Liability of owners (including fractional interest owners), lessors and financiers for personal injury, death or property damages: Aerolease of America, Inc. v. Vreeland

Aoife O’Sullivan of Kennedy’s Aviation says financiers need to take note of the recent Supreme Court decision in Florida of Aerolease of America, Inc. v. Vreeland.

In the context of business/private aviation and the highly-publicised issue of illegal grey charter, it is essential that extra care is taken by owners and financiers to ensure that operation of the aircraft vests with a professional and capable operator and/or that appropriate insurance cover has been obtained.

Aircraft owners (which may include fractional interest owners), lessors and financiers, may be held liable for personal injury, death or property damages arising out of the aircraft due to situations where they are found to be in control of the aircraft under the laws of Florida State.

It is crucial that (a) the legal status of ownership versus operation of the aircraft is clearly defined; (b) appropriate liability indemnity and insurance coverage for operation of aircraft is obtained for any aircraft with potential exposure to the jurisdiction of Florida (and potentially Illinois as a result of the Air Philippines case); and (c) all parties pay particular attention to choice of law clauses and jurisdiction clauses in their documentation.

In Vreeland, an aircraft leased from Aerolease of America, Inc. (“Aerolease”) crashed killing the pilot and its single passenger. The plaintiff relied on Florida’s “dangerous instrumentality” doctrine in bringing a case against Aerolease, the lessor of the aircraft, which imposes strict liability upon the owner an aircraft by requiring that an owner has an obligation to ensure that the vehicle is operated safely.  The position of Aerolease was not protected by federal statute, 49 U.S.C. § 44112 (1994), which provides as follows: “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 Court ultimately held that (1) the limitation on liability provided by the Federal statute only applied to death, injury or damage that is caused to people or property that are physically on the ground or in the water; and (2) in the instant case, the plaintiff’s liability claim against the owner was not pre-empted by federal statute because the victim died while he was a passenger inside an aircraft that crashed and he was not present “on the surface of the earth” beneath the aircraft when he died.

The applicable state law will most likely be the law of the state in which the accident or incident occurs (Florida in this case) unless trumped by a clearly worded choice of law/jurisdiction clause. Other US states impose similar liability on aircraft owners unless control has been divested to an operator under an arrangement of 30 days or more (e.g. New York law).

The question of who is in control of the aircraft is extremely relevant. Aircraft which are operated privately are usually under the control of the owner. The owner may be the financier under a finance or operating lease. Please take care in ensuring that you have dealt with the question of operation and control effectively in your contracts. Please also ensure you consider your insurance policy and ensure it will cover any exposure to US litigation in this context. Please do not rely solely on indemnities and guarantees as the potential exposure in litigation is extremely high.