Airport Risks Management

Transcription

1 Airport Risks Management (Insurance & Claims Handling) presented by Tan Siew Huay (Ms) Head (Legal), CAAS

2 Airport Owner & Operator Risks

3 Airport Owner & Operator - Responsibilities An airport environment brings together large number of people & companies to enable Air Transport Industry to function Airport Operator is responsible for provision & smooth running of the airport facilities & safety of airport users Airport Operator is responsible for safe movement of aircraft on ground & in airspace around airport / aerodrome

4 Airport Owner s s & Operator s s Risks Major air crash / accident attributed to airport operator Physical damage to buildings, runways, equipment, etc. Major or prolonged electrical power fault / failure Major breakdown of telecommunications / IT connections Loss / Major failure of radar or other ATC equipment Unavailability of services provided by third parties e.g. GHs Contamination or shortage of fuel supply Problems with access - public transportation / roads & rail Terrorist attack / scare Industrial Strikes Health scare Loss of major airlines, ETC

5 Airport Owner s s & Operator s s Risks Potentially serious incidents that could affect normal airport operations Cyclonic storm Flood Earthquake Structural Fires Aircraft Accidents / Incidents Bomb threat / Hijacking Crowd / Mob Attack Epidemics & other serious diseases Aerial attack Nucleur Disaster / Radiological incidents Volcanic Activity From plan2.htm

6 Airport Third Party Liability Risks - The Potential Claimants / Plaintiffs Where the Airport Operator or its contractors / concessionaires have been negligent, this could result in bodily injury &/or property damage to: Passengers / airport visitors Owners/operators of aircraft in flight or on the ground passenger baggage / cargo ground crew employees tenants and contractors & subcontractors

7 Airport Contractors / Concessionaires Airport contractors / concessionaires are also potential sources of major liability losses Many of their activities are in the airside Could involve passenger / baggage security screening Tend not to have significant liability insurance programmes unless of major international status May not have insurance placed with best insurer security Lack of adequate insurance by contractors = additional risk airport owner / operator could become the ultimate party against which to claim

8 Airport Risks Radar Financial ial Risk Sources Hazard Risk Sources Obtaining Planning Construction Compliance Consents Development Credit rating Mergers Equity Collapse & acquisitions Currency / foreign Customer demand exchange shortfall Cost Overruns Shareholder conflict Tax issues Jet fuel prices Customer credit Cost overruns Liquidity & cash flow Economic Fraud recession Cost of Interruption Terrorism Lack of recovery plans Environmental Employee incident welfare Demonstration Airport Adverse closure/ weather disruption Fire / explosion Aircraft incident Natural catastrophe Failure to maximise nonaeronautical income Poor planning / forecasting Security IT issues Poor management processes HR / Training Inability to expand & invest Airlines/Operators withdrawing Communication Competitive E-commerce pressures Employee Dishonesty Poor service ATC strike or standards breakdown Industrial action Compliance with Pollution regulation / legislation Inadequate maintenance Loss of utilities Health scares Project /epidemics Loss of Management Strategic Airport Management Fire Service Programme Loss of CAA licence Restricted airport access Strategic Risk Sources Operational Risk Sources

9 Airport Losses

10 Examples of Losses - Airport Owners / Operators

11 Examples of Losses Airport Owners & Operators SIA aircraft accident at Taipei, ROC Aircraft on wrong runway, which was closed for works in progress Attempted take-off & hit construction equipment, including 2 cranes 83 passengers & crew killed CKS Airport has been named as third party in US litigation to share of damages that may be awarded CKS is Division of Ministry of Transport & Communications Settlement : Most agreed Airport & ATS operator may have been brought into the settlement

12 Examples of Losses Airport Owners / Operators fire in Dusseldorf Airport Fire started by maintenance engineers spread to roof 16 deaths Claims: DM16,000,000 for bodily injury DM100,000,000 for business interruption

13 Examples of Losses Airport Owners / Operators August Fire at Kuwait International Airport Short circuit in departure gate caused fire, which spread to 5 other gates Terminal evacuated - no injuries Flights disrupted Claim / loss? THIS COULD HAVE BEEN MUCH MORE DISASTROUS

14 Other Examples of Losses WTC - Boston airport - possible liability for poor security checks 2001 Pan Am Lockerbie - Maltese Airports nearly involved on account of their security services allowing bomb on board 1992 New York December US$175 million Aircraft crashes on approach Los Angeles - February US$17 million Two narrow body jets collide on ground New Delhi - November US$60 million Saudi 747 in mid-air collision with jet cargo aircraft Mexico 2000 US$15,000,000 Mexicana A320 damaged following fire during refuelling

15 The Blame Trail Aircraft Operator Airport Operator Manufacturer Certification Authority Ground Handler Sub-contractor Certification Authority Certification Authority Certification Authority Maintenance Organisation Crew Licencing Authority Crew Licencing Authority Approving Authority Approving Authority

16 The Scatter-gun Approach Example : CONCORDE ACCIDENT Defendants Aeroport de Paris Air France BAE SYSTEMS/ Aerospatiale Goodyear Continental Airlines GE Middle River Airport at which accident occurred Operator of Concorde Manufacturer of Concorde Manufacturer of Concorde tyres Operator of aircraft which took-off off prior to Concorde Manufacturer of engines on Continental aircraft Company which serviced the engines of the Continental aircraft This example demonstrates the extent plaintiffs will go to.

17 Risk Management

18 Benefits of Risk Management Improves Service, Quality, Efficiency, Morale Reduces Losses Enhances Reputation

19 Risk Identification & Evaluation To effectively manage risk exposures, a systematic approach to risk identification & evaluation is needed Identify main business threats at all levels of the organisation Calculate likely severity and probability of each risk Assess current loss prevention measures Identify risk improvement potential Own the risk and the risk management strategy - best practice

20 Risk Management Solutions Elimination - by better risk awareness or ceasing a certain activity Don t t do it Substitution Reduction - specific risk management techniques including: Business continuity planning Behavioural risk training Training Loss control surveys Retention - accept risk but knowingly Business impact analysis Risk modelling - transfer cost may outweigh the risk cost Deductibles / Self Insured Retention Captive Insurers

21 An Airport Operator s s Contractual Limitation Condition with Airlines Neither the Company nor its servants shall be liable for any claim by any Operator or Handling Agent for loss of or damage to the Aircraft, or any property contained in the Aircraft, howsoever such Loss or damage may arise occurring while the Aircraft is at the Airport or is in the course of landing at or taking off from the Airport arising or resulting directly or indirectly from any act, omission, neglect or default on the part of the Company or its servants or agents unless done with the intent to cause damage or recklessly and with the knowledge that loss or damage would probably result.

22 Risk Management Solutions Transfer by contract and by insurance Contractual Indemnities Exclusions Limitation of Liability Insurance Obtain protection under contracting parties insurance programme by means of inclusion as additional Insureds. Control level of insurance to be maintained by contracting party where able. Own Insurance Programme

23 Airport Operator s s Contractual Limitation Condition How effective? Limitation language only applies to loss or damage to an aircraft It may not be possible to exclude liability for bodily injury or death (e.g. due to operation of Unfair Contract Terms Act) There is also potential exposure to passengers and crew on aircraft & bodily injury & property damage to third parties on the ground (e.g. WTC) The potential for catastrophe claims exists

24 Aviation Insurance

25 Transfer of Risks thru insurance Aviation liability insurance (including aviation products liability insurance) is one of the mainstream catastrophe risks insurance protection that the aviation insurance market provides Protects the insured if, as a result of negligence in an activity carried out, an accident occurs resulting in third party bodily injury or property damage.

26 Airport Owners & Operators Liability Insurance Liability coverage limit will reflect nature & scope of business handled i.e. wide-bodied aircraft landings and movement may have to reflect extended coverage for ATC operations could be contractual and/or regulatory requirements which dictate the limit purchased Market Capacity most major airports purchase limits to mirror the airlines that operate there the current maximum available would be up to a CSL US$2,000,000,000 Contractors / Sub-Contractors Extension available to contractors that performing maintenance, construction, alteration and demolition work under contract with underlying limit

27 Aviation TPLL Insurance Limits Purchased NATS (UK) US$1,500,000,000 CAA (UK) US$1,000,000,000 Israel Airports US$1,000,000,000 Dubai US$ 750,000,000 Austrocontrol US$ 500,000,000 Bahrain CAA US$ 500,000,000 Cambodia ATC US$ 500,000,000 China CAA US$ 500,000,000 Egypt US$ 500,000,000 Saudi Arabia US$ 500,000,000 BAA (UK) US$1,500,000,000 Frankfurt US$1,300,000,000 Hong Kong US$1,250,000,000 New York US$1,000,000,000 Irish Airports US$1,000,000,000 South Africa US$1,000,000,000 Paris Airports US$ 831,000,000 Sharjah US$ 500,000,000 Note - Above figures may have changed

28 Aviation TPLL War Risk Insurance Cover - Limits Available For Airports War Risk Cover up to surcharge (same policy) - Available from usual aviation insurers Excess War Risk Cover up 1o additional premium (separate policy) - Available from specialist aviation war risk insurers (effectively, 1 source only)

29 Typical Insurance coverage includes Automobile (airside in the absence of RTA) Concessionaires Hangar and maintenance facilities Ramp and aircraft handling Security Cargo operations Control Tower / Air Traffic Control Public Liability Runways Terrorism write-back coverage

30 Typical Insurance does not include liability to insureds employees business interruption employers liability / workers compensation pollution directors & officers crime property

31 Claims Handling

32 Liability claims What type of liability claims occur? Broadly speaking these can be split into : (1) Third Party Property Damage e.g. Airside vehicle collision involving damage to aircraft (2) Bodily Injury to Passengers e.g. Injury caused by objects falling from overhead locker / slips and falls in the airport terminal (3) Baggage and Cargo claims e.g. Damage or loss of perishable cargo

33 Liability claims Property Third Party Minor claims often best left to the Insured to handle. Large losses handled by an independent adjuster where there is no legal action. Damage to aircraft on the ground can involve large consequential losses. Contractual provisions will be relevant. Common law issues will require consideration. Can get litigious and may involve subrogation (recovery) by airline insurers

34 Liability claims - Passengers Types of claim Death claims from dependants claims from employers costs including funeral/repatriation Bodily Injury claims claims from medical/advance payments hospital bills compensation The insured airport is sometimes granted settlement authority for minor claims. Most likely to get litigious. Claims arise during period of embarkation & disembarkation or in / around the airport terminal / apron Cost of settlement is met by the policy.

35 When do passenger claims occur? Prior to check-in - terminal slip and fall security screening terrorist attack Post check-in -prior to embarkation slip and fall in duty free area slip and fall on escalator/in aerobridge/on ramp food poisoning in lounge

36 Common injuries Injuries commonly suffered by passengers during embarkation / disembarkation: slip and fall in aerobridge or on tarmac falling from aerobridge falling off bus carrying passengers to or from an aircraft at a remote stand falling on external aircraft stairs

37 Claims Process The Insured should give immediate notice and include: (i) the date of incident concerned (ii) the location (iii) brief details of circumstances (iv) In regard to hull/spares claims, advise aircraft registration or serial number cost estimate if known (v) In regard to liability claims, advise if possible the seriousness of injury or damage The initial Notification details serve as the tool by which insurers make any early assessment of the potential claim. It is very important therefore that this is received as soon as possible.

38 What happens next? The general reporting lines would be: Insured Airport (advises) Broker (who discusses with all interested parties) Underwriters

39 Claims Process Both Loss Adjusters & Lawyers issue reports to insurers via insured airport operator s s Broker The Broker is responsible for discussing / negotiating each claim with insurers on client insured airport operator s s behalf The usual chain is: Insured Airport Broker Lawyer/Adjuster Insurer

40 Just look at who might be involved! Manufacturers Lessors of aircraft/engines Service providers eg salvage team or repatriation Accident investigators Insurers Regulator Military Police Insured Airport Loss Adjusters Surviving passengers Cargo interests Property damage claimants Plaintiff lawyers Media An Airport Authority Lawyers Family members -This is where the broker should help -

41 Parties Involved Surveyor/Loss Adjustor Insurers do not get involved directly in claims They appoint third party surveyors/adjusters to act as their agent The surveyor will make immediate contact with the airline instigate a physical survey of damage (if required) investigate circumstances of loss evaluate repair options and deal with salvage Report to insurers via broker his recommendations Set reserves (which are very important) Adjust costs (wear and tear, betterment)

42 Parties Involved Lawyer Insurers as with surveyors utilise third party lawyers The lawyer is instructed to protect the policy holder s interest His costs are met by insurers He does not comment on policy coverage He reports via the broker on: facts of accident recommendation to settle or defend extent of injuries reserves liability of the airline

43 Who s s Involved in Such Claims?

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45 Claims against Ground-Handlers Are covered for legal liability arising from their operations as a ground handler. Insurance Policy responds if there is bodily injury or property damage following an occurrence. However, Policy usually has Deductibles : US$10,000 per claim US$25,000 in respect of damage to aircraft. This can affect the ground-handlers handlers response to claims below these amounts.

46 Summary re Claims & Insurance All legal liability claims from passengers / third parties which: (i) (ii) stem from an accident [occurrence ] arising from Airport operations (iii) result in bodily injury and / or property damage (iv) occurs during the policy period (v) are not explicitly excluded e.g. radioactive pollution ARE covered up to the amount of insurance purchased.

47 Thank you for your attention