On September 14, 2015, about 1630 eastern daylight time, a Bellanca 7KCAB, N86705, sustained substantial damage when it impacted the water in the vicinity of Dare County Regional Airport (MQI), Manteo, North Carolina. The commercial pilot sustained serious injuries. Day, visual meteorological conditions prevailed and no flight plan was filed for the local banner tow flight, which was conducted under the provisions of Title 14 Code of Federal Regulations Part 91.According to an eyewitness, after the airplane departed, the pilot threw the grapple hook out of the left window in order to pick up the banner. The tow hook "whipped" down and then up into the right horizontal stabilizer and the cable became lodged in between the right horizontal stabilizer and right elevator. The pilot then proceeded to pick up the banner, kept the airplane wings level and it sounded like the engine power increased. After picking up the banner, and as the load imparted to the cable by the banner increased, it pulled taught until the grappling hook lodged itself between the horizontal stabilizer and the elevator. The pilot reported that the due to the banner tow grappling hook becoming lodged between the elevator control surface and the horizontal stabilizer, the elevator was stuck in the down position. The airplane subsequently descended and impacted water located to the left of the runway. A post-accident examination of the wreckage revealed that the wings and fuselage were substantially damaged. In addition, the banner tow grapple hook line was wrapped around the right horizontal stabilizer and right elevator of the airplane. When the line was removed, control continuity was confirmed to the flight control surfaces. Furthermore, there were no devices installed on the airplane or the tow line that would help prevent the grapple line from entangling in the rudder or elevator. According to Federal Aviation Administration (FAA) records, the airplane was manufactured in 1974 and registered to a corporation in 2014. It was powered by a Lycoming IO-320 series engine. According to the airplane maintenance records, the most recent 100-hour inspection was signed off on June 26, 2015, and at that time the airplane had accumulated 4,442 hours of total flight time. According to the pilot, she held a commercial pilot certificate with a rating for airplane single engine land, and a flight instructor certificate with a rating for airplane single engine. Her most recent second-class medical certificate was issued on August 30, 2015. In addition, she reported 5,000 hours of total flight time, of which, 2,000 hours were in the same make and model as the accident airplane, and 3,000 hours were accumulated performing banner tow operations.