Liability - Is There A Solution

Here's a copy of a post on this subject that I made a few months ago:

 

Well...this is kind of a "Bad News/Good News" situation.

The bad news is that there *is* no way to completely shed one's vulnerability to a lawsuit. 

Get the buyer to sign a waiver?  The buyer cannot waive his spouse's or children's right to sue, nor will the waiver help you if he re-sells the plane.

Disassemble the plane and sell it as parts?  The makers of aviation parts are sued all the time!

The fact is, if someone *wants* to sue you, they will, and there's no way to dance around it.  Even if you got them to sign an ironclad waiver, their suit can claim you mis-represented the condition of the parts and thus the waiver should be nullified.

The good news?  Well, the good news is that lawsuits against homebuilders are extremely rare.  There have been numerous suits against kit companies, but I'm only aware of one against a builder...and the builder was dismissed from the suit very early.

It all boils down to "deep pockets"...most homebuilders don't have them.  The typical lawsuit after a crash is handled on a contingency basis, where the plaintiff's attorney is paid a rather hefty portion of any settlement.   If the judgment puts the defendant into bankruptcy, the plaintiff's attorney will have expended hundreds of hours for nothing.  The builder of a typical Pietenpol, Baby Ace, T-18, and other older homebuilts shouldn't have much to worry about.   The vast majority don't have the kind of liquid assets that would attract an attorney on a contingency basis.

This doesn't even get into the issues involved with convincing a jury that someone who buys an "amateur-built" flying machine could have any expectation of  a given level of quality. The FAA actually does us a favor here, by requiring us to put "Passenger Warnings" on our airplanes that warn any or all occupants that the aircraft does comply with federal safety standards.

HOT POTATO!

Don't you just love it...  Anyone can file a law suit against anyone anytime for just about any reason...  Everyone is loooking for that pot of gold at the end or the jury box!

The problem is we need reforms in our tort laws.  it's one hting when a jury decides to award reasonable compensatory damages...but when the jury award multi-million dollar punitive damage10-20-100 times the compensatory damage that's when the legal system sohws just how broken it is.  I believe everyone regardless of their position in life should be entitled to  have their day in court but what I don't agree with is the ridicuous punitive awards.

EAA has an insurance plan for EAA Member that includes insurance coverage for up to 12 months after you sell you airplane.  This insurance is a special expansion that is included as a reult of EAA membership.  To my knowledge though I don't know of any litigations that have been successfully brought against a homebuilder.

My suggestion is tlak to one of the members of the EAA Legal Advisory Council.  Find out what you might be able to do with a release.  Next if you decide you want ot buy insurance see about getting the EAA Aircraft Insurance Plan with the expanded insurance coverages.

Bob

This issue has been debated many times in many different forums, including often at AirVenture.  EAA people have given very different answers to the same question, so that's not necessarily helpful. What it comes down to is your personal tolerance for risk vs. the cost of of minimizing that risk.

The best liability protection probably comes from removing things you have not made yourself from your plane (like engine, prop, instruments, radios) and selling them.  The rest of the plane should then be destroyed.  You can thereby recover a fair portion of your investment and rest assured that the chances of getting sued are pretty slim.  The downside, of course, is that you have paid a pretty high price for liability protection, but maybe it's worth it to you.

The EAA insurance plan is great, but it is limited. After that you're on your own.

Some people have concocted some fairly elaborate legal arrangements to avoid liability, but as far as I know, none has been seriously tested. The benefit of these is the harder you make it on a potential litigant, the less likely he/she is to pursue you. The downside is that they are expensive to structure and maintain, and may not work against a really determined adversary.

Perfect protection from liability in anything is pretty elusive. In the end each person must determine how much they risk are willing to take.

We have organized a webinar on this subject scheduled for 5/12/10 - Pat Phillips of the EAA Legal Advisory Council will speak about "Liability of Selling Your Homebuilt".  Sign up here.

It would be interesting to know how many members have elected not to build because of the concern over liability.  I have got to admit that I have.

What would it take to implement change?  Could EAA tilt the pendulum toward a reasonable resolution of liability issues.  Is it even on their agenda?

  

I gave serious thought to the litigation possibility before I started building.  For me, I equated my project the same as an automobile purchase. Now, this may seem blasphemous, but think of it this way - at some point, that shiny new Escalade you just bought is going to be worth no more than $500. Why must we treat an airplane as an investment as opposed to an expense that depreciates each year? 

As the other poster said, sell the "purchased" products and junk the rest. Of course, I'm building a Sonex, which is priced closer to a Chevy than a Cadillac, but I have no intention of ever selling it. I may give it to my son, or I may just keep it in my garage once I can no longer fly it. Maybe I'll sell the good stuff and just cut it up. I know firsthand of at least one builder in my chapter who did just that.

"I equated my project the same as an automobile purchase."

Carl, if you have a very reliable income stream, are absolutely certain that you will want to maintain ownership of the aircraft over two decades or more, can cover all of the associated costs involved, then this argument may be valid.  Keep in mind though, that unlike your car, you effectively will not be able to trade-in or sale your airplane for decades.

Automobiles and airplanes are in completely different categories unless flying is your business.  When justifying cost, a reasonably priced automobile is more of a must then a homebuilt aircraft.  A Sonex kit runs about $15,000, add in the engine and instruments and you are way up there in the Escalade price range.  I am in the Corolla/Saturn category not Escalade.  Effectively, it is less costly to buy a ready made, airworthy 140, 152 etc. around $20,000 - $25,000 rather than build your own LSA.  Of course the aircraft would not be new, as fast or fancy as the new designs, but liability would no longer be an issue. 

The experience of having to take care of ailing relatives, the unpredictability of the economy and life in general, has made me skittish.  What happens if you are suddenly unable to fly or afford your aircraft?  Cutting it up to avoid liability is simply too costly.  The shinny new car you speak of in your example will be worth $500 if and only if you retain ownership for 20 years or so.  Say that your homebuilt originally cost $50,000, you need or want to sell it after 5 years, you sell what parts you can for $10,000 and cut up the rest.  That is a $40,000 loss!  The Escalade would be still be worth around $20,000.

In my case, I would want to build an aircraft strictly for the experience of doing so.  Helping someone else with a project is something I have done in the past, but it is not the same as fabricating one's own from start to finish.   

My plan seems to be to take about half of my adult life to build my Starduster Too Biplane, then fly it for a few years before I die. The Wife (widow by then) will have to decide what to do with it, along with abunch of other stuff...maybe she can get an oversized plot and bury me in it?? Or, maybe she could hire some adventurous soul to fly it over the coast with my ashes strapped in the front pit, and parachute out after pointing the airplane toward open water....

I don't think I could ever dismantle it after spending so many years building it.

For what its worth, I think this subject is outrageously overblown. If your that worried about getting sued, how do you avoid exposure in the rest of your life? You're insured, you say...well all insurance has limits, and in today's world a million dollars worth of liability isn't going to go very far if your teenager runs the mini van through a school bus.

I've heard one or two stories about someone trying to sue a homebuilder, but never heard of anyone being successful. I look forward to the legal eagle's comments.

Dave

Legal Eagle?

David, your commentary is sad though true for way too many builders, and I sincerely hope that your project will meet and exceed all your expectations.

The many benefits you enjoy today in everyday life are due to  "outrageously overblown"  responses to issues of importance.  Most everyone will agree that the liability issue is one that needs fixing.  But, change does not occur on its own.  The point is that if you are passive on the subject, and it happens that "your teenager runs the mini van through the school bus", and you suddenly find yourself in bankruptcy though you carried a million dollar liability policy, then you should have nothing to complain about.

Yes you are right, life is full of liabilities.  But, one should not bury his head in the sand and simply accept the status quo.  Sooner or later, what goes around comes around and you may be one it happens to.

In conclusion, much has been said in this thread.  Good and valid comments were made.  Personally I am looking forward to next month's webinar on the Liability of Selling Your Airplane.

Bernie

Liability is a huge concern to just about anyone involved in aviation.  Unfortunately, there just isn't an easy answer.  As a CFI owner/operator (I provide the aircraft also), I have the option of paying an exorbatant insurance premium (approx 1/6th the hull value) every year or being exposed.  If I purchase a second aircraft w/ the same hull value, my premium doubles.  Then I would be paying 1/3rd the hull value of one aircraft to insure two for just a single year.  Why not just skip the insurance and buy an aircraft every 3 years?  Because of the slim possibility that I'll get sued.  It may never happen, but if it did and I didn't have coverage, I'd be wiped out.

Tort reform is needed.  From what I've read, I like England's process.  You sue and loose, you pay the bills for plantiff and defendant.

I totally agree, Shannon.  Too many 'get rich quick' law suits are brought because the complaintant has nothing to lose.  "Give it a shot and if I win, I'm set for life - if I lose, I have risked very little"

Another aspect of this is that the lawyer representing the complaintant stands to make a tidy sum either way.  Limiting the amount a lawyer can recover from a law suit, would also help to reduce the number of legal actions brought for less than major injuries.   (Any lawyers on this forum - I am not talking about you, just the guys who bring frivolous law suits)

Actually, no...the biggest abuse has been in contingency lawsuits, where the plaintiff's attorney only gets paid if they win.  Generally the agreement is that the lawyer will get a huge percentage of the settlement...around 33%-50%.

The vast majority of these cases in aviation involve actual injuries or death, so I don't quite agree with the "has nothing to lose" comment.  Usually, somebody HAS lost something.  The problem, too often, is that the suits "shotgun" the related parties...a non-IFR pilot flies into clouds and crashes, and the widow sues the aircraft manufacturer, the engine manufacturer, the vacuum pump manufacturer, the guy's CFI and the last four A&Ps to touch the airplane. They usually eventually get dismissed from the suit, but they still have to pay all their legal expenses to that point.

A "Loser Pays" system has its attractions, but unfortunately, that would tend to favor huge corporations over "the little guy."  Some lawsuits are justified, but results are never guaranteed. 

What I'd like to see is a penalty that'll cut down on the "shotgunning."  An example would be "loser pays" if a participant is dismissed from the suit prior to the final judgment.  So if the widow sues the guy who made the wheel chocks, he can get his attorney costs paid if his attorney gets him dismissed.

It's like most of the socio-political ills of the world:  No question there's a problem, but a blanket solution will likely cause more problems than it solves.

 

One of the easiest ways I can see to short-circuit some of the lawsuit insanity would be to actually permit the NTSB reports as factual evidance in court. I know currently they are not allowed due to the encouragement of open reporting for safety purposes, but I can't think of any better analysis to present to juries that indicate that the pilot was the usual suspect in the accident causal chain!

Good points, Ron. 

Yeah, Ron, you kinda said what I meant only more understandably.  Guess you thought it through more fully than I did before hitting the keyboard.  Logic vs emotion again