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Setting Up a Co-Ownership by Jim Robb
Joe and his partner in a CPA firm, Bill, have gotten a new contract for services for a company on the other side of the state of Pennsylvania, about 125 miles away. It takes almost three hours to get there by car due to traffic and back roads. So, they decide to buy an aircraft to shorten the trip. Besides, Joe has a place in Myrtle Beach where he would like to fly for weekends rather than the 10-hour drive. And Bill has a son a few hundred miles away he likes to visit. So, they buy a Cessna 182 in great shape, with low time, and up-to-date avionics.
They decide on a co-ownership personally rather than putting the plane in the business name to avoid putting the business at risk, on the advice of a friend that is a real estate lawyer. After all, most of their trips will be personal anyway.
Joe gets a call from a Myrtle Beach neighbor who needs to set up business accounts for a new business he is set- ting up. So, Joe combines his usual long weekend with a meeting Saturday morning with his neighbor. Landing at Myrtle Beach, Joe lands in a 30 mph crosswind and loses control of the aircraft, running into a Gulfstream in the runup area, causing a fire and killing a prominent busi- nessman. Joe and Bill are both sued for $5 million. Bill wonders why he is included in the lawsuit since he was
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not connected to the trip. But since there was a business meeting for their CPA firm connected to the trip, it was a joint venture for the business, and both partners can be liable.
Clients often ask me about what precautions to take when owning an aircraft with another person or entity. Should they just check “Co-Owner” on their FAA Application for Registration? How about “Partnership”?
First, remember that registration with the FAA does not define what a relationship legally is. So, if you check that you are to be co-owners, but then you act as partners in a business or joint venture, you are partners in the eyes of the law. So what, you might ask. Well, if your partner is flying the aircraft and is negligent and injures someone, or dam- ages property, like Joe in the example above, guess who is also liable? All the partners. But you have insurance, right? Sure, unless you purchased the insurance as co-owners, and there is an “exclusion” for operating the aircraft in a business. And what are the insurance limits? If only $1 million, that would not cover the claim in the example.
And if you truly are co-owners, what are the issues? While you are not liable for each other’s negligence, you still can be responsible for ownership liability, such as