Lessor Liability
By Jeff Wieand - December 1, 2009
If you own an aircraft and lease it out, can you be liable for damages caused when the lessee is operating it? The answer reminds me of a joke my securities law professor, Louis Loss, used to tell about a client wanting to hire a one-handed lawyer so the lawyer couldn’t say: “Well, on the one hand…but on the other hand.”
Aircraft leasing is a common activity. Financial institutions lease aircraft to purchasers; companies lease aircraft to their officials using time-sharing agreements; flight schools rent aircraft to weekend fliers; fractional-ownership programs create “pools” of dry leases in which program participants lease airplanes to each other; and airlines acquire new aircraft via complicated lease financing arrangements. In all these cases, the owner/lessor may ask: am I liable if the aircraft is involved in an accident?
Congress enacted a statute to address this question. As originally passed, it was designed to oil the wheels of commerce and make it easier to finance the purchase of aircraft by protecting secured parties, leasing companies and other financial institutions from liabilities racked up by the borrower or lessee. In 1994, Congress added “owners” to the list of protected parties as part of a re-codification of Title 49, so the statute’s pertinent part now reads:
“[A] lessor, owner or secured party is liable for personal injury, death or property loss or damage on land or water only when a civil aircraft, aircraft engine or propeller is in the actual possession or control of the lessor, owner, or secured party, and the personal injury, death, or property loss or damage occurs because of 1) the aircraft, engine or propeller; or 2) the flight of, or an object falling from, the aircraft, engine or propeller.”
The statute defines a “lessor” as someone leasing an aircraft for at least 30 days.
On the one hand (sorry, but I’ve got two), this statute looks as if it provides comprehensive liability protection for owners, lenders and long-term lessors–and that makes a certain amount of sense. After all, if the aircraft is in the lessee’s possession and control, why should the owner, lender or lessor have any liability if the lessee crashes it?
On the other hand, the statute contains qualifications that courts have taken seriously. My favorite is the stipulation that the damage must occur “on land or water.” This seems to neglect a major airplane danger zone: the air. That’s where airplanes frequently can collide–and where the damage inflicted by the 9/11 attacks occurred. A Michigan court relied on the “on land or water” requirement in ruling that the federal statute didn’t apply because the plaintiff’s injuries in an airplane crash occurred “inside the aircraft and not on the surface of the earth.” Reading it this way, “on land or water” is reminiscent of old statutes preoccupied with people being damaged by things falling out of airplanes; no need to worry about people silly enough to fly in the airplanes themselves!
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