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Aviation Insurance
Sunday, February 1, 2009
Hick!

To most people of sense the answer will surely be “Yours”. Not so the Jap fellow Yoichi Shimamoto who is suing United Airlines for negligence for letting him drink too much so he beat his wife up – after they had left the aircraft. Yoiks thinks that it was the numerous glasses of red wine forced upon him that caused all this. In typical US legal fashion this rubbish all depends on whether an aircraft can be termed a bar – bars are legally liable in the US for harm caused by intoxicated customers.

Is no one there in the US responsible for their own behaviour? By Henry Tours - Consultant and claims negotiator

Always have a written lease agreement for your aircraft

I never cease to be amazed at the number of times there is litigation of some sort about the leasing in or out of aircraft. Barloworld Finance had an issue with Lloyd’s Underwriters about its interests not being catered for in the policy. The aircraft crashed and the insolvent owner was paid, not Barloworld. It turned out that Barloworld never ensured that it was named in the policy so the insurers correctly found they could not recognise its interests. Cost them a bomb.
It’s not just aircraft people who are loony – I mean you aren’t talking about a lawn mower worth R500 - the values at stake is often in excess of R10mn. A recent court case involved a burnt out rented premises. The problem was not with the insurance, which paid out, but then the insurers want subrogation from the lessees. If the people concerned had bothered to study the documents or had got their brokers to do so, then they would have seen that their names were not in the policy. Ten minutes reading would have saved them millions.
Always have a signed lease – it doesn’t have to be 10 pages of turgid legalistic prose – a single page suffices. By Henry Tours - Consultant and claims negotiator

THE LAW

The following items are all drawn from Deneys Reitz’ excellent Legal Update. The facts are theirs but some of the assumptions are mine.

Breakdown not covered but the consequences are

In the matter of Allianz Insurance v RHI Refractories, RHI applied an epoxy lining to an acid plant. The lining failed, causing physical damage to some of the plant. RHI was insured for products liability with an exclusion of replacement/rect-ification of defective designs, materials or workmanship. So far so good – it’s pretty clear that the insurance does not cover replacing defective bits and pieces nor does it cover defective plans, materials or workmanship themselves.
The policy then goes on to extend cover to unintended damage that results from such defective stuff. As is so often the case, Aviation insurance has dealt with this type of problem for years and is much clearer.
The basic aircraft policy – and I have yet to come across one in RSA that differs – excludes damage to the aircraft caused by breakdown, but goes on to say that the consequences of such breakdown are covered. So if the engine fails, no cover, but if the aircraft crashes thereafter it is paid for. Simple.
In the RHI case Allianz tried to get out of the claim but it took an Appeal Court to find in RHI’s favour. Even then, the blindingly obvious was ignored in favour of a dark and turgid argument around the meaning of the word “unintended”. Luckily RHI had the boodle to pursue its cause through to the Appeal Court.

Misrepresentation not fatal

In another case, Mutual&Federal v Da Costa, the issue was a misdescription of a Merc 230E which turned out to be a rebuild of a 1988 Merc 200 combined with a 1990 Merc 230. M&F chucked out the claim but lost the case because its legal team failed to lead any evidence of the materiality of the non-disclosure of the rebuild. It must be pretty obvious to even that yucky piece of work, “The Reasonable Man”, that an insurer would want to know if he is covering a car put together by a top German manufacturer or a couple of pieces of junk cobbled together by an amateur.
In aviation we have the protection of the many rules and regulations that require any modifications or repairs to be subjected to detailed scrutiny and permission and then logged.

Disclaimers – again!

Disclaimer notices are very much in vogue right now in legal arenas. As I have pointed out in numerous Downwinds since I started them in 1991, disclaimers are very important in RSA law. Without them lessors and owners could be exposed to all sorts of unexpected risks. As a result it is imperative that if you lease out premises, aircraft or other stuff, or run a workshop or garage, you must embody a good disclaimer in your contract.
This must be clear, concise and open: sixteen pages of drivel is no substitute for one page of well-stated facts. However it is fatal to do as many leading organisations do and that is to print the clauses in minute fonts in greyscale.
Use an easily readable font: 10-point is good. Tell the sucker customer about it and ensure that where he signs is where he can see it all.
The recent case of Mercurius Motors v Lopez is one where the disclaimers failed. There were four of them. The court found that the terminology incomprehensible and that Mercurius had failed to draw the client’s attention to the disclaimer.
The result was not surprising taking account of the well known case of Brian Porter Motors v Ndlovu in which one Ndlovu signed at least three different forms all containing disclaimers. She won the case on the basis that the print was too small to read and she thought she was simply signing the OK to do specific work. Her notice was not drawn to the disclaimers – nor to the other conditions of the contract. It was also of note that there was a huge sign containing a full disclaimer behind the counter where she was signing the forms. Sadly it could not be considered as evidence as the legal team had not brought it into evidence. How strange!
So – take no chances! Get a good clear disclaimer into your contracts and, for heaven’s sake don’t be shy – tell the client about it! Your future solvency depends on this.
By Henry Tours – Aviation consultant and claims negotiator

Copyright © Insurance Times and Investments® Vol:22.2 1st February, 2009
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