Suborbital Operators Face Some Big Unknowns, Underwriters Say

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DUBAI, United Arab Emirates — Companies planning to fly tourists or scientists to the edge of space for brief exposure to low-gravity conditions still face potentially serious liability issues depending on how U.S. courts view the nascent industry, insurance underwriters said.

Despite the efforts of the U.S. Federal Aviation Administration’s Office of Commercial Space Transportation in licensing new commercial space ventures, and initiatives in several states to promote and protect the new businesses, the financial exposure of these companies in the event of an accident remains unknown, insurers said.

Addressing the World Space Risk Forum here May 13-15, Global Aerospace President Jeffrey Cassidy said “no one really knows” what would be the likely outcome of a lawsuit filed on behalf of a wealthy space passenger.

In addition to the U.S. government, at least six state legislatures have enacted immunity statues aimed at protecting the industry, Cassidy said. Not all have extended these protections to the vehicle manufacturers. All include exceptions for negligence and all are written in broad language, he said.

“On the one side, the government is working with the [space transport] operators to keep liability controlled and constrained, to help grow the industry,” said Cassidy, who said his company, which underwrites satellite and launch insurance policies, is structuring insurance policies for the sector. “On the other side, we have plaintiffs’ attorneys and the risk of common-carrier designation.”

In some legal jurisdictions, being labeled a “common carrier” means you are held to stricter liability standards than might otherwise be applicable.

How various U.S. courts will rule on this will not be known, but the case precedent in the airline industry is not promising, Cassidy said.

Four criteria generally are used to determine whether a transportation service gets common-carrier designation when transporting goods or people: It must have a regular place of business, provide regular services, offer a schedule of prices and advertise to the public.

Companies that meet all four criteria would be viewed as common carriers in at least some jurisdictions.

Railroads have been considered common carriers since they began, as were commercial aircraft services.

Courts have nonetheless ruled that adventure travel involving transportation — the helicopter taking skiers to places with no designated slopes, the aircraft carrying skydivers — should not carry the common-carrier label.

But Cassidy said the adventure-travel precedent is not a good legal fit for space tourism because the adventure-travel businesses are using transportation only as a means to the real event, which is skydiving or heli-skiing.

“Going into space could be considered an adventure,” Cassidy said, but legal precedent in California, at least, makes that less likely. California courts in the 1930s determined that a company offering sightseeing flights over the Grand Canyon and other attractions were in fact common carriers.

If that precedent holds for suborbital space travel, then “the whole notion of informed consent — the waivers that participants have signed — would be called into question in the event of an accident,” Cassidy said. “A

liability award may be higher than you anticipated under the regulations.”

The companies now planning to take passengers to edge of Earth’s atmosphere have required passengers to sign liability waivers intended to prevent one accident from causing the business to shut down or go bankrupt.

The question — which has animated many debates among space lawyers — is whether such a policy can withstand sustained assault by lawyers representing families claiming millions in lost income because their chief breadwinner has been killed or incapacitated during a flight.

Three companies — Virgin Galactic and XCOR Aerospace, both operating from Mojave, California, and Blue Origin LLC of Kent, Washington — are developing suborbital vehicles to carry passengers.

Khaki Rodway, XCOR’s director of payload sales and operations, told an April conference in Paris that the company would be flying the first iteration of its Lynx vehicle experimentally later this year. XCOR commercial flights are scheduled to start in mid-2015 for both payloads — Mitsubishi Heavy Industries is a major payload customer — and passengers.

Rodway said XCOR likely will pursue a full commercial operator’s license from the FAA, and that insurers have approached the company to discuss how to structure policies.

“Do we have insurance that will cover the [passengers]? Yes, that is part of the insurance we have on the vehicle.”

Cassidy agreed that insurance underwriters are already discussing how to approach the industry despite the ongoing questions about liability.

“From an insurance perspective, we’re excited about this business,” Cassidy said. “This is coming up [as an insurance topic] in the next year or two and I am sure the aviation and satellite insurance markets will figure out the right place to put this.” 

 

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