14 TH ANNUAL RISK MANAGEMENT CONFERENCE THE LIFE OF AN ACCIDENT AND HOW TO HANDLE IT: CASE STUDY Mark Meyer Cal Burnton 1
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 - employer of Charlie Chance - owner of vehicle - had a contract with Eastpointe Airport which made it responsible for fueling operations 2
FIRST STEPS AFTER ACCIDENT - Make sure employees know the importance of intelligent document creation. - Institute a document hold. - Notify insurance carrier. - Consider tender of claims. 3
TWO APPROACHES TO DEFENSE - True fault = Who is responsible? - litigation - contribution actions - Contractual - duty to defend - indemnity - named insured status 4
LAWSUIT CLAIMS - There will be negligence claims between parties. - Effect of workers compensation bar. - Right to cross claim on contract. 5
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 - Insurance provisions go hand in hand. 6
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 Sky Top Airlines - Master Maintenance Contract 7
THREE TYPES OF CONTRACTUAL INDEMNITY GENERALLY - Broad form: Includes indemnitee s own negligence. - Intermediate: Includes the passive negligence of indemnitee. - Narrow coverage: Only for indemnitor s negligence. 8
STANDARD INDEMNITY CLAUSE Airline shall protect, defend, indemnify and hold Airport harmless from and against any and all liabilities, losses, damages, causes of action suits, claims, demands, judgments, awards and settlements, costs and expenses (including attorney s fees and expenses ), of whatever nature, even if groundless, frivolous, false or fraudulent,... arising out of Airlines use or occupancy of the Airport. 9
PROVISIONS IN AIRPORT CONTRACT - defend and indemnify - any and all liabilities, claims - attorneys fees and costs - even if groundless - arising out of use or occupancy of airport 10
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: Airport tenants will ask for indemnification from airport for claims where alleged injury arises out of your negligence. 11
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. 3. Contracts typically are strictly construed against the indemnittee. 12
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. - Indemnity for the sole negligence of indemnitor. 13
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? - May need separate counsel. - Reservation of rights. 14
WHEN PARTY IS ASKED TO INDEMNIFY: - What is scope of agreement? - Broad or limited to negligence of the airport? - Are there defense obligations? - Insurance implications. 15
DUTY TO DEFEND - Broad duty. Broader than duty to indemnify. - Failure to defend can lead to a claim of bad faith for breach of duty of good faith. 16
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... - Secure additional insured status. - Secure a certificate of insurance. 17
INSURANCE PROVISIONS - Require Airline to protect airport by insuring that all contractors/subcontractors: - indemnify and defend airport - carry insurance - secure certificate of insurance 18
WHOSE POLICY IS PRIMARY? - Typically the policy of the indemnitor is primary. - Other insurance clause. 19
QUESTIONS TO ASK (1) Are there indemnity obligations? (2) Are there defense obligations? (3) Are there insurance implications? - your policy - other party 20
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. 21
ADDITIONAL PROTECTION -Clause for non-liability for damage to Airline property. Neither party shall be liable to the other under this agreement for any indirect, special, incidental, punitive, or consequential damages (including without limitation damages for loss of goodwill, work stoppage, computer failure or malfunction, lost profits, lost business or opportunity) or any similar damages... 22
DUTY TO TENDER 1. Must be timely. 2. Request indemnity. 3. Request defense. 4. Request reimbursement of fees and costs. 5. Repeat tender as allegations change. 23
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. - If not an agent, New York has duty to maintain areas under its control. - prompt and safe access to Terminal One - But no intent to confine her 24
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. - Contract = all claims arising out of the contract. 25
IN THIS CASE - Eastpointe Airport should tender to: - Its insurer - Sky Top Airlines - Famous Fuel - Master Maintenance (by virtue of Sky Top contract) 26
LITIGATION ISSUES - Right to sue other parties. - Right to cross claim - Consider breach of contract claim. - Tender all new claims. 27
THE LAWSUIT - State or federal court? - Need to promptly secure counsel and respond. - Tender of claims. - third party notice - third party action - cross claims 28
INITIAL CHALLENGES - Motions to dismiss - Affirmative defenses - Answer to complaint - Third party and cross claims - Joint defense agreements 29
THE MUNICIPAL IMMUNITY DEFENSE - Most airports owned by government entity. - Government not liable for torts that result from the performance of a governmental function. - Are liable for performance of a proprietary function. - Limitations of state tort acts. 30
DISCOVERY PROCESS - Written discovery - Corporate representatives - Depositions 31
DOCUMENTS - Intelligent creation. - Early document hold. - Organized production. - Deal with bad documents. 32
COMPANY DEPOSITIONS - Identify correct people to represent company. - Preparation. - Know documents 33
EARLY MEDIATION PROCESS - Court process. - Voluntary involvement. - Timing of case. 34
EXPERTS - Role in case - aid lawyers - sell the case - Credentials - Daubert issues 35
DEFENSE GOALS - Narrow the case - summary judgment - Daubert - Have a theme 36
TRIAL OR SETTLEMENT Key Factors: - Implications of settlement on other matters. - Costs of defense vs. risk. - It s all about the money!! 37
INSURANCE ISSUES 38
The House COVERAGE Entrance: Insuring Agreement Exit: Exclusions Side Door: Conditions through which coverage can also leave if not satisfied 39
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.) Endorsements 40
Declarations Named Insured Is there a minimum ownership requirement? Limits and applicable deductibles Per Occurrence will vary between coverages Geographical limits Named premises All aviation premises owned or used by the Insured 41
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 (AVN 37B, Lloyd s Excess Aviation Liability Policy) 42
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)? In addition to per Occurrence limits but subject to aggregate annual limit? 43
Premises Legal Liability PD or BI caused by an occurrence in or about Named Insured s aviation premises as a direct result of services granted by insured caused by fault or negligence of insured 44
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 in the care, custody or control or whilst being serviced, handled or maintained by the Named Insured 45
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 condition precedent to maintain primary insurance during the currency of the excess policy 46
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. The Company will pay on behalf of the Insured all sums which the Insured, by reason of contractual liability assumed by him under a contract designated in the Policy Schedule, shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence 47
Exclusions Bodily injury to an employee or former employee of the Named Insured arising out of and in the course of employment of the Named Insured 48
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 (AVN 20) An Occurrence is not the filing of a Third Party Action! 49
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 Claims of additional insured against the Named Insured not excluded if such claims would have been recoverable had the additional insured not been included within the coverage Where does action lie may not be in jurisdiction of occurrence forum conveniens issues 50
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 mmeyer@edwardswildman.com Cal R. Burnton Partner Edwards Wildman Palmer LLP 225 West Wacker Drive, Suite 3000 Chicago, IL 60606 +1 312.201.2646 cburnton@edwardswildman.com 51