Aerial Application Frequently Asked Questions about Insurance Coverage

Aerial Application Insurance Frequently asked questions:

Check with N.A.I.A. at any time for further clarification. This isn't easy to understand and the insurance companies use different definitions and coverage forms so please review your policy personally with N.A.I.A.

How many insurance companies insure Aerial Applicators?

There are currently only five insurance companies that are insuring aerial applicators. They are AIG Aviation, Inc., Allianz Aviation Managers, LLC, C.V. Starr, Phoenix Aviation Underwriters, Starr Aviation and USAIG.
W. Brown/XL Specialty will only renew their existing customers and will not quote new business.

What can I do to get the best rates possible?

Other than the obvious of flying safe, no drift or hull claims and maintaining a clean and professional aerial application business the best thing for you to do is join the NAAA.
The National Agricultural Aviation Association is as they say "The voice of the aerial application industry". One of the major benefits that the NAAA provides is the PAASS program.
All the insurance companies recognize the evolution that the NAAA is making for the ag aviation community with the PAASS program and their publications. Some companies offer direct discounts to the operator for attending PAASS every year and other companies might not even consider insuring you without attending the PAASS program every year.

For the ag operator you can not lose by joining the NAAA and attending the PAASS program. It is an excellent organization and has established proven results that the PAASS program is working to decrease accidents and drift problems.

Where can a low time ag pilot get coverage?

A low time ag pilot, i.e. one who has less than 500 hours ag time, can get coverage to fly ag however you more than likely won't be able to do it on your own. An ag underwriter is going to want to see an experienced ag pilot take you under their wing for the first and maybe even second season before they would consider offering you coverage certain coverages.
The typical training regiment for a new pilot flying ag would consist of attending an Ag Flying School and then work with an experienced operator doing only seeds and fertilizer while you build up your experience level. After a 100 or 200 hours of logged ag time the underwriter may consider offering coverage for pesticides so you can gain experience spraying chemicals, but at the same time it minimizes the risk to the insurance company because most people will not complain about drift of a pesticide. After another 100 hours or more the underwriter might be willing to offer coverage for you to be able to spray herbicides.
You and your mentor should come up with a training curriculum that you can present to the underwriter that will give you operating experience. We can help you come up with a training program that would be acceptable. Give us a call to discuss.

What are the highest liability limits available to aerial applicators?

This question has a lot of information in it. First lets start with the basics.

The most common limit carried by aerial applicators is 1/3/1 also known as split limits.
This means the limits for non-chemical liability are $100,000 per person with a $300,000 per occurrence bodily injury limit and $100,000 per occurrence for property damage.

For chemical liability the limits are usually the same however there is an aggregate limit for chemical liability of 1/3/1.
That means no matter how many drift/ liability claims that you may have pending the maximum the insurance company will pay out for the entire policy period will be $100,000 per person with a $300,000 per occurrence bodily injury limit and $100,000 per occurrence and aggregate for property damage.
Every paid chemical claim will lower the amount of liability coverage left under the aggregate by that amount.
For example: If you were spraying a field with Round Up and the wind shifted and carried the chemical to another farmer's field and destroyed $120,000 of cotton, then the maximum amount that could be available to indemnify the farmer would be $100,000. less your deductible. The other $20,000. would come out of your pocket. That is just one claim and with that one claim your entire property damage liability has been exhausted for the rest of the policy period. You would have to purchase additional liability coverage to replace the exhausted limit already paid out.

Under chemical liability coverage there are different limits available also. All companies have these available to them but some may choose not to offer limited coverage.

They are generally split up in to three categories:

1. Excluding chemical

2. Limited chemical / Restricted chemical

3. Comprehensive chemical.

The different level of chemical coverage can be used by the underwriter or the ag operator to further define what the insurance company is willing to cover or what the Ag operator wants coverage for.
Non-chemical liability limits can usually be increased to 1 million dollars or more but that doesn't provide any chemical liability coverage and would only be available for bodily injury or property damage not caused by chemicals.

That is the most common type of liability coverage most aerial applicators carry. Of course the limits can be lowered as long as they do not fall below the state requirements for the state and or states you are operating in.
Another limit carried can be the combined single limit (CSL). This combines the bodily injury and property damage liability limits into one. The usual limits are $100,000, $300,000 and $500,000. These limits still carry aggregates for bodily injury and property damage they are just combined into one limit.
Most companies will reserve these limits for very experienced and relatively loss free operators. Some companies will only increase the liability limits while the operator is working on a specific contract.

Do I have to carry hull coverage?

Each company has a different opinion on this but liability only coverage can be available. The insurance companies need the premium that insuring the hull generates to cover the liability losses also. In a lot of cases just setting up an investigator/ adjuster to investigate an allegation of chemical drift is going to cost the insurance company more than the operator paid for their entire liability coverage (on a per plane basis).
Additionally most operators now use very expensive aircraft and equipment so there is usually a bank note attached to these aircraft and the lender will specify that all risk hull coverage would be required.

Can my buddy and his plane fly for me if I'm swamped with work and can't handle it alone?
None of the aerial application polices allow automatic attachment of aircraft so if he is flying for you then you need to call N.A.I.A. to get that aircraft and pilot added to your policy.
If you are sub-contracting the work out to your buddy then his insurance should provide coverage for his operations and you should be named as an additional insured on his policy to protect you against his mistakes.

What is F.O.G. ?
F.O.G. means: Farmer, Owner & Grower coverage. In general terms if you buy this coverage then you are extending liability coverage to the farmer, owner or grower for whom you are spraying. While this is a great benefit to your customers, you should take into consideration that by providing your customers with additional insured coverages under your policy, you will also be extending your liability coverage to include your client there by the potential to decrease the limit of liability you have available for yourself and operation.

What is an OPW?
OPW means: Open Pilot Warranty or some companies call it an Open Pilot Clause or any variation on that basic idea. What the OPW means is that if a pilot meets all the requirements listed on the OPW then the pilot would not need to get named onto the policy for coverage to be provided while they are operating the aircraft.

What is the ag short rate table?
The ag short rate table is the method the insurance companies use when adding, deleting or otherwise changing coverage on your policy. A simplified view is that insurance premiums are earned on a daily basis. That means if you have a policy with an insurance company and six months into that policy period you sell your aircraft and you want to delete that aircraft off your policy then you would be refunded for the six months of unearned premium. Well in the ag insurance policy they use something called the ag short rate table which is an accelerated earned premium table. The table is as follows:

Ag Short Rate Table

Days Policy in force	Minimum Earned Premium
Less than 31 days	33 1/3% of annual premium
31 days or more but less than 61 days	60% of annual premium
61 days of more but less than 91 days	75% of annual premium
91 days or more but less than 120 days	85% of annual premium
120 days or more	100% of annual premium

The reason the underwriters use this table in their policy is because many years ago the aerial applicators were buying coverage for the five or six months that their season might have lasted for and then cancelled their policy to get the refund on the unearned premium. That put the insurance companies into a situation where they still had claims being reported for drift situations months after the season ended and they still had to pay for the hull claims during the season and with the applicators canceling their policy early the insurance companies did not have the cash reserves to pay for the claims and they had to make a choice. They could stop writing Aerial Applicator insurance or they could use an accelerated earned premium table to ensure they had the premium dollars necessary to pay the drift and hull claims every year.
These days it is not much of an issue any more as a lot of the ag aircraft today are very expensive so there are usually bank liens on the aircraft and the bank will want and demand insurance coverage on the aircraft all year round regardless of whether it is flying or not. That does not mean the underwriters completely disregard the ag short rate table.
They use it for when you are adding a new aircraft to the flight line. They will look to see the date you are adding the aircraft and apply the ag short rate table.

Here is an example: The policy is in force and will expire in 95 days and you worked smart and won a contract to spray a large portion of XYZ corporation's fields. In order for you to complete the work on time you need to bring in another aircraft. You find a suitable aircraft and call your broker and tell him to add the aircraft onto your policy. The underwriter will look at your policy and determine there are 95 days left in the policy period, he/ she will then turn to the ag short rate table and add the aircraft for 85% of the annual premium because they will be providing you 95 days of coverage until the policy expires.

_{* Disclaimer *
These are general questions that can only be answered generally. N.A.I.A. does not make the final determination if there is coverage or isn't coverage. Only the contract/ policy between you and the insurance company can determine whether coverage exists for your set of circumstances. None of the questions and answers on this page are binding or meant to construed as coverage. Contact us at N.A.I.A. to review your individual policy and coverage.}