Insurance liability as Group Member?

[QDMQDMQDM]

OK, here's a question. Just say I was to join an aircraft group. Then, the aircraft suffered a mishap when being flown by A.N.Other member, unfortunately killing the two passengers, both high-earning youngish and with young families, and the damages were greater than our third party liability cover. Would I, as a group member, albeit uninvolved with the accident, be at risk of being sued for the outstanding damages?

I have a sneaking suspicion that this is indeed the case, but would just like it confirmed or otherwise.

Anyone seen a Flying Lawyer?

Thanks,

QDM

[FNG]

(1) Generally, if a member of your group causes death, injury, or damage to property through his or her negligence (that is: failure to exercise reasonable care), you are not liable for the damages simply by reason of your membership of the group or part ownership of the aircraft, any more than you would be if you lent your car to a friend who then carelessly ran someone over whilst driving it, or if your friend beat someone over the head with a cricket bat which you happen to own.

(2) If the aircraft crashes because of a provable defect in maintenance, it is possible, although not necessarily certain, that you could incur some liability as a part-owner of the aircraft to someone who suffers as a result of the crash, particularly if you knew or could reasonably foresee that the aircraft would be used to take non group members flying. In this situation, you might yourself have a claim against the maintenance outfit (assuming that you haven't scrimped on important work on the aircraft).

(3) If you happened to know that your fellow group member was dangerously lacking in currency, or had developed dangerous flying habits or attitudes, and knew that he/she intended to take a passenger, you might run some risk, but still ought not to be liable, save perhaps in rather extreme and improbable circumstances. He/she is the pilot, you are not.

The situations referred to in (2) and (3) would, of course, not arise in the well run group, in which people take care of their aircraft and, formally or informally, take care that all members are OK to fly it. I reiterate that, in general, you do not incur liability to third-party victims of your co-owner's finger trouble simply by virtue of being a co-owner.

This may not prevent some cheesy character with a cheesy no-win-no-fee type of adviser having a go, which indicates why, for peace of mind and avoidance of hassle, it is a good idea not to scrimp on the level of insurance for the group aircraft.

[Final, 3 Greens]

QDM

I'm no lawyer, but our group made the decision to operate as a limited company so there was no joint and several liability as there could have been with a partnership.

Of course we were thinking a little more broadly than the very situation you describe, but it did cross our minds.

[FNG]

A group of people who own an aircraft to fly it for fun will not ordinarily constitute a legal partnership, because their association is not a joint venture with a view to making a profit. Partners are liable for one another's debts, but non-partner associates who co-own an aircraft are not generally so liable merely by virtue of their co-ownership. Limited companies can, however, be useful instruments for GA aircraft ownership and operation, for a number of reasons.

It might be worth correcting one misapprehension which sometimes arises in this respect. I have sometimes seen it suggested here and on other fora that corporate ownership of the machine creates an impenetrable wall of protection for each individual pilot in the group. The true position is that corporate ownership of a group aircraft does NOT absolve an individual group member of his/her own liability for his/her own negligence. In other words, if you crash it, you face the consequences. Yet another reason for being properly insured, however you structure your group.

QDM, none of this should put you off joining or starting a group (if that is what underlies you question).

[Final 3 Greens]

FNG

That's a good point. We all understand that we are all personally liable for our own actions (I am a consultant and have PII because of this factor, even though I bill through a limited company of which I am a shareholder and a director.)

We just took the view that the limitation of liability was generally a good thing and frankly we understood limited companies better than unincorporated ones.

[QDMQDMQDM]

This may not prevent some cheesy character with a cheesy no-win-no-fee type of adviser having a go, which indicates why, for peace of mind and avoidance of hassle, it is a good idea not to scrimp on the level of insurance for the group aircraft.

Yes, I guess that's the nub of the issue. The problem is that most people don't appreciate how much 3rd party cover you need. Most of my friends are doctors in their thirties with young children. Let's say another 25 years of earning £60-90K ahead of them. Kill two of those and you have a big bill!

The other complicating factor which makes people more likely to sue is that most life insurance policies won't pay out if you die as a non-fare paying passenger in a light aircraft.

Hmm. FNG, so you're really, really sure they can't get me, then? ;-)

QDM

[FNG]

F3G, I agree: limitation of liability is in general a good thing, and my aircraft group runs through a company. Quite apart from anything else, the existence of the company may operate as a further deterrent against opportunistic claims.

QDM: here's a lawyer-to-doctor special offer: I will guarantee that no one can sucessfully sue you if you guarantee to cure me of anything that ever goes wrong with me. Does that seem fair? Seriously, though, the basic position holds good: you are not in general legally responsible for the bad flying of someone else in your group's aircraft. Cheesy claimant advisers seek to roll people (or, more often, their insurers) over, using as their lever the sheer hassle factor of fending off claims, even claims which are legally duff. You could always supplement your group liability insurance with a personal legal expenses insurance policy, which may assist you in hanging rocky tough if Mr Ambulance Chaser comes calling.

[keendog]

Most people are unaware of the potential consequences of expensive accidents because their most numerous manifestation is in traffic accident claims, where insurers are obliged to pay out whether or not they are in fact contractually liable to indemnify the insured person. Also, those who drive around in uninsured vehicles usually have no assets so it is pointless suing them personally.
If you have substantial assets and are pursuing an activity involving risk to others, such as flying, then you have to be aware that, if sued, the Claimants could go for everything you own if their claims exceed the limit of your insurance cover.
It is in fact much more expensive, as a rule, to badly injure a person than to kill them. On the basis of a reasonable worst case scenario - injuring or killing a 172 with 4 quite affluent young people on board, £10 million would be a minmum amount of cover for reasonable protection.

[Legalapproach]

FNG

I agree with your points (2) and (3) above but I seem to recall that under the Civil Aviation Act there is strict liability without proof of negligence in respect of any loss caused by an aircraft whilst in flight. I don't have a relevant text book or copy of Halsbury to hand at the moment but this certainly used to be the case unless the relevant section has been repealed.

If I'm correct about this then liability would arise by virtue of co-ownership subject to any 3rd party notice etc. Liability would be joint and several and arises without proof of negligence.

This was the rational behind many flying groups operating as limited liability companies.

[A and C]

I buy insurance on the following basis , first to cover my losses , second to cover third partys including passengers , there is no doubt that no matter what the limit of your cover some one could come after you personaly but the level of the cover should be such that it is not worth the aggro of going after you following the payout by the insurance company.

[FNG]

Legalapproach, I think that you have in mind section 76(2) of the Civil Aviation Act 1982, which provides as follows:-

***

(2) Subject to subsection (3) below, where material loss or damage is caused to any person or property on land or water by, or by a person in, or an article, animal or person falling from, an aircraft while in flight, taking off or landing, then unless the loss or damage was caused or contributed to by the negligence of the person by whom it was suffered, damages in respect of the loss or damage shall be recoverable without proof of negligence or intention or other cause of action, as if the loss or damage had been caused by the wilful act, neglect, or default of the owner of the aircraft.


***

(section 76(3) deals with indemnities).

This implements the Rome Convention of 1933 on damage caused by aircraft to third parties on the surface. Section 76(2) applies to damage to "a person or property on land or water".

Thus, I would say that the provision applies if I crash my aircraft into Farmer Nimby's roof whilst (carefully) doing a low beat-up (purely in the interest of airfield-neighbourhood relations, of course). It applies if I (carefully) stuka in on landing and de-capitate the chief engineer (hmmmm.... don't put ideas in my head). It applies also if my tailwheel falls off in flight and bonks the engineer on the head (assuming that it's not his fault for not screwing it on properly, which it probably is) .

It does not apply if I kill my passenger: he is not a person on the surface: he is sitting beside me saying "hullo clouds, hullo sky, hullo ground spiralling up towards me...BAM". His dependants must in that event prove that I was careless. That's how it seems to me to work. There appear, surprisingly, to be no reported decisions on the section: but I say this after only a fairly cursory check of the indices to the main reports. I would welcome your thoughts on this.

You are right to point out this provision, because it does impose liability without fault in certain circumstances, but I would say that it does not affect the answer to QDM's question about spearing in and killing all his loaded passengers in the process.

[QDMQDMQDM]

Interesting. I'm no lawyer as you know, but it seems a bit perverse that a third party on land or water should be able to claim liability from the aircraft's owner (or group owners), yet a passenger in the aircraft should not. Whether in the aircraft or not, both are third parties and why should the location when the injury occurs make a difference to their ability to claim?

Makes me a bit anxious...?

QDM

[Legalapproach]

FNG

You're quite right and I agree your interpretation. As I said in the original post I didn't have a copy of the Act in front of me when I was writing and it was something nagging away in the back of my mind. The answer to the specific question posed by QDM is right but as you point out if the partner crashes on a car containing the two young high earners then liability arises.

This is a pretty obscure piece of legislation and I am unaware of any reported decisions on it. That being said, it is pretty unambiguous and the lack of authority may be because an action brought under the Act is, subject to the facts, pretty unanswerable.

It also, as I thought, puts the liability on the owner [or owners] of the aircraft.

[FNG]

/Engage pompous Court of Appeal "Lord Justice Sleepy Bloke sitting on the end of the row" mode:

"I agree with what has fallen from Lord Justice Legalapproach (although not with what has fallen from his aeroplane: ouch!)"

/pompous LJ mode disengaged


Hi QDM,

Legalapproach and I are not saying that you CAN'T be liable if you kill your passenger whilst flying, only that your liability in that case depends on you being negligent. There is no strict liability (that is: liability without proof of fault) to those injured in the air.

Legalapproach and I also agree that your co-ownership of a group aircraft does not in itself render you liable for the mayhem inflicted by your co-owner on his in-flight buddies, even though the Act can render you liable to the owners of the ground-bound cow upon which the the flaming wreckage descends (steak tartare, anyone?).

There you are: two lawyers for the price of none, and that's a deal you don't get every day!

The policy of the legislation is to make it easier to recover damages caused by an aircraft to people or things on the ground. The international legal accord underlying this legislation dates from the early 1930s, when flying was still perceived as something new-fangled and voodoo-weird, and it was assumed that aircraft would plummet from the sky, things and people would fall off them etc.

The policy underlying the law seems to me to possess a reasonable degree of social utility and justice. Why should someone who has had a jet engine fall through the roof of his factory have to prove that the engine fell off because someone was careless? Who is the most obvious person from whom to demand compensation? The owner, who has (or used to have) at least one asset.

By contrast, a passenger, paying or not, volunteers to get on board the devilish contraption and to defy the laws of reason and nature by leaving the surface of the Earth. The fool! The pilot (and, if the pilot is flying as a pro, his employer) owes the passenger a duty not to kill or injure him through careless flying, but is not responsible for accidents beyond his control*. The pilot's friends on the ground, who have clubbed together with him to buy the shiny death machine, owe the passenger nothing.

* NB this discussion deliberately ignores contractual conditions of carriage, Warsaw Convention etc, as we are principally talking about accidents occurring in the context of non-commercial flying.

[QDMQDMQDM]

By contrast, a passenger, paying or not, volunteers to get on board the devilish contraption and to defy the laws of reason and nature by leaving the surface of the Earth. The fool!

Thanks FNG and legalapproach -- I appreciate the free legal opinion. You can have a free medical opinion: take two aspirin and go to bed. ;-)

So let me get this straight: the third party on the ground can demand compensation from the pilot / owner / group owners whether there has been negligence or not. The passenger can demand compensation from the pilot, but to get anything from the other group owners would have to prove they have each individually or as a group been negligent?

Going further, if the pilot pulls the wings off in a daring stunt dive I have no duty of care in that context and cannot be deemed negligent, although the pilot can. However, if the wings fall off because we as a group forgot to check they were bolted on then I do have a duty of care and could be deemed negligent. Interesting that the duty of care is contingent upon the type of accident which occurs in the aircraft...

Sorry to harp on this, but I'd rather get it sorted in my own mind now, rather than later!

QDM

[MLS-12D]

I agree with FNG's points, especially the one in which he says that although you may not ultimately be liable, you may nevertheless still be targeted in a lawsuit. It's worth having liability insurance if only to pay your defence costs (although I think that Keendog is rather overdoing it in suggesting that "£10 million would be a minimum amount" of coverage).

One thing that should be mentioned is that most aviation policies will not respond if the PIC doesn't have a valid medical: which could involve a situation where he or she has an ostensibly valid medical certificate but is knowingly flying with an undisclosed medical condition. As always, it pays to know your partners well.

QDM, these unpleasant issues have to be considered, but try not to let them spoil all the fun of flying.

MLS-12D

P.S. Without meaning to imply that the law is completely and utterly arbitrary (which would be going too far) bear in mind that most cases turn upon their individual facts, as proven on a balance of probabilities. Whenever you go to court, there are no certainties, whatever decision X or statute Y may have to say.

[QDMQDMQDM]

QDM, these unpleasant issues have to be considered, but try not to let them spoil all the fun of flying.

Quite so, but at the moment I'm trying to decide whether to join a group (and I really do want to) with £250K third party insurance for a three seat aircraft.

QDM

[keendog]

MLS. I see that you are in the US so may be coming from a different angle - I'm sorry if what I am saying doesn't have any relevance to you BUT
£10,000,000 is not over the top. Having enough money to cover your "Defence Costs" is pointless unless you are talking about (as you may be) the costs of Defending a criminal prosecution.
The fact is that if you negligently crash a plane whilst carrying 3 or 4 reasonably wealthy people and severely injure them or kill them, your liability may well exceed several million (pounds or dollars).
Example. You fly with a friend. You negligently land on boggy field. You nose over. Freind is unluck and damages his back. He is an airline pilot, aged 40, on £50,000 per annum. He loses his Class 1 and loses his job. He requires (or will require, by the time his Solicitors have enlightened him) help performing everyday activities, special beds, etc. etc. His Claim against you could easily be worth a million. Your insurance is £250,000. Your house is worth £500,000. He sues, your insurance covers the quarter mil, you have to sell your house and still owe £250,000.
Believe me, these are not exaggerated figures.
Thats not to say that the relatively low risk of having such a horrible accident makes the risk not worth taking - but if your want to be sure you're not going to lose your shirt £10 million is about right.

[FNG]

QDM: a three-seater? Beagle Pup 150 by any chance? Very pleasant machines. Unless all three on board have been living the healthy, non-lardy lifestyle no doubt encouraged by their doctor, however, a Pup won't happily get airborne three-up with fuel. More of a two-plus-one than a real three-seater.

Hello keendog. Although MLS-12 D is based in the US he is, I gather, a UK solicitor. I understood his last posting to be referring, amongst other things, to the costs of defending an unfounded civil claim.

For any American PPLS reading this, the legal debate here is based on English law, and my observations on risk evaluation are based on the approach to liability and damages generally adopted by English Courts, where decisions are made by Judges rather than by juries of Hostess Twinky-nourished daytime TV viewers [sorry if that sounds like an anti-American comment: it is meant lightheartedly. I am in most (but, especially at the moment, not all) respects a USA-o-phile].

QDM, I wouldn't necessarily be as gloomy in my view of potential exposure as is keendog (although I should point out that (thankfully!) my legal practice does not involve personal injury litigation, so I am not au fait with damages calculations for negligently crocked Captains, whereas keendog may be), but I wouldn't be very comfortable with a level of cover as low as 250K.

Of course, it's possible that a group which chooses to be so economical on insurance premiums does so because it lavishes endless cash on care and maintenance of the aircraft, but on the other hand, it might not...Have you had a look at the books?

It may be that the group you are thinking of joining has just been, up to now, a little innocent in its approach to insurance and might respond sensibly to a suggestion from you that, if you buy into the group, you will expect a commitment to significantly enhanced insurance cover. If the group won't agree to this, but it is otherwise a good group with a good aircraft, then you may face a tough decision, but my own inclination in those circumstances would be to wait for another opportunity to come up, with a group that has a realistic, hard-headed view on insurance.

I agree with MLS-12D. We should think carefully about these things, but shouldn't let them put us off flying.

[MLS-12D]

FNG, you're quite right, I'm admitted in England but don't live or practice there.

keendog, I would be the last person to advise anyone that there is no possible way that they will ever need more than £X liability coverage. However, I still think that £10 million is far more than all but the unluckiest recreational pilot will require. Even in your example (which I don't believe is exaggerated; see postscript), the potential loss of income is only the present value of £1 million, and the non-pecuniary losses would certainly not increase the total potential damages to more than £2 million.

While one can never have enough insurance, it's equally true that the more coverage you buy, the higher the premium. Assuming that one flies a four-seat airplane, there's usually no need for more liability coverage than you have on your automobile (hopefully everyone has more than £250,000 cover on their cars; I quite agree that less than £1 million would be inadequate).

Re "defence costs": I was not referring to criminal or quasi-criminal matters. What I was getting at is that even in cases where the defendant has no real liability exposure and/or no significant damages exposure, the legal fees and disbursements can quickly mount up. I'd prefer to have my insurer pick up that tab, rather than pay for it out of my own pocket.

MLS-12D

P.S. A few years ago, I was consulted in a glider accident involving a 747 captain in his 50's. He lost his medical and allegedly incurred a huge income loss. Although the accident happened in Canada, the plaintiff was based in the US and commenced his action there. As I recall, it was settled for policy limits, which I believe were C$1 million.