Do you have maintenance insurance as an A&P?

[edessa]

I'm asking because the last few years I have met a few technicians that worked side jobs or were traveling techs but did not have insurance. A couple of them said that insurance never crossed their mind.

 

[Bell206]

A couple of them said that insurance never crossed their mind.

Didnt cross their mind... or couldnt afford it?

 

[Punkinhead]

I know a couple who take the "can't get blood out of a turnip" approach so don't see the need for insurance.

 

[edessa]

Didnt cross their mind... or couldnt afford it?

Probably both. I'm the DOM for a corporate flight department that doesn’t fly much and looked into getting insurance for side jobs. Quote for making up to $10K per year was $4550-$5200 per year for insurance.

 

[Checkout_my_Six]

I do my work naked. So all is good.

 

[edessa]

I do my work naked. So all is good.

That is always an option.

 

[Bell206]

Quote for making up to $10K per year was $4550-$5200 per year for insurance.

Interesting. Don't quite follow the "making up to $10K per year" part but any actual aircraft mx insurance premium south of $10K would be great especially for a freelance mechanic... at least in my experience. Just prior to my retirement from my Part 135 day wrench job, my side business mx insurance premium was north of $11K. Granted it was as a freelancer vs a domiciled shop which was in the $7-8K range, but the only 2 underwriters my broker could find at the time would only only sell me a "hangar-keepers" policy which I could not claim on 2/3's of it as I didn't store aircraft nor sell fuel. So any premium at your estimated cost would be a steal unless the market has dramatically changed in the last 6 years.

 

[Ryan Klems]

Just renewed my policy. Was just a little over $15k for the year. Products/Hangarkeeper/Premise liability. Have a separate policy that runs ~$600/yr for property insurance (tools and equipment). Last year was just under $10k, rates did go up this year, but I also increased my coverage. Not having insurance really isn't really something I'd consider, it protects me, my customers and those that work with me.

 

[schmookeeg]

I have deliberately stuck to low-liability work -- Pre-buys, and working on my own plane mainly. I have quote in hand at $7,900 for 100K in work from my broker. So for me to strike out as a paid A&P, I will need to amass at least that much work.

I have only recently begun to consider -- if I create a maintenance problem on my own plane and crash it -- what coverage even exists -- do they pay me and then subrogate against me to get the money back?

(I will be asking the broker soon, it only occurred to me today as I was elbows deep in my RHE's induction system)

 

[mondtster]

When I had a shop I had insurance. Now I just do work on airplanes I have a vested interest in, in an attempt to limit my liability.

 

[FORANE]

Just another sign the system is flawed.

 

[Checkout_my_Six]

Just renewed my policy. Was just a little over $15k for the year. Products/Hangarkeeper/Premise liability. Have a separate policy that runs ~$600/yr for property insurance (tools and equipment). Last year was just under $10k, rates did go up this year, but I also increased my coverage. Not having insurance really isn't really something I'd consider, it protects me, my customers and those that work with me.

either you have a large shop +$1M/yr.....or a poor business man.....lol

 

[bflynn]

Form a corporation, rent them your tools and don't carry insurance on the corporation. If the corporation gets sued, they are no assets to take, so you aren't worth suing.

Yes, there are still risks. You can you manage those by keeping your personal assets well distanced from the corporate assets. It also helps if you have more than one employee.

Also need to be careful with tax treatment, you have to get paid a fair salary before you can take dividends (at a lower tax rate) from the corporation.

 

[idahoflier]

what coverage even exists -- do they pay me and then subrogate against me to get the money back?

Would be interested to hear your findings! As a side note, how does this work in the EAB world if a hull claim is the direct result of negligent maintenance by the owner?

 

[Kristin]

Form a corporation, rent them your tools and don't carry insurance on the corporation. If the corporation gets sued, they are no assets to take, so you aren't worth suing.

Yes, there are still risks. You can you manage those by keeping your personal assets well distanced from the corporate assets. It also helps if you have more than one employee.

Also need to be careful with tax treatment, you have to get paid a fair salary before you can take dividends (at a lower tax rate) from the corporation.

If you name is in the logs or you provided advice or any sort of assistance, the corporation will not help you when they sue you as an individual.

 

[bflynn]

You mean when they try to ignore your status as a corporate officer and try to personally sue you for work performed on behalf of a corporation.

If that is true then corporations are useless.

 

[Kristin]

You mean when they try to ignore your status as a corporate officer and try to personally sue you for work performed on behalf of a corporation.

If that is true then corporations are useless.

Corporation is useless in this case as you put your name on it. You could be working for Boeing and you can be sued individually if you signed something, worked on something, or could otherwise be arguably negligent. The only difference is that Boeing as your employer is also on the hook and owe you a defense and to indemnify you. Boeing has the resources to make that work. Your company that had no other purpose that to protect you from liability does not have the resources to protect you.

Corporations are primarily to protect the investors who had no role in any alleged wrongdoing. Of course, they have organizational uses as well, but that isn't the subject.

 

[Jdm]

I’ve had this discussion with a fellow A&P IA friend many times. He has a crazy but brilliant strategy. He doesn’t own anything. Everything stays maxed out on mortgage. Shop, tools, house, mx truck, everything. He’s constantly borrowing even though he could easily pay for everything out right. He only keeps enough in the bank to pay the bills. Profits are pulled and stashed away in such a fashion that it would literally impress Pablo Escobar!

 

[Tom-D]

I’ve had this discussion with a fellow A&P IA friend many times. He has a crazy but brilliant strategy. He doesn’t own anything. Everything stays maxed out on mortgage. Shop, tools, house, mx truck, everything. He’s constantly borrowing even though he could easily pay for everything out right. He only keeps enough in the bank to pay the bills. Profits are pulled and stashed away in such a fashion that it would literally impress Pablo Escobar!

He may in debt to pay libel cause estates. All the judges may apply any amount they please.

 

[Checkout_my_Six]

As my late FIL would say......fifteeeeeen yeeeears ....and I haven’t lost a customer yet. Lol

 

[Bell206]

He has a crazy but brilliant strategy.

He must live in state that doesn't protect his house or retirement from creditors/settlements. But unfortunately that strategy doesnt protect you from future income garnishments provided he makes more than a nickel a day. Know a couple 1 man support shops that operate without coverage but pay cash for all equipment, etc. and keep no inventory. Have seen one shop go through 2 investigations and the opposing side didn't give him a glance due to no deep pockets to pursue. But to each their own. I didnt have that option in the past as some of my clients required insurance for me to work on their aircraft.

 

[Kristin]

I’ve had this discussion with a fellow A&P IA friend many times. He has a crazy but brilliant strategy. He doesn’t own anything. Everything stays maxed out on mortgage. Shop, tools, house, mx truck, everything. He’s constantly borrowing even though he could easily pay for everything out right. He only keeps enough in the bank to pay the bills. Profits are pulled and stashed away in such a fashion that it would literally impress Pablo Escobar!

Might work, and then again it might not work. If the plaintiff's attorney is energetic enough trying to collect a judgment, the debtor can be hauled in front of the judge to provide an entire accounting. One also has to wonder if paying the interest on all the loans is cheaper than the insurance.

 

[Geosync]

I have deliberately stuck to low-liability work -- Pre-buys, and working on my own plane mainly. I have quote in hand at $7,900 for 100K in work from my broker. So for me to strike out as a paid A&P, I will need to amass at least that much work.

I have only recently begun to consider -- if I create a maintenance problem on my own plane and crash it -- what coverage even exists -- do they pay me and then subrogate against me to get the money back?

(I will be asking the broker soon, it only occurred to me today as I was elbows deep in my RHE's induction system)

I’m in claims. You cannot file a liability claim against yourself as you are not a 3rd party. Your standard hull policy would pay for the crash but no subro. No different than backing your car into your plane, its just a hull claim, pay and done.

To the initial question, many independent mechanics don’t have coverage because it isn’t cheap. I used to work for a guy that went independent and didn’t bother keeping coverage. When I became an adjuster, I saw what CAN happen if an A&P doesn’t have coverage and causes an accident. A guy didn’t secure a fuel line on a plane, and it ended up burning up to a crisp on the ground. We had to go after him because it wasn’t a small amount of money. He didn’t pay the full $200k plus, but he did pay $50k or so. I have also had claims that were a small amount and not worth it to go after him, because a few days of attorney payments would exceed the loss.

The thing is, the owner of the plane get screwed, because his/her policy pays the loss and in theory his/her premium goes up from the beancounter’s point of view. That’s not fair to them, so we have to go after the responsible party.

I always tell my my fellow A&Ps to keep coverage. Sure you will probably skate by, but you may not, and it may be expensive. If there are fatalities involved, you WILL be paying something out of pocket, even if you are not responsible. When a crash happens, the lawyers sue everyone, and if your name is in the log book from that annual 5 hours ago, that means you. An insurance policy pays for legal defense, and that alone is worth it. I’ve been with the NTSB in repair shops after a crash, flipping through logs while the owner is sweating it out in the next room. And I’ve literally been at wreckage inspections with plaintiff lawyers who proclaimed “YES, there is the smoking gun! I’m going after that mechanic and maintenance facility!!”

Will the worst case happen? Probably not to you, but it does happen, and quite a bit.

 

[Tom-D]

Lawyers look for the deep pocket. If that isn't you, don't worry.

 

[schmookeeg]

I’m in claims. You cannot file a liability claim against yourself as you are not a 3rd party. Your standard hull policy would pay for the crash but no subro. No different than backing your car into your plane, its just a hull claim, pay and done.

I like the sound of that My broker is still reviewing policy language and getting a clarification from the underwriter. When they get back to me with an answer that matches yours, I'll rest easy -- on the strength of my broker's E&O insurance if they get it wrong

 

[schmookeeg]

Lawyers look for the deep pocket. If that isn't you, don't worry.

Even at lawyer billing rates, it costs about five bucks to add my name onto some junk lawsuit, and I'd rather spend insurance company dollars on my defense. BTDT.

 

[Kristin]

Lawyers look for the deep pocket. If that isn't you, don't worry.

You are assuming that the plaintiff's attorney hires an investigator to try to decide of you have any money to go after. Not bloody likely! They will add everyone and then sort it out with discovery. In the meantime, you will have to hire a lawyer to answer the complaint, respond to written discovery, and then try to get the plaintiffs to let you out of the suit. Kiss at least $25K goodbye. Now you can ignore the suit and let them take a default judgment against you. Maybe they come after you and maybe they don't work too hard at it. But try getting a mortgage, etc, which a massive judgment on your credit record.

 

[MooneyDriver78]

Even at lawyer billing rates, it costs about five bucks to add my name onto some junk lawsuit, and I'd rather spend insurance company dollars on my defense. BTDT.

I think he’s not going to fight it if going that way. Eventually you’ll need to appear in court, be better to file bankruptcy first, then show up under the umbrella of bankruptcy protection.
If you live in a state like Florida, your house and retirement accounts are untouchable. OJ lived here, after all the legal problems he had...still kept his house and retirement.

 

[Jdm]

Ha, we’re talking about an extremely competent mechanic here. Unlikely anything would happen anyway. However, I’d bet a beer on the mechanic in this case. 2nd generation A&P/IA. Very bright and well structured plan. Plenty of untouchable remote property, etc.
Doubt they would ignore any suit, but you can’t pay lawyers without money, remember there is none. He would shut down the shop in a New York second if it came down to it. Social Security would be about the only thing to fight for. Doubt anyone would waste time on that. Early retirement time

 

[Kristin]

I think he’s not going to fight it if going that way. Eventually you’ll need to appear in court, be better to file bankruptcy first, then show up under the umbrella of bankruptcy protection.
If you live in a state like Florida, your house and retirement accounts are untouchable. OJ lived here, after all the legal problems he had...still kept his house and retirement.

You can't file bankruptcy before you are bankrupt. In the scenario under discussion, it will be the judgment, or the attorney's fees, that do the bankrupting.

In most states you can protect your retirement and some portion of the equity in your house. The government figured out that if the let the lawyers pick your bones clean, then the state will end up paying in some form or fashion.

 

[schmookeeg]

Closing the loop on this -- after thoughtful contemplation for two weeks, I received this from my broker:

We spoke with your current insurance company, Acceleration Aviation underwriters with regards to the policy expiring on June 2021. They have advised that as long as the maintenance is an authorized repair and you have the credentials required, hull coverage is not compromised.

Of course, now I need to ask them to clarify what an "authorized repair" is, because I am tedious like that.

 

[Scott MacMoyle]

I work in corporate aviation and I never got insurance for my side hustles. I figure that the owner is too rich for me to sue and im to poor for him to sue.

 

[Patrick Harris]

If you name is in the logs or you provided advice or any sort of assistance, the corporation will not help you when they sue you as an individual.

If the corporation is set up to avoid a specific risk such as insurance be careful about exposure to fraud in the inducement.