THE LIFE OF AN ACCIDENT AND HOW TO HANDLE IT: CASE STUDY

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_{ANNUAL RISK MANAGEMENT CONFERENCE}

THE LIFE OF AN ACCIDENT AND

HOW TO HANDLE IT:

CASE STUDY

POTENTIAL PARTIES (DEEP POCKETS)

- Eastpointe Airport

- owned airport

- erected temporary barriers around the maintenance facility

- Sky Top Airlines

- owned the airplane - leased the apron

- were paid to secure the area where the maintenance was to be done - had put up signs

- Master Maintenance

- had subleased apron from Sky Top

- performing maintenance on widebody jets - had control of jet

- says Sky Top is responsible for safety

- Famous Fuel

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FIRST STEPS AFTER ACCIDENT

- Make sure employees know the importance of intelligent document creation.

TWO APPROACHES TO DEFENSE

- True fault = Who is responsible? - litigation

- contribution actions - Contractual

- duty to defend - indemnity

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- There will be negligence claims between parties. - Effect of workers compensation bar.

- Right to cross claim on contract.

EXPRESS OR CONTRACTUAL INDEMNITY

- Getting someone else to pay - liability

- defense

- Disfavored by courts. Must be “clear and unambiguous.” - Dependent on bargaining powers of contracting parties. - you get what you negotiate

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CONTRACTUAL DEFENSES

“An ounce of prevention is worth a pound of cure”. Indemnity provisions in:

Eastpointe Airport – Sky Top Contract

Eastpointe Airport – Famous Fuel Contract

THREE TYPES OF CONTRACTUAL INDEMNITY

GENERALLY

- Broad form: Includes indemnitee’s own negligence.

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STANDARD INDEMNITY CLAUSE

PROVISIONS IN AIRPORT CONTRACT

- “defend” and “indemnify”

- “any and all liabilities, claims” - “attorneys fees and costs” - “even if groundless”

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INDEMNITY AGREEMENTS IN AVIATION

-Contracts for the supply of services or goods to airport

-Contracts for supply of goods and services to airlines

-Lessor – Lessee situations But:

A FEW RULES OF CONTRACT INTERPRETATION

1. Choice of law or “most significant contacts”.

2. Typically, not required to indemnify for own negligence unless contract clearly says so.

“This includes claims where it is asserted or shown that the acts or negligence of the Airport, in whole or in part, caused or contributed to the claimed loss or injury”.

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ANTI-INDEMNITY STATUTES

- Agreements to indemnify for other’s intentional conduct are void as a matter of public policy.

- No indemnity for reckless or willful conduct.

DUTY TO DEFEND vs. INDEMNITY

- Governed by terms of agreement and allegations.

- “Party agrees, at its own expense, and upon written request of Airport, to defend any suit, action or demand brought against Airport on any claim covered herein.” - Reimbursement or take over defense?

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WHEN PARTY IS ASKED TO INDEMNIFY:

- What is scope of agreement?

- Broad or limited to negligence of the airport?

- Are there defense obligations?

DUTY TO DEFEND

- Broad duty. Broader than duty to indemnify.

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DUTY TO PROVIDE INSURANCE PROVISIONS

- “The Airline shall procure and keep in full force, at all times,

insurance covering all operations under this agreement, in such kinds and amounts . . .”

INSURANCE PROVISIONS

- Require Airline to protect airport by insuring that all contractors/subcontractors:

- indemnify and defend airport

- carry insurance

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WHOSE POLICY IS PRIMARY?

QUESTIONS TO ASK

(1) Are there indemnity obligations?

(2) Are there defense obligations?

(3) Are there insurance implications? - your policy

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ADDITIONAL PROTECTION

- Waiver of subrogation/contribution.

“To the extent that any loss of any kind is covered or paid by any insurer, the contracting parties hereby waive subrogation or contribution rights against each other and their respective officers, agents and employees, and the contracting parties shall notify their respective insurers of this waiver of subrogation agreement and shall cause this waiver of subrogation agreement to be included in the insurance policies secured by each of the contracting parties.”

ADDITIONAL PROTECTION

-Clause for non-liability for damage to Airline property.

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DUTY TO TENDER

4. Request reimbursement of fees and costs.

TWO CASES HOT OFF THE PRESS

(1) Vumbaca v. Terminal One, U.S.D. Ct. N.Y. (2012) - 2010 incident at JFK Airport. 7 hours stranded.

- TOGA leases, finances and operates Terminal One. - Sole responsibility for gates.

- TOGA subcontracted with ASIG over ground handling. - Question: Is TOGA an “agent” of a carrier? If so, claims limited by Montreal Convention.

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HOT OFF THE PRESS (2)

(2) Alicea v. JetBlue, N.Y.S. Ct., 2012 - Plaintiff lost balance on jet bridge - JetBlue

- Port Authority

- Oxford = Safety checks

- Defendants sue Oxford for indemnity and contribution - Oxford = “we were not negligent.”

IN THIS CASE

- Eastpointe Airport should tender to: - Its insurer

- Sky Top Airlines - Famous Fuel

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LITIGATION ISSUES

- Right to sue other parties. - Right to cross claim

THE LAWSUIT

- State or federal court?

- Need to promptly secure counsel and respond. - Tender of claims.

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INITIAL CHALLENGES

THE MUNICIPAL IMMUNITY DEFENSE

- Most airports owned by government entity.

- Government not liable for torts that result from the performance of a governmental function.

DOCUMENTS

- Intelligent creation. - Early document hold. - Organized production.

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COMPANY DEPOSITIONS

- Identify correct people to represent company. - Preparation.

EARLY MEDIATION PROCESS

- Court process.

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EXPERTS

- Role in case

- aid lawyers - sell the case - Credentials

DEFENSE GOALS

- Narrow the case

- summary judgment

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TRIAL OR SETTLEMENT

Key Factors:

- Implications of settlement on other matters. - Costs of defense vs. risk.

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The House

Conditions through which coverage can also leave

if not satisfied

Is It Covered?

♦ Declarations (identity of insured, effective dates of policy, limits, retentions, etc.)

♦ Insuring agreements (insurer’s coverage obligations) ♦ Definitions

♦ Exclusions

♦ Terms and Conditions (reporting, cooperation, dispute resolution, etc.)

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Declarations – Named Insured

♦ Is there a minimum ownership requirement? ♦ Limits and applicable deductibles

♦ Per Occurrence

♦ will vary between coverages ♦ Geographical limits

♦ Named premises

Insuring Agreements

♦ Bodily Injury or Property Damage

“We the Insurers agree, to the extent and in the manner hereinafter provided, and in consideration of the payment of Premium, to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages in respect of bodily injury and/or property damage caused by an Occurrence during the Policy Period and arising out of the Hazards Covered set forth in the Policy Schedule”

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Defense Costs

♦ Insurer will usually agree to defend any suit against the Named Insured in respect of liability for which coverage is provided under the policy.

♦ Is the coverage excess of primary (pro rata of expense against exposure)?

Premises Legal Liability

♦ PD or BI caused by an occurrence

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Hangarkeepers’ Liability

♦ property damage to aircraft or aircraft equipment ♦ not owned, rented or leased by Named Insured ♦ caused by an occurrence

♦ whilst on the ground

Excess Legal Liability

♦ Liability attaches only after primary insurers have paid or been held liable to pay

♦ limits not increased by virtue of there being more than one insured

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Contractual Agreements

♦ Waivers of subrogation, hold harmless agreements, indemnity agreements and contractual agreements are usually automatically included within the coverage, subject to the policy terms, conditions and exclusions of cover.

Exclusions

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Definitions

♦ Named Insured – does the holder of an Insurance Certificate fall within the definition?

♦ relevant for exclusions eg employee of the Named Insured

♦ Occurrence – an accident, or a continued or repeated exposure to conditions occurring during the Policy Period, which results in

injury during the Policy Period provided the injury is accidentally caused

General Conditions

♦ The Named Insured shall not act in any way to the detriment or prejudice of the interest of the Insurers

• is separate representation necessary for defence of claim and the defence of a Third Party Action?

♦ Subrogation

• waiver of subrogation without insurers’ knowledge (Liberty Mutual v Altfillisch Construction Co, 70 Cal App. 3d 789 ♦ Cross Liability

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Mark D. Meyer

Partner, Head of Aviation & Space Group Edwards Wildman Palmer UK LLP

Dashwood, 69 Old Broad Street London, EC2M 1QS +44 (0) 20 7556 4527 [email protected] Cal R. Burnton Partner

Edwards Wildman Palmer LLP 225 West Wacker Drive, Suite 3000 Chicago, IL 60606

+1 312.201.2646