Flying Club Insurance: Named vs Open Pilot and What Limits

A flying club outside Lancaster, Pennsylvania, landed its Mooney gear up. The carrier went looking for the pilot's checkout in the club's records, found no entry, and denied the hull claim. The members paid the $62,000 repair themselves. Avemco tells that story in its guide for flying club owners, and it's a fair summary of how flying club insurance usually goes wrong. The policy was written correctly. The club wasn't running the way the policy assumed.

The short answer is to put the policy in the name of a real entity, choose named pilots or an open pilot warranty based on your roster, buy agreed value hull and smooth liability limits, ask for three specific endorsements, and then write your checkout rules so they match the policy word for word.

1. Who should be the named insured on flying club insurance?

The club entity, and ideally an LLC or corporation. Avemco's guide says an LLC or corporation as the named insured puts a layer between the airplane and each member's personal assets, while a general partnership or an informal arrangement leaves every member's house and savings exposed when a lawsuit arrives. It also points out that the policy follows the legal entity, so a club that has never quite decided what it is ends up with coverage that is just as vague. Our post on co-ownership legal structures compares LLCs, general partnerships, and informal ownership if you're still deciding.

2. Named pilot vs open pilot warranty: which fits your club?

A named pilot policy lists each member by name, date of birth, and certificate number, and the underwriter prices each one. That costs money as the roster grows. In Avemco's example, a five-member club flying a Bonanza might pay an extra $400 to $900 a year to list every member, compared with a smaller listed roster.

An open pilot warranty skips the list and sets minimum qualifications instead. Anyone who meets them is covered. Avemco's illustration for a complex single is 500 hours total, 100 hours in retractables, 25 hours in make and model, an instrument rating, and a flight review within the prior 12 months. Your carrier's numbers will differ, and the warranty on a 172 will be much lighter than on a Bonanza.

The risk sits with the pilot who falls below the warranty. Avemco's example is a 280-hour pilot who joined the club last month and damages the nosewheel on a bad landing. The carrier denies the hull claim, and it denies the liability claim too. A pilot who doesn't meet the warranty can leave the club with no coverage at all on that flight, which is a very different problem from a higher deductible.

AOPA adds a caution to take to your agent. Its guidance to owners is to identify the pilots who regularly fly the aircraft, because the open pilot warranty isn't meant to cover pilots with regular access. A club is a roster of people with regular access, so ask the carrier directly how it treats club members under the warranty and get the answer in writing.

• Small, experienced, stable roster: named pilots are usually the simpler choice, since every member is known to the underwriter and nobody falls through a gap.
• Larger roster or frequent turnover: an open pilot warranty saves paperwork, but membership rules then have to stop anyone below the minimums from flying until they meet them or are added by name.
• Mixed experience: ask whether low-time members can be named individually while everyone else flies under the warranty, and what that costs per member.
• Size limits: Avemco notes some carriers won't write clubs under three members or over fifteen. Ask before you grow past a threshold, not after.

3. Agreed value or stated value hull coverage?

Agreed value pays the figure on the policy if the airplane is totaled, with no argument about depreciation. Stated value lets the carrier pay the lower of the stated value or the actual cash value at the time of loss. If the policy says $95,000 and the adjuster decides the airplane was worth $80,000 that day, stated value pays $80,000. Avemco's view is that most club aircraft are better served by agreed value, and for a club it's hard to argue with. Nobody wants to explain a $15,000 shortfall at the membership meeting. Whichever you choose, reset the value at every renewal so it tracks what the airplane would cost to replace.

4. What liability limits should a flying club carry?

Read the per-passenger number first. A sublimited policy written as $1M / $100K per passenger pays up to $1 million in total, but no more than $100,000 to any one passenger. Avemco's example is a four-seat Cherokee with three passengers aboard, where the most the policy pays for passenger injuries is $300,000. A smooth $1M policy pays up to $1 million per occurrence with no per-seat cap, and a $2M smooth policy doubles the ceiling.

Avemco estimates moving from sublimited to $1M smooth at roughly $300 to $700 a year, and another $400 to $900 to go from $1M to $2M smooth. Those are Avemco's illustrative figures, not a quote. Split across members, the arithmetic is easy. At $700 a year in a ten-member club, smooth limits cost each member $70. Club members carry friends and family, and $100,000 per seat is a thin number if one of them is badly hurt. For most clubs, smooth limits are worth the money. The premium is the same whether members fly 200 hours or 600, so it fits in dues better than in the hourly rate.

5. Which endorsements does a club policy need?

1. Cross-liability. It treats each member as a separate insured, so a claim by one member against another is handled like a third-party claim instead of falling into a gap.
2. Waiver of subrogation in favor of members. Without it, Avemco notes, the carrier that pays the club for a damaged airplane can turn around and sue the member who was flying to recover what it paid.
3. Non-owned aircraft liability, as a separate policy for members who also rent elsewhere. The club policy covers only the club's aircraft.

6. Write the bylaws to match the policy

The Lancaster claim was lost on paperwork. Avemco recommends a required checkout with a club CFI before any member flies solo, because it leaves a paper trail the carrier can use to confirm the pilot was qualified. A few habits make that trail hold up:

• Copy the warranty minimums, or the list of named pilots, into your membership and checkout rules so nobody is cleared to fly an airplane the policy doesn't cover them in.
• Record every checkout with the date, the instructor, and the aircraft, and keep it where the board and an adjuster can both find it years later.
• Re-read the warranty at each renewal. If the carrier raises the minimums, some current members may no longer meet them, and they need to hear that before their next booking.
• Talk to the agent before changing who can fly or how the club charges for flying, such as letting non-members rent. A club policy is priced on the operation you described when you bought it.