CFI Insurance, LLCs, etc

[DEMO]

I will be instructing for a Part 61 flight school - I will be a 1099 employee (or I guess it would be considered an independent contractor). I've been researching CFI Insurance, setting up an LLC, and AOPA's Pilot Protection Services. Talk about a confusing and convoluted subject. I've pretty much read every thread I could find on Google about these subjects as it relates to instructing.

Quite a few instructors have talked about setting up an LLC for liability and tax reasons. That said, my research has indicated that setting up an LLC will not do much for me in terms of liability. If someone sued me, my LLC wouldn't provide any protection. This seems to be a fairly misunderstood topic. It also seems like a lot of work to set one up and to keep it properly maintained.

The aircraft are fully insured and they made it pretty clear to me that they have never gone after a student or instructor for any damages - not even the deductible. I'm waiting to hear back if instructors are covered under their policy. After quite a bit of research I decided to join SAFE over NAFI. SAFE has the best CFI Insurance from what I can tell (setup through Aviation Insurance Resources). I plan to give them a call once I know what the flight school's insurance covers. It looks like plans range from a couple hundred dollars a year to $1500+. I can't afford $1500+ a year as an instructor. From what I've gathered, the vast majority of people who instruct for a school do not hold any insurance at all. In fact, a friend of mine who did only independent instructing never held insurance either. I'm not a rich man, but I wouldn't say I am the penniless young instructor that is quite common (I've worked as an engineer for a large Aerospace company for the past 4 years and my wife has a good paying job as well).

It seems like the general consensus is that the AOPA PPS is pretty cheap insurance for someone looking to make a flying career. I'm not interested in this for flight instructing, just for general legal help if I ever need it (lose a medical, etc). I could also use this as an opportunity to consult an aviation lawyer about setting up an LLC, Insurance, etc.

Anyways...any feedback is greatly appreciated.

Thanks.

 

[msmspilot]

Looks like you've done your research and figured it out to me.

When I was instructing full time, the planes I was flying were mostly older 172s, and a $50K hull and million liability was about $1K/yr. I also had AOPA's PPS. I found it to be good peace of mind.

You're correct that the LLC won't protect you from what you personally do.

Beyond that, being judgement proof is a form of insurance.

 

[Nihon_Ni]

Looks like you've done your homework here. I'd caution you about making decisions based on what others are doing.

If you can't afford the proper insurance, then you can't afford to engage in that activity at the current economics.

When I was a young flight instructor, I was oblivious to CFI insurance. Now, it's my number one rule: I won't teach without it.

 

[MidlifeFlyer]

I will be instructing for a Part 61 flight school - I will be a 1099 employee (or I guess it would be considered an independent contractor). I've been researching CFI Insurance, setting up an LLC, and AOPA's Pilot Protection Services. Talk about a confusing and convoluted subject. I've pretty much read every thread I could find on Google about these subjects as it relates to instructing.

Quite a few instructors have talked about setting up an LLC for liability and tax reasons. That said, my research has indicated that setting up an LLC will not do much for me in terms of liability. If someone sued me, my LLC wouldn't provide any protection. This seems to be a fairly misunderstood topic. It also seems like a lot of work to set one up and to keep it properly maintained.

The amount of work and cost to set up and maintain an LLC varies a lot from state to state. But you are absolutely right that the existence of an LLC does not provide you protection from things you do which cause injury or damage. To take the "fairly misunderstood" comment a little further with an simple example, few realize that when a UPS driver causes an accident, he or she is personally liable. We don't think about it in those terms because UPS is also liable and UPS is the solvent deeper pocket, but if that wasn't the case, the driver would be on the hook.

The aircraft are fully insured and they made it pretty clear to me that they have never gone after a student or instructor for any damages - not even the deductible. I'm waiting to hear back if instructors are covered under their policy.

That is important to know. My flying club carries a large, excellent policy which includes all of the members and instructors as insureds, with no right to go after them for damage. I've know commercial FBO/instruction organizations which have done the same. In those, CFIs will typicaly not have their own policies unless they also instruct independently. OTOH, it is probably more typical for an organization to protect itself and not provide the same full benefit to their customers and CFIs.

It seems like the general consensus is that the AOPA PPS is pretty cheap insurance for someone looking to make a flying career. I'm not interested in this for flight instructing, just for general legal help if I ever need it (lose a medical, etc). I could also use this as an opportunity to consult an aviation lawyer about setting up an LLC, Insurance, etc.

I have to issue a disclaimer on this one. I am one of the PPS attorneys. I also pay for the PPS for myself.

 

[CFI A&P]

"I certify that [First name, MI, Last name] has received and logged training time within 2 calendar-months preceding the month of application in preparation for the practical test and [he or she] is prepared for the required practical test for the issuance of [applicable] certificate."

"I certify that [First name, MI, Last name] has received and logged pre-solo flight training for the maneuvers and procedures that are appropriate to the [make and model] aircraft. I have determined [he or she] has demonstrated satisfactory proficiency and safety on the maneuvers and procedures required by § 61.87 in this or similar make and model of aircraft to be flown."

"I certify that [First name, MI, Last name] has received the required training in accordance with §§ 61.107 and 61.109. I have determined [he or she] is prepared for the [name of] practical test."

It isn't any different in the maintenance side:

"I certify this [airframe/ engine] has been inspected in accordance with 14 CFR Part 43 Appendix D, and is in a condition safe for flight."

Do you see how often I certify is mentioned? You will always be personally liable for your actions as an airman. That is part of being the instructor and the PIC.