december 2011 volume 11 • number 12 - American Bonanza Society

www.bonanza.orgExpert Opinion By Peter TracyLoss of InsuranceCoverage on aTechnicalityYou’re flying your Bonanza, the visibility is perfect, and the airis smooth. On approach, you point out to your passenger thestunning view. But as you flare for landing you hear the awfulsounds of the prop hitting the runway, and the scraping of metalon asphalt. The plane screeches to a halt. No one is injured. You made themost human of errors; you forgot to put the gear down. The plane hasextensive, and expensive, damage.At least you have insurancecoverage. Well, maybe you do. Yourannual inspection expired at midnight.You check your insurancepolicy, and it requires that your planebe airworthy. But since the cause ofthe accident had nothing to do withthe annual inspection – and nothingto do with airworthiness – the insurancecoverage should be good. Right?The legal question is: “May an insurer deny coverage under an avia tioninsurance policy for failure to complywith an unambiguous ex clusion, ifthere is no causal con nec tion betweenthe exclusion and the loss?” In lay man’sterms: “Can an insurance com pany getout of paying on a ‘techni cality’ thathas nothing to do with the cause ofthe accident?” The answer dependson which state’s law applies.This question was addressed in twocases arising from one airplane accidentin Nevada. In September 2001, aman standing in his own back yard(Bystander) sustained severe injurieswhen a plane owned and operated bya Pilot-Owner (P/O) fell on him. P/Ohad insurance through Old RepublicInsurance Company. Old Republic’spolicy excluded coverage when “theAirworthiness Certificate of the aircraftis not in full force and effect” orwhen “the aircraft has not been subjectedto the appropriate air worthinessinspection(s) as required undercurrent applicable [FARs] for theoperations involved.”FAR section 21.181 provides that“standard airworthiness certificates…are effective as long as the main tenance[is] performed in accordancewith Parts 43 and 91….” FAR section91.409 says, “…no person may operatean aircraft unless, within the preceding12 calendar months, it has had…an annual inspection….”Bystander filed suit in Nevada statecourt against P/O seeking com pensationfor his injuries. Old Republicfiled suit against Bystander and P/Oin Nevada federal court seeking a determination that it had no obliga tion24 AMERICAN BONANZA SOCIETY DECEMBER 2011