Types of clauses in aircraft insurance
Clauses in aircraft insurance are usually set according to international standards, particularly those of the Lloyd’s of London insurance market, and are divided into various categories. The following are the types of clauses commonly used in aircraft insurance:
1. Clauses related to hull insurance (Hull Clauses)
These clauses cover physical damage to the aircraft:
– AVN 1A (All Risks – Ground and Flight):
– Comprehensive coverage for damage to the aircraft body during flight, takeoff, landing, or while the aircraft is on the ground.
– Includes damage caused by accident, fire, theft, natural disasters, and vandalism.
– Exclusions: Usually wear and tear, design defects, or intentional damage by the insured are excluded.
– AVN 1B (Ground Risks Only):
– Covers damage to the aircraft body only while it is on the ground (e.g. in a hangar or during repairs).
– Suitable for aircraft that are temporarily out of service.
– AVN 1C (Hull War and Allied Perils):
– Coverage for damage caused by war, terrorism, confiscation, strike, or hijacking of aircraft.
– This clause is usually offered separately from standard hull coverage and costs more.
– AVN 48B (War, Hi-jacking and Other Perils Exclusion Clause):
– War risks exclusion clause which excludes certain risks (such as war, expropriation, or terrorism) from standard body and liability coverage unless they are covered separately.
2. Liability insurance clauses(Liability Clauses)
These clauses cover damages caused to third parties or passengers:
– AVN 4 (Third Party Liability):
– Liability coverage against bodily injury or property damage to third parties (such as people or property on the ground) resulting from the operation of the aircraft.
– The minimum coverage limit is usually set by international or local law.
– AVN 52E (Extended Coverage Endorsement – Aviation Liabilities):
– Broader coverage for additional liabilities such as noise damage, sound pollution, or indirect damages.
– Important for commercial airlines operating in densely populated areas.
– AVN 60 (Passenger Liability):
– Coverage for bodily injury or property damage to passengers, including death, injury, or damage to personal property.
– Often aligned with the Montreal Convention.
3. Cargo insurance clauses (Cargo Clauses)
– AVN 5A (Cargo Legal Liability):
– Coverage of the airline’s legal liability for damage, loss, or destruction of carried cargo.
– Includes damage resulting from loading, unloading, or transportation.
– AVN 5B (Cargo All Risks):
– More comprehensive coverage for cargo, including damage caused by unexpected events (such as fire or fall).
– Exclusions: Damage caused by improper packaging or the perishable nature of the cargo is usually excluded.
4. Clauses relating to specific risks
– AVN 16 (Ingestion Damage):
– Coverage for damage caused by foreign objects (FOD) entering the aircraft engine (such as birds or objects on the runway).
– AVN 38 (Noise and Pollution Clause):
– Coverage for damages caused by noise or environmental pollution related to aircraft operations.
– Common in some areas with strict environmental laws.
– AVN 51 (Extended War Risks):
– Additional coverage for war risks that may be excluded in AVN 48B.
– Used for flying in high-risk areas (such as war zones).
5. General and Supplementary Clauses
– AVN 20 (Deductible Clause):
– Determines the amount of deductible that the insured must pay in the event of a claim.
– Usually used to reduce insurance premiums.
– AVN 28 (Breach of Warranty Endorsement):
– Ensures that if the insured breaches certain terms of the contract (e.g., unauthorized flight), the insurer will still pay damages to the third party.
– AVN 67B (Airline Finance/Lease Contract Endorsement):
– For aircraft that are under a leasing or rental agreement, this clause guarantees the rights of the leasing company (such as a bank or financial institution).
– AVN 111 (Date Recognition Clause):
– Covers problems caused by historical system errors (such as Y2K or similar problems).
– Mostly applicable to aircraft equipped with complex digital systems.
