CFIing and protecting your *ass*ets

RalphInCA

RalphInCA

Cleared for Takeoff
Joined
Jun 1, 2014
Messages
1,353
Location
McMinnville, OR
Display Name
Display name:
RalphInCA
Had and interesting conversation today with a guy at my airport. He is in his late 40s, retired from a law enforcement career, just got his commercial and was thinking of getting his CFI but decided pursue charter work instead. Reason he does not want to CFI is because he has a fair amount of assets built up and he doesn't want the liability that comes with instructing. He is afraid he may someday be sued and lose everything he has worked for.

Is this a real concern? He is a pretty meticulous pilot. I have flown with him and, although he makes typical low time pilot mistakes, he is pretty good.

How often do CFIs get sued? How expensive is malpractice insurance?

I ask because I may soon be pursuing my CFI and also have assets I want to protect.
 
As a CFI, who's got a few toys, I ain't worried.

Even as a charter pilot, he can get sued, someone breaks into his house and slips on his rug, he can get sued.

I just live my life and don't huddle in the corner worrying about what might happen.
 
RalphInCA said:
Had and interesting conversation today with a guy at my airport. He is in his late 40s, retired from a law enforcement career, just got his commercial and was thinking of getting his CFI but decided pursue charter work instead. Reason he does not want to CFI is because he has a fair amount of assets built up and he doesn't want the liability that comes with instructing. He is afraid he may someday be sued and lose everything he has worked for.

Is this a real concern? He is a pretty meticulous pilot. I have flown with him and, although he makes typical low time pilot mistakes, he is pretty good.

How often do CFIs get sued? How expensive is malpractice insurance?

I ask because I may soon be pursuing my CFI and also have assets I want to protect.
Click to expand...
As a pro pilot flying charters he's still exposed.

Previous discussion: https://www.pilotsofamerica.com/community/threads/cfi-rating-and-liability.22767/
 
James331 said:
As a CFI, who's got a few toys, I ain't worried.

Even as a charter pilot, he can get sued, someone breaks into his house and slips on his rug, he can get sued.

I just live my life and don't huddle in the corner worrying about what might happen.
Click to expand...

I tend to agree with this philosophy. Would establishing a LLC (like has been known to occur with aircraft) be a wise path? A CFI that I have used several times over the years has set one up for his CFI business purposes. Kinda curious if it would protect his assets.
 
I'm sure most lawyers could get around a LLC or waiver rather easily.

Only way to avoid being sued is to never leave your house, and never interact with anyone.
 
I think it's pretty rare for a CFI to get sued. The best defense for a CFI from being sued is to document, document, document. There are a lot of things that worry me as a CFI; getting sued is not one of them.
 
James331 said:
I'm sure most lawyers could get around a LLC or waiver rather easily.

Only way to avoid being sued is to never leave your house, and never interact with anyone.
Click to expand...

Negative! Sit inside alone while the storm blows, and your neighbor can sue you for "stuff" that is blown into and damages his fences, plants, house, cars, etc.

Where I used to live, the common refrain was, "anyone with $35 can sue you for anything they want, at any time." That was the filing fee . . . The only real way to avoid being used is to reside in a nice horizontal box, a safe six feet underground. But that won't keep your estate from getting sued!
 
Brad Z said:
I think it's pretty rare for a CFI to get sued. The best defense for a CFI from being sued is to document, document, document. There are a lot of things that worry me as a CFI; getting sued is not one of them.
Click to expand...
Documentation doesn't stop a lawyer from bringing a suit.
 
AWACSEng said:
I tend to agree with this philosophy. Would establishing a LLC (like has been known to occur with aircraft) be a wise path? A CFI that I have used several times over the years has set one up for his CFI business purposes. Kinda curious if it would protect his assets.
Click to expand...
Nope. Maybe for business/tax reasons, but it's zero protection in a suit.

Maybe put the big assets all in the wife's name. Some states protect retirement accounts and homes from judgements.
 
Most states don't recognize a tort for educational malpractice. There was a relatively recent case involving a Cirrus accident where the claims against the CFI were dismissed based on that theory. And if you dig around, you'll find a summary of state laws that generally indicate that a CFI can't be sued for negligent instruction.
 
If this is a serious question, you should ignore everything that's been written in this thread and contact an attorney licensed in your state.
 
Brad Z said:
And by extension, a trial lawyer isn't going to pursue a lawsuit against a party with a strong defense.
Click to expand...

Ha, you haven't met many plaintiff's lawyers, have you? They generally don't care if you have a good defense, they only care if you have cash. Many (though certainly not all) tort suits are pure shakedowns; the facts of the case don't matter, it's just about making it so time consuming and expensive for the defendant that they throw some settlement money your way.
 
Brad Z said:
And by extension, a trial lawyer isn't going to pursue a lawsuit against a party with a strong defense.
Click to expand...
And how much is it going to cost a defendant to prove that?
 
Brad Z said:
I think it's pretty rare for a CFI to get sued. The best defense for a CFI from being sued is to document, document, document. There are a lot of things that worry me as a CFI; getting sued is not one of them.
Click to expand...

I agree with Brad Z. It's really all a CFI can do. I had a sheet I made up that listed what we had flown (maneuvers etc), any ground instruction, deficiencies on the lesson, and assignment for studying for the next lesson. Student and myself signed, ran a copy for student. Was a PITA but I felt it showed what I had done as a CFI. Only other thing a CFI can do to really protect is not instruct I guess.

I do have an umbrella policy which I'm sure a lawyer would go after, but they'd have to fight the insurance company on that.
 
paflyer said:
And how much is it going to cost a defendant to prove that?
Click to expand...

Exactly. While a CFI may not have any real liability due to states not recognizing educational malpractice/instructional negligence, you still have to defend if you get sued. The best benefit of CFI insurance isn't the actual liability protection (because you may not have any actual liability), but it's the duty to defend, which means the insurance company will pay your lawyer. A CFI with a rock-solid defense against a claim could go bankrupt from legal fees incurred in trying to get the suit dismissed.
 
Lindberg said:
If this is a serious question, you should ignore everything that's been written in this thread and contact an attorney licensed in your state.
Click to expand...
That's always the real answer because liability is a matter of state law. But for general information, two items:
  1. An LLC or corporate entity will not insulate a CFI from liability for his or her own negligent actions in any state of the US I am aware of. It's is probably the most commonly misunderstood things about entities like corporations and LLCs that provide liability protection. Properly done, they provide a good degree of contract liability and can, depending on state law, even some degree of asset protection. But they are not designed or intended to protect us from our own negligent actions (or other things the law calls "torts"). It doesn't take "piercing the corporate veil." There's no "veil" to pierce in that case. If we drive a company truck and get in an accident, yes the company is liable, but so are we.
  2. One might want to read Flight Instructor Negligence: Does This Tiger Have A Tail ? (pdf link).

    It was written 20 years ago but since then, but it's still pretty accurate about the state of the law. In those 20 years, there have been several cases around the country holding that there is no such thing as instructional malpractice liability (including a wel-publicized one against Cirrus in 2012) , as well as a few going the other way. . The problem is that liability is generally a matter of state law, so some states will say yea while others will say nay, while still others have not even answered the question.

My strictly personal view as an instructor, not as a lawyer, is that, at least with primary students, I expect I will be held liable if I am in the airplane but that my risk is acceptably low if I am not. YMMV.
 
Funny thing, years ago flew right seat on a trial lawyer's Cheyenne II and he didn't want his full time pilot (my old CFI) doing any instruction. Couldn't request that of myself as I wasn't full time.
 
midlifeflyer said:
My strictly personal view as an instructor, not as a lawyer, is that, at least with primary students, I expect I will be held liable if I am in the airplane but that my risk is acceptably low if I am not. YMMV.
Click to expand...

This is the same way I view it. If I'm in the plane at a control station, I expect that I'll be held at least partially responsible if an accident happens. If I'm not in the plane, the risk is low enough that I don't given it a second thought. FWIW, I don't carry CFI insurance (though I don't give a lot of instruction anyway).
 
bradg33 said:
This is the same way I view it. If I'm in the plane at a control station, I expect that I'll be held at least partially responsible if an accident happens. If I'm not in the plane, the risk is low enough that I don't given it a second thought. FWIW, I don't carry CFI insurance (though I don't give a lot of instruction anyway).
Click to expand...
Where we are different is that I do carry CFI insurance. In my case, it's just an inexpensive rider on a non-owned aircraft policy. The expensive part of a CFI policy is hull damage, not injury liability protection. Limits are low but I figure enough to pay for a decent defense by experts if not much else.
 
midlifeflyer said:
Where we are different is that I do carry CFI insurance. In my case, it's just an inexpensive rider on a non-owned aircraft policy. The expensive part of a CFI policy is hull damage, not injury liability protection. Limits are low but I figure enough to pay for a decent defense by experts if not much else.
Click to expand...

I'm certainly not saying it's "smart" to skip the CFI insurance, just a personal risk assessment/choice. If I were to start giving instruction outside my close circle of friends, I'd likely pick up a cheap liability policy.
 
mscard88 said:
I agree with Brad Z. It's really all a CFI can do. I had a sheet I made up that listed what we had flown (maneuvers etc), any ground instruction, deficiencies on the lesson, and assignment for studying for the next lesson. Student and myself signed, ran a copy for student. Was a PITA but I felt it showed what I had done as a CFI. Only other thing a CFI can do to really protect is not instruct I guess.

I do have an umbrella policy which I'm sure a lawyer would go after, but they'd have to fight the insurance company on that.
Click to expand...
A personal umbrella is going to have exclusions for commercial activities and aviation.
 
paflyer said:
A personal umbrella is going to have exclusions for commercial activities and aviation.
Click to expand...
Yep, my umbrella policy covers NOTHING with regard to aviation (commercial or personal). You find one that does, let me know.,
 
Lindberg said:
If this is a serious question, you should ignore everything that's been written in this thread and contact an attorney licensed in your state.
Click to expand...

Must not discuss anything here. Must be quiet. No discussion allowed.
 
I am a trial lawyer but do not practice in aviation. If you are providing instruction or any other service as a business, in most states you should be able to protect your personal assets by setting up a separate legal entity such as an LLC, S Corp, etc. There are ways to "pierce the corporate veil" and go after a principal's personal assets, but the specific jurisprudence on that will vary by state, and a lawyer should be able to advise you on how to best avoid that. The general concept is that if the corporate entity is a legitimate business, the principals will be protected from personal liability.
 
TylerSC said:
I am a trial lawyer but do not practice in aviation. If you are providing instruction or any other service as a business, in most states you should be able to protect your personal assets by setting up a separate legal entity such as an LLC, S Corp, etc. There are ways to "pierce the corporate veil" and go after a principal's personal assets, but the specific jurisprudence on that will vary by state, and a lawyer should be able to advise you on how to best avoid that. The general concept is that if the corporate entity is a legitimate business, the principals will be protected from personal liability.
Click to expand...

The corporate veil may protect the principles if an EMPLOYEE of the business commits a tort (or from contract liability), but if you're the CFI giving instruction, the corporate form won't insulate you from your own personal negligence. You'll get sued in your individual capacity based on your own actions.
 
bradg33 said:
The corporate veil may protect the principles if an EMPLOYEE of the business commits a tort (or from contract liability), but if you're the CFI giving instruction, the corporate form won't insulate you from your own personal negligence. You'll get sued in your individual capacity based on your own actions.
Click to expand...

I beg to differ, as long as it is a legitimate business venture and not just a pure attempt to avoid liability. The specific rules would vary by jurisdiction.

https://www.law.cornell.edu/wex/piercing_the_corporate_veil#
 
midlifeflyer said:
That's always the real answer because liability is a matter of state law. But for general information, two items:
  1. An LLC or corporate entity will not insulate a CFI from liability for his or her own negligent actions in any state of the US I am aware of. It's is probably the most commonly misunderstood things about entities like corporations and LLCs that provide liability protection. Properly done, they provide a good degree of contract liability and can, depending on state law, even some degree of asset protection. But they are not designed or intended to protect us from our own negligent actions (or other things the law calls "torts"). It doesn't take "piercing the corporate veil." There's no "veil" to pierce in that case. If we drive a company truck and get in an accident, yes the company is liable, but so are we.
  2. One might want to read Flight Instructor Negligence: Does This Tiger Have A Tail ? (pdf link).

    It was written 20 years ago but since then, but it's still pretty accurate about the state of the law. In those 20 years, there have been several cases around the country holding that there is no such thing as instructional malpractice liability (including a wel-publicized one against Cirrus in 2012) , as well as a few going the other way. . The problem is that liability is generally a matter of state law, so some states will say yea while others will say nay, while still others have not even answered the question.

My strictly personal view as an instructor, not as a lawyer, is that, at least with primary students, I expect I will be held liable if I am in the airplane but that my risk is acceptably low if I am not. YMMV.
Click to expand...
I don't disagree with anything above, but would add that being potentially liable does not mean that you cannot protect your assets. In some states, you can be quite wealthy and nevertheless be virtually judgment proof.
 
Lindberg said:
If this is a serious question, you should ignore everything that's been written in this thread and contact an attorney licensed in your state.
Click to expand...

Let'sgoflying! said:
Must not discuss anything here. Must be quiet. No discussion allowed.
Click to expand...
Well, I qualified my response. If the OP wants speculation with no basis in legal training or experience from sources of unknown reliability, then by all means, he should ask legal questions on a pilot forum. But if he wants actual legal advice, he should probably ask someone who's actually qualified to give it.
 
Last edited:
TylerSC said:
I beg to differ, as long as it is a legitimate business venture and not just a pure attempt to avoid liability. The specific rules would vary by jurisdiction.

https://www.law.cornell.edu/wex/piercing_the_corporate_veil#
Click to expand...

An individual, whether an employee of an LLC or not, is (generally) always liable for torts he or she commits, even if they're committed during the course of employment. So providing instruction through an LLC will NOT protect the CFI from suits for negligence allegedly committed by the CFI. There's no need to "pierce" any veil, as the corporate veil simply provides no protection for individual torts. There may be a little variation from this state-by-state, but that's general treatise law.

"A corporate officer's personal liability for torts he personally participated in rests on the notion that an individual is responsible for his own tortious acts; thus, the focus in this type of liability is whether the individual personally participated in a tort. Holding a corporate officer or owner personally liable for her own tortious conduct is a distinct and separate claim from piercing the corporate veil; it is only where the evidence is insufficient to pierce the corporate veil that the liability of the corporate officers for a tort committed by the corporation is dependent upon the separate evidence of direct participation in the tort." 36 Causes of Action 2d 441 (Originally published in 2008)
 
You must log in or register to reply here.
Back
Top