Contract Pilot Liability Insurance Info

[DS]

All -

I am a brand new part-time 1099'er and need some advice/clarification re: insurance. Currently, I'm a 1099, pt.91 for a company that's managing an aircraft for another company owner. The company that manages the a/c pays my daily rate, all meals, training, and are really decent to fly for. I brought up the subject of establishing an LLC for liability protection but the a/c manager said that I'm covered under their insurance, so no need. I asked for a certificate, in which I was sent one but it doesn't list me by name as a pilot but only states, "all approved pilots are covered" by the insurance certificate.

If I have an LLC, do you all recommend that I go out and buy my own professional liability?

Am I covered? Do I need my own insurance? If they put the a/c on a 135 certificate, does it change anything my insurance needs?

v/r
Des

 

[PilotDefenseAttorney]

First of all, read the FLYING AN LLC OWNED AIRCRAFT string below. You'll want to make sure there are no issues there. It sounds as though you are an independent contractor being hired by a management company to fly an airplane for the owner of the airplane. My first question is, when you say are covered under "their" insurance, are you referring to the aircraft owner's insurance or the management companies insurance? It is critically important to know whether the insurance is referring to you as an approved pilot (meaning the insurance is in effect for the insured) or whether you are being included as an additional insured under the policy. Typically, insurance only protects the insured - generally, the named insured. The only way to really answer your questions and advise you concerning your potential liability would be to review the applicable insurance policy(s), the management agreement, and the independent contractor agreement (contract) that you should probably be working under (although I am guessing you are not). I would recommend that you spend a few dollars with an aviation savvy attorney who also knows a bit about insurance and contract law. An LLC may be a good idea but it is not going to protect you from many personal liability issues that can arise following a claim event. Having your own professional liability insurance and/or an appropriate umbrella policy is always a good idea.

 

[DS]

Thank you for the great advice. Since I don't have answers to most of your questions I'll seek out a MD aviation atty. Thanks again!!

 

[MidlifeFlyer]

I'm just going to add one item PilotDefense didn't mention because it may reflect a very common misconception.

You said

I brought up the subject of establishing an LLC for liability protection

What do you see as the protection a LLC can give you? Unless I misread your post, you are a pilot flying for another company. If that's the case, your potential liability is primarily for things you do personally, like carelessly or negligently flying the airplane and injuring someone or damaging something.

An LLC is not designed to and will not protect against that kind of liability. There may be some reasons for an LLC in this situation but negligence liability protection is not one of them.

 

[ghoster]

Simplest way to avoid not being covered is to have insurance name you as one of the "insured". If you are a named insured, then if you ball it up as a contractor, you will be covered by anyone who might sue you for negligence.

 

[PilotDefenseAttorney]

Generally speaking, ghoster is correct. By having the policy owner add you as an additional named insured you will enjoy the same benefits as the primary policy holder. The insurance company will look at the relationship between the primary policy holder and the party they want to have added as an additional named insured in determining whether it is appropriate to add them. In many cases the primary consideration is keeping it simple - or as simple as possible - in the event of an accident (i.e. in may cases they would prefer for the interests of the primary insured and the contractor to be the same). The good news is that, in my experience, the insurance company rarely charges an additional premium to add such a party.

 

[Patrick]

Generally speaking, ghoster is correct. By having the policy owner add you as an additional named insured you will enjoy the same benefits as the primary policy holder. The insurance company will look at the relationship between the primary policy holder and the party they want to have added as an additional named insured in determining whether it is appropriate to add them. In many cases the primary consideration is keeping it simple - or as simple as possible - in the event of an accident (i.e. in may cases they would prefer for the interests of the primary insured and the contractor to be the same). The good news is that, in my experience, the insurance company rarely charges an additional premium to add such a party.

Exactly. As long as you aren't skirting the minimum edges of being qualified in the aircraft, most companies will happily add your name to the policy.

 

[propsync]

Hi Group,

I went through this a bit with my little Cessna Cardinal and a pilot who was interested in flying my airplane. Although a Cessna is probably not in the same ball park as what the OP might be flying, let me describe my conversation with my insurance company as it might help.

First, my policy generically allowed me to give permission to any pilot to fly my airplane who met the minimum experience level as outlined in my policy.

If the pilot did not meet all the experience requirements above, then he would have to be added to my policy as named pilot. This would likely have an impact on my insurance cost, it would go up.

Being a named pilot (also known as approved pilot) is not the same thing as being named insured. Only someone with a financial interest in the airplane can be added on as named insured.

Next, regardless of whether the pilot meets the minimum experience or has been added as a named pilot, they do not get any liability protection from my policy. That is reserved for the airplane policy owner(s) (the named insured).

Named insured must be reflected in the FAA aircraft owner registry. If the airplane is titled to a corporation, then the corporation is the named insured.

An injured party will likely sue the aircraft owner because the attorney would be reasonably sure that the owner has a policy. Sometimes they will go after the pilot personally. Sometimes they will do both separately.

So let's say that something happens with the other pilot flying my airplane and he has a boo-boo. My insurance company is going to pay out, no problem I am in the clear. However, my insurance company might decide to subrogate against the other pilot (go after the other pilot) to recoup their loss.

So what should the other pilot who wants to fly my airplane do to protect himself? In my case he would need to get a renters policy. In the original posters question, the proper type of policy is probably called a Non-owned policy.

So, as you can see, lots of different entities have insurance. This insurance is designed to protect the owner of the insurance policy from liability. It generally does not exist to protect some other third party.

The situation explained by the original poster is a complex one. There is an airplane owned by an owner. There is a management company who says they will fly the airplane for an owner. Then, the management company contracts out to individual pilots, you are not an employee of this management company or an owner of the airplane. It is my belief that in the event of an accident, all three parties could bear liability. If you were an employee of the management company, I would think they would provide you with a common legal defense, as they would want you on their side. Otherwise you could side with the airplane owner or with the victim.

So what could you possibly do? Yes, you could buy your own non-owned policy. But how much would that cost? What if you are a contract pilot on a 737? Might not be affordable. I think what you are after is what is called a waiver of subrogation. Having one of these says that if you make a boo-boo and the insurance company has to pay out as a result, they promise not to come after you personally to recover payout. But that doesn't mean you still can't be sued by the victim.

Then there was the other question of having an LLC as a form of liability protection. This never works the way you think it will. LLC's and corporations protect you personally from business debts and claims. But it doesn't protect you from personal liability in a negligence situation.

Please don't take my words as gospel though, speak to a higher power

 

[MidlifeFlyer]

Hi Group,

I went through this a bit with my little Cessna Cardinal and a pilot who was interested in flying my airplane. Although a Cessna is probably not in the same ball park as what the OP might be flying, let me describe my conversation with my insurance company as it might help.

Pretty decent description of a personal aircraft policy (although even with those, terms change depending on the insurer and available endorsements)

But the real "different ball park" here is not the differences in aircraft. It's the difference between your personal non-commercial aircraft insurance policy and a commercial aircraft insurance policy that is specifically designed for and sold to companies needing to insure business-related operations, generally including coverage protecting its hired pilots.

Even in something as basic as car insurance there are major differences between the policy covering your pickup truck and the pickup truck(s) used by a landscaping company, driven by its employees, to customer job sites.

 

[propsync]

Pretty decent description of a personal aircraft policy (although even with those, terms change depending on the insurer and available endorsements)

But the real "different ball park" here is not the differences in aircraft. It's the difference between your personal non-commercial aircraft insurance policy and a commercial aircraft insurance policy that is specifically designed for and sold to companies needing to insure business-related operations, generally including coverage protecting its hired pilots.

Even in something as basic as car insurance there are major differences between the policy covering your pickup truck and the pickup truck(s) used by a landscaping company, driven by its employees, to customer job sites.

You make an excellent point. Taking your example of an employee driving a company landscape vehicle, I suppose there is still nothing to stop a victim or their estate from suing the employee directly who was driving. For example, lets say that employee for whatever reason was a millionaire but the landscape company he worked for had no money. What (if anything) protects a person from personal liability?

Further, does the owner of the aircraft have a commercial insurance policy? How do we know if the airplane is being flown under part 91?

 

[PilotDefenseAttorney]

One other difference in the commercial aircraft insurance policy is that they will allow "additional named insureds" who do not have a financial interest in the airplane and are not named on the registration. Generally, you only have to show some sort of legitimate contractual relationship to the other party. But, for personal use policies, propsync is pretty much spot-on - keeping in mind that each company and policy will be slightly different (in other words, read before you sign). Protection from personal liability - if not specifically incorporated into a commercial policy (and sometimes it is - perhaps as a rider) is generally going to have to come from a personal insurance policy of some sort. Depending on the circumstances, non-owned aircraft liability policies, general personal liability policies, umbrella liability policies, and even homeowner liability policies can come into play. Bottom line is that you are always going to be liable for harm caused by your sole negligence (or intentional acts for which you will rarely find insurance coverage) - the question is do you have a policy that insures YOU for that particular scenario. [Sorry for being late to the party - had to be in court]

 

[DS]

I think the best bet would be to be a "named" person on the a/c insurance through the management company, get the subrogation waiver, set up the LLC, and look into getting my own insurance. I haven't met w/ the aviation atty yet but will update when I do. The new wrinkle is that another company wants to 1099 me to move their BE-20, so I need to get this done. Thanks to everyone that provided great input.

 

[propsync]

I think the best bet would be to be a "named" person on the a/c insurance through the management company, get the subrogation waiver, set up the LLC, and look into getting my own insurance. I haven't met w/ the aviation atty yet but will update when I do. The new wrinkle is that another company wants to 1099 me to move their BE-20, so I need to get this done. Thanks to everyone that provided great input.

If you are named insured on the aircraft, then you don't need a waiver of subrogation as the insurance protects you directly.