AWG monitors, and assess the effect of, liability rules and insurance practices that may adversely affect aviation financing and leasing.
AWG has been a main driver behind efforts to improve insurance cover for financiers and lessors and works to ensure that they are not liable for damages caused by other parties in the aviation sector.
General principles
AWG’s work on liability and insurance is based on these principles:
- airlines operate aircraft on a ‘net’ basis, meaning that they, rather than lessors / financiers, assume operational risk, which they are best positioned to control and insure
- lessors / financiers are entitled to the proceeds of insurance in connection with physical loss of, and other damage to, the aircraft (typically above a de minimis threshold)
- lessors and financiers benefit from insurance cover related to the airline’s underlying insurance policy
AWG has prepared a memorandum on the topic. It is titled, ‘Memorandum on Aviation Insurance in the context of Financing and Leasing’.
AWG has submitted legal briefs, including to the US Supreme Court, on questions of liability of lessors and financiers.
War-risk and aviation terrorism
AWG has been a leader in the development of thinking and policy in the field of terrorism liability (and insurance) since the events of September 11.
The economics of the aviation sector, the role of governments in the approval of anti-terrorist aircraft design, and general principles, collectively require that aircraft owners/lessors, financiers and manufacturers bear no legal liability for losses resulting from acts of aviation terrorism and other war risks.
AWG was actively in securing government cover for war-risk and aviation terrorism when markets restricted insurance. It also was a principal negotiator of post 9/11 liability rules, which moved away from strict liability towards systems that reflect the economics surrounding these risks and exposures.
Historical documents
In 2 May 2009, a diplomatic conference adopted the final text, as well as a related text on general third party liability . AWG published an article prepared by the AWG secretariat that provides a lessor, manufacturer and financier’s perspective on the final texts. Should the text on general third party liability gain support, AWG will revise and review its position on the matter.
Neither of these instruments, however, has gained support to date. The terrorism / unlawful interference treaty may prove useful in due course.