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Air race tragedy leaves event in limbo and insurers at a loss

Fri Oct 14th, 2011 on     Insurance Claims,    

The human cost alone was appalling. Last month, 11 people died and 74 were injured — some horribly so — when a modified World War II plane crashed into the crowd of spectators at the National Championship Air Races. As one witness said, it looked like a war zone.

As the National Transportation Safety Board investigates the cause of the crash, the event’s and the pilot’s insurance companies are attempting to assess the damage. The accident is without precedent.

According to public documents, the race carried a $100 million insurance policy. Insurance insiders say, though, that the limit could easily be exceeded, given the number of dead and the nature of the injuries. If claims go much over the limit, the insurer could very well cancel the policy — and that would make the event almost certainly uninsurable, said one aviation insurance specialist.

It would be the end of an era for air race enthusiasts. The show is one of the last in the country.

The show may not be the only liable party, though. The NTSB report indicated that the plane lost a piece of its tail before the accident. That would put the pilot’s insurance company on the hook, too.

The plane was a vintage P-51 Mustang, but it had been significantly modified for air race use. The pilot had lengthened the plane’s nose to accommodate a more powerful engine. He had also shortened the wings by several feet.

Insurers will be looking not only at those modifications but also at how the pilot described the plane’s condition to his insurer. And, while the pilot was a 74-year-old veteran with years of experience, insurers will scrutinize his level of competence and his health.

Experienced pilots who were at the show or who watched the video afterward say the pilot could not have been conscious right before the accident. The plane hit the ground at full speed — about 400 mph — and, if he’d been awake, the pilot would have tried to slow it down.

If the show survives, the NTSB, the Federal Aviation Administration and the insurers will likely be reviewing the safety guidelines. The spectators were 1,900 feet away from the race course; the recommended distance is 1,500 feet.

The accident has raised a host of new issues for the show and the insurance companies. In the past, the pilots were at the greatest risk. When that plane slammed into the VIP seats in Reno, the game changed forever.

Source: Risk and Insurance, “Insurers Assessing Air Race Tragedy,” Dan Reynolds, Sept. 27, 2011

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