An item in a recent Newsletter,
has prompted me to
express the opinion of one insurance market
and correct any possible misunderstandings
which may have been created by the item.
Notwithstanding what was said, and subject to no
special breaches of. policy conditions, the
insurance companies must honour the claim
for hail damage under the hull insurance
section of your policy. The problem arises as
to how the settlement is negotiated so that it is
fair to the aircraft owner and fair to the
insurance company.
As a result of a hailstorm, two kinds of
damage are usually evident. First, there is
actual physical breakage such as cracked
windscreensand skins or parts which are
damaged so severely as to affect the operation
or airworthiness of the aircraft. The insurance
company is obligated to pay for repair or
replacement of these items so as to put them
back in at least the condition they were prior
to the storm (usually you end up better off
than before), l am not aware of any serious
problems in settling with insurance compa-
nies on this part of the claim.
Second, however, are those little (someti-
mes pretty big) dimples in the upper skins of
the aircraft where the hailstones hit extra
hard. In most cases this damage is cosmetic
only -- the aircraft is still airworthy and it still
flies just as fast as before. It is only when you .
look at your prize bird that you can tell the
difference and, aside from the dimpled look,
you haven't really lost anything until you try
to sell or trade-in the aircraft. The resale or'
trade-in value is reduced so you have ob-
viously suffered a loss and your insurance
company is obligated to reimburse you. How
the settlement is made calls for some honest
and fair negotiation between you and the
insurance adjuster.
If you insist on the reskinning of all surfaces
damaged, you create two problems; one is
yours and the other is the insurance
company's. Your problem is that you will not
have the use of your aircraft while it is under
repair (and for a small job like this, repairers
can be inordinately slow) but also the log
book on your aircraft gets messed up with all
sorts of horrible scratches noting the work
performed. When you sell or trade-in, those
log book notes can reduce the value almost to
the same extent as the dimpled skins. From
the insurance company's point of view, the
cost of reskinning is inordinately high at
today's rates, considering that it gains you little
and the aircraft still flies as it always did. To
solve everybody's problems, most insurers
now try to negotiate a settlement which will
compensate you for the lost value at trade-in
or sale time.
Your airplane has depreciated and that can
be paid for in cash. A competent adjuster and
an independent aircraft sales type can usually
come to a meeting of the minds with you on
the amount of depreciation which, in most
cases, turns out to be between four and seven
percent of the current value of your aircraft.
After they have paid for fixing the actual
physical breakage, perhaps reskinning one
panel that really got blasted and maybe doing
a little painting, the insurance company can
hand you a cheque for the agreed amount of
depreciation. If you put this in the bank until
you sell or trade-in your aircraft, the' interest
should look after inflation problems and you
have the cash on hand to make up for your
loss in value. The insurance company has put
you in the same position, financially, as you
were before the storm - which is all that
insurance is expected to do at any time. You
have also avoided downtime and a messy log
book.
This negotiation or procedure is fair to all and
better in most respects. Pushing complete
reskinning and repainting not only can hurt
you but contributes in its own small way to
the rising cost of insurance claims. In the long
run we all know who pays for the increase in
insurance claims - the aircraft owner, who
must buy insurance for his own protection.