Professional Documents
Culture Documents
Aviation Industry in India is one of the fastest growing aviation industries in the world. With the liberalization of the Indian aviation sector, aviation industry in India has undergone a rapid transformation. From being primarily a governmentowned industry, the Indian aviation industry is now dominated by privately owned full service airlines and low cost carriers. Private airlines account for around 75% share of the domestic aviation market. Earlier air travel was a privilege only a few could afford, but today air travel has become much cheaper and can be afforded by a large number of people. The origin of Indian civil aviation industry can be traced back to 1912, when the first air flight between Karachi and Delhi was started by the Indian State Air Services in collaboration with the UK based Imperial Airways. It was an extension of London-Karachi flight of the Imperial Airways. In 1932, JRD Tata founded Tata Airline, the first Indian airline. At the time of independence, nine air transport companies were carrying both air cargo and passengers. These were Tata Airlines, Indian National Airways, and Air service of India, Deccan Airways, Ambica Airways, Bharat Airways, Orient Airways and Mistry Airways. After partition Orient Airways shifted to Pakistan. In early 1948, Government of India established a joint sector company, Air India International Ltd in collaboration with Air India (earlier Tata Airline) with a
capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. The inaugural flight of Air India International Ltd took off on June 8, 1948 on the Mumbai-London air route. The Government nationalized nine airline companies vide the Air Corporations Act, 1953. Accordingly it established by 1995, several private airlines had ventured into the aviation business and accounted for more than 10 percent of the domestic air traffic. These included Jet Airways Sahara, NEPC Airlines, East West Airlines, ModiLuft Airlines, Jagsons Airlines, Continental Aviation, and Damania Airways. But only Jet Airways and Sahara managed to survive the competition. Meanwhile, Indian Airlines, which had dominated the Indian air travel industry, began to lose market share to Jet Airways and Sahara. Today, Indian aviation industry is dominated by private airlines and these include low cost carriers such as Deccan Airlines, GoAir, SpiceJet etc, who have made air travel affordable.
after bad weather and the resulting crashes at an air meet caused losses on many of those first policies. It is believed that the first aviation polices were underwritten by the marine insurance Underwriting community. In 1929 the Warsaw convention was signed. The convention was an agreement to establish terms, conditions and limitations of liability for carriage by air, this was the first recognition of the airline industry as we know it today. By 1933 realizing that there should be a specialist industry sector the International Union of Marine Insurance set up an aviation committee, and by 1934 eight European aviation insurance companies and pools were formally established and the International Union of Aviation Insurers was born. The London insurance market is still the largest single centre for aviation insurance. The market is made up of the traditional Lloyds of London syndicates and numerous other traditional insurance markets. Throughout the rest of the world there are national markets established in various countries, this is dependent on the aviation activity within each country, the US has a large percentage of the world's general aviation fleet and has a large established market. No single insurer has the resources to retain a risk the size of a major airline, or even a substantial proportion of such a risk. The Catastrophic nature of aviation insurance can be measured in the number of losses that have cost insurers hundreds of millions of dollars (Aviation accidents and incidents). Most airlines arrange "fleet policies" to cover all aircraft they own or operate.
AVIATION INSURANCE
NORMAL RISKS
The
LIABILITIE S
above diagram suggests that there are mainly two kinds of risks which an aviation insurance company will cover which has been divided into two parts. They are: 1. Normal Risks 2. Liabilities
These two risks are further divided into various parts which involve various risks and liabilities they are which is explained in detail later on.
NORMAL RISKS
These risks are those risks which every aviation company in this industry carries it on its back when it enters into the business. These risks may differ from time to time and situation to situation. These are 1. Hull Risks 2. Hull War Risks 3. Spares All Risks/ War Risks 4. Hull total Loss Only cover These risks are those risks which takes place when these takes place when any of these factors comes into action. Because all the above risks mentioned above are unpredictable and may occur at any time
HULL RISKS
The hull "All Risks" policy will usually refer to something like "all risks of physical loss or damage to the aircraft from any cause except as hereinafter excluded". Airline hull "All Risks" policies are subject to a standard level of deductible (that is an uninsured amount borne by the Insured) applicable in the event of partial (non-total) loss. Currently, this deductible can range from $50,000 in respect of a Twin Otter to $1,000,000 in respect of a wide-bodied jet aircraft, such as a Boeing 747. Deductibles too can be reduced by means of a separate "Deductible Insurance" policy. The Deductible Insurance Policy is affected to reduce the large "All Risks" policy deductibles to a more manageable level. For example the US$1,000,000 applicable to a Boeing 747 can be reduced to say US$100,000. The term "all risks" can be misleading. "All risks of physical loss or damage" does not include loss of use, delay, or consequential loss. "Grounding" is a good example of consequential loss. Some years ago when there had been a
couple of accidents involving DC10 Aircraft, the Civil Aviation Authorities throughout the world imposed a "grounding order" on that type of aircraft. That order in effect said until certain things had been established and checked out those aircraft could not fly. The operators of those aircraft were unable to fly them and as a consequence of that they "lost" the use of them. But the aircraft were not "lost" - it was known precisely where they were but they could not be used to carry passengers. Such an eventuality would not be covered by an "all risks" policy because in such circumstances there is no PHYSICAL loss or damage. What the policy will cover is the reinstatement of the aircraft to its "pre-loss" condition, if repairable damage is involved, or some other form of settlement in the event that more substantial damage is sustained. Exactly what form of settlement will depend on the policy conditions. Today, the vast majority of airline hull "all risks" policies are arranged on an "Agreed Value Basis". This provides that the Insurers agree with the Insured, for the policy period, the value of the aircraft and as such, in the event of total loss, this Agreed Value is payable in full. Under an Agreed Value policy the replacement option is deleted.
The hull risk does not cover some risks whish are as follows 1. Wear, tear and gradual deterioration - in common with most non-marine policies (which includes aviation insurance) these perils are thought to be a trading expense and not a peril to be insured. 2. Ingestion damage - caused by stones, grit, dust, sand, ice, etc., which result in progressive engine deterioration is also regarded as "wear and tear and gradual deterioration", and as such is excluded. Ingestion damage caused by a single recorded incident (such as ingestion of a flock of birds) where the engine or engines concerned have to shut down is not
regarded as wear and tear and is covered subject to the applicable policy deductible. 3. Mechanical Breakdown - likewise is thought by aviation insurers to be an operating expense, but subsequent damage outside the unit concerned is usually covered. However, it is possible to obtain insurance coverage against mechanical breakdown of engines by way of a separate policy. This coverage has a high degree of exposure and as a result is relatively expensive. The majority of airlines do not purchase it probably viewing such exposure as a part of the "engineering"
government.
7. Hijacking or Unlawful exercise to control plane other than crew
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The brutal second plane crash in World Trade Center, New York, United States of Ameica, 11 September,2001
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The majority of the excluded "War and Allied Perils", other than the detonation of a nuclear weapon and a war between the Great Powers (the aviation insurance world identifies these as the U.S.A., the Russian Federation, China, France and the UK), can normally be covered by way of a separate "War and Allied Perils" policy. Aircraft deductibles are not normally applied in respect of losses arising out of "War and Allied Perils". Other exclusions insurers will usually apply are, as follows:1. Confiscation etc. by the "state" of registration (this exclusion can often be deleted in respect of financial interests - albeit, in some instances at an additional premium charge) 2. Any debt, failure to provide bond or security or any other financial cause under court order or otherwise; 3. The repossession or attempted repossession of the Aircraft either by any title holder or arising out of any contractual agreement to which any Insured protected under the policy may be party; 4. Delay and loss of use. (Although there is often an extension to the policy for a limited amount for extra expenses necessarily incurred following confiscation or hijacking). The aircraft hull "War and Allied Perils" policy will cover the aircraft on an "Agreed Value" basis against physical loss or damage to the aircraft occasioned by any of these perils. This statement is made carefully and deliberately in order to highlight the essential difference from a "Political Risks" Insurance.
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Spares installed on any aircraft are not covered by the Spares Insurance. They become, from an insurance standpoint, a part of the aircraft upon which they are installed and a part of the Agreed Value for which it is insured. This becomes particularly important if the parts are loaned to another airline.
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This is similar to Hull All Risks cover given above but will respond only to total losses of aircraft, whether actual, constructive or arranged. This is particularly given for old aircraft since the old aircraft are heavily depreciated and insured for low sums and premium on such low sums would result in low premium, which would be inadequate for the partial losses. The ratio of partial losses to total losses in such old aircraft is distorted.
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LIABILITIES
Liabilities are those risks which may arise due to some consequences or some reasons the company has to face. Those reasons are as follows 1. Aircraft Liability 2. Excess Liability 3. Aerospace Manufacturers products and Grounding Liability 4. Airport Owners and Operations Liability 5. Product Liability A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. The explanations of all the liabilities are given below
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AIRCRAFT LIABILITY
Here in aircraft liability there are many other liabilities involved which are further divided into four parts. They are
These are the kinds of liabilities which are covered in aviation insurance the explanation in detail is given below
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PASSENGER LIABILITY
Coverage
for
killed during
or an
accident while aboard insured aircraft. policies liability into two Aviation divided coverage
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A Passenger Liability policy covers incidents resulting from the transportation of passengers by land, sea or air and can often be included as part of a aviation insurance policy. However care must be taken to check that the motor policy wording does not exclude fare-paying passengers, which is often the case. It is unlikely that an underwriter will be prepared to cancel or amend the wording of a standard motor vehicle policy. For this reason Daily Cover policies are specifically for to cater for fare-paying passenger liability.
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Insurance showing that coverage is in place, access to more flying sites are accessible for the operation of your aircraft
Concorde crash on a hotel near Paris Airport just few minutes after the take off which resulted in destruction of th hotel it fell on, 25 July, 2000
When one engages in recreational activities requiring the use of a vehicle - whether it be land, water, or air sports related - there are inherent factors that could result in liability issues. No one wants to enjoy an activity and then have the pleasure of it clouded with possible situations that would result in liability claims against their hard earned savings. This Third Party liability insurance for USUA members can help relieve the worry of possible claims against the pilot should this type of
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situation occur. Additionally, access to airports, flight parks, and flying events often require liability coverage. Many states require insurance of this nature just to operate an airplane of any description. Third party liability coverage is also less expensive than full coverage, and therefore allows the members (insurance holders) the opportunity to enjoy the thrill of aviation without the worry of liability concerns or the expense of high-priced insurance. The people can be only eligible who are a registered, certificated or licensed pilot are eligible. Sport Pilot Students who are endorsed to solo are also eligible. Pilot registration can be with any recognized organization.
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BAGGAGE LIABILITY
This kind of liability may include various reasons in the happening. They are as follows:
1.
Delays
If your bags are delayed, try not to panic. The airlines typically have ways
to track them, and about 98 percent of all misplaced luggage is returned eventually. If your bags are on the next flight, you could have them within a few hours. If they've been sent to the wrong airport, it could take a couple of days. Make sure to file your claim immediately at the airport and to give the attendant a hotel or home phone number and address.
The airlines will typically bring you your luggage when it is found; you will
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rarely need to return to the airport to pick it up. Additionally, many airlines will reimburse any unexpected expenses caused by the loss or delay (keep your receipts!). But be careful here -- the airline sometimes has the option to deduct any reimbursement or stipend from any subsequent awards. Before you leave the airport, be sure you know how to check on your bag's status; some airlines have an online system while others will provide you with a phone number to call for updates.
2. Lost Baggage
If the airline loses your bags, make sure you get a written claim for damages. This may require a different form than the original "missing luggage" form. This can be done at the airport or by mail. On domestic flights, the airline baggage liability is capped at $3,300 per person. On international trips, the liability limit may vary, as it is governed by various international treaties, including the Montreal and Warsaw Conventions.
You may
need to
produce receipts to prove the value of items you had in your suitcase. If you have them, include copies in any documentation you send to the airline. (Keep in
A place consisting lost baggages in airport
reimbursed for the depreciated value of your items -- so the airline won't give you the full $1,000 you paid for that suit you purchased two years ago.) You can purchase "excess valuation" protection if your checked baggage is worth more than these limits (but before doing so, make sure the items aren't already covered by your homeowner's or travel insurance policy). The airlines typically have a long list of items for which they will not be held responsible; these include jewelry, money, heirlooms and other valuables. These sorts of items should always be packed in your carry-on bag.
3.
Stolen Baggage
Head directly to the baggage carousel when you get off your flight. Many airlines scan bags when they're loaded into the baggage claim area and keep records,
Unclaimed baggage ready to be stolen
especially
at
larger
airports. Once you've left the baggage claim area, your claim is no longer with the airline, but with the police.
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4. Damaged
Baggage
A damaged bag due to hush made by the airport workers in the green belt
Once you've gotten your bags off the carousel, immediately check them for damage or other signs of tampering or mishandling. Report any damage before leaving the airport; airline customer service will often want to inspect the bag. Keep in mind that most airlines won't cover minor wear and tear.
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According to,
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Although Martinair Cargo will give its best efforts to deliver your shipment at its final destination in good order and condition, sometimes damage / depreciation, delay or (partial) loss unfortunately occurs. In case such an irregularity should affect your shipment, a claim can be filed with Martinair Cargo Claims. In order to facilitate and speed up the claim handling process, we kindly would like to draw your attention to the following: I What to do in case you receive your shipment with damage 1 Make sure that the damage of the shipment is noted on the release form/delivery receipt of the warehouse. 1 If possible, please take (digital) pictures of the damaged shipment upon
receipt of your cargo at the final destination, as recorded on the Airway Bill. 1 To strengthen your case, you can appoint an independent and objective
surveyor. However kindly be advised that the decision to appoint a surveyor is up to the claimant as the claimant always has to provide independent evidence in order to prove the extent of the damage as claimed for.
1
Measure the temperature of the shipment upon release and measure the
boxes on the outside of the pallets in case of complete pallet delivery. Please record the temperature on the release form/delivery receipt of the warehouse.
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To strengthen your case, you can appoint an independent and objective surveyor to check the condition of your perishable shipment. Please make sure that your shipment will be surveyed as soon as possible but not later than 8 hours after arrival at your premises: perishables are time sensitive and/or temperature sensitive commodities, therefore only a survey done shortly after arrival of the cargo will be considered as an objective survey.
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Waybill) reported missing Send a preliminary claim to Martinair Cargo Claims within 120 days from
the date of issue of the Master Air Waybill. Partial loss / pilferage:
1
Partial loss is defined as one or more pieces of the total shipment Pilferage is defined as the loss of one or more items out of one or more
pieces
1
the date of delivery (both partial loss and pilferage are considered as damage). 1 Make sure, that partial loss and/or pilferage is noted on the warehouse
release form/delivery receipt of the warehouse or on the Trucking document in case of direct deliveries. In case of pilferage, please also establish the weight discrepancy. III How to file a priced claim
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Whenever a priced claim is filed, the necessary information must be gathered. We strongly request you to enclose the relevant documentation and information as mentioned below, in the English language:
1
explicitly indicate the items / pieces claimed for. Please note that Martinair Cargo cannot offer full compensation based on the commercial / sales invoice as a refund for loss of profit is not part of our contractual liability.
2
Packing list. Please indicate the items / pieces claimed for Cession of
Rights, if required, from the party (shipper / consignee as mentioned of the Master Air Waybill) entitled to claim, which states that your company is authorized to act on their behalf. 3
4
Copy of the Martinair Master Air Waybill (and if possible a copy of the relevant House Air Waybill).
5 A specification of the amount claimed for (by means of a shippers invoice, an independent survey report, a bill of sale or a bill of repair).
1 2 3
Copy of the delivery receipt. (digital) Pictures, if available. Your banking details, including swift code.
In case your claim concerns damage / depreciation, please enable us to verify the extent / direct consequences of the irregularity by also enclosing:
1
Independent and objective survey report, if issued. In case the amount of the
damage / depreciation is expected to be below the costs involved in employing a surveyor, a survey report obviously is not required. Please note that the decision
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whether or not to involve a surveyor is entirely yours. The presence of an objective survey report, however, will never reduce the strength of your case.
2
Destruction report, in case the shipment was no longer fit for sale. Bill (s) of sale, in case the shipment was still fit for sale.
3
4
5
6
Only upon receipt of the information as requested above, your claim can be taken into consideration. If any of these documents are not available, please explicitly state so. Please be informed that an adequate and sufficient provision of all relevant documents enables a swift and efficient claim handling procedure. IV Claims handling information 1 Claims will be handled in accordance with the applicable Conventions
and /or General Conditions and / or Conditions of Contract. 1 An airline can only be held responsible for proven irregularities which can
be held against the carrier and which occurred while being under its custody. This means the period from acceptance of the shipment at the airport of departure until delivery at the airport of destination.
1
case of damage (also including partial loss and pilferage) a (preliminary) notice of claim must be filed within 14 days from the date of receipt of the cargo. In case of
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loss (all pieces reported missing) a (preliminary) notice of claim must be filed within 120 days from the date of issue of the Mawb. 1 The maximum liability of Martinair Cargo is limited. We refer to the Conditions (available on the website of Martinair Cargo:
relevant provisions of the Warsaw / Montreal Convention, as well as to our General www.martinaircargo.com) and our Conditions of Contract. As a consequence hereof, we politely advise you to file a claim with your (clients) underwriters in first instance, in case your shipment is covered by an insurance policy. 1 For a number of irregularities Martinair Cargo is protected by an exclusion
of all liability. For example: the damage as claimed for is of an indirect / consequential nature ( e.g. loss of profits, additional taxes incurred, fines etc.), Act of God , Force Majeure situation, authority regulations. Reference is made to our General Conditions. Martinair also will decline all liability for goods not properly packed for air transportation. Martinair Cargo does not accept liability for perishable cargo delivered into our custody at a temperature exceeding the temperature limits mentioned on the warehouse receipt / acceptance slip or exceeding the temperature limits mentioned in the IATA, Perishable Cargo Manual. Also liability is not accepted by Martinair Cargo for damages which are a result of inherent defect, nature or vice of the cargo whilst shipment has not suffered a significant delay. 1 The right to claim shall be extinguished if any action is not brought within
two years, reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have arrived, or from the date on which the carriage was stopped.
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Whenever our liability for a claim exceeds our policy deductible, Martinair
Cargo will be forced to hand over the file to the liability claims adjusters appointed by our insurers. The claim will then be dealt with directly by these claims adjusters and the claimants will be contacted accordingly. 1 In case we accept liability we request the claimant to sign and to stamp a
Final Release Form before being able to settle, hence relieving Martinair Cargo from any further future liability. After receipt of the duly signed and stamped Final Release Form and if necessary the Cession of Rights, settlement will be effected. Our financial department will transfer the amount to your bank account, for which we of course need your banking details, including swift code. 1
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EXCESS LIABILITY
Excess liability is all about the refueling and the defueling of the aircraft. Excess liability is also known as THIRD PARTY WAR RISKS.
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Coverage
This policy protects parties from claims arising from injury or damage caused by defects in the products sold or manufactured or from improperly completed operations. Manufacturers, distributors and sellers can be open to liability even if it is proven that the product was used improperly. Insurance
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coverage will cover their legal fees needed for defense against claims and class action suits
Statistics
Though air traffic is considered to be a safe means of transportation, accidents do occur. Some of the more common causes of many of these incidents are faulty equipment and structural or design problems. Aviation products can cause catastrophic accidents as the result of relatively minor failures.
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GROUNDING LIABILITIES
This may include liabilities as follows
PREMISES-LIABILITY
This basic part of the policy will protect the liability of the operation for the employees while performing their duties. This would be the fueling operation, and any part of the business associated with the office and ramp areas. The facility will add to this policy additional parts to cover the specific needs of each operation.
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TRAINING
It is the hope of the insurance underwriters that if you are asked to do something new that you will have received training ahead of time. If you usually move a Robinson R22 or Schweizer 300 and are now asked to move a multimillion dollar Sikorsky S-61, please be sure you ask for training or assistance. This same training will apply to any part of the operation you perform. Even something that seems as simple as fueling or de-fueling must be part of your training before you perform it by yourself. Underwriters would prefer the operation participate in NATAs Safety
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IN-FLIGHT-HANGARKEEPERS
This coverage is important if you are operating the helicopter in flight. It is not uncommon for an operation to do a test flight after maintenance has been performed or if avionics have been installed or changed. Sometimes a problem reported by the owner can only be replicated while in flight. If you are the one who flies it, be sure you meet all of the pilot requirements of both the operators policy and the helicopter owners policy. In almost every case, an owner will have an aircraft policy that has as part of their pilot warranty a paragraph that states what qualifications a pilot needs to meet before he can fly as part of a maintenance flight. There are some operators who believe that the owners policy will cover any damage loss aircraft provision. Remember that the owner has a
Eligible pilots
results from a to
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The Insureds liability as an airport owners and/or airport structures that may include:
o o o o o
- airport terminal, airfield and other infrastructure; - fuelling station; - air traffic control center.
Insurance risks:
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Insurance period:
- security measures;
Exclusions:
Standard: military risks; risks related to nuclear explosion effects and radiation hazard.
Specific:
o o o o o
- liability for property owned or temporarily possessed by the Insured; - Liability for injuries to persons and property resulting unless such activities have been agreed on with the Insurer.
Also to mention that airport owners liability also includes operations liabilties
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PRODUCT LIABILITY
Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause.
Theories of liability
In the United States, the claims most commonly associated with product liability are negligence, strict liability, breach of warranty, and various consumer protection claims. The majorities of product liability laws are determined at the state level and vary widely from state to state. Each type of product liability claim requires different elements to be proven to present a successful claim.
Plane crash due to manufactures and other members related with the airlines
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Types of liability
Section 2 of the Restatement (Third) of Torts: Products Liability distinguishes between three major types of product liability claims:
manufacturing defect, design defect, a failure to warn (also known as marketing defects).
Manufacturing defects are those that occur in the manufacturing process and usually involve poor-quality materials or shoddy workmanship. Design defects occur where the product design is inherently dangerous or useless (and hence defective) no matter how carefully manufactured. Failure-to-warn defects arise in products that carry inherent non obvious dangers which could be mitigated through adequate warnings to the user, and these dangers are present regardless of how well the product is manufactured and designed for its intended purpose.
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LEGAL CONCERNS
In many cases, changes in other areas of our society have a great influence over aviation. This is the case with our court system. The trend toward unreasonable verdicts and ridiculous awards has forced many aircraft owners to create shell corporations to "front" as the registered owner of their aircraft. Owners today are uncertain as to how much liability insurance is adequate protection, a situation made far worse by the growing reluctance of insurance underwriters to offer higher limits of liability protection at any price. The underwriters explain that
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it is impossible for any aviation insurance company to predict an adequate liability premium rating structure when the court decisions are so volatile and erratic. All aviation insurance companies are heavily reinsured by companies in London and other foreign markets, and those foreign insurers usually charge passenger liability premiums for aircraft operated in the United States that are three to five times as much as those paid by non-U.S. operators. And so it goes for the owner of general aviation and commercial aviation aircraft in the United States. Aircraft owners seem to be trapped between inadequate coverage limits, high-priced liability insurance premiums, and the perils of the U.S. court system.
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"Instruction and Rental" risks while others have increased their premiums for this class. The future may see the small maintenance facility replaced with a newtechnology aircraft requiring far less maintenance. The same style of maintenance used by the military and airlines -- the remove-and-replace concept -- may become commonplace throughout general aviation as well. Maintenance problems may be identified by computer and repaired only by the manufacturer at factory service centers, a practice that is already common in today's bizjet fleet. "Plug and fly" replacement parts keyed to a computer analysis may decrease cost with little or no downtime. All this, of course, is little consolation to owners of existing, oldertechnology, maintenance-intensive aircraft. They're not getting any younger ... and neither are we.
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Aircraft hull and liability insurance for the senior pilot has become such a concern that our insurance agency has developed a special task force to help deal with this problem. Looking into the future, as the baby boomers age, our average pilot populations continue to age. As with automobile drivers, we have found this segment of our industry to be no more likely to have an accident than the younger group. In fact, they tend to be more cautious, better trained, and better financed than most underwriters care to admit. Maybe it is because we are growing older ourselves, but we believe increased awareness at the underwriting level will soon improve insurance company acceptance and serve to extend the insurable age of the senior pilot. We can assure you, we are doing everything in our power to influence the underwriting community in that direction. Meantime, what can be done to infuse new blood in the cockpit? The industry is currently suffering from a lack of trained professional pilots. Without the military-trained pilot to help fill the need for commercial and airline pilots, we must depend solely upon civilian-trained pilots. This then becomes an economic problem. There is no longer a generous GI Bill to offset the cost of flight training in an age of escalating costs. Many of our charter and corporate clients complain of sending a young second-in-command to school on their aircraft, only to have the airlines snap them up upon completion. The trend toward younger and younger pilots in the right seat is disturbing whether at the charter, corporate, or airline level of operation.
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SHRINKING FLEET
Primary training costs are increasing for a number of reasons. The high cost of new replacement training aircraft and inadequate and expensive insurance render the training sector of aviation vulnerable to lawsuits and financial disaster, and a shortage of qualified instructors has slowed the flow of new pilots to a trickle. The shortage of career CFIs is due in part to the low pay scale at most flight schools, whose owners respond that they're just barely able to stay in business as it is. The majority of the general aviation aircraft flying today are 15 to 20 years old and older. To replace a simple single-engine Cessna 172 today would cost in excess of $140,000. A new twin-engine Beech Baron is in the $1,000,000 range. Of course, used aircraft are always an option. The obvious problem is that as new replacement aircraft increase in cost, the price of good used aircraft is forced up as well. Today, there are no bargains. It is often a struggle to find a used aircraft for sale with no damage history. Couple the normal attrition of our aging fleet with the high cost of replacement aircraft and it is easy to understand why our overall general aviation numbers are plummeting. Again, a look into the future suggests that the majority of primary training will be done in flight simulators and computerized flight-training devices. As demand increases and technology advances, the full-motion simulator should become much more affordable and so realistic the only thing left for the student pilot is the checkride. "Safe and inexpensive" will become the name of the game.
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If you want proof, the military has already adopted this method of training from the combat tank to aircraft and everything in between, and airline pilots are getting type-rated in new transport jets without having ever set foot in the actual aircraft.
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Of course, adversity is the mother of innovation (and invention). With this in mind, the future is very bright. New methods of training using simulators at all levels will produce more, better-trained pilots. As these techniques become more available, the costs will continue to decrease. Some of the new-generation flight simulation software for home PCs is quite spectacular, and CFIs tell us it offers excellent training value (although the FAA does not yet recognize this fact). New technology and new production methods may eventually bring down the cost of new aircraft ownership, and a younger, more efficient fleet will be born. A modern fleet of this type should be less expensive to repair and with the improved repair costs, insurance hull premiums will also decline. In addition, these new-age improvements are producing aircraft that are easier to handle and fly. Safety and comfort seem to be a priority. As this permeates our fleet, accidents will surely decrease, and insurance premiums will decline as well. The advent of the computer is changing the way we live our lives, and the cockpit is no exception. First seen in our navigational aids with the very affordable GPS, the computer is revolutionizing the entire look and function of our instrument panels. Tom Chappell, president of our agency, recently attended the open house of one of our clients to view his new Lear 45. This new-generation aircraft is truly an awakening. Sitting in the cockpit wondering just what all the new pretty and colorful screens and dials were, Tom felt as if he was viewing a piece of equipment from a future epoch. The instrumentation, function and completeness of the panel were truly a look into the future of general aviation. The way pilots are trained in the future will be changing -- not just to cut costs, but because the aircraft of the future are here and are like nothing you have ever seen.
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This is more so in the General Aviation (generally aircraft with less than 61 seats) segment where the sum insured limits are within the capacities of many Indian Insurers. General Aviation buyers in India have enjoyed substantially lower premium payouts in 2008 compared to their world and regional peers, as buyers have bargained hard taking advantage of the soft market conditions and excess market quite a few buyers have switched their insurers. On the Airline front, pricing continues to be driven by leading international markets especially in London, as Indian Insurers continue to off load major risks to international companies mainly in the European sub continent, with insurance brokers playing a very important role in the entire process. Market Potential For 2008, Aviations direct premium income in India is circa INR 3,750 million and this includes buyers from all segments including airlines, general aviation, aerospace, airports, ground handlers, catering companies etc but excluding satellite. Over 75% of the total premium comes from the airline segment with another 23% from General Aviation. A very small portion of 2% is contributed by airport, ground handlers, catering segment etc. In addition, capacity. In the process, National Reinsurer, GIC Re writes substantial international aviation business (mainly by way of inward reinsurance) coming into the country and gradually other insurers are following suit, but with caution. Over the last 10 years GIC Re has emerged as one of the largest aviation reinsurer in the international market and is playing a key role in supporting Indian Insurers. Currently there are over 200 buyers of aviation insurances in the country who need aviation products in one form or other. Many new buyers have entered the market in 2008 and the trend is expected to continue in 2009 albeit at a slow pace. For the airline sector, customer base and number of aircrafts has increased significantly in the past three years but current economic situation is taking a toll on its future growth.
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When one compares the above limits to 2-3 years back it signifies a jump of over 200%-250% and majority of the capacity comes from National Reinsurer, GIC Re. New capacity has entered Indian market especially during 2007, 2008 with Private Insurers buying reinsurance programmes to support their direct underwriting. At the same time existing Insurers have expanded their underwriting limits. It is expected that capacity will be more or less stable during 2009 and as a result dependence on international market for General Aviation is likely to get reduced, but for large airline risks reliance on international market is expected to continue.
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Claims Scenario
Each Insurer will have its own underwriting experience to show and can vary from its peers considerably depending on their participation on the policies that has produced losses. General Aviation claims in 2008 are expected to exceed Rs. 500 million and 2009 has started on a bad note with claims in first five months exceeding Rs.350 million. As against this, past 10 years average general aviation losses are hovering around Rs.400 million. When we compare these claim figures against the total general aviation premium in India, one may come to a conclusion from the insurers perspective that general aviation is profitable over the last 10 years period. This may not be true for all insurers, especially considering the fact that 10 years average loss figure consists of two or three major losses in each year. Insurers participating on these losses would have been hit hard. Majority of the losses in the last 10 years are on account of aircraft damages and liability claims forma a very small portion of it. However, by no means does this give any indication into the future considering the catastrophic nature of aviation business.
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Montreal Convention
The Indian Government ratified Montreal Convention 1999 in March 2009 and currently it applies to international travel. There is nothing on record at this stage to show that the revised liability limits are applicable to domestic sectors. In brief, the Convention has increased compensation levels for international passengers in the event of death or bodily injury and damage and delay to the passenger baggage and cargo. While the compensation for death or bodily injury has increased almost 7 times from the existing levels of approximately USD 20,000 to around USD 140,000, the compensation for damage to the checked baggage has increased from approximately USD 20 per kg to around USD 1,400 per passenger. The compensation for damage to cargo has increased from USD 20 per kg approximately to USD 24 per kg. The Warsaw System, which is in force in India by way of Carriage by Air Act, 1972 had allowed four choices of jurisdiction for filing of a claim by the passenger, namely, place of issue of ticket, principle place of business of the carrier, the place of destination of the passenger and the place of domicile of the carrier.
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Through the Montreal Convention a fifth jurisdiction is added which is the place of domicile of the passenger, provided the airline has a presence there. Therefore an Indian would be able to file claim in India even if the journey was undertaken outside India. Liability Limit for domestic passengers in the event of death or bodily injury continues to be at the old level of Rs.750,000 for passengers above 12 years of age and Rs.350,000 for below 12 years. As regards damage and delay to the passenger, baggage compensation is Rs.4,000 per passenger for hand baggage and Rs.450 per kg for registered baggage. So far, Insurers have responded very positively by covering their customers based on the revised limits for international travel and it remains to be seen whether new limits will be applicable for domestic travel as well and its impact on the liability claims scenario.
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Aviation
Liability
Insurance
Limits
in
India:
Western European countries including countries in the Far East namely Hong Kong, Singapore have adopted regulations specifying minimum liability insurance limits for aircraft based on the maximum take off weight of the aircraft and passenger seating capacity, however India is yet to adopt any such regulations. Even neighboring countries like Sri Lanka and Nepal have minimum liability insurance requirements for aircraft and it may not be too long before India adopts such requirements. While Airlines and Corporate Jet owners are buying liability limits in line with the international trend, there is no similar trend when it comes to helicopter operators. Like Airline policies, liability limits on Corporate Jets many times are driven by financing /purchase agreements; however helicopter operators tend to buy low limits
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