Do you need a lawyer?

You’ve known your potential airplane partner for the better part of your flying life. Do you really need to get a lawyer involved in the transaction?

If you want to be sure your personal assets are protected in the event of an accident, the answer is yes.

Some pilots are under the assumption that owning an aircraft in a corporation or an LLC automatically insulates them from liability. It’s a little more complicated than that, says Phillip J. Kolczynski, a lawyer in Southern California who has 30 years experience in aviation and business law. He notes he often finds himself explaining the difference between an owner/operator and an aircraft owner.

“If a crash occurs, an owner of an aircraft who is not the pilot of the aircraft, and does not employ the pilot, may have some protection through a corporation,” he says. “The same is not true if the owner is the operator. The reason is that liability primarily attaches for negligent operation of the aircraft versus just ownership. The pilot of a small aircraft is usually the operator.”

Kolczynski suggests that operators and owners find a lawyer who is experienced in aviation liability laws regarding aircraft ownership and operation, as well as the rights and responsibilities of corporations and limited liability companies when it comes to aircraft ownership.

Laws vary from state to state, he notes. “In some states having the airplane owned by a corporation or LLC may protect you personally, if you are not piloting the aircraft,” he says. “In other states, you may not be entitled to such protection. If you are piloting the aircraft the only real protection is insurance.”

Complications can arise if an accident happens outside the state where the corporation has filed. “Then it is a question of which state law will be applied,” Kolczynski explains. “It can get very gnarly.”

A simpler method of protection is for the owners to buy insurance that will cover them in the event of a crash or other mishap.

There are other ways to protect your estate, he notes, “This involves using very sophisticated estate planning tools,” he says. “For that you need to see your estate planning lawyer.

“I tell pilots to buy plenty of aircraft liability insurance,” Kolczynski continues. “I also warn them to pay the premiums and make sure they comply with the policy. For example, most policies state that the pilot has to have a valid medical certificate. What if Joe the pilot knows his medical was invalid because he didn’t report his heart condition to his AME and then there is an accident? The insurance company can deny coverage and the law upholds them. Since Joe falsified his medical information, the carrier may be able to deny coverage. Then the victim’s attorney may be able to go after Joe’s assets or the assets in his estate.”

And don’t be tempted to rely on other insurance. “There are some pilots who think their homeowner, automobile or business liability insurance will cover them for an air crash and that is not true,” he warns.

Kolczynski stresses that the law does not allow insurance companies to deny coverage just because of a violation of the Federal Aviation Regulations.

“The violation must be material, causal and different than the underwriting risks assumed in the policy,” he explains.

For more information: 714-662-2995.

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