Looking back, looking forward

Cessna and several of its component manufacturers were sued for $4.5 million after a pilot crashed a Cessna while drunk. Three hours after the accident the pilot’s blood alcohol level was 0.2 percent. The FAA allows a maximum of 0.04 percent. The suit was settled for $50,000 following four years of litigation.

These are just a couple of examples of frivolous lawsuits that I included in the final research paper I submitted to complete my MBA in 2006. The 80-page paper was an investigation into the effects of the General Aviation Revitalization Act of 1994 (GARA) a decade after its passage. I hadn’t looked at the paper in years until I was recently peppered with questions from an AOPA member regarding the effects of product liability costs on general aviation. The conversation caused me to dig back through the report. Going down that rabbit hole, I spent a few hours re-reading the report and pondering 15 years later—28 years after the legislation passed—whether it was still relevant. Certainly, it seems the number of frivolous lawsuits has declined—or at least we don’t hear about them as much anymore.

Cessna and several of its component manufacturers were sued for $4.5 million after a pilot crashed a Cessna while drunk.Such lawsuits were not uncommon in the 1980s and early 1990s. GARA helped by implementing an 18-year statute of repose, which basically meant that once a product reached 18 years of age without an incident, it was deemed safe and without material defect and therefore the manufacturer could no longer be sued if it crashed. There are exceptions for negligence and a few other situations. As a result, legacy manufacturers such as Cessna and Piper were able to eliminate tens of thousands of aircraft older than 18 years from their liability tails. The goal was to reduce the cost of liability insurance for those manufacturers and create a more vibrant GA marketplace, which was definitely in the doldrums in the early 1990s. As I reported in the paper, most companies reported minimal declines in their insurance costs after GARA was signed, but what they gained was a stabilization of costs and a more predictable insurance environment. At a time when product liability premiums were rising rapidly, this was welcome relief. Cessna got back into the piston airplane business, hiring hundreds of workers for its new factory in Independence, Kansas, and Piper emerged from bankruptcy.

New companies entered the GA space, such as Cirrus Aircraft (née Cirrus Design) and Columbia Aircraft, which was later acquired by Cessna. Both brought safety innovations and modern designs that consumers had been asking for but couldn’t get because legacy companies had stopped investing in their products. The lack of innovation was in part driven by fears from legacy companies that if they infused new safety features into new products, it would only open the door to more lawsuits against older products that didn’t include those features, even if those features were not technically feasible at the time of manufacture. It can be hard to get your head around that line of thinking, but it was driven by real fears at the time.

GARA was far from a perfect solution. In many ways it simply shifted some of the liability burden from airframe manufacturers to other segments of GA, especially the maintenance industry. But it without question provided a boost in confidence and innovation needed at the time. Many believe that more reform is needed, including federal preemption, which would basically mean product liability claims would be immune from state laws and would be heard at the federal level with one national standard. At that point, FAA certification would become the de facto safety standard in such cases. Currently, FAA certification provides minimal benefit to defendants in cases heard at the state level.

However, there are many other tweaks that could be made to liability laws that could help keep innovation alive without sacrificing the rights of those who have legitimate liability claims. Such additional reform is unlikely to occur in today’s political climate.

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