to stop flying for the company at age 60 was dismissed. The topic of mandatory retirement for Part 91 and 135 operations continues to be discussed by trade groups and the FAA. The AOPA Air Safety Institute (ASI) published a report titled “Aging and the General Aviation Pilot”, which broadly summarizes a number of research studies conducted between 1990 and 2010 on the effects of aging on pilots. The conclusion, or “big picture” of the ASI report follows: “The studies and reports examined represent a number of different approaches to the question of aging in the cockpit. Vision, memory, cognition, accident involvement, airmanship, and health have all been investigated across various segments of the pilot population. Yet for all of the work that has been done, what is perhaps most striking is the relative absence of exact findings. The questions seem to resist efforts at analysis. Indeed, it’s tempting to conclude that the question of aging may be a red herring—that, as the saying goes, “There is no there there.”
confidently at 90. In short, age matters. But it’s not all that matters. The real lesson seems to be that chronological age, for all its convenience as shorthand, is not a terribly good lens through which to examine a particular pilot’s ability to function safely in a given capacity. In many studies, individual differences between pilots of the same age were significantly larger than the differences between age groups themselves. And despite all the studies that, on the surface, seem to speak grimly of the performance of older pilots, we are presented every day with strong evidence that age is only one factor among many, and that “safety” is not a line but a gradient. Aircraft piloted by men and women over the age of 70 are not falling out of the sky with any great regularity. The airline accident rate has not increased since the Age 60 Rule became the Age 65 Rule—if anything, it has fallen. In short, the key insight of all the research, for our purposes, seems to be that different pilots experience the aging process differently, and compensate for it (or fail to) in a variety of different ways. There are, no doubt, certain commonalities among older pilots, but in the broad view it seems that individual factors—experience, proficiency, physical fitness, genetics—come together to play a much greater role than chronological age in determining a given pilot’s ability to fly safely on a given day”.
This overstates things. The situation is extraordinarily complicated from a research standpoint, and there’s ultimately no getting around the fact that we are mortal beings. All of us eventually go through a period of decline. The precise nature and steepness of that decline vary tremendously— there are pilots of 60 years whose “true age” is closer to 90, and vice-versa—but it always comes; and as with many things in life, we are talking about a bell-shaped curve. Only a lucky handful of us will still be flying safely and
Pilot proficiency is best evaluated by those who directly observe the flying skills and judgment of the airman, whether it’s a simulator instructor, check airman, FAA examiner, chief pilot or fellow crewmembers.
So this leads us back to the underwriting question of how old is too old? How long does the positive impact of greater experience offset any negative effect of aging?
Let’s take a look at a typical pilot history form. The insurability of a pilot is based on a number of factors including license/ ratings, medical certification, overall experience, recency of training and experience, any history of accidents, violations, etc. and of course, age. When an unblemished PHF of a highly experienced, current and qualified pilot comes across an underwriter’s desk but the year of birth is in the 1940-50 range, should that pilot automatically be deemed an unacceptable risk? Who is most qualified to make the pilot approval/disapproval decision? Underwriters will typically say, “we look at approving older pilots on a case by case basis,” but in fact they’re looking at a form and not at the pilot. Pilot proficiency is best evaluated by those who directly observe the flying skills and judgment of the airman, whether it’s a simulator instructor, check airman, FAA examiner, chief pilot or fellow crewmembers. It is incumbent on the aviation insurance broker to query the insured’s flight department manager to clearly understand their policies with respect to utilizing and monitoring older pilots. This should include procedures related to crew pairing, medical certification and proficiency standards. The broker is best positioned to gather the relevant information on each pilot, even beyond the details on a PHF, to present to underwriting to assist in this important decision making process. In closing, let’s keep in mind that as we take a hard look at professional pilots nearing the end of their career, we also have the challenge of underwriting the young, inexperienced pilots just beginning their career who will be replacing them. The pilot shortage is not going away anytime soon. Until there is regulatory guidance for 91/135 corporate pilots, it would serve our clients well if the broker/underwriter community could establish a set of standards to use in the approval process of professional pilots over 65.
Daniel Lundy is co-owner of Lundy & Clark Insurance Group, an aviation specialty brokerage based in Fort Lauderdale, FL. Mr. Lundy holds an ATP license with seven turbojet type ratings and has over 11,000 flight hours.
ATTORNEY’S DIVISION REPORT Deborah elsasser - Clyde & Co US LLP
t’s hard to believe that 2016 is rapidly coming to a close. After a tumultuous presidential election, many of us are waiting to see how the new administration’s economic and regulatory policies will impact the aviation industry. The transportation and defense sectors are hopeful that the new administration will follow through on easing regulations, freeing up military spending and investing in infrastructure projects, including, airport improvements, while manufacturers ponder the fallout of potential renegotiation of trade agreements. No one really knows what changes and challenges lie ahead, but we will do our best to keep our members up to speed on relevant developments. For now, we can expect industry programs that have been in the works for years to continue, at least in the short term. That brings us to our update on NextGen. Last month, the Office of Inspector General (“OIG”) issued a report on the costs, progress and benefits of the FAA’s NextGen transformational programs. The audit was performed pursuant to a request by the Chairman and Ranking Member of the Senate Committee on Commerce, Science, and Transportation to update the OIG’s April 2012 report on the NextGen program. In the April 2012 report, the OIG reported that the FAA had failed to establish total costs and schedules for the six transformational programs that are expected to provide the platform necessary to support NextGen, and that the FAA’s progress in implementing the programs was limited by a lack of finalized program requirements. In response to that report, the FAA made certain changes and had approved costs and schedules for the programs. However, in this most recent audit, the OIG found that the FAA still has not identified total costs or schedules, and has not quantified anticipated benefits of the programs. The report notes that many uncertainties exist as to how the programs will improve the flow of air traffic and reduce agency operating costs. The report further notes that the FAA has not fully identified the end-state for the programs, and the lack of a uniform approach to the programs has made it difficult to evaluate progress. The OIG concluded that while the FAA has made progress since the 2012 report, the FAA must better define program end-states, determine total costs and provide plans for delivering the expected benefits of NextGen initiatives. The OIG therefore recommended that the FAA “develop and implement Agency-wide guidance for a uniform approach to segmentation that provides a common format to aid the management of multiple, complex, and interrelated programs needed to achieve NextGen capabilities for transforming the NAS.” The FAA did not concur with the OIG’s recommendation and disagreed with some of the statements in the report. The FAA responded that the OIG’s recommendation is unnecessary because good project management is being employed to define and manage the cost, schedule and performance goals of the project and that the FAA has demonstrated the benefits for each segment of the program. The OIG’s report and the FAA’s response can be found at www.oig.dot.gov/library-item/33888.
SAN DIEGO HOTEL DEL CORONADO APRIL 29 - MAY 2, 2017 REGISTRATION OPENS IN JANUARY
The Aviation Insurance Association is THE place to make the connections that matter. In addition to the knowledge you will gain from the education sessions, the available networking opportunities are what truly makes this conference the place to be for those working in the aviation insurance industry. This is the one time per year when all facets of the industry are together at once. It is your opportunity to renew old acquaintances, build new relationships and your business. The 2017 AIA Annual Conference is the best venue to trade experiences, create business partnerships, and discuss the current state of the industry from each segment of the association. Network with your peers over cocktails during the opening reception and learn what is to come for the aviation insurance industry during the general education sessions. Save the dates for the 2017 AIA Annual Conference and you will be sure to see that AIA continues to be THE conference for those in the aviation insurance industry!
KEYNOTE SPEAKERS Mark Baker President AOPA
Mark Baker is a longtime general aviation (GA) pilot and only the fifth president in the 75-year history of the Aircraft Owners and Pilots Association (AOPA). Prior to his appointment at AOPA, Baker served in numerous senior executive roles, including chief operating officer at Scotts Miracle -Gro Company, president and CEO of outdoor outfitter Gander Mountain Company, and chief merchandizing officer and executive vice president for The Home Depot. Most recently, he served as CEO of Orchard Supply Hardware Stores Corp., a leading retailer of home improvement and garden products.
Burt Rutan Aerospace Legend
Aerospace entrepreneur and Virgin Galactic spacecraft designer Burt Rutan was described by Newsweek as “the man responsible for more innovations in modern aviation than any living engineer.” A bold visionary with a passion for the advancement of technology, he founded the aerospace research firm Scaled Composites and was named one of “the world’s 100 most influential people” by TIME. Rutan designed the legendary Voyager, the first aircraft to circle the world nonstop without refueling. He also created SpaceShipOne, the world’s first privately funded space craft, which won the $10 million Ansari X Prize, offered in an effort to spur the development of affordable space tourism. Rutan is currently working on two projects: the Stratolaunch — part airplane, part spaceship — with Microsoft co-founder Paul Allen, and the SkiGull, an amphibious aircraft that runs on the same gas we use for cars and boats.
Scott Shappell Professor and Chair,
Department of Human Factors & Systems Embry-Riddle Aeronautical University
Dr. Shappell is currently a Professor and Chair of the Department of Human Factors and Systems at Embry-Riddle Aeronautical University. Before joining the faculty at ERAU in the fall of 2012, Dr. Shappell was professor of Industrial Engineering at Clemson University from 2005-2012. Before that, he was the Human Factors Research Branch Manager at the Civil Aerospace Medical Institute. In addition, he has served over 16 years in the U.S. Navy as an Aerospace Experimental Psychologist. He has published/pre sented well over 200 papers, books, and presentations in the fields of accident investigation, system safe ty, spatial disorientation, sustained operations and fatigue. Dr. Shappell received a B.S. in psychology (1983) from Wright State University graduating Summa Cum Laude with honors in psychology and a Ph.D. in Neuroscience from the University of Texas Medical Branch in 1990.
FOURTH SPEAKER TBA
SCHEDULE AT-A-GLANCE 10
SATURDAY, APRIL 29 7:30 a.m.–2 p.m. 8:30 a.m.–2:30 p.m. 2–5 p.m. 4–5 pm. 5:30–7 p.m. 5:30–6 p.m. 6–7:30 p.m.
AIA Golf Tournament and Lunch for Golfers AIA Sporting Clay Tournament Registration Desk open Education Committee Meeting Quick Pick-Up Registration Open New Member/First-Timer Reception Opening Reception
SUNDAY, APRIL 30 7 a.m.–4 p.m. 7–8 a.m. 8 a.m. – 5 p.m. 8–9 a.m. 9–10 a.m. 10–11 a.m. 11 a.m.–Noon Noon–1 p.m. 1–2 p.m. 2–3 p.m. 3–4 p.m. 4–5 p.m.
Registration Desk open Breakfast with Exhibitors Continuing Insurance Education Sessions Inadequate Liability Limits: Impacts on Insureds, Brokers, Claimants & Insurers Jonathan M. Stern, Schnader Harrison Segal & Lewis LLP So Much is Riding on Your Tires Kimberley Stufflet, Preferred Aviation UW “Any Doctor’s Appointment You Walk Away From…” Mitchell A. Garber, Engineering Services, Inc. Insuring and Defending Public Entities Alan Farkas, SmithAmundsen Aerospace Michael Calhoun, Aon Risk Solutions Lunch Worldwide Coverage: International Aviation Operations and Insurance in 2017 Glen Vallach, USAIG Mitchell Young, USAIG How Drones Benefit Aviation and What You Need to Know Ted Dunlap, RTI Forensics Mark Dombroff, Dentons Ann Taylor, Locke Lord Art Dawley, Wyvern Insuring a US Registered Aircraft to a Foreign Operator Jim Gardner, The James A Gardner Company, Inc. Jeff Towers, TVPX Vic D’Avanzo, USAIG Ken Forsyth, Crawford Aviation Is your Insurance License in Jeopardy? Frank Kimmel, Kimmel Aviation Insurance Agency David McCredie, McCredie Insurance Agency Todd McCredie, McCredie Insurance Agency John Howard, Silver Eagle Agency
MONDAY, MAY 1 7 a.m.– 3 p.m. 7:30–8:45 a.m. 8–9 a.m. 9 a.m.– 12:30 p.m. 9–9:15 a.m. 9:15–10:00 a.m. 10 –10:15 a.m. 10:15–10:30 a.m. 10:30–11:10 a.m. 11:10 a.m. –12 p.m. 12 –12:15 p.m. 12:15 – 1 p.m. 1 – 1:45 p.m. 2–4 p.m. 6–9 p.m.
Registration Desk open Past Presidents’ Breakfast Breakfast with exhibitors General Session President’s Welcome TBA CAIP/CAIP Gold Award Break Mark Baker, President, AOPA Scott Schappell,Ph.D., Embry-Riddle Aeronautical University Pinnacle Award Lunch Luncheon Speaker – Burt Rutan, Aerospace Legend DIVISION SESSIONS Attorney/Claims | The Invisible Hijacker - Robert J. Williams, Schnader Harrison Segal & Lewis Agent/Brokers | Queuing Up at AIA Monday Night Party – Beach Party
TUESDAY MAY 2 7 a.m.–8 a.m. 8 a.m.–12:30 p.m.
Breakfast Continuing Legal Education sessions
8–9 a.m. 9–10 a.m. 10–10:15 a.m.
False Claims Act Issues Ed Glady, Sanders & Parks, P.C Coverage Issues Relating to Claims Under The False Claims Act Stephen Wood, Chuhak & Tecson Morning Break
10:30–11:30 a.m. Witness Preparation: Achieving Goals within Ethical Boundaries Moderators: Lisa Savitt - The Axelrod Firm, P.C. and Leann Capps – Polsinelli LLP Panelists: Elizabeth A. Vasseur-Browne – Cooling & Herbers Michele C. Sears - Wilson Elser Moskowitz Edelman & Dicker LLP Aileen Camacho - Holman Fenwick Willan LLP 11:30 a.m.–12:30 p.m. TBA
RATES AND FEES Registration Fees:
Through March 1
After March 1
AIA Member $625 $675 Nonmember $950 $1000 One-Day Pass $550 $550 Speaker Rate $450 $450 AIA Member Tabletop $850 $950 Nonmember Tabletop $925 $1,025 Booth Personnel/Member $550 $600 Booth Personnel/Nonmember $875 $925
Add-on and Special-Event Fees Guest Meal Package $275 Guest Opening Reception $75
Guest Monday Night Party
Continuing Insurance Education Credits
Continuing Legal Education Credits
Golf $275 Golf Rental Clubs $50 Sporting Clays Tournament $190
Answers to puzzle on page 24. 1 9 11 15
Lawrie Capp Earns AIA Prize for CII Exam The Aviation Insurance Association Education Foundation is pleased to award Lawrie Capp the 2016 AIA Education Foundation prize for earning the highest score on the CII exam. The prize is ÂŁ1000 and is only open to UK candidates employed in aviation insurance who have passed unit P91. In addition to the CII Prize, the Foundation provides four (4) $2,500 scholarships each year to students who are currently enrolled in an accredited undergraduate or graduate degree program and who have completed or are completing an internship program within the aviation insurance industry. The scholarship was formed in order to help him or her alleviate financial strain while expanding their professional knowledge and education. If you have interns who you feel would benefit from this scholarship, please complete the application located on the AIA Website or contact Mandie Bannwarth at AIA Headquarters at 913-627-9632.
THE BINDER CALL MANDIE BANNWARTH AT (913) 627-9632 FOR ADDITIONAL INFORMATION
Create Satisfied Customers
Michael Grady - U.S. Specialty Insurance Company
etting a new aircraft properly registered and insured can be tedious tasks for a new aircraft owner to complete. They stand in the way of satisfying the principal desire to begin flying operations without delay. As a result, many owners rush through the process, relying on aircraft brokers and insurance agents to guide them, to make it as painless as possible. Sellers of aircraft and insurance are more than willing to oblige as that is how we make our income. However, sometimes the rush to placate an impatient customer results in incomplete or improper descriptions of the risk which can lead to problems during the claims process in the unfortunate event of an accident or claim. Many of these problems could be avoided by objective and critical analysis during the purchase, registration and application process. Is the Named Insured an individual, a partnership, a LLC or Corporation? The idea of protecting personal assets appeals to everyone regardless of your level of wealth. It is simple and inexpensive to form an LLC in most States. However, the in-
sulation that an LLC provides depends on whether there is a legitimate business purpose for the LLC and whether it functions as a business entity. The IRS and the courts look with disfavor on businesses that take deductions but never show a profit or whose only articulable purpose is to shelter an asset. Hastily conceived and formed LLCs can create more problems than they solve and these problems often remain unidentified until after a loss occurs. Unless there is a lease or other similar agreement that is identified to the insurer, the aircraft should be insured as it is registered. From time to time, an individual will purchase an aircraft and take a bill of sale as an individual. The aircraft gets registered as it was purchased because the FAA Aircraft Registry will not accept an application for registration that does not match the bill of sale. The owner then decides that he wants to shelter the new asset and forms an LLC and purchases an aircraft insurance policy in the LLCâ€™s name but does not change the aircraft title information to match. In this example, the
...sometimes the rush to placate an impatient customer results in incomplete or improper descriptions of the risk which can lead to problems during the claims process in the unfortunate event of an accident or claim. aircraft owner is not insured and the Named Insured under the policy has no insurable interest in the asset. This is an unpleasant fact to discover after a loss occurs. Corporations are distinct legal entities on purpose and title and interest provisions are standard language in property and casualty policies. If our customers are contemplating the formation of a corporation to protect their asset(s), they need legal advice to do it right. We can’t give them legal advice but we can let them know they need it. Clues an agent may see that suggests a hastily conceived LLC are premium payments drawn on personal accounts or requests that refunds or credits be made payable to an individual as opposed to the corporate entity. Insurance underwriters cannot properly assess the acceptability of a risk or the premium to charge without a clear understanding of who or what the Named Insured is, who the aircraft owner is, knowledge of where the aircraft is based, how it is stored, the qualifications of the pilots who will be flying it and the nature of those operations. Full disclosure and properly completed insurance applications protect every party in the transaction for insurance. It allows the presumptive insured to give full and complete information so as to ensure the risk is properly rated and to ensure all contemplated exposures are reviewed and discussed. The agent has an opportunity to give the customer the benefit of their considerable experience and it allows the insurer to properly evaluate and rate the risk which makes it much more likely there will be no coverage issues if an accident occurs. Diligence on everyone’s part makes for satisfied customers especially when there are no surprises during the claims process.
in one of the largest studies every conducted on what customers want. Customers’ needs vary depending on the type of business. However, Gallup determined that there are four expectations bearing on customer satisfaction that are remarkably consistent and they are hierarchical. The first two levels are prerequisites and achieving them will only prevent active customer dissatisfaction. The first two levels are accuracy and availability. If you provide a bill or other information it must be accurate. If a customer has a question or needs service, you must be available and empowered to help. If you can’t accomplish these two things, there is nothing you can do to get to the elements that produce the strongest feelings of customer satisfaction and loyalty. The next two levels are partnership and advice. Partnership is probably the most intuitive and very simply means that you take an active interest in your customer’s cause or business by placing yourself in their shoes. Advice is a value added service. It is service above and beyond what the customer reasonably expects. You share your knowledge and experience with your customer to further their interests. Such knowledge sharing has perceptible value that a customer is unlikely to forget at renewal. Insurance agents and underwriters have many opportunities to achieve customer satisfaction with an understanding of these principles. Claims personnel are exposed to seemingly every conceivable type of exposure and have many opportunities to share what they have learned with our customers too. Unfortunately, our opportunities usually come after an accident has occurred. If
The Gallup Organization interviewed over a billion customers
You share your knowledge and experience with your customer to further their interests. Such knowledge sharing has perceptible value that a customer is unlikely to forget at renewal. I had the opportunity to offer a few suggestions before a loss I would talk about record keeping. When I renew my aircraft insurance policy, I place a copy of my pilot certificate, current medical certificate, latest biennial flight review endorsement and the aircraft logbook page showing the current annual inspection in the folder with the policy. If something bad happens, my survivors will not be at a loss to provide that information on my behalf. I update the copies as the certificates and endorsements are updated. I leave my pilot logbook and aircraft maintenance records at home. They are too valuable to carry around in the aircraft. We see cases every year where the aircraft is destroyed and all the aircraft and pilot records along with it. This is not a position most of us would knowingly put our survivors in. If you are concerned about a ramp check, place a copy of documents showing pilot and aircraft currency with the other aircraft documents and update them once a year. You can make the originals available for inspection, at a reasonable time and place, if necessary. Your claims personnel are often pilots, mechanics and aircraft owners in addition to the experience we have gained in handling thousands of claims. Take advantage of this valuable resource. We enjoy helping people. We take our fiduciary responsibility very seriously and take great satisfaction in helping our business partners and insureds when they need us most.
During his career, Michael has conducted field investigations involving all types of accidents, led catastrophe response teams and acted as an expert witness with respect to accident reconstruction and insurance matters. He holds a Commercial Pilot Certificate with an Instrument Rating and a Mechanic Certificate with Airframe and Powerplant Ratings. He received an Associate in Applied Science Degree in Aircraft Maintenance Technology and a Bachelor of Science Degree in Aviation Technology. He also completed a program certificate in Aviation Safety and Security from USCâ€™s Viterbi School of Engineering. Michael is currently an Assistant Vice President and Claims Manager for U.S Specialty Insurance Company. He is a member of the International Society of Air Safety Investigators and holds the Associate in Claims designation from the Insurance Institute of America.
board of directors PRESIDENT david Sales
Ed Broking LLP firstname.lastname@example.org
vice PRESIDENT Paul Herbers
Cooling & Herbers email@example.com
SEcretary James Gardner
The James A. Gardner Company, Inc. firstname.lastname@example.org
Treasurer Christopher R. Zanette
ZANETTE Aviation Insurance Service, Inc. email@example.com
Director Agent & Brokers Division Luke Uithoven
Kimmel Aviation Insurance Agency, Inc firstname.lastname@example.org
Director Attorneysâ€™ Division Deborah Elsasser
Clyde & Co US LLP email@example.com
Director- elect Attorneysâ€™ Division nicole wolfe stout, esq, Strawinski & Stout, P.C. firstname.lastname@example.org
Director Claims Division Steve Teller
Aviation LS email@example.com
Director International Division Bruce Carman
Cathedral Underwriting Ltd firstname.lastname@example.org
Director Reinsurance Division Ian Wrigglesworth
Guy Carpenter & Company Ltd email@example.com
Director Underwriters Division Ernest De Spain
W. Brown & Associates firstname.lastname@example.org
Director-elect, Underwriters Division greg sterling
Director-At-Large Matt Rowley
Berkley Aviation, LLC email@example.com
Director-at-large john doolittle
Sutton James, Inc. firstname.lastname@example.org
Executive Director Mandie Bannwarth
Aviation Insurance Association email@example.com
aia general counsel ray mariani
Murray, Morin & Herman, P.A. firstname.lastname@example.org
INVEST IN YOUR FUTURE
Core Principles & Concepts March 31
April 2, 2017
through Residence Inn Marriott Los Angeles LAX/Century Blvd
ONLINE REGISTRATION NOW OPEN! Aviation Insurance Core Principles and Concepts, the new course written by aviation insurance professionals for aviation insurance professionals and taught by industry leaders is now available! This new course will replace the Aviation Insurance 101 and Aviation Insurance and Risk Management courses. If you wish to earn the Certified Aviation Insurance Professional Designation, you MUST take this course.
HOTEL Residence Inn Marriott Los Angeles LAX 5933 Century Boulevard Los Angeles, CA 90045
REGISTRATION The cost to register for the class is $600 and $150 for the final exam if you are a member of AIA. If you are NOT a member of AIA, the cost to register is for the class is $950 and $350 for the final exam. MEMBERSHIP DUES ARE $140.
FOR RESERVATIONS please call 310-568-7700and tell them you are with the Aviation Insurance Association. The discounted room rate for the class will be $169.00 (plus tax). This rate will be valid until March 9, 2017 or until the room block is sold out. Reservations made after that date will be accepted based on availability.
WHATâ€™S INCLUDED WITH REGISTRATION All course materials Eligibility for up to 16 CIE credits. If you need credits in a specific state, please contact AIA headquarters This course IS eligible for adjusters credits in some states! Breakfast, Lunch and refreshments Completion of the course in a weekend with face-to-face instruction by the course creators
SCHEDULE DAY 2:
DAY 1: MODULE MODULE 1: Course Intro & Preview Case Study This module will discuss the overall objectives of the course and introduce the case study scenario that will be referenced throughout the course.
This session will discuss the commercial general liability policy, how it is modified to adapt to the unique requirements of the aviation industry and the various coverages available under the CGL policy form.
8:00 – 9:30 AM
9:30 – 9:45 AM
MODULE 6: Continued
9:45 – 11:15 AM
11:15 – 12:15 PM
MODULE 6: Aviation CGL Insurance 8:00 – 9:00 AM
MODULE 2: Industry History & Overview This session will provide a brief overview of the beginnings of the insurance industry along will a timeline of significant events in the development of the aviation line of coverages specifically.
9:00 – 9:30 AM
9:30 – 9:45 AM
MODULE 7: Related Aviation Coverage
9:45 – 10:45 AM
This section will present other aviation policy coverages needed by most commercial aviation operators to include workers compensation, property insurance, business auto, etc., all in the context of the aviation operator.
MODULE 3: Aviation Risk Management This session will provide the student with an overview of the risk management process, the tools used to identify risk and the various methods utilized to deal with risk in the aviation industry.
MODULE 4: Aviation Insurance Law & Contracts
10:45 – 11:45 AM
11:45 – 1:00 PM
This section will focus on actual claims scenarios provided by aviation claims managers from around the industry to see how the aviation coverage responds to a particular accident or incident. Helpful best practices are shared so that risk managers and aviation insurance professionals can prevent claim problems. Break
MODULE 5: Hull & Liability Insurance
1:45 – 2:00 PM
2:00 – 3:30 PM
3:30 – 3:45 PM
COURSE RECAP / Q&A 1:00 – 2:30 PM
2:30 – 2:45 PM
MODULE 5: Continued
2:45 – 4:45 PM
DAY ONE RECAP / Q&A
4:45 – 5:45 PM
aia education news
MODULE 8: Claims
This module will discuss contract law and how and why contracts are utilized in the aviation industry as a risk transfer method.
This module will delve specifically into aviation insurance policies and discuss the important differences between those contracts and the more standardized ISO contracts used in other industry segments. It will also point out the differences between policy wordings and how they can affect coverage.
12:15 – 1:45 PM
This time is set aside to review the course material and work with students in applying the principles and concepts presented to an actual business such at the one presented at the beginning of the course. The focus is on risk identification, and both insurance and non-insurance solutions available to deal with the risk.
3:45 – 5:45 PM
Birth of an Industry alexander t. wells, ed.d - AIA Education Consultant
little over 100 years ago aviation insurance was barely recognized. It was a challenge for the frail craft of the early days to get off the ground. Only 50 years later the jet age arrived and man had walked on the moon. Today we are on the edge of exploring our solar system. Aviation insurance has been there during its brief history meeting each new challenge along the way. The birth of aviation insurance may be placed in the summer of 1912 when military trials were held on Salisbury plain in south central England when the first “White Wings Aviation Policy” was underwritten by the White Cross Insurance Association (a consortium of several Lloyd’s non-marine syndicates) and the London branch of the Union Insurance Society of Canton. Unfortunately the weather was bad, the crashes were numerous and the losses on the policies were so bad that the association completely gave up the insurance of “aero
planes.” No one else was ready to take up the experiment and the infant market died almost before it was born. The First World War put an end to civilian aviation and until 1919 the demand for insurance coverage lapsed. But with the return of peace, underwriters began thinking again about the possibilities of this new form of travel and several syndicates decided to try their hands again at insuring airplanes. However, there was comparatively little flying at the time and what flying there was did not produce enough business to feed a competitive market with an adequate premium volume.
EARLY AVIATION UNDERWRITERS IN AMERICA After World War I civilian air transportation and the aviation insurance market began in the United States. Many returning pilots bought surplus war aircraft, Curtiss Jennies, de Havilland
DH-4s and S.E. 5s, and went into business. A Curtiss Jenny which had cost the government close to $17,000 sold off for as high as $750 including a new OX-5 engine and as low as $50. These happygo-lucky barnstormers toured the country putting on shows and giving rides to the local townsfolk. These men sooner or later decided that they needed insurance, but most of them were completely underfinanced. Their revenue was entirely uncertain and in many cases, because of economic pressure, the moral hazard turned out to be very bad. Some insurance companies experimented with the risk of insuring them, but the loss ex-
perience was poor and withdrawals from the market were frequent. Nevertheless, in meeting the needs, the Travelers Insurance Company announced on May 1, 1919, a comprehensive insurance program for air risks. Aviation insurance became a reality. The lines of insurance written by the Travelers applied to the maintenance, operation, and use of aircraft for private and commercial purposes, including the transportation of passengers. The program assumed that airplane use was for business as well as pleasure purposes would increase vastly in the next few
years. According to the announcement the lines of aviation business to be written included: •
Life Insurance. The company was prepared to issue aviation risk life insurance upon the one-year nonrenewable term plan, with a $5,000 limit. Accident insurance for owners and pilots. The policy provided death, dismemberment, and loss of sight benefits, also indemnity for total and partial disability. Trip accident ticket insurance. The company prepared to furnish transportation-by-air companies with an accident ticket to be sold to passengers. These tickets were issued to take effect as of date and hour of issue and to end at 4 a.m. the following day. The ticket provided $5,000 for accidental death benefit and disability benefits. Workers’ Compensation insurance. Public liability and property damage insurance.
The stated purpose was “offering insurance to encourage the manufacture, improvement and use of aircraft.” Public liability policies were designed for injuries occasioned by collision in the air resulting in injuries to occupants of other aircraft. They did not include the passenger hazard of the insured’s aircraft. Public liability policies also included injuries caused to others on the ground while landing or taking off or because of articles accidently dropped from the aircraft while in flight. Property damage coverage provided for the liability of the insured for damage to the property of others not carried on the aircraft. This early Traveler’s program did not include coverage against damage to the aircraft itself (the aircraft hull insurance).
A few days after the Travelers’ announcement on May 6, at a convention of the Aero Club of America in Atlantic City, New Jersey, the agency of Payne and Richardson issued Aero Tickets to an illustrious group of Americans, including President Woodrow Wilson and the Wright brothers. Aero Ticket Number One was sold to President Wilson at a premium of $5 for $5,000 accidental death benefits. “In issuing aircraft trip tickets, commented the Weekly Underwriter that week, “the Travelers increased the reputation of that company for initiative in the insurance business.” Unfortunately, the early development of air transportation did not measure up to the Travelers’ expectations. After struggling to write aviation insurance business independently for 12 years, the Travelers was finally forced to cease in 1931, after several tragic air disasters that year wiped out the company’s reserves for aviation business. The Travelers did not reenter the aviation insurance market until 1939, when the company joined the United States Aircraft Insurance Group (USAIG). In the next three years after 1919 there were, besides the Travelers, five other companies active in aviation insurance: Home Insurance Company, Queen Insurance Company of America, Globe & Rutgers Insurance Company, National Liberty Insurance Company and Fireman’s Fund Insurance Company. In May 1920 Horatio Barber, an underwriter at Lloyd’s, came to the United States and became an aviation underwriter for the Hartford Accident and Indemnity Company. In 1924 the Hartford dropped out of all aviation coverages except public liability and property damage liability and in 1925 it and the Travelers were the only American companies writing any aviation insurance. Finally
the Hartford group dropped out entirely in 1926. Hartford joined the USAIG on September 1, 1929. Following the termination of his contract with the Hartford, Barber and his partner, Baldwin, in 1926 became the aviation underwriting managers for the Independent Fire Insurance Company and its casualty affiliate, the Independent Indemnity Company of Philadelphia. This initial entry of Barber and Baldwin, as an organization, into the field of aviation insurance in America lasted three years. In September 1929 the independent withdrew from the office of Barber and Baldwin and entered the field as a competitor. Finally in October 1930 the Independent retired from the aviation insurance field. In explanation of the withdrawal of the Independent Companies from the aviation field, Charles A. Holland, president of the Companies, stated in part: “There not being any aviation rate making organization, we have
been forced on all renewals by competition not only to continue to broaden the contracts all the time to unsafe proportions but also to reduce the premiums to such an extent that it is impossible for us to make any money on the business”. The Barber and Baldwin Agency remained in business until 1948, writing business through Lloyd’s and other British companies. Their success was largely attributable to underwriting hull coverages with very high deductibles, using very difficult and complicated policy conditions and charging very high rates. Since the very early days another individual, and the company he organized, continuously played an important role in the development of the aviation insurance in the United States. This individual was J. Brooks B. Parker. The firm he organized, Parker & Co., International Inc. (later the Parker Aviation Division of Frank B. Hall and Company, now a
part of the AON Risk Services) has been recognized as the world’s first brokerage house specializing in aviation insurance and a pioneer in aviation since its founding in 1919. Mr. Parker graduated from the University of Pennsylvania in 1911. While at the University, he was one of the original founders of the Aero Club at the University in 1908, one of the very oldest aero clubs in the United States. It was during his college days that he started to acquire a broad experience in insurance when he worked for Chubb & Son during his junior summer. After his gradua-
tion from Pennsylvania, he continued to work for Chubb & Son as a junior marine underwriter. During World War I he was appointed Assistant Director of War Risk Insurance in the Treasury Department in Washington. Then, he entered the first class of the Army flying schools in May 1917, graduated as a pilot, and because of the marine insurance background, established his insurance firm. He personally knew a number of the early aviation pioneers including the founders of the early airlines for whom he wrote aviation insurance. In exploring ever-broadening coverag-
The First World War put an end to civilian aviation and until 1919 the demand for insurance coverage lapsed. But with the return of peace, underwriters began thinking again about the possibilities of this new form of travel and several syndicates decided to try their hands again at insuring airplanes.
es to meet the needs of clients, Parker & Co. originated many of the forms and methods of writing aviation insurance. In addition to his qualifications, he knew aircraft manufacturing and airlines from having assisted in the formation of several groups including airlines from their earliest days. For example, having known Juan Tripp, president of Pan American World Airways (PAA) since its founding, Mr. Parker placed its insurance and also introduced flight insurance for international air passengers that were sold by PAA ticket agents through Continental Casualty Company. Over the years Parker & Co. opened offices around the country and expanded its operation in Latin American countries. He also established an American aviation reinsurance pool. The industry stabilized during the mid1920s with the passage of the Air Mail Act of 1925 followed by the U.S. Commerce Act of 1926 and formation of the Bureau of Air Commerce, forerunner of today’s Federal Aviation Administration. For a further understanding of “The Early Years” see my article from the fall, 2015 (Vol. 40 No. 4) edition of The Binder.
crossword puzzle 1
ACROSS 1 6 9 10 11 13 15 16 18 20 21 23 24 26
Aircraft hull coverage A Frenchman who became the first man to be lifted off the ground in a powered aircraft One of the original thirteen colonies; capital is Dover (abv) Early aviation pioneer Compensation that the law awards to someone who has been injured or has suffered a loss due to action of another Severe destruction or disintegration A nuclear deal was established with this country in 2015 To specify or designate A loud, deep or prolonged sound A graduate degree (abv) A medical physician (abv) Supreme allied commander during WWII in Europe (abv) Hall of Fame outfielder and 24-time all star for the Giants and Mets A person who has the legal title to property
28 29 30 34 35 37 38 39 40 41 42 44 46 47
Hebrew name for “Lion” To be born American landing beach in France on June 6, 1944 On or upon in Spanish To put into a specific order or relation Initials for the shares purchased on a Wall Street exchange Initials for the actor who played Dr. Spock in the Star Trek Series Major American airline based in Miami from 1926 to 1991 (abv) Forerunner to UPS and air service (abv) Large university in New Orleans (abv) Number one in Spanish To perform or execute Disturbance of the peace Texas revolutionist who died at the Alamo; a determined fighter whose mother said after the battle “I’ll wager there were no wounds on his back.”
17 19 22 25 27 31 32 33 36 43 45
First president of American Airlines A pilot or navigator of a balloon or lighter-than-air craft The transaction where an insurance company accepts a portion of a risk from a ceding company Called the City of Angels (abv) Dr. _________ Heisenberg a German theoretical physicist who lead research toward developing nuclear weapons during WWII Abbreviation for milligram ________ space; the region consisting of the earth’s atmosphere and outer space The last German jet appearing over Great Britain during WWII Forerunner of the A&P certificate Opposite ends of the earth’s poles Initials of the last living Wright brother
DOWN 1 2 3 4 5 6 7 8 12 14
A type of insured other than the original named insured that is protected under the terms of the policy An early business jet, the Model 23, was designed by an innovator in aviation and flown in October, 1963 Located in the Blue Ridge mountains in southwestern Virginia, it is known as the Star City A weapon consisting of a long shaft with a sharply pointed head An American hard rock bank formed in New York City in 1973 _____________ Experiment Association was formed in 1907 by Alexander G. Bell and Glenn Curtiss A narcotic To make a short, quick trip _____________ spacecraft took television pictures of mars in 1971 A loss of net income resulting from the inability to use the services of damaged property
aviation insurance association
the binder 7200 W. 75 th street
overland park , ks 66204
SAN DIEGO HOTEL DEL CORONADO APRIL 29 - MAY 2, 2017 REGISTRATION OPENS IN JANUARY