As a flight school owner, we've invited clients to go elsewhere for lying to us and failing to take responsibility for their actions. We've kept clients, even after aircraft damage, due to their owning up to the situation, learning from it, and not repeating it. We can work with clients that want to learn.
For flight instructors, it is a much less tolerant stance. We expect our flight instructors to be a cut above our clients. Our clients trust their lives to the instructors and the liability should an instructor screw up is unimaginable. Even if the school does everything right, and it is an instructor screw-up, the school can lose their insurance and be out of business. Worse, flight instructors "breed" their mistakes, producing generations of pilots with the same problems. Thus if an incident results in the instructor trying to do anything other than take full responsibility for the situation, they're gone. If the incident is egregious enough, a detailed report of our investigation will be sent to the FAA due to the "failure to warn" aspect of liability cases.
In nine years of doing this, I've only sent one letter regarding an instructor that had an engine failure on takeoff due to fuel starvation. Only because the pilot-undergoing-instruction was better skilled than his instructor did this avoid tragedy. The instructor raged on and on about how it was everyone else's fault, including Piper, that he ran out of fuel. The FAA conducted the pilot-undergoing-instruction's checkride but did not pursue enforcement action. The instructor would go on to lose his certificates after causing an accident with a different flight school.
