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By DAN REYNOLDS, senior editor, Risk & Insurance®

A first glance at the numbers might indicate that the size of the loss when a P-51 Mustang slammed into a crowd of spectators at the National Championship Air Races in Reno on Sept. 16 would make the event uninsurable going forward.

Reports in the Reno-Gazette Journal, citing public documents, pointed to the show's $100 million liability limit, placed with excess insurers via Lloyd's of London. That limit appears to be in jeopardy given the loss of life and numerous severe injuries.

"I could easily see this exceeding that limit," said Finley Harckham, a New York-based insurance recovery partner with Anderson Kill & Olick.

Steve Johns, president of Waterford, Mich.-based LL Johns & Associates, an aviation broker, said the event could prove to be uninsurable going forward. But there could be one thing that could save it, a very soft aviation insurance market.

"I would think in a normal marketplace and a logical market place it would be hard to find insurance for this event in the future," Johns said.

Johns cites premium rates that remain 40 percent below where rates were in 2002. He said that might be the only thing that might save one of the last sizable air races in the country.

"The whole commercial insurance market has been soft for a number of years and aviation has been extremely soft for quite a few years," Johns said.

A preliminary report from the National Transportation Board released on Friday, Sept. 23, said little beyond the obvious, except for the information that a piece of the plane's tail separated just before the crash.

Modifications to that plane and representations to insurers as to its condition and the competence of its pilot are going to be one of the first places insurers are going to look as they engage in what Harckham called "post-loss underwriting."

"What disclosures did they make and what disclosures did they not make?" Harckham said.

"The other aspect of this is the pilot's own insurance and I think it is going to be the same exercise," he said.

"I would expect the insurers to go through that and there they would focus on what representations were made with respect to the pilot's training and with respect to the pilot's health," Harckham said.

Reports in the Salt Lake Tribune and the Reno Gazette Journal quoted aviation experts who believed Leeward could not have been conscious as his plane drove nose down into the crowd of spectators. They base their conclusions on the fact that the plane plummeted into the crowd at full speed. Had Leeward, a veteran pilot, been conscious they theorized, he would have made some attempt to slow the plane down.

Perhaps adding to the loss of life was the fact that spectators in the VIP section had pushed out onto the tarmac ramp somewhat. Should this sort of event be allowed to continue, one can expect that spectators will be kept further out of harm's way.

September 27, 2011

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