Should Your Insurer Review Hangar Leases and Service Contracts?

Yes. As a best practice, aviation businesses should have relevant leases and commercial agreements reviewed for insurance implications before assuming that contractual liability is covered.

A contract can transfer risk to your business that your standard insurance policy was never designed to accept automatically.

Signing a contract can change your liability

Aviation agreements commonly contain provisions involving:

Indemnification
Hold-harmless obligations
Additional insured requirements
Waivers of subrogation
Minimum insurance limits
Defense obligations
Other forms of assumed liability

These provisions can materially change who is responsible when something goes wrong.

What is an “insured contract”?

Liability policies can exclude certain obligations that a business assumes solely because it signed a contract.

Policies may then provide exceptions for agreements that meet the policy's definition of an insured contract.

The problem is that business owners should not assume every signed agreement automatically qualifies.

Aeris’s source material specifically cautions that complex modern aviation agreements can fall outside the standard policy definition unless the exposure is properly addressed.

The contract and the insurance policy need to agree

Imagine an airport lease requires your company to indemnify the airport for a particular liability.

Your lease says one thing.

Your insurance policy says another.

The gap between those documents is where the problem exists.

This is particularly relevant to the type of aviation businesses Aeris serves, which may operate under airport leases, manufacturer agreements, service contracts and customer indemnification requirements.

Review agreements before signing when possible

A better process is:

1. Identify the liability being transferred.

2. Compare it with the insurance policy.

3. Determine whether the policy already addresses it.

4. Obtain an endorsement or insurer approval when necessary and available.

5. Address the contractual language before signing when there is a mismatch.

The details depend on the contract and insurance policy, and insurance review is not a substitute for legal advice.

But from a risk-management perspective, ignoring the contract until a claim occurs is backwards.

Insurance programs should reflect contractual obligations

A strong insurance program considers more than assets and operational activities.

It should also consider the promises the company has made to other parties.

For complex FBOs, MROs, airports and aviation service businesses, contract review is therefore part of understanding the complete exposure—not an administrative afterthought.

Have a lease, service agreement or customer contract that could affect your insurance? Request a Coverage Risk Review from Aeris Insurance Solutions.