March 3, 2022

Block time arrangements, the devil is in the details

Jon Robinson

By Steven Godfrey, Vice President – Aviation, The Magnes Group

There is much discussion in the pilot and aircraft owner communities about block time arrangements between owners of private aircraft and pilots who want to fly something other than flight school / flying club aircraft. Discussion tends to focus on a few common questions:

• Is it legal?
• What should aircraft owners be concerned about when screening potential renters?
• How much can someone charge per hour of block time?
• What do aircraft insurers think of this?

I do not want to debate the legality of block time arrangements here, though I will start to refer to these arrangements as what they are, rental. Make no mistake, if you sell 15 hours of access to your aircraft for an hourly fee you are renting your aircraft to a third party for remuneration. This is no difference between these arrangements and the flight school or flying club you trained at other than, the flight school has an operating certificate, commercially registered aircraft, and an insurance policy that allows for that activity and the increased potential liability that renting an aircraft to another party carries.

Regarding the issue of legality, well, that is very grey right now. Recently, there was a decision at a Maritime tribunal where the Aeronautics Act definition of “Hire or Reward” was upheld. The definition reads:

Hire or reward means any payment, consideration, gratuity, or benefit, directly or indirectly charged, demanded, received, or collected by any person for the use of an aircraft.

In the end, the rental of a private aircraft constituted the operation of the aircraft for hire or reward. Let us turn our attention to what insurers think of these arrangements.

Aircraft insurance policies highlight in the declarations what uses are acceptable and define those uses in the definitions section of the policy.

In the following example, we see the permitted use and definition.

Purpose of Use: Private Pleasure & Business

What matters now is how the term is defined. See the following definition from this same Policy:

(b) “Pleasure and Business” means the use of your aircraft for personal and pleasure purposes, or in connection with your business, but excludes the use of your aircraft for:
(i) hire, reward, or any use for which any remuneration or benefit is received, promised, or anticipated, other than a bona fide reimbursement to you for operating expenses only of your aircraft,
(ii) instruction, other than as permitted under Paragraph 31 (c); or
(iii) rental to others.

The definition under (iii) expressly excludes rental to others. Every insurance policy contains language that defines accepted uses for the aircraft and a definition of the uses that clarify what the accepted uses include and exclude. In every private aircraft policy that I have reviewed, there is wording that excludes rental to others or it limits remuneration to the reimbursement of specific costs relating to a specific flight. Either way, block time arrangements fall outside the scope of the policy.

Ultimately, no matter what you hear at the hangar, if you arrange to take money from someone in exchange for the use of your aircraft you are very likely to violate the accepted uses for your aircraft under your insurance policy. As such, you are exposing yourself to significant potential loss financially. Remember, there is an increased duty of care when you enter an arrangement like this. Someone who pays to use your aircraft has a right to expect that a certain airworthiness standard is met with your aircraft. Failure to meet that standard carries with it increased liability.

What is the solution? You must discuss your intention to do this with your broker and have it disclosed to your underwriter. Your underwriter can decide if they want to take the exposure and rate your policy accordingly if they accept it.

Within the COPA Gold Program, we can ensure that Block Time Arrangements are covered under the policy with up to five named pilots. Simply advise your COPA broker that you will be selling block time and who the pilot will be. Once the pilot is approved, an endorsement will be added to your policy that provides coverage for the Block Time Agreement. With this done, you can be confident that there will be coverage in the event of a claim.

(Photo: Adobe Stock)