Liability, insurance, owner maintenance

gkainz

gkainz

Final Approach
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Greg Kainz
Something that's been running around my head for a while now ... what are the thoughts (or facts ... oh wait - this is POA :) ) of personal liability for owner maintenance in a partnership situation, where any one of the owner/partners performs allowed owner maintenance and "something goes wrong" while another owner/partner is flying?

What does the typical aircraft insurance cover in this case? Anything beyond the typical damages, personal injury, et al to the aircraft and occupants?

Is there another type of insurance that covers that personal liability? Or is it hopefully covered in a well defined partnership agreement with hold harmless clauses?
 
On top of our airplane policy we have a personal liability umbrella policy. It covers liability beyond your vehicle policy (airplane, cars, whatever) and any other thing people might sue you for. Our attorney told us jury awards are getting large.
 
If you are both named pilots, wouldn't that cover it. Unless the insurance subrogates to the maintainer.?
 
Most umbrellas I have seen have an Aviation exclusion...still looking for one that does not
 
Never heard of a insurance company caring about owner mx
As long as it’s per the FAR seems like they are all good with it.
 
gkainz said:
personal liability for owner maintenance in a partnership situation
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Too many unknowns to answer. Is this pertaining to liability involving your partnership agreement or liability as referenced in your insurance policy?
 
I’m not really sure, exactly. Was thinking “I do an oil change. Partner flies the plane and the engine quits over the worst pass in the Rockies. Partner dies. Partner’s brother in law is a lawyer and sues me for negligence in the oil change.”
How am I covered? Sounds like maybe umbrella liability insurance mentioned above could be the answer?
 
Warlock said:
Most umbrellas I have seen have an Aviation exclusion...still looking for one that does not
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Well carp, I better go read it again. No matter, we sold our plane anyway, but if it doesn't have one I'll let you know.
 
gkainz said:
How am I covered?
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Well... it depends. And there's no simple answer either as liability can cross several different paths, even with you're oil change example. Since you're unsure of where the liability exists, I suggest getting educated on the topic.

If you're an AOPA member, call the pilot info center to start. They can get you started with a solid foundation on this topic. Next would be insurance carrier. However, at some point, in order to get the correct solutions for your specific situation, a trip to an aviation attorney will be necessary. Each state has their own civil liability and aviation liability laws so its important to cover all aspects.

Once you have the necessary foundation you can then determine which liabilities you want to cover.

But here are a couple subjects/examples to toss into your conversations:
You mentioned "partnership" in your original post. While you may have used it in a generic sense, a lot of aircraft owners use a "co-ownership" agreement. It's different from a "partnership" on several levels and much less complex.

There is also a regulatory liability. 91.403 puts the responsibility right on the owner or operator regardless of how many there are. And you don't need an accident to see how this part works.

As to the "umbrella" policy, I don't recall seeing that term used in aviation circles. I've seen "excess" and "additional insured" used. I do know an "excess" policy is different than an "umbrella" policy though.

In very general terms, liability exposure exists between multiple owners on a business level (paying the bills), negligence level (paying the damages), and regulatory level (paying the fines). Only you can determine which levels need what protection with each co-owner. There is no single answer for each level or each owner.

Some people think its overkill to get this deep into it. And it might seem that way, until you're in the middle of a liability battle. When there is only one owner it's simple. When there's two...
 
gkainz said:
I’m not really sure, exactly. Was thinking “I do an oil change. Partner flies the plane and the engine quits over the worst pass in the Rockies. Partner dies. Partner’s brother in law is a lawyer and sues me for negligence in the oil change.”
How am I covered? Sounds like maybe umbrella liability insurance mentioned above could be the answer?
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Short answer: you need to read your aircraft insurance policy very, very closely. I actually started to write "you're not covered," but then I decided to read my own policy. On my first pass, I didn't see anything that expressly and clearly excluded liability related to improper maintenance. I need to read it more closely, though. In any event, you likely have some level of exposure if you're performing maintenance on the airplane and someone thinks you performed it negligently. No excess or umbrella policy is going to offer you any coverage there. Your only hope is that your aircraft owner's policy is broad enough to cover it, or if you go buy a mechanic's insurance policy (which I assume you can't get if you aren't a licensed A&P).
 
You change oil. Engine fails. Are the two related? Probably not. Was the airplane airworthy when it was pre-flighted... like was ther oil in it and not a puddle of oil under it? Then the pilot took the responsibility for the flight. If you changed a mag and forgot to secure it? Then you’re in over your head, but an oil change?
 
bradg33 said:
Short answer: you need to read your aircraft insurance policy very, very closely. I actually started to write "you're not covered," but then I decided to read my own policy. On my first pass, I didn't see anything that expressly and clearly excluded liability related to improper maintenance. I need to read it more closely, though. In any event, you likely have some level of exposure if you're performing maintenance on the airplane and someone thinks you performed it negligently. No excess or umbrella policy is going to offer you any coverage there. Your only hope is that your aircraft owner's policy is broad enough to cover it, or if you go buy a mechanic's insurance policy (which I assume you can't get if you aren't a licensed A&P).
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That's part of the thought process that started my questions. Our club A&P monitors pilot maintenance actions before we're "blessed" to perform them, to ensure they're performed IAW with club standards. So, I suppose I could show "trained" and "demonstrated the action IAW commonly accepted maintenance practices" in case of an adverse event?

Oh, and to clarify my (mis?) use of partner/owner/co-owner ... our club is a corporation. Each member owns 1 share in the corporation. So, that makes us co-owners? Which is different, apparently, than "partner" as implied in posts above. Does that make a difference?

I do intend to have calls with AOPA and review our policy for clarification.
 
Stewartb said:
You change oil. Engine fails. Are the two related? Probably not. Was the airplane airworthy when it was pre-flighted... like was ther oil in it and not a puddle of oil under it? Then the pilot took the responsibility for the flight. If you changed a mag and forgot to secure it? Then you’re in over your head, but an oil change?
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The oil change scenario was just an off-the-cuff example. Fill in the blank with any authorized pilot maintenance action. And this is really just a mental "what if" game at this point, but could have real world implications, I suppose.
 
Stewartb said:
You change oil. Engine fails. Are the two related? Probably not. Was the airplane airworthy when it was pre-flighted... like was ther oil in it and not a puddle of oil under it? Then the pilot took the responsibility for the flight. If you changed a mag and forgot to secure it? Then you’re in over your head, but an oil change?
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Problem is, you're thinking like a regular person and not a personal injury attorney. A PI attorney is going to place blame wherever he/she thinks money can be found. Aircraft accidents that involve injury or death tend to create a LOT of litigation against nearly everyone involved. OP's concerns are legitimate.
 
gkainz said:
That's part of the thought process that started my questions. Our club A&P monitors pilot maintenance actions before we're "blessed" to perform them, to ensure they're performed IAW with club standards. So, I suppose I could show "trained" and "demonstrated the action IAW commonly accepted maintenance practices" in case of an adverse event?

Oh, and to clarify my (mis?) use of partner/owner/co-owner ... our club is a corporation. Each member owns 1 share in the corporation. So, that makes us co-owners? Which is different, apparently, than "partner" as implied in posts above. Does that make a difference?

I do intend to have calls with AOPA and review our policy for clarification.
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People (especially non-lawyers) commonly refer to any kind of co-ownership arrangement as a "partnership," whether it's legally one or not. In your case, you're not co-owners or partners, you're shareholders in a corporation that owns an airplane and by virtue of being a shareholder you're granted rights to use the airplane. You do not own any part of the airplane; you just own a share in a corporation that owns a plane. Again, largely semantics but there are some legal distinctions that can be important in the event of an accident. That said, in certain situations holding yourself out as a "partner" could have some legal implications, but I'm not sure airplane ownership is one of those situations.
 
Our ByLaws state:

"7 . Member Ownership: Excepting the dissolution provisions of these bylaws, Capital Share ownership secures the rights of membership and warrants the ownership of 1/45th (one forty-fifth) of this corporation and its assets"

I would read that (and its assets) to say I own 1/45 of each aircraft ... yes?
 
gkainz said:
Our ByLaws state:

"7 . Member Ownership: Excepting the dissolution provisions of these bylaws, Capital Share ownership secures the rights of membership and warrants the ownership of 1/45th (one forty-fifth) of this corporation and its assets"

I would read that (and its assets) to say I own 1/45 of each aircraft ... yes?
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The bylaws may say that, but I'm not sure those actually override basic tenants of corporation law. Bylaws can say all kinds of nonsense that conflict with state law on corporations; sometimes they control, sometimes the law controls. But basic corporate law is that shareholders don't have a direct ownership interest in corporate assets. I haven't done the research, but I'd be surprised if bylaws can override that, esp. when the asset is titled in the corporation's name.
 
My understanding is the corporation will protect you from your co-owners mistakes and visa versa. When I owned a plane with a friend we formed an LLC for just that purpose. I nor he wanted to suffer for the others mistakes.
 
Thanks for that. Any suggestions on where I research the difference between Colorado basic corporate law and this bylaws clause? Unless it doesn't really matter?
 
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