Aviation sector should expect Covid impact on EL claims and hull policies – Weightmans

The aviation sector should expect an increase in new coronavirus-related employment liability claims as the industry grapples with issues such as passengers not wearing face masks and planning safe overseas rest stops for cabin crew.

These insights were shared by Hayley Kiely, legal assistant at law firm Weightmans, which hosted a webinar on 13 January titled ‘Horizon Scanning: what’s in store for insurers in 2021 and beyond?’.

Despite confirming that insurers working in the aviation industry have noted a recent decline in claims, as “a lack of flights and grounding of aircraft will reduce your risk”, she added that claims are instead emerging from new expected, as well as unexpected, quarters.

For example, Kiely predicts that Covid-19-related claims will begin to make an appearance and “that this won’t only affect an all-risks policy or a passenger plane, this is also an employee liability matter”.

She explained: “One particular area I found interesting on the employee liability side is the way in which we rest crew or crew are rested moving forward.

“Predominantly on a more long-haul flight, crew would be staying in overseas destinations for X period of time. How are we protecting them against the risk of Covid, depending obviously on how the landscape’s looking?

“Equally, the reason I think we might see a surge in this type of claim is there’s already been press articles, particularly in the US, on airlines failing to ensure passengers are wearing masks. It’s uproar because they’re not protecting the safety of their passengers. That’s something I think we may see.”

Claims on the ground

Claims that insurers may not be anticipating, however, may come from hull policyholders.

“The pandemic has grounded so many aircraft – there’s currently in excess of 160,000 aircraft grounded.

”Now, what you have to think about is there’s a risk there on the hull policy because grounded aircraft comes with its own issues.

”Corrosion, weather damage, it has its own risks and I think moving forward, depending on how things pan out, we probably will see more claims in that area come in,” Kiely continued.

Plus, “there is now increased [directors’ and officers’] exposure within the aviation and travel industry because there probably will be scrutiny of how airlines have managed the pandemic and what measures have been put in place moving forward?”.

Not all ‘doom and gloom’

Despite the array of new claims exposures for insurers, Kiely doesn’t think it’s all “doom and gloom” for the aviation and aerospace insurance market.

She said: “Whilst we’ve seen a dramatic impact on certain areas, areas of the industry such as cargo has thrived. E-commerce is massive now.

“Equally, there’s reports that private charters are on the increase because people are loathe to put themselves at risk on a commercial aircraft, but they can charter a private flight, if your financial means support that.

“Moving forward, rather than talking about a particular claims landscape, I think the whole aviation, aerospace insurance market will change and we will see a shift in how risk is analysed on those particular areas that perhaps weren’t as exposed before.”