General Aviation Liability Insurance Is Not Mandatory…But It Should Be

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In the United States, small planes and helicopters operating under general aviation rules are far more likely to be involved in accidents than commercial aircraft operated by airlines.

Many different factors contribute to this-most notably, commercial pilots often have more experience than general aviation pilots and fly aircraft equipped with better technology and in superior mechanical condition.

But while general aviation accidents, like those involving small personal planes, far exceed the number of commercial accidents, no federal law exists requiring general aviation aircraft owners and operators to carry liability insurance to cover damages in the event of a crash. If you think state laws cover this issue, think again: only 11 U.S. states have some form of liability insurance requirement or aircraft financial-responsibility requirements.

What does this mean?

The lack of federal and state oversight means that passengers are often forced to cover the costs of their medical expenses if they sustain injuries in a general aviation accident. Likewise, the burden to cover the cost of property damage stemming from a general aviation crash falls to the property owners themselves, rather than the responsible party (or parties). Perhaps worst of all, the families of victims who lose their lives in these types of crashes have limited recourse to pursue damages.

The lack of a federal liability insurance mandate stands in stark contrast to commercial flights. Commercial carriers are required by federal law to carry accident liability insurance to compensate victims (or their next of kin) for personal injury, death and property damage resulting from an accident.

Commercial carriers must have a minimum policy of $300,000 per passenger and a total per involved aircraft for each accident occurrence of $300,000 times 75 percent of the total number of passenger seats. The policy must also include $300,000 for property damage and bodily injury or death for non-passengers with a minimum required coverage of $20 million per occurrence.

Aviation Attorneys Say Now is the Time for the U.S. to Require General Aviation Liability Insurance

Over the years, the aviation attorneys at Baum, Hedlund, Aristei & Goldman have become intimately acquainted with the fallout from general aviation crashes in which aircraft owners, operators, pilots, maintenance facilities and mechanics do not have any liability insurance, or are woefully underinsured.

It is heartbreaking that general aviation passengers harmed by tortious conduct can be left with little to no recourse to address their grievances. As a nation that prides itself on leading by example, the U.S. has failed to take the issue of general liability insurance for general aviation seriously.

"Far too many innocent people have suffered through two devastating events; first when they or a loved one are injured or killed in an aviation incident; and second when they learn that there is little or no insurance and no assets," says aviation attorney Timothy A. Loranger.

Loranger and other aviation attorneys at Baum, Hedlund, Aristei & Goldman assisted the Government Accountability Office (GAO) in its 2015 report on the lack of liability insurance requirements for general aviation.

The report provides a few specific examples of general aviation accidents with no liability insurance:

  • A pilot and two passengers aboard an experimental aircraft died when the pilot lost control of the plane, struck a series of trees and crashed. The estimated cost of the damages was $18 million. The pilot did not have liability insurance.
  • The pilot and a passenger in an experimental aircraft died when their plane crashed shortly after takeoff. Before the accident, FAA-licensed aircraft mechanics performed maintenance and repairs on the aircraft. Neither the pilot nor the owner of the aircraft had liability insurance. The estimated cost of the personal injury and property damage was $3 million.
  • A passenger lost most of her left arm after disembarking a commercial aircraft. A commercial operation owned the aircraft but did not have liability insurance. After the company sold the aircraft, hangar and other assets, the case settled for about $40,000. The estimated cost of the victim's medical expenses was more than $1 million.

General Aviation Safety Will Improve with Liability Insurance Requirement

If the Federal Aviation Administration (FAA) mandated that all general aviation owners and operators carry liability insurance, the insurance companies would undoubtedly require more robust training for pilots because the policy underwriters would be assuming the risk in the event of an accident.

To take on this risk, it is highly likely that insurance companies would enact:

A safety standard for all general aviation pilots would have to maintain. More in-depth flight training for pilots. A stronger requirement for minimum flight hours before issuing a policy. Continued education and pilot education requirements to maintain a policy.

Put simply, a liability insurance mandate for general aviation would make the skies safer, because pilots would be more experienced and better trained.

Which U.S. States Require General Aviation Liability Insurance?

A total of 11 states impose either liability insurance requirements or aircraft financial responsibility requirements that apply to general aviation owners and operators.

Minnesota is the only state that requires nearly all general aviation owners to have liability insurance. All aircraft owners in the state must have proof of insurance, with the minimum coverage requirements, when registering the aircraft with the state.

Hawaii, Maryland, Oregon, and Rhode Island require general aviation aircraft owners and operators to have liability insurance if they either hangar their aircraft at a state-owned airport or operate their aircraft for commercial purposes (leasing or renting out aircraft, for example).

California, Connecticut, Indiana, Massachusetts, and Virginia general aviation aircraft owners and operators are required to demonstrate aircraft financial responsibility by showing differing combinations of liability insurance, a bond, deposits of money or securities, or a letter of credit.

North Dakota has an aircraft financial responsibility requirement, but does not specify how civilian aviation pilots, owners and operators should demonstrate financial responsibility to the state.

Alabama, Alaska, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming do not have provisions relating to general aviation aircraft liability insurance.

The Time is Now to Enact a Federal Liability Insurance Mandate for General Aviation

With no federal mandate and limited state requirements for general aviation liability insurance, too many pilots, owners and operators of aircraft are uninsured or underinsured. This demographic has not demonstrated a willingness to voluntarily purchase liability insurance, which means innocent victims of general aviation accidents are left to deal with the financial fallout with limited to no recourse to recover damages.

This failure to enact a federal mandate to protect general aviation disaster victims and their families has lasted for far too long. It is time for Congress to act and change the status quo.