Supplemental Insurance for Fractional Owners
Everyone who owns a fractional share of a private jet already has some amount of coverage. Although the coverage purchased by fractional owners is often similar to the coverage owners of whole private jets purchase, fractional owners face unique risks that may require additional coverage. Supplemental insurance is an option for fractional owners who feel that the standard insurance coverage offered by their fractional company is insufficient.
A fractional jet owner who purchases his share through a fractional jet ownership company with a large fleet will probably fly on jets other than the one he officially owns. Large fractional jet companies own dozens of the same model of aircraft and typically provide owners with whichever private jet is closest to their departure point to avoid repositioning costs. Most owners do not notice the change in serial number when they fly and are unaware of the risk involved.
Insurance policies provided by large fractional companies typically cover owners when they are flying on an interchanged aircraft. However, the owner is still be liable for whatever damages are incurred by the aircraft which he officially owns, even if he is not using it at the time of the accident. The owner can be sued for damages incurred by either of the private jets. Insurance which is sufficient for a single 1/8 th share may not be enough to cover the double exposure of owning one jet and flying in another non-owed aircraft.
For example, if each private jet has the standard $100 million coverage, the limit is shared by all owners and the management company. The maximum limit that the insurance company will pay on any one occurrence is $100 million: if the manager or operator is sued for $100 million and the claim paid is $100 million, no further coverage would be provided to the individual owners for subsequent suits against them. Likewise, if the manager or operator is sued for $50 million, the owners would be left with only $50 million coverage shared between them. If the first owner is then sued for $50 million and the claim paid is $50 million, no further coverage would be provided to the remaining seven owners. There is no 1/8 share or equal distribution of the insurance ; payments are distributed in the order that parties are sued, and claims are paid by the share that the court allows. Once the $100 million limit is reached, coverage ends. The remainder over the $100 million limit must be paid out-of-pocket by each of the fractional owners.
In addition, each fractional owner is responsible for any repairs, services or maintenance performed on the aircraft while they owned a share. Even after the share is sold, the fractional owner could be liable for future products liability for the sale of the private jet if a future loss occurs as a result of repairs, service or maintenance performed on the aircraft while they were an owner. Carrying supplemental coverage, including products liability for the sale of the aircraft, will provide coverage to the owner for these types of exposures as well.
The escalated risk which fractional owners face can be reduced by purchasing supplemental insurance. A trustworthy, experienced insurance agent can determine what amount of supplemental insurance is necessary, if any. Although the chances of being liable for damages incurred by multiple aircraft accidents, or by a single but very costly accident, is unlikely, owners should remember that insurance is purchased precisely in anticipation of such unfortunate and rare occurrences.