LARSON’S LESSONS
‘Plane Crash, Chance, Bad Landing’
WHAT WENT
WRONG?
By: Will Larson
Many years ago, I defended an E&O case arising from a
serious aircraft accident. The wife of the principal owner
of a closely held corporate business decided she wanted
to learn how to fly. After she took some lessons, the
business bought a small airplane. The owner contacted
his insurance agent to get coverage for the airplane. At the
time the company bought the plane, the wife was still a
student pilot. The agent checked with his standard carriers
and found the highest passenger liability limits he could
get for a student/new pilot was $50,000 per seat.
According to the agent, the owner was notoriously
insurance cost-conscious. The agent knew that trying to
get higher limits in the E&S market would be difficult and
expensive, so he did not attempt to get a quote for higher
passenger liability limits through a broker.
The wife ultimately got her pilot’s license, although
neither she nor her husband notified the agent. Even
had they notified the agent, he would not have been able
to get higher limits from his standard companies for an
inexperienced pilot.
Shortly after the wife got her license, she and her daughter-
in-law flew to a small airport in the Ozarks. She brought
22
the plane down short of the runway and crashed. Her
daughter-in-law sustained severe injuries, including brain
damage and disfigurement. The daughter-in-law’s damages
far exceeded the per seat liability limits of the policy.
The company, the owner, and his wife sued the agent,
claiming he failed to obtain sufficient liability limits.
The testimony and evidence of the parties and expert
witnesses established higher limits could have been
obtained through a Lloyd’s of London non-admitted carrier,
although it would have been costly. The owner testified
he would have agreed to pay for higher limits. The agent
testified that the owner regularly refused to buy additional
coverage and/or higher limits because of cost, but there
was little or no documentation of this. The case was
ultimately settled for a considerable amount.
LESSONS
1.
The defense the insured would not have agreed to
pay for additional coverage or higher limits never
works unless there is excellent documentation.
When an insured is faced with an uncovered loss,
he or she will always say they would have agreed to
pay for additional coverage or higher limits if it had