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Indemnify Seller Clause

GottaFly

I'm New Here
I'm in the process of purchasing an RV12 from a person who purchased it from the builder. The seller has been conducting his own annual condition inspections. He is requiring a clause in the purchase agreement that would require that I indemnify him from any claim. Is it common for buyers to agree to indemnify a seller?

Another question is if it's possible for me as the buyer to purchase insurance that would cover indemnifying the seller? I know that some insurance companies will cover the seller for up to a year after the sale under the sellers policy. I have not been able to find any coverage that I can purchase as the buyer however.

Thanks in advance for your input.
 
IANAL, but I did sleep in a Holiday Inn Express recently :). I'm pretty sure that one cannot waive someone *else's* rights, including the right to make a claim (suit) in the event of injury or death. So this clause

THIS WAIVER AND RELEASE IS BINDING ON THE
HEIRS, PERSONAL REPRESENTATIVES AND ASSIGNS OF THE PURCHASER,
SUBSEQUENT OWNER, PILOTS AND PASSENGERS.

is probably not going to hold up to good lawyering by, say, the family of the purchaser or their passengers in the event of a fatality or injury to the passengers.

I certainly could be wrong, as I said, I'm not a lawyer, but this has come up from time to time here (and elsewhere). Your best bet is to talk to a lawyer...answers you get on internet forums are going to be wide, varied and probably wrong :). Mine included LOL!
 
Sneaky lawyers... To my non-professional knowledge, once you've agreed to indemnify somebody... the insurance is not gonna cover you. quite the contrary, all insurance policies have a clause prohibiting "assumed liability"

Good news is, I've read somewhere that in order to really give away an indemnification promise it has to be written in a large font on a separate sheet of paper, yada yada... in California.

I personally absolutely hate signing any agreements containing indemnification clauses.
 
That is what I tried to say- yes, common use.

Does it work? Mileage varies, I have seen it as bad as it gets- all still pay lawyers a lot for defense of civil suits in case of fatalities, which will take years, also.

Gladly, seen from a distance. Other than the time and defense, seemed like a pretty fruitless suit effort. - YMMV.

My opinion- if you think the word "indemnify" is important, charge up your industrial sawzall and prepare to recycle.
 
For me, the critical question would be - has anyone ever successfully sued or otherwise received compensation from the builder of an experimental aircraft for a defect in construction, or from a prior owner based on some error in maintenance? If so, based on what standard? The builder can always go back to the aircraft passing its original airworthiness inspection and builder/owner can show evidence of maintenance/annual inspections/etc. Who holds builders/owners to a maintenance standard and what is the standard? Who would testify as an expert against the builder/owner?

If I were buying an experimental aircraft I would base that decision on a careful pre-buy inspection and not have any intention of seeking remedy from the seller for a defect that I failed to discover. It wouldn't bother me to sign a hold harmless/indemnification agreement if I were satisfied with the aircraft based on careful evaluation which is my responsibility.

My experience in the world of torts (medical malpractice as a risk manager for my medical group and as an expert witness) suggests to me that lawyers are not likely to go after a builder/prior owner unless that person has very deep pockets indeed - the deep pockets are usually the target (think manufacturers of engines and other key components).

It would be interesting to hear experience of anyone who's actually aware of lawsuits involving experimentals...
 
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Sneaky lawyers... To my non-professional knowledge, once you've agreed to indemnify somebody... the insurance is not gonna cover you. quite the contrary, all insurance policies have a clause prohibiting "assumed liability"

Good news is, I've read somewhere that in order to really give away an indemnification promise it has to be written in a large font on a separate sheet of paper, yada yada... in California.

I personally absolutely hate signing any agreements containing indemnification clauses.

Must be some loop holes, as no one can get a new plane registered without a bill o sale and you can’t get one from Vans without indemnifying them. I can’t imagine buying anything used where i expect to hold the seller responsible, beyond misrepresentation, which is different than indemnity . Buying something “as is” kind of implies that your are accepting in its current state and the risks that go with it. If not comfortable with that, buy new. Inthis case, the op is buying from a traditional seller, not a builder.
 
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Indemnification etc.

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. :)

It would be interesting to hear experience of anyone who's actually aware of lawsuits involving experimentals...
 
.... 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.
 
Technically I think this goes in my column...

...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.

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.
 
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.
 
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.
 
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"?
 
In that case, you definitely "win"

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

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

It's just an idea. An LLC purchases the airplane and sings whatever the indemnity agreement the seller wants. After that the LLC sells the airplane to your without any tricky clauses. Now only the LLC is on the hook. Good luck with that.

Technically, it's easier just keep the airplane in the LLC forever, as many owners do, but you will need to pay LLC fees each year
 
That is a genuine denial of coverage for a BS violation of the FARs, I'd say.

There was NO violation of the Regs. That?s why the FAA gave me a letter for court. That didn?t stop the insurance company from denying coverage. My point is they?ll do it and it?s up to you to figure out why they shouldn?t.
 
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LLC

It's just an idea. An LLC purchases the airplane and sings whatever the indemnity agreement the seller wants. After that the LLC sells the airplane to your without any tricky clauses. Now only the LLC is on the hook. Good luck with that.

Yeah, holding a number of other issues to the side, as a practical matter I don't think many sellers would agree to that. :)

Technically, it's easier just keep the airplane in the LLC forever, as many owners do, but you will need to pay LLC fees each year.

True. And of course the LLC doesn't provide any protection to a pilot operating the aircraft, even if the aircraft is at all times owned by the LLC, since the pilot will always be personally on the hook for allegedly negligent conduct.
 
Very educational

Got it. Definitely "aggressive" for the insurance company to deny coverage in those circumstances. A really useful real-world data point, there.

There was NO violation of the Regs. That?s why the FAA gave me a letter for court. That didn?t stop the insurance company from denying coverage. Muy point is they?ll do it and it?s up to you to figure out why they shouldn?t.
 
Just my two cents.

I don’t think anyone has successfully sued and won a case. Do know of a couple stories where the builder got sued but won the case. They had to pay attorneys fees to defend themselves and that was in the 40 to 50k range.

Not sure what I will do if and when the time comes to deal with mine. Maybe lawn art!

True story of a gentleman in Northern California with an RV6 about ten or fifteen years ago. Upon the advise of his attorney he sold the engine, prop, and avionics. Then cut up the plane for scrap.
 
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"I'm in the process of purchasing an RV12 from a person who purchased it from the builder. The seller has been conducting his own annual condition inspections."

So the seller is the second owner of the plane and therefor not allowed to sign off the condition inspection for the plane? If that is true, the plane has not received a legal condition inspection for as long as the seller has been signing them off. If he didn't build the plane and isn't an A&P, he can't legally do a condition inspection without the participation and sign off of an A&P. You have no idea of the condition of the plane and the seller wants you to take any liability for his work. Without on heck of a thorough inspection by a DAR who is a builder and an A&P, I'd move on. Quickly.
 
So the seller is the second owner of the plane and therefor not allowed to sign off the condition inspection for the plane? If that is true, the plane has not received a legal condition inspection for as long as the seller has been signing them off. If he didn't build the plane and isn't an A&P, he can't legally do a condition inspection without the participation and sign off of an A&P.

What you say is true if the -12 is registered E/A-B. If it?s an ELSA, the second owner can take a course and be eligible to sign off on condition inspections for that particular airplane. If he/she hasn?t taken the course, they can?t sign off on condition inspections.
 
Easy decision

This has been discussed several times. I think the decision is easy - if you are worried about this risk, and if you have enough money to be an attractive target, just don't sell the aircraft - 100-150k is not much money for you.

If you feel that 150k is a lot of money, you probably won't be that attractive of a target.

Obviously these are rough numbers - everyone's number will be different.
 
Thanks for all the feedback. Here's an update. I chose not to proceed with the purchase agreement with the seller who required the indemnity clause. Good new is I have signed a purchase agreement on another nearly identical RV12 that has no indemnity clauses.

To be clear, the indemnity clause in the previous purchase agreement stated that I would have to pay to defend the seller from 3rd party suits and if damages were awarded I would pay for those also. Now I know that there are purchase agreements signed that have similar clauses, but I was not willing to take the risk. Especially since there was a fair chance that if there were suits being made, my family would be the ones dealing with it cause I might not be around anymore as a result of the incident causing the suits. As is usual in deals like this, I've learned way more about insurance than I ever really cared to.

Again, thanks for the feedback. As a new RV12 owner, I'll be back looking for more help and hopefully at some point will be able to help others.

Blake
 
To be clear, the indemnity clause in the previous purchase agreement stated that I would have to pay to defend the seller from 3rd party suits and if damages were awarded I would pay for those also. Now I know that there are purchase agreements signed that have similar clauses, but I was not willing to take the risk.
Good call -- I wouldn't have touched that either.
 
Stock in LLC

I?ve heard of LLC purchasing the plane and when a new person was to have the plane, then they buy the LLC and change the address. Prevents a lot of FFA paperwork and terminates liability of previous LLC owner. Of course the builder is still on the hook I guess.

It's just an idea. An LLC purchases the airplane and sings whatever the indemnity agreement the seller wants. After that the LLC sells the airplane to your without any tricky clauses. Now only the LLC is on the hook. Good luck with that.

Technically, it's easier just keep the airplane in the LLC forever, as many owners do, but you will need to pay LLC fees each year
 
It's just an idea. An LLC purchases the airplane and sings whatever the indemnity agreement the seller wants. After that the LLC sells the airplane to your without any tricky clauses. Now only the LLC is on the hook. Good luck with that.

Technically, it's easier just keep the airplane in the LLC forever, as many owners do, but you will need to pay LLC fees each year


That just sounds shady. I'd make sure I had a good lawyer that specializes in LLCs.
 
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.

Who was the insurance company? What was the tail number? It?d be interesting to understand this case.
 
Same here

This seems to be an example of precisely the sort of insurance industry ticky-tack shenanigans that I thought were largely overblown hearsay....

Having never been wrong before, this entire experience is shocking. :)


Who was the insurance company? What was the tail number? It?d be interesting to understand this case.
 
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