Indemnify Seller Clause

[Dugaru]

After engaging in a number of aircraft transactions over the years, I'd say that release & indemnification clauses seem to be pretty common in aircraft sales agreements, for both certified and homebuilt aircraft.

How much good they do is another question. As far as I can tell, in the U.S. there is just no way to build an airplane, sell it to someone, and be protected against all subsequent litigation risk. The protection, if any, provided by releases and indemnification agreements will vary considerably depending upon things like state law and the buyer's solvency (remember, to effectively indemnify the seller, the buyer has to still have money when it's time to start indemnifying.....).

How big is the risk to the seller of a homebuilt aircraft? Who knows. In general, I think lawsuits against homebuilders are sort of like stories of insurance companies denying hull claims for ticky-tack FAR violations. That is, everybody talks about them and predicts them, but real-life examples seem to be very hard to come by.

Not saying these sorts of things never happens or couldn't happen, of course. Not saying rational people shouldn't worry about them. Just saying that our concern over them may be disproportionate to the actual risk.

But it only has to happen once, if it happens to you. So sellers out there, consult your lawyers, and please keep in mind that I am not your lawyer.

Originally Posted by mturnerb

It would be interesting to hear experience of anyone who's actually aware of lawsuits involving experimentals...

[Pilot135pd]

Originally Posted by Dugaru

.... I think lawsuits against homebuilders are sort of like stories of insurance companies denying hull claims for ticky-tack FAR violations. That is, everybody talks about them and predicts them, but real-life examples seem to be very hard to come by.

Only to address this part of your comment here?s an example in broad strokes that happened to me:

I crashed my Seneca into the ocean. Insurance didn?t want to pay because the logbooks showed the transponder?s 24 month inspection was expired, even though they accepted it wasn?t the reason for the crash. Transponder was turned off and I was flying in airspace where it was not required. It took over a year and letters from the FAA for them to finally pay me.

It does happen.

[Dugaru]

...since they only harrumphed, and ultimately paid. Admittedly, I have lower expectations for insurance companies than most, so I take the harrumphing as something of a given.

Glad this worked out, in any event. Who was the carrier? I wouldn't want to do business with any carrier who even made rumblings about denying a claim over an expired transponder certification.

Originally Posted by Pilot135pd

Only to address this part of your comment here?s an example in broad strokes that happened to me:

I crashed my Seneca into the ocean. Insurance didn?t want to pay because the logbooks showed the transponder?s 24 month inspection was expired, even though they accepted it wasn?t the reason for the crash. Transponder was turned off and I was flying in airspace where it was not required. It took over a year and letters from the FAA for them to finally pay me.

It does happen.

[isosceles]

Originally Posted by lr172

Buying something ?as is? kind of implies that your are accepting in its current state and the risks that go with it.

Problem with it, if the buyer agrees to indemnify the seller, he is accepting an unlimited liability that he, the buyer, cannot insure. How can anybody be comfortable with that??? The other problem with that is the indemnifying
is often unenforceable, so the seller does not gain anything from that.

As a result, that clause creates so much unknowns so neither party are certain what it protects and what it does not.

Maybe, a solution would be to sell the airplane via an intermediately LLC and immediately dissolve it. This should terminate the indemnity liability.

[Pilot135pd]

I?d have to go back and check but they closed my case without paying. We had to sue them to get them to pay me.

[lr172]

[quote=isosceles;1369987]Problem with it, if the buyer agrees to indemnify the seller, he is accepting an unlimited liability that he, the buyer, cannot insure.

So, how does the seller insure for this liability?

[isosceles]

[quote=lr172;1369998]

Originally Posted by isosceles

Problem with it, if the buyer agrees to indemnify the seller, he is accepting an unlimited liability that he, the buyer, cannot insure.

So, how does the seller insure for this liability?

The seller's insurance typically cover for 1 year after the aircraft sold.
After that... Imho, no good way. I wonder if the statute of limitations
kicks in at some point.

I'm no lawyer. Imho, indemnity agreement is not a solution: first it is
often unenforceable, second, if if it is, your buyer who should be
indemnifying your may go bankrupt not pay a dime. What's the point of
such "insurance"?

[Dugaru]

That is a genuine denial of coverage for a BS violation of the FARs, I'd say.

Originally Posted by Pilot135pd

I?d have to go back and check but they closed my case without paying. We had to sue them to get them to pay me.

[Dugaru]

Maybe somebody offers insurance to sellers of homebuilt aircraft, but I'm not familiar with it.

And if there's no insurance available, I don't see how a seller of a homebuilt aircraft can effectively limit his or her liability as its manufacturer.

[quote=lr172;1369998]

Originally Posted by isosceles

So, how does the seller insure for this liability?

[Dugaru]

Originally Posted by isosceles

Maybe, a solution would be to sell the airplane via an intermediately LLC and immediately dissolve it. This should terminate the indemnity liability.

Not sure how that would work, but I'm all ears.