[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Notices]
[Pages 20047-20048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10245]
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DEPARTMENT OF TRANSPORTATION
Office of the Secretary
[Docket OST-99-5051]
Passenger, Third-Party, and Property Liability Insurance Coverage
for U.S. and Foreign Air Carriers--Non-Approval of Exclusions Related
to the Year 2000 Problem
AGENCY: Office of the Secretary, DOT.
ACTION: Notice.
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SUMMARY: The Department issues this notice to remind all carriers of
its requirements with regard to passenger, third-party, and property
liability insurance under 49 U.S.C. 41112(a) and 14 CFR part 205. The
notice informs carriers that certain aviation insurers wish to write
into airline insurance policies required by Title 49 and Department
regulations an exclusionary clause that would exclude liability for
damages related to the Year 2000 problem and other computer-related
time, date, and year changes. The notice further informs carriers that
no such exclusion has been approved by the Department and reminds
carriers that any carrier operating with such an exclusion in place
would not be in compliance with Title 49 of the United States Code and
14 CFR part 205 and would be subject to enforcement action.
FOR FURTHER INFORMATION CONTACT: Dayton Lehman, Deputy Assistant
General Counsel, Office of Aviation Enforcement and Proceedings, U.S.
Department of Transportation, 400 7th Street SW., Washington, DC 20590.
Tel. No. (202) 366-9342.
Notice
We face a challenge in the Year 2000 (Y2K) computer problem that,
if unmet, could pose risks to the public and disrupt the flow of
commerce. Addressing the Y2K problem is a top priority for the U.S.
Department of Transportation.
While transportation operations are typically the responsibility of
the private sector, ensuring their safe, smooth functioning is a matter
of national concern and the Department is taking steps to assist our
partners.
Department officials have met with industry associations and
businesses in every sector, and have held industry-wide forums to
address the issue. We will continue to work with carriers to address
Y2K problems; however, we wish to make clear that carriers must
continue to comply with existing requirements while addressing Y2K
problems.
Department regulations require airlines to provide a minimum level
of insurance coverage for passenger, third-party, and property
liability resulting from an accident. 14 CFR Part 205. It has come to
our attention that some aviation insurers wish to write into airline
insurance policies an exclusionary clause that would exclude all
liability for damages related to the Y2K problem. No Y2K insurance
exclusion has been approved by the Department.\1\
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\1\ The same endorsements that contain the Y2K exclusionary
clauses of which we are aware also propose to eliminate coverage for
claims arising from computer-related problems in connection with
``any other change in time, date, or year,'' including the reset of
the Global Positioning Satellite system that will occur on August
21-22, 1999. As with the Y2K exclusion, the Department has not
approved any such exclusion.
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[[Page 20048]]
Pursuant to part 205, all direct air carriers and foreign air
carriers, including U.S. commuters and air taxis (14 CFR 298.2) as well
as Canadian charter air taxi operators (14 CFR 294.2(c)), are required
to carry minimum ``aircraft accident liability insurance coverage'' for
``bodily injury to or death of aircraft passengers'' as well as
``persons, including non-employee cargo attendants, other than
passengers, and for damage to property.'' Each carrier must file a
certificate of insurance with the Department, signed by an authorized
representative of the insurer or insurance broker, stating that the
carrier has in effect insurance coverage meeting the requirements of
Part 205. Minimum coverage amounts depend on the class of carrier and
aircraft size.
Section 205.6 of the Department's regulations, 14 CFR 205.6,
prohibits the effectiveness of any liability insurance policy exclusion
not specifically approved by the Department. The Department and the
Civil Aeronautics Board before it have permitted exclusions from
liability coverage only in a very limited number of circumstances.
These exclusions cover, in essence, the following risks:
(1) War and insurrection;
(2) Noise, pollution, and other effects not caused by a ``crash,
fire, explosion, or collision, or a recorded in-flight emergency
causing abnormal aircraft operation'' (an accident);
(3) Nuclear risks;
(4) Damages incurred by an employee arising out of and in the
course of his/her employment; and
(5) Injury to property owned, leased, occupied or used by the
insured.
The Department recently established a public docket, OST-99-5051,
that contains correspondence regarding exclusions requested in the
past, including those described above. All future correspondence
regarding requests for exclusions will also be placed in the docket,
which can be accessed through the Internet at http://dms.dot.gov. You
should be aware that, although the Department may not have permitted a
particular exclusion, section 205.6 also specifically provides that
insurers retain the right to recover from carriers any amounts paid
under the policy. For example, although an insurer may be obligated to
make payments to claimants because the regulations require a particular
coverage, the regulations would not prohibit a provision in a policy
requiring a carrier to reimburse an insurer for Y2K-related claims
where the carrier has failed to satisfy the insurer that it has in
place a program to become Y2K compliant.
Any carrier operating with a Y2K exclusion in place covering
passenger, third party, or property liability for aircraft accidents
would not be in compliance with the insurance requirements contained in
part 205. All U.S. carriers should be aware that, under 49 U.S.C.
41112(a), any certificate to provide air transportation ceases to be
effective if an air carrier fails to comply with part 205. This
condition is also specifically made a part of the operating certificate
of each U.S. carrier. Likewise, pursuant to 14 CFR 298.37 air taxis and
commuter air carriers are prohibited from conducting operations not
properly covered under part 205. In addition, all foreign air carriers
should be aware that all permit and exemption authority of foreign air
carriers is also specifically conditioned on compliance with part 205.
Consequently, any operations performed without lawful insurance
coverage as required by part 205 would be unauthorized.
The Department has been approached by a major aviation industry
insurer requesting approval of its Y2K exclusion. In addition, other
major insurers have attempted to impose such an exclusion on carriers
without first seeking Department approval of the exclusion. The
exclusions of which we are aware would involve immediate imposition of
a Y2K exclusion, with the insured carrier given the right to obtain a
limited ``write-back'' of coverage, provided it demonstrates adequate
Y2K compliance or planning to the insurer's satisfaction. The write-
back coverage would be designed to meet Part 205 requirements. We urge
carriers that have not done so to implement programs to ensure that
they will achieve timely Y2K compliance and to work with their insurers
to ensure that there is no lapse in required coverage. We wish to make
clear, however, that the Department has not approved any insurance
arrangement for Y2K-related problems that does not provide continuous
coverage meeting the minimum coverage requirements set forth in part
205.
Certain insurers have assured us they recognize that, in the
absence of Department approval, any Y2K exclusion written into the
policies of their particular airline clients will not be applicable to
the minimum liability requirements of part 205. However, we are
concerned that other carriers may have had Y2K exclusions written into
their liability policies by insurers with different views and that such
carriers may not yet have obtained coverage meeting the requirements of
part 205 under a ``write-back'' clause, or otherwise. Any carrier
operating without the liability coverage required by part 205,
including coverage for Y2K-related problems, is subject to immediate
enforcement action, which could include civil penalties assessed under
49 U.S.C. 46301 and action against its operating authority. Section
46301 provides for civil penalties of $1,100 per violation and, in the
case of a continuing violation, $1,100 per day for each day each
violation continues. In addition, carriers and their responsible
officials should be aware that 49 U.S.C 46316 provides for criminal
penalties in the event of knowing and willful violations of the
Department's regulations and Title 49.
This notice is not concerned with Y2K exclusions from insurance
coverage not included in the minimum passenger, third-party, or
property liability limits set forth in 14 CFR part 205, such as loss of
business by an airline or other liability not resulting directly from
operation of an aircraft.
If you have any questions, you may contact Dayton Lehman, Deputy
Assistant General Counsel, Office of Aviation Enforcement and
Proceedings, on 202-366-9342.
Dated: April 19, 1999.
An electronic version of this document is available on the World
Wide Web at http://dms.dot.gov.
Nancy E. McFadden,
General Counsel.
[FR Doc. 99-10245 Filed 4-22-99; 8:45 am]
BILLING CODE 4910-62-P
