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This class of insurance has been mainly because of the steep increase in the values of aircraft and the consequent phenomenal increase in the limits of indemnity under third party and other legal liability covers.
It may be interesting to note here that the Jumbo Jets which are being operated by Air India are covered for a sum of Rs. 18,75,00,000 each and the third party legal liability and passenger legal liability that may be incurred by Air India out of the operation of this aircraft are covered for a combined limit of Rs. 75,00,00,000.
Gross direct premium collected by General Insurance Corporation of India amounted to Rs. 119.51 crores during 1994-95. The overall operations have given a profit of Rs. 8.99 crores in that year.
Flights operated on scheduled routes by recognised airlines as also chartered flights are covered. The rate of premium for chartered flights is higher because of the greater hazard involved.
Aircraft Comprehensive Policy :
The policy is divided into three sections, viz.-
(i) Loss of or damage to aircraft;
(ii) Third party legal liability; and
(iii) Legal liability to passengers.
(i) Loss of or damage to Aircraft :
The indemnity is provided for loss of or damage to the aircraft (also known as aircraft hull, i.e., the body of the aircraft and its component parts) by any cause whatever accepts those that are specifically excluded by the policy.
The cover is also granted in respect of standard component parts (of the aircraft) temporarily detached in connection with overhaul or repair while in the custody or control of the insured. The cover is operative whilst the aircraft is in flight or is taxing or is on the ground or is moored.
Wear and tear and gradual deterioration are excluded. The losses or damage arising from mechanical, structural or electrical breakdown or failure is excluded, but if the loss or damage is caused by fire, explosion or impact of the aircraft with an external object, the said loss or damage is payable even though the fire, explosion or impact might have been caused by the breakdown or failure referred to above.
In addition to the actual cost of repairs, the following are also payable in the event of valid claim:
(a) The reasonable expenses incurred by the insured with the written consent of the insurers in respect of:
(i) Maintenance of watch on the damaged aircraft and safeguarding it from further loss or damage;
(ii) Transportation of the necessary materials, parts and/or technical personnel to the site of the accident;
(iii) Transportation of aircraft from the site of the accident to the repairers.
(b) Such proportion of the cost of obtaining a new certificate of Airworthiness as shall apply to the period from the date of accident to the date of expiry of the current certificate of Airworthiness.
The rate of the premium varies with the value of the aircraft, and has a bearing on the type of aircraft.
The premium, in respect of low valued aircraft like ‘Pushpak’ which are valued around Rs. 20,000 is charged at a high rate as 15%. The rate of premium charged for Jumbo Jets of Air India which is insured for as high as Rs. 18, 75, 00,000 is about 2.5% only.
(ii) Third Party Legal Liability :
Insurers indemnify the insured or any member of the operative crew of the aircraft acting in the course of their duties with the insured, against all sums which they may become legally liable to in respect of death, sickness or disease, and bodily injury sustained by any person and caused by an accident arising out of the ownership, maintenance or use of the aircraft.
There are ordinarily two limits under third party liability: a limit per accident and a limit per policy year. Under this section of the aircraft comprehensive policy, however, limit per accident is the only limit that is specified.
In other words, the liability of the insurers per policy year is unlimited. The limit of indemnity depends on the type of aircraft to be covered and the route over which it is to be flown.
The following are not treated as third parties for the purpose of this section of the policy: (i) any member of the insured’s household or family;
(ii) Any sub-contractor whilst such person is engaged in his duties as such or any other person claiming by virtue of any contract the insured;
(iii) Any passenger whilst entering into, being carried in or alighting from the aircraft; and
(iv) Any member of the crew of the aircraft or any person working in or about the aircraft.
(iii) Passenger Legal Liability :
Insurers indemnify the insured or any member of the operative crew of the aircraft acting in the course of his duties with insured in respect of all sums which insured or any such, member of crew, shall become legally liable to pay as compensation in respect of:
1. Death, personal injury, sickness or diseases caused to any passenger by an occurrence arising out of the ownership, maintenance or use of such aircraft whilst such passenger is entering into, being carried in or alighting from the aircraft;
2. Loss of or damage to passenger’s baggage and personal effects whether registered or personally retained by the passengers whilst in the course of carriage by the insured.
The insurers are not liable in respect of death, personal injury, sickness or disease, damage or loss caused to or sustained by any member of the insured’s household or family, any sub-contractor of the insured or any agent or servant of the insured or of any such subcontractor whilst such person is engaged in his duties as such.
The policy will not pay under the sections, hull and liability, in respect of bodily injury, disease, loss, damage or liability under the following contingencies:
(i) Whilst the aircraft is being used for any illegal purpose or for the purpose other than that stated in the policy or whilst outside the geographical limit specified in the policy.
(ii) Whilst the aircraft is being piloted by a person other than the one specified in the policy.
(iii) Whilst the aircraft is being flown at night (i.e., one hour after sunset and one hour before sunrise) unless due to force carriage,
(iv) Whilst the aircraft is being transported.
(v) Whilst the aircraft is using unlicensed landing areas unless due to force major use.
(vi) Due to or arising out of the use of the aircraft for racing speed trials, acrobatics, etc.
(vii) Contractual liability other than that assumed by the insured under an approved contract of carriage.
(viii) War and allied risks including hijacking and riot, strikes and civil commotion.
(ix) Whilst the total number of passengers carried exceeds the seating capacity.
The exception relating to night flying is normally removed without charging extra-premium since most of the modern aircraft are filled night-flying equipment.
Freight Liability Policy:
In addition to the passengers and the crew, an aircraft carries passengers’ baggage, cargo and mail. The airline operating the aircraft is, therefore, liable if the baggage, cargo or mail is lost or damaged. The liability for the passengers’ baggage is dealt with under the aircraft comprehensive policy.
The freight liability policy deals with the cargo carried on the aircraft. In terms of the provisions of this policy, the insurers indemnify the insured against all sums which the insured may become legally liable to pay to the owners of cargo as a result of loss or damage to cargo or delay in delivery of the cargo or the mishandling of the cargo.
The limits of indemnity that appears in the freight liability policy range from Rs. 1 lakh to Rs. 25 lakhs for any one accident.
Airmail Liability Policy :
This is similar to freight liability policy, except that this policy provides cover per liability in respect of mail carried on the aircraft. The limits of the liability that appear in the airmail liability policy range from Rs. 1 lakh to Rs. 5 lakhs.
Personal Accident Policy for Crew Members :
The crew members can be granted personal accident insurance cover under this policy. Pilots, flight navigators, radio officers, air-hostesses, etc., are covered. The benefits are more or less similar to those granted under the personal accident insurance policies.