The developer of what may well be the world’s first mass-produced “flying car” is discussing a range of options with underwriters from several companies in an attempt to come up with an affordable insurance policy for this hybrid vehicle/aircraft. 

As noted here in a recent blog, Woburn, Mass.-based Terrafugia Inc. announced successful flight testing of the Transition Roadable Aircraft—a flying car.  The company said the Transition completed its historic first flight on March 5, 2009 with 27 additional flights completed over the next several weeks. They added that successful completion of flight-testing with the proof of concept concludes the first stage of a four stage-process to bring the Transition into production. Work is underway on Stage 2, the Beta Prototype. First delivery is expected in 2011.

Categorized as a Light Sport Aircraft, the Transition, once marketed, will require a Sport Pilot certificate to fly, said Terrafugia, whose name in Latin means “escape from land.”  It is a two-seat aircraft designed to take off and land at local airports and drive on any road. Transforming from plane to car takes the pilot less than 30 seconds.

We’re building something unique,” said Richard Gersh, vice president, business development, for Terrafugia.  “It was clear to us that insurance regulations never contemplated anything like it.” 

In an attempt to create a solid foundation on which to build insurance for the flying car, the company has been in discussions with the Federal Aviation Administration, the National Highway Traffic Safety Administration, and the Environmental Protection Administration, he noted.  They are also talking with insurance underwriters to help formulate workable definitions that would make sense for assigning risk to the vehicle as either a car, an airplane, or something else.  Willis Aviation, a broker of aviation insurance, has been part of the discussion as well. 

In case of an accident, one obvious key is to decide which definition fits at the time of the accident, said Gersh.  Customers require coverage for auto liability, aircraft liability, and damage to vehicle. 

“When you are in aircraft operating area of an airport, usually inside a fence, then it is an airplane, even if the wings are folded up,” he explained.  “Underwriters at a number of companies are comfortable with this.  Outside of the airport operations area, it’s a car. 

The area where planes operate includes taxi areas and ramps.  In case you were wondering, the vehicles you see running around the planes at airports are considered “mobile equipment in an airport,” and are not registered, according to Gersh.  The flying car, on the other hand, will have a VIN number and will meet highway safety standards, he noted.

“Underwriters are really not concerned about the auto liability,” he said.  “While the vehicle will have a purchase price of around $200,000, 85% of the time it will be an airplane.”  The auto mode kicks in while the vehicle is going to and from airports and to other ground destinations.  “The auto liability is fairly small.  The vehicle has a 100 horsepower motor and is the size of a VW, but quite a bit lighter.  We suggest that the auto carrier provide liability insurance only.”  

The issue I raised last time is how to assign risk if the status of the vehicle at the time of accident is in question.  Rather than have automotive and aviation underwriters “pointing fingers at one another,” Gersh suggests that the vehicle be covered at all times by aviation insurance, with the ground mode being assigned under the “in motion” provisions of the policy (which would normally refer to aircraft moving on the ground).  He refers to this as “24/7 all-risk hull insurance.”  Otherwise, he said, flying car owners will have to purchase two separate policies. 

At the moment, these questions are still being weighed and discussed by underwriters and government authorities.  But insurance is state by state, and Terrafugia is facing the very real possibility of having to work with many entities in order to offer an insurance product to owners, which it seeks to do. 

In the end, the exceptions will be key in deciding what form insurance takes for these interesting new vehicles.  For example, what happens if you have to make an emergency landing on a roadway and your car/plane and perhaps another car are damaged?  At what point does your flying car cease being a plane and start being a car? 

With the hull insurance option, the answer doesn’t matter, so that would be the most sensible solution.  Then again, we don’t always do what is sensible. 


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