AIRCRAFT

There has been a 600% increase in the number of homebuilt aircraft registered with the FAA since the 1970s. In the 1980s, the production of single-engine factory-built aircraft just about came to a halt. Manufacturers of such production aircraft were the targets of many product liability lawsuits, which led to large verdicts and increased insurance premiums. Corporate ownership of small GA aircraft became less advantageous with the demise of government tax breaks and other financial incentives. Modern labor economics, environmental surcharges, and factory production costs have escalated. As a result, "previously-owned" single-engine general aviation aircraft have become increasingly expensive. All of these factors created a wide-open market for homebuilt aircraft — a trend which continues today.


The decline in the manufacture of small factory-built aircraft is not the only reason for the ascendancy of the homebuilt aircraft. Under the Federal Aviation Act, the FAA wears two hats, one to maintain safety and the other to promote air commerce. In its role of promoting air commerce the FAA has promulgated supportive regulations and advisory circulars encouraging the development of homebuilt aircraft; e.g., Advisory Circular 20.27D. Thus, anybody can buy the plans and/or parts, and obtain a special airworthiness certificate to operate the aircraft in the experimental category, if the amateur-builder does more than 50% of the fabrication or assembly, and does so solely for his own education or recreation.


Recently, a prominent insurance claims executive expressed an opinion at an Aviation Law and Insurance Symposium that homebuilt aircraft liability litigation will be a growth industry during the next decade because of the proliferation of amateur-built aircraft and the likelihood that there will be crashes.

Plaintiffs have often been reluctant to sue kit manufacturers because the manufacturers have always "gone bare." They have manufactured and sold kits without product liability insurance. The fear of winning a long and costly product liability battle against a kit manufacturer only to face the difficulty of collecting a judgment against assets, which may only consist of plans and parts, has been sufficient to dissuade most attorneys from pursuing such cases on a contingency fee.

Now more manufacturers are making money and getting "established." A serious effort is being made by the EAA to arrange Product Liability Insurance from Lloyds of London for qualified kit manufacturers. There is a strong market for inexpensive kit airplanes and gyroplanes, both domestically and abroad. Add to these factors a recognition that an excellent financial opportunity exists to sell such aircraft kits and it is predicted that many business groups with financial depth will be getting into the market. While this will remain a high-risk industry there are new legal protections available to manufacturers and builders.