The International Cessna^® 170 Association

Del As a business owner of almost 30 years whose insurance company has paid out about 3% of premiums for claims I sure wish no one had ever thought of insurance. I could be debt free if I could get my premiums back. I also believe that doing away with insurance would do away with many accidents as people would soon be more careful. Lawsuits would probably drop as people would start to worry that when the sheriff came to auction your possesions (did he get all your shotguns?) But all that said in our present enviroment a person really sticks his neck out if he operates without insurance. If I were a mechanic there is no way I would make an entry in a logbook without some insurance. Bill K

As an insurance professional for almost 39 years, I must admit I don't ask a shop if they have insurance just as I don't ask the pilot tied down next to me a a 170 or other flyin if they have insurance to protect me. Maybe I should? I hope that if that person causes damage or injury to me or my property that he will either have adequate limits of insurance or be honest enough to belly up to the bar and make me whole out of his pocket if he doesn't have the coverage. I have met very few people during my career in the industry, including myself, that would admit to enjoying or wanting to purchase insurance. Its just a piece of paper, better known as a contract between the insured and the insurance company. I have seen some losses paid by companies I have worked for that I personally would have preferred that they not pay and go to the courthouse, but more knowledgable folks looked at the facts and made a decision. No doubt there have been situations where claims were paid that probably shouldn't have been, but what business can say they never made a business mistake. Insurance is kind like the banking industry, most of us don't particularily like doing business with them, but most of us find it necessary to do so in order to operate. Try borrowing money to build a house, commercial building, a car or truck or a plane without providing the lender with evidence of insurance or collateral of equal value and see how quicky the lender declines the loan. Insurance is simply shifting the risk to an organization that can withstand a loss or losses where the individual probably cannot do so and they like the hardware store, grocery store, etc. are in the business to make a profit for their stockholders.

In addition to, and/or in place of, depending on the state laws that govern, there are ways to protect assets against judgement. For example, one could register the business as a limited liability company and then ensure that this company had no real assets. The tools, machines, vehicles, you name it, could be leased to the limited liability company from another LLC.

You still may need insurance to cover your personal liability as the A&P or A&I, but, if you really wanted to, you could also place your personal assets into certain types of structures that would make collecting on a judgement against you very difficult. Again, much of this depends upon the state you live in and you would need to consult a knowledgeable attorney in your state.

Do I care or consider whether the shop that works on my plane has insurance? No, not at all. I have insurance on my own aircraft and I watch very closely all maintenance performed on my plane. I am much more interested in the quality of the people working on my plane than whether they have insurance or not.

Unfortunately, in this litigeous society that we live in, I have decided that it is too risky from a personal liability standpoint to take anyone who isn't a direct family member up in my plane. I have the usual insurance with $1 mil in liability, but, $1 mil doesn't go as far as it used to. I miss taking friends up (and they miss it too), but, if the "friend" is injured or killed, I'm virtually positive that their heirs would sue, and I can't imagine $1 mil in liability covering a major injury or death. So, I've just decided to "self insure" by not taking anyone other than my wife and kids up.

I know that I could still injure or kill someone on the ground in the even of an accident, but, all risks are just not avoidable if we chose to fly. So, all I can do is minimize them to the extent practical. This was a personal choice, not easy to make.

Curt

The first million is the most expensive. Subsequent, additional coverage is considerably less expensive. If one thinks $1M isn't enough....ask for higher limits. But the real reason for the first $1M is to get the legal expertise the underwriter has working to protect you...as much as it is to meet at least a modicum of responsibility to other. IMHO.

I can't afford to pay $1M to another for the loss of their loved one. But how can I claim not to afford the $700 premium for that liability insurance with a straight face while I fly around in a personal airplane for my own pleasure while putting others at risk?

George is right on. The responsible thing is to carry appropriate liab insurance coverage. It protects you and your family.

I agree that some amount of liability insurance is necessary, but, even $2 or $3 million may not be enough in a wrongful death lawsuit. Jury awards exceed those levels in vehicular and aircraft awards with some regularity.

I feel no moral obligation to carry rediculous amounts of liability insurance, (note - I didn't say any liability, but just rediculous amounts) but, I do feel morally obligated to protect my assets for my family. Florida, (my state of legal residence) has wonderful asset protection laws built right into the state constitution. For example, if your home is your homestead (primary legal residence meeting certain guidelines), you can have a home valued at any amount, and that home is untouchable from all non-govermental creditors and judgements. In addition, any investments in annuities are also completely protected, as are the disbursements from those annuities, without limit in Florida. Thus, if a significant portion of your assets are in your primary residence, annuities, pensions, IRA's and 401k's in the state of Florida, you are virtually judgement proof. (By "judgement proof", I mean that even if a court awards damages against you, there is almost no way for the judgement to be collected against these asset classes.) Of course, you need to work with a Florida attorney familiar with asset protection to ensure that everthing is set up correctly, and also set up in such a way that those assets can be passed to your heirs untouched.

Now, most states do not offer the asset protections available to Florida residents, but, the point I'm making is although insurance is an important component in asset protection, it isn't the only strategy that can or should be deployed. If there are significant assets to be protected, depending upon the state you live in, there may be less expensive and more secure ways of protecting your assets from judgement that can, and should be used in conjunction with insurance.

Curt

CBogle wrote:I agree that some amount of liability insurance is necessary, but, even $2 or $3 million may not be enough in a wrongful death lawsuit. Jury awards exceed those levels in vehicular and aircraft awards with some regularity.

I feel no moral obligation to carry rediculous amounts of liability insurance, (note - I didn't say any liability, but just rediculous amounts) but, I do feel morally obligated to protect my assets for my family. Florida, (my state of legal residence) has wonderful asset protection laws built right into the state constitution. For example, if your home is your homestead (primary legal residence meeting certain guidelines), you can have a home valued at any amount, and that home is untouchable from all non-govermental creditors and judgements. In addition, any investments in annuities are also completely protected, as are the disbursements from those annuities, without limit in Florida. Thus, if a significant portion of your assets are in your primary residence, annuities, pensions, IRA's and 401k's in the state of Florida, you are virtually judgement proof. (By "judgement proof", I mean that even if a court awards damages against you, there is almost no way for the judgement to be collected against these asset classes.) Of course, you need to work with a Florida attorney familiar with asset protection to ensure that everthing is set up correctly, and also set up in such a way that those assets can be passed to your heirs untouched.

Now, most states do not offer the asset protections available to Florida residents, but, the point I'm making is although insurance is an important component in asset protection, it isn't the only strategy that can or should be deployed. If there are significant assets to be protected, depending upon the state you live in, there may be less expensive and more secure ways of protecting your assets from judgement that can, and should be used in conjunction with insurance.

Curt

I'm not arguing with Curt's observations at all, but only continuing the discussion of the subject...

There may be less reason (in Fla) to carry more than some modicum of insurance. (Sounds like Fla is especially generous to property owners....) However it is not my intention (in carrying liability insurance) to cover each and every possibilty in claims made against me. I would hope that any award by a jury of my peers would take into consideration whether or not an injury I caused was deliberate, or whether I had acted responsibly and taken due care to not expose others to reckless behavior or needless risk. I hope my regular flying activites are judged to be careful, and safety-oriented. Not careless or reckless or delibrerately negligent.
But even the best intentions can go wrong, and I personally look back on the day when my state (TX) finally came into modern times and made automobile liability insurance mandatory. The law always said it was required. But they put no teeth into it until they required proof of insurance before license renewal and vehicle tag renewal, and prosecuted non-compliant operators in court. I'd welcome the same serious view in every operation including aviation, marine, etc. IMHO

(Now before anybody gets in an uproar over it...let me say that the key phrase in the (TX) law is ...."financial responsibility". The law provides that anyone operating a vehicle in TX shall demonstrate "financial responsibility". One may do this in several ways...the simplest is purchasing insurance to cover one's liabilities. Another is to provide "financial responsibility" proof to the state, that one has the fiscal wherewhithal to pay the minimum damages to others, as required by law. (presently a ridiculous $25k. That would be unlikely to cover the average car...should I cause your car to be totalled,... much less your hospital, pain, suffering, etc. etc.)

Of course, THIS msg thread was about shop insurance. Let me give you a scenario: John Doe has a Debonaire and the local small shop does not have in-stock the specially numbered $32 bolt with a unique Beech part number that ties the left and right elevator torque tubes to each other. It looks like an ordinary $1 AN4-32 bolt.... So the shop, rather than delay the customer, installs an ordinary AN4 bolt, signs off the annual and sends the customer on it's way. (Unlike the AN4 bolt, the special bolt actually is NDT tested prior to certification and part number assignment.)
The customer is a charter operator who charges me money to take my daughter back to college. She's the pride of my life, and in the beginning of a promising career, and mother of my ony grandchild.
The ordinary bolt, in a service for which it was not intended...but installed by a shop in a careless manner in order to make a buck..., shatters in tubulence, and the tail falls off the airplane and my daughter (mother of my 2 year old grandchild and wife of a young husband) is killed, along with the unsuspecting pilot (husband of another young woman) and the airplane crashes into a busy street killing three others and burning a kid beyond recognition.
The installing mechanic maybe did or maybe didn't realize the special part number bolt that ordinarily is to be used in that application wasn't an ordinary AN4 bolt. The shop owner had no knowlege his mechanic did anything out of the ordinary until the accident investigation.
Does the shop owner need insurance? Is he a responsible, honorable person if he has chosen not to have any? Even if he has a good reputation locally, do you want his shop working on your airplane after you find out?

(PS- The scenario is imaginary. The bolt is not.)

The problem with mandatory auto insurance (at least in California) is that it doesn't stop people from doing negligent things. We have a huge number of unisured, unlicensed, un-documented drivers in California. Documentation such as an insurance card can be bought on the streets. Heck you can make one on your computer! The point is that the "law" doesn't offer the protection that some imagine.

Regarding the bolt scenario, I was (perhaps mistakenly) under the impression that Del was a sole- proprietor with no employees, and that he oversaw all of the work that was performed in his shop. I also am under the impression that he wouldn't substitute parts in the suggested scenario.

Having said that, let's suppose that the suggested scenario actually happened. How much insurance is "enough"? What are your loved ones really worth? I suggest that you won't put a price on the loss, which is why the attorney you hire is going to go after the aircraft manfacturer for designing an A/C with an unusual bolt that looks like an AN bolt. And he is going to sue the pilot that intentionally flew into the turbulance, and the operator of the charter, etc, etc, etc. The meager insurance that the shop had is not going to be enough to satisfy your loss. Especially after your lawyer takes his cut.

regards

~Marc

And remember, even though many policies have a 1 million liability limit, there is often a $100,000 limit per person.

Just wanted to point that out. Many times we incorrectly think we've got a higher limit than is actually provided for our passengers.

Plummit wrote:
"Regarding the bolt scenario, I was (perhaps mistakenly) under the impression that Del was a sole- proprietor with no employees, and that he oversaw all of the work that was performed in his shop. I also am under the impression that he wouldn't substitute parts in the suggested scenario."

I am sole proprietor with 3 employees, 2 have 16 years and 1 has 14, not counting their schooling. Our inspection process includes a second employee and then the 3rd inspection being myself, at each stage of the work in process and at final inspection/return to service. My guys are truly masters at what they do. These mechanics are paid premium for their expertise. This alone is a form of insurance for you, myself and the company. And I personally order all parts and verify installation eligibilty.

Again, I'm not asking what the moral, ethical or honorable thing to do is.

I want to know the opinion of you, the aircraft owner. As for me, I have never ask a service provider if they are bonded, insured etc. I consider it to be my responsibility that when I hire someone to build my home, change tie rod ends on my car etc., I will hire the best for the job.

My original question "Do you care...?" was assuming all things were equal, including the experience and quality conscious attitude of the mechanics working the aircraft. Unfortunately, in the real world these attributes are not equal. As for morals, if a shop owner finds himself needing to raise shop rates to cover rising cost, or reduce overhead, should he: A) Raise shop rates, with the risk of loosing new business and some existing customers, or B) Consider lowering insurance coverage or dropping altogether, while retaining top notch mechanics at premium wages, or C) Retaining insurance in an amount considered “morally acceptable” while freezing or lowering wages, benefits etc., risking the loss, or ability to hire, choice mechanics? Any of those options could have a negative impact on the business, either by loosing customer base or quality employees, or both. So I bring my question to those whom I am in business to serve.

I am not facing this problem now, nor do I expect to in the immediate future. We will all have an interest in the results of insurance companies favoring shops who refuse to work on older aircraft. Integrity, honor, and morals can be argued from both sides of this fence.

Fellow members:

You all bring up excellent points and this has been a good discussion. It is a reality that as pilots, we not only need to pre-plan and manage numerous risks associated with each flight, but, we also need to pre-plan and manage, to the best of our ability, the risk of being a defendant in a negligent death law-suit.

The major limitation of liability insurance is that if you were to carry enough to cover the amount of jury awards being given out today, it would be prohibitively expensive. I work for a fortune 50 company and looked into what it would take for them to allow me to fly my own aircraft on company business where I could save about 1/2 the time on trips under 300 miles. Their response was a minimum of $10 mil in liabilitty with them listed as the primary beneficiary. I tried breifly to line up that type of insurance and it will come as no surprise, I couldn't find anyone willing to write such a policy. Even if I could get $10 mil in liability, it would cost too much. (I'm instrument rated, have over 1,500 hours, and never had any accidents where I was at-fault or any FAA, NTSB sanctions, etc. But, noone would write anywhere near $10 mil.)

Therefore, I've come to the opinion that liability insurance is a required first step in any asset protection strategy for all of the reasons pointed by others in prior comments. Not only does it offer you some level of asset protection, but, it also ensures that your insurance company will at least make an effort to defend you (we hope) and it also meets some of our obligation to the people we may put at risk.

However, since it is financially not practical to carry enough liability insurance to cover the amounts of today's jury awards in a wrongful death case, I believe it prudent to take additional steps to protect your assest, whether you are in the maintenance business or just a recreational pilot. Limited liability companies and corporations were established by states for just such a reason...so business could be conducted while limiting exposure of business and personal assets. I don't see anything wrong with using these vehicles...that is why they were created. Just make sure that you have a good attorney set them up. Established correctly, they can offer significant asset protection to a sole proprietor, set up incorrectly, they may offer no protection at all.

For individual recreational pilots, in addition to insurance, the reality is that if one has substantial personal assets to protect, they will need more than liability insurance if they really want those assets protected. That is why I have deployed many of the strategies available in my state, and also why I have chosen to limit my exposure by not taking anyone but family members up in my plane. It is really too bad but, a personal financial choice that I felt I had to make.

Regards,

Curt

Wow!
I was looking back at some of my old post, and realized this wasn't such a dumb question after all. Thanks for all the replies.

Plummit wrote:The problem with mandatory auto insurance (at least in California) is that it doesn't stop people from doing negligent things. We have a huge number of unisured, unlicensed, un-documented drivers in California. Documentation such as an insurance card can be bought on the streets. Heck you can make one on your computer! The point is that the "law" doesn't offer the protection that some imagine.

Regarding the bolt scenario, I was (perhaps mistakenly) under the impression that Del was a sole- proprietor with no employees, and that he oversaw all of the work that was performed in his shop. I also am under the impression that he wouldn't substitute parts in the suggested scenario.

Having said that, let's suppose that the suggested scenario actually happened. How much insurance is "enough"? What are your loved ones really worth? I suggest that you won't put a price on the loss, which is why the attorney you hire is going to go after the aircraft manfacturer for designing an A/C with an unusual bolt that looks like an AN bolt. And he is going to sue the pilot that intentionally flew into the turbulance, and the operator of the charter, etc, etc, etc. The meager insurance that the shop had is not going to be enough to satisfy your loss. Especially after your lawyer takes his cut.

regards

~Marc

Since it's been brought up agian...(Thx Del)... let me respond to you on this point you made, Marc.
The purpose of a shop holding a liability policy is NOT to provide the injured party's family ALL the loss of the loved one's life was worth... THAT is the purpose for that family having a LIFE INSURANCE policy on family members at their OWN expense.
The purpose of a shop having liability insurance is to protect the SHOP (and it's owner, etc.)

As for Del... I don't care if HE has insurance or NOT... I'd rather HIM work on my airplane that ANY OTHER SHOP regardless of how big they were or how well insured they are. And THAT is in MY HONEST OPINION!

I used to have a sign to put in my airplane that said, "WARNING. This pilot/owner operates NAKED! Don't get too close1"

I didn't wan't to start rehashing the topic. When I realized I had been posting here for 5 years (my how time flys) I started using the search feature to look at old post (to see what kind of stoopid things I've said ). I was surprised because I don't remember seeing all of the latter post on this topic, way back when. In fact, I had ask this question on another type forum and had forgotten I posted here as well. I do appreciated EVERYBODIES thoughts on this. It was a serious question, with honest replies. Thank you all.