AIRLINE

INSURANCE GUIDE
SYNDICATE 5555
 CONTENTS
Why read this guide? 2
Regulatory Background - Outline 4
Potential Areas of Liability Exposure for Air Carriers 6
– Liability under the Warsaw and Montreal Conventions
to passengers and cargo interests 7
FROM JET ENGINES TO STAIRWELLS,
– EU Regulation 261/2004 12
WE’LL SEE A WAY TO INSURE THEM.
– Liability for surface damage – people, animals and property 14
IT’S OUR POLICY TO SEE THINGS DIFFERENTLY
The Environment, Health and Safety 16
Major Incident Handling 17
– Immediate response 17
– Managing the site 18
– Search and rescue, identification and repatriation 19
– Collection and preservation of evidence 20
– Official accident investigation 21
– PR 22
– Insurance 24
– Role of lawyers, loss adjusters and DVI specialists 24
– Passengers including advanced payments 27
– Subrogation 27
Unlawful interference against aviation 28
Risk Management 31
– Reducing liabilities in contracts 32
– Containment Protocols 33
– Airline Insurance 34
– Aviation Insurance Products Glossary 37
 WHY READ
THIS GUIDE?
The purpose of this guide is to
provide a broad outline of legal
liability exposures involved in airline
operations. This guide refers to some
components of risks associated with
airline operations and seeks to place
in context the various elements of
insurance cover provided by airline
insurance products. Finally, it also
aims to provide an overview of issues
such as major incident handling and
risk management.
2 3
However, since each airline insurance
policy is tailored to the specific needs
of each business, it is impossible to
cover all aspects in a general guide
such as this. Familiarising yourself
thoroughly with your airline policy will
allow you to utilise it to best effect
to protect your business. We, on the
other hand, would like to develop
a detailed understanding of your
business needs, in order to offer you
the best possible insurance product.
Bearing in mind that your insurance
policy is your last line of defence when
other risk management measures have
been unsuccessful, this guide also
focuses on risk minimisation and
management measures, which may
benefit you in a number of ways,
including, ensuring the highest
possible reputation for your services
and minimising the number of
potential claims. Despite your
best preparations, unfortunate
circumstances may arise which trigger
claims (first or third party) which may
need to be referred to your insurers.
As a lead insurer, we emphasise
continuity and value long-standing
relationships. We look at claims
sympathetically and bring our
experience, professionalism,
imagination and enthusiasm to bear
in resolving claims related issues. We
endeavour to evaluate and settle all
your first party hull claims as quickly as
possible to ensure your operations are
not adversely affected. We will manage
third party liability claims fairly and
efficiently and in a timely manner,
whilst maintaining effective lines of
communication with you and your
insurance broker.
Whilst we expect you may be familiar
with much of the information contained
in this guide, it is also intended that it
be used as a platform for more in-
depth training, and should this be
of interest, we would welcome your
enquiries. Our airline team’s contact
details are set out at the end of the
guide and we would be happy to
discuss any training requirements
with you.
This publication is intended as a guide
only and the information provided
is necessarily summary in nature, as
our aim was to create a manageable
document which could be used for
easy reference. This guide is not
exhaustive or definitive and should
not be used as a substitute for specific
legal advice. Please seek advice from
specialists if you have any questions
or require further information.
Always read your specific insurance
policy carefully (which provides full
details of the benefits, terms and
conditions which will apply) to ensure
you understand the extent of your
coverage. Discuss any policy issues
or questions with your insurance
broker in the first instance.
 REGULATORY BACKGROUND –
OUTLINE
Airline operations are regulated by
domestic and international, and in
some cases regional, laws. Many of
these laws emanate from Standards
and Recommended Practices (SARPs)
adopted by the International Civil
Aviation Organisation (ICAO), a
specialised agency of the United
Nations created pursuant to the
Chicago Convention of 1944.
The ICAO SARPs cover a diverse
range of issues including procedures
and practices for air navigation, rules
of the air, airworthiness of aircraft,
facilitation for the entry and departure
of aircraft, passengers and cargo
(including the prevention of diseases),
accident investigation, security and
dangerous goods handling.
The recommended practices
contained in the ICAO SARPs must not
be confused with the recommended
practices of the International Air
Transport Association (“IATA”).
SARPs are applied under the Chicago
Convention, a multilateral treaty
4 5
between sovereign states, and are
implemented in each state by that
state’s national law. IATA Resolutions,
Standards and Practices apply only
to IATA members or to those who
otherwise agree to be bound by them.
Whilst contracting states of ICAO
undertake to collaborate in securing
uniform regulations, standards,
procedures and organisation in relation
to all aspects of civil aviation, regional
economic blocs like the North
American FreeTrade Area (NAFTA)
and the European Union (EU) play an
important role in setting agendas and
creating regulations. Recent examples
in Europe include compensation
in respect of denied boarding,
cancellation and delay, and attempts
to include aviation in the European
carbon emissions trading scheme.
 POTENTIAL AREAS OF LIABILITY
EXPOSURE FOR AIR CARRIERS

LIABILITY IN RELATION TO
DOMESTIC CARRIAGE
Carriage solely within the borders
of a country will be governed by the
domestic legal regime of that state.
Most countries have implemented a
codified system setting out the liability
of air carriers in relation to domestic
carriage of passengers, baggage and
cargo. In many cases this domestic
system of liability is based on the
Warsaw Convention or, more recently,
the Montreal Convention.
In the United Kingdom, an airline’s
liability in relation to domestic carriage
is governed by the provisions of the
Air Carrier Liability Order 1998 and the
Carriage by Air Acts (Application of
Provisions) Order 2004 implementing
a modified version of the Montreal
Convention to domestic carriage
within the UK.
Other examples of countries applying
(sometimes modified) provisions of
the Warsaw or Montreal Conventions
to the liability of carriers in domestic
carriage include Australia, Hong Kong
and Malaysia.
In some other countries, such as the
United States, the liability of airlines
in domestic carriage is not based
on either the Warsaw or Montreal
Conventions. Airline liability is
accordingly based on common law
principles of negligence, although
common carriers are subject to the
“highest duty of care.”
In countries which do not have statutory
rules governing domestic carriage by air,
but which apply common law rules of
liability, it is very important for an airline
to have in place appropriate terms and
conditions of carriage limiting or
excluding liability where appropriate.
The liability provisions applicable to
international carriage (outlined below)
are also broadly applicable to domestic
carriage in those countries which have
implemented modified versions of the
Warsaw regime or the Montreal
Convention in relation to domestic
carriage. Please see (a), (b) and (c) from
page 7 onwards for further details in
relation to general guidance on airlines’
potential liability to passengers,
baggage and cargo.
Your company’s lawyers will be able
to advise on the implications of the
domestic legal regime of the states
in which your Company conducts
operations. Should you require any
recommendations or references in this
regard, we would be happy to assist you.
LIABILITY UNDER THE WARSAW
AND MONTREAL
CONVENTIONS
An airline’s liability in relation to
international carriage of passengers,
baggage and cargo will likely be
governed by one of the following
international convention regimes:
• Warsaw Convention, 1929;
• Warsaw Convention, as amended by
the Hague Protocol, 1955;
• Warsaw Convention, as amended by
the Montreal Additional Protocol(s)
No.1, No. 2, No. 3, or No. 4, 1975; or
• Montreal Convention,1999 (this is
the most widely applicable).1
The above are collectively referred
to as “the Conventions”.
Which convention applies depends
on the full ticket itinerary of each
passenger, or the itinerary found in
an air waybill and not on the nationality
of the airline or state of registry of the
aircraft. For example, if the ultimate
points of departure and destination
(ignoring all stops in between) are
in states that have implemented the
Montreal Convention 1999 then that
convention applies.
Whilst most jurisdictions have now
implemented one of the conventions,
Taiwan and Thailand remain notable
exceptions. Accordingly, international
carriage with an ultimate point of
departure or destination in either of
these states may be subject to the
domestic civil aviation laws of that state.
The conventions are broadly similar and
provide for a presumption of liability in
the event of delay; loss of or damage
to baggage or cargo; and death of, or
bodily injury to, passengers caused by
an accident. In return, they allow the
airline to limit the amount of liability
in certain circumstances. You should
remember that any provisions in the
conditions of contract (on tickets,
e-tickets and the reverse side of air
waybills) and general conditions of
carriage (separate booklets, websites)
relating to liability must be in line with
the provisions of the conventions and
domestic laws of the countries on the
airline’s route network or they may be
held to be unenforceable.
(a) Passengers
Death or Personal Injury:
Airline operators are liable to their
passengers for any bodily injury or
death which is caused by an accident
either on board the aircraft or whilst
the passenger is in the course of
embarking or disembarking.

Since the Montreal Convention now applies to

1 **All sums are expressed in SDRs (Special Drawing
most international carriage by air, for the purposes Rights) which are based on an international basket
of this guide, we have provided the liability and of currencies. Exchange rates for most currencies
time limits in accordance with that convention, are published daily by the IMF (www.imf.org). As at
unless specified. March 2008, 100 SDRs is approximately US$ 162.
6 7
 Embarking and disembarking would
cover the entire period when a
passenger is deemed to be within
an airline’s control at the airport.
The cause of the death or bodily injury
must have been an ‘accident’, meaning
an unexpected or unusual event which
is external to the passenger rather than
his own internal reaction to the normal
operation of a flight. As such, an airline
will not normally be held liable if a
passenger becomes unwell or dies from
natural causes during a flight, unless its
employees or agents were in some way
responsible for causing or contributing
to that passenger's demise.
An airline cannot normally be held
liable to a passenger who suffers
mental distress or psychological injury,
unless this somehow arises from a
physical injury. The conventions only
provide for compensation for death
or ‘bodily’ injury, meaning a physical
injury or wounding sustained by
a passenger.
8 9
Under the Montreal Convention an
airline may be exonerated wholly or
partly from liability if it is determined
that the passenger caused or
contributed to the accident which
resulted in the passenger’s injury. Art. 20.
In addition, the Montreal Convention
provides that liability in respect of
recoverable damages up to 100,000
SDRs (approximately US$ 162,000)
cannot be excluded, but over this
amount an airline may contend that
neither it nor its agents were negligent
in causing the death or bodily injury or
that the damage was caused by a third
party. Art. 21.
Ordinarily, in the liability coverage
section of the airline insurance policy,
insurers agree to pay on behalf of
the airline all sums which the airline
becomes legally liable to pay as
damages arising from bodily injury
caused by an occurrence and arising
out of or in connection with the
airline’s operations. However, the
scope of cover for liability arising
outside the relevant period, starting
from embarkation, while on board the
aircraft and including disembarkation,
may be restricted. Insurers will also
usually reimburse the airline for
expenses reasonably incurred in
respect of first aid, hospital and
medical services; and the policy may
provide cover for all expenses arising
out of the diversion of an aircraft due
to sudden passenger illness.
In addition, insurers will ordinarily pay
for all legal and other defence costs
incurred with the prior consent
of insurers.
Cover is often made conditional
upon an airline taking all reasonable
measures to exclude or limit its liability
in its ticket conditions of contract and
general conditions of carriage.
No deductibles are ordinarily
applicable or payable by airlines in
relation to passenger injury and death
caused by an accident.
Delay:
(a) Passengers
Under the Montreal Convention, if a
flight is delayed, as a result of which
a passenger suffers damages which
he can prove, the airline will be liable
to compensate that passenger up
to a maximum sum of 4,150 SDRs
(approximately US$ 6,300).
If a flight within the EU (or from
an airport in the EU) is delayed or
cancelled, the airline may also be
subject to relevant EU Regulations.
In the United States, legislation is
currently under consideration by both
the Department of Transportation,
a federal agency, and by some of the
individual states, which would require
airlines to provide certain benefits or
compensation to passengers who are
delayed on domestic flights in the US.
In the liability coverage section
of an airline insurance policy insurers
ordinarily agree to pay on behalf
of an airline all sums which the airline
becomes legally liable to pay as
damages arising from delay which is
caused by an occurrence and arising
out of or in connection with the airline’s
operations. The scope of cover for
liability arising outside the period of
embarkation, while on board the aircraft
and disembarkation may be restricted.
(b) Baggage
Delayed or lost baggage is a problem
faced by most airlines today but in
the unfortunate event that an airline
delays, loses or destroys a passenger’s
checked baggage or hand baggage
(or part of it), the Montreal Convention
will normally allow it to limit its liability
to 1,000 SDRs (approximately US$
1,500) per passenger. This limit can
be broken if there is proof
of intentional or reckless conduct
on the part of the airline or its agents.
A passenger must notify the airline in
writing of their claim for damaged or
delayed baggage within 7 or 21 days
of travel respectively. If they fail to do
so, they will lose their right to claim
compensation, unless the airline has
acted fraudulently towards them.
Typically, the airline insurance policy
will apply a US$1,250 deductible (or
in the case of most US airlines, a
US$2,500 deductible) to each
baggage or personal effects claim.
While insurers will usually provide
cover for the bad conduct (negligence,
gross negligence, wilful misconduct) of
the airline’s employees while acting in
the scope of their authority/employment,
liability arising from illegal or criminal
activities or dishonest acts committed
by or at the direction of management
or directors will normally be excluded
from cover.
 (c) Cargo
As with baggage, cargo is sometimes
lost, delayed or destroyed and claims,
particularly those in relation to
consignments of valuable cargo, can
often be significant. Again, the Montreal
Convention provides almost strict liability
if cargo is destroyed, lost or damaged
whilst it is in the airline’s charge during
the carriage by air, but this is limited to
a maximum of 17 SDR (approximately
US$ 25) per kilo of cargo.
The maximum limit of liability will not
apply if a consignor makes a “special
declaration of interest” in delivery,
declaring a higher value for the cargo
and paying a small premium, which
acts like an insurance premium for
the value he has declared.
Where claims are governed by the
Montreal Convention, the limit
(17 SDRs per kilo or declared value)
is unbreakable. However, this is not
the case with claims governed by
the Warsaw Regime. In such cases,
10
the limit is breakable upon proof of
wilful misconduct, i.e., intentional or
reckless conduct, on the part of the
airline or its agents acting within the
scope of their authority.
Under the Montreal Convention, an
airline may avoid liability to the extent
damage, loss or destruction results
from the following:
• Inherent defect, quality or vice of
the cargo;
• Defective packaging (unless
performed by the airline’s employees
or agents);
• An act of war or armed conflict;
• An act of a public authority in
connection with exit, entry or transit
of the cargo, e.g. where cargo is
held by Customs officials.
If no written claim is made by the
claimant within 14 days of receipt of
damaged cargo, or 21 days in the case
of delay, no claim can be made against
the airline except in the case of fraud.
In the liability coverage section of
an airline insurance policy, it is usual for
insurers to undertake to pay on behalf
of an airline all sums which the airline
becomes legally liable to pay as
damages arising out of property
damage caused by an occurrence and
arising out of or in connection with the
airline’s operations. This extends to
cargo which is damaged, destroyed,
lost or delayed while in the care,
custody or control of the airline.
Typically, deductibles of US$10,000
apply to each claim.
While insurers will usually provide cover
for the misconduct (negligence, gross
negligence, wilful misconduct) of the
airline’s employees while acting in the
scope of their authority/employment,
liability arising from illegal or criminal
activities or dishonest acts committed
by or at the direction of management
or directors will normally be excluded.
For example, ordering a flight crew to
deliberately overload an aircraft with airline will not be liable if it can prove
cargo beyond its design limitation. that its servants and agents took all
necessary measures that could
(d) Mail
reasonably be required to avoid the
The carriage of mail is not governed damage or that it was impossible to
by air law conventions but where mail do so.
is carried it will be subject to the
In cases of delay, an airline’s maximum
provisions of a separate agreement
liability is as follows:
with the relevant postal authorities.
At a government to government level • Passengers – 4,150 SDRs
the carriage of mail is regulated by
• Baggage – 1,000 SDRs
the Universal Postal Convention.
• Cargo – 17 SDRs per kilo
Delay summary:
A flight may be delayed or cancelled for
any number of reasons, from weather to
mechanical failure. The airline’s liability
to passengers will be governed by the
conventions but may, in addition, be
subject to the provisions of local law
or EU regulations.
The convention provides liability
for damage occasioned by delay to
passengers, baggage or cargo but the
11
 EU REGULATION 261/2004 -
DELAY AND CANCELLATION
OF FLIGHTS
Flights operated by an EU airline, or
flights operated by any airline from an
airport in the European Union will be
subject to EU Regulation 261/2004,
which sets out an airline’s obligations
towards passengers and the levels of
compensation payable if a flight is
cancelled or there is a long delay.
Under the regulation, where an airline
reasonably expects to deny boarding
on a flight, it is obliged to call for
volunteers to surrender their
reservations in exchange for benefits
to be agreed between the airline and
12
volunteers. If insufficient volunteers
come forward, only then may boarding
be denied to passengers against their
will. Such passengers are entitled to
immediate compensation in sums
ranging from EUR 250 for flights of
1500 kilometres or less to EUR 600
for flights over 3,500 kilometres. This
compensation may be reduced by
50% where passengers are offered re-
routing to their final destination on an
alternative flight and the arrival time of
the re-routed flight does not exceed
that of the original flight by a specified
number of hours, ranging from 2 hours
where the flight is of 1,500 kilometres
or less, to 4 hours where the flight is
over 3,500 kilometres.
Where passengers have been denied
boarding the carrier is also obliged to
offer each such passenger a choice
between:
(a) Reimbursement within seven days
of the price paid for the ticket, for
the part or parts of the journey not
made, and for the part or parts
already made if the flight no longer
serves any purpose in relation to
the passenger’s original travel plan.
This offer of reimbursement is to be
combined in certain circumstances
with a return flight to the
passenger’s first point of departure
at the earliest opportunity;
(b) Re-routing, under comparable
transport conditions, to the
passenger’s final destination.
In addition, where passengers have
been denied boarding, they are
entitled to meals and refreshments and
in some cases hotel accommodation,
transportation and telephone calls,
faxes or e-mails.
In the case of cancellation of a flight,
the carrier is obliged to offer the same
options to passengers regarding
reimbursement or re-routing as would
apply in the case of denial of boarding.
In addition, passengers have specified
rights to assistance (meals and so on).
A passenger whose flight has been
cancelled has the same rights to
compensation as a passenger denied
boarding, unless they are informed of
the cancellation at least two weeks
before the scheduled time of
departure. The carrier may avoid
the need to compensate where the
passenger is given shorter notice
of cancellation but is offered re-
routing within specified parameters.
Passengers whose flights are delayed
have no right to compensation under
the regulation but must be offered
assistance in the form of meals/
refreshments, accommodation and
communications depending on the
length of delay.
It is unlikely that most airline insurance
policies would provide cover for the
fulfilment of the airline’s various
obligations pursuant to EU Regulation
261/2004. However, there may be
circumstances where an airline may
wish to discuss potential extended
coverage with its broker and insurer.
United States Passenger Bills of
Rights in the Event of Delay
As a result of a number of incidents
involving aircraft ground delays in early
2007, legislation aimed at protecting
passengers’ rights in connection with
such delays was introduced at both the
federal and state level. The New York
state legislature enacted the Consumer
Bill of Rights Regarding Airline
Passengers which was signed into law in
August 2007. This act provided that in
the event of a delay of more than three
hours, passengers should be provided
with electricity for fresh air and lighting,
as well as food, water and access to
lavatories. While this act has now been
overturned by the courts on the ground
that it was pre-empted by federal law, it
is likely that legislation will be adopted
at the federal level in the United States
which will obligate airlines to take steps
to assist passengers in the event of an
extended delay. The steps called for will
likely include permitting passengers to
disembark from the aircraft, requiring
passengers to be served food and
water during the delay, enabling
passengers to communicate with
third parties outside the aircraft, and
providing passengers with access to
clean lavatory facilities.
Airlines with operations to the United
States should keep an eye out for the
adoption of this kind of legislation
which will impact their operations.
13
 EU REGULATIONS ON PACKAGE
TRAVEL, PACKAGE HOLIDAYS
AND PACKAGE TOURS
The sale of holiday packages (e.g. air
ticket + hotel) in Europe, whether they
be for holidays in Europe or elsewhere,
may attract broad and onerous
obligations, responsibilities and
liabilities. Airlines offering these
holiday packages are known as
“Inclusive Tour” (IT) carriers. For
example, airlines can be held liable
to passengers for any misleading
information given about hotels. They
may also commit criminal offences for
failing to provide sufficient information
about passport and visa requirements
and what financial arrangements are
in place to protect against insolvency.
It is important that specific insurance
coverage for holiday packages (tour
operator liability coverage) should be
addressed by the airline in discussions
with its broker and insurer, where
appropriate, at the earliest opportunity
14
since most airline insurance policies
exclude cover for tour operator
liabilities, see “Exclusions” under the
liability coverage section of the policy.
LIABILITY TO PERSONS AND
PROPERTY ON THE GROUND
Damage caused by an aircraft other than
to passengers, baggage, cargo or mail
carried on board the aircraft falls into
three categories: (a) damage to persons,
animals or property on the surface
caused by aircraft in flight; (b) damage
caused by aircraft in flight to persons
or property resulting from an aerial
collision; (c) and surface damage caused
by aircraft operating on the surface.
(a) Damage to persons, animals or
property on the surface caused
by aircraft in flight
Under the Rome Convention 1952
an airline will be held strictly liable for
damage to persons or property on the
ground caused by aircraft in flight or
by an object falling from that aircraft,
if the damage takes place in a state
that has implemented the Convention.
An aircraft is considered to be in flight
from the moment when the power is
applied for the purpose of actual take-
off until the moment when the landing
run ends.
Airlines can, however, limit their liability
by reference to limits based on the
maximum take-off weight of the
aircraft. In any event, liability for death
of a person on the ground should not
exceed 500,000 Convention Francs
(approximately US$ 40,000) per person
killed or injured, unless caused by the
deliberate act or omission of the
operator or his agent with intent to
cause damage and if such agent was
acting in the course of his employment.
Damage caused solely or partly by the
negligence of the person who suffers
damage will either extinguish or
remove liability.
Claims under the Rome Convention
must be notified to the airline within
6 months of the alleged incident which
gave rise to the damage and claims are
subject to a maximum limitation period
of 2 years.
The aircraft operator will not be
liable if the damage is the direct
consequence of armed conflict or
civil disturbance, so for example if an
aircraft is shot down by enemy missiles
during a war, the airline will not be
liable for consequential damage to
persons or property on the ground.
Few countries have implemented the
Rome Convention. However, many
countries have similar laws in force
and ICAO is currently examining a
new surface damage convention.
As a result of the liability provisions set
out in the international conventions,
some jurisdictions, including all EU
member states, now impose minimum
insurance requirements for carriers
to ensure they can comply with their
potential compensation obligations.
(b) Damage caused by aircraft in
flight to persons or property
resulting from an aerial collision
Where a collision takes place over the
territory of a state then the law of that
state should normally apply. If the
collision takes place over the high seas,
then the applicable law will probably
be the law of the state most closely
connected with the provision of air
traffic services for that aircraft. If both
aircraft are registered in the same
state, there is an argument that the law
of the State of Registration should
apply. The applicable law is most likely
to apply either principles of negligence
or strict liability.
(c) Surface damage caused by
aircraft operating on the surface.
Aircraft, when taxiing, taking-off or
landing, may cause damage to people,
other aircraft, airport vehicles and
buildings.
Where the aircraft is not in-flight, then
in the absence of any contract, liability
will almost certainly be governed by
the law of the place of the accident
and is more likely to arise in
negligence.
Insurers will normally pay for all sums
which an airline is legally liable to pay
for surface damage, except criminally
imposed penalties.
While insurers will usually provide
cover for the bad conduct (negligence,
gross negligence, wilful misconduct)
of an airline’s employees while acting
in the scope of their authority/
employment, liability arising from
illegal or criminal activities or dishonest
acts committed by, or at the direction
of management or directors will
normally be excluded. For example,
ordering a flight crew to operate an
aircraft which has been deliberately
overloaded with cargo beyond its
design limitation such that it is unable
to take off.
15
 THE ENVIRONMENT,
HEALTH AND SAFETY
From the moment a manufacturer
begins construction of an aircraft it
releases a chain of events, each of
which may have an impact on the
environment at several levels.
A departing or arriving aircraft not only
emits noise but also burns fuel, which
affects air quality and global warming.
Before taking off again, the aircraft
may be de-iced, cleaned and
overhauled with chemicals that
represent a source of soil, water and
air pollution. Crews, passengers and
persons on the ground may be
exposed to airborne diseases, fuel
droplets, and radiation sickness.
Aircraft accidents expose rescuers
to carbon fibres and burns and the
systems and materials used to contain
a site and dismantle aircraft may cause
further damage. It is no wonder that
environmental issues are of increasing
concern to the aviation industry,
governments and the general public.
The health and safety of people in the
workplace is regulated by laws and
16
contractual obligations on the part of
employers. The primary concern must
of course be to ensure the wellbeing
of all employees and other contract
personnel on premises.
Directors and officers have an onerous
responsibility in setting an airline’s
course, establishing its corporate
culture and guiding it to business
success. In many countries,
organisations which implement
practices that jeopardise safety and
cause death or environmental damage
face the prospect of lengthy
investigations and prosecution for
breaching the occupational health and
safety regime and for gross negligence
or manslaughter, as well as for breach
of environmental regulations. Directors
and officers are potentially faced with
prison sentences and heavy fines if
found guilty. In some countries,
governments are tightening
regulations to make it easier to
prosecute companies for corporate
manslaughter, emphasizing the need
for an ingrained rather than bolted on
safety culture.
For public policy reasons, it is not
possible to purchase insurance to pay for
penalties or fines. However, insurers may
be willing to help defend an organization
from prosecution if this will help
minimise its exposure to civil claims.
MAJOR INCIDENT
HANDLING
In this section, we look at some of the
most important aspects of handling a
major incident, including the importance
and roles of key players, and provide a
basic check-list of items to bear in mind,
should a major incident occur.
IMMEDIATE RESPONSE
When an airline is faced with a major
incident, (such as a serious aircraft
accident, hijacking and so on) speed is
of the essence. All appropriate people
within the organisation, as well as your
aviation insurance broker and insurer,
should be informed immediately. A
disaster manual should be available,
setting out the role of each department
within the organisation in dealing with
the emergency situation, which will act
as a guide in the unfortunate event of a
major accident. A list of key staff with
their full contact details and an outline
of their roles and responsibilities should
be set out in the disaster manual.
17
 A main operating emergency team
should be set up comprising
representatives of major departments/
sections within the organisation. Their
primary function will be to ensure the
successful implementation of all tasks
to be conducted. They should in turn
appoint field teams who will deal with
specific tasks, such as family call centres,
dealing with the site and liaising with
various external organisations.
Most airlines will have a fully equipped
and trained emergency response team
(often known as the “Go Team”) which
can be quickly dispatched to the scene
of a major accident to deal with the
immediate aftermath. The leader of
the Go Team should be responsible
for liaising with officials at the scene
of the accident, which may include
representatives from local government
authorities, aviation authorities,
18
emergency services, accident MANAGING THE SITE (a) Obtain necessary permissions from
investigators, and the media. The Go personnel in control of the incident
Along with the emergency services,
Team may need to set up a temporary site;
the members of the Go Team may
emergency operations centre at the
well be some of the first people at (b) Secure the site. If the scene of
local airport or other facility to deal
the scene of a major incident. They will the incident has not already been
with immediate issues on the ground,
probably need to deal with a number secured by the police or other
including search and rescue. The main
of urgent issues, including (but by authorities you should use a
emergency operations centre should
no means limited to) the following: pre-designated security company
be set up at the airline’s head office.
(where practical);
(c) Assist in the co-ordination of any
search and rescue operations. The
Go Team should monitor and/or
assist in the rescue process;
(d) Provide assistance as required to
official investigators;
(e) Set up communication links with
the emergency operation centre.
SEARCH AND RESCUE,
IDENTIFICATION AND
REPATRIATION
Search and rescue will normally be
handled by the local emergency
services. The airline’s emergency
operation and Go Teams should assist
in co-ordinating this exercise and, of
course, relaying relevant information
back to the operations centre.
Information gathering is crucial at this
stage and a comprehensive passenger
list will be of key importance. Details
of all passengers on board should
be drawn up with the help of the
passenger manifest, and as much
information as possible should be
compiled in relation to each passenger
and crew member. This will be of
crucial importance both in the early
stages, to provide emergency services
and the Disaster Victim Identification
(DVI) teams with guidance as to the
numbers and possible identities of
those affected and also, in the later
stages, to the airline’s insurers and their
lawyers in their dealings with claims for
compensation, including advance
payments.
If permitted by the government of
the country where the accident takes
place, DVI specialists should be
retained to identify any victims,
although relatives will normally identify
their loved ones personally.
The airline should ensure that
arrangements are quickly implemented
to fly relatives to the scene of a major
accident and to provide accommodation
and assistance to them there. The
airline will be expected to provide
assistance in repatriating any injured
passengers or crew and/or bodies of
the deceased.
When the issue of costs arises, it is
important to recognise that recovery
and identification of the remains of
accident victims are the responsibility
of local authorities or government
agencies. These services are not the
airline’s responsibility unless the airline
contractually agrees to perform them.
Airlines have generally assumed the
obligation of notifying families that
a family member was on board the
aircraft and may be obliged to do so
under family assistance regulations.
19
 Family Assistance
In the United States, and certain other
states, family assistance regulations
require airlines to undertake certain
actions on behalf of the family
members of passengers involved
in an aircraft accident.
Under the applicable United States
legislation, airlines are obligated to
prepare and file a family assistance plan
with the National Transportation Safety
Board (NTSB) and the U.S. Department
of Transportation. The legislation, which
only applies to major accidents
occurring in the United States, requires
airlines’ family assistance plans to
include such information as a toll-free
number that families of passengers can
call to enquire about their loved ones,
and provide personnel to handle related
calls; establish a procedure for notifying
families that their family member was on
board as soon as the identity of the
passenger has been verified, and before
any general publication of the
20
passenger list is made. They must also
provide a list of the passengers aboard
the aircraft to the N.T.S.B. and Red
Cross as soon as possible. Under the
family assistance legislation, airlines are
also required to consult with families
about the disposition of remains and
personal effects of family members,
arrange for the return of passengers’
possessions if requested by the families,
transport family members to the scene
of the accident if requested, and
otherwise provide service and assistance
to the families of passengers, including
counselling and support where
appropriate.
Family assistance legislation can
impose significant obligations on
an airline, and should be carefully
reviewed in order to ensure proper
compliance. Certain companies
specialise in providing advice to
airlines on compliance with family
assistance legislation and the
coordination of family assistance
services on behalf of airlines.
COLLECTION AND
PRESERVATION OF EVIDENCE
The Go Team should establish
immediate connections with members
of the emergency and investigating
services to ensure that evidence is
gathered swiftly and that the integrity
of the evidence is maintained.
They should complete an initial
accident report and prepare a detailed
map identifying the location of the
incident precisely. They should take
photographs of as much of the scene
as possible and send the report, map
and photographs to relevant internal
departments and insurers’
representative lawyers and loss
adjusters as soon as possible.
The Go Team should also make every
effort to secure the collection of any
baggage and personal effects, which
should be designated to a secure
recovery location prior to its release
to passengers and their families.
OFFICIAL ACCIDENT
INVESTIGATIONS
Aside from all the activity in caring for
survivors and for family members of
accident victims, an investigation into
the cause of the accident will be
quickly organised by the state where
the accident took place.
The states in which the aircraft is
registered, operated, designed or
manufactured have the opportunity to
appoint representatives to participate
in official investigation.
The location of the accident will
significantly influence whether or not
the airline will have any, and if so what,
ability to participate in the official
investigation. In many parts of the
world, commissions are created on
a largely ad hoc basis with assistance
to the government being sought from
internationally recognised agencies,
such as the Air Accident Investigation
Branch (AAIB) in the United Kingdom,
Bureau Enquêtes-Accidents (BEA) in
France, the Transportation Safety Board
(TSB) of Canada or the National
Transportation Safety Board (NTSB) in
the United States. Very early contact
and co-operation on the part of the
airline in such loosely structured
arrangements can ensure a close
relationship. Even if this does not
lead to direct participation in the
investigation, it can ensure that the
airline has the ability to access and
comment upon evolving official reports.
Investigators will take all of the original
documents relating to the aircraft, its
operation and maintenance. The airline
should try and ensure it takes a copy of
everything before it is handed over.
21
 Ordinarily, the aircraft wreckage will be
retained by the accident investigation
authority. Once released back to the
airline and its insurers, consideration
will need to be given to which elements
it might be necessary to store and
where, by way of evidence for future
enquiries and potential litigation.
Unless specific legislation dictates
otherwise, airlines are not legally
obligated to pay for the cost of official
aircraft accident investigations. One
notable exception is Singapore.
In any event, the airline should liaise
closely with the loss adjusters and
lawyers appointed by the airline’s
insurers throughout the investigation
since they can help explain the airline’s
obligations and minimise its exposure
to criminal prosecution and civil claims
by assisting with the enquiries of
official investigators and judicial
bodies. Their reasonable costs will
ordinarily be paid by insurers.
22
Emergency Drills
Every station of an airline should be
given a copy of the airline’s emergency
response procedures, which should be
practised by each station at least once
a year in a coordinated emergency drill.
Specialised companies will contract
with airlines to run emergency practice
drills, and provide feedback on station
performance and emergency
procedures. Airport authorities usually
will welcome the opportunity to
cooperate with or participate in an
airline’s emergency practice drill.
As an essential part of any airline’s
emergency drill, the ability of the
airline to comply with any applicable
family assistance legislation should
be thoroughly tested.
PUBLIC RELATIONS
In the aftermath of a major incident,
the airline will become the focus of
significant attention from the press,
as well as, of course, the relatives
of any injured and/or deceased
passengers. Both these categories
need careful and considered handling
and will be very sensitive in view of the
recent events.
(a) Relatives of injured or deceased
If there are injuries and/or fatalities
resulting from the accident then the
airline will need to set up an emergency
contact centre for relatives and to notify
relevant next of kin. A family support
team should also be put in place to
assist the relatives of the passengers
involved in the accident by: arranging
transport to carry relatives to the
incident scene; arranging
accommodation at local hotels close
to the incident scene, as well as
transportation to and from the hotel.
Passenger/family welfare facilities
should be established at the nearest
airport, hotel, crash site and city centre.
Survivors should not be forgotten and
they, whether injured or not, will have
their own needs and may require the
following:
(i) alternative arrangements for travel
to destination;
(ii) accommodation, including
transport to/from;
(iii) assistance in alerting and dealing
with appropriate embassies,
consulates.
Once you have a clearer picture of the
profile of nationalities involved in the
incident, you should liaise closely with
your lawyers with regard to issuing
statements and/or letters to families.
Specific family assistance legislation
may apply to the airline (e.g. Nigeria
and the EU have strict family assistance
requirements). Insurers generally pay
reasonable family assistance costs
as incurred.
(b) Press
Aviation accidents tend to attract a lot
of press coverage and interest from the
general public. Whilst the airline should
make efforts to brief the media as far as
possible, it is imperative that any written
press releases are prepared in
conjunction with the airline’s legal
department and external lawyers
appointed by insurers, in order to
ensure that they do not say anything
which might prejudice the airline’s
position in any way. Each airline should
prepare a template press statement for
inclusion in its emergency procedures,
to be given to the press in the
immediate aftermath of an accident
or emergency until the extent of the
accident/emergency can be properly
assessed, and the Go Team established.
The airline should have previously
designated a point of contact
(preferably from the PR department),
to deal with all press enquiries.
He or she should liaise closely with the
lawyers regarding the wording of any
press releases. It is recommended that
the airline’s key staff such as the CEO,
local and overseas Station and
Operations Managers receive advance
training on how to manage the press
in case of a major incident.
Initial press releases should only
identify basic details such as (in the
event of an aircraft accident) the flight
number, origin and destination, aircraft
type, number of passengers and crew
on board, date and time of accident.
A passenger list should not be released
until it is very carefully checked for
accuracy, and is in accordance with
any applicable family assistance
regulations.
23
 INSURANCE
The airline’s insurance department
should immediately notify details of
any major incident to its insurers or
reinsurers and insurance brokers.
The insurance brokers are also
themselves responsible for notification
of any major incident to the insurers/
reinsurers.
The extent of the airline’s insurance
cover will depend on the exact terms
of the insurance policy. The airline’s
insurers will usually indemnify it for
loss, damage or injury which is
“proximately caused” by a risk it
has insured against. This cover will
normally include not only the airline
itself but also other named insured
under the policy, for such losses and
damage ranging from the hull of the
aircraft itself to the airline’s liability to
passengers and third parties, including
related expenses such as legal costs.
The airline’s liability insurers will
typically instruct outside specialist
24
aviation liability lawyers, following a
major incident, to protect the airline’s
interests and to provide it with legal
advice and assistance.
LAWYERS, LOSS ADJUSTERS,
DVI SPECIALISTS AND AVIATION
INSURANCE CLAIMS ADJUSTERS
(a) Lawyers
Following a major incident the legal and
insurance departments of an airline will
be responsible for the collation of
information and for liaison with the
insurer’s appointed specialist aviation
lawyers. Although lawyers will be
instructed by insurers, they will act on
behalf of the airline, being the insured
client, and look after its interests.
It is likely that the lawyers will require
detailed information which should be
collated as soon as it is practicable. The
disaster manual must set out a checklist
of the information required in the event
of a major incident, as well as details
of the lawyers customarily retained by
the airline’s insurers for this purpose.
Occasionally, it may be necessary for
the lawyers to make direct contact with
the airline’s personnel.
The lawyers will help the airline liaise
with official investigations and handle
all claims (including settlements) arising
out of the incident and this may include
dealing with the aircraft hull/salvage
issues; claims made by passengers,
crew and their relatives; cargo interests;
and third parties. They may also be
instructed to bring claims against other
potentially responsible parties, such
as the aircraft manufacturer or
maintenance organisation.
Confidential memoranda and other
communications with lawyers may be
protected from disclosure to any third
party by the rules of privilege.
Nevertheless, care should be exercised
to preserve privilege by ensuring that
such communication is written for the
purpose of obtaining legal advice or
assistance. This is one of the reasons to
secure legal advice at an early stage.
(b) Loss Adjusters
Insurers will also appoint loss adjusters
in the event of a major incident. The
loss adjusters will attend the scene of
the accident and inspect the damage
to or wreckage of the aircraft and other
affected property. A team, normally
including aircraft surveyors, will assess
the damage and will assist the airline,
its lawyers and insurers in ascertaining
the cost of any repairs and indeed
whether or not the aircraft is
economically repairable. Therefore,
it is vital that the airline should make
the necessary arrangements in advance
to allow loss adjusters to attend the
site at the earliest opportunity. Insurers
will not be able to respond to an
airline’s claim for the loss of or damage
to the aircraft until they have read the
loss adjuster’s report.
The loss adjusters will need to contact
a number of the airline’s personnel and
as such, professional cooperation is
essential for a swift resolution.
The legal department should be kept
fully informed of all communications
with loss adjusters including copies of
any correspondence. Again, the details
of those loss adjusters ordinarily
retained should be available in the
disaster manual.
(c) DVI Specialists
In the event of an accident resulting
in passenger fatalities, Disaster Victim
Identification (DVI) specialists are also
normally appointed by insurers. It is their
role to supply personnel and material
and to take charge of identifying the
victims of any major disaster, provided
this is permitted by the state where the
accident takes place.
It will be of utmost importance to the
relatives of any missing passengers and
crew that their loved ones are quickly
and accurately identified as being
among those injured or dead
passengers, to enable them to begin
to come to terms with their tragic loss.
If the airline is thinking of formally
retaining DVI specialists on an annual
basis, this should be discussed with the
broker and insurers before finalising
any contract.
(d) Aviation Insurance Claims
Adjusters
The airline’s lead insurer or reinsurer
will usually employ an in-house team
of Aviation claims experts. They are
known as claims adjusters within the
London Aviation Insurance Market.
Aviation claims adjusters will be
experienced in managing all types and
aspects of aviation claims.
In the case of a major incident, a senior
claims adjuster may spend some time
with the airline’s senior staff to facilitate
communication between the airline and
the appointed lawyers and loss adjusters.
25
 HULL
If one or more of the airline’s insured
aircraft is damaged as a result of an
accident, insurers will usually have the
option (at their discretion) to arrange
for one of the following:
(a) For the aircraft to be repaired, at
their cost;
(b) To make a cash payment to the
airline in respect of the damage; or
(c) To pay for repairs to be carried out
to the airline’s order, subject to any
policy deductible.
If the aircraft is a “total” or a
“constructive total” loss (i.e.
uneconomic to repair), insurers may
either (depending on the type of
insurance policy) (i) replace the aircraft;
or (ii) pay the airline an amount up to
the agreed value (being the value of
the aircraft which the airline has agreed
with its insurers at the inception of the
policy period).
26
Where we are the airline’s lead insurer,
we will endeavour to evaluate and
settle all first party hull claims promptly,
whether it is organising for repairs to
be carried out in a timely fashion or
paying the airline compensation, to
ensure any disruption to its operation
is minimised.
PASSENGERS - INCLUDING
ADVANCE PAYMENTS
In the event of a major accident, there
may be a number of injured and/or
deceased passengers. Those injured
passengers or, in the case of the
deceased, their relatives and heirs,
may indicate they wish to bring legal
action against the airline for damages,
or indeed they may actually commence
legal action. It is important that any
such claims are immediately notified to
the airline’s insurers and lawyers, who
will deal with those claims.
In circumstances where the Montreal
Convention is the applicable liability
regime, there is a requirement that,
in the case of an aircraft accident
resulting in death or injury of
passengers, the airline should make
advance payments without delay to
those passengers or their relatives
in order to meet their immediate
economic needs if domestic laws
provide for this. This sum will vary
from one passenger to the next and it
is important that payments are made
to the rightful claimant.
Advanced payments and interim
settlements are payments that will
ordinarily be paid and/or reimbursed
by your insurers. Typically the amounts
paid as interim settlements will be
offset against any future damages
which may be paid.
SUBROGATION
Once insurers have covered the airline
for its losses under the airline insurance
policy, they are usually entitled to take
over any rights of recovery the airline
may have against third parties. This is
known as subrogation. The airline
is under a duty not to do anything to
waive or otherwise prejudice any rights
it may have against any third party,
unless it has the express written
permission from its insurers to do so.
Any action will normally be brought
in the airline’s name.
27
 UNLAWFUL INTERFERENCE
AGAINST AVIATION
Unruly behaviour of passengers, often
combined with consuming excessive
quantities of alcohol, has become
an increasing problem for aircraft
operators in recent years. Where a
passenger’s conduct endangers the
aircraft or any person or property on
board, or obstructs the crew in the
performance of their duties, then the
crew may be entitled to restrain the
passenger and disembark him/her
at the earliest opportunity.
The passenger may also have
committed a criminal offence and may
be prosecuted. In this case, it is the
authorities of the state of register
of the aircraft that have responsibility
for such process, unless the acts or
omissions resulting in the offence
take place outside the aircraft.
In practice, it is often difficult to ensure
that passengers who have committed
an offence on board an aircraft are
prosecuted because of the desire
to disembark them at the earliest
opportunity. It can also be difficult
28
to seek compensation from them for
property damage, personal injury or
the cost of a diversion, even where the
airline’s conditions of carriage require
troublemakers to indemnify the carrier
in respect of any losses. This is in part
due to the weakness of international
treaties like the Tokyo Convention
1963 and the difficulty of applying
a uniform penal code globally.
The Tokyo Convention was designed
primarily to combat terrorism on board
aircraft. The convention outlines
various rules which countries should
pass to enable national courts to deal
effectively with offenders. In the UK,
the Civil Aviation Act 1982
incorporates the rules outlined in the
Tokyo Convention, and in particular,
Section 92 of the Act gives UK courts
the jurisdiction to deal with offences
committed on board UK registered
aircraft, wherever in the world the
offence may take place. Offences
committed on non-UK registered
aircraft can be dealt with in the UK
if the next landing place of the aircraft
is in the UK, and if the offence is a
crime in the state of registration of that
aircraft. Pursuant to the Act, the Air
Navigation (No 2) Order 1995, outlines
specific rules to protect the crew and
fellow passengers from disruptive
behaviour.
Prior to the tragic events of 11
September 2001, airline operators
experienced a number of fatal
hijackings and bombings. As unlawful
acts became more outrageous, the
1970 Hague and 1991 Montreal
Conventions were introduced
establishing new offences.
The arsenal available to the
contemporary terrorist is broad,
ranging from dirty bombs causing
radioactive contamination, through
biological and chemical weapons, to
more sophisticated devices which emit
electro-magnetic pulses (EMPs) which
“fry” electronic circuitry of aircraft with
disastrous consequences.
29

In many states, airlines are strictly liable
for surface damage caused by
terrorism, a system which was not
designed for the modern world with
the proliferation of terrorist threats.
ICAO is currently examining a new
Convention on compensation for
surface damage caused by unlawful
interference. The issues to be resolved
include the extent to which airlines will
be entitled to limit their overall liability
and the exoneration of aircraft
financiers, airports, air traffic control
and airport service providers. These
developments are being closely
monitored by aviation insurers.
Unlawful acts are an unwelcome
feature of airline operations.
Increasingly, it is difficult to dismiss
these acts as independent criminal
acts for which no innocent party is
responsible. Consequently, a number
of potential defendants can be
30
prosecuted or sued in respect of
their failure to prevent an unlawful act.
These include airlines, ground handling
agents, security agents, airport
operators and government agencies
charged with intelligence gathering.
Historically, all aviation hull all risks
and liability policies have been subject
to a war, hi-jacking and other perils
exclusion clause known as AVN48. In
addition to excluding cover for losses
arising from wars and hi-jacking, the
clause excludes cover for a number
of other perils including the hostile
denotation of nuclear weapons,
malicious acts of sabotage, strikes
and riots. However, cover in respect
of certain risks was written back into
the hull all risks and liability policies
through endorsements to the policies
known as AVN51 (Hull) and AVN52
(Liability).
RISK
MANAGEMENT
Today, insurers remain troubled by the
increased exposures that unlawful acts
bring, particularly a catastrophic event
caused by dirty bombs, bio-chemical
and EMP devices or weapons of mass
destruction. Accordingly, changes have
been made to the exclusions found in
AVN48 to include any hostile use of
dirty bombs such as EMPs; and there
are a number of new extended
endorsements writing back cover in
respect of certain risks. However,
coverage for risks arising from the
hostile use of weapons of mass
destruction (nuclear, radioactive
contamination, biological or chemical
weapons or devices emitting EMP)
remain excluded.
The aim of a system of airline risk and retention of risks and these are
management is to control the risks continuing obligations. In this section,
which inevitably arise from airline we examine how airline liability
operations on land and in the air. exposures can be reduced or
Control action includes the transferred through contracts,
identification, reduction, transfer containment protocols and insurance.
31
 REDUCING LIABILITIES IN
CONTRACTS
Contracts provide a ready means of
managing risk by providing certainty
in relation to the extent of a party’s
obligations.
Within a contract typically there are
specific types of clauses which are
used to exclude responsibility for a
breach or inadequate performance
of contractual obligations. These are
known as exclusion clauses. Clauses
which only limit the extent of liability
are known as Limitation clauses.
Clauses which transfer liability to
another party are known as indemnity
clauses. Others determine where, how
and in what forum disputes will be
resolved and according to the law of
which country.
There are many standard agreements
in the aviation industry because these
are a simple and cost effective means
to provide certainty and consistency in
32
relation to contractual relationships.
Typical examples include IATA’s
Passenger and Cargo Ticket/Air
Waybill Conditions of Contract and
(b) they have understood that there
General Conditions of Carriage and
the Standard Ground Handling and
Catering Agreements.
Whilst many insurers will expect airlines
to at least adopt standard industry
agreements (and airline insurance
(c) they have understood how the
policies will usually automatically cover
IATA ground handling agreements
without the agreement of insurers) it is
of fundamental importance that airlines
do not adopt standard agreements until:
(a) they have formally resolved upon
the risks, as a matter of principle,
which they want to accept for
themselves and want their service
providers or suppliers to bear. This
is because they may need to be
able to demonstrate to their
shareholders, insurers, third parties
or a court that they have not only
identified the risks but also
understood the overall
management of risks between
themselves and others.
are dangers if standard terms are
not prepared and used with care.
These dangers include a failure
to properly incorporate terms
into an agreement
various editions of the agreements
operate in different circumstances
and made a decision on the
governing law and how to resolve
disputes. In the absence of a
properly worded governing law
and dispute resolution provision,
a critical liability and indemnity
provision may be interpreted very
differently from what the parties
originally intended. In some
instances, airlines will seek to
ensure that the law governing the
agreement, as well as the exclusive
jurisdiction in which disputes are to
be resolved, will be that of a
country whose legal system is
familiar to the airline.
As a general comment, it is normal
industry practice for airport service
providers and suppliers to obtain a full
waiver of recourse or indemnity from
an airline in relation to acts or
omissions resulting in passenger delay,
injury and death and the destruction,
loss and/or damage to cargo, baggage
and mail except in cases of particularly
bad (i.e. reckless) conduct. However,
many airlines and their insurers now
expect airport service providers and
suppliers to take greater responsibility
for losses and, therefore, are less
willing to give indemnities. This is
particularly true of maintenance, repair
and overhaulers and ramp handlers.
This is reflected in the fact that some
airlines prefer to create their own
bespoke tailor made contracts.
Liability assumed by an airline under
any contract or agreement will
generally be excluded from the scope
of insurance cover unless such liability
would have attached to the airline
even in the absence of such contract
or agreement.
CONTAINMENT PROTOCOLS
Insurers require airlines to take the
necessary steps to protect their liability
exposures including promptly notifying
insurers of claims and not prejudicing
insurers by making admissions of
liability or entering into any
settlements without their approval.
If a serious event gives rise to a claim
or upon receipt of a claim, it is
essential that an airline take steps to
contain its exposure to both criminal
and civil liability. This includes
ensuring, so far as is reasonably
practicable, that evidence and
information is collected and retained;
and that third parties and their
representatives are not given free
access to an incident site or the
airline’s files.
For example, where cargo is found
damaged at the airport of destination,
surveyors should only be given access
with the airline’s prior approval and
should be accompanied so that a
record is made of their investigations
and findings. Another example is
where there is a collision between a
ramp handling operator’s vehicle and
an aircraft. Often the police will be
called in such cases and will seek to
interview those involved. In many
countries, those involved in the
incident have a right to legal
representation which should be
invoked in order to ensure that they
and their companies are properly
protected. An ill-considered comment
to a police officer or other authority
may result in a successful prosecution
and civil liability of the airline.
33

In many countries there is a legal
requirement to disclose information to
regulators. There may also be a legal
requirement to release documentation
to a claimant which may be relevant to
his/her claim. Failure to do so because
the documents have been lost or
destroyed may prejudice the airline’s
(and, therefore insurers’) ability to
properly defend the claim; and may
even result in imprisonment.
It is important to appreciate that
airlines can be sued in many
34
jurisdictions and that the requirement
to retain and disclose documents
applies to all means of storing
information which could be relevant
to the matters in issue between the
parties. These include letters/faxes/
emails, contracts, internal memoranda,
minutes of meetings, technical data,
diagrams, disks/CD-Rom,
photographs, audio and CCTV tapes,
even if they are marked confidential.
In order to minimise the risk of
misplacing or destroying documents,
general best practice would be to take
active steps to retain documentation in
an orderly fashion, not to destroy any
documents which could be relevant,
avoid copying documents unless
absolutely necessary. Many courts
require sight of the originals, establish
a reference system for storage; and do
not make notes on documents if they
concern the merits of a claim.
AIRLINE INSURANCE
The purchase of insurance is a major
element in risk management. In this
section we examine the role of the
airline’s broker, the kind of cover
typically found in airline insurance
programmes and how specialist
aviation adjusters and lawyers
appointed by insurers assist the
airline in dealing with claims.
(a) Role of the Insurance Broker
The insurance broker is best placed to
provide an airline with advice on the
nature and extent of insurance
coverage required in order to protect
its operations from adverse economic
consequences of the risks to which the
airline’s business is exposed in its day
to day operations.
Under English law, the insurance
broker is the agent of the insured
client and the broker is tasked with
representing the insured client’s
interests. However, the insured client
is, of course, also the client of the
insurer, once an insurance policy has
been purchased, as a result of the
insurance broker’s advice and
representation. The broker should
not only use expertise to advise the
insured client how to obtain insurance
coverage on the best possible terms,
but also if and when there is a claim
under the policy, they should assist
with the timely provision of information
to the insurer and also with the expert
management and resolution of claims.
The airline’s insurance policy is
effectively its last line of defence when
other risk minimisation measures have
not been successful. Therefore, when
and if there are circumstances giving
rise to liability claims which need to be
referred to insurers, a typical insurance
policy for airlines may contain the type
of provisions mentioned below.
(b) Cover
The insurance purchased by an airline
will depend on the nature of risks
which that company’s business
generates. It would ordinarily include
cover for first party hull damage and
liability cover for potential exposure to
passenger, cargo or baggage claims.
It would also typically include cover
for third party liability claims including
property damage, bodily injury or
death caused by, or arising from the
airlines’ operations.
(c) Duty to Notify Claims
Notice of loss, claims or potential
claims must be given to the insurers
as soon as possible and, in any event,
within the time stipulated in the
contract of insurance. Failure to
comply with this requirement may
prejudice coverage under the policy.
(d) Liability Under Contract
When entering into any contract in
which the airline is asked to assume
liability or to waive rights, its insurance
may only operate to offer protection
to the extent any liability would have
attached to the airline in the absence
of such an agreement. As a result, any
extra liability voluntarily assumed by
the airline may not be covered by the
policy. In many instances, insurers will
be willing to review contracts entered
into by airlines and advise whether the
terms of the contract will result in any
liability exposure to the airline which
is not covered under the airline’s
liability insurance policy. In any event,
an airline should employ its own
personnel to make this determination.
35
 (e) Claims Control
Ordinarily insurers will retain the right
to manage how a claim is handled and
resolved albeit in consultation with the
insured airline. However, the insured
airline is under an obligation to assist
insurers and their agents (such as loss
adjusters) by providing all reasonable
assistance that insurers may require
to investigate and if necessary/
appropriate defend claims. Failure to
do so may constitute a breach of policy
terms and may prejudice the coverage
available to the insured airline.
(f) Aviation Insurance Claims
Adjusters
Most insurers or reinsurers will usually
employ an in-house team of aviation
claims experts (known as claims
adjusters within the London Aviation
Insurance Market). Aviation claims
adjusters are experienced in managing
all types and aspects of aviation claims.
36
It is their role to actively manage
and oversee all stages of the aviation
insurance claims process on behalf of
the lead insurer/reinsurer, and they are
responsible for decision making
regarding first party hull claims and
third party liability claims.
In all instances, they will liaise closely
with the insured airline, the lawyers,
loss adjusters and, of course, the
broker and will make all decisions
accordingly. In effect, the claims
adjusters are the decision makers and
co-ordinators of the team of experts,
which includes the insured, lawyers,
loss adjusters and brokers who all
contribute to the claims handling
and decision making process.
Loss adjusters will usually focus on
investigating property damage claims
including aircraft hull, engine,
equipment and spares claims where
they will recommend and monitor
appropriate repair methods and/or
appropriate amounts of payments. The
loss adjuster’s role is to determine the
extent of the insurers’ liability under
the terms of the insurance policy and
then make recommendations to the
claims adjusters as to the levels of
payment to be made.
If a matter becomes particularly
complex or proceedings are initiated,
or anticipated, specialist aviation
lawyers will be instructed by claims
adjusters, in consultation with the
insured airline, to act on behalf of the
airline. They in turn may instruct local
correspondent lawyers and experts to
assist with claims in different countries.
The lawyers will investigate the claim
and, in consultation with the claims
adjusters and the insured airline,
take all necessary steps to defend
proceedings and bring them to a
speedy and satisfactory conclusion
either by negotiating a settlement or
defending the case to trial if necessary.
In order to minimise the risk of
inadvertent admissions, or loss of
documentation and information which
will be needed to facilitate a full legal
assessment of the circumstances of
a claim, early instruction of lawyers
is preferable.
AVIATION INSURANCE
PRODUCTS GLOSSARY
Outlined below are some aviation
insurance terms which are purely
illustrative of the type of aviation
coverage QBE Aviation Syndicate 5555
writes and should not be relied on as
a guide to coverage which your policy
will typically pay for repairs and Hull Deductible Insurance:
may provide. Please always read your
reinstatement of the aircraft to the Most hull policies are subject to
particular policy carefully to determine
condition that it was in before the a deductible, being an uninsured
the extent of coverage which has been
incident, subject to certain exclusions amount for which the insured party is
afforded by it:
and policy conditions which may apply. responsible in the case of repairable
Aircraft Hull Insurance: If the aircraft is not repairable an damage to its aircraft. Hull deductible
Physical damage insurance provided to agreed amount may be paid, known insurance is a type of cover which
cover loss or damage to the insured’s as the agreed value, which is usually protects the insured’s exposure and
aircraft, while it is in motion, not in agreed with the insured at inception thereby reduces the amount of the
motion or for both. This type of cover and is noted in the policy. uninsured exposure.
37
 Hull Total Loss Insurance:
Provides cover in the case of a total
loss of the insured’s aircraft when it is
damaged to such an extent that it is
beyond economic repair or has been
totally destroyed. This cover is paid in
full and provides indemnity for the
additional expenses that are typically
incurred by operators in replacing a
lost aircraft.
Loss of Use Insurance:
When an aircraft is damaged as a result
of an incident which is covered under
hull insurance the repairs may take
some time to complete. Loss of use
insurance usually offers a daily rate of
indemnity over a defined period which
is typically excess of a few days and
with a maximum period of time and
policy limit.
Spares Insurance:
Provides cover for aircraft parts when
detached from any aircraft. Certain
parts may be detached for storage,
overhaul or transport but still remain
the property of the insured. There may
38
also be cover provided for the flying Aviation Products Liability Insurance:
spares kit as carried on most aircraft. A form of insurance which typically
provides cover to manufacturers or
Aircraft Liability Insurance:
maintenance organisations against
Coverage written to protect and
liability arising out of products sold,
indemnify the insured for potential
serviced or supplied. The type of
exposure to passenger, cargo or
product which may be covered
baggage claims and to third party
also includes software and training
liability claims including property
programs.
damage, bodily injury or death
caused by, or arising from the Aviation Hull War & Allied Perils:
insured’s operations. Coverage written to explicitly cover
physical risks of loss or damage to
Airport Liability Insurance:
aircraft arising from war, hi-jacking,
Coverage that provides protection to
confiscation, any malicious act, and
airports for bodily injury and property
other similar causes. It is usual that
damage liability and may also include
this type of cover is excluded from
protection for premises liability risks.
the main hull coverage and has to
Hangar-keepers Liability Insurance: be obtained separately.
A form of insurance that covers the
Liability War and Allied Perils
insured’s liability for damage to aircraft
Insurance:
or spares stored for safekeeping (but
The war and allied perils coverage in
not owned by the insured). This cover
respect of liability is achieved through
will be relevant in any situation where
a write-back endorsement to the
a party has accepted responsibility
aviation liability coverage, AVN52.
for the safekeeping of an aircraft,
including in flight hangar-keepers
when an aircraft is being flight-tested.
39
 CONTACTS
QBE AVIATION SYNDICATE
5555 AIRLINE CONTACTS:
EMILIO DI SILVIO
Managing Director
Tel +44 (0)20 7105 5714
Mob +44 (0)7785 257836
DAN BOULTWOOD
Airlines Underwriter
Tel: +44 (0)20 7105 5726
Mob: +44 (0)7766 056725
JERRY FLAXMAN
Claims & Business Development
Manager
Tel: +44 (0)20 7105 5706
Mob: +44 (0)7802 807742
JOHN BOWMAN
Underwriting
Tel: +44 (0)20 7105 5712
Mob: +44 (0)77340 101113
MELISSA KAC
Underwriting
Tel: +44 (0)20 7105 5709
Mob: +44 (0)7984 688765
DEBRA JOHNSON
Claims
Tel: +44 (0)20 7105 5711
Mob: +44 (0)7788 438394
40
MARKO NINKOVIC PETER COLES DISCLAIMER any warranties or representations of any For further information on any matters
Claims Partner kind about the contents of this guide, the discussed herein, please contact Marko
This guide was produced by QBE Aviation
Tel: +44 (0)20 7105 5713 Tel: +852 2526 4202 accuracy or timeliness of its contents, or Ninkovic at QBE Aviation Syndicate 5555,
Syndicate 5555 at Lloyd’s, acting via its
Mob: +44 (0)7795 094307 Fax: +852 2810 5994 that the information or explanations (if Peter Coles at Barlow, Lyde & Gilbert LLP
Email: pcoles@blg.com.hk managing agent, QBE Underwriting
any) given in this guide are appropriate or Rod Margo at Condon & Forsyth LLP.
STUART FARLOW Limited, in conjunction with the law firms
for your purposes, or (ii) have (to the
Claims Barlow, Lyde & Gilbert LLP and Condon & The team at QBE Aviation Syndicate
fullest extent permitted by law) any duty
Tel: +44 (0)20 7105 5728 Forsyth LLP. QBE Underwriting Limited is 5555 would like to express their thanks
CONDON & FORSYTH LLP to you, whether in contract, tort, under
Mob: +44 (0)7747 014099 authorised and regulated by the Financial to Peter Coles, partner, Barlow, Lyde
7 Times Square statute or otherwise with respect to or
Services Authority and is a member of a & Gilbert LLP, Hong Kong and to Anna
New York, NY 10036 in connection with this guide or the
group of companies (the “QBE Group”) Anatolitou, Associate, Barlow Lyde &
Email: firstname.lastname@uk.qbe.com USA information contained within it. To the
whose ultimate parent undertaking is Gilbert LLP, London, for their invaluable
fullest extent permitted by law, Syndicate
MICHAEL HOLLAND QBE Insurance Group Limited (a company help and assistance in the preparation
5555, QBE Underwriting Limited, each
Partner incorporated in Australia). of the international sections of this Airline
BARLOW LYDE & GILBERT LLP other member of the QBE Group; Barlow,
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Beaufort House Readership of this guide does not create Lyde & Gilbert LLP and Condon &
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USA for any omissions or inaccuracies.
Fax: +44 (0)20 7071 9000 the diversity and complexity of its subject
Email: gkavanagh@blg.co.uk
COPYRIGHT NOTICE
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may it be relied upon as a substitute for Copyright vested in QBE Underwriting
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41
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