Liability?

Oldmanb777

Oldmanb777

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Oldmanb777
For those of you in partnerships, how do you manage liability? In the past I had only one partner and they were well qualified, and well insured. Only one we put into a leaseback (major mistake) and that plane got wrecked. So now, I don't need a plane, can't justify a plane. I just want to do some $100 burgers. I could afford to own, but probably would not get enough use to justify it. I recently heard of a possibility. I don't think it works for me. But as a learning experience, I want to understand how liability works, and how you deal with it. That possibility seemed to me to be asking for trouble. So 5 pilots as owners, most fairly low time, less than 300 hrs, with a couple less that 200. Plane flew well under 200 hours last year and about the same previous year. So average pilot flew less than 40 hrs per yr. I guess that's enough to sort of stay proficient, but barely. I'm an A&P but would not be signing anything off on this. But say one of the partners had a mishap, the lawyers would say the last pilot flying the plane did something to the plane that ultimately caused the crash. Or the last three pilots didn't report or have fixed the widget that caused the mishap. Everyone gets sued. I have done a few professional witness gigs in my day, so maybe I'm paranoid. But still, how do you manage that risk as a partnership?
 
Avoid it (partnership that is).

I have yet to meet an owner who needs a plane, or are able to justify a plane.
 
Put the airplane in an LLC, and have a rock solid operating agreement. Pay a lawyer to look over said operating agreement.
 
In the situation of co-owning a plane and worrying about one owner’s bad piloting hurting the plane and leading to another owner’s crash, I would be much more concerned about being the guy in the crash rather than the guy who gets sued for it.
 
Groundpounder said:
Put the airplane in an LLC, and have a rock solid operating agreement. Pay a lawyer to look over said operating agreement.
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If you are going to get a lawyer suggest you get an AVIATION Attorney.

Not just an atty that flies but one who actually handles aviation cases.

AOPA will provide a listing.

AOPA members also get some type of deal on hours and fees.
 
midlifeflyer said:
...and advise to what extent it will protect the members.
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...after you tell the lawyer the specific liability concerns you have. Most lawyers will hear “Will having an LLC protect me from liability if one of the other owners crashes our plane?” and not even think about the unspoken “...and someone claims the crash was because I had a hard landing the week before or something like that?”
 
I don't think you can buy enough insurance. and the more you have, insurance or assets, the bigger target you become. And insurance is a business, they won't pay if they can figure out a way not to. And protecting you is the last thing they want to do. They only want to reduce their own liability or financial risk. So possible to actually use an LLC or rother vehcile to reduce your exposure. Probably the best is to have all your assets in a blind trust. I have not gone that route.
 
I would love to hear from some of the aviation knowledgeable attorneys and maybe the insurance knowledgeable posters. I've always assumed that the main value of liability insurance was having a large pot of money to offer a settlement as a timely and sure alternative to a lawsuit. Also having the insurance company's legal team conducting the process.
 
Insurance...gives you Lawyers that work in the Aviation arena in case of a loss. I could not begin to estimate the legal fees associated with four lawsuits involved with the loss of my Arrow ( Owner leased to to an LLC) that are currently ongoing.
 
I'm in claims. Set it up in an LLC and insure it, you'll be fine. If there is a mechanical issue that caused a crash, the mechanic is exposed, not the pilot who missed it. And if the pilots are part of the LLC, the LLC can't sue themselves. As for "pilots did something to the plane", well that doesn't hold up in a court of law. Plaintiff (party suing) has burden of proof. It would be difficult to prove that a pilot who missed low oil pressure was negligent. Think end game, which is a jury trial. How would a jury rule if told the facts? Because a defense lawyer will say something like "how many of you kept driving after the engine light of your car came on?". Boom, case over. So, real world- LLC, insure, and you're good.
 
Given the growth of costs, I would venture to say most people are underinsured to some degree. Just think about the average cost of a car today and compare it to your automobile policy limits. And then consider the number of vehicles out there on the road that are well north of a $100K. If you’re only carrying the minimums mandated by your state, you are underinsured.
Some are aware of how much they are underinsured and don’t really care; others have no idea. Still some believe their liability ends once they’ve reached policy limits. Uh - no - that’s not how it works. If you want some illumination, visit with an economic expert who can calculate damages in a typical personal injury case. The probable cost profiles they develop using a Monte Carlo type of analysis, are sobering and easily get into 7 figures with wage loss, medical costs, etc. And I worked with defense economic loss experts and their reports were sometimes frightening so you can imagine what a plaintiffs looks like. So if you are not looking over your policies every couple of years, you may be falling further into the world of self-insurance.
 
Oldmanb777 said:
I don't think you can buy enough insurance. and the more you have, insurance or assets, the bigger target you become. And insurance is a business, they won't pay if they can figure out a way not to. And protecting you is the last thing they want to do. They only want to reduce their own liability or financial risk. So possible to actually use an LLC or rother vehcile to reduce your exposure. Probably the best is to have all your assets in a blind trust. I have not gone that route.
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Not my experience. Never had an aviation accident or claim, but in every claim I've ever filed (home & auto), the insurance company did their job and paid the claim. Can you come up with examples of where an aviation insurance underwriter (which is what we're talking about here) has dodged paying a legitimate claim?
 
Oldmanb777 said:
I was hoping for just that sort of insight.
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You will only receive anecdotal and very generalized advice on a public forum. Best you will hear is that the liability exposure for being held liable for another LLC member's crash because of your hard landing is on a very low rung of the rusk factor ladder. Sound like the liability I might pick up as a simple renter pilot.

But you mentioned paranoia.
 
iamtheari said:
...after you tell the lawyer the specific liability concerns you have. Most lawyers will hear “Will having an LLC protect me from liability if one of the other owners crashes our plane?” and not even think about the unspoken “...and someone claims the crash was because I had a hard landing the week before or something like that?”
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I hope not. The limits of liability protection is a major part of any discussion I have ever had with a client about what they hoped to accomplish by setting up a limited liability entity (standard question). I am not at all unusual.
 
Yes I am a bit paranoid. I have done a few professional witness cases. I was always amazed at how the lawyers would try to draw a liability link to others. I'm sure I'm underinsured, although I carry more than most. Same reasons I don't loan my car, to ANYBODY. I don't want to share responsibility when I'm not in control of the situation. So one of the owners takes the neighbor kid for an airplane ride. Crashes and a wrongful death suit emerges. The LLC gets sued, but also all the owners and anybody who has some financial assets to go after. Anyone who ever had contact with the pilot, or the airplane.
So will an LLC protect the induvial owners and their assets?
With our Viking, the insurance payed us off, then went after the renter, and the CFI who checked him out in it. And they wanted to ask a lot of questions of me (The A&P). That didn't get far, it was ridiculous, but they wanted to. Totally pilot decision making that caused the crash. No fatalities. So that was only a relatively minor hull claim.
 
We had a major fire in our area this last fall. 28 houses totally destroyed, just in our neighborhood. It's becoming very interesting to see how the insurance industry is dealing with it.
 
Hangar fires can be a concern; particularly if it originates in your unit.

Stored cars, atv’s , and lawn mowers can be the source.

Often folks get paid off by the Insurance Co. rather quickly.

They in turn want their money back from the folks that were “ negligent”.

That can be the fbo or another tenant or ?


It’s not fun calling someone to tell them their aircraft is destroyed.

In some states the fbo’s insurance will not cover you.
 
Oldmanb777 said:
So will an LLC protect the induvial owners and their assets?
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It kind of depends. In the case of a multiple owner airplane in an LLC, the LLC structure can provide liability protection for a partner IF the other owner crashes the airplane and it is determined to be their fault. But, if the issue is due to something like maintenance, and both owners contribute to maintaining the airplane, then they can still go after the other partner.

Also, an LLC provides no protection to you if you are the accident pilot.
 
Oldmanb777 said:
So will an LLC protect the induvial owners and their assets?
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Absolutely? 100% of the time? Regardless of the factual situation, what the "accused" member actually did, the manner in which the members treated the company, the ease or difficulty of proof, the costs of proving the case, etc, etc, ect, etc? No.

Truth is, liability paranoia is very individual. I know pilots who will never take a passenger up who is not an immediate family member. I know other pilots who love taking passengers.
 
Yes, I'm paranoid more than most. I just try to plan for the unexpected and protect myself. Like good flight planning, plan for the worst, hope for the best, but have an alternate plan when the SH*t hits the fan. As I look into possible ownership, I want to get educated on what not to do and what to look out for. I know I can't plan for all things. If i did, i never would have done what I've done in life. But a lb of prevention is always a good thing. Partnership is sorta like marriage, some work, some don't. I have seen more that don't. Sharing liability with some people is going to end in disaster. No way around that. Being up on the liability part is probably a good place to start. Maybe I just need to be sole owner and not deal with a partner. Same with rentals. You know they try to cover themselves, but no way they will cover you. In fact they will be part of the team going after you if you bend some metal.
 
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