Chapter 11- Safety & Liability
Risk- Probability of an undesirable outcome during a period of uncertainty.
Risk Management involves 2 areas:
Risk Reduction- The application of good
management techniques by leaving only
unforeseeable occurrences to be insured.
Risk Transfer- A business passing on some
of the operational risk to another entity- ins.
*The better the risk reduction the less expensive the risk transfer.
FBO risk mgmt. is unique because of the blurred lines of distinction between airport & FBO liab.
2 reasons for this:
1. FBO’s often have airport operating duties
2. Airports often provide same svcs. as FBO’s
A concept related to FBO liability is the “Deep Pocket” theory- litigants tend to pursue the entity with the most $ regardless of liability
Some Common risk exposures- p. 276
Risk Reduction- How can we effectively reduce risk (and lower our insurance costs)?- All Ops.
-Inclement weather plan- ice, hurricane etc.
-Theft/fire deterrents- use checklists- all ops
-bonding employees having access to cash
-Use of outside auditors
-Depositors don’t reconcile bank stmts.
-Require countersignatures on checks
-Ensure money handlers take vacations
-Positive I/D for check writers
-Ensure regs./A.C.’s are followed
-Standardize procedures/require documents
What risks are unique to aviation?
-comprehensively signing off a/c as fit to fly
-“” “ students“
-Providing a service which involves an
exposure to (a perceived higher) risk.
*Good operational risk mgmt. Will: p. 279
Risk Transfer (p. 289- items that can be insured)
-Insurance Companies
-Risk pool- self insurance
-reinsurance- insurance for insurers- Lloyds of...
Largest areas of risk to G.A.- p. 282
Different types of insurance listed p. 283
Types of coverage:
Liability- one of the most prominent
-insurance costs are 30% of a new A/C
-Product liability claims against Cessna,
Piper, and Beech are twice their worth
-It is the aviation operation’s greatest
Exposure because awards are unlimited
And are based on “failure to provide
Due care” which is easy to manipulate
“Joint and Several Liability”- says that all involved parties have some degree of responsibility.
There are generally 4 types of liability exposure:
1. Employers liability
2. Workman’s compensation
3. Automobile liability
4. Professional liability- “catch all”
* Trend towards settlements has helped reduce liability suits- $70 - $90K
Other types of liability:
-Workman’s comp.- Requires employer to be liable for:
-failure to provide safe working cond.
-failure to hire competent co-workers
-failure to warn employees of dangers
-Hangerkeeper’s liability
When it comes to property insurance and replacement a manager must try to reduce premiums by selecting the proper coverage:
-Actual Cash Value
-Replacement value
-Co-insurance- way of predicting income
-Know type of coverage needed
For example: Aircraft Hull Coverage- premiums determined by:
-Type of Coverage
-all risks
-all risks not in flight
-all risks not in motion
-Deductible size
*To select insurance- generally go through an insurance sales broker (many listed in Trade-a-plane) who will select the proper underwriter (actual coverage provider) and will negotiate the coverage contract
*Be sure to get several quotes from at least two brokers to use as bargaining chips