New Voluntary Hot Air Balloon Safety Program Announced

The Balloon Federation of America (BFA) has instituted new safety accreditation for companies and pilots. The Envelope of Safety program was the result of the Federal Aviation Administration’s (FAA) year-long call to action from the commercial hot air balloon industry in response to last year’s mid-air accident in Lockhart, Texas which caused 16 fatalities.

The Envelope of Safety aims to enhance the standards for commercial balloon operators and reduce the risk of injury or death leading up to and during a flight. The program is voluntary and aims to reassure confidence by giving consumers the ability to select a ride company or pilot meeting the new flight worthiness certification. The Envelope of Safety’s missions it to insure that companies and pilots carrying four or more passengers:

  • Are commercially certificated for 18 months
  • Accumulate a specified amount of flight experience
  • Hold a second-class medical certificate from the FAA

Additionally, pilots are required to pass a drug and alcohol background check, attend a BFA-sanctioned safety seminar in the 12 months before takeoff and be enrolled in the FAA WINGS pilot proficiency program.

The program features three levels of safety accreditation—Silver, Gold and Platinum—which detail stringent safety requirements for companies of all sizes. That criteria includes meeting pilot requirements, holding valid aircraft and commercial vehicle insurance and hosting a forum for passengers to rate the company.

While the FAA is not connected to the new program in an official capacity, it did applaud the BFA’s announcement on its own website and promoted it via social media. Following last year’s deadly incident in Texas, the agency was criticized for having previously rejected the National Transportation Safety Board’s (NTSB) recommendations for stricter safety oversight regarding commercial hot air balloon travel. That accident, in which a Heart Of Texas Hot Air Balloon Ride vessel crossed power lines, caught fire and plummeted 100 feet to the ground, is considered the worst of its kind in U.S. history.

The NTSB held a board meeting to examine the cause of the July 30, 2016 crash and found the accident attributable to the Heart Of Texas pilot’s pattern of poor decision making, which led to “the initial launch, continuing the flight in fog and above clouds and to dissent near clouds that decreased the pilot’s ability to see and avoid obstacles.” The board believed the operator’s bad judgment may have been exacerbated by the many prescription drugs found in his blood, according to a toxicology report. The board stressed, however, that it did not believe the medications impaired the pilot’s ability to operate the balloon.

The NTSB recommended that the FAA review its policies based on the findings and, in particular, close a loophole that exempts balloon operators from holding the same second-class medical certification that other aviators must possess.

“Today’s recommendations, if acted upon, will bring the safety standards and oversight of commercial passenger carrying balloon operators closer to those that apply to [general aviation] pilots,” said NTSB Chairman Robert L. Sumwalt.

According to the FAA, 413 people died in 219 general aviation accidents in 2016, with inflight loss of control—mainly stalls—accounting for the largest number of fatal accidents.

Visit the BFA’s site or the FAA’s endorsement for more information regarding the Envelope of Safety.

Words (and Clauses) Matter

A recent report published by RIMS highlights the importance for risk professionals—or the person within the organization tasked with the responsibility—to fully understand the language included in their insurance policies.

The report A Common Language: Aligning Third-Party Contracts with Insurance Policies, suggests that there are “clauses in contacts that may not be understood as well as others, and some people may be tempted to skim past those to move work along.”  But, in this haste, deciding to “skim” past those clauses may activate exclusions, limitations and even, unknowingly, nullify the transfer of risk to a third-party.

Authored for RIMS by Brenda Tappan of United Educators, the report defines key insurance terms that should be understood by contract reviewers, as well as common contract clauses that impact the validity of both the contract and insurance policies.

“At any given time, an organization could have hundreds of contracts with external stakeholders,” Tappan said. “With in-depth knowledge of coverages held by the organization, risk professionals can play an integral role in ensuring terminology is understood and that discrepancies between third-party contracts and insurance policies are identified.”

The report advises risk managers to be aware of the following insurance contract elements:

  • Indemnification Clauses – This clause delineates whether the parties of a contract wish to retain, transfer or share responsibility from a potential third-party. Be aware that not all “bodily injury” or “property damage” will be covered, even if you have stipulated everything correctly in the indemnification clause.
  • Additional Insured Status – This status provides proof of financial capability to cover what is assumed in the indemnity clause. Keep the additional insured provision separate from indemnification clause because if the latter is found unenforceable, the additional insured clause might be unenforceable as well.
  • Waivers of Subrogation – This says that the insurer has the right to stand in the place of the insured and go against the responsible party to make themselves whole. Risk professionals might consider requesting a Waiver of Transfer of Rights endorsement. Also, get as much in writing as possible – don’t leave anything up to chance or interpretation.
  • Primary and Non-Contributory – Essentially, the insured will not seek contribution from any other insurance available. When named an additional insured, you are afforded coverage as provided by the other insurance policy.
  • Excess and Umbrella Coverage – Organizations buy this coverage to increase the limits. It can be used for commercial general liability, commercial auto, employers liability, and other primary liability policies. As an indemnitor, you will want to ensure that for any coverage that taps into the policies that provide the upper limits, there is a specified cap to the coverage contractually offered to the indemnitee.
  • Limitation of Liability – It’s an attempt by third-party contractors to cap the amount of liability they will be responsible for to a set amount prior to an incident. Be on the lookout for these limitation of liability clauses. Generally, they are found toward the end of the contract, but can have a significant impact on indemnification.

8 Legal Developments You Need to Know About

In a new RIMS Professional Report, attorneys Mark Plumer and Xandra Bernardo (of Pillsbury Winthrop Shaw Pittman LLP) and Patrick Walker, a risk professional at mining company Rio Tinto Group, shed light on the top risk management legal developments of 2017.

According to the authors, risk managers “must be familiar with the legal principles that underlie claims that are asserted. A successful resolution will turn on the policy wording, the company’s business relationship with the affected insurers and the strength of the  coverage argument under the law.”

In The Top 8 Legal Developments You Need to Know About in 2017, the authors lay out the notable rulings on insurance law relating to rights of coverage, rescission, cyber coverage and more. Here is a quick look at their findings:

  1. Rights to Coverage: There were important developments to rights of coverage under historic occurrence-based policies. These relate to “long-tail” liabilities such as environmental exposures.

“The best practice now is to assign the right to make claims on historic policies for such exposures, where such transfer of rights is intended. Legal counsel should assure that the law in the affected jurisdictions allows for the transfer of insurance rights.”

  1. Rescission: It’s an insured’s worst nightmare: you have a claim that you believe should be covered, and the insurance company finds a way to rescind coverage. It’s a growing trend. “In particular, insurers are requiring more disclosures during the application process and may seek rescission if full and accurate disclosures are not provided.”

The authors focus on H.J. Heinz Co. v. Starr Surplus Lines Ins., a trial decision that was reached in New York’s Third Circuit. The court ruled that Heinz was not entitled to its purchased coverage because of historic loss information that was mistakenly withheld by the company’s risk manager.

“The Heinz case highlights the importance of answering questions thoroughly and truthfully in connection with applying for insurance. Applying for insurance is an increasingly challenging process, particularly with respect to specialty policies that require answers to many questions and call for considerable data. Risk managers must assume that insurers will be emboldened by Heinz and other, similar cases.”

  1. Consent to Settle: In case you needed to be reminded: risk management and corporate counsel need to work together!

“Some courts may simply void coverage where there is a voluntary payments provision and advance consent from an insurer for a settlement was not requested regardless of whether the insurer was prejudiced. It is rare that insurers will stand in the way of a settlement. Thus, asking for consent often is no more than a technical requirement. Insurers should not be allowed to escape coverage your company has paid for based on a technicality.”

  1. Notice: Your coverage can be voided if you don’t give prompt notice of a claim. There were two important developments on this front in 2017 that the authors describe in detail in the report.

“The best way to avoid an insurer ‘late’ notice argument is to provide notice at the earliest reasonable date, even if this requires later supplementation and clarification. Of course, this is often easier said than done. You should learn the law affecting notice in your home jurisdiction and consider treating occurrence-based policy and claims-made policy notification procedures differently…”

  1. Cyber Claims: This is obviously a hot area in risk management and in insurance. It seems like we constantly hear about new entrants into the insurance market on this front, with new firms specializing in cyber also popping up almost every day. Risk managers need to exercise caution in this field: cyber insurance is still relatively new and untested, and the claims history for this subfield is short.

The policies are also potentially confusing. For example, “many cyber policies specifically provide coverage for credit card association assessments for an additional premium. These policies are quite complicated and may contain dozens of cross-referenced definitions.”

  1. Construction Claims: The authors dive into key decisions coming out of New Jersey and Iowa on this familiar risk management topic. They caution risk managers to “make certain your CGL policy has a subcontractor exception in the ‘your work’ exclusion. Policies containing a ‘your work’ exclusion that do not also include a subcontractor exception to that exclusion place your company at greater risk.”
  2. Additional Insured: Access to additional insured endorsements is getting narrower, according to the authors. A decision from New York continues this trend: the June 2017 decision from New York’s high court in Burlington Ins. Co. v. NYC Transit Auth.

The report cautions that the Burlington decision “may come as a surprise to many policyholders who expect courts to interpret additional insured endorsements broadly, particularly ISO’s standard form endorsements. Risk managers concerned about this potential reduction in coverage can follow the advice of the Burlington court: ‘Of course, if the parties desire a different allocation of risk, they are free to negotiate language that serves their interests.’”

  1. Scope of Coverage: It’s important to understand your home jurisdiction’s philosophy on long-tail general liability claims. There are two types of jurisdictions, according to the authors: “all sums” and “pro rata.” In 2017, there were several decisions that complicated this well-understood legal dynamic.

“If your company faces a long-tail claim, be proactive and understand the scope of coverage law applicable to your historic policies. If the jurisdiction applies the ‘all sums’ principle, make sure your counsel is aware of it. If not, confirm whether your historic policies contain non-cumulation clauses or if the applicable jurisdiction has considered the ‘unavailability’ exception to pro rata allocation.”

For more information on “all sums” versus “pro rata,” as well as detail for all of the top legal developments, please visit www.rims.org and download the paper. All RIMS papers are members-only for the first 60 days of their release.

Lessons from Distracted Driving Awareness Month

June is Distracted Driving Awareness Month, and while it is quickly drawing to a close, the message remains: Distracted driving is escalating, with 25% more vehicle accidents resulting from drivers talking or texting on cellphones. More cars on the road, especially during summer months, also translates to more accidents.

Organizations with fleets should take note as motor vehicle crashes are the number-one cause of work-related deaths, accounting for 24% of all fatal occupational injuries, according to the National Safety Council (NSC). On-the-job crashes are also costly, with employers sustaining costs of more than $24,500 per property damage crash and $150,000 per injury crash.

Zurich sums up NSC statistics:
Employers can and are being held liable for damages resulting from employee accidents. “We might expect an employer to be held liable for a crash involving a commercial driver’s license holder who was talking on a cell phone with dispatch about a work-related run at the time of an incident—especially if the employer had processes or a workplace culture that made drivers feel compelled to use cell phones while driving,” the NSC said.

The lines believed to exist between employment-related and personal or private life get blurred in some cases involving:

  • Cell phones owned by employees as well as employer-provided equipment
  • Vehicles that were employee-owned as well as employer-owned or leased
  • Situations where employees were driving during non-working hours or were engaged in personal phone calls

To protect themselves and their employees, the NSC recommended that organizations implement and enforce a total ban policy.

“The best practice is to prohibit all employees from using any cell phone device while driving in any vehicle during work hours or for work-related purposes. Regarding off-the-job hours, precedent has been set by lawsuits. Thus employers may want to extend their policies to cover off-the-job use of company-provided wireless devices, use of personally-owned devices that are reimbursed by the company, and use of devices in company-provided vehicles. All work-related cell phone use while driving should be banned 24/7,” the NSA advised.

Companies should also pay attention to other common distractions that can lead to accidents, Zurich adds: