An Fixed-Base Operator will sometimes tell the pilot to whom it rents an aircraft that, in the event of an accident, the pilot may be held responsible for the FBO's deductible. From that, pilots sometimes conclude that their liability will be limited to the amount of the deductible, and that everything else is "covered."
Not so. Not only can the FBO pursue the pilot for the deductible, but the FBO's insurance company can (and often does) pursue the pilot for the full amount it pays to the FBO for the damage to the aircraft. In other words, the renter pilot can be held responsible for the entire loss.
But more importantly, the FBO's policy doesn't necessarily cover the renter pilot for any injury or death he may cause to others. That was the recent holding in Knezovich v. Hallmark Insurance, an Illinois case arising from a fatal midair collision between a Cirrus and a Cessna in Wyoming. The families of those killed in the Cirrus sued the estate of Cessna pilot, claiming the Cessna pilot caused the crash. The court ruled that the FBO's insurance policy didn't protect the pilot at all (or, more accurately, his estate) and that the insurance company didn't even have to hire the renter pilot's estate a lawyer to defend against the wrongful death lawsuit brought against it. In short, the estate was on its own.
Aviation lawyer Greg Reigel sums it up:
Although this is an unfortunate situation for the deceased pilot's estate, this case serves as a reminder to anyone who rents aircraft to confirm that insurance coverage is in place that will protect the renter. It isn't enough to simply ask the FBO or aircraft owner whether they have insurance. You need to be sure that coverage is in place to protect you, the person renting the aircraft. If the aircraft owner's or FBO's insurance doesn't provide coverage, you need to know that so you can understand your risk and either obtain coverage elsewhere or go without.
Of course, not only was the situation unfortunate for the estate of the Cessna pilot, but it was unfortunate for the families of the others killed in the accident. Even assuming that they prove the crash was caused entirely by the Cessna pilot, unlike the FBO, its unlikely they will ever be fully compensated.