GENERAL AVIATION
Observations Related
to Liability Insurance
Requirements and
Coverage for Aircraft
Owners
Report to Congressional Requesters
September 2015
GAO-15-740
United States Government Accountability Office
Highlights of GAO-15-740, a report to
c
ongressional requesters
September 2015
GENERAL AVIATION
Observations Related to Liability Insurance
Requirements and Coverage for Aircraft Owners
Why GAO Did This Study
A substantial proportion of all domestic
aviation accidents and fatalities that
occur each year involve GA, which
includes all aviation except commercial
and military. Under federal law, the
Secretary of Transportation is
responsible for ensuring that
commercial air carriers carry liability
insurance. However, no such federal
requirements exist for GA aircraft
owners. In some cases, accidents
involving uninsured or underinsured
GA aircraft owners have occurred
where individuals (passengers or third
parties) who incurred losses received
little or no compensation.
GAO was asked to look at the
feasibility and costs associated with
adopting federal liability insurance
requirements for GA aircraft owners.
This report examines (1) existing
liability insurance requirements for GA
aircraft owners, (2) premiums for GA
liability insurance, and (3) factors that
selected stakeholders cited which
should be considered in determining
whether to adopt a federal liability
insurance requirement. GAO surveyed
aviation officials in 50 states, analyzed
state statutes identified in the surveys,
collected insurance premium
information from three nationwide
aviation insurance brokers, and
interviewed a diverse group of 73
aviation stakeholders—including FAA
and NTSB officials, GA associations,
and attorneys representing accident
victims—selected based on GAO’s
prior work that identified the GA
associations and recommendations
from FAA, NTSB, and other aviation
stakeholders.
What GAO Found
Based on GAO’s 50-state survey of state aviation officials and analysis of state
statutes and regulations identified by such officials, the vast majority of states do
not have liability insurance requirements for general aviation (GA) aircraft owners
and operators (i.e., pilots). As of April 2015, 11 states have some variation of a
liability insurance requirement or aircraft financial-responsibility requirements,
which require GA aircraft owners to demonstrate financial ability to cover
potential losses incurred in an accident (see figure below). Minnesota is the only
state that requires almost all GA aircraft owners to have a minimum liability
insurance coverage: the required minimum coverage is $100,000 per passenger
seat.
States with Minimum Liability Insurance Requirements or Aircraft Financial-Responsibility
Requirements Applicable to GA Aircraft Owners and Operators
Annual premiums for liability insurance vary depending on the type of aircraft
insured and a pilot’s experience. For example, three nationwide brokers GAO
contacted noted that an annual premium for a common 4-seat GA aircraft, a
Cessna 172, can range from $200 to $550 for a policy that provides $1 million in
coverage per accident, with a limit of $100,000 for each accident victim.
GAO interviewed 73 aviation stakeholders who most frequently cited five factors
that they felt should be considered in determining whether to adopt a federal
liability insurance requirement. Understanding the extent of the problem—both
the number of GA aircraft owners who are uninsured and underinsured and the
extent to which accident victims received little or no compensation from such
owners—was one such factor. However, data on the extent of this problem are
not available and, according to FAA and NTSB officials, could be challenging to
collect. Four other factors cited include: (1) costs to victims and the public in the
absence of liability insurance; (2) costs to the GA community if such a
requirement were adopted; (3) issues related to the implementation and
administration of such a requirement; and (4) the potential public-safety benefits.
View GAO-15-740. For more information,
contact
Gerald L. Dillingham, Ph.D. at (202)
512
-2834 or dillinghamg@gao.gov.
United States Government Accountability Office
Letter 1
Background 4
The Majority of States Have No GA Liability Insurance or Related
Financial-Responsibility Requirements, Although Other Entities
May Impose Such Requirements 9
The Ranges of GA Liability Insurance Premiums Are Influenced by
the Type of Coverage and Several Risk Factors 14
Selected Stakeholders Cited Understanding the Extent of the
Problem and Costs among Key Factors That Should Be
Considered in Determining Whether to Adopt a Federal Liability
Insurance Requirement 18
Agency Comments 25
Appendix I Objective, Scope, and Methodology 27
Appendix II States with Minimum Liability Insurance or Aircraft Financial-
Responsibility Requirements 31
Appendix III GAO Contact and Staff Acknowledgements 36
Tables
Table 1: Number of General Aviation Accidents, Fatalities, and
Serious Injuries in Calendar Year 2010—2014 6
Table 2: List of Federal and Private Aviation Stakeholders GAO
Interviewed or Contacted 29
Table 3: States with Minimum Liability Insurance or Aircraft
Financial-Responsibility Requirements Applicable to
General Aviation Aircraft Owners and Operators (as of
April 2015) 31
Figures
Figure 1: Types of General Aviation Aircraft 5
Figure 2: States with Minimum Liability Insurance or Aircraft
Financial-Responsibility Requirements Applicable to
General Aviation Aircraft Owners and Operators (as of
April 2015) 11
Contents
Page i GAO-15-740 General Aviation Liability Insurance
Figure 3: Estimated Ranges of Annual Liability Insurance
Premiums for Selected General Aviation (GA) Aircraft 16
Abbreviations
DOT Department of Transportation
FAA Federal Aviation Administration
GA general aviation
NAIC National Association of Insurance Commissioners
NTSB National Transportation Safety Board
OST Office of the Secretary of Transportation
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Page ii GAO-15-740 General Aviation Liability Insurance
441 G St. N.W.
Washington, DC 20548
September 9, 2015
The Honorable Bill Nelson
Ranking Member
Committee on Commerce, Science, and Transportation
United States Senate
The Honorable Sherrod Brown
United States Senate
According to National Transportation Safety Board’s (NTSB) statistics, the
number of accidents involving general aviation (GA), which includes all
forms of aviation except commercial and military, represent a substantial
proportion of all domestic aviation accidents and fatalities each year.
1
However, the number of GA accidents has decreased over the last
decade. Although no federal requirements for liability insurance exists for
GA aircraft owners and operators,
2
a marketplace for liability insurance is
available for GA aircraft owners and operators. Some members of
Congress and aviation stakeholders have raised questions regarding the
lack of such a federal requirement as a result of accidents involving
uninsured or underinsured GA aircraft owners and operators
3
where
1
For instance, according to the most recent available data reported by NTSB, of the 1,287
total civil aviation (GA and commercial) accidents that occurred in 2014, about 95 percent
(1,221) involved GA aircraft, and 419 aviation fatalities and 240 serious injuries resulted
from GA accidents that year.
2
All commercial air carriers are required by federal law to carry accident liability insurance
to compensate victims (or their survivors) for bodily injury or death and property damages
resulting from an accident. 49 U.S.C. § 41112. Under the Department of Transportation’s
(DOT) Office of the Secretary’s federal regulations, commercial air carriers are required to
have a minimum of $300,000 per passenger and a total per involved aircraft for each
accident occurrence of $300,000 times 75 percent of the total number of passenger seats
and $300,000 for property damage and bodily injury or death for non-passengers with a
minimum required coverage of $20 million per occurrence. 14 C.F.R. § 205.5.
3
We refer to uninsured GA aircraft owners and operators as those operating an aircraft
without liability insurance. GA aircraft owners may also have other types of insurance,
such as hull insurance, which insures damages to the aircraft. For the purpose of this
report, GA aircraft owners and operators we focus on GA airmen (i.e., pilots) and GA
operators that use aircraft for commercial purposes (i.e., flight schools, aerial
photographers). We did not include public aircraft operations, which include state or locally
owned and operated aircraft or pilots flying for public purposes, such as fighting forest
fires.
Letter
Page 1 GAO-15-740 General Aviation Liability Insurance
individuals (i.e., passengers and third parties) who incurred losses
received little or no compensation from the responsible aircraft owners
and operators. For instance, in September 2012, a young flight instructor
was killed during a landing attempt with a student pilot and another
passenger, both of whom survived the accident. According to documents
from the flight instructor’s family, he was not covered under the flight
school’s liability insurance policy, and his estate received a claim against
the estate for property damage caused by the accident.
You asked us to examine the feasibility of and costs associated with
adopting a federal requirement for GA aircraft owners and operators to
maintain liability insurance. This report examines (1) existing liability
insurance requirements for GA aircraft owners and operators in the
United States; (2) available data on the range of premiums charged by
selected insurance providers for GA liability insurance and factors that
influence those costs; and (3) factors that selected stakeholders stated
should be considered in determining whether to adopt a federal liability
insurance requirement for GA aircraft owners and operators.
To identify existing liability insurance requirements, we conducted a
survey of aviation officials in all 50 states and analyzed state statutes,
regulations, and other documents identified by state aviation officials. We
received a 100 percent response rate to our survey as of April 2015. We
also spoke with state aviation officials in those states that identified some
kind of GA liability insurance or aircraft financial responsibility
requirements to obtain more information about those requirements,
including how they are administered.
4
To identify the range of premiums
charged for GA liability insurance and factors that influence those costs,
we obtained information on GA liability insurance premiums for common
GA aircraft and factors that influence those costs from three nationwide
insurance brokers that work with the major underwriters in the GA
insurance market; these insurance brokers and underwriters were
identified by aviation insurance representatives we interviewed.
5
Although
4
We use the term “aircraft financial responsibility requirements” to mean laws, enacted by
a few states, that require noncommercial aircraft owners and operators to demonstrate
some type of financial ability to address potential losses from third-party claims arising out
of an accident through measures, such as proof of liability insurance or security deposit,
after an accident occurs.
5
An insurance broker is an independent agent, who represents the buyer rather than the
insurance company, and tries to find the buyer the best policy by comparison shopping.
An insurance underwriter is an insurance company that underwrites insurance policies.
Page 2 GAO-15-740 General Aviation Liability Insurance
we could not independently validate the insurance premium information
collected from these brokers, we corroborated the premium information
received from the insurance brokers with premium data from the
insurance underwriters to assess the reasonableness of the data
provided. We determined that the information provided was sufficient to
use as examples of GA liability insurance premiums, but that it is not
generalizable to the entire spectrum of the GA aviation insurance market,
given the multiple and unique factors that can significantly influence
premium prices. To obtain aviation stakeholders’ perspectives on factors
that should be considered in determining whether to adopt a federal
liability insurance requirement, we interviewed or obtained written
responses from 73 stakeholders, including officials from the Office of the
Secretary/Department of Transportation, Federal Aviation Administration
(FAA), NTSB, and 39 state aviation offices,
6
representatives from 9 GA
trade associations and 10 aviation insurance-related organizations, as
well as an accident victims association and 11 aviation attorneys
representing GA accident victims. The selection of representatives from
GA trade associations was based on prior GAO reports that identified the
GA associations and recommendations from FAA, NTSB, stakeholders,
and selected state aviation officials. We identified an accident victims
association and selected aviation attorneys, specializing in personal injury
and representing aviation accident victims based on our initial literature
reviews and recent news articles that mentioned law firms prosecuting or
defending GA accident cases. The aviation stakeholders’ views are not
generalizable to the entire GA community, but provided us with valuable
insights. See appendix I for a more detailed description of our scope and
methodology and for a list of stakeholders we interviewed.
We conducted this performance audit from October 2014 to September
2015, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
6
Aviation officials from five states declined to talk with us, and aviation officials from six
states did not respond to our numerous attempts to obtain their views on factors that
should be considered in determining whether to potentially adopt a federal GA liability
insurance requirement.
Page 3 GAO-15-740 General Aviation Liability Insurance
GA is composed of a diverse fleet of aircraft, including airplanes, gliders,
and helicopters, that are flown for a variety of purposes (see fig. 1). In
2013, FAA estimated there were about 340,000 licensed GA pilots, and
approximately 200,000 aircraft were in the active GA fleet, with airplanes
comprising the vast majority—almost 79 percent. According to FAA 2013
data, most GA airplanes are light, single-engine piston, fixed-wing aircraft.
FAA also identifies a small, but growing portion of the GA fleet as
“experimental” aircraft, which include amateur and home-built aircraft and
aircraft used for racing and research (among other purposes), as well as
exhibition aircraft, such as former military aircraft that are commonly
referred to as “warbirds.” The majority of these GA aircraft (about 88
percent) are used for one of the following purposes:
• personal (e.g., a pilot taking a family on a sightseeing trip);
• business (e.g., an owner and pilot flying to a meeting);
• corporate (e.g., a professionally-piloted aircraft transporting corporate
employees); and
• instructional (e.g., a student flying with a certified flight instructor
7
).
Domestic GA operations are conducted from more than 2,950 public-use
GA airports (which primarily serve GA aircraft) as well as from thousands
of other airports, including those that support commercial air service. GA
flights operate under various federal aviation regulations. For the
purposes of this report, our definition of GA includes flights operated
under Part 91 of general operations and flight rules, namely, all civilian
aviation flying except passenger air carriers and military aircraft.
8
7
The holder of a valid flight instructor certificate may provide pilot training and instruction
for the pilot certification in any aircraft for which they are qualified. (14 C.F.R. § 61.193,
61.195(b)).
8
Federal Aviation Regulations under which GA operations are flown include 14 C.F.R
Part 91 (general operating and flight rules), Part 125 (privately operated aircraft with
seating capacity of 20 or more passengers or maximum payload capacity of 6,000 lbs. or
more when common carriage is not involved), Part 133 (rotorcraft external load
operations), and Part 137 (agricultural aircraft operations).
Background
Page 4 GAO-15-740 General Aviation Liability Insurance
Figure 1: Types of General Aviation Aircraft
Although the number of GA accidents in the United States has been
generally decreasing in recent years, there were over 1,200 accidents
and over 400 resulting fatalities in 2014 (see table 1). In October 2012,
we found that most GA accidents involved personal use and instructional
flight operations.
9
In 2014, personal use and instructional flight operations
combined accounted for about 75 percent of GA accidents. Most
accidents also occurred during the landing and take-off phases of a flight,
and in 2014 most GA accidents occurred in California, Texas, and
Florida, all states with large numbers of GA aircraft.
9
GAO, GENERAL AVIATION SAFETY: Additional FAA Efforts Could Help Identify and
Mitigate Safety Risks, GAO-13-36 (Washington, D.C.: Oct. 4, 2012).
Page 5 GAO-15-740 General Aviation Liability Insurance
Table 1: Number of General Aviation Accidents, Fatalities, and Serious Injuries in
Calendar Year 2010—2014
Calendar year
Number of
accidents
Number of
fatalities
Number of
serious injuries
2010
1440
457
256
2011
1470
448
328
2012
1471
440
247
2013
1298
391
215
2014
1287
419
240
Source: GAO analysis of National Transportation Safety Board data. | GAO-15-740
Two federal agencies are primarily responsible for investigating GA
accidents and ensuring aviation safety: FAA and NTSB. FAA is
responsible for administering aircraft registration and pilot certification,
conducting safety oversight of pilots’ training and GA operations, and
taking enforcement actions against pilots and others who violate federal
aviation regulations and safety standards. FAA also collects GA fleet and
flight activity data through an annual survey that includes the number of
hours flown and the uses of GA aircraft. The FAA’s statutory mandate
does not, however, include requiring that GA aircraft are covered by
liability insurance. NTSB is responsible for investigating all civil aviation
accidents and major accidents and incidents in other transportation
modes.
10
Using the information gathered by its own investigators and in
coordination with FAA, NTSB is responsible for determining an accident’s
probable cause, issuing safety recommendations, and conducting safety
studies. According to NTSB officials, if an NTSB official is not available at
the scene of where the accident occurred, FAA gathers perishable data
that are provided to the NTSB. However, NTSB is responsible for issuing
a preliminary report and final accident report describing the history of the
flight (e.g., date and time of accident, aircraft and accident type, purpose
of flight, extent of pilot and passenger injuries, etc.) and findings of
10
With respect to NTSB, the term “accident” includes damage to or destruction of vehicles
in surface or air transportation or pipelines, regardless of whether the initiating event is
accidental or otherwise”. 49 U.S.C. § 1101. An “incident” is currently defined in NTSB
regulations as “an occurrence, other than an accident, associated with the operation of an
aircraft, which affects or could affect the safety of operations.” 49 C.F.R. § 830.2.
According to NTSB officials, due to resources, NTSB typically travels to the site of an
aircraft accident involving fatalities and conducts a more limited investigation of non-fatal
accidents. NTSB defines a major accident as one that affects public confidence or
transportation safety in a significant way, or is catastrophic.
Page 6 GAO-15-740 General Aviation Liability Insurance
probable cause. NTSB also coordinates accident disaster-assistance
activities, including providing information and assistance to accident
victims (or their survivors), in the aftermath of an accident.
The Office of the Secretary of Transportation (OST) within DOT is
responsible for ensuring that commercial air carriers meet minimum
liability insurance coverage amounts for liability, as required under federal
law
11
, and FAA has assumed this role pursuant to a memorandum of
understanding with OST.
12
The related regulatory requirement, which
became effective in 1982, establishes minimum liability insurance
requirements for air carriers. Commuter air carriers and air taxi operators
are also required under federal regulations to have minimum liability
insurance. While federal insurance requirements exist for commercial
modes of transportation, the states generally regulate the business of
insurance.
13
No federal requirement exists for GA liability insurance,
although as discussed later in this report, some states have liability
insurance or similar requirements.
Some countries require liability insurance for GA aircraft. Canada, for
instance, requires commercial and GA aircraft owners operating aircraft
with a maximum permissible take-off weight of more than 5,000 pounds to
have liability insurance for death and bodily injury in the minimum amount
of $300,000 (in U.S. dollars) multiplied by the number of passengers
11
The Airline Deregulation Act of 1978 (Pub. L. No. 95-504, § 20, 92 Stat. 1705, 1722)
(codified as amended at 49 U.S.C. § 41112), in general, required that certificates were not
to be issued or remain in effect unless air carriers complied with regulations requiring
liability insurance policies or self-insurance plans.
12
14 C.F.R. Part 205. See also, 46 Fed. Reg. 52572 (Oct. 27, 1981). In cases dealing
with Part 298 exemption certificates for on-demand operations, the FAA verifies that an
applicant has insurance prior to issuing the certificate, according to the FAA.
13
An act commonly referred to as the McCarran-Ferguson Act generally reserved the
regulation of the business of insurance to the states. A congressional declaration of policy
in this act provides, in part, that the continued regulation and taxation by the several states
of the business of insurance is in the public interest. The act further provides, in general,
that acts of Congress shall not be construed to invalidate, impair, or supersede state laws
regulating the business of insurance unless an act of Congress specifically relates to the
business of insurance. Pub. L. No. 79-15, 59 Stat. 33 (1945) (codified as amended at 15
U.S.C. §§ 1011-1015).
Page 7 GAO-15-740 General Aviation Liability Insurance
onboard the aircraft.
14
Similarly, a European Union regulation requires
liability insurance coverage for both commercial and GA aircraft when
operating within, into, out of, or over the European Union member
territories.
When operating aircraft, owners and operators face financial risks, such
as the risks associated with damage to the aircraft itself as well as those
associated with death, injury, and property damage to third parties.
Aircraft owners and operators, like many other individuals and
organizations, may choose to purchase insurance in which the financial
risks of an accident are transferred to an insurance company in exchange
for a premium payment. Various aviation insurance products are
available, such as hull insurance, which covers physical damages to the
aircraft, including the engine, propeller, and all other systems and
permanently attached equipment. Liability insurance covers death or
bodily injury to passengers or persons on the ground as well as property
damages caused by an aircraft accident. Aviation insurance policies for
GA aircraft owners are generally sold to owners as a package, which
include coverage for aircraft hull and liability.
Additionally, GA pilots who do not own their own aircraft may also
purchase their own liability insurance policy, commonly referred to as
renters insurance. This type of insurance is designed to protect pilots
against claims arising from bodily injury or property damages when they
are deemed to have caused an accident. It is also designed to provide
pilots with legal representation to defend themselves if they are sued,
whether or not they are ultimately determined to be at fault for the
accident. However, renter’s insurance is an excess insurance product that
is secondary to the primary insurance policy of the aircraft owner, which is
designed to pay for damages first. As such, renter’s insurance is not as
comprehensive as aircraft owners insurance tied to the aircraft. For
instance, in contrast to an aircraft owner’s policy, coverage for damages
to third parties on a renter’s policy is typically not triggered unless the pilot
was deemed to have been negligent in the operation of the aircraft,
according to a principal insurance underwriter offering such policies. In
14
Canadian regulations further require liability insurance covering “risks of public liability”
of differing dollar amounts depending upon the maximum permissible take-off weight of
the aircraft. The amounts range from $100,000 for aircraft with a maximum permissible
take-off weight of 2,300 pounds to $3,000,000 for aircraft with a maximum permissible
take-off weight of more than 75,000 pounds.
Page 8 GAO-15-740 General Aviation Liability Insurance
addition to passengers on the aircraft or parties on the ground, insurance
companies themselves may also sue pilots for damages, taking action to
subrogate against the party responsible for losses paid.
15
Apart from
where liability insurance is required, whether GA aircraft owners or
operators choose to purchase insurance depends, in part, on how much
risk they are willing to assume versus the risk they need or desire to
transfer (for a premium) to an insurance company. In particular, they may
choose not to purchase coverage if they believe the coverage is too
expensive for the amount of risk they bear.
Based on our survey of state aviation officials and analysis of state
statutes and regulations identified by such officials, as of April 2015, the
majority of the states do not have liability insurance requirements
applicable to GA aircraft owners and operators (see fig. 2). Five states
have a liability insurance requirement that is applicable to at least some
categories of GA aircraft owners and operators, and six states have some
type of aircraft financial-responsibility requirements. Aviation officials we
spoke with in these states generally commented that they did not know
the history of why they have these requirements or how effective they
have been in terms of ensuring liability insurance coverage because data
15
Subrogation is the lawful substitution of a third party in place of a party having a claim
against another party. As noted by a principal aviation insurer, it is common practice for
insurers of flight schools to subrogate against renter pilots to recover their payment for
damages.
The Majority of States
Have No GA Liability
Insurance or Related
Financial-
Responsibility
Requirements,
Although Other
Entities May Impose
Such Requirements
Eleven States Impose
Either Liability Insurance
or Aircraft Financial-
Responsibility
Requirements Applicable
to Some GA Aircraft
Owners and Operators
Page 9 GAO-15-740 General Aviation Liability Insurance
are not collected to measure the effect of these requirements. Minnesota
is the only state that has a liability insurance requirement applicable to
nearly all GA aircraft owners.
16
Every owner of aircraft in Minnesota,
including GA aircraft owners, must show proof of insurance, with the
minimum coverage requirements, when registering the aircraft with the
state.
17
While it is a misdemeanor under Minnesota law for an owner to
operate an aircraft registered within Minnesota without the required
liability insurance,
18
according to state aviation officials, the state relies on
self-reporting of liability insurance coverage during the aircraft registration
process and does not systematically track violations.
16
Experimental aircraft that are prohibited from carrying passengers under FAA
regulations are exempt under Minnesota’s requirements from having passenger seat
liability insurance. Minn. Stat. § 360.59, Subd 10 (c).
17
FAA is responsible for registering GA aircraft; however, Minnesota statutory
requirements applicable to GA aircraft in the state require registration and listing for
taxation purposes. Minn. Stat. § 360.59. According to a state aviation official, Minnesota’s
aircraft registration tax is used for airport improvement. A state aviation official also told us
that GA aircraft operators, who may lease or rent aircraft that are engaged in aviation as a
business (i.e., aerial photographers, flight schools), must also register with the state.
18
Minn. Stat. § 360.92.
Page 10 GAO-15-740 General Aviation Liability Insurance
Figure 2: States with Minimum Liability Insurance or Aircraft Financial-Responsibility Requirements Applicable to General
Aviation Aircraft Owners and Operators (as of April 2015)
Four other states—Hawaii, Maryland, Oregon, and Rhode Island—have
provisions applicable to GA aircraft owners and operators that require
them to have liability insurance if they either hangar their aircraft at a
state-owned airport or operate their GA aircraft for commercial purposes,
such as leasing or renting out aircraft.
19
For instance, according to a state
aviation official, GA aircraft owners that base or hangar their aircraft at
Rhode Island’s six state-owned airports for more than 90 days are
19
Aircraft used for commercial or business purposes may include those that are leased or
rented for remuneration, including those used by flight schools or air tour companies.
Page 11 GAO-15-740 General Aviation Liability Insurance
required to register their aircraft with the state and have a minimum
liability insurance coverage limit of $1 million per accident. In Hawaii,
persons such as GA aircraft owners who rent a state hangar as well as air
tour operators are required to maintain liability insurance.
20
Six other states have some type of aircraft financial responsibility
requirements. Under the aircraft financial responsibility requirements in
California, Connecticut, Indiana, Massachusetts, and Virginia, GA aircraft
owners and operators must demonstrate aircraft financial responsibility to
the state by showing differing combinations of liability insurance, a bond,
deposits of money or securities, or a letter of credit.
21
Unlike the other five
states, North Dakota does not specify how financial responsibility should
be demonstrated.
22
According to Virginia state aviation officials, most GA
owners meet the Virginia requirement by purchasing liability insurance;
however, aviation officials in California, Connecticut, Indiana, and
Massachusetts told us that this requirement has not been enforced, due
to lack of resources. See appendix II for more detailed description of
states with minimum liability insurance requirements or aircraft financial
requirements applicable for GA aircraft owners and operators.
Seventeen of the 73 aviation stakeholders, including aviation insurers, GA
association representatives, and aviation attorneys, we spoke with stated
that other public and private entities require GA owners and operators
with whom they do business to purchase liability insurance, but the extent
of such requirements is unknown. According to six of the 73 aviation
stakeholders, data are not systematically collected on which or how many
public and private entities have liability insurance requirements. Some
20
Hawaii Administrative Rules §§ 19-34-6, 19-17.1.
21
South Carolina repealed its requirement for aircraft financial responsibility in 2012.
According to a state aviation official in South Carolina, the rule was outdated, and injuries
and damages from GA accidents would have to be addressed via state aviation tort laws
that might give rise to a legal cause of action S.C. Code Ann §§ 55-3-50 – 55-3-80. A
bond is a financial instrument whereby the purchaser provides funds in advance to a
surety company to guarantee payment of damages to a third party. In the context of
aviation liability insurance, a limited number of states allow the use of a bond to satisfy
financial responsibility requirements required for aviation operations. A letter of credit is a
bank guarantee that payments to a third party will be received on time and for the correct
amount.
22
N.D. Cent. Code § 26.1-48-05.
Other Public and Private
Entities Require Liability
Insurance, but Extent Is
Unknown
Page 12 GAO-15-740 General Aviation Liability Insurance
local government airport operators may require GA aircraft owners to
have liability insurance as a condition of using the airport (e.g., to operate
in or out of or to use as a hangar for their aircraft). For instance, a GA
airport owned and operated by the city of Redding, California, requires
GA aircraft owners to have a $1 million liability insurance policy with
coverage for bodily injury and property damage in order to lease space at
the airport.
Fourteen of the 73 aviation stakeholders, including representatives from
most of the GA associations and state aviation offices and aviation
attorneys, we spoke with also told us that to their knowledge, all financial
institutions or lenders require GA aircraft owners and operators to have
aircraft hull insurance as a condition of financing an aircraft purchase.
Although only hull insurance might be required as a condition for
financing, four aviation insurance providers we spoke with told us that GA
insurers generally offer a package of both hull and liability insurance to
GA aircraft owners, and almost all GA aircraft owners opt to purchase the
package.
According to representatives from a flight school association, some flight
schools either cover certified flight instructors under the schools’ liability
insurance or require certified flight instructors and student pilots to have
their own liability insurance. As such, certified flight instructors and
student pilots have the option of purchasing a renter’s insurance policy.
Flight school association representatives also told us that some
independent certified flight instructors may require student pilots to have
liability insurance. In addition, a few states require flight schools to
disclose the extent of liability insurance coverage they carry, if any, which
would cover a student pilot or a pilot renting one of their aircraft. For
instance, according to a state aviation official, Nebraska requires flight
schools to disclose to renters or student pilots whether they are covered
by the school’s liability insurance before they fly. However, DOT does not
require flight schools or flight instructors to carry liability insurance.
23
23
As previously mentioned, we found in October 2012 that instructional flight operations
are the second most often involved in GA accidents.
Page 13 GAO-15-740 General Aviation Liability Insurance
According to the three nationwide insurance brokers we spoke with, the
two most common types of liability insurance policies purchased by GA
aircraft owners were those with coverages of:
• $1 million per occurrence (i.e., accident) with a $100,000 per
passenger sublimit
24
(commonly referred to as a “$1 million/$100 K
policy”), meaning the insurance policy limits the coverage for each
passenger in the aircraft to $100,000, although the limitation does not
apply to victims on the ground, and
• $1 million per occurrence with no sublimit (commonly referred to as a
“$1 million smooth policy”), meaning the policy can offer higher
coverage to passengers up to the maximum total policy limit,
depending on the accident scenario.
Because of the higher potential payouts, premiums rates are higher for
the smooth policies than for those with sublimits. Based on information
provided by brokers and underwriters we contacted, we found that other
policies with higher coverage amounts were not prevalent in the
marketplace.
We obtained premium range estimates from the three different nationwide
insurance brokers
25
and, for comparison purposes requested the range of
24
A sublimit per passenger refers to a coverage limit available to a passenger on the
aircraft, which is less than the maximum limit per occurrence of the overall policy. For
example, a $1 million per occurrence maximum limit could be met with a combination of
passenger losses (subject to limits of $100,000 per passenger) and losses to third parties
on the ground, with total losses to all parties not to exceed $1 million.
25
These three
brokers write policies with multiple underwriters in the GA area.
25
These three brokers write policies with multiple underwriters in the GA area.
The Ranges of GA
Liability Insurance
Premiums Are
Influenced by the
Type of Coverage
and Several Risk
Factors
The Two Most Common
Types of Coverage Have
Different Insurance
Premium Ranges
Page 14 GAO-15-740 General Aviation Liability Insurance
premiums for aircraft with certain characteristics. Specifically, we sought
premium information applicable to aircraft owners who:
• use their aircraft primarily for personal, non-commercial use;
• have light aircraft with six seats or less (single or multi-engine); and
• use turboprop or piston engine planes (excluding corporate jets and
helicopters).
Given those parameters, the insurance brokers estimated that for the $1
million/$100K policies most commonly sold to aircraft owners, premiums
generally ranged from $125 to $1,500 annually.
26
Comparatively, for the
$1 million smooth policies, estimated premiums ranged from $450 to
$3,500. They noted that these ranges are dependent on a number of
factors that are highly unique and individualized to characteristics of the
aircraft as well as the pilot. For example, for a Cessna 172 aircraft,
27
owned and operated by a pilot who has achieved at least a private pilot’s
certificate, the range of premiums was estimated from $200 to $550
annually for the $1 million/$100K policies and $500 to $1250 annually for
the $1 million smooth policies, according to the three nationwide brokers
we interviewed.
28
Figure 3 below illustrates estimated ranges of premium
costs tied to the two types of insurance policies commonly sold to GA
aircraft owners.
26
Ranges of premium costs provided by aviation insurance brokers do not include outliers
tied to unique aircraft or pilot characteristics. These ranges of premiums do not include the
hull portion of an insurance policy.
27
Cessna 172 is the most widely produced and used aircraft in the United States.
28
This range of premiums does not include the hull portion of an insurance policy.
Page 15 GAO-15-740 General Aviation Liability Insurance
Figure 3: Estimated Ranges of Annual Liability Insurance Premiums for Selected General Aviation (GA) Aircraft
Note: Estimated premium information provided by nationwide insurance brokers applicable to aircraft
owners that use their aircraft primarily for personal, non-commercial use; have light aircraft with six
seats or less (single or multi-engine); and use turboprop or piston engine planes (excluding corporate
jets and helicopters).
As discussed earlier, GA pilots who do not own aircraft may also obtain
liability insurance or renter’s insurance. This type of insurance policy
offers pilots coverage separate from that of an insurance policy of the
aircraft owner. Such coverage is offered at many different coverage limits
(with many policies covering less than $100K per passenger) and is less
costly than insurance purchased by aircraft owners. For example, the
published rates from one of the largest GA insurance organizations in the
marketplace offered renter’s insurance for a $1 million/$100K sublimit
policy for approximately $200 per year.
Page 16 GAO-15-740 General Aviation Liability Insurance
Beyond the type of coverage, the aviation insurance brokers and
underwriters we interviewed generally identified the following
characteristics associated with the aircraft and the pilot as key factors that
can have a significant influence on the price of liability insurance policy
premiums:
• Aircraft characteristics: Relevant characteristics include the number of
seats, the aircraft’s equipment and technology, and aircraft’s (e.g.,
make and model) accident history. For instance, an insurance broker
noted that insurance rates are higher for a 6-seat aircraft than for a 2
or 4-seat aircraft because the risk level and liability will increase with
additional passenger capacity. Additionally, some aircraft with higher
performance characteristics (e.g., higher horsepower engines and
retractable landing gear) can cost more to insure than less complex
aircraft.
• Pilot characteristics: Relevant characteristics include the pilot’s
experience, (e.g. flight hours and flying frequency), certifications,
training, age, accident history, and violations, if any, of FAA rules or
regulations. For example, insurance brokers and underwriters noted
that a pilot who flies more frequently will likely be offered lower rates
than pilots who fly occasionally. Further, as pilots increase the number
of flight hours tied to the aircraft they are currently flying, such
experience can help lower their insurance rates. Conversely, higher
rates can be expected for pilots who have had FAA violations (e.g., an
expired medical certification).
29
• Geographic location: Relevant considerations include the location
where the aircraft is based and will be flown, including elevation,
runway length at airports used, and terrain of the area. For instance,
an insurance broker mentioned that premiums can increase for a
plane based at an airport in mountainous terrain compared to an
airport located in flat terrain.
29
According to FAA officials, FAA requires that pilots be medically certified to prevent or
mitigate the effect of various medical conditions that may present an undue risk to the
safety of pilots, passengers, or others. Private pilots must have their medical certifications
renewed every 5 years for pilots under 40 years of age and every 2 years for pilots over
40 years of age. After obtaining a medical certificate, and between renewal periods, pilots
are prohibited from performing pilot operations when they know or have reason to know of
a medical deficiency that would make them unable to fulfill their pilot operation. GAO,
AVIATION SAFETY: FAA Should Improve Usability of its Online Application System and
Clarity of the Pilot’s Medical Form, GAO-14-330, (Washington, D.C.: Apr. 8, 2014).
Aircraft Type and Pilot
Experience Are among
Key Factors That Influence
Premium Costs
Page 17 GAO-15-740 General Aviation Liability Insurance
• Use of the aircraft: This factor focuses on how the aircraft will be
used, such as primarily for personal business and recreational use or
for commercial business purposes. For instance, insurers will price
insurance for personal and recreational uses of aircraft differently than
aircraft used for commercial purposes, such as a charter operation.
We asked 73 aviation stakeholders, including federal and state aviation
officials, GA association representatives, aviation insurers, and aviation
attorneys what factors should be considered in determining whether to
adopt a federal GA liability insurance requirement. From these interviews,
we identified the five most frequently cited factors, which include
considering: 1) the costs borne by victims and the public in the absence
of a liability insurance requirement; 2) the extent of the problem; 3) the
cost impact on the GA community if a requirement were adopted; 4)
implementation and administration issues of a potential requirement; and
5) the potential public safety benefits of a requirement.
Forty-seven of the 73 aviation stakeholders who responded to us,
particularly aviation attorneys representing victims of aviation accidents
and state aviation officials, cited financial costs borne by some victims
and the public in the absence of liability insurance as a factor that should
be considered in assessing the appropriateness of liability insurance
requirements for GA aircraft owners and operators. For example, 36
aviation stakeholders, including all 11 of the aviation attorneys we spoke
with mentioned that a liability insurance requirement would help ensure
that victims could receive compensation for at least some of the costs
they incurred, including medical expenses and property damage. They
also emphasized that a liability insurance requirement could help shift
some of the costs currently being borne by society at large (e.g., medical
expenses) as a result of an accident involving uninsured or underinsured
GA aircraft owners and operators. Some of these stakeholders also
commented that the very purpose and principal benefit of liability
insurance is to cover damages that the insured party, who assumes the
risk of engaging in a certain activity, causes to innocent bystanders or
Selected
Stakeholders Cited
Understanding the
Extent of the Problem
and Costs among
Key Factors That
Should Be
Considered in
Determining Whether
to Adopt a Federal
Liability Insurance
Requirement
Costs to Victims and the
Public
Page 18 GAO-15-740 General Aviation Liability Insurance
their property. Some stakeholders also believed that liability insurance
requirements for GA aircraft owners and operators would serve the same
purpose as automobile liability insurance, which is to protect the public at
large from the costs associated with accidents.
30
Forty-five of the 73 aviation stakeholders who responded to us—including
state aviation officials, GA association representatives, and aviation
insurers—mentioned the importance of understanding the extent of the
problem—namely the number of GA aircraft owners and operators who
do not have liability insurance and the extent to which the absence of
liability insurance has precluded accident victims from receiving
compensation—as a factor that should be considered in determining
whether to adopt a liability insurance requirement. Based on our
interviews with aviation stakeholders, including representatives of GA
associations and insurance organizations, data are not readily available
to help quantify the extent to which GA aircraft owners and operators do
and do not have liability insurance, much less to identify policy limits for
those with liability insurance. Representatives from insurance industry
associations and many aviation stakeholders we contacted in our review
confirmed that no central data existed or are systematically collected in a
manner that would help provide this information.
Although no central data exist, a number of stakeholders we interviewed
offered differing opinions based on their experience about the extent to
which GA aircraft owners and operators have liability insurance.
Representatives from 5 of the 9 GA associations and 11 of the 39 state
aviation officials estimated that the majority of GA aircraft owners and
operators have liability insurance and, therefore, questioned whether the
lack of liability insurance is widespread enough to justify the need for a
federal requirement. Eight of these stakeholders offered estimates in the
80 to 90 percent range.
30
According to the Insurance Information Institute, all states, except New Hampshire,
require liability insurance for automobiles.
Extent of the Problem
Page 19 GAO-15-740 General Aviation Liability Insurance
However, 10 aviation attorneys and representatives from a GA
association and an accident victims association we contacted believed
that a problem exists, but said they did not know the extent of the
problem. As compared to the other aviation stakeholders who offered
estimates of the percentage of GA owners and operators with liability
insurance, three aviation attorneys offered a lower estimate—about 50 to
70 percent. A few aviation attorneys we spoke with said that they were
aware of accidents where no liability insurance was available to
compensate accident victims, but they did not know how many cases like
this had occurred. In some instances, the attorneys we spoke with had
represented victims or their survivors; three aviation attorneys also
mentioned that they had declined to take such a case because there was
little chance, given the absence of liability insurance, that the victim could
obtain compensation from the GA aircraft owner or his or her estate.
Some of these stakeholders pointed to the magnitude of injury that can
occur—in the millions of dollars, in some cases—as another indicator of
the problem.
All 11 aviation attorneys we spoke with, however, also commented that,
based on their experience, accidents involving underinsured owners or
pilots are more prevalent than those where there is no liability insurance.
That is, the aircraft owner or pilot involved in an accident had liability
insurance; however, the liability insurance’s limit–often $100,000 per
passenger—was, according to the aviation attorneys, frequently
insufficient to compensate victims or their families in accidents involving
death or serious injury. For example, according to an NTSB report, in
February 2012, a GA aircraft owner-pilot and a passenger died after the
pilot lost control of the plane and crashed. According to aviation attorneys
we spoke with, the families of the deceased pilot and passengers each
received the total individual liability insurance coverage limit of $100,000;
however, aviation attorneys estimated the damages at about $3 million.
Two aviation attorneys we spoke with noted that their firms often do not
accept cases where the liability insurance coverage limit involved is
$100,000 because they want the prospective client to receive the total
$100,000 in compensation, rather than having their legal fees being paid
from the insurance coverage limit. At the same time, aviation insurers we
spoke with stated that such liability limits are commonly found in aviation
liability insurance policies. Furthermore, we found no GA accident data
describing the frequency of accidents with third-party damages or the
magnitude of those damages. Such data would inform an analysis of
policy limits that would be a component of a broader examination of
issues related to a possible GA liability insurance requirement.
Examples of general aviation (GA)
accidents with no insurance involved
• In March 2014, a private pilot, flying an
experimental amateur-built aircraft, and
two passengers were killed. According to
a preliminary NTSB report, the pilot lost
control of the airplane, struck a few trees,
and crashed. The aviation attorney we
spoke with said the pilot did not have
liability insurance and the estimated cost
of the damages was $18 million, based on
the DOT’s 2011 Guidance on Treatment
of the Economic Value of a Statistical Life.
• In November 2009, an experimental
aircraft crashed and killed the pilot and a
17-year-old passenger, shortly after
takeoff. Prior to the crash, the aircraft had
maintenance and repair work performed
by FAA-licensed aircraft mechanics.
Neither the pilot, nor the owner of the
experimental aircraft had insurance.
According to the aviation attorney, the
estimated cost of the personal injury and
property damages was more than $3
million.
• A female passenger lost most of her left
arm after de-boarding an aircraft that was
used for a commercial purpose. The
commercial operation owned the aircraft
but did not have insurance on it. After the
company sold the plane, hangar, and
other assets, the case was settled for
about $40,000, which did not cover the
victim’s medical expenses, which were
estimated to be more than $1 million,
according to an aviation attorney.
Source: GAO analysis of NTSB reports and interviews with
aviation attorneys. | GAO-15-740
Page 20 GAO-15-740 General Aviation Liability Insurance
Although more than half of the aviation stakeholders said that considering
the extent of the problem is important, no process is currently in place to
collect information on the portion of the GA community that does not carry
liability insurance coverage. FAA is responsible for registering GA aircraft
and pilots, but FAA does not collect information on insurance coverage at
the time of registration or at a subsequent time and is not required to do
so. NTSB and FAA collect certain data on GA accidents, including the
type of aircraft involved in the accident, number of fatalities and injured
parties, and geographic location of the accident. However, FAA and
NTSB data on accident and incident investigation does not include
information about insurance coverage or the amount, if any, of property
damage.
We identified four potential mechanisms to collect data based on our
interviews with aviation stakeholders and our previous work on GA
issues, and discussed these potential mechanisms with FAA and NTSB
officials. Based on these discussions and our prior work, we determined
that these mechanisms could be challenging or problematic to implement.
Specifically, according to FAA, it may be possible to collect information on
insurance coverage as part of the aircraft registration process, but FAA
officials indicated this approach could be problematic since there is no
federal requirement that GA owners and operators have insurance. FAA
officials also commented that their lack of authority to require insurance
coverage may cause some challenges in any effort to collect information
on insurance coverage.
31
FAA officials also stated that it would be
possible to include a question on FAA’s annual survey of GA owners and
operators, but we previously found that the overall response rate to the
survey is low and the reliability of the information is questionable.
32
Another potential method to collect insurance information would be to
match registered aircraft numbers with policy information from insurance
underwriters; however, this would require FAA, the National Association
31
Any FAA initiative to request information on insurance coverage would require OMB
approval in accordance with the Paperwork Reduction Act, according to FAA officials. In
general, under the Paperwork Reduction Act, federal agencies must submit proposed
collections of information for review and approval by OMB. See 44 U.S.C. §§ 3501 – 21.
32
GAO-13-36.
Page 21 GAO-15-740 General Aviation Liability Insurance
of Insurance Commissioners (NAIC),
33
or another third party to devote a
significant amount of resources to collect and analyze data from about
200,000 registered GA aircraft owners; the expense of this process is
unknown. Finally, according to NTSB officials, information on insurance
coverage could be collected as part of GA accident investigations, but the
officials stated that an accident investigation is already time consuming
and collecting liability insurance information is not relevant to their safety
investigation or their broader safety mission. In addition, NTSB officials
told us that the NTSB comes in contact with only a very small number of
aircraft, and thus, the data would not be representative of the industry.
Sixty of the 73 aviation stakeholders we spoke with—including state
aviation officials, aviation attorneys, representatives of GA associations,
and aviation insurance organizations—cited potential costs to and their
effect on the GA community as a key factor in assessing the
appropriateness of a liability insurance requirement. At the same time,
these stakeholders held mixed views on the impact such a requirement
would have on costs. For instance, 18 of the 60 aviation stakeholders,
including state aviation officials, representatives from GA associations,
and aviation attorneys stated that a requirement could likely impose
higher costs on the GA community. Specifically, among the 18
stakeholders, two noted that higher operating costs would be imposed on
those who currently do not purchase liability insurance. In addition, three
aviation stakeholders noted that all GA aircraft owners could pay higher
premiums if insurance companies are forced to include potentially higher
risk owners in the coverage pool as a result of the requirement. Two
representatives from insurance-related organizations we spoke with told
us that some sort of a high-risk pool might have to be established in order
to provide insurance for all aircraft owners. Conversely, four stakeholders,
including an aviation insurance provider, stated that a larger pool would
not significantly affect costs because they believe most GA aircraft
owners and operators are already insured now or liability insurance
requirements would further spread the risk of an accident among more
insureds in the pool. Five stakeholders, including some from state
aviation offices and GA associations, raised concerns that some GA
33
NAIC is the standard-setting and regulatory support organization created and governed
by the chief insurance regulators from the 50 states and the District of Columbia.
According to NAIC representatives, the organization collects financial information from
insurance companies.
Costs to the GA
Community
Page 22 GAO-15-740 General Aviation Liability Insurance
aircraft may be uninsurable at a reasonable cost, including some vintage
and experimental aircraft.
34
Four insurance providers and a state aviation
official we spoke with, however, told us that overall, insurance is generally
available and that providers have the capacity to offer additional liability
insurance coverage if liability insurance were required.
Additionally, six stakeholders, including representatives from GA
associations, believed that requiring liability insurance might discourage
individuals who were thinking of pursuing a career in aviation because of
the cost of insurance. In a February 2014 report, we found that according
to pilot school representatives we interviewed, the cost of pilot training
(about $9,500) coupled with low entry-level pay at regional airlines was
deterring students from entering pilot school and pursuing an airline pilot
career.
35
As we noted above, renters insurance is available to student
pilots for approximately $200 per year for a $1 million/$100k sublimit
coverage policy—a fairly minimal cost when compared to the overall cost
of pilot training. Seven stakeholders also believed that insurance
requirements may cause some existing GA aircraft owners and pilots to
leave aviation, particularly those who may be subject to higher premiums.
On the other hand, other stakeholders pointed out that if most GA aircraft
owners and pilots already have liability insurance, then the number who
may choose to exit because of additional costs may be relatively low.
Forty-five of the 73 aviation stakeholders that responded to us—including
federal and state aviation officials, aviation attorneys, and representatives
of GA associations—cited implementation and administration issues as
another factor that should be considered in determining whether to adopt
a federal liability insurance requirement for GA aircraft owners and
operators, though their perspectives differed. For example, two state
aviation officials and an aviation insurance provider stated that
implementing and administering a liability insurance requirement for GA
aircraft owners and operators at the federal level would be logical
34
Under Minnesota statute, experimental aircraft that are prohibited from carrying
passengers under FAA regulations are exempt from Minnesota provisions requiring
passenger seat liability insurance.
35
According to the University Aviation Association, which represents providers of college
aviation education, the costs to attain a private pilot certificate generally averages about
$9,500. See GAO, AVIATION WORKFORCE: Current and Future Availability of Airline
Pilots, GAO-14-232 (Washington, D.C.: Feb. 28, 2014).
Implementation and
Administration Issues of a
Potential Requirement
Page 23 GAO-15-740 General Aviation Liability Insurance
because of the existing federal role—that is, FAA oversees and monitors
GA aircraft registration and pilot licenses. In addition, as previously noted,
commercial air carriers are required under federal law to have liability
insurance, and OST through FAA enforces this requirement by annually
collecting and certifying insurance information and coverage from
commercial air carriers’ insurers. However, if a GA liability insurance
requirement were to be implemented at the federal level, FAA officials
noted that a cost-benefit analysis would need to be conducted for the
development of any related regulations. FAA officials also noted that
additional resources would be needed for collecting insurance information
from GA aircraft owners and operators due to the significantly larger
number of GA aircraft and operators as compared to commercial air
carriers.
In contrast, 11 state aviation officials told us that if there is a need for a
liability insurance requirement, it should continue to be addressed and
implemented at the state level. As we mentioned above, the states
generally regulate the business of insurance with state insurance
regulators having the ability to regulate insurance companies and collect
information for other insurance products. Some of these state aviation
officials also considered the state the natural entity to require liability
insurance, analogous to state requirements for auto insurance. Four state
aviation officials also raised concerns that a federal requirement may
impede a state’s ability to best tailor a requirement to meet their specific
state’s needs and characteristics. For instance, one state aviation official
noted that the risk level of third-party losses or property damages is lower
in Montana than in Massachusetts because Montana has more remote
areas (e.g., mountain ranges and flat farmlands) and less population per
square mile while Massachusetts has fewer remote locations and a high
population density in certain parts of the state. Such factors could
influence states’ decisions to institute mandatory liability insurance
requirements and any associated coverage minimums. On the other
hand, 12 aviation stakeholders, including state aviation officials and
aviation attorneys we spoke with, commented that the advantage of a
potential federal requirement would be uniformity and standardization of
any potential requirements.
Page 24 GAO-15-740 General Aviation Liability Insurance
Thirteen of the 73 aviation stakeholders who responded to us—including
aviation attorneys and representatives from an accident victims
association and GA associations—cited potential public safety benefits as
key considerations in determining whether to adopt a federal GA liability
insurance requirement. For instance, five aviation attorneys told us that
although requiring GA liability insurance will not eliminate accidents, it
may positively impact safety because insurers offer policyholders reduced
premium incentives for activities they consider could enhance safety. For
instance, an insurance broker we spoke with told us that premiums can
be lowered if a pilot participated in FAA’s voluntary pilot proficiency
program called “WINGS,” which is a training program designed to reduce
the number of GA accidents. Aviation attorneys noted that if GA aircraft
owners and operators were required to have liability insurance, they may
seek higher training certification or update their training more frequently in
order to obtain lower premiums from insurance companies. NTSB officials
questioned whether there was a direct link between liability insurance and
safety, although NTSB has recently noted that ongoing pilot education,
among other factors, could help reduce one of the major causes of GA
accidents—that is, a pilot’s loss of control.
36
FAA officials also told us that
while liability insurance requirements may have an indirect impact on
safety, enforcing such requirements would be outside of their aviation
safety mission.
We provided the DOT and NTSB with a draft copy of this report for review
and comment. Neither agency had comments on the report. FAA and
NTSB did provide technical clarifications, which we incorporated into the
report as appropriate.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Transportation, the Chairman of NTSB, and
interested parties. In addition, this report is available at no charge on the
GAO Web site at http://www.gao.gov. If you or your staff members have
any questions about this report, please contact me on (202) 512-2834 or
at [email protected]. Contact points for our Offices of Congressional
36
NTSB, 2015 Most Wanted Transportation Safety Improvements: Prevent Loss of Control
in Flight in General Aviation.
Potential Public Safety
Benefits
Agency Comments
Page 25 GAO-15-740 General Aviation Liability Insurance
Relations and Public Affairs may be found on the last page of this report.
Key contributors to this report are listed in appendix III.
Gerald L. Dillingham, Ph.D.
Director, Physical Infrastructure Issues
Page 26 GAO-15-740 General Aviation Liability Insurance
Appendix I: Objective, Scope, and
Methodology
The objectives of this report were to describe (1) existing liability
insurance requirements for general aviation (GA) aircraft owners and
operators in the United States; (2) available data on the range of
premiums charged by selected insurance providers for GA liability
insurance and factors that influence those costs; and (3) factors that
selected stakeholders stated should be considered in determining
whether to adopt a federal liability insurance requirement for GA aircraft
owners and operators.
To identify existing liability insurance requirements, we conducted a
survey of aviation officials in all 50 states and a legal analysis of state
statutes and regulations identified by such officials to determine the
number of states with existing liability insurance requirements for GA
aircraft owners and operators. We developed two questions in the survey
instrument, asking each state about any liability insurance or aircraft
financial-responsibility requirements for GA aircraft owners and pilots, and
we requested citations of their state statutes, regulations, or policies. We
pre-tested the two-question survey instrument with state aviation officials
from California and Virginia—two states we initially found to have
provisions relating to liability insurance—and Alabama and Alaska—two
states that did not have insurance requirements.
1
These state aviation
officials provided technical comments to our questions, which we
incorporated as appropriate. We conducted the survey from February
through April 2015 and received a 100 percent response rate. We also
spoke with aviation officials in those states that indicated some type of
liability insurance or aircraft financial-responsibility requirements to obtain
more information about those requirements, including how they are
administered. We also spoke with aviation stakeholders, as we mention
later, to ascertain information on other entities that may require GA
aircraft owners and operators to maintain liability insurance.
To identify the range of premiums for GA liability insurance and factors
that influence those costs, we obtained GA liability insurance premium
information for common GA aircraft from insurance associations, brokers,
and underwriters through interviews and responses to a questionnaire.
We spoke with three nationwide insurance brokers who work with the
major underwriters in the GA aviation insurance market, according to
1
During our initial literature review and background research, a number of states with
provisions relating to some type of liability insurance for GA aircraft owners and operators
were identified.
Appendix I: Objective, Scope, and
Methodology
Page 27 GAO-15-740 General Aviation Liability Insurance
Appendix I: Objective, Scope, and
Methodology
aviation insurance representatives. We collected liability insurance
premium information, using the following parameters to be covered by an
insurance policy: light, single-piston or multi-piston or turbo-prop engine
GA aircraft type with 6-seats or less that is used primarily for personal
and non-commercial flights. Although we did not independently validate
the insurance premium information collected from these brokers, we
corroborated the premium information received with premium data from
aviation insurance underwriters to assess the reasonableness of the data
provided. We determined that the information provided was sufficient to
use as examples of GA liability insurance premiums, but that it is not
generalizable to the entire spectrum of the GA insurance market, given
the multiple and unique factors that can significantly influence premium
prices.
To obtain selected stakeholders’ perspectives on factors that should be
considered in determining whether to adopt a federal liability insurance
requirement, we obtained oral or written responses from 73 aviation
stakeholders, including officials from the Department of Transportation,
Federal Aviation Administration, the National Transportation Safety
Board; 39 state aviation offices; representatives from 9 GA trade
associations and 10 aviation insurance-related organizations; as well as
an accident victims association and 11 aviation attorneys representing
GA accident victims (see table 2). Through interviews or written
responses, we collected the perspectives of aviation officials in 39 states
on these factors after receiving their responses on our survey of state
liability insurance or aircraft financial-responsibility requirements. Aviation
officials from five states declined to talk with us, and aviation officials from
six states did not respond to our numerous attempts to obtain their views
on factors that should be considered on potentially adopting a federal GA
liability insurance requirement.
2
The selection of representatives from GA
trade associations was based on prior GAO reports that identified the GA
associations and recommendations from FAA, NTSB, and selected state
aviation officials. We identified the accident victims association and
selected aviation attorneys, specializing in personal injury and
representing aviation accident victims, based on our initial literature
reviews and recent news article that mentioned attorney firms prosecuting
or defending GA accident cases, recommendations from state aviation
2
Aviation officials from five states—Idaho, Mississippi, New Hampshire, Ohio, and Utah—
declined to participate and six states—Maine, Michigan, Nebraska, New Jersey, North
Carolina, and Wisconsin—did not respond to our numerous attempts to obtain their views.
Page 28 GAO-15-740 General Aviation Liability Insurance
Appendix I: Objective, Scope, and
Methodology
officials, and an Internet search with the following terms: “aviation
lawyers, aviation attorneys, and aviation litigation.” We analyzed the
contents of our interviews with or written responses from all 73 aviation
stakeholders to identify the key factors that were mentioned in
consideration of potentially adopting a federal liability insurance
requirement. The aviation stakeholder’s views are not generalizable to the
entire GA community, but they provided us with valuable insights.
Table 2: List of Federal and Private Aviation Stakeholders GAO Interviewed or Contacted
Aviation Stakeholder Groups
Stakeholders
Federal agencies
Department of Transportation
Federal Aviation Administration
National Transportation Safety Board
Accident victims association
National Air Disaster Alliance/Foundation
Aviation attorneys
American Association for Justice
Baum, Hedlund, Aristei, & Goldman
Braden, Varner, & Angelley
Brodkowitz Law
Corboy & Demetrio
Hill, Peterson, Carper, Bee & Deitzler
Kreindler & Kreindler
Motley Rice
Mozley, Finlayson & Loggins
Reep, Bell, Laird & Simpson
Slack & Davis
General aviation associations
Aircraft Owners and Pilots Association
Experimental Aircraft Association
Flight School Association of North America
General Aviation Manufacturer Association
Helicopters Association International
Independent Fixed Based Operator Association
National Air Transportation Association
National Association of Flight Instructors
National Business Aviation Association
Insurance-related organizations
American Academy of Actuaries
Aviation Insurance Association
National Association of Insurance Commissioners
Old Republic Aerospace, Incorporated
Page 29 GAO-15-740 General Aviation Liability Insurance
Appendix I: Objective, Scope, and
Methodology
Aviation Stakeholder Groups
Stakeholders
Starr Aviation
AIG Aerospace
Trans Re
Insurance brokers of 3 nationwide firms within the GA market
Source: GAO | GAO-15-740
We conducted this performance audit from October 2014 to September
2015, in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Page 30 GAO-15-740 General Aviation Liability Insurance
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
Eleven states have either a minimum liability insurance requirement or an
aircraft financial-responsibility requirement applicable to general aviation
(GA) aircraft owners and operators. Five states—Hawaii, Maryland,
Minnesota, Oregon, and Rhode Island—have a liability insurance
requirement that is applicable to at least some categories of GA aircraft
owners and operators. Six states—California, Connecticut, Indiana,
Massachusetts, North Dakota, and Virginia—have some type of aircraft
financial-responsibility requirements, which require GA aircraft owners to
demonstrate financial ability to cover potential losses incurred in an
accident. Details on the requirements are in table 3 below.
Table 3: States with Minimum Liability Insurance or Aircraft Financial-Responsibility Requirements Applicable to General
Aviation Aircraft Owners and Operators (as of April 2015)
States
(state citations)
(date established)
a
Description of requirements
Alabama
No requirements
Alaska
No requirements
Arizona
No requirements
Arkansas
No requirements
California
(California Public Utility Code §§
24230 – 24410)
(1968 as amended)
Requires the operator of any aircraft involved in an accident with the state to file a report with
the state after an accident has occurred. The reporting requirement applies to an accident in
which any person is killed or injured or there is damage to property in excess of $400. Upon
receiving an accident report, the state is to determine the amount of security, within specified
limits, deemed sufficient to satisfy any judgment for damages resulting from the accident
against each owner or operator. Such an owner or operator must then deliver the specified
amount of security to the state. In general, these security requirements do not apply to
owners or operators who had an aircraft liability policy, self-insurance, or bond meeting
certain specifications in effect at the time of the accident. Financial coverage under a policy
or bond must be not less than:
• $50,000 for bodily injury or death of a person not a passenger in any accident;
• $50,000 damage to or destruction of property in any accident; and
• $100,000 for bodily injury or death of 2 or more persons in any 1 accident
Coverage under self-insurance may occur at the state’s discretion when the state is satisfied
that the applicant is possessed of and will continue to be possessed of financial ability to pay
judgments against the applicant within specified limits.
Colorado
No requirements
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
Page 31 GAO-15-740 General Aviation Liability Insurance
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
States
(state citations)
(date established)
a
Description of requirements
Connecticut
(Connecticut Code
§§ 15-102 – 15-120)
(1959, as amended)
Requires the operator of any aircraft involved in an accident within the state to file a report
with the state after an accident has occurred. The reporting requirement applies to an
accident in which any person is killed or injured or there is damage to property in excess of
$1,000. Upon receiving an accident report, the state is to determine the amount of security,
within specified limits, deemed sufficient to satisfy any judgment for damages resulting from
the accident against each owner or operator. Such an owner or operator must then deliver
the specified amount of security to the state. In general, these security requirements do not
apply to owners or operators who had an aircraft liability policy, self-insurance, or bond
meeting certain specifications in effect at the time of the accident. Minimum required liability
insurance policy coverage is as follows:
• $10,000 for bodily injury or death of a non-passenger person per accident;
• $20,000 for bodily injury or death of 2 or more persons per accident;
• $20,000 for bodily injury or death of a passenger per accident (if aircraft was being
operated for hire);
• $20,000 times the number of passenger seats for 2 or more persons per accident (if
aircraft was being operated for hire);
• $10,000 for bodily injury or death of a person per accident (if aircraft was not being
operated for hire and the accident results in bodily injury to or death of a passenger);
• $10,000 times the number of passenger seats for bodily injury or death of 2 or more
persons per accident (if aircraft was not a for hire use); and
• $10,000 for property damage
Coverage under self-insurance may occur at the state’s discretion when the state is satisfied
that the applicant is possessed of and will continue to be possessed of ability to pay
judgments against the applicant within specified limits.
Delaware
No requirements
Florida
No requirements
Georgia
No requirements
Hawaii
(Hawaii Administrative Rules § 19-
17.1;§ 19-34-6)
(1991, and 1989, as amended
respectively)
Requires any person desiring a small plane hangar, tie down space, or any other small
aircraft space at a public airport to maintain a general liability policy in the amount of at least
$500,000. Also, air tour operators are required to have liability insurance in the amount of at
least $300,000 per individual with the State as an additional insured.
Idaho
No requirements
Illinois
No requirements
Page 32 GAO-15-740 General Aviation Liability Insurance
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
States
(state citations)
(date established)
a
Description of requirements
Indiana
(Indiana Code Ann. §§ 8-21-3-1 –
8-21-3-23)
(1951, as amended)
Requires any person operating any aircraft involved in any aircraft accident in the state
resulting bodily injury or death, or in damage to property of another in excess of $100 to file a
report with the state after an accident has occurred. Upon receiving an accident report, the
state may require security from the owner or operator of the aircraft, within specified limits,
sufficient to indemnify the injured party against loss and guarantee the payment and
satisfaction of any judgment or judgments for damages resulting from the accident. In
general, these security requirements do not apply to owners or operators who had an aircraft
liability policy, self-insurance, bond, or a deposit of money or securities meeting certain
specifications in effect at the time of the accident. Financial coverage for bodily injury to or
death of a person that is not a passenger should be:
• $10,000 for bodily injury or death of a person in any accident;
• $20,000 for damage to or destruction of property in any accident;
• $20,000 for bodily injury or death of 2 or more persons in any 1 accident
Coverage under self-insurance may occur at the state’s discretion when the state is satisfied
that the applicant is possessed of and will continue to be possessed of financial ability to pay
judgments against the applicant within specified limits.
Requirements also apply to non-residents of the state.
Iowa
No requirements
Kansas
No requirements
Kentucky
No requirements
Louisiana
No requirements
Maine
No requirements
Maryland
(Maryland Transportation Code §
5-1002)
(1957, as amended)
Requires aircraft owners that use aircraft for commercial purposes and based or hangered in
the state to have a liability insurance policy with at least the following minimum coverage to
operate the aircraft:
• $50,000 for bodily injury or death per individual;
• $100,000 for bodily injury per accident;
• $50,000 for property damage protection.
Page 33 GAO-15-740 General Aviation Liability Insurance
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
States
(state citations)
(date established)
a
Description of requirements
Massachusetts
(Annotated Laws of Massachusetts
ch. 90 §§ 49D, 49E, 49G)
(1955, as amended)
Requires aircraft owners or operators to post security following any accident report in the
form of an insurance policy, self-
insurance, or surety bond meeting specified requirements. In
general, these security requirements do not apply to owners or operators who had an aircraft
liability policy, self-insurance, bond, or a deposit of money or securities meeting certain
specifications in effect at the time of the accident. Required minimum liability insurance policy
coverage is as follows:
• $5,000 for bodily injury or death of a non-passenger person per accident;
• $10,000 for bodily injury or death of 2 or more persons per accident;
• $10,000 for bodily injury or death of a passenger per accident (if aircraft was being
operated for hire);
• $10,000 times the number of passenger seats for bodily injury or death of 2 or more
persons per accident;
• $5,000 for bodily injury or death of a passenger per accident (if aircraft was not being
operated for hire);
• $5,000 times the number of passenger seats for bodily injury or death of 2 or more
persons per accident (if aircraft was not being operated for hire); and
• $5,000 for the damage to or destruction of property.
Michigan
No requirements
Minnesota
(Minnesota Stat. § 360.59, subd. 10)
(1976, as amended)
For purposes of registration, requires every owner of aircraft in the state to have a liability
insurance policy with at least the following minimum coverage:
• $100,000 per passenger seat and non-passengers (i.e., people on the ground) for bodily
injury or death
• $100,000 for property damage
• $300,000 per occurrence for bodily injury or death to nonpassengers.
Mississippi
No requirements
Missouri
No requirements
Montana
No requirements
Nebraska
No requirements
b
Nevada
No requirements
New Hampshire
No requirements
New Jersey
No requirements
New Mexico
No requirements
New York
No requirements
North Carolina
No requirements
North Dakota
(North Dakota Cent. Code § 26.
1-48-05)
(1995)
Requires owners of aircraft or aircraft components manufactured in the state to provide proof
of financial responsibility in the amount of $100,000 per occurrence, for property damage and
personal injury or death on the ground resulting from the use of the aircraft or aircraft
component.
Ohio
No requirements
Oklahoma
No requirements
Page 34 GAO-15-740 General Aviation Liability Insurance
Appendix II: States with Minimum Liability
Insurance or Aircraft Financial-Responsibility
Requirements
States
(state citations)
(date established)
a
Description of requirements
Oregon
(Oregon Administrative Rule §
738-015-0040)
(2002)
Requires persons leasing space at state-owned airports to meet insurance requirements
specified in the lease, in the amounts specified. According to an Oregon state official, the
minimum required coverage in such leases is as follows:
• $1 million for private, noncommercial tenants;
• $2 million for commercial tenants; and
• $5 million for fixed based operators that sell fuel.
Pennsylvania
No requirements
Rhode Island
(Rhode Island Airport Corporation,
Airport Tie-down Monthly Use
Agreement)
c
Tenants at state-owned airports are required to have liability insurance of no less than $1
million per occurrence for bodily injury and property damage.
South Carolina
No requirements
South Dakota
No requirements
Tennessee
No requirements
Texas
No requirements
Utah
No requirements
Vermont
No requirements
Virginia
(Virginia Code Annotated §§ 5.1-88.
1 – 5.1-88.6)
(1968, as amended)
Requires that proof of financial responsibility be furnished for each GA aircraft licensed in the
state. Proof of financial responsibility may be shown with an insurance liability policy, bond,
cash or an irrevocable letter of credit. Financial coverage through an insurance poli
cy or bond
for bodily injury to or death of a person should be:
• $50,000 for bodily injury or death of a person in any accident, including a passenger;
• $25,000 damage to or destruction of property in any accident;
• $100,000 for bodily injury to or death of 2 or more persons in any 1 accident
Cash or irrevocable letter of credit must be delivered to the state in the amount of $ 250,000.
Washington
No requirements
West Virginia
No requirements
Wisconsin
No requirements
Wyoming
No requirements
Source: Survey responses and GAO analysis of state statutes and regulations identified in the survey responses. | GAO-15-740
a
Current state requirements date back to at least the identified years.
b
State aviation official mentioned that Nebraska requires anyone renting aircraft, in the ordinary
course of his/her business, provide written notice to the renter of the nature and extent of insurance
coverage provided, if any. (Nebraska Administrative Code Title17 Ch 9 § 001.01)
c
According to state officials, Rhode Island has required aircraft general liability insurance since the
inception of its quasi-public agency, Rhode Island Airport Corporation, in 1993.
Page 35 GAO-15-740 General Aviation Liability Insurance
Appendix III: GAO Contact and Staff
Acknowledgements
Gerald L. Dillingham, Ph.D., (202) 512-2834, [email protected]
In addition to the contact named above, the following individuals made
important contributions to this report: Edward Laughlin, Assistant Director;
Stephen Brown; Jim Geibel; Geoff Hamilton; Delwen Jones; Jennifer Kim;
Elke Kolodinski; Barry Kirby; Emei Li; Amanda Miller; SaraAnn
Moessbauer; Malika Rice; Sandra Sokol; Patrick Ward; and Frank
Todisco.
Appendix III: GAO Contact and Staff
Acknowledgements
GAO Contact
Staff
Acknowledgments
(540284)
Page 36 GAO-15-740 General Aviation Liability Insurance
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