Aircraft Leasing
Aircraft Leasing
Aircraft Leasing
BankAssure
Guide
2000
Second Edition
THE BANKER’S & LESSOR’S
GUIDE
T O I N S U R A N C E A S P E C T S
of
A I R C R A F T
F I N A N C I N G
S E C O N D E D I T I O N
P U BL I SH E D BY
BANKASSURE INSURANCE SERVICES LIMITED
© 2 0 0 0
The crew of a Japanese fishing boat were rescued from The crew of a Russian cargo aircraft had stolen a small
the Sea of Japan and then arrested.They were accused of herd of cows from a remote airfield in Asia.During the
scuttling their boat in an insurance fraud.The fishermens’ flight the stolen animals ran riot and were destabilising
story was that a large cow had struck their vessel the aircraft. The crew lowered the cargo ramp and
amidships.After the hapless fisherman had spent 48 hours jettisoned the stolen cargo.
in prison, their story was proved correct.
This Guide is intended to serve as a ready reference for bankers, lessors
and lawyers involved in aircraft finance.
Table of contents
INTRODUCTION
Principles of Insurance Versus Principles of Aircraft Finance
SECTION ONE
AVIATION INSURANCE ....................................................................................1
Standard aircraft operator insurances
i) Aviation Hull ‘All Risks’Insurance....................................................................2
ii) Aviation Hull ‘War & Allied Perils’Insurance ...................................................3
iii) Spares ‘All Risks’Insurance...............................................................................4
iv) Aviation Legal Liability Insurance....................................................................4
v) General Legal Liability Insurance.....................................................................6
Appendix A
Specimen Insurance Article.................................................................................119
Appendix B
Sample Certificates..............................................................................................133
i) Certificate of Insurance....................................................................................133
ii) Certificate of Reinsurance...............................................................................142
Appendix C
Sample ‘Broker’s Letter of Undertaking’..............................................................151
Appendix D
Selected Aviation Insurance Clauses and Wordings ............................................154
Clauses
Premium Payment Clause – AVN6A ............................................................154
Deferred Premium Clause – AVN5A ............................................................156
Personal Injury Extension – AVN60 ............................................................157
AV57A (USA) ...............................................................................................159
50/50 Provisional Claims Settlement Clause – AVS103 ...............................161
Sample ‘Orphan Engine’Clause ..................................................................162
Noise and Pollution and Other Perils Exclusion Clause – AVN46B ............163
Nuclear Risks Exclusion Clause – AVN38B .................................................165
War, Hi-jacking and Other Perils Exclusion Clause – AVN48B ....................168
Extended Coverage Endorsement (Aviation Liabilities) – AVN52C ............169
Aircraft Financial Interest Endorsement – AVN28B ....................................171
Airline Finance/Lease Contract Endorsement – AVN67B ...........................174
Airline Finance/Lease Contract – AVN67B (HULL WAR) ............................178
Wordings
Aviation Hull “War And Allied Perils” Policy – LSW 555B.............................182
Appendix E
Specimen Policy Wordings for Specialist Bank/Lessor Insurances
Contingent Aircraft Hull and Liability Insurance Policy – LSW610A ..........189
Repossession of Leased Aircraft Insuring Conditions – LSW147 ................207
Contingent War Insurance (sample wording) .............................................216
Introduction
Air travel has grown at an amazing rate over the past 30 years. In
order to satisfy this growth in demand,airlines have greatly expanded
their fleets.Notwithstanding the growth in demand,airlines continue
to operate in a very challenging commercial environment. Many
airlines have weak balance sheets but are operating in a highly
capital intensive industry. Profit margins are typically thin and the
regulatory environment uncertain.
Owing to high leverage in aircraft financing and the fact that the
bank/lessor often remains the legal owner of the asset,it is vital that
the financier protect themselves against loss of their asset and
potential liability exposures. Substantial losses and catastrophic
liabilities may occur. Though banks/leasing companies are non-
operational owners, there is a risk, under some jurisdictions, of
liability ‘in the last resort’ for compensation claims should the liability
insurances on the aircraft be inadequate or fail.Insurance, therefore,
will be a major consideration for those contemplating aircraft
financing. Insurance can be divided into two categories. Firstly, the
essential Hull and Liability coverages maintained by the operator, and
endorsed to protect the financier’s interests.And secondly, specialist
insurances that financiers can arrange to protect themselves against
losses not covered by the operators’policies.
ii) The pessimistic (forced) resale value of the asset will, at any
time, exceed the debt outstanding in the currency of that debt.
iii) The asset is fully insured at all times against total and partial
loss under which insurers are fully liable to the bank/lessor and
able to pay claims due in the currency of the debt.
iv) The potential liabilities that may arise from the operational
use of the asset are insured for sufficient amounts to ensure
against catastrophic circumstances that might occur, and that the
bank/lessor is itself covered as Mortgagee/Lessor.
A group of Boeing employees smuggled a life raft out The emergency locator beacon had been activated by
of the factory in Seattle.The following weekend they contact with the water.
took the inflata ble craft out for a little rafting trip.
Their ‘former’employer, Boeing,and the US coastguard
Their relaxing afternoon was ruined by a noisy were not amused.
coastguard helicopter, strangely far inland,that persisted
in hovering low over their heads.
SECTION ONE
AV I AT I O N
I N S U R A N C E
S E C T I O N O N E
Aviation Insurance
The aviation insurances referred to below are the unive rs a l ly
recognised insurances for aircraft with standard conditions accepted by
underwriters.
The following is a list of the policies that are available, with a brief
summary of the conditions for each, and may be included within the
terms of a financing commitment:-
1
Standard Aircraft Operator Insurances
i) AVIATION HULL ‘ALL RISKS’ INSURANCE – Covers ‘All Risks’
of physical loss or damage to an aircraft from any cause (unless it is
excluded it is covered!).Cover includes pilot error, theft, all natural
causes,damage during maintenance, ground fires/taxiing accidents
etc. Coverage does not include groundings due to FAA or
manufacturer directives, or consequential loss of revenues.
2
ii) AVIATION HULL WAR AND ALLIED PERILS INSURANCE –
Covers loss or damage to an aircraft resulting from war and associated
perils including confiscation, terrorist acts, strikes, riots, sabotage and
hijacking,as excluded from the hull ‘All Risks’policy.
War policies for large fleets are usually subject to an overall annual
Aggregate Limit; claims will be paid up to this point, but thereafter no
cover is given.At the time of writing,the normal maximum limit given
on large airlines is US$1,750,000,000 in any one policy year.
3
The standard wording is called LSW555B.Refer Appendix D (page 182)
for sample policy wording.
War coverage for spares can be effected either under the Hull War
policy, or by extending the Spares ‘All Risks’ policy. Owing to market
agreements, war coverage excludes war and civil war in respect of
storage risks. This was highlighted by the Gulf War where Kuwait
Airlines had their spares inventory plundered by Iraq. Whereas the
cover was in force for the aircraft seized, the spares claim was
disputed.
4
liability to third parties. The policy also covers legal expenses/costs
incurred in defending a claim; these costs are covered in addition to the
overall sum insured and can be claimed even if no legal liability claim is
paid. For airlines, coverage is normally extended to cover ‘Personal Injury’
claims for an annual aggregate limit of US$25,000,000 (within the overall
limit). Personal injury is defined as false arrest, malicious prosecution,
invasion of privacy, discrimination, slander/false advertising and medical
malpractice (refer AVN60 clause Appendix D, page 157). In addition,
coverage is normally extended to include liability arising out of war
perils, other than nuclear/major powers war, by inclusion of AVN52C –
the war ‘writeback’endorsement (refer Appendix D, page 169).
5
- Liability to pilots/crew and payments made under any Workmens’
Compensation Act/Employers Liability law
6
c) Products Liability Insurance indemnifies aviation manufacturers,
suppliers and repairers from liability arising from accidents due to
faulty equipment/product failure.Many operators provide maintenance
services to third parties on an ‘ad hoc’, or contracted basis.The coverage
would also apply to claims arising out of aircraft disposed of, where the
faulty work had occurred during the period of the operator’s control
and such work is a contributory cause of an accident.
7
Hull ‘War’insurance is usually placed on a separate form with different
insurers. Wordings are based upon the LSW555B form (refer Appendix
D, page 182)
8
Other insurance covers described
i) DEDUCTIBLE INSURANCE – is designed to reduce the standard level
of deductible imposed under the main hull ‘All Risks’ insurance. It is
normally a separate policy and is subject to an aggregate limit for all
claims.The policy is primarily intended to cover damage to aero engines
caused by ingestion of ‘foreign objects’, but will cover other damage such
as landing gear or damage to the fuselage .N ew generation jet engines are
valued at over US$15,000,000 and minor incidents can easily result in
claims of over US$1,000,000.Aircraft financiers often require that smaller,
or less well capitalised airlines, purchase this insurance. The standard
deductibles for airline jet aircraft are:-
10
ii) UNEARNED PREMIUM INSURANCE (UPI) – in the event of a total
loss,premium instalments normally become payable in full.UPI covers
the pro rata premium from the date of total loss to expiry, that would
otherwise be deemed ‘earned’ and payable to insurers.This protection
can normally be included under the Hull policies.
11
v) TOTAL LOSS ONLY INSURANCE (TLO) – Provides an additional
insured amount payable in the event of a total loss of the aircraft.
Some airlines purchase hull insurance for an Agreed Value and then buy
a separate ‘TLO’ amount in addition to the Agreed Value amount. This
should satisfy the financier (actually any loss will be adjusted on the
Agreed Value and hence a ‘total loss’ will be achieved with a lesser
amount of damage) and will typically result in a premium saving for the
operator;‘TLO’insurance is normally less expensive than ‘All Risks’.‘TLO’
can also be purchased by the financier in their own name.This type of
policy is described in greater detail under Section Two ,p age 101.
12
OK, SO WHO’S RESPONSIBLE?
A drunken teenager, a member of a party of rugby and the stewardess, she eventually agreed for it to be
players, boarded an aircraft in Darwin carrying a stowed in a cupboard adjacent to the first class cabin.
freezer box containing a large number of live mud
crabs. On arrival in Melbourne,and as the passengers were about
to disembark, the stewardess made the following
“I’m sorry, Sir, but you cannot bring that container announcement to all the passengers, over the aircraft
on board” the stewardess said to the youth.After much intercom.“Could the young guy who gave me the crabs in
discussion and stubbornness by both the teenager Darwin, please make himself known to the cabin crew”.
Important coverage issues on the
Operator’s various insurances
i) Agreed Values
It is normal for aircraft to be insured on an ‘Agreed Value’ basis.This
means that the underwriters do not have the option to replace a lost
aircraft with another of similar age and condition.Insurers are normally
comfortable with Agreed Values of plus or minus 10% of a market value
estimate.Hence the financier can require a level of Agreed Value that is
greater than the amount outstanding on the loan/lease at the date of any
loss. In the event of a loss the insurance proceeds will then clear the
debt plus any outstanding interest and expenses.
15
which the airline is operating, the type and weight of aircraft, the
passenger nationality profile, passenger seating numbers and airport
destinations. Passenger liability exposures depend upon the nationality
of passengers,domestic laws,and a number of international treaties.
16
iii) Leased engines
Some small airlines,which ‘out-source’their maintenance, do not keep
a spares inventory. However, when an engine is removed for repair or
service it is common for a replacement engine to be leased or
borrowed on a short term basis.In such circumstances it is important
that the airline has purchased a spares insurance policy and that the
aircraft value is increased by the value of the replacement leased
engine. In the event of a total loss, insurers will then pay the agreed
value of the aircraft plus the value of the replacement engine and take
title to the original engine that is off the wing (sometimes known as the
‘Orphan Engine’).A suggested clause is shown in Appendix D, page 162.
17
Hull deductible ‘buy down’ policies are subject to aggregate limits,
though the potential for lar ge financial shortfalls is limited.
v) 50/50 clause
In the event of a mid-air explosion and catastrophic loss of an aircraft
t h e re is always speculation about potential terro rist causes.
Sometimes the actual cause of the loss is never determined with any
certainty. In other cases it takes many months for the accident
investigation to report its conclusions. During this period the airline
and/or financiers will want their hull claim paid and will not want to
be prejudiced by arguments between the hull ‘All Risks’ and hull ‘War
Risks’ insurers. The 50/50 Provisional Claims Settlement Clause
(AVS103) states that the respective ‘All Risks’ and ‘War Risk’ insurers
will immediately pay half the total loss amount each, and then resolve
the final apportionment at a later date. This results in the loss payee
receiving claim proceeds quickly.This clause has operated on several
occasions, including, after the 1985 Air India loss, where the aircraft
exploded over the Atlantic Ocean. For full text of AVS103 clause refer
Appendix D, page 161.
18
provisions.Historically this was to protect insurers from unmanageable
exposures that would result from wars.War insurers on hull,spares and
liability policies monitor wars and regional conflicts very closely.
19
It is sometimes possible to include a form of words in the Geographical
Limits section of the operator’s policy to ensure that such a gap in
coverage does not occur.
20
If a bank/lessor is unable to repossess and de-register an aircraft
following a default under the lease,it will be very hard to convince war
risk underwriters that a ‘bona fide’ confiscation has occurred. Only in
circumstances where a country descends into general turmoil, with
widespread acts of seizure, would the policy be expected to respond.
However, in such circumstances (general turmoil or outright war) there
is a strong chance that underwriters will have already exercised their
rights to cancel or review the conditions of coverage.
21
of illegal cargoes,notwithstanding that local officials may deem that the
airline has acted illegally.
22
fines, taxes, penalties or contractual liability that may attach to the
bank/lessor arising out of the lease.Insurance protections (in respect of
perils covered) afforded to the bank/lessor will only be as wide as those
enjoyed by the operator. Since many of the ‘indemnity’ provisions are
not insurable, banks/lessors should accept that, having signed the
agreements,the liability will rest with the operator.
23
AVN5A is more commonly used on general aviation risks.However, for
airlines with premium payments problems (or a history thereof) airline
underwriters have been known to insist upon AVN5A. If this clause is
used, it is essential that the financier fully comprehends the
implications and receives clarification as to how coverage under
AVN67B (or AVN28A) will be affected,if the cancellation provisions of
AVN5A are invoked.
The surest way to eliminate the risk of coverage being withdrawn,is for
the financiers to take out separate Contingent Hull and Liability
insurances in the name of the bank/lessor.These products are explored
further in Section Two,page 89.
24
PL EASE PR OMO TE THI S PI LO T – T O AN OFF IC E J OB!
A Boeing 747,operated by a large Asian airline,landed between wild gesticulations to cut the engine and
at Anchor age Alaska and taxied to the docking area. desperate scrambles for cover.
Unfortunately the pilot was having an off day and
parked in the wrong bay. Rather than calmly accepting The engine was broken off spewing large volumes of
his error and waiting for a tractor tug to pull the aircraft fuel and further, more serious damage was sustained b y
back out,the pilot attempted a u-turn.As the left hand the hapless Russian jet. In addition, a large cargo
wing swung around the wing tip struck an Aeroflot container was picked up in the vortex and hurled
aircraft in the next bay. Undeterred,the pilot increased through the airport terminal window (causing
power on the outer engine to full takeoff power in an considerable damage and several spilled cups of coffee).
attempt to complete the u-turn. This caused some Miraculously nobody was hurt,other than, we hope,the
consternation among ground staff who alternated career prospects of the pilot.
Endorsement and Acknowledgement of
the Bank’s/Lessor’s Interests
The primary aviation insurances will have been placed in the name of
the airline, or aircraft operator. The financier’s priority interest in the
aircraft will need to be included under these insurances.A specimen
‘insurance article’, is found in Appendix A, page 119. The principal
requirements are as follows:-
i) Additional Insured
The bank/lessor to be named as an additional insured on the
airline’s/operator’s insurance policies.When the financing is made by
way of a mortgage, then the Mortgagee may, alternatively, require an
assignment of the Hull policies. This is addressed in the Airline
Finance/Lease Contract Endorsement AVN67B. For full text of AVN67B
and explanatory notes refer to page 54.
27
provided that the bank/lessor has not caused, contributed to or
condoned such act,omission or misrepresentation.
- An airline f lying with pilots who have less than the stipulated
qualifications.
28
iv) Letter of Undertaking
Financiers should insist upon a ‘Letter of Undertaking’from the placing
insurance broker (or direct insurer). The letter should include the
following:-
29
with the named insureds. Therefore, the bank/lessor could be held
responsible for such payment unless provision is made in the
insurances to the contrary.This is addressed in the text of the AVN67B
Endorsement (refer page 51).Insurers will normally agree to waive any
liability for premium set off (i.e.deducting outstanding premium from
a claim payment) other than in respect of outstanding premium due in
respect of the particular aircraft,subject to a claim (AVN67B contains
such a provision).
30
Underwriting Security
An insurance policy is only as strong as the security backing it. Each
underwriter is only liable for his proportionate share;there is no joint
liability.
Lloyd’s Insurance policies are all backed by the Lloyd’s Central Fund.
31
Local Domestic Insurers and
‘Cut Through Clauses’
In many countries local law dictates that all insurance is placed with a
domestic insurer, who will typically reinsure into international markets.
The ratings of such companies are often far lower than would normally
be acceptable to major insurance brokers and financial institutions. In
the event that the domestic insurer becomes insolvent,not only may his
share of claims be unrecoverable, but as the direct insurer, the whole
policy may be jeopardised
32
Cut through clauses can be an emotive issue with local governments
and domestic insurers.The inclusion of a clause must be agreed by the
domestic policy issuing company (the reinsured) as well as the
international reinsurers.In addition,it must not act in contravention of
local law. There are certain countries where the clause is currently
illegal (including People’s Republic of China) and other countries
where its legality is untested (India and South Korea for example).
The clause applies to physical damage policies only and should not
normally apply to liability claims.
“The Reinsure rs here by agree (at the request and with the
consent of the Reinsured) that in the event of any valid cl a i m
a rising hereunder the Reinsure rs shall in lieu of payment to the
R e i n s u red its successors in interest and assigns pay to the
p e rson(s) named as loss payee(s) under the ori ginal insura n c e
e ffected by the Insured that portion of any loss for which the
R e i n s u re rs would otherwise be liable to pay the Reinsure d
(subject to proof of loss) it being understood and agreed that
33
a ny such payment shall fully disch a rge and release Reinsure rs
f rom any and all further liability in connection with such cl a i m .
34
W H Y A R E W E WA I T I N G ?
P assengers boarded an aircraft for a scheduled flight increasingly agitated at the delay. No announcement
from the Indian subcontinent to Europe.The checked was made, and none of the aircrew appeared to have
baggage was loaded,the catering arrangements finalised any knowledge of the circumstances causing the
and completed,and with the chief steward confirming delay.
the passenger manifest,the cabin doors were closed and
sealed. Everything was ready for the scheduled Suddenly, there was a tapping noise on the cabin
departure time. door at the front of the airc ra f t . The chief steward
released the safety catches and the door was opened.
Thirty minutes elapsed. The aircraft remained on the T h e re , standing on the steps, were the captain and
ground, and not surprisingly, the passengers became co-pilot.
Loss Payable Clauses
Paragraph 1.1 of AVN67B contains the following ‘Loss Payable’
language:-
37
to the named loss payee of funds intended to pay for repair, could delay
the process of repair or curtail it completely. Insurers obviously cannot
pay the same funds to both loss payee and the repairer.
Although insurers will generally pay the repairer, the clause does
provide for consultation with the Contract Parties in the settlement;
thus the bank/lessor will be kept informed of what is happening to
their asset.The clause does leave the question of settlement process of
a partial loss open. If there is a good reason why the partial loss
proceeds should be paid to the Loss Payee then this would be a subject
for negotiation. If, for example, the operator was insolvent then the
recipient of funds may need to be amended.
38
Airworthiness and Aircraft Regulation
There is an implied warranty on all aviation policies that aircraft are
maintained to the specified standards. The standards and procedures
are dictated by the aircraft manufacturers, in conjunction with the FAA
and/or the relevant civil aviation authority. The procedures are
minutely documented and require very detailed records to be kept.
39
banks/lessors require periodic updates of the maintenance/certification
programme and may require duplicate records to be filed with them.
40
The Vital Checks for Aircraft Safety
Step by Step to Safety – the programme that keeps an aircraft in the air
Takes 10-20 minutes Takes 2 hours Takes half a day Takes 24 hours in hangar Takes 3-8 weeks in hangar
C aptain walks aro u n d As A - C h e c k , but re c o rd As previous checks, but Open all panels, t a ke Complete strip dow n
a i rc r a f t . Checks fo r t y re pre s s u re s , top up in more detail. Check engine cowls off. Check to bare metal; eve ry
obvious damage, l e a k a g e, f l u i d s , check braking and replace hydraulic critical systems – fire, component taken to
loose panels. Visual e f f i c i e n c y, open access f i l t e r s , rectify any faults stall and overheat pieces and replaced or
check of engine area and panels and doors. advised by airc rew s . w a r n i n g s . Check wiring, re b u i l t .
of fuel and fluid leve l s . change fluids, and check
Checks that control all items in A , B and C.
surfaces are fre e, Repeat every 1,500 hours
emergency equipment until P-5: major strip
and lighting in good d ow n ; non destructive
o rd e r, that engine fans testing of airframe
a re undamaged using X-rays and dye
and turning fre e ly. p e n e t r a t i o n , check for
c o rrosion and cracks.
41
Insurance Claims
i) Hull Claims
The predominant structure for aircraft financing is the lease.As such the
lessor effectively retains title to the asset and is particularly concerned
that it is maintained in excellent condition. The condition has a
considerable impact on residual values; RVI guarantees do not normally
cover loss in value due to the aircraft ‘return condition’ being below
stipulated lease standards.
Aviation hull claims are far more clear cut and subject to less negotiation
than marine hull claims.This is due to several factors including:-
42
120% of the financed amount outstanding,this ensures that
bank’s/lessor’s costs and lost revenues are recovered.
Some losses are borderline cases between being a total loss or large
partial loss. For example,if a Boeing 747-400 insured for
US$175,000,000 sustains US$150,000,000 worth of damage,the
airline operators and the financiers may not wish for it to be
repaired.They will try to negotiate for a total loss,with the
underwriters retaining salvage.The long-term desirability of an
aircraft that has suffered serious damage is questionable.
Underwriters may argue for the damaged aircraft to be repaired.In
such cases it is helpful to have an agreed threshold,beyond which
the aircraft will be declared a total loss. For example,if repair costs
exceed 75% of the agreed value.
Engine leases
Complications can arise when an aircraft suffering a loss is fitted
with a borrowed or replacement engine;the engine not being
subject to the aircraft lease in question.In such circumstances the
agreed value of the aircraft should be increased to include the value
of the replacement engine (i.e.Boeing 747 airframe plus five
engines).Then underwriters will pay a total loss, for the increased
agreed value,and take the replaced engine as salvage.Such
scenarios need to be addressed by a specific policy clause.
If the value has not been increased,then the respective owners of
the engines may become embroiled in a dispute as to the
distribution of claim proceeds.This may result in underpayment,or
a lessor being presented with an unwanted ‘Orphan Engine’!
Refer Appendix D, page 162 for a suggested ‘Orphan Engine’ clause.
43
b) Partial losses
Following partial losses, financiers will want to ensure
that the repairs are carried out to their satisfaction. For this reason
leases contain loss payable clauses that typically require for claim
proceeds, over a stipulated amount,to be paid directly to the
bank/lessor.This threshold varies depending upon the standing of
the airline. For example,the threshold for a ‘start up’airline may be
US$500,000,but US$10,000,000 for a large international airline.
However, normal practice is that claims are paid directly to the
repairer and this is reflected in the language of paragraph 1.1 of
AVN67B.It is important that banks/lessors appreciate that,unless
specifically addressed with insurers,the provisions of AVN67B may
override the ‘Loss Payable’provisions contained in the lease
contract.This subject is explored in further detail in Loss Payable
Clauses.Refer to page 37.
44
- CHOICE OF REPAIRER.The aircraft financier does not have the
right to insist upon a chosen repairer. Insurers will seek to repair
the damage in the most economic way, but will be bound to use
an approved repairer.This would typically be an FAA/JAA/CAA or
equivalent licenced repair station.Normally insurers will
consider the wishes of a bank/lessor and this could be the basis
for negotiation.
Some ‘loss payable’ clauses require that all claims, including liability
claims are paid via the bank/lessor.This langua ge is not recommended
and is likely to cause added workload, delay in claim payments and,
more dangerously, could lead to the bank/lessor becoming needlessly
involved in expensive liability suits. If a claim payment, destined for a
dependant of a deceased passenger, were to be inadvertently held up
within a bank’s/lessor’s accounting process, this could attract un-
quantifiable liability suits for bad faith etc.
45
Lessor Liability
One of the primary concerns of a bank/lessor financing transportation
assets is to avoid any legal liability exposure arising out of operation of
the asset.The essential defences against aviation liability exposures are:-
46
Aviation lawyers consider the possibility of a lawsuit filed directly
against an aircraft financier to be remote. In order to bring a suit
successfully the plaintiff will need to be able to demonstrate some
‘contribution’ by the bank/lessor. In most jurisdictions it is very unlikely
that the act of leasing an aircraft to an operator could satisfy this pre-
requisite. Furthermore, if a suit is successfully brought against the
financier, the operator’s policy should afford protection to the named
financier as an Additional Insured.
47
Any financier who is uncomfortable with the liability exposure
assumed when financing aircraft can buy a contingent liability policy.
This type of policy is detailed in Section Two of this book – refer page
89.
48
SO MU CH BE TT E R THA N T HE F IL M ?
A B o e i n g jet was cruising overnight on route to Lagos. many minutes of panic the captain decided that the
The aircraft was on autopilot and the majority of the only way to regain access was to physically break it
passengers had settled down to sleep. For one reason or down. A fire axe was brought from the rear of the
another, first the flight engineer and then the captain a i rc raft and, under the full glare and to the
departed the flight deck leaving the co-pilot in sole charge. consternation of the passengers, the crew started to
hack away madly at the door. After apprehensive
The co-pilot needed to attend to a call of nature and minutes of frantic exertion it finally gave way and the
likewise took his leave allowing the flight deck door embarrassed crew were able to regain control of the
to close behind him. On the return of the crew it was aircraft.
suddenly appreciated that the door was fitted with an
anti-hijacking security lock which would not allow For many of those passengers of a strong nervous
re-entry from the first class passenger cabin. After disposition this incident was so much better than the film!
Aviation Lease/Finance Clause AVN67B
Unlike Marine Insurance where financiers are normally obliged to take
out separate ‘Mortgagee’s Interest Insurance’ policies, AVN67B is
endorsed onto the operator’s own policy with the same insurers. On
occasions insurers may deny a claim to the airline/operator but pay a
valid claim in respect of the bank’s/lessor’s interests.
i) Background to AVN67B
The AVN67 clause was introduced by insurers in an attempt to
standardise the method and language used in giving effect to the
insurance requirements of financiers.Previously, insurers felt that they
were frequently being asked to agree the ‘Insurance Article’ of a lease
agreement with little time to review the often complex language and
being told that the transaction might fall through if they did not agree
without question. Insurers also felt that rather than perhaps reacting
negatively to a set of words constructed by others, it was appropriate
that they should state the coverage they were prepared to give for the
benefit of financiers. The development of a standard clause was
intended to enable insurers to react immediately and confidently when
presented with contracts in respect of financed aircraft.
The original AVN67 clause has been refined and improved in stages –
the cur rent clause is designated AVN67B.Whilst its incorporation into
airlines insurance programmes was initially haphazard, it is now
included automatically (though there is some lingering resistance in US
51
insurance markets). When drawing up insurance provisions for new
leases,the requirements of AVN67B must therefore be considered.
52
needs of financiers into account. In view of this, insurers are reluctant to
amend the provisions of AVN67B and will only do so with good reason.
v) Engine Leases
AVN67B is designed so that it can be applied to engine leases as well as
complete aircraft.
53
vii) Text of AVN67B and explanatory notes
54
1. Under the Hull and Airc r a f t
S p a res Insurances
1.1 In respect of any claim on equipment This section relates to the Loss
Payable clause contained in the
that becomes payable on the basis of lease. If the terms of the lease
differ from section 1.1, then the
a Total Loss, settlement (net of any provisions of AVN67B override
the lease provisions (unless
relevant policy deductible) shall be s p e c i fi c a l ly agreed by insurers
to the contra ry ) .I n s u re rs are
made to, or to the order of the reluctant to pay amounts in
respect of partial losses direct
Contract Party(ies). In respect of to a bank/lessor. In order to
make good damage in a timely
any other claim, settlement (net of any manner (insure rs ’p ri m a ry duty
under the policy), i n s u re rs will
relevant policy deductible) shall be n o rm a l ly make payments
d i re c t ly to the repairer, but are
made with such party(ies) as may be happy to consult with the
Contract Party prior to doing
necessary to repair the Equipment so.
unless otherwise agreed after
‘Equipment’ can mean a single
consultation between the Insure rs spare engine or a complete
aircraft (comprising airframe
and the Insured and, where necessary and non-specified engines).
under the terms of the Contract(s),
the Contract Party(ies). S u ch
payments shall only be made provided
t h ey are in compliance with all
applicable laws and regulations
55
2. Under the Legal Liability
Insurance
2 . 1 Subject to the provisions of this This is the ‘severability of
interest cl a u s e ’ .E a ch insured
E n d o rs e m e n t , the Insurance shall receives separate cover, but this
is subject to the overall policy
o p e rate in all respects as if a limit for each occurrence.
56
2 . 3 This Endorsement does not I n s u re rs are retaining their
rights to proceed against
p rovide cove rage for the C o n t r a c t m a nu fa c t u re rs , re p a i re rs ,o r
servicing agents. Since contract
Party(ies) with respect to cl a i m s parties are added as ‘additional
i n s u re d s ’ this could pre cl u d e
a rising out of their legal liab i l i t y insurers from subrogating
against such parties if they
as manu fa c t u re r, re p a i re r, o r contributed to a loss. Most
banks/lessors have no
s e rvicing agent of the operational interest in the
aircraft they fi n a n c e .H owever,
E q u i p m e n t. many manufacturers lease
a i rc ra f t , either directly or
through their own finance
company. The provisions of this
clause may need to be
specifically addressed in such
cases.
In addition, this wo rd i n g
cl a ri fies that no coverage is in
force for liability suits enjoining
an insured, in his capacity as
m a nu fa c t u re r. Following a major
accident, with loss of life, it is
commonplace for suits to be
filed against manufacturers
d i re c t ly.
57
3.2 The cover afforded to each Contract This provides the ‘Breach of
Warra n t y ’c overage.
Party by the Policy in accordance
with this Endorsement shall not be As discussed elsewhere in this
report (refer ‘ O p e ra t i o n a l
invalidated by any act or omission I n t e re s t ’ – page 52) it is
important that the bank/lessor
(including misrepresentation and distances itself from the
operation of the aircraft.
non-disclosure) of any other person
or party which results in a breach of
any term, condition or warranty of
the Policy PROVIDED THAT the
Contract Party so protected has not
c a u s e d ,c o n t ributed to or knowingly
condoned the said act or omission.
58
3.4 The Contract Party(ies) shall Even if the airline has paid no
premium the policy is still valid
have no responsibility for premium as far as the Contract Party’s
interests are concerned
and Insurers shall waive any right of (provided notice of cancellation
has not expired or automatic
set-off or counterclaim against the termination occurred). The only
premium that can be offset by
Contract Party(ies) except in the underwriters is the premium
due in respect of the equipment
respect of outstanding premium in (i.e. the aircraft or engine subject
to a claim – not the whole fleet)
respect of the E q u i p m e n t. subject to a claim.This would be
deducted from the final
settlement. Since aviation rates
are low, this will typically be a
very small percentage of the
claim proceeds.
59
3.6 Except in respect of any prov i s i o n Aviation policies contain
automatic cancellation/
for Cancellation or Au t o m a t i c termination clauses fo l l ow i n g
hostile nuclear detonation and
Te rmination specified in the outbreak of war between the
five major powers (refer AV38B,
Policy or any endors e m e n t AV48B and AV52C clauses in
Appendix D). ‘ B ro ke rs Letters of
t h e re o f, c over provided by this U n d e rt a k i n g ’ cannot override
these clauses.
E n d o rsement may only be
cancelled or materi a l ly altered in a Other than in respect of these
prov i s i o n s ,i n s u re rs are re q u i re d
manner adve rse to the Contra c t to give 30 days notice to the
appointed broker (or lesser
Pa rty(ies) by the giving of not less customary period in respect of
War risks – usually 7 days but
than T h i rty (30) days notice in may be reduced in times of
major conflict). In practice the
w riting to the appointed bro ke r. Contract Party may have less
time to resolve the fo rt h c o m i n g
Notice shall be deemed to lapse in cover – unless the
broker can notify them
commence from the date such immediately.
notice is gi ven by the Insure rs .
There is no requirement to
S u ch notice will NOT, h oweve r, b e advise of cover lapsing at
expiry – this can be addressed
gi ven at normal ex p i ry date of the in ‘ B ro ker Letters of
U n d e rt a k i n g ’( re fer Appendix
Policy or any endors e m e n t . C ,p age 151).
60
EXCEPT AS SPECIFICALLY VARIED OR The AVN67B endorsement does
not broaden the scope of
P ROVIDED BY THE TERMS OF T H I S coverage, other than as
s p e c i fi c a l ly addressed in the
E N D O R S E M E N T: - e n d o rs e m e n t .N o t w i t h s t a n d i n g
the Insurance Requirements
detailed in the lease covenants,
coverage is only as broad as
1. THE CONTRACT PA RTY(IES) A R E that which would have been in
place, but for the bre a ch ,n o n -
C OVERED BY THE POLICY d i s cl o s u re or misrepresentation.
SUBJECT TO ALL T E R M S ,
C O N D I T I O N S , L I M I TAT I O N S ,
WA R R A N T I E S , EXCLUSIONS A N D
C A N C E L L ATION PROV I S I O N S
T H E R E O F.
61
SCHEDULE IDENTIFYING TERMS USED
IN THIS ENDORSEMENT
4. C o n t ra c t ( s ) :
62
A QU EST IO N OF P RIO R IT IES
A Boeing 747 was approaching Kai Tak Airport, Hong and proclaimed, “Jeez, you know what I fancy?
Kong on a flight originating from Sydney,Australia. Firstly, an iced cold beer, and then a really buxom
blonde!”
As the aircraft was making its landing approach the
co–pilot switched on the intercom to inform the On realising the the pilot had failed to sw i t ch off the
passengers of the sights and landmarks they could see i n t e rc o m , a blonde air hostess immediately ru s h e d
through the windows.On completing his geographical t h rough the passenger cabin towa rds the f l i g h t
narrative he failed to switch off the intercom. d e ck .A little old lady noticing her frantic dash called
to her, s ay i n g “ D e a r, t h e re re a l ly is no ru s h . I
When he had landed the aircraft the captain handed d i s t i n c t ly heard him say that he wanted the iced
over the controls to the co-pilot, leant back in his seat cold beer fi rs t ! ”
Aircraft Financial Interest
Endorsement – AVN28B
Whilst AVN67B is now the standard method of endorsing a
bank’s/lessor’s interests in airline equipment,the AVN28B clause is still
used for general aviation and helicopter finance.The scope of AVN28B
is not as broad as AVN67B and, where possible, it is recommended to
use AVN67B.
65
E f fective Date of this Endorsement
until the ex p i ry of the Insurance or
until the satisfaction of the obl i g a t i o n s
under the A g re e m e n t, w h i ch ever shall
fi rst occur, in respect of the interest of
the P a r t y and in consideration of an
Additional Pre m i u m IT IS
U N D E R S TOOD AND AGREED T H AT:
66
2. The protection affo rded to the Coverage is limited to hull
physical damage (which will be
P a r t y by the terms of this defined in the relevant
wo rd i n g ) . The amount insured
E n d o rsement shall be limited to should be specified in the
s ch e d u l e .
loss of or physical damage to the
i n s u red A i r craft and shall not Some deductibles (normally on
helicopters) apply in respect of
exceed the Original Amount total losses.This clause
establishes that even if 100%
under the A greement less any finance is in place, the
deductible will still apply.
re l evant Policy Deductible a n d In such cases the financier may
require that the Agreed Value
l e s s all m a t u re d I n s t a l m e n t s p a i d is increased to take this into
account.
or due prior to the accident gi v i n g
rise to a loss here u n d e r.
67
i m m e d i a t e ly he becomes awa re of
the event in fo rm and manner as
p re s c ribed by the Po l i c y.
68
n o n - p ayment of pre m i u m , t h e
Party shall have the option to pay
all outstanding premiums in
respect of the A i rc r a f t within the
notice peri o d .
69
SCHEDULE IDENTIFYING TERMS USED
IN THIS ENDORSEMENT
1. A i rc ra f t :
R e gi s t ra t i o n :
Payable in Instalments of
5. Policy Deductibl e :
6. Additional Pre m i u m :
7. Appointed Bro ke r :
AVN 28B
17.10.1996
70
Insurance Documentation Checklist
The insurance requirements are detailed in full in the Specimen
Insurance Article (refer to Appendix A,page 119).The following serves
as a brief checklist of the documentation that the bank/lessor should
receive prior to ‘drawdown’and/or delivery, and annually thereafter.
71
iv) Limits of coverage.Being the insured value of the aircraft,on
an Agreed Value basis,and for the liability insurances,the
Limit of Liability insured.
3. If Reinsurance is involved:-
i) Certificates of Reinsurance with details as per 1. and 2. above.
72
4. Broker’s Letter of Undertaking in respect of insurance and
reinsurance arrangements.
73
W H AT V E G E T A R I A N M E A L S D O Y O U H AV E ?
Delta 702 “Tower, Delta 702 switching to Departure… by the way, as we lifted off, we saw some
kind of dead animal on the far end of the runway.”
Control Tower “Continental 635, cleared for takeoff, contact Departure on 124.7… did you copy the
report from Delta?”
Continental 635 “Continental 635, cleared for takeoff… and yes, we copied Delta and we’ve already
notified our caterers.”
SECTIONTWO
I N S U R A N C E S
a n d
G UA R A N T E E S F O R
A I R C R A F T F I N A N C I E R S
S E C T I O N T WO
Aircraft Repossession Insurance
These policies are designed to protect aircraft financiers in the event of
them being unable to enforce their legal title and rights to repossess or
repatriate their collateral, the aircraft, following a default under a
loan/lease a greement.These policies have been variously described as
Aircraft Repossession Insurance, Political Risks, Collateral Deprivation
Insurance or Repatriation Insurance.
79
i) ‘Perils’ covered:-
1) Confiscation,seizure,appropriation, expropriation,
nationalisation, restraint or detention by the Foreign
Government (the meaning of Foreign Government is clearly
defined under the policy wording) of the aircraft.
80
components necessary to reinstate the aircraft and records to FAA
standard,or equivalent.
iii) Security
Aircraft Repossession policies are insured with underwriters at Lloyd’s
of London and with certain leading insurance companies.
81
- The applicable laws in force and the perception of the local
judicial system
82
- The operator’s hull ‘War’coverage is available for only a 12 month
period
The operator’s policy will probably respond to an overt and hostile act of
confiscation by a government undertaking widespread seizure of assets or
nationalisation. If the aircraft confiscation is an isolated act, it will be very
hard to persuade hull ‘War’ underwriters that this is a ‘bona fide’ political
act,as opposed to a contractual dispute.As one hull ‘war’underwriter was
quoted as saying, “governments do not declare war on a single asset”.
83
The BankAssure Repossession Insurance policy will respond
in the following manner:
Aircraft
The triggering of the Yes Yes
Deregistration returned and
Waiting Period under the
of Aircraft no claim
Insurance Policy, leading to
required
Yes
The Lessor exercising
their rights to recover
the Aircraft,leading to
No
No
Peril 2 + 3
Peril 5 Peril 6 Peril 4
Non Repossession
Proceeds of sale Sanctions Non De-registration
or Non Removal
84
Lease Payment Delay Insurance
(single transaction)
Aircraft Repossession Insurance, as described above, protects the
bank/lessor against the loss of the asset. It is also possible to increase
the sum insured to include provision for a limited amount of unpaid
lease payments and ‘default interest’.However, if no claim is recoverable
under the Repossession Insurance,and/or the asset is returned prior to
the maturation of the relevant ‘Waiting Period’, the bank/lessor will
suffer a significant unrecoverable loss.
85
countries and lessees where the financier is prepared to accept the
risk and vice versa for lower rated countries and lessees.
86
A NEAR MISS!
Bank’s/Lessor’s Hull and
Liability Insurance
This can be divided into i) Contingent Hull and Liability Insurance and,
ii) insurance arranged for Aircraft in the Care Custody and Control of
the Bank/Lessor.
89
Notwithstanding the requirements of the insurance covenants of a
lease, some financiers insure against the remote risk of an operator’s
insurance failing to respond,or proving inadequate.
90
b) Breach of Geographical Limits
If the operator flies outside the terms of the ‘Geographical Limits’
all coverage can become invalid,including the endorsement of the
financier’s interests.
91
their professional indemnity insurers,is likely to take several years.’
Also,the level of professional indemnity protection that smaller
intermediaries carry may prove insufficient.
92
The only significant exclusions to coverage are insolvency of the
operator’s insurers (however, the insolvency exclusion only applies to
hull claims – not liability),‘Major Powers’and nuclear war.The scope of
coverage for pollution and noise liability is the same as a standard
airline policy.
- Ferry flights
93
- Aircraft being repossessed
If the financier buys an existing Contingent Hull and Liability policy, the
aircraft (as described above) can be included, by application of the
‘Repossessed Aircraft Endorsement’. If no such contingent policy is in
force, a ‘stand alone’policy can be arranged.
In addition to Hull ‘All Risks’and Legal Liability the financier can arrange
Hull ‘War’Risks (based on LSW555B) and/or Hull Deductible insurance,
applicable whilst the aircraft are in its care custody and control.
94
Contingent Hull War Insurance
Leases invariably require that the operator carries Aviation Hull War and
Allied Perils insurance (usually on the LSW555B Wording).This policy
will normally be endorsed to include the bank’s/lessor’s requirements
in the same way that that the hull ‘All Risks’ policy is endorsed.This
typically includes a Loss Payable clause, Breach of Warranty clause,
minimum notices of cancellation and a Cut Though Clause (where
appropriate). In addition, the financier will require that the operator’s
appointed insurance broker issues a ‘Letter of Undertaking’ regarding
material changes in coverage and the like.
95
the lienholders.This problem may be exacerbated by local politics.
A state airline,and/or the national insurer issuing the direct
insurance policy, may not accept that it is involved in a war and
may cease cooperating with underwriters/reinsurers.
ii) UN Sanctions
If the country in which an airline operates becomes an international
pariah and is subjected to UN sanctions,it may become illegal for
insurers or reinsurers to continue coverage.The bank/lessor may be left
with a gap in cover at the time of greatest risk.
96
default and endeavour to repossess the aircraft.If Aircraft
Repossession Insurance has been purchased by the bank/lessor,
then the bank/lessor is protected against inability to repossess the
aircraft due to interference of the ‘Foreign Government’.However,
this policy is subject to ‘Waiting Period’of 180 days,prior to any
claim being paid.During this ‘Waiting Period’the aircraft may be
trapped in hazardous location, abandoned or generally misused.
Physical damage during the ‘Waiting Period’is not covered under
the Aircraft Repossession insurance and the likelihood is that the
operator’s own policy will have been cancelled or lapsed.
97
Exhaustion of Aggregate/Ground Limit on Operator’s War Policy
Contingent War policies can be extended to cover the financier for any
shortfall in recovery, in respect of their financial interest, due to
aggregate or ground limitations on the operator’s primary hull war
policy.This coverage is slightly different from that described in i) to iii)
above.Since it is not technically‘contingent’,the relevant section of the
policy is subject to normal cancellation and review clauses (the same as
LSW555B).
98
TA K E M E T O . . . . ?
An American airliner was on a scheduled flight from “But, we’re already going to Miami”.
New York to Miami.Some way into the flight a passenger
approached and entered the flight deck and ordered the The passenger immediately responded, “Maybe, but on
crew to, “Fly me to Miami”. the last occasion I travelled with you we were
hijacked to Havana, and I wanted to make sure I got
After a moment’s thought the captain replied, to you first!”
Total Loss Only Insurance
There are circumstances when a bank/lessor may wish to purchase a
policy that pays an agreed amount in the event of the Total Loss of the
aircraft (Total Loss is as defined under the operators’s hull ‘All Risks’or
‘War Risks’policy).This amount would be over and above that which is
already purchased under the main hull policies.It protects the financier
against a specific financial loss that would occur following a total loss.
For example, where the insured value under the operator’s policy
reflects the market value of the aircraft,but this amount is less than the
stipulated loss value (SLV) under the lease agreement.
If an aircraft market value rises, it is possible that the SLV will be less
than the true value of the financier’s asset.This may also create a need
for TLO.
101
Aircraft Repossession
Expenses Insurance
(Including ‘Return Condition’ and
Technical Records Insurance)
- Certification charges
102
iv) Loss or Dama ge of Technical Records
In the event that the aircraft is returned without technical records
or with incomplete technical records,there will be substantial cost
incurred to reinstate the technical records.The ease of reinstating
records will depend upon the quality (and currency) of back up
records filed with the bank/lessor or manufacturer. If the ‘time life’
of a specific part cannot be established with certainty, a new part
will be required.
103
A NOTHE R SO OTHI NG C AB IN A NNO U NCE ME NT!
After a real crusher of a landing in Phoenix,Arizona the brought the aircraft to a screeching halt up against the
flight attendant came on with: gate. And once the tyre smoke has cleared and the
warning bells are silenced, we’ll open the door and
“Ladies and gentlemen, please remain in your seats you can pick your way through the wreckage to the
until Captain Crash and his wrecking crew have terminal.”
Residual Value Insurance
Operating leases are the most common financing structure for new
aircraft.‘Sale and lease-back’ transactions are also gaining favour with
airlines seeking to restructure their balance sheets.The recent demise
of the ‘German Leveraged Lease’and the ‘Japanese Leveraged Lease’has
left many lenders pondering their future role in aircraft financing
transactions. Banks are expert at evaluating and accepting credit risk;
they are often very reluctant to accept ‘asset risk’.
Over the last 20 years there have been various ‘Residual Value
Guarantee’ products available. These have included insurance type
products,‘put & call options’ and ‘buy back’ guarantees. From time to
time these guarantees have been offered by aircraft manufacturers in
order to promote sales (there is a cash flow advantage to the
manufacturer who otherwise may have to discount the cash price).
106
In the last three to five years, insurers/guarantors new to the asset
financing market have brought significant capacity into the aircraft
financing arena. These insurers/guarantors, who are offering clear
contract wordings and carry excellent credit ratings, have been
selectively selling RVI.The deals are all tailored according to the specific
needs of the bank/lessor; there is no standard product. Most deals
provide for a guarantee at one set date in the future.
107
It can be seen that even with a premium of $3,960,000 (being 6% of the
$66,000,000 RVI Sum Insured) capitalised in the transaction,the airline
is able to realise a saving on each monthly lease rental of US$272,601.
Hence, within 15 months, the RVI premium is fully “recovered” from
such monthly savings on each lease rental.
1) Principal outstanding
108
2) Reducing Lease Rentals with RVI
109
RVI arrangers must have the following:-
- Ability to fully understand the financier’s motivation and
requirements.
110
Revenue Stream Protection
In addition to protecting the assets that underpin a portfolio of leases,
it is possible to protect the stream of revenue derived from that
portfolio.Protections can be arranged for long periods that mirror the
periods of financing.The coverage can include causes wider than those
traditionally available in insurance markets,including:-
- Insolvency/default of lessees.
111
- Longer periods of coverage than are typically available in
insurance markets (up to 15 years).
112
Summary of Key Protections
for Aircraft Financiers
113
4) Aircraft Repossession Expenses Insurance
i) Covers the costs of repossessing an aircraft,including legal
expenses.
114
B AC K S E AT D R I VE R S !
A Royal Air Force VC10 was on an arduous flight gentleman if he would hold the string, whilst he
carrying the families of air force personnel from Brize attended to the call of nature. He gingerly passed the
Norton,England to Goa,India. string over, telling the man he was now controlling the
aircraft.
In those days this was a long journey and,a few hours
into the flight, the crew became bored with the The flight engineer up on the flight deck, started
monotony of their task. tugging on the string to create the effect that the
controls were moving.
The captain,who had a reputation with his colleagues as
being something of a joker, decided to liven up the For a few minutes the old gentleman, with sweaty
proceedings. He took a ball of string and paid it out, hands,perspiration pouring from his brow and no doubt
whilst walking backwards down the aisle of the aircraft his heart-in-his-mouth, fought to “control” the aircraft,
from the flight deck. and if the captain had not returned when he did,he may
well have have returned to a collapsed passenger in a
On reaching the rear of the aircraft he asked an elderly deep state of shock!
APPENDIX
[ ] INSURANCE
119
( a ) on a direct basis with insure rs of recognised standing
who norm a l ly participate in aviation insurances in the
leading international insurance markets and led by
re p u t able underwriter(s) approved by Lessor; o r
120
c o n s i d e rs that any ch a n ge should be made, Lessee will
then arra n ge or pro c u re the arra n gement of altern a t i ve
c over satisfa c t o ry to Lessor.
121
(i) i nvalidates or may invalidate the Insura n c e s ; o r
122
fo rm acceptable to Lessor in English, detailing the
c ove rage and confi rming the insure rs ’ (and any
re i n s u re rs’) agreement to the specified insura n c e
re q u i rements of this A greement within 7 day s
after each re n ewal date;
123
( b ) at any time while such fa i l u re is continuing to re q u i re
the A i rc raft to remain at any airport or to proceed to
and remain at any airport designated by it until the
fa i l u re is remedied to it’s satisfa c t i o n .
124
US$[ ] will be paid to Lessor and applied in
payment (or to reimburse Lessee) for repairs or
replacement property upon Lessor being satisfied that the
repairs or replacement have been effected in accordance
with this Agre e m e n t .I n s u rance proceeds in amounts
below US$[ ] may be paid by the insurer directly to
L e s s e e .A ny balance remaining may be retained by Lessor.
SCHEDULE [ ]
INSURANCE REQUIREMENTS
125
2. HULL WAR AND ALLIED PERILS, being such risks excluded from
the Hull All Risks Policy to the fullest extent available from the
leading international insurance markets including confiscation
and requisition by the State of Registration for the Agreed Value.
5. All required hull and spares insurance (as specified above), so far
as it relates to the Equipment (Airc ra f t ,a ny Engine or Part) will:
126
( 2 ) p rovide that any loss will be payable in Dollars , a n d :
127
additional insureds for their re s p e c t i ve rights and
i n t e re s t s ,
128
and that the Insurances are subject to a securi t y
assignment in favour of Lessor;
129
p remium due against the re s p e c t i ve interests of the
additional insureds other than outstanding pre m i u m s
relating to the Equipment which is the subject of the
re l evant cl a i m ;
130
p roceedings) disch a rged its obligations in full under
the ori ginal insurance policies in respect of which the
then re l evant policy of re i n s u rance has been effe c t e d ;
and (c) contain a “ c u t - t h ro u g h ” clause in the fo l l ow i n g
fo rm (or otherwise, s a t i s fa c t o r y to Lessor):
131
(ii) that the Reinsured has made no pay m e n t
under the ori ginal insurance policies.
( 1 1 ) Date Recognition
132
Appendix B
i) Certificate of Insurance
TO WHOM IT MAY CONCERN
DAT E :
CERTIFICATE OF INSURANCE
The Hull All Risks and Hull War Risks insurances are arra n ge d
s e p e ra t e ly and contain a 50/50 provisional claims settlement
clause AV S 1 0 3 .
SCHEDULE OF EQUIPMENT
1. Equipment:
3. ( a ) Contract Party(ies)
A N D, (b) in respect of Legal Liability Insura n c e s .
5. E ffe c t i ve Date
6. Additional Pre m i u m US$100 the receipt of which is
h e re by ack n ow l e d ge d .
DIRECTOR SIGNAT U R E S :
ii) Certificate of Reinsurance
DAT E :
CERTIFICATE OF REINSURANCE
142
2. LIABILITIES – A i rc raft T h i rd Pa rt y, Pa s s e n ge r, B ag g age , C a rgo ,
M a i l , P remises Products and Hangarke e p e rs Legal Liability fo r
a Combined Single Limit (Bodily Injury / P ro p e rty Damage) of
US$ a ny one accident/occurrence and in
the ag gregate in respect of Pro d u c t s , subject to a bag g age
and personal effects deductible of US$ 1,250 each and eve ry
loss and a cargo deductible of US$ 10,000 each and eve ry
loss but Pe rsonal Injury limited to US$ 25,000,000 any one
o ffence and in the annual ag gre g a t e . ( N OT E :T H I S
AG G R E G ATE LIMIT MAY BE REDUCED OR EXHAUSTED BY
V I RTUE OF CLAIMS MADE IN RESPECT OF OTHER A I R C R A F T
INSURED UNDER THIS INSURANCE). War and Allied Risks are
c ove red under this policy in accordance with AV N 5 2 C .
143
CLAIMS MADE IN RESPECT OF OTHER AIRCRAFT INSURED
UNDER THIS INSURANCE.
Amount Reinsure d: 100% of %.
The Hull All Risks and Hull War Risks insurances are arra n ge d
s e p e ra t e ly and contain a 50/50 provisional claims settlement cl a u s e
AV S 1 0 3 .
SCHEDULE OF EQUIPMENT
MAKE/MODEL SERIAL NUMBER AGREED VALUE
It is further cert i fied that the ori ginal insurances have been
e n d o rsed as fo l l ow s : -
144
are terminated by any action of the Insured or the Contract
Party(ies), whichever shall first occur, in respect of the said interest
of the contract party(ies) and in consideration of the Additional
Premium it is confirmed that the insurance afforded by the Policy is
in full force and effect and it is further agreed that the following
provisions are specifically endorsed to the Policy.
145
Policy had been issued cove ring each party Insure d
h e re u n d e r, but this provision shall not operate to incl u d e
a ny claim how s o ever arising in respect of loss or damage to
the E q u i p m e n t I n s u red under the Hull or Spares Insura n c e
of the Insure d . Notwithstanding the fo re going the total
l i ability of Insure rs in respect of any and all Insureds shall
not exceed the limits of liability stated in the Po l i c y.
146
3 . 3 The provisions of this Endorsement apply to the C o n t r a c t
P a r t y ( i e s ) s o l e ly in their capacity as fi n a n c i e r ( s ) / l e s s o r ( s )
in the identifi e d C o n t r a c t ( s ) and not in any other capacity.
K n ow l e d ge that any Contract Pa rty may have or acquire or
actions that it may take or fail to take in that other
capacity (pursuant to any other contract or otherwise)
shall not be considered as invalidating the cover affo rd e d
by this Endors e m e n t .
147
E n d o rsement there o f, c over provided by this Endors e m e n t
m ay only be cancelled or materi a l ly altered in a manner
a d ve rse to the Contract Party(ies) by the giving of not
less than T h i rty (30) days (but 7 days or such lesser peri o d
as may be customari ly ava i l able in respect of War and A l l i e d
Pe rils Risks) notice in writing to the Appointed Bro k e r.
Notice shall be deemed to commence from the date such
notice is gi ven by the Insure rs . S u ch notice will NOT,
h oweve r, be gi ven at normal ex p i r y date of the Policy or
a ny endors e m e n t .
148
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
1. Equipment:
2. Policy Deductible a p p l i c able to physical damage to the
Equipment (Insert all applicable Policy Deductibl e s )
HULL: US$ e a ch and eve ry loss (ex cluding To t a l
L o s s / A rra n ged Total Loss/Constru c t i ve Total Loss).
S PA R E S : U S $ e a ch and eve r y loss but in respect of
i n gestion whilst Spare Engines Running the Hull All Risks
D e d u c t i bles apply.
3. ( a ) Contract Party(ies)
A N D, (b) in respect of Legal Liability Insura n c e s .
4. Contract(s) Lease A greement betwe e n
and
5. E ffective Date
6. Additional Pre m i u m US$100 the receipt of
w h i ch is here by ack n ow l e d ge d .
7. Appointed Insurance Bro k e r
This endorsement does not:
a. I n c o r p o rate the Contract into the policy.
b. P rovide cove rage to the Contract Pa rties in the event of the
repossession of the equipment.
149
e ffected by the Insured that portion of any loss for which the
R e i n s u re rs would otherwise be liable to pay the Reinsure d
(subject to proof of loss) it being understood and agreed that
a ny such payment shall fully disch a rge and release Reinsure rs
f rom any and all further liability in connection with such cl a i m .
DIRECTOR SIGNAT U R E S :
150
Appendix C
Sample ‘Broker’s Letter of Undertaking’
In addition to requiring brokers to issue certificates,Banks/lessors need
to formalise the obligations of the insurance broker. This is done by a
‘Brokers Letter of Undertaking’. The following is a sample (i.e. a
suggested format that the Bank/lessor will request from brokers) that
can be incorporated into the lease insurance covenants.This letter can
be amended, as appropriate, if the broker is arranging reinsurance, as
opposed to direct insurance.
To :
Date:
Dear Sirs ,
I n s u re d :
151
P u r suant to instructions re c e i ved from the Insured and in
c o n s i d e ration of your approving ours e l ves as the Insura n c e
B ro ker for such insura n c e , we undert a ke as fo l l ows in
connection with the Insure d ’s policy arra n gements (under
w h i ch the A i rc raft identified ab ove is insure d ) , but only in
relation to your interest(s) in the A i rc ra f t :
2. To advise yo u , p ro m p t ly :
152
2 . 4 if we cease to be Insurance Bro ke r s to the Insure d .
Yo u rs fa i t h f u l ly,
D i rector
153
Appendix D
Aviation Insurance
Wordings and Clauses
Larger, more sophisticated airlines tend to have ‘manuscript’ policy
wordings that are tailored according to their needs. These wordings
have evolved from the standard AV1B/AVIC, AV16/AV20 wordings.
Section One of this book provides descriptions of the insurance
coverage usually provided for aircraft operators.
Policies issued by local companies are normally based on,or similar to,
the normal London wordings, even if they are issued in another
language.
154
its due date Insure rs shall have the right to terminate the cove r
a ffo rded by the Policy to the Insured and any other part y ( i e s )
p rotected there by, whether by endorsement or otherwise, by the
giving of not less than T h i rty (30) days notice in writing to the
Appointed Bro ke r. Notice shall be deemed to commence from the
date such notice is gi ven by the Insure rs .
AVN 6A (1.10.96)
Author’s Note
The authors endorse the use of AVN 6A. However, we stro n g l y
caution against the use of AVN 5A. In the event that insurers insist
upon AVN 5A, specific safeguards should be taken to ensure that
coverage provided for the bank/lessor is not subject to the
automatic cancellation pro v i s i o n .
155
AVN 5A DEFERRED PREMIUM CLAUSE
AVN 5A (9.10.74)
156
PERSONAL INJURY EXTENSION (AVN60)
2. Malicious pro s e c u t i o n .
157
(i) if the fi rst injurious publication or utterance of the same
or similar material was made prior to the effe c t i ve date
of this insura n c e .
AVN 60 (19.12.85)
158
AV57A(USA)
D.O.T. 14 CFR PART 205
(HEREINAFTER CALLED “PART 205”)
AIRCRAFT ACCIDENT LIABILITY INSURANCE
5. If the Insure rs are called upon to provide cove rage to the Insure d
in compliance with Pa rt 205 including the defence and legal costs
associated therewith and if by reason of the term s ,c o n d i t i o n s ,
limitations and ex clusions of the Policy such cove rage would not
159
h ave been provided except for this endorsement then the Insure d
will re i m b u rse the Insure rs for such payments made in prov i d i n g
c ove rage under Pa rt 205.
160
50/50 PROVISIONAL CLAIMS SETTLEMENT CLAUSE (AVS103)
B) a “Hull War Risks” policy which inter alia cove rs certain of the
risks ex cluded by AVN 48B/the Common North A m e rican A i r l i n e
War Exclusion Clause in A) ab ove
P ROVIDED A LWAYS T H AT
(i) the “Hull All Risks” and “Hull War Risks” placing slips are identically
e n d o rsed with this provisional claims settlement cl a u s e
(ii) within 12 months of the advance being made all Insure rs specifi e d
in (i) ab ove agree to re fer the matter to arbitration in London in
a c c o rdance with the Statutor y provision for arbitration for the
time being in fo rc e
(iii) once the arbitration decision has been conveyed to the parties
concerned, the “Hull All Risks” Insurers as the case may be shall repay
the amount advanced by the other group of Insurers together with
interest for the period concerned which is to be calculated using the
London Clearing Banks’ Base Rate
161
( i v ) if the “Hull All Risks” and “Hull War Risks” policies contain diffe ri n g
amounts payabl e , the advance will not exceed the lesser of the
amounts invo l ve d . In the event of Co-insurance or risks invo l v i n g
u n i n s u red pro p o rt i o n ( s ) , the appro p riate adjustment will be made.
162
NOISE AND POLLUTION AND OTHER PERILS
EXCLUSION CLAUSE (AVN46B)
(b) a claim or claims cove red by the Policy when combined with
a ny claims ex cluded by Pa ragraph 1 (re fe rred to below as
“Combined Claims”).
163
4. Nothing herein shall ove rride any ra d i o a c t i ve contamination or
other ex clusion clause attached to or fo rming part of this Po l i c y.
164
NUCLEAR RISKS EXCLUSION CLAUSE (AVN38B).
165
(i) the Insured under this Policy is also an insured or an
additional insured under any other insurance policy, i n cl u d i n g
a ny nu clear energy liability policy; o r
( i i i ) the Insured under this Policy is, or had this Policy not been
issued would be, entitled to indemnification from any
gove rnment or agency there o f.
(ii) this Policy shall only apply to an incident happening during the
p e riod of this Policy and where any claim by the Insured ag a i n s t
the Insure rs or by any claimant against the Insured arising out of
s u ch incident shall have been made within three ye a rs after the
date there o f ;
166
Emitter M a x i mum perm i s s i ble leve l
of non-fi xed ra d i o a c t i ve
167
WAR,HI-JACKING AND OTHER PERILS EXCLUSION CLAUSE (AVN48B)
(f) C o n fi s c a t i o n , n a t i o n a l i s a t i o n , s e i z u re , re s t ra i n t , d e t e n t i o n ,
a p p ro p ri a t i o n , requisition for title or use by or under the order of
a ny Gove rnment (whether civil military or de facto) or public or
local authori t y.
168
WAR ‘WRITEBACK’ CLAUSE
3. AU TO M ATIC T E R M I NAT I O N
169
( i i i ) All cover in respect of any of the Insured Airc r a f t
requisitioned for either title or use
– upon such re q u i s i t i o n
(d) Notices
All notices re fe rred to herein shall be in wri t i n g .
170
AIRCRAFT FINANCIAL INTEREST ENDORSEMENT (AVN28B)
1. The insurance affo rded by this Policy for loss of or physical damage
to the insure d A i rcraft shall not be invalidated as re g a rds the intere s t
of the Party by any act or omission by the Insured which results in a
b re a ch of any term , condition or wa rranty of the Policy PROV I D E D
T H AT the P a r t y has not caused, c o n t ributed to or know i n g ly
condoned the said act or omission. N eve rtheless any ch a n ge in title or
ow n e rship of the A i rc r a f t, c o nve rs i o n , embezzlement or secretion by
the Insured in possession of the A i rc r a f t is not cove red here u n d e r.
171
5. Upon payment of any loss or claim to the P a r t y, I n s u re rs shall to
the extent and in respect of such payment be subrogated to all
legal and equitable rights of the P a r t y.
At the expense of Insure rs the Party shall do whatever is
n e c e s s a ry to assist the Insure rs to exe rcise such ri g h t s .
172
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
1. A i rc ra f t :
R e gi s t ra t i o n :
Payable in Instalments of
5. Policy Deductibl e :
6. Additional Pre m i u m :
7. Appointed Bro ke r :
AVN28B 17.10.1996
173
AIRLINE FINANCE/LEASE CONTRACT ENDORSEMENT AVN67B
174
l i ability of Insure rs in respect of any and all Insureds shall not
exceed the limits of liability stated in the Po l i c y.
2.3 This Endorsement does not provide cove rage for the C o n t r a c t
P a r t y ( i e s ) with respect to claims arising out of their legal liab i l i t y
as manu fa c t u re r, re p a i re r, or servicing agent of the E q u i p m e n t.
3.2 The cover affo rded to each Contract Party by the Policy in
a c c o rdance with this Endorsement shall not be invalidated by any
act or omission (including misre p resentation and non-discl o s u re )
of any other person or party which results in a bre a ch of any term ,
condition or wa rranty of the Policy PROVIDED T H AT the C o n t r a c t
Party so protected has not caused, c o n t ributed to or know i n g ly
condoned the said act or omission.
175
3.5 Upon payment of any loss or claim to or on behalf of any
Contract Party(ies), I n s u re rs shall to the extent and in respect of
s u ch payment be thereupon subrogated to all legal and equitabl e
rights of the Contract Party(ies) i n d e m n i fied here by (but not
against any Contract Party) . I n s u re rs shall not exe rcise such
rights without the consent of those indemnifi e d , s u ch consent not
to be unre a s o n ably withheld. At the expense of Insure rs such
Contract Party(ies) shall do all things re a s o n ably necessary to
assist the Insure rs to exe rcise said ri g h t s .
176
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
4. C o n t r a c t ( s ):
6. Additional Pre m i u m :
7. Appointed Bro k e r :
177
AIRLINE FINANCE/LEASE CONTRACT ENDORSEMENT (AVN 67B HULL WAR)
178
other contract or otherwise) shall not be considered as
i nvalidating the cover affo rded by this Endors e m e n t .
179
EXCEPT AS SPECIFICALLY VARIED OR PROVIDED BY THE
TERMS OF THIS ENDORSEMENT: -
180
SCHEDULE IDENTIFYING TERMS USED IN THIS ENDORSEMENT
3. Contract Party(ies):
4. Contract(s):
6. Additional Pre m i u m :
7. Appointed Bro k e r :
28.9.94
181
Aviation Hull War Wording (LSW 555B)
The following wording is almost always used to cover war and
‘allied perils’.
(e) C o n fi s c a t i o n , n a t i o n a l i s a t i o n , s e i z u re , re s t ra i n t , d e t e n t i o n ,
a p p ro p ri a t i o n , re q u i s i t i o n , for the title or use by or under the
o rder of any Gove rnment (whether civil militar y or de facto) or
p u blic or local authori t y.
182
(f) H i - j a cking or any unlawful seizure or wrongful exe rcise of contro l
of the A i rc raft or crew in flight (including any attempt at such
s e i z u re or control) made by any person or persons on board the
A i rc raft acting without the consent of the Insure d .
183
SECTION THREE:- GENERAL EXCLUSIONS
This insurance ex cludes loss, d a m age or ex p e n s e
(b) C o n fi s c a t i o n , n a t i o n a l i s a t i o n , s e i z u re , re s t ra i n t , d e t e n t i o n ,
a p p ro p ri a t i o n , requisition for title or use by or under the
a u t h o rity of the Gove rnment(s) named in the Sch e d u l e , or any
p u blic or local authority under its juri s d i c t i o n ;
184
SECTION FOUR:- GENERAL CONDITIONS
1. This Policy is subject to the same wa rra n t i e s , t e rms and conditions
( except as re g a rds the pre m i u m , the obligations to investigate and
d e fe n d , the re n ewal agreement (if any ) , the amount of deductibl e
or self insurance provision where applicable AND EXCEPT A S
OT H E RWISE PROVIDED HEREIN) as are contained in or may be
added to the Insure d ’s Hull “All Risks” Po l i c y.
185
SECTION FIVE:- CANCELLATION, REVISION AND AUTOMAT I C
T E R M I N AT I O N
Amendment of 1 . ( a ) I n s u re rs may gi ve notice effe c t i ve on
Te rms or the ex p i ry of 7 days from midnight
Cancellation G. M . T. on the day on which notice is
i s s u e d , to rev i ew the rate of premium
and/or the ge o graphical limits. In the
event of the rev i ew of the rate of
p remium and/or ge o graphical limits not
being accepted by the Insured then at
the ex p i ry of the said 7 day s , this Po l i c y
shall become cancelled at that date.
186
Au t o m a t i c 2. Whether or not such notice of
Te rm i n a t i o n cancellation has been gi ven this
i n s u rance shall T E R M I NATE
AU TO M AT I C A L LY
187
THE SCHEDULE
Policy Number:
I n s u re d :
A d d ress of Insure d :
Additional Insure d ( s ) :
Ap p roved Lienholder(s) for Bre a ch Of Wa rranty pro t e c t i o n :
A i rc raft here by insure d :
M a nu fa c t u re r Model R e gi s t ra t i o n A greed Va l u e
G e o graphical Limitations:
E x cluding Confi s c a t i o n , e t c e t e ra by Gove rnment(s) of:
Pe riod of Po l i c y :
F ro m :
To :
Both days incl u s i ve
E x t o r tion and Hi-Ja ck Expenses
Limit of Po l i c y :
90% of any one loss and in all
( WARRANTED REMAINING 10% UNINSURED).
P re m i u m
Immediate notice of ch a n ges in risk or of circumstances like ly to gi ve
rise to a loss hereunder to be communicated to:
LSW 555
188
Appendix E
LSW610A
CONTINGENT AIRCRAFT HULL (INCLUDING SPARES AND
EQUIPMENT) AND CONTINGENT LIABILITY INSURANCE POLICY
Policy No:
POLICY SCHEDULE
189
(b) Section Two – Liability Cove rage
Item 5. P re m i u m :
The premium to be paid to the Insure rs in respect of this Policy is as
fo l l ow s :
(a) For Section One – Hull and Spares and Equipment Cove rage
Dated in London:
190
SCHEDULE OF AIRCRAFT
1. Hull Coverage
This Section One cove rs “ a i rc ra f t ” in which the Insured has a
financial interest (as per the Schedule of A i rc raft herein) against all
risks of loss or damage how s o ever occasioned, except as
h e reinafter ex cl u d e d , sustained during the Policy Pe ri o d .
2. Exclusions
This Section One does not cove r : -
191
(b) Loss of use, d e p re c i a t i o n , or any other loss which may re s u l t
f rom loss or damage which is cove red by this Po l i c y.
(f) Loss or damage which is not re c ove rable (in whole or in part )
as a claim from the “ p rincipal policy” by reason of the
i n s o l vency of an insurer or insure rs .
(b) A total loss may be decl a red under this Po l i c y, at the option of
the Insure d , in the event that the cost of repair of the damage
t o gether with the cost of salvage and/or tra n s p o rt from the
place of the accident to the place of repair and re t u rn to
s e rvice be estimated at 75% or more of the agreed value on the
“ p rincipal policy”.
192
4. Cost of Repair – Partial Loss
With respect to partial loss the Insure rs will pay for the “ i n s u re d
p ro p o rt i o n ” of re p a i rs less any applicable deductible as set fo rth in
clause 5.
In no event shall the amount due with respect of any loss cove re d
by this clause 4. exceed the “stipulated loss va l u e ” of the “ a i rc ra f t ”
less the amount of the applicable deductibl e .
5. Deductibles
The deductible to be borne by the Insured in respect of each loss
w h i ch becomes payable under clause 4. of this Section One is:-
193
(b) the “ i n s u red pro p o rt i o n ” of the fo l l owing amounts, w h i ch eve r
is the gre a t e r.
6. No Abandonment
In the event of loss or damage the Insured may not abandon the
d a m aged “ a i rc ra f t ” to the Insure rs .
7. Definitions
1. “A i rc ra f t ”i n cludes the propulsion system and equipment
u s u a l ly installed in or on the airc ra f t ,
(c) while re m oved from the airc raft for replacement until such
time as installation of the replacement item has
commenced at which time the replacement item shall be
c o n s i d e red a part of the airc ra f t ;
also tools and equipment in the airc raft which have been
s p e c i a l ly designed for the airc raft and which are ord i n a ri ly
c a rried there i n .
194
(a) w h e re the Insure d ’s interest in the “ a i rc ra f t ” is an entire
i n t e rest then the “ i n s u red pro p o rt i o n ” h e reon shall be
100%,
8. Disappearance
If any “ a i rc ra f t ” is missing and not re p o rted for a period of thirt y
(30) days subsequent to take off then in the absence of any
evidence that Exclusion 2.(c) of this Section One applies the
“ a i rc ra f t ” shall be deemed to have been lost due to a peril cove re d
by this Section One.
9. Supplementary Payments
To the extent that re c ove ry is not ava i l able from the “ p ri n c i p a l
p o l i c y ” this Section One also cove rs the “ i n s u red pro p o rt i o n ” o f : -
195
alighted in any place from which it is unable to take off ag a i n
t o gether with the cost of tra n s p o rt from the place of
alighting to the nearest suitable aero d rome and the cost of
re a s s e m bling there even if no damage has been sustained,
The Insure rs will indemnify the Insured for costs, ch a rges and
expenses incurred under this clause 9. in addition to any
other amounts which may be payable under this Section One.
196
1 1 . S p a res and Equipment Coverage
This Section One also cove rs “ s p a re s ” and “ e q u i p m e n t ” (as per the
S chedule of Spares and Equipment herein) being pro p e rty in
w h i ch the Insured has a financial interest against all risks of loss
or damage how s o ever occasioned, except as hereinafter ex cl u d e d ,
sustained during the Policy Pe ri o d .
197
The “ i n s u red pro p o rt i o n ” of the cost of repair or the cost of
re p l a c e m e n t , w h i ch ever shall be the least amount, or any
p re d e t e rmined value agreed by Insure rs in respect of any one
item of pro p e rty subject to the limit of the Insure rs ’l i ab i l i t y
as set fo rth in the Policy Sch e d u l e .
198
4. “ d e t a ched fro m ” shall mean from the moment such part
is in contact with the ground or the tro l l ey/stand on
w h i ch it is to be located when the process of re m ov i n g
it from the airc raft is completed and it is totally
disconnected from the airc ra f t , and until the moment
the replacement part is deemed to fo rm part of the
a i rc raft as defined in paragraph 11.(d) 3. ab ove .
2. Exclusions
This Section Two does not cove r : -
199
(d) L i ability arising fro m
2. a ny fi d u c i a ry re s p o n s i b i l i t y.
(e) Liability for claims as set out in the NOISE AND POLLUTION AND
OTHER PERILS EXCLUSION CLAUSE attached to this Policy.
200
(b) p ay all premiums on bonds to release attachments for an
amount not in excess of the applicable limit of the Insure rs ’
l i ability and all premiums on appeal bonds re q u i red in any
s u ch defended suit, but without any obligation to apply for or
f u rnish any such bonds;
4. Definitions
( a ) The term “ i n s u re d ”m e a n s
201
2. a ny board member, d i re c t o r, o fficer or employee whilst
acting within the scope of his duties on behalf of said
I n s u re d ;
202
conditions which results in “ b o d i ly injury ” or “ p ro p e rt y
d a m age ”d u ring the Policy Pe riod which is neither ex p e c t e d
nor intended from the standpoint of the Insure d . All “ b o d i ly
i n j u ry ” or “ p ro p e rty damage ”a rising out of one accident or
s u b s t a n t i a l ly the same ge n e ral conditions shall be deemed to
a rise out of one “ o c c u rre n c e ” .
203
with endorsement language notified to and approved by Insure rs
h e re o n .
204
(d) The Insured shall render such further info rmation and
assistance as the Insure rs may re a s o n ably re q u i re and shall
not act in any way to the detriment or prejudice of the
i n t e rest of the Insure rs . No admission, o ffe r, p romise or
p ayment shall be made by the Insured without the wri t t e n
consent of the Insure rs .
2. Assignment
This Policy shall not be assigned in whole or in part except with the
consent of the Insurers ve ri fied by endorsement hereon.
3. S u b ro g a t i o n
In the event of any payment under this Po l i c y, the Insure rs may
exe rcise their rights of re c ove ry against any re s p o n s i ble part y, a n d
will advise the “ i n s u re d ” of their intention so to do. H oweve r,
should the “ i n s u re d ” request the Insure rs not to pursue a re c ove ry
then such request will not be unre a s o n ably denied.
4. Contractual Agre e m e n t s
I n s o far as provision may be made under va rious contracts and
agreements entered into by the “ i n s u re d ” re l a t i ve to the fi n a n c i n g
of the “ a i rc ra f t ” re q u i ring hold harmless agre e m e n t s ; wa i ve rs of
s u b ro g a t i o n ; b re a ch of wa rranty prov i s i o n s ; and loss payabl e
clauses it is here by understood and agreed that such re q u i re m e n t s
a re automatically cove red here u n d e r, p rovided alway s : -
(a) that the other parties to the said contracts and agre e m e n t s
h ave no invo l vement in the day to day operation of the
“ a i rc ra f t ” ,
205
5. Non-Contribution
It is specifi c a l ly understood and agreed that this Policy does not
c over any loss, d a m age or liability which is re c ove rable as a cl a i m
on the “ p rincipal policy”. F u rt h e rm o re , if at the time of any “ b o d i ly
i n j u ry ” , or “ p ro p e rty damage ” t h e re is or but for the existence of
this Policy would be any other policy of indemnity or insurance in
favour of the “ i n s u re d ” a p p l i c able to such cl a i m , the Insure rs shall
not be liable under this Policy to indemnify the “ i n s u re d ”i n
respect of such claim except for any excess beyond the amount
w h i ch would be payable under such policy of indemnity or
i n s u rance had this Policy not been effe c t e d .
6. Limitation of Liability
E a ch of the Insureds included for cover under Section Two of this
Policy will be considered as a separate person or org a n i s a t i o n , i t
being the intention for this Policy to protect each such person or
o rganisation in the same manner as though a separate policy had
been issued to each , p rovided always that nothing contained in
this Condition 6. shall operate to increase the limits of liab i l i t y
a p p l i c able to Section Two of this Po l i c y. This Condition 6. shall not,
h oweve r, o p e rate to enable claims in respect of loss of or damage
to A i rc raft insured under Section One of this Po l i c y, to be
re c ove red under Section Two of this Po l i c y.
7. Jurisdiction
This Policy shall be construed and gove rned by the laws of
. . . . . . . . . . . . . . . . . . . . . . . . . . . and any dispute or diffe rence between the
I n s u red and the Insure rs shall be submitted to arbitration in
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . in accordance with the Statutor y provision fo r
the time being in fo rc e .
206
REPOSSESSION OF LEASED AIRCRAFT
INSURING CONDITIONS – LSW147
INSURING CLAUSE
W h e reas the Insured has entere d into a L ease A greement dated
. . . . . . . . . . . . . . . . . 19 ........ to supply the Les see with the Insu re d
Equipment.
N ow this Policy is to pay the Insured the A greed Value in the event of
the Insured Equipment being lost as a consequence of the occurre n c e
d u ring the period of this Policy of an Insured Pe ri l , subject to the
D e fi n i t i o n s , E x cl u s i o n s , Conditions and Wa rranties below.
DEFINITIONS
1. INSURED PERIL
Means an action taken by, or refusal or fa i l u re by, the Fo re i g n
G ove rn m e n t , b e i n g :
a) C o n fi s c a t i o n ,s e i z u re ,a p p ro p ri a t i o n , expropriation,nationalisation,
restraint, detention or requisition for title or use of the Insured
Equipment by the Foreign Government.
207
or d) Refusal or fa i l u re of the Fo reign Gove rnment to allow
the Insured Equipment to be dere gi s t e red from the
aviation re gister of the Fo reign Country fo l l owing the
I n s u re d ’s exe rcise of its rights to repossess the Insured
Equipment in accordance with the terms and
conditions of the Lease A gre e m e n t .
p rovided always that Insure rs hereon shall not be liable for any
loss or damage to the Insured Equipment unless the action by the
Fo reign Gove rnment is effe c t i ve for a period not shorter than the
a p p l i c able Waiting Pe riod specified in the Schedule here t o .
2. INSURED EQU I P M E N T
Means the A i rc raft specified in the Schedule here t o .
This policy also cove rs loss of all or any of the Engines specifi e d
in the Schedule hereto from any of the Insured Pe ri l s
(notwithstanding that the airframe does not suffer any such loss).
This policy also cove rs loss of the technical re c o rds for the airc ra f t
or engines from any of the Insured Pe rils (notwithstanding that the
a i r f rame and engines do not suffer any such loss). In the event of
s u ch loss, I n s u re rs will pay the Insured an amount equal to the costs
i n c u rred by the Insured in reconstituting such technical re c o rds and
c a rrying out any maintenance, ch e cks or re p a i rs necessary to effe c t
the same, but only fo l l owing a loss as per 1. a ) ,b ) , c) and d) ab ove ,
subject to separate schedule limits endorsed here t o .
208
3. FOREIGN COUNTRY
Means
4. LESSEE
Means the entity to which the Insured Equipment has been leased
in the Fo reign Country.
5. FOREIGN GOV E R N M E N T
Means the present or any succeeding gove rnment or gove rn m e n t a l
a u t h o rity (whether civil, m i l i t a ry or de facto) of the Fo re i g n
C o u n t r y, or any defi n able re gion there o f, p rovided that such
gove rning authority exe rcises effe c t i ve exe c u t i ve control there i n ,
and without having re g a rd to the manner of its accession.
6. AGREED VA L U E
Means the amount specified in the Schedule here t o .
7. LEASE AG R E E M E N T
Means the contract specified in the Schedule hereto and all support i n g
d o c u m e n t a t i o n , under which the Insured agrees to lease the Insure d
Equipment to the Lessee on terms and conditions seen by Insure rs
h e reon and under which the Insured retains title to the Insure d
Equipment.
8. WAITING PERIOD
Means the period specified in the Schedule here t o , and prior to
the ex p i ry of which Insure rs hereon shall not be liable for any loss
or damage to the Insured Equipment; p rovided that if the Insure d
s a t i s fies Insure rs that there is no re a s o n able prospect of the action
by the Fo reign Gove rnment being reve rsed or cancelled during the
Waiting Pe ri o d ,I n s u re rs will pay the A greed Value to the Insure d
upon being so satisfi e d , notwithstanding that the Waiting Pe ri o d
has not ex p i re d .
209
The Waiting Pe riod shall commence from the date of advice to
I n s u re rs of an event like ly to gi ve rise to a claim under this Po l i c y.
EXCLUSIONS
1. M ATERIAL DEFAU LT BY THE INSURED
E x cluding any loss arising from material default by the Insured (or
a ny sub-age n t , sub- or co-contractor of the Insured) in the
p e r fo rmance of their obligations under the Lease A gre e m e n t .
3. WA R
Excluding any loss arising from destruction or physical damage
d i re c t ly or indirectly occasioned by, happening through or in
consequence of war, invasion, acts of foreign enemies, hostilities
(whether war be declared or not), civil war, rebellion, revolution,
insurre c t i o n ,m i l i t a ry or usurped power.
5. N E C E S S A RY PERMITS
E x cluding any loss arising from any fa i l u re of the Insured to obtain
all permits and authorisations necessary at inception of this policy
and/or make eve ry endeavour re a s o n ably pra c t i c able to keep such
p e rmits and authorisations in fo rce during currency and/or make
eve ry endeavour re a s o n ably pra c t i c able to obtain such new
p e rmits and authorisations as may be stipulated by the Fo re i g n
G ove rnment during curre n c y.
210
CONDITIONS
1. NON-ASSIGNMENT
The Insured shall not (without Insure rs ’p rior written consent)
assign or tra n s fer this Policy or the benefits or obligations there o f
to any other pers o n ,p rovided always that the Insured can, w i t h
the Insure rs ’p rior agre e m e n t , re q u i re any claims pay m e n t s
h e reunder to be made to a named loss paye e , all the Insure d ’s
o bligations under this Policy remaining unaffe c t e d .
2. DUE DILIGENCE
The Insured shall use due diligence and do and concur in doing all
things re a s o n ably pra c t i c able to avoid or diminish any loss here i n
i n s u re d . The Insured shall be deemed to have complied with this
condition including but not limited to if the Insured shall have
acted in accordance with the ex p ress written directions of the
I n s u re rs during the Waiting Pe ri o d .
3. N OTICE OF LOSS
Upon the discove ry of any event like ly to gi ve rise to a claim under
this Po l i c y, the Insured shall within a re a s o n able period there a f t e r
gi ve notice thereof to the Insure rs here o n .
4. ONUS OF PRO O F
In any cl a i m , and/or any action, suit or proceeding to enfo rce a
claim for loss here u n d e r, the burden of proving that the loss is
re c ove rable under this Po l i c y, that no Wa rranty has been bre a ch e d
and that no Exclusion applies shall fall upon the Insure d .
5. COINSURANCE
The Insured shall bear any coinsurance re q u i rement of all losses
h e reunder at their own risk and uninsure d .
211
q u e s t i o n , and shall permit ex t racts and copies thereof to be made.
7. OTHER INSURANCES
This insurance does not cover any loss or damage which at the time
of the happening of such loss or damage is insured by or wo u l d ,b u t
for the existence of this policy, be insured by any other ex i s t i n g
policy or policies except in respect of any excess beyond the
amount which would have been payable under such other policy or
policies had this insurance not been effe c t e d . The insurance of other
ex p o s u res under the Lease A greement in excess of or in addition to
the cove rage provided hereunder shall not be effected by the
I n s u red without the prior approval of Insure rs here o n .
8. S U B RO G AT I O N
The Insured under this Policy shall at the request and at the
expense of the Insure rs do and concur in doing and permit to be
done all such acts and things as may be necessary or re a s o n ably
re q u i red by the Insure rs at any time after the Waiting Pe riod has
commenced for the purpose of enfo rcing any rights and re m e d i e s ,
or of obtaining relief or indemnity from other parties to which the
I n s u re rs shall or would become entitled or subrogated upon their
p aying for any loss under this Po l i c y.
9. R E C OV E R I E S
After payment of a claim here u n d e r, all subsequent salvage and
re c ove ries made by the Insured shall inu re to the benefit of
I n s u re rs . The Insured here by ack n ow l e d ges that it will re c e i ve
s u ch sums re c ove red in trust for Insure rs and that it will pay all
sums upon receipt by it and/or by any person on its behalf to
I n s u re rs .
212
10. NO CANCELLATION AND PREMIUM RETURN
No cancellation and no re t u rn of premium for short intere s t ,
unless specifi c a l ly agreed at inception.
11. HEADINGS
Headings in this Policy are included for convenience of re fe re n c e
o n ly and shall not affect the interpretation of this Po l i c y.
WA R R A N T I E S
1. LEASE AG R E E M E N T
Wa rranted that the Lease A greement is signed by or on behalf of all
n e c e s s a ry parties and is in full fo rce and effect at inception
h e re o f. This wa rranty shall be deemed satisfied (as to the va l i d i t y
and enfo rc e ability of the Lease A greement against the Lessee) by
the terms of the independent legal opinion re fe rred to under
wa rranty 4 below. In addition, it shall not constitute a bre a ch of
this wa rranty if the Insured agrees to wa i ve or defer fulfilment of
a ny conditions precedent or subsequent described in the Lease,
but this qualification shall not apply to those conditions
e nu m e rated under the Material Change wa rranty of this Po l i c y.
2. DISCLOSURE
Wa rranted that at inception hereof the Insured have no know l e d ge
or info rmation of any matter, fact or circumstance which is like ly
to gi ve rise to a loss here u n d e r.
213
3. HULL AND LIABILITIES INSURANCE
Wa rranted that the Lease A greement re q u i res hull and war and
allied perils insurances and liabilities insurances to be maintained
by the lessee throughout the term of the leasing there u n d e r, o n
the terms specified there i n .
4. LEGAL OPINION
Wa rranted that written independent legal opinion of a qualifi e d
l aw yer in the Fo reign Country shall be supplied by the Insured to
I n s u re rs confi rming that the laws of the Fo reign Country in effe c t
at the date it is submitted do not prevent or hinder the Insure d ’s
exe rcise of its rights under the Lease A gre e m e n t . I n s u re rs confi rm
that the opinion of ........................ dated ................ 19 ........
s a t i s fies the wa rranty set fo rth here i n .
5. M ATERIAL CHANGE
Wa rranted that immediate notice of any material ch a n ge in the
Lease A greement shall be gi ven to Insure rs . No claim ari s i n g
subsequent to such ch a n ge shall be re c ove rable hereunder unless
s u ch ch a n ge has been accepted by Insure rs .
1. Te rms of pay m e n t s .
2. E vents of defa u l t .
3. Legal status of lease contract in host country.
4. Uses of insured airc ra f t / ro u t e s .
5. Maintenance prov i s i o n s .
6. Pe riod of agre e m e n t .
7. C ro s s - c o l l a t e ralization prov i s i o n s , if any.
8. Identity of Lessee/Sub-Lessee.
9. I n t e rest ch a n ge in nature of lease.
10. A r b i t ra t i o n / L aw.
11. C h a n ge in insurance re q u i re m e n t .
12. A ny ch a n ge which could re a s o n ably be fo reseen by lessor to
u l t i m a t e ly affect collateral value of the airc ra f t .
214
SCHEDULE
INSURED:
O P E R ATO R :
C O U N T RY OF OPERATO R :
LEASE AG R E E M E N T:
INSURED EQU I P M E N T:
AGREED VA L U E :
PERIOD:
WAITING PERIOD:
215
CONTINGENT WAR INSURANCE
W h e re a s The Insured and the Airline have entered into the A gre e m e n t
in order for the Insured Equipment to be supplied to the A i r l i n e .
INSURED PERILS
N ow in consideration of the premium as described in the Schedule and
subject to the Defi n i t i o n s ,C o n d i t i o n s , Wa rranties and Exclusions contained
h e re i n , this Policy is to pay the Insured the A greed Value as described in
the Sch e d u l e , in the event of the Insured Equipment being lost or damage d
as a consequence of the occurrence during the period of this Po l i c y, of a
Pe ril as described in Section A or Section B below and which would have
otherwise been re c ove red from the A i r l i n e ’s and/or Opera t o r ’s Hull and
Allied Pe rils Insurance Policy and/or specific Reinsurance Policy there o f
subject to the same Te rm s ,D e fi n i t i o n s ,C o n d i t i o n s , Wa rranties and
E x clusions as contained there i n , except as may be specified here i n .
Section (A)
This Section shall automatically attach for a maximum period of 180
d ays from the fi rst occurrence of an Eve n t , as defined here i n ,p rov i d e d
that such Event dire c t ly causes the termination of the A i r l i n e ’s and/or
O p e ra t o r ’s Hull War and Allied Pe rils Insurance Policy and/or specifi c
R e i n s u rance Policy there o f : -
E vent 1. Refusal of the Airline to pay the additional War Risk Pre m i u m
re q u i red by the Hull War Risk Policy Underwri t e rs and/or
s p e c i fic Reinsure rs there o f, o r
216
E vent 3 N o n - re n ewal of the A i r l i n e ’s Hull War Risks Policies and/or
s p e c i fic Reinsurance Policy there o f, o r
Section (B)
This Section shall provide Hull War and Allied Pe rils Insurance cove rage
as the Pri m a ry Policy contingent upon the Insured being unable to
re c over their financial interest as described in the Schedule either in
whole or in part under the A i r l i n e ’s Hull War and Allied Pe rils Insura n c e
Policy and/or specific Reinsurance Policy there o f, due to the
implementation of any ground accumulation or ag gregate limits
a p p l i c able there u n d e r.
AGREED VA L U E
The amount specified in the Schedule hereto provided that
U n d e r w ri t e r ’s maximum total liability shall not in any event exceed the
A greed Value specified in the Sch e d u l e .
DEFINITIONS
“A gre e m e n t ” means the contract and all supporting documentation under
w h i ch the Insured agrees to (a) lease the Insured Equipment to the
Airline and under which the Insured retains title to the Insure d
Equipment or (b) lend to the Mort g agor upon the security of the Insure d
Equipment under which the Insured retains rights as Mort g age e .
“ E vent of Defa u l t ” shall have the same meaning as set fo rth in the
A greement between the Insured and the A i r l i n e .
“ D e cl a ration of Defa u l t ” shall have the same meaning as set fo rth in the
A greement between the Insured and the A i r l i n e .
217
“ Fo reign Gove rn m e n t ” shall have the meaning as set fo rth in the
A greement between the Insured and the A i r l i n e .
EXCLUSIONS
1. C O N F I S C ATION BY THE FOREIGN COUNTRY
In the event of actual war cove rage hereon being prov i d e d
subsequent to the cancellation of the Pri m a ry Po l i c y / R e i n s u ra n c e
Po l i c y, c ove rage shall not be provided in respect of direct losses of
c o n fi s c a t i o n , n a t i o n a l i s a t i o n , s e i z u re , re s t ra i n t , d e t e n t i o n ,
a p p ro p ri a t i o n , ex p ro p ri a t i o n , requisition for the title or use
( c o l l e c t i ve ly “ C o n fiscation Pe rils”) by or under the order of the
Fo reign Gove rn m e n t .
2. RADIOACTIVE CONTA M I N AT I O N
This clause shall be paramount and shall ove rride any t h i n g
contained in this insurance inconsistent therew i t h :
3. S PARE EQUIPMENT
E x cluding any loss arising from destruction or physical damage to
S p a re Equipment (spares and/or engines all as more fully descri b e d
218
in the A greement) dire c t ly or indire c t ly occasioned by, h a p p e n i n g
t h rough or in consequence of wa r, i nvasion acts of fo re i g n
e n e m i e s , hostilities (whether war be decl a red or not) civil wa r,
revo l u t i o n ,i n s u rre c t i o n , m i l i t a ry or usurped power (such peri l s
being defined by Section One, p a ragraph (a) of LSW555B wo rd i n g )
4. I N S O LV E N C Y
E x cluding loss damage or expense caused solely by any debt,
fa i l u re to provide bond or security or any other financial cause
under court order or otherwise.
GENERAL CONDITIONS
1. DUE DILIGENCE CLAUSE
The Insured undert a kes that they will do and concur in doing all things
re a s o n ably pra c t i c abl e , at all times during the Po l i c y, to avoid or
diminish any loss hereunder and/or to re c over the Insured Equipment
after the occurrence of an Insured Pe ri l , and/or Event (as described in
Section A ) , in each case by taking such action under or in connection
with the A greement as the Insured would take if they did not have the
b e n e fits and protection of this Po l i c y : it being nonetheless agreed that:
ii) After the exe rcise of such rights the Insured will be obligated to
t a ke only such action to avoid or diminish loss hereunder or to
219
re c over the Insured Equipment or otherwise exe rcise remedies as
m ay be mu t u a l ly agreed upon between the Insure d , the Loss Paye e
s p e c i fied in the Schedule hereto and the Underwri t e rs .
3. C A N C E L L AT I O N
Section fi ve (5) of LSW 555B Fo rm – or the equivalent prov i s i o n s
in the A i r l i n e ’s policy – is deleted in its entirety and replaced by
the fo l l ow i n g :
220
a loss or partial loss from any Insured Pe ril hereunder any
p remium due and then owing by the Insured shall become payabl e
i m m e d i a t e ly, or the Underwri t e rs shall be entitled to take cre d i t
t h e re o f.
4. HEADINGS
Headings in the Conditions, Wa rranties and Exclusions of this
Policy are included herein for convenience of re fe rence only and
shall not constitute a part of this Po l i c y.
5. NON-ASSIGNMENT
The Insured shall not (without Underwri t e rs ’ p rior wri t t e n
consent) assign or tra n s fer this Policy or the benefits of
o bligations thereof to any other pers o n ,p rovided that the Insure d
can re q u i re any claims payments hereunder to be made to the Loss
Payee (as per the Sch e d u l e ) , all the Insure d ’s obligations under this
Policy remaining unaffe c t e d .
SPECIAL CONDITIONS
1. ( Ap p l i c able to Insured Pe ril Section A only )
In the event of the occurrence of Section A Events 1-4 during the
p e riod here o n , this policy shall thencefo rth automatically prov i d e
221
180 days of actual war cove rage as the Pri m a ry Policy and/or specifi c
R e i n s u rance Policy thereof and shall not exceed 180 days in all.
222
WA R R A N T I E S
1. HULL & LIABILITIES INSURANCE
Wa rranted that the A greement re q u i res war and allied peri l s
i n s u rances to be maintained by the Airline throughout the term
t h e re o f, on the terms specified there i n .
A U T O M ATIC TERMINAT I O N
Whether or not such notice of cancellation has been gi ven this
I n s u rance shall T E R M I NATE AU TO M AT I C A L LY.
223
CONTINGENT WAR INSURANCE
SCHEDULE
1. INSURED
2. O P E R ATO R
3. INSURED EQU I P M E N T
4. AGREED VA L U E
5. FOREIGN COUNTRY
6. PREMIUM SECTION A
SECTION B
7. LOSS PAY E E
8. POLICY PERIOD
224
INDEX
Word Page
50/50 clause (AVS103) 18,161
A check (scheduled maintenance) 39,41
Additional insured 27,51,65
Aggregate extension 98
Aggregate limit restrictions 17,98
Agreed value 15
Aircraft checks 39,41
Aircraft Financial Interest Endorsement – AVN28B 65
Aircraft recovery costs 12,102
Aircraft regulation 39
Aircraft repossession insurance 79
Aircraft return condition insurance 102
Aircraft service documents 41
Aircraft unavailability insurance 11,85
Airline Finance/Lease Contract Endorsement – AVN67B 51,54,174
Airworthiness 39
Ariel Form 6, 7
Asset value guarantees 106
Automatic termination 18
Aviation hull ‘all risks’insurance 2,89
Aviation hull ‘war and allied perils’insurance 3,95
Aviation insurance wordings and clauses 7
Aviation legal liability insurance 4
AVN28B (Financial Interest Endorsement) 65
AVN38B (nuclear risks exclusion clause) 165
AVN46B (noise and pollution exclusion clause) 163
AVN48B (war exclusion clause) 168
AVN52C (war liability writeback clause)b 169
AVN57A (“Part 205”) 48,159
AVN5A (deferred premium clause) 23,156
AVN67 (lease/finance endorsement) 51
AVN67B (lease/finance endorsement) 51,54,174
AVN67B War (lease/finance endorsement) 53,178
AVN6A (deferred premium clause) 23,154
AVS103 (50/50 clause) 18,161
Betterment 44
Breach of geographical limits 19
Breach of warranty 27,51,90
Breach of warranty endorsement 51,54,65
Breaches of warranties (examples) 90
Broker’s letter of undertaking 29,151
Buy back guarantees 106
C check (scheduled maintenance) 41
Cancellation clauses 18,23
Cancellation for non-payment of premium 23
Care,custody and control insurance (for financiers) 93
Cargo legal liability insurance 4
Certificates of airworthiness 39,41
Certificates of insurance 71,133
Certificates of reinsurance 71,142
Checklist of insurance requirements 71
Civil aviation authorities 39
Claims 42
Collateral deprivation insurance 79
Combined single limit 5
Confiscation by government of registr y 20,79,83
Confiscation/deprivation coverage 79
Contingent hull and liability insurance 89
Contingent hull war risks insurance 95
Continuing indemnity 22
Contracts of carriage for passengers 15
Credit insurance 85,111
Cut through clause 27,32
D Check (scheduled maintenance) 41
D.o.T. 14 CFR Part 205 48,159
Deductible insurance 10
Deferred premiums clause 154,156
Domestic insurers 32
EC 2027 15
Errors and omissions 91
Extended Coverage Endorsement (Aviation Liabilities) – AVN52C 5,169
FAA 39
Foreign object damage/ingestion 10
General legal liability insurance 6
Geographical limits 19,95
Hangarkeepers liability insurance 6
Hull ‘all risks’insurance 6
Hull ‘war risks’insurance 3,95
Hull and liability insurance wordings 7
Hull claims 42
Hull deductible ‘buy down’ 10
IATA Intercarrier Agreement 15,47
IATA/EC 2027 (contracts of car riage) 15,47
Illegal acts 21
Illegal cargoes 21
Indemnities 22
Independent consultants 73
Ingestion/foreign object damage 10
Innocent operator’s coverage 21
Insurance article 119
Insurance covenants 119
Lease covenants 119
Lease payment insurance 85,111
Leased engines 4,17,43,162
Legal liability insurance 4,89
Legal opinions (for repossession insurance) 81
Lessor liability 46
Letter of undertaking 29,151
Liability claims 45
Liability for premiums 29,59
Liability insurance 4,6,89
Liability limits 4,15
Lloyd’s Central Fund 31
Local domestic insurers 32
Loss of use insurance 11,85
Loss payable clauses 27,37
Loss payee 37
LSW147 wording 79,207,
LSW555B airline hull ‘war’ wording 3,207
LSW610A contingent hull and liability wording 89,189
Mechanical breakdown 2,11
Mechanical breakdown insurance 11
Non-payment of premium 23
Notice of cancellation 18,23
Nuclear Risks Exclusion Clause – AVN38B 165
Ongoing products liability insurance 22
Operational interest 52,57
Orphan engine 17,43,162
Orphan engine Clause 162
Partial loss claims 44
Passenger legal liability 4,15
Personal injury 4,157
Personal Injury Extension – AVN60 157
Political risks 79
Premises liability insurance 6,15
Products liability insurance 6
Rating agencies (for insurers) 31
Repatriation insurance (of assets) 79
Repossession delay insurance 85
Repossession expenses insurance 102
Residual value guarantees 106
Residual value insurance 106
Return condition of leased aircraft 102
Revenue stream protection 85,111
RVI 106
Salvage 42
Search and rescue coverage 12
Spare parts 4
Spares ‘all risks’insurance 4
Specimen insurance article 119
Technical records 39,102
Technical records insurance 102
TLO 12,101
Total loss claims 42
Total loss only insurance 12,101
Underwriting security 31
Unearned premium insurance (UPI) 11
United Nations sanctions 96
UPI 11
War ‘writeback’endorsement 4,169
War aggregate extension insurance 98
War cancellation clauses 18,95
War, Hi-jacking and Other Perils Exclusion Clause – AVN48B 168