It’s happened to you because it’s happened to every pilot: You wake up at 2 o’clock in the morning in a cold sweat, as the nightmare played out. You swerved while rolling out in a gusty crosswind. Suddenly you were heading toward a line of parked airplanes. You applied opposite rudder so hard you were sure that you’d put it through the firewall and turned the yoke all the way into the wind to keep the upwind wing down and take advantage of the drag of the down aileron. To your astonishment and relief, you got the airplane straightened out on the edge of the runway, missing a runway light and taxiway sign by the barest of margins.
Parade of Horribles
The nightmare presented a parade of horribles—you were still going fast; if you’d hit something the quick stop would have hurt or killed your passengers. There were people by those parked airplanes—you can vividly recall the wide “O” of their mouths and shocked eyes as they realized that you were going to hit them, and it was going to hurt. A lot. You were going to do something you had never done in your life, bend an airplane you were flying and maybe tear up others—an almost unendurable blow to your pride in the work you’d put into becoming a pilot.
You got up and padded into the kitchen for a drink of water, replaying the nightmare and thinking of the potential liability you would have incurred had it been real and you had hit people and airplanes and whether it could have potentially bankrupted you and put your family—who trust and rely on you—on the street.
Hoo boy, that’s a fun way to start an article. Makes a pilot want to turn on the gas and stick his head into the oven.
At this point we’ll fall back to the first rule of The Hitchhiker’s Guide to the Galaxy: Don’t Panic. You don’t need a gas oven—there are ways to mitigate the liability risks you face as a pilot when your flying day goes south and there are numerous ways to reduce the risk of having a flying day go south. We’ll look at those two subjects in order.
At the risk of creating an insomnia cure, we’ll start with the basics when it comes to the risk you face when it’s your hot, sweaty hands on the yoke and things come to a stop in a cloud of dust.
Liability Law
As American pilots who have aircraft accidents, we’re subject to state (not federal) law as to whether we are liable to someone who claims to be hurt. The starting point is that if you injure someone (or someone else’s property) because you did it on purpose or weren’t careful enough, you are liable to pay for the damages she or he suffered.
That makes sense, but which state law? You’re from Utah. You have a passenger from Iowa and one from Texas. You’re on an IFR flight plan on a flight from Dayton, Ohio, to Portland, Maine. The airplane was manufactured in Kansas as were most of the avionics. Things go wonky and you crash on the very northwest corner of Rhode Island. Where are the survivors buried? Oops, sorry, bad old riddle—they’re survivors, no burial.
What is the appropriate state law to apply to the accident? Entire law school classes are dedicated to questions such as this—in fact many cases used as examples in those “Conflict of Laws” classes involve aircraft accidents. That sort of question is one reason why aircraft accident litigation can be staggeringly expensive.
Reduced to the essentials, you are at risk of hurting yourself, others and their stuff any time you operate an aircraft. If you hurt yourself because you disregarded the placard on your panel that said “Don’t do anything dumb,” your injuries and financial loss are your own punishment.
If you hurt someone else and/or their stuff, the only way for you to compensate them for their injuries and financial upset is—under our legal system—with money.
Insure it
That being the case, the most solid advice we can give to an aviator wanting to mitigate financial risk is to insure that risk. Yes, we’re going to have a hard look at the risk aviators face, the insurance available and how to make decisions as to what to do as an aviator with insurance available to you.
Before we go any further, we’ll mention that pilots who don’t want to buy insurance have attempted to dodge their potential responsibility to those they may injure by doing such things as incorporating themselves and their airplanes, hiding evidence of an accident and fleeing the area, among other schemes.
Incorporating yourself and/or your airplane just plain doesn’t work. If you are flying, you are personally responsible for injuries. Trying to hide evidence has a funny way of backfiring, plus, it’s hard to plan in advance where you are going to have a mishap. Fleeing the area has a low success rate; injured victims and law enforcement have long memories.
The reality is that if you have the resources to own and fly an airplane, one of the costs of doing so is insurance. We’ll say right here that should you have an accident and get sued, it’s quite likely that the cost of defending the lawsuit will exceed any settlement reached or a judgment that you’re ordered to pay. The dirty little secret of aviation insurance is that it is the thing that keeps you from going broke paying the cost to defend and resolve the suit.
Aviation Insurance 101
For an aircraft owner there are two types of insurance available—it’s almost certain that you’ll want both and they are generally sold as a package.
The first is liability insurance. If you messed up and caused personal injury and/or property damage, that is the insurance that pays.
The second is hull insurance—when aviation insurance was created a bit more than 100 years ago, it used a lot of marine insurance terms. Hull insurance covers the aircraft itself.
Unlike auto insurance, when you buy aircraft hull insurance, you and the insurance company agree on the value of your airplane. Then, if it is totaled in an accident or windstorm, the insurance company writes you a check for that number—no haggling.
That also means that if you upgrade your aircraft avionics or interior, or if it just appreciates, you need to be sure that you increase the value of the airplane each time you renew your insurance. Underinsuring the hull value because you didn’t pay attention to its increase in value or were trying to save money could cost you a great deal. For example, if your airplane is really worth $150,000 and you’ve only got it insured for $100,000, you are out a bunch if it is wrecked.
What you are going to pay for insurance depends on your age, ratings, overall experience, experience in type, history of accidents and FAR violations, recurrent training that you take, the value of the aircraft, how easy/expensive it is to repair, the accident rate of the type of aircraft, number of passengers the aircraft can carry and how the insurance underwriter (the person at the insurance company who sets insurance premiums) likes what you bring to the table and the type and age of the aircraft involved.
When you purchase aircraft insurance the usual procedure is to contact an aviation insurance broker. He or she collects information about you and your airplane, or airplane to be, and then goes into the insurance market (there are about 12 companies that write aviation insurance) and gets quotes from those that are interested in covering you.
You and your broker then discuss the quotes. If you don’t like them, it will almost certainly not help you to go to another broker and request more quotes—you will either get the same ones or you’ll aggravate the insurance company reps. It’s a very small world, and they may decline to cover you at all. Your broker’s fiduciary responsibility is to you, not to the insurance companies. She or he is trying to get the best deal for you and is obligated to be completely open with you and discuss your strengths and weaknesses when it comes to getting an insurance policy.
Your broker will also discuss the various quotes with you as regards the nature of the coverage provided by those companies’ policies. And here’s the big deal—unlike automobile insurance where all of the policies are alike, aviation insurance policies differ, sometimes greatly.
There is one exception to the practice of buying insurance through a broker—Avemco Insurance (www.avemco.com) is what is called a direct writer. You contact Avemco directly and one of their agents will talk with you about your experience level and your airplane and give you a quote.
Aircraft liability insurance comes in two forms—and not knowing the difference may prove hazardous to your financial health. The policies offered are referred to as either “smooth” or “sublimits” policies. A smooth policy makes the entire value of the policy—for example, $1 million—available as a pool of money to resolve any claim(s) made against you following an accident, be it from one person or several.
Smooth vs. Sublimits
A sublimits policy only makes a portion of the full policy value available to you to settle the claim by any one person after an accident. For example, if you buy one of the most common liability policies with $1 million in coverage but $100,000 sublimits, and you have a claim by a passenger against you, only $100,000 is available to you to resolve that claim.
We’ll say right here and now that $100,000 doesn’t go very far in an aviation accident case where someone is injured. We have often seen cases where a person was injured seriously, sued the pilot and the insurance company put up its $100,000 under the policy and walked away, leaving the pilot to pay whatever additional money was needed to resolve the case as well as the cost of continuing to defend the case. In our experience, that can be a substantial sum of money.
Our experience is that insurance companies push sublimit policies; in fact, that’s all Avemco sells. They are money-makers.
Our strong recommendation is that, if possible, buy a smooth policy. It will cost more but it will let you sleep at night should you have an accident.
How much insurance? In our opinion, for the hull, make sure that the full value of the aircraft is insured. For liability, if you have enough assets to own a reasonably high-performance airplane, $2 million smooth is a good starting place. In conference with your broker and your attorney, you may decide that more coverage is needed, if you can get it.
We note that it has become almost impossible to buy smooth policies for two-place airplanes.
“Don’t buy insurance, it just makes you a target.” We still hear this advice from time to time. It’s well-meaning, but just plain wrong.
The reason is that when a lawsuit is filed after an accident, the plaintiff (person bringing the lawsuit) usually sues anyone and everyone connected with the accident looking for someone who has money to pay for the injuries. In this case, your insurance pays its first benefit in hiring an aviation attorney who can speak with you about the details, do other investigation and, if you had nothing to do with the accident, get you dismissed for nothing or a nominal sum.
That process right there costs tens of thousands of dollars (yeah, we agree, that’s just plain wrong). If you were uninsured, that would be coming right out of your pocket. Plus, what the insurance company pays to defend you is not subtracted from the value of the policy—the money available to pay the claim against you. If you have a $1 million smooth policy, there’s still a million bucks ready to go even if defense costs have ballooned into the hundreds of thousands.
If you did have something to do with the cause of the accident, the insurance company is paying for an attorney who will work to settle the lawsuit with each party paying its share or take it to trial.
Not enough insurance?
This takes us to the next issue—what do I do if my analysis of the liability risks I face exceeds the value of the insurance I can purchase?
First, talk with your broker and get an understanding as to why insurance company underwriters won’t cover you at a level you need. That may result in a compromise that will work for you. You may be required to get a certain amount of dual in the type of aircraft involved or have a CFI fly with you for a number of hours or months, or always. Is there an airplane that you can “step down” into and get coverage, say from a pressurized piston twin to a fixed-gear single? A friend of ours who had flown a Turbo 210 for 40 years found that it was getting more difficult to insure. He sold it, bought an LSA and flew happily insured for several more years.
Are you a victim of “fat wallet, thin logbook” syndrome? Nothing scares an insurance underwriter more than a rich guy with just a private pilot certificate plus a few hundred hours of flying time (and maybe an instrument rating) buying an expensive high-performance piston single or twin or turbine airplane. That proceeds into ulcers for the underwriter if the buyer is over 60 and has no time in type.
That allows us to interject here the absolute warning—don’t buy any aircraft unless you are certain you can get insurance.
If you cannot buy what you consider to be adequate liability insurance, the next step is to seriously consider not carrying passengers.
If you do want to carry passengers, having them sign a waiver of liability might be effective. Speak to an attorney to see if they work in your state.
Finally, and painfully, it may be time to stop flying as PIC.
Self-Insure?
Every year a certain proportion of pilots elect to either “go bare”—have no insurance—or self-insure—which is similar but involves creating a pool of money so that if the worst happens, the pilot isn’t facing an unreasonable financial risk.
Going bare is essentially whistling while walking past the graveyard—ineffective and about as financially stupid for someone with any assets as can be imagined.
If you are going to self-insure, we recommend that you do it for hull insurance only, never for liability. There are antiques, classics and other rare airplanes for which a pilot cannot buy hull insurance. The pilot who then self-insures has made the decision that their airplane is worth a certain amount and consider it a pile of money of that sum sitting in their hangar. If something bad happens, they can accept the loss. We think few people can rationally do that sort of thing, but that’s their choice.
Self-insuring liability insurance is almost never realistic for an individual aircraft owner. We shudder to think how much it would cost to defend an injury aircraft accident, especially if the owner/self-insurer dies in the accident. So much for any estate to pass along to a family.
Reducing Accident Risk
Let’s switch gears from mitigating risk in the event of an accident to reducing the risk of having an accident as well as reducing the seriousness of injuries that may occur during an accident.
We’ll start with looking at the accidents that you are most likely to have as a pilot and how to reduce the risk of being involved in one.
The big one is a runway loss of control event (RLOC). They are the high-risk but usually low-injury wrecks. For nosewheel airplanes they generally range from 5 to 25 percent of all accidents for an aircraft type. For tailwheel the rate is much higher, 20 to 55 percent of the accidents.
From years of looking at accident data and giving flight instruction, our recommendation when it comes to reducing accidents in general and RLOC in particular is regular, serious recurrent training. Most RLOC accidents involve crosswind landings with loss of control coming after the airplane is rolling on the runway, usually after flying final at well above the speed recommended in the POH.
Spending a half a day and a little money for dual (usually a flight review) twice a year has been shown to dramatically reduce a pilot’s risk of having an accident of any type. Hey, professional pilots have to fly with a check pilot twice a year—we amateurs should go more often. Besides, you spend all that money on fancy avionics to make your flight safer, why not spend a little money on keeping your skills honed? After all, the skills involved in hand-flying an airplane deteriorate painfully quickly.
An insurance underwriter we spoke with for this article (we agreed to keep their name and company identification confidential) told us that they have 60 years of accident claim records. Those records show that the average time since a flight review for the accident pilots is 348 days. We cannot recommend frequent recurrent training strongly enough.
Other loss of control accidents figure well up there in the oops parade—stalls, loss of control in IMC and loss of control on go-arounds. We think that regular recurrent training that hits the high-risk accidents will pay dividends for you.
Besides, most insurers want to see evidence that you are doing more than a flight review biennially. Annual or semiannual training may mean you can get coverage you otherwise couldn’t or may mean a discount.
Aging
As we age we do things more slowly. Unfortunately, we absolutely cannot detect it. It’s little things that bite us. That look down to change a frequency takes longer every year and gives the airplane more time to wander off heading and altitude, potentially leading to an unusual attitude and loss of control.
As we age we are more easily distracted. That’s one reason insurers are less willing to insure aging pilots in retractable-gear airplanes. We can’t count how many accident reports we’ve read where the middle-aged or older pilot got distracted because there were other airplanes in the pattern and forgot the gear. It’s also a good reason to enforce a sterile cockpit policy when within 10 miles of landing.
If you want to step up to a more sophisticated airplane, you’re going to have to do it before you are 70. Yes, we know that you can finally afford something you’ve always wanted, but insurance may tell you no.
Purchases
When it comes to buying something to help prevent an accident, our number one recommendation is ADS-B In and Out for weather and traffic information. Our number two recommendation is a carbon monoxide detector—but not one of the fabric circle things that get dark in the presence of CO. You want a detector that measure accurately and sounds a warning when there is a buildup. We’ve reviewed them in Aviation Consumer. They aren’t expensive. Order one.
We also recommend VGs because they lower stall speed, potentially reducing stall-related accidents and allowing the airplane to be going more slowly when it hits something.
To reduce the magnitude of injuries and risk death in an accident, install shoulder harnesses for every seat where it is possible. They have proven to be the silver bullet when it comes to reducing the degree of injury and preventing death in aircraft accidents.
Conclusion
We fly, therefore we take risks. Insure them to protect yourself against the results of an accident and take recurrent training to reduce the risk of having an accident.
When it comes to flight instructor liability issues there is some good news—CFIs don’t get sued very often. That may be because most of them are young and working their way toward flying time needed for a better job and their idea of splurging for dinner is a second pack of Ramen noodles.
Nevertheless, bad things do happen to good flight instructors, and some of those instructors have assets and are instructing because they love it and the people they fly with—so, no matter what your financial circumstances as a CFI, we think it’s worth your time to think about how to mitigate liability risks you may face.
As we said in the main article, the primary way to deal with risk is to insure it. We think that the best way to do that as an instructor is to work for a flight school or FBO that carries insurance that will cover you as one of its CFIs.
The general legal principle is that an employer is liable for the actions of its employees. Thus, if a student of yours that you instructed as an employee of a flight school has an accident, and you get sued, the flight school is also responsible. Its insurance defends the school and you.
Rule of thumb—if you are instructing for a flight school as an employee or independent contractor, make certain that the flight school’s insurance covers you.
If you are instructing on your own, we recommend that you buy insurance that will cover you for the type of instructing that you do. We also recommend that you join either the National Association of Flight Instructors (NAFI) (www.nafinet.org) or the Society of Aviation and Flight Educators (SAFE) (www.safepilots.org). Those organizations have teamed with insurers to offer what we consider to be good quality CFI insurance. We also think highly of their educational resources and programs.
The overwhelming recommendation we have regarding CFI insurance is to take the time to determine what exactly each policy covers and whether it meets the needs you have as an instructor. Read everything about the policies offered on the NAFI and SAFE websites. If you find policies that look good, talk with an insurance rep to make sure you understand what they cover and what they don’t. Plus, make sure that they will cover you if you get sued a year or two after the time you gave instruction or the incident/accident happened.
Finally, no matter where you are instructing there are actions that you can take to protect yourself against a liability claim or the FAA giving you the side eye after your student does something less than brilliant.
Keep records of what instruction you gave to each student, each time. Not just the name of the student and something like “Syllabus lesson 5,” specify everything, all maneuvers. If you were the instructor giving spin instruction in the photo, document it in your records. If a student crashes and burns up her logbook, your records may be the only thing that shows you gave her dual in gusty crosswind landings.
Grade accurately and honestly. If the student didn’t meet the performance requirements for a maneuver (altitude, airspeed, heading, etc.), the grade is unsatisfactory. If he did, then it’s satisfactory. We have seen too many situations where a pilot crashed after being a knucklehead and the CFI then said that the student was repeatedly subpar, yet the CFI had graded everything “satisfactory.”
If you are uncomfortable signing off flight reviews, either refer applicants to other instructors or have your applicants follow the steps of the FAA WINGS program. You will fly with the applicant three times and note that each was for a WINGS segment. That counts as a flight review and you do not certify that the applicant met the requirements of a flight review.
If you are instructing in a client’s airplane, get added to the client’s aircraft policy as a “named insured” or “additional insured” so that you are covered as well. Just because you meet the open pilot warranty flying time in the coverage does not make you an insured and you can be sued after an accident.
You will have students and pilots who demand that you sign them off for solo, or a rating or a flight review, when they aren’t ready. They are the problem children for instructors, rating their performance far above reality. Don’t give in—they are the ones who are going to crash. To help yourself, set objective standards for completion such as altitude, heading and airspeed tolerance. When they can’t meet them (and they’ll have excuses) tell them that until they meet the standards, no endorsement.
If your discomfort with a someone seeking a rating or FR exceeds your limits, stop flying with him or her, and if a private pilot student, make an entry in the person’s logbook terminating all of your endorsements. If you have a bad experience when giving dual to a rated pilot and would not ever fly with her or him, you may want to write that in their logbook—definitely put it in yours.
Oh, and when you get an I’m-a-great-pilot-and-you’re-just-an-instructor in for a flight review, give him an engine out 3000 AGL over the airport and ask them to land on a runway. They almost never can do it the first time.
