A maintenance facility recently asked me to explain what duties it may owe to an aircraft owner when the owner leaves his or her aircraft with the facility for service, other than the responsibility for performing repair or maintenance services on the aircraft as requested by the aircraft owner. This situation creates what many states refer to as a "bailment" and it does impose certain additional duties upon the maintenance facility.
So, what is a bailment? Well, the bailment relationship is created when:
- the aircraft owner (the "bailor") delivers the aircraft to the maintenance facility (the "bailee");
- the aircraft owner/bailor does not transfer ownership of the aircraft to the maintenance facility/bailee;
- the maintenance facility/bailee accepts the aircraft based upon an agreement with the aircraft owner/bailor that the aircraft will be returned to the aircraft owner/bailor; and
- return of the aircraft to the aircraft owner/bailor, the aircraft must be in at least the same condition it was in when delivered to the maintenance facility/bailee.
Once the bailment relationship is created, as a bailee of the aircraft, the maintenance facility has a duty to exercise reasonable care with respect to the aircraft based upon the maintenance facilities acceptance of possession of the aircraft and its subsequent exclusive custody and control over the aircraft. The maintenance facility/bailee must ensure that the aircraft is in at least the same condition as it was when it was delivered to the maintenance facility/bailee.
If the aircraft is damaged while it is in the exclusive custody and control of the maintenance facility/bailee and it is damaged (e.g. the aircraft is lost, stolen, damaged or destroyed), the maintenance facility/bailee will be responsible for the damage unless the damage occurred in spite of the maintenance facility's/bailee's exercise of reasonable care. And, the maintenance facility/bailee will have the burden of proving that it was not at fault and the damage occurred despite its use of reasonable care.
To be clear, the maintenance facility/bailee doesn't become an insurer of the aircraft under the bailment relationship. However, the maintenance facility/bailee must use reasonable care; the type of care a reasonably prudent maintenance facility would exercise with respect to its own aircraft under similar circumstances which, of course, may vary depending upon the time and place or the custom and usage of maintenance facility.
Additionally, if the maintenance facility/bailee fails or refuses to deliver the aircraft to the aircraft owner upon demand, or if it uses or permits others to use the aircraft contrary to the aircraft owner's/bailor’s instructions, then the maintenance facility/bailee could also be liable for conversion. In that situation, the maintenance facility/bailee could be responsible for the value of the aircraft at the time of the conversion plus interest from that time.
However, the duty to return the aircraft is qualified: a maintenance facility/bailee may condition return of the aircraft upon the aircraft owner proving that the owner has title or right to possession of the aircraft, so long as the maintenance facility/bailee then does, in fact, provide an opportunity for the aircraft owner/bailor to present proof of title or right to possession. This rule is intended to protect the maintenance facility/bailee from being placed in the difficult position of risking a suit by the rightful owner of the aircraft for converting the aircraft when the maintenance facility/bailee gives the aircraft to another person who claims to be the owner of the aircraft. If the maintenance facility/bailee does not receive such proof, the maintenance facility/bailee will likely not be liable for conversion.
Unfortunately, this can potentially leave a maintenance facility/bailee in the unenviable position of having to decide to whom it should release the aircraft and to suffer the consequences if its decision turns out to be incorrect. In situations where the maintenance facility/bailee may be presented with multiple bills of sale or documents indicating security interests held by creditors, it may be difficult to figure out which party has the right to delivery and possession of the aircraft.
Another situation that may impact the decision to deliver the aircraft may arise if the maintenance facility/bailee has no been paid for its services. Depending upon the state in which the maintenance facility/bailee is located, it may be necessary for the maintenance facility/bailee to retain possession of the aircraft if it wants to assert a mechanic's or artisan's lien against the aircraft to secure payment of the amount owed for the work it performed. Retaining possession of the aircraft to perfect the lien would excuse the maintenance facility/bailee from complying with the aircraft owner's request for return of the aircraft and, as long as the lien claim was valid, the maintenance facility/bailee would likely not be liable for conversion of the aircraft.
So, what can a maintenance facility do to protect itself from potential liability under a bailment relationship? For starters, the maintenance facility should ensure that it is, in fact, exercising reasonable care with respect to the aircraft in its custody. Maintaining custody and control of the aircraft and taking reasonable precautions to minimize the opportunities for damage to aircraft will go a long way to avoiding claims.
Another option is to include language in the work order or service request signed by the aircraft owner that limits the maintenance facilities liability for negligent damage to an aircraft. This may include exclusion of damages for loss of use or diminution of value and it may cap or limit the total amount of damages for which the maintenance facility could be liable. Other language may be included to require that the aircraft owner carry certain minimum insurance and that the maintenance facility be protected by the owner's insurance.
In the end, when the maintenance facility accepts an aircraft owner's aircraft for service, in most cases a bailment relationship will result. Maintenance facilities should understand the duties and liability to which they may be exposed as a bailee in that relationship. With proper procedures and contractual planning, maintenance facilities can comply with their duties and limit their liability exposure in the bailment relationship.