Independent Contractor & Insurance

[UIPilot45X]

Hi Guys,

I recently got the opportunity to work at a local flight school/mom and pop FBO. My role would be a part time flight instructor. I would technically be an independent contractor.

Do I have to get CFI insurance for his job? Is there something I should look out for?

They are having me fill out what looks like an app for an insurance company. I'm assuming that I will be added as an additional insured onto their policy...have asked the question and am waiting to hear back.

The current shop where I am instructing has me as an hourly employee. This would be my first foray into the world of independent contractors.

Thanks in advance.

 

[Adebord13]

Working as an independent contractor CFI is risky. Their insurance only covers them.

I have a friend who was a contractor down in florida, one of his students bent up a 152 on a solo and he got stuck paying for it along with legal fees.

I would strongly caution against doing this.

 

[PGT]

Working as an independent contractor CFI is risky. Their insurance only covers them.

I have a friend who was a contractor down in florida, one of his students bent up a 152 on a solo and he got stuck paying for it along with legal fees.

I would strongly caution against doing this.

It's popular around here. I've looked into insurance or forming an LLC, haven't done either yet.

 

[drunkenbeagle]

Non-owned insurance is pretty cheap. Cheap enough that I would get it regardless of whether you think you need it or not. I pay about $250/year for a $250k liability and $10k hull, through Avemco. The reason you want such a policy is that the flight school's policy protects them, not you. If you are at fault in an accident, even when the FBO's policy pays, the insurer has the right to recover what they paid to settle the claim from you. This is called subrogation. Your non-owned policy protects you, which means that your insurance company will pay to defend you, and most policies will cover the deductible of the FBO's policy as well. With aircraft mishaps, there are almost always lawsuits - so the legal defense you get is arguably as valuable as the policy itself. Better policies don't have a cap on what they will pay in legal defense, but some will not cover legal bills after the policy limits are exhausted. Some of these policies will also pay to defend you from FAA administrative actions.

Insurance in general covers the "named insured," the person or company buying the policy. Adding a pilot to a policy means that the named insured is covered when that pilot is operating the aircraft - it does not cover that pilot though. Adding the pilot as an "additional insured" does cover and protect them. In many/most cases, employees or agents of a named insured are also covered, or at least won't be sued by the insurance company. The only way to know this is to ask your agent or insurance company. Sometimes, it is possible to get the insurance company to give you a "waiver of subrogation." This means that they agree not to sue you in the case of a claim where the insurance company would otherwise have the right to recover their expenses from an accident where you are at fault. *hint, the pilot is pretty much always at fault

As for how much coverage you need, look at what a prop strike or landing accident going off the runway is likely to cost, and get hull coverage that will cover most of that. For liability, your probably want coverage in the ballpark of your net worth. Policies may or may not also cover professional liability (getting sued when someone you instruct screws up, possibly years into the future), so that may or may not be a separate policy you would want.

Disclaimer: I'm a licensed general lines insurance agent in Florida, so feel free to ask any general insurance questions, I might possibly even know the answer.

 

[UIPilot45X]

Hi Guys,

Thanks for the response. I'm a NAFI member and found that they have some insurance options with AVEMCO. I'm going to give them a call today...hopefully they will lead me in the right direction.

 

[drunkenbeagle]

Hi Guys,

Thanks for the response. I'm a NAFI member and found that they have some insurance options with AVEMCO. I'm going to give them a call today...hopefully they will lead me in the right direction.

I believe they also give you a discount if you have taken any FAA Wings courses online. So if you haven't taken one in a while, they are informative and painless to watch.

 

[UIPilot45X]

I believe they also give you a discount if you have taken any FAA Wings courses online. So if you haven't taken one in a while, they are informative and painless to watch.

Right now, they are quoting me $460 for 20K in aircraft liability and 500K in general liability. Is that too much? She was also telling me that I should go for the $1 million general liability policy that makes the overall cost go up to $650 for insurance. How much is too much or how much is too little?

 

[drunkenbeagle]

Right now, they are quoting me $460 for 20K in aircraft liability and 500K in general liability. Is that too much? She was also telling me that I should go for the $1 million general liability policy that makes the overall cost go up to $650 for insurance. How much is too much or how much is too little?

Can't really answer that for you, as everyone's finances and needs are different.

For hull insurance, there isn't much need to have more than the value of the most expensive aircraft that you fly. This insurance is in excess of the policy the aircraft already has. So if you are flying a $40,000 C172, there is no benefit to having more than 40k in hull limits. It might be okay to have less - typical losses result from airplanes departing the runway to the left, and damaging the landing gear. Costs money, but not usually a total loss. I don't carry that much, but can also afford to pay out of pocket for amounts exceeding that.

For liability, you want the most you can get. You have no idea how much you are going to get sued for. If you have rich or famous passengers or students, it could potentially be a lot. Most airplane mishaps don't involve death or serious injuries, but when they do, it is most of the dollars that an insurance company ends up paying out. The insurance companies generally negotiate the settlement, not you. $1 million is probably the most you can get in a non-owned policy. If there are deaths, there will be a lawsuit, and the settlements are usually in the multiple millions range. Having a multi-million dollar judgement against you is something most of us would like to avoid. Lawsuits like these often go on for years.

Lawyers will usually be happy with a settlement that exhausts the policy limits - getting more money out of an already broke CFI or their minuscule estate isn't very likely. But you have no assurance that this will be the case.

Here's an example of the dollar amounts involved:
http://bangordailynews.com/2013/09/...ached-in-owls-head-plane-crash-that-killed-3/