CFI Liability Insurance

[mjburian]

I recently (finally) got my CFI certificate and was pretty excited about it at first. That initial excitement, however, was quickly tempered as I started to look into insurance options.

I’ve seen a handful of CFI insurance posts here, but nothing that directly addresses what I’m trying to figure out.

Both AOPA and Avemco offer personal liability insurance for CFIs, but do not cover commercial operations. So, according to both of them, I can be covered if I do some instructing as an individual, but if I want to form an LLC to do so (which the lawyer I spoke to said I should do) I may run into issues.

Also, the highest amount of coverage those two places offer is $1 million per incident, with a limit of $100K per passenger. I was once told (years ago) that if someone is killed in a car crash, the payout basically STARTS at $2 million. If that’s true (it may not be), I’d expect a similar outcome from an aviation accident would have a similar (or higher?) starting point. If so, then the AOPA and Avemco options may not offer enough coverage to make me comfortable. (I obviously hope this situation would never arise, but there’s a reason people buy insurance).

The local flight school has expressed interest in having me teach part time (that’s all I’d be able to do anyway) and I’d be covered under their insurance if I went that route. Which seems like the easiest option to deal with the insurance situation. The problem is, I have a few friends I’d like to give some instruction to and the school isn’t a fan of their employees also freelancing. (Plus, I’d still need my own coverage if I taught outside of their operations.)

I have a lawyer looking into this as well as two insurance brokers researching their options for general commercial liability coverage levels and costs. But, I’m wondering if anyone here has experience with this that can help point me in the right direction.

Edit to add:
I posted too soon and forgot to include a question about how common a waiver of subrogation is. While I understand the concept (after it was explained to me), it’s a little unclear what motivation an insurance company would have to agree to it.

 

[Tarheelpilot]

My best advice is make sure you have a broker that is actually taking the time to find the best product for you and has good relationships with the underwriters they sell. In my experience there is always a solution available what isn’t always available is a broker willing to put forth the effort to find the solution.

 

[mjburian]

My best advice is make sure you have a broker that is actually taking the time to find the best product for you and has good relationships with the underwriters they sell. In my experience there is always a solution available what isn’t always available is a broker willing to put forth the effort to find the solution.

One of the brokers is a longtime friend who is planning to “go to school” on aviation insurance for me. He’s unfamiliar, but knows that he’s my “expert” on this stuff so will likely sniff out the best options by using his contacts.

The other broker is well-versed in this stuff, but I have no prior experience with him. He did come highly recommended and I managed to slip on our friend-of-a-friend connection in our initial conversation, which went well.

But I can appreciate where you’re coming from and will definitely take that into consideration.

 

[unsafervguy]

bottom line is that you cannot buy enough coverage to cover your shelf. that goes for anything you do. the higher the limits you have the bigger the number the lawyers throw at the jury.

 

[mjburian]

That makes sense, but in such a frustrating way. I have the knowledge, experience, motivation and ability to teach people to fly... but the lawyers and insurance companies are likely going to keep me from doing so.

 

[midlifeflyer]

bottom line is that you cannot buy enough coverage to cover your shelf. that goes for anything you do. the higher the limits you have the bigger the number the lawyers throw at the jury.

Should people consider that about 90% of cases within insurance policy limits in evaluating that statement?

That makes sense, but in such a frustrating way. I have the knowledge, experience, motivation and ability to teach people to fly... but the lawyers and insurance companies are likely going to keep me from doing so.

To each his own. They never kept me from doing so. in fact, a lawyer keeps encouraging me to continue

Waivers of subrogation for CFIs are not uncommon. Insurers don't balk too much because it's minimal additional exposure for them and aviation insurers want to encourage their customers to get recurrent training, not discourage them.

BTW,

So, according to both of them, I can be covered if I do some instructing as an individual, but if I want to form an LLC to do so (which the lawyer I spoke to said I should do) I may run into issues.

You may want to review that with your attorney and insurance broker. It makes no sense to me unless you are buying an airplane and starting a flight school, but not knowing the details of a situation (and I don't want to) is one of many reasons for not giving advice over the internet.

 

[James331]

Never bought any of those products.

If you're working for a flight school they should cover you under their insurance, otherwise find a diffrent flight school.


Try not living in fear, because if you look at the profits in insurance, chances are nothing is going to happen anyways, and using common sense and thinking ahead does wonder to prevent anything from happening.
Just a risk matrix.

 

[tlglenn]

Make sure your policy covers you even when you're not in the aircraft e.g. you sign off a student pilot to solo who then crashes into a house and the homeowners sue you. Some cheaper policies will only cover accidents that occur with you on board.

 

[mjburian]

Waivers of subrogation for CFIs are not uncommon. Insurers don't balk too much because it's minimal additional exposure for them and aviation insurers want to encourage their customers to get recurrent training, not discourage them.

Ahh, there it is. Additional training with minimal additional exposure could lead to lower claims overall.

You may want to review that with your attorney and insurance broker. It makes no sense to me unless you are buying an airplane and starting a flight school, but not knowing the details of a situation (and I don't want to) is one of many reasons for not giving advice over the internet.

Which part makes no sense to you... that I'd want to form an LLC or that the AOPA and Avemco policies wouldn't cover me if I did?

Never bought any of those products.

If you're working for a flight school they should cover you under their insurance, otherwise find a diffrent flight school.


Try not living in fear, because if you look at the profits in insurance, chances are nothing is going to happen anyways, and using common sense and thinking ahead does wonder to prevent anything from happening.
Just a risk matrix.

I would be covered by the school if I work for them, and that is likely the route I'll go. But I'd still like to be covered if I give instruction to friends or family outside of the school. While I'm not exactly living in fear, my wife and I have built up some assets over the past 20 years that I'd prefer not to jeopardize for what will amount to being a part-time job done more for the benefit of others than for us. Hence, the consideration of limiting liability as much as possible.

Make sure your policy covers you even when you're not in the aircraft e.g. you sign off a student pilot to solo who then crashes into a house and the homeowners sue you. Some cheaper policies will only cover accidents that occur with you on board.

That's a great point, and one I hadn't considered until talking to Avemco. Apparently, there "standard" policy would only cover me while I was in the aircraft. But, if I become a member NAFI, the Avemco coverage is expanded to times when I'm not in the aircraft... so that would be a no-brainer at $50/year.

 

[DoubleD]

Another thing to consider is just how much of your net worth is attachable in a lawsuit settlement: jointly owned home? IRA? accounts held in trust with spouse? Autos owned in trust? Talk to a lawyer in your state. You may have less exposure than you imagine, or you may be able to take steps to reduce your exposure.

 

[mjburian]

Another thing to consider is just how much of your net worth is attachable in a lawsuit settlement: jointly owned home? IRA? accounts held in trust with spouse? Autos owned in trust? Talk to a lawyer in your state. You may have less exposure than you imagine, or you may be able to take steps to reduce your exposure.

My wife joked (I think?!) that we should get divorced and put everything in her name, so then there'd be nothing at risk. You know... except her skipping town with her new boyfriend.

 

[midlifeflyer]

Ahh, there it is. Additional training with minimal additional exposure could lead to lower claims overall.


Which part makes no sense to you... that I'd want to form an LLC or that the AOPA and Avemco policies wouldn't cover me if I did?

Although, generally speaking, setting up an LLC will not protect you from personal instructional liability, there may be a number of reasons to set one up, so hearing someone advised to do so doesn’t surprise me.

That the policies would not cover Marty just because Marty operates through Ace Flight Training LLC makes no sense to me. Those personal policies not covering Ace makes sense. Not covering Marty doesn’t.

But that’s why you are getting professional advice instead of relying on SGOTI.

 

[mjburian]

Heard back from one of the brokers and the 25 companies he's checked with are unwilling to underwrite coverage for operations with less than $30,000 of annual revenue. Given that this will probably be (at most) a night or two a week and one weekend day, it's unlikely that I'll ever get to that level of revenue. So... waiting on the other broker to see what, if anything, he's able to find.

Assuming he doesn't have access to anything that'll work, I'm probably just going to work for the school (and funnel any family and friends through them at full price rates) and work under their coverage or possibly pick up a personal policy (through AOPA or Avemco) for any of the family/friends stuff and just hope nothing bad happens...

 

[PilotPeeeete]

Heard back from one of the brokers and the 25 companies he's checked with are unwilling to underwrite coverage for operations with less than $30,000 of annual revenue. Given that this will probably be (at most) a night or two a week and one weekend day, it's unlikely that I'll ever get to that level of revenue. So... waiting on the other broker to see what, if anything, he's able to find.

Assuming he doesn't have access to anything that'll work, I'm probably just going to work for the school (and funnel any family and friends through them at full price rates) and work under their coverage or possibly pick up a personal policy (through AOPA or Avemco) for any of the family/friends stuff and just hope nothing bad happens...

Marty - coming to this rather after-the-fact but read with interest and curious to know what you ended up doing?
I am a CFI on the way to the airlines, willing to shell out a few $$$ over this next year-2 years of hour building for some reassurance that the career I am building all these hours for is a little more protected. I have insurance through my school, but for any instructing I do outside I've so far just been advised to make sure that the owner has you on their insurance. Then any other private flying I do with friends/family.

Thanks mate.

 

[mjburian]

Peeeete - I went the school route. My availability is very part time (0-2 days per week) and I couldn't justify the insurance expense. Between them having airplanes, students and insurance coverage already in place, it was hard to beat the $0 upfront costs and ease of getting started.

 

[flyingron]

Yep, there's no practical CFI liability insurance unless you are a broke CFI time building to get into regional airline poverty and don't have anything to lose anyhow. This is why I don't instruct.

 

[Salty]

My wife joked (I think?!) that we should get divorced and put everything in her name, so then there'd be nothing at risk. You know... except her skipping town with her new boyfriend.

This actually makes so much sense, but get a woman to actually go along with it and she probably will skip out on you. IE: one that is willing to not be married is more likely to skip town on you.

 

[PilotPeeeete]

Peeeete - I went the school route. My availability is very part time (0-2 days per week) and I couldn't justify the insurance expense. Between them having airplanes, students and insurance coverage already in place, it was hard to beat the $0 upfront costs and ease of getting started.

Thanks Marty. Yeah that sounds sensible. I had a helpful chat with my FBOs insurance agent who explained I'd also be foregoing my FBOs workers comp benefits too if I did any instructing on the outside - sounds like there are a couple reasons why it's just simpler and safer to bill everybody through the school.