AIM Aviation Insurance Quiz

1. It spreads the occurence limit under passenger liability over the number of passengers in the aircraft. e.g. PLL insured as $100,000 any one passenger and $300,000 per occurence. The aircraft has 4 passengers on board and the exclusion regarding too many pasengers for the limit is waived and the per person limit becomes, automatically, $$75,000 per person. Handy clause for such aircraft as primarily cargo carriers where an extra jump seat might be put in rarely.

4. A simple 'additional insured' is anyone who is included in the coverage by virtue of the policy wording and may be endorsed to clearly draw them into the coverage. A 'Named Insured' gains the benefits of the entire policy for whatever coverages are included in the 'adding wording' used, however, a danger here is that they are subject to all the policy conditions including, possibly responsible for paying the premium!

2. In 1981, Eastern Air Services had an accident in Nova Scotia resulting in the first major loss of its kind in Canada and setting the cargo carriage business on its ear. What was lost and what new cover was developed to cover it?

2. They were couriering bank documents made up of cancelled cheques and while of no direct value the reconstruction costs approched $1mill. A modified valuable papers form with reconstruction limits was developed but soon after underwriters withdrew from offering it due to the inability to quantify the amount of exposure on any flight - the banks would not reveal the value to the operator.

3. On a flight from Chicago to Boston in 1979, an aircraft crashed where the only cargo was $1 million worth of army uniforms. The subsequent cargo loss cost underwriters the policy limit of $2 million. How come?

3. Since the uniforms had all the appropriate badges sewn on them they could not be destroyed due to some obscure miltary law, they could not be sold unless the badges were removed and this cost over $250 per uniform for seamstresses to do and there were 10,000 tunics!

5. In 1983 a new JetStar owned by an international fast food maker was declared a total loss BUT the aircraft appeared and flew perfectly and was just parked in Chicago. Why the loss?

5. A canister of onion/garlic flavor concentrate used in the making of potato chips leaked its contents into the under floor area. No amount of clearing would get rid of the smell and the aircraft could not be flown for the purpose for which it was intended because of that - executives couldn't stand it.

6, A "chinese retro" in its first phase usually provides cover for failure to collect on the - what - .....clause of a hull policy.

9. a) In what country would you most expect to find a "vension" exclusion in your aviation policy?
b) What would the exclusion be trying to exclude?

14. The underwriter says he will apply a Component Parts Clause to your policy:
a) what is the most likely reason?
b) what does the clause do?
c) how much is usually allocated for recovery and transportation of the damaged aircraft?

14. a) probably an obsolete or one of a kind aircraft where repairs will be out of proportion to the value.
b) it breaks the aircraft down into its major components and allocates a percentage of the value as the maximum that will be spent to repair or replace each component. eg. wings - 15%, instrumentation - 5%, etc.
c) 15%

15. It is basically a retrospective premium adjustment clause. Premium is paid at inception based upon a rate which is then adjusted at expiry to produce a desired loss ratio for underwriters subject to a minimum and maximum. See AV24 of Lloyd's book of wordings.

16. As the amount of loss (claim) increases the amount of the deductible descreases until it vanishes. eg. $10,000 dis. ded. with a $5000 claim has $5000 deducted, with a $9999 claim has $1 deducted and with a $10,001 claim there is no deductible.

17. a) What sort of policy contains a "sistership" liabilty clause?
b) What does it try to cover?
c) What is another name used for this?

17. a) Products Liability
b) Liability for the grounding of an entire fleet or model of an aircraft due to some airworthiness problem.
c) grounding liabilty

20. a) Give the traditional formula for changing the dedictible in an aviation policy assuming that the deductible applies to total losses.
b) add to the formula if deductibles do not apply to total losses.

20. a) 2 times the rate applied to the difference in deductible.
b) 2 times 70% of the rate applied to the difference in deductible.

22. Originally written for Bell206B 'Blue Ribbon' engines and then for all jet turbine engines to establish that each section -modular-was seperate. If one section failed and caused damage to another downstream then the policy would respond instead of treating failure of the part as failure of the engine amd excluding payment. Made underwriters very unhappy!

23. Assuming 30% of all losses are totals, what is the traditional formula for loading a rate as the aircraft insured value is reduced from what is considered its proper or real value (Under-insurance).

23. A 'grace' of a 5% reduction is allowed with no change in the rate and after that 70% of the rate (100% less the total loss factor (which is not affected by under insurance) is applied to the reduction for the loading. The new premium is the sum of original rate applied to the new value plus the result of the formula. e.g. Original value= $100,000, rate 10%, new value $90,000. (10% X .70 X (100,000 X 95%)) + (10% X $90,000)= $9350 so new rate is 10.38%. Note: for helicopters it was assumed that 50% of losses were totals. Formula has long fallen into disuse as underwriting becomes less scentific and more political!

24. ...But these exclusions shall not apply unless with the knowledge ??? consent of an executive officer of the Named Insured. What is the best word to fill in for the ??? marks.

24. Always ask for "and" as this requires both criteria to be met whereas the more commonly used "or" allows for only one of the criteria to be met before negating the benefit of the clause.

25. You incorporate a 'franchise deductible' into your aircraft policy of $10,000.
a) How much do you collect on a claim of $5000.
b) How much on a claim of $11,000.

25. a) Nothing - you have not reached the franchise threshold.
b) $11,000 - having exceeded the threshold you get everything.

26. When the COPA insurance program started only one coverage and one limit was offered.
a) What was it?
b) What was the premium?

27. In times of high aviation insurance rates, particularly for helicopters, a policy might be issued on a dual value basis. Briefly describe this.

27. Short answer - different values applicable for flight losses and for ground losses. Long answer - The owner felt he could take his chances on 'in flight' losses (maybe to the extent of a loan on the a/c) but in the event of ground loss such as hangar fire he wanted the proper value and the lower ground rate was affordable. E.g. Ground risks insured for $200,000 at a rate of 2%, Flight risks insured for a value of $150,000 at a rate of 10% adjusted for under-insurance (see earlier quiz for formula) resulting in overall insurance saving but usual deductibles applicable to each cover.

29. A RIPOFF policy:
a) insured against what?
b) the acronym stood for what?
c) in what year(s) what it available?
d) Name the issuing underwriter or Canadian issuing agent.

29. a) it was insurance against your aviation insurance rates going up at renewal whether due to a poor accident record, market changes or even underwriter surrendippity!
     b) Rate Increase Policy OFFer.
     c) One year only, 1975
     d) Bob Roberts, Lloyd's Underwriter issued through Stewart, Smith (Canada)

30. Bob D'Arcy (retired) formerly British Aviation Insurance Company, Reed, Shaw. Osler, Stewart Smith Canada, Sterwart Wrightson, Reed Stenhouse, Aon
He says "hello" at his email address.