Neither A Lender Nor A Borrower Be ... Non-Owner Pilots And Liability Insurance

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If you borrow a friend's car, you're covered by their car insurance. But if you borrow their plane, you are probably not covered by their aircraft liability insurance. Same if you rent a plane from an FBO. Are you prepared to pay out tens or even hundreds of thousands of dollars if there is an accident? AVweb's Kevin Garrison looks at insurance for those who don't own the plane they are flying.

Insurance

What a great day to be flying! The sun is shining and -- with the exception of the low-level gusty winds that a clear, cold, winter day can provide -- it is invigorating to be in the air. You and your neighbor, who has been bugging you to take him flying, are really enjoying your day.

And what an airplane! The single-engine airplane you recently checked out in at the local FBO has it all: modern instruments, good handling qualities, and that great "new-airplane smell" including the scent of leather seats.

To paraphrase a great line from the movie Hotshots, "You're in an airplane; what could go wrong?"

What Could Go Wrong

You are doing a few touch and goes before putting your rented bird on the ramp for the day. A sudden, gusty crosswind catches you and you dig a wingtip into the ground and skid into a power pole, causing damage to the aircraft that will cost over $20,000 to repair and resulting in a six-hour power outage for two-hundred suburban homes and businesses.

Your passenger is injured and requires medical care, including physical therapy. He is not happy and sues you and the FBO for negligence.

Your "friendly neighborhood FBO" turns out to be a little less than friendly when they also sue you for financial damages resulting from loss of use of the airplane while it is being repaired. They also claim a loss of value for the airplane: Because it was damaged, its value will be less when the FBO tries to sell it or trade it in.

Finally, various people in the neighborhood are suing you because the loss of electricity led to damages to their property, including tons of spoiled food in non-functioning freezers.

If you think the scene I set for you is pure fiction, similar events have happened to pilots in the past and are likely happening today.

You Are Covered, Right?

Most non-owner pilots are under the assumption that when they rent or borrow an insured aircraft from either an FBO or a buddy, the insurance carried by the FBO or buddy covers them. They couldn't be more wrong. With very few exceptions, the insurance carried by the owner of the aircraft covers the owner, not a renter or borrower.

Most standard insurance policies include a subrogation clause. In exchange for paying the claim to its policyholder, the insurance company assumes the insured's right to recovery against the negligent pilot. In other words, you can be held responsible for all of the costs of your little mishap, including the expense of hiring a lawyer to represent you.

The insurance company, in this case, represents the FBO, not you; and after paying the FBO, they will come to you for the money. You never were covered -- the FBO was.

Many non-owner pilots who rent aircraft either assume, or are told by the owner, that the FBO carries insurance coverage that covers them. In some cases this may be true, but how can you be sure? Word of mouth from the operators of the aircraft or FBO is not enough. Even if they offer to let you read their policy, which is unlikely, do you have the expertise to understand it?

Insurance-coverage specifics are a mystery to many pilots, and most FBO managers are not lawyers or insurance professionals. In many cases they will tell you that if you rent you are only responsible for whatever hull deductible is in force. While this may be true, in many accidents the hull damage is the least thing you have to worry about and their word won't protect you from subrogation should their insurer choose that option.

Not Your Fault? Think Again

Even if the accident is not your fault, you are financially under the gun. Let's say you are on short final and the engine simply quits, leading to a landing short of the runway that results in damage and injury. It isn't your fault -- the engine quit -- but you may still be liable for the damage and your medical treatment.

The physical injuries to your passengers or any bystanders to your mishap may be placed at your financial doorstep as well. In today's litigious society, it is usually juries, not impartial judges, who determine damages when it comes to people being injured in "those little airplanes." You can expect non-pilots, who have learned from movies and televisions to expect the worst out of those "little Piper Cub airplanes," to be on the jury deciding how much money you owe for damages, both actual and punitive.

Who Needs Non-Owned Aircraft Liability Protection?

Even if you are only a passenger in these cases and aren't covered by the aircraft owner's policy or elsewhere, you need some protection. Here is a list of non-owned aircraft exposures:

  1. A person or organization that charters an aircraft (pilot furnished by the aircraft owner), whether for personal or for business use.

  2. A pilot who rents an aircraft from the aircraft owner (e.g., from a Fixed Base Operator).

  3. A student pilot taking instruction in someone else's aircraft.

  4. A CFI providing flight instruction in a customer's aircraft.

  5. A pilot who borrows an aircraft, even though an approved pilot.

  6. A mechanic who is test-flying a customer's aircraft.

  7. Someone who is ferrying or delivering an aircraft for someone else.

  8. A Fixed Base Operator providing flight instruction in a customer's aircraft.

  9. An independent professional contract pilot operating an owner's aircraft.

  10. A person who is operating the aircraft when a loss occurs, even if accompanied by the aircraft owner.

In terms of your risk exposure, there is very little -- if any -- difference between being a renter of an aircraft or just someone who borrowed a friendís. Your liability all depends on the specific coverage for the specific aircraft.

Even your best friend can become your former best friend when it comes to tens of thousands of dollars of loss. Your friend would have to secure a "waiver of subrogation endorsement" on his or her insurance policy. This waiver would mean that the insurance company would forgo its right to sue you in the event of a loss. This is a very rarely used clause and is very expensive when added to a policy.

From the above list youíll see that even if you are taking flight instruction from a friend in that friendís aircraft you might be exposed.

Who Is On Your Side?

Make no mistake: The other guys -- the FBO, your passengers, and the insurance company -- will have experienced lawyers to represent their interest. Who represents you?

In this kind of case it will be whomever you can hire and afford. It is likely that you will not know which attorneys are adept at aviation and tort law; and you will, at best, spend a lot of time and treasure finding representation.

How Big Is Your Risk Exposure?

Your risk depends on how much you own and how much income you make now and in the future. It can be that serious. If you are found personally liable, the sky is the limit on damages. It is a jungle out there and you need somebody on your side who you can depend on.

The Good News -- Enter the Insurer

Non-owned aircraft insurance coverage is both available and affordable. Policies written for non-commercial operations can give you liability coverage and are offered by various aviation insurance companies including Avemco, CS&A, and others.

Coverage limits of a million dollars per accident, with $10,000 aircraft damage liability, can be purchased through Avemco, for example, for $410 a year. Coverage limits and premiums vary between companies and are subject to change. We'll include links to the insurance companies at the end of this article so you can comparison-shop their sites and get current information.

Why Didn't My FBO Tell Me About This?

Like their customers, many FBOs are not aware that the problem exists. If they do know it exists, they are not usually eager to talk about it out of fear that the cost of non-owned insurance coverage might scare the customer away.

The insurance companies themselves, until recently, haven't made non-owned insurance a priority. This is based, in part, on the way that most aviation insurance is sold. Independent agents, who are paid by commissions from the insurance companies, are not enthusiastic in selling this coverage because of the low commissions the policies generate for them.

The one exception to that rule is Avemco insurance. According to Avemco's Lauretta Godbey, her company is the only direct writer of aviation insurance. Because of this, Avemco has undertaken a strong effort to educate the general aviation community about the need for this kind of insurance.

AOPA and EAA offer insurance in these areas as well and might be worth a look. For example, EAA's insurance covers rented experimental aircraft. On the other hand, Avemco's plan includes $1,000 no-fault hull coverage if the aircraft damage liability option is purchased, and they cover Civil Air Patrol missions at no extra charge. Like any other product on the market, for specific information on various policy options it is best to contact the companies themselves.

So You Say You Are An Instructor?

Many flight instructors operating in the United States do so as a sort of "diplomat without portfolio," or freelance. They do so for pay rates that could be easily beaten by an hourly gig at the local Wal-Mart, and they do this because they love flying and teaching.

Almost all established flight schools have liability coverage for their instructors built into their policies, but most have no coverage if you go "off the reservation" and instruct in aircraft not owned and operated by the school. Even if you are an employee of the flight school, it is likely that if you instruct in "that Baron a student owns and wants to work on instrument approaches," you are doing so without insurance coverage.

The liability here can be enormous. Not only are you liable for what happens during the flight, you may be confronted years later when your student has a mishap and blames your instructional technique and content.

A freelance flight instructor who flies in the student's aircraft is really hanging it out there in terms of liability. That little $15/hour instructing gig you had could lead to financial ruin without proper coverage.

It isn't exactly cheap, but CFI insurance for liability is also available though aviation insurance companies.

This coverage handles the financial aspects of an instructing mishap, but remember that your licenses and ratings are in jeopardy as well. If you have another flying job -- such as a gig with an airline -- an FAA enforcement action based on an instructional accident could affect your other ratings.

What Could Go Right?

Meanwhile, back at our little rental-aircraft landing accident with injuries, we have changed one variable: You now have non-owner liability insurance in force.

After the accident, one of the first calls you make is to your insurance company. They provide professional legal representation at no cost to you. The damage to the aircraft is covered, the medical costs for you and your passenger are covered, and your insurance company negotiates any subrogation claims from the FBO. Other claims -- including the neighborhood's spoiled food and loss-of-use claims from the FBO -- are handled by your insurer, not you.

It is good to have professional legal and insurance people on your side in a case like this; and because you have non-owners liability coverage, you have their help and expertise.

If you rent or borrow an aircraft, your exposure to liability is both real and confusing. Relying on the FBO's insurance or your friend's coverage can be foolish and costly.

Let's Talk ...

You need this coverage, pure and simple. How to get this insurance and how much of it you need can be less clear. The best way to get the information you need is to discuss the subject with a professional insurance expert. The insurance professional can discuss your needs and help you come up with adequate affordable coverage. Other insurance issues, like "liability coverage for damage to non-owned aircraft" and insurance for professional pilots in various situations can be best discussed with an experienced agent.

A good starting point would be accessing these and other aviation insurance Web sites and later phone contact with their agents.

Avemco Insurance
877-359-2836

AOPA Insurance
800-622-2672

EAA Insurance
Falcon Insurance Agency, Inc.
866-647-4322

CS&A Insurance
800-761-2557


Want to read more about aviation insurance issues? Check out AVweb's Insurance section.