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June 30, 2006

Causal Connection Between Insurance Policy Exclusion And Loss Not Required In Nevada

You can add Nevada to the the growing majority of states that do not require a causal connection between an insurance policy exclusion and a loss in order for an insurer to deny coverage. In Griffin v. Old Republic Ins. Co., Griffin was injured when an aircraft piloted by Kevin Jensen crashed into Griffn's backyard. Jensen insured the aircraft through Old Republic Insurance Company. Old Republic’s aviation policy excluded coverage when "the Airworthiness Certificate of the aircraft is not in full force and effect" or when "the aircraft has not been subjected to the appropriate airworthiness inspection(s) as required under current applicable Federal Air Regulations for the operations involved." Mr. Jensen also initialed a clause in the insurance application, stating that coverage would not be available for his aircraft "unless a standard airworthiness certificate is in full force and effect."

As you might imagine, Griffin sued Jensen and his wife in state court. In response, Old Republic filed an action in the United States District Court for the District of Nevada seeking a declaratory judgment. Old Republic argued that it had no obligation to pay damages to Griffin or Jensen because the aircraft's airworthiness certificate had lapsed and was not "in full force and effect" at the time of the accident. It argued that coverage was expressly excluded in this situation. The federal district court granted summary judgment for Old Republic holding that "even if Jensen’s failure to maintain an airworthiness certificate was not related to the cause of the accident, Nevada law did not require a causal connection between the exclusion and the loss in order for the insurer to avoid liability." Griffin then appealed to the Court of Appeals for the Ninth Circuit.

On appeal, the 9th Circuit held that under Nevada law, "insurers may avoid liability under safety-related exclusions in aviation insurance policies, even when the insured’s noncompliance with the exclusion is not causally related to the loss, so long as the exclusion is unambiguous, narrowly tailored, and essential to the risk undertaken by the insurer." It went on to analyze the airworthiness exclusion and concluded that "the airworthiness exclusion at issue in this case is narrowly tailored and essential to the risk undertaken by the insurer" and it applied to exclude coverage.

Although this appears to be an unfortunate decision for Griffin, it is actually a good decision for aircraft insurers and aircraft owners seeking insurance. The decision allows aircraft insurer's to limit their exposure which will hopefully keep aircraft insurance premiums more reasonable and ensure that aircraft insurance will be available. In the absence of this type of decision, and to avoid the increased liability exposure that results, insurers have in the past, and could in the future, cease writing aircraft insurance policies in states that require a causal connection between a policy exclusion and the loss in order for the exclusion to apply.

Posted by Greg

June 26, 2006

Petitioning For An Exemption From The Federal Aviation Regulations

In the aviation world, just about everything we do is governed by a rule or regulation. The rules exist for a reason. Safety is the reason that gets the majority of the airplay. But must we always follow the rules? Not necessarily. It is possible to obtain an exemption from certain Federal Aviation Regulations ("FAR’s"). As matter of fact, exemptions are frequently requested. However, they aren’t necessarily granted. For more information on the process for petitioning the FAA for an exemption, some of the exemptions that the FAA has granted and some of the exemption requests that the FAA has denied, please read my latest article on the subject here.

Posted by Greg

June 21, 2006

FAA Issues Final Rule Regarding Disqualification For Airman And Airman Medical Certificate Holders Based on Alcohol Violations or Refusals To Submit to Drug and Alcohol Testing

The FAA today published its Final Rule on Disqualification For Airman And Airman Medical Certificate Holders Based on Alcohol Violations or Refusals To Submit to Drug and Alcohol Testing. The Final Rule: (1) changes the airman medical certification standards to disqualify an airman based on an alcohol test result of 0.04 or greater breath alcohol concentration (BAC) or a refusal to take a drug or alcohol test required by the Department of Transportation (DOT) or a DOT agency; (2) standardizes the time period for reporting refusals and certain test results to the FAA (2 days), and requires employers to report pre-employment and return-to-duty test refusals; (3) amends the airman medical certification requirements to allow suspension or revocation of airman medical certificates for pre-employment and return-to-duty test refusals; and (4) updates the regulations to recognize current breath alcohol testing technology.

According to the FAA, the Final Rule "updates the existing regulations regarding airman certification of individuals who have violated the drug and alcohol testing regulations or who have otherwise demonstrated a substance abuse history through violation of State or local laws involving driving while intoxicated/driving under the influence" and it represents "a current example of the FAA's continuing efforts to ensure that only drug- and alcohol-free individuals perform safety- sensitive duties."

This Final Rule is consistent with the FAA's current policy and enforcement relating to drug and alcohol abuse and regulatory violations. However, it doesn't address the aftermath of such violations (besides suspension or enforcement). The FAA does state that "[t]hese amendments are necessary to ensure that persons who engage in substance abuse do not operate aircraft or perform contract air traffic control duties until it is determined that these individuals can safely exercise the privileges of their certificates." However, this seems a bit disengenuous to me, given the onerous, and often times unreasonable, burdens imposed upon a certificate holder to prove that he or she can safely exercise the privileges of his or her certificate following such a violation.

I don't disagree with the FAA's policy: Certificate holders who have had their certificates suspended or revoked should have to prove that they can safely exercise the privileges before they are allowed to do so. But the policy should be enforced and implemented reasonably. Unfortunately, this is currently not always the case.

The amendments contained in the Final Rule become effective July 21, 2006. If you would like further information regarding the Final Rule you may contact: For technical information, Sherry M. de Vries, Aeromedical Standards and Substance Abuse Branch, Medical Specialties Division, AAM-210, Office of Aerospace Medicine, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591; telephone (202) 267-8693. For legal information, Michael Chase, Office of the Chief Counsel, AGC-200, Federal Aviation Administration, 800 Independence Avenue, SW., Washington, DC 20591; telephone (202) 267-8442.

Posted by Greg

June 20, 2006

Evidentiary Questions Must Amount To Prejudicial Error To Justify Reversal

A recent NTSB case discusses the standard of review utilized by the Board in analyzing appeals based upon alleged evidentiary errors. Administrator v. Nadal arose out of a runway incursion at LAX in which the airman failed to obey an ATC "hold-short" instruction and forced another aircraft to go around when he subsequently crossed runway 25L. The FAA charged the airman with violating FAR's 91.123(b)(violation of an ATC instruction) and 91.13(a)(careless and reckless). After a hearing, Judge Geraghty found that the airman's runway incursion violated the FAR's as charged by the FAA and he affirmed the 60 day suspension.

On appeal, the airman did not dispute that he failed to hold short as instructed. Rather, he argued that Judge Geraghty's decision should be reversed because Judge Geraghty "(1) should have admitted three exhibits that discuss runway 25L at LAX; (2) should not have allowed one of the Administrator’s witnesses to be present during the hearing, while other witnesses were ordered sequestered; and (3) should not have admitted a document that contained a statement from respondent’s co-pilot, when his co-pilot did not testify, nor a hypothetical question that did not have a proper foundation."

The Board initially noted that the Federal Rules of Evidence are considered "non-binding" in NTSB hearings. It then stated that it "will only entertain evidentiary questions when they amount to prejudicial error." An evidentiary error is only considered prejudicial when it actually affects the outcome of the case. The Board then addressed each of the airman's arguments and concluded that none of the evidentiary issues raised by the airman would have affected the outcome of the case. As a result, the Board affirmed Judge Geraghty's decision.

Posted by Greg

June 16, 2006

Dismissal Of Emergency Revocation Is Reversed When ALJ Confuses "Intentional False Statement" With "Fraudulent Statement"

In a recent case, Administrator v. McGonegal, the NTSB reversed Judge Fowler's dismissal of an emergency revocation of the airman's airline transport and medical certificates. The FAA alleged that the airman had falsified 14 applications for medical certificate in violation of FAR 67.403(a)(1) by failing to disclose required information regarding the airman's conviction for “Refusal to Take Chemical Test” following a traffic stop; his hospitalization and associated follow-up medical care for injuries sustained in connection with a car accident; and a knee injury resulting in treatment by an orthopedic surgeon. At the hearing, Judge Fowler concluded that, although respondent’s answers to questions 18v and 19 on the medical applications may have been "wrong", the evidence was insufficient to show that the airman had any "false or fraudulent intent" or any "intent to deceive or to falsify" or that the airman the statements were false.

On appeal, the FAA argued that the airman's statements were indisputably false and that his own testimony showed that he made a conscious decision not to disclose the requested information. The FAA further contended that "it is not up to [r]espondent to decide which medical information that is required to be disclosed on [the medical application] is significant and which is not," that the airman was, "substituting his judgment for those charged with the responsibility to perform those functions," and that in, "failing to report requested information to the FAA, [r]espondent effectively denied the FAA the opportunity to assess his qualifications to hold the medical certificate that was issued to him." The NTSB agreed.

The Board first cited the elements of an intentionally false statement: (1) a false representation; (2) in reference to a material fact; (3) made with knowledge of its falsity; and the additional elements that must be proven to establish a fraudulent statement: the representation be made (4) with the intent to deceive; and (5) with action taken in reliance on the representation. The Board observed that "[a]lthough the complaint alleges that respondent’s answers were 'fraudulent or intentionally false,' it does not appear from the record that the Administrator was attempting to establish a case of fraud." Since intentional falsification alone is sufficient to justify revocation, the Board noted that the FAA was only required to show that respondent’s incorrect answers on the application were made with knowledge of their falsity. It then stated that "[t]he law judge appears to have applied the wrong standard for an intentional falsification case."

The Board then concluded that, applying the proper standard, "it is abundantly clear from the record that, notwithstanding the law judge’s contrary view, this standard was met." It found that Judge Fowler's findings of fact were inconsistent with the overwhelming weight of the evidence in light of the airman's admission that he knew the answers to those questions were false and his attempt to justify those false answers by arguing that the undisclosed information was not significant or material. Unfortunately for the airman, Board precedent is clear that an applicant’s answers to all questions on a medical application are material.

Although the Board's decision is not surprising, what is surprising is that Judge Fowler would dismiss the emergency revocation based upon the facts cited in the Board's opinion. Not something I would expect from Judge Fowler.

Posted by Greg

June 15, 2006

NTSB Reverses EAJA Attorney's Fees Award

The NTSB recently granted an FAA appeal in Application of Raymond L. Keith and reversed an administrative law judge's award of attorney's fees under the Equal Access to Justice Act ("EAJA"). In the underlying certificate action upon which the EAJA application was based, the FAA had alleged a number of FAR violations based upon the airman's unauthorized flight through the Washington ADIZ. After a hearing, Judge Fowler dismissed the FAA's complaint, concluding that the airman was not responsible for his aircraft's unauthorized entry into the ADIZ because the airman had reasonably relied upon his co-pilot to obtain clearance from ATC to enter the ADIZ. Based upon this conclusion, Judge Fowler also granted the airman's EAJA attorney's fees request holding that the FAA was not substantially justified in pursuing the charges against the airman. The FAA appealed, arguing that it was in fact substantially justified in pursuing the action.

In response to the FAA's appeal, the Board initially discussed the standard of review for awarding attorney's fees under EAJA noting that "we will not award certain attorney’s fees and other specified costs if the government is shown to have been substantially justified in pursuing its complaint." In order for its claims to be substantially justified, the FAA must have had sufficient reliable evidence such that its pursuit of its claims was reasonable in both fact and law. The Board also observed that "EAJA’s substantial justification test is less demanding than the Administrator’s burden of proof when arguing the merits of the underlying complaint" and that "we are compelled to engage in an independent evaluation of the circumstances that led to the Administrator’s original complaint, and determine whether the Administrator was substantially justified in pursuing the case based on those circumstances."

The Board then analyzed the airman's reasonable reliance defense, stating that "[w]e cannot find that its application to the undisputed facts of this case was so clear that the Administrator had no substantial justification for pursuing the case." Under the reasonable reliance defense, the airman's violation could only be excused if the airman proved that he had no independent obligation or ability to ascertain whether the flight was cleared to enter the ADIZ, and no reason to question his first officer’s performance. After discussing the evidence presented by the FAA at the hearing, the Board concluded that "the Administrator was substantially justified in charging applicant with violating applicable Federal Aviation Regulations when applicant entered the ADIZ in violation of the NOTAM. The Administrator’s allegations were reasonable in fact and in law, because the Administrator had sufficient, reliable evidence to pursue the charges against applicant. Applicant admitted to entering the ADIZ without permission from ATC, and only much later presented the affirmative defense of reasonable reliance."

This case provides a nice discussion both of the standard of review for EAJA attorney's fees applications and of the requirements for successfully asserting the reasonable reliance defense. Although the airman did not recover his attorney fees, at least he was successful in avoiding a suspension of his airman certificate.

Posted by Greg

June 14, 2006

NTSB Affirms Denial Of Medical To Airman Suffering From Dysthemia

The NTSB recently affirmed the FAA's denial of an airman's application for thirdclass medical certificate based upon the airman's suffering from Dysthemia (a low grade depressive disorder). In Petition of Scott J. Pias, the airman was diagnosed with Dysthemia and treated with a number of medications over a period of time. During this time period, the airman and his psychiatrist determined, largely based upon the airman's representations, that Celexa best controlled the airman's symptoms. The airman applied for an unrestricted third-class medical certificate and was denied.

On appeal, the Board noted that the airman had a mental disorder and that certain of the symptoms of that disorder could easily adversely affect aviation safety ("poor concentration, questionable decision-making ability in complex tasks, nervousness anxiousness, irritability, sadness, depression, and feelings of worthlessness clearly would adversely affect a pilot’s attention and capability to fly and to prepare for flight in even the most routine circumstances.").

The airman argued, among other things, that he was qualified to hold a medical because his mental disorder was controlled by Celexa. However, the Board responded that "the FARs do not provide an exception to the rule for cases where medication is controlling an individual’s symptoms. The FAA cannot monitor and cannot be expected to monitor individuals to ensure that they stay on their medication, that they are having no adverse side effects from it, and/or that the medication is continuing to be effective."

Based upon the facts and precedent, the Board concluded that "the expert testimony clearly shows that petitioner’s underlying diagnosis and case history make him unfit to hold a medical certificate now and in the future 2 years. Petitioner’s evidence is not sufficient to demonstrate that the FAS was wrong in declining to issue the certificatethe airman." (It is important to note that the airman has the burden of proof on appeal of a denial of a medical application).

Posted by Greg

June 09, 2006

FAA Releases Turbojet Aircraft Airport Obstacle Analysis Advisory Circular

The FAA has released AC 120-91 Airport Obstacle Analysis which provides "acceptable methods and guidelines for developing takeoff and initial climb-out airport obstacle analyses and in-flight procedures to comply with the intent of the regulatory requirements of FAR §§ 121.177, 121.189, and §§ 135.367, 135.379, and 135.398 and other associated one-engine-inoperative requirements relating to turbine engine powered airplanes operated under parts 121 and 135." As with most AC's, the methods and guidelines presented in the AC are neither mandatory nor the only acceptable methods for ensuring compliance with the applicable regulations. Operators may use other methods if those methods are shown to provide the necessary level of safety and are acceptable to the FAA. And, although the AC does not specifically apply to Part 91 turbojet operators, the information in the AC may be implemented by such an operator to the extent that it is applicable to the operator’s needs and requirements, as long as the resulting operations are otherwise consistent with applicable regulations.

Posted by Greg

June 08, 2006

Although Failure To Follow A Manufacturer's Manual, Even If The Manual Is Wrong, Is Still A Technical FAR Violation, It Isn't Necessarily Grounds For Revocation

The NTSB recently affirmed a six month suspension of a repair station's certificate for FAR violations, one of which was the repair station's alleged failure to follow a manufacturer's service instructions. In Administrator v. Millenium Propeller Systems, Inc. the FAA was seeking revocation of Millenium's air agency certificate, which included propeller, limited-specialized service, and limited non-destructive inspection ratings based upon eight counts alleging a variety of FAR violations. Count Four of the FAA's complaint alleged that Millenium did not comply with McCauley's overhaul requirements when it overhauled a propeller and returned it to service, in violation of FAR §§ 43.13(a)11 and (b)12 and 145.57(a)13. After a hearing, Judge Mullins found that Millenium had failed to comply with the manufacturer's instructions, but that Millenium's failure was only a "technical" violation. Based upon this violation and the other violations proved by the FAA, Judge Mullins suspended Millenium's certificate, rather than revoking it. Both Millenium and the FAA appealed Judge Mullins' order.

On appeal, Millenium argued that it could not have safely followed the McCauley manual’s instructions with regard to installing counterweights on the propeller, because McCauley's instructions were incorrect and resulted in an unsafe propeller. Millenium relied upon a "Letter of Correction" issued by McCauley that subsequently revised the installation instructions and expert testimony as proof that it was correctly installing the counterweights, despite the manual’s contrary instructions. Based upon this evidence, Millenium asked "the Board to make a policy decision regarding whether a repair shop’s completion of what the shop deems a "safe" repair may override a manual’s contrary instructions."

The Board refused to make such a policy decision. Although it agreed with Judge Mullins that Millenium's conduct was only a "technical" violation based on the mis-installation of the counterweights, it stated that "Respondent did not use the methods, techniques, and practices described in the current manufacturer’s maintenance manual or Instructions for Continued Airworthiness prepared by McCauley, or other methods, techniques, or practices that the Administrator had accepted." As a result, the Board affirmed the finding of violation.

One of the issues appealed by the FAA was the sanction imposed by Judge Mullins: the FAA argued that six months was an inadequate sanction, given Millenium's "apparent indifference toward FAA regulations regarding repairs and alterations of propellers." The FAA took the position that Millenium's certificate should be revoked because it lacked qualifications necessary for maintaining an air agency certificate, and that the Board was required to defer to this sanction policy of imposing revocation upon a certificate-holder in cases involving a lack of qualification. Fortunately for Millenium, the Board disagreed with the FAA's arguments.

The Board noted that lack of qualification is a factual finding that does not command deference and went on to state that the FAA had presented no evidence upon which to reverse Judge Mullins' finding that Millenium's violations did not demonstrate a lack of qualification. It concluded that "[t]he Administrator’s argument that revocation is appropriate in light of the published sanction policy guidance, which mandates revocation when a respondent lacks qualifications, avoids the real issue of whether respondent’s violations in fact demonstrate a lack of qualification. In this regard, the Administrator has not cited any sanction policy guidance or case law that identifies revocation as the only appropriate sanction for the violations at issue here."

Posted by Greg

June 07, 2006

FAA Issues Advance Notice Of Policy Regarding Turbojet Operations

The FAA today issued an Announcement of Policy for Landing Performance Assessments After Departure for All Turbojet Operators for use in establishing "methods of ensuring that sufficient landing distance exists for safely making a full stop landing with an acceptable safety margin, on the runway to be used, in the conditions existing at the time of arrival, and with the deceleration means and airplane configuration to be used." This Notice comes in the wake of the Southwest Airlines landing overrun accident involving a Boeing 737-700 at Chicago Midway Airport in December 2005. Following that accident the FAA initiated an audit to evaluate information relating to the accident including the applicable regulations, FAA orders, notices, advisory circulars, ICAO and foreign country requirements, airplane manufacturer-developed material, independent source material, and the current practices of air carrier operators. The Notice is the result of that audit.

The Notice applies to operators subject to Part 121, section 121.195(b), part 135, section 135.385(b), and part 91, section 91.1037(b) and (c). The Notice requires that "[n]o later than September 1, 2006, turbojet operators will be required to have procedures in place to ensure that a full stop landing, with at least a 15% safety margin beyond the actual landing distance, can be made on the runway to be used, in the conditions existing at the time of arrival, and with the deceleration means and airplane configuration that will be used."

Affected operators can expect to receive Operations Specification/Management Specification (OpSpec/MSpec) C082 from the FAA by June 30, 2006 implementing the Notice's requirements. If not currently in compliance, all affected turbojet operators will have to comply with the Notice and the requirements of OpSpec/MSpec C082 no later than October 1, 2006. Prior to that time, affected turbojet operators will be required to submit their proposed procedures for compliance with the Notice and OpSpec/MSpec to their POI no later than September 1, 2006. When the turbojet operator demonstrates the ability to comply with the C082 authorization for landing distance assessments and has complied with other requirements of the Notice the OpSpec/MSpec should be issued.

If you would like further information regarding the Notice you may contact Jerry Ostronic, Air Transportation Division, AFS-200, 800 Independence Avenue, SW., Washington, DC 20591, and Telephone (202) 267-8166.

Posted by Greg

June 06, 2006

1st Circuit Affirms Application Of Economic Loss Doctrine Under Puerto Rican Law

In Isla Nena Air Services v. Cessna Aircraft Company et al., a pilot for the plaintiff, Isla Nena, was operating a C-208B Caravan along the northeast coast of Puerto Rico in clear weather when the engine failed and the Caravan lost power. Although the pilot was able to perform a controlled emergency water landing just off a beach, the Caravan suffered major damage to all of its components and the engine was destroyed. Fortunately, none of the passengers were seriously injured.

The NTSB determined that the damage to the engine was consistent with ingestion of a foreign object. Isla Nena sued Cessna (the aircraft manufacturer) and Pratt & Whitney (the engine manufacturer) asserting negligence and strict liability claims. It argued that certain engine inlet duct rivets were defectively designed or installed, which caused them to break off, and that the rest of the engine failed when it ingested one of the broken rivets. Isla Nena claimed to have suffered damages in the form of loss of value to the Caravan and engine, cost to repair the Caravan and engine, loss of use of the Caravan, and lost profits.

Cessna and Pratt & Whitney moved to dismiss the lawsuit arguing that Isla Nena was precluded from recovering damages based upon the economic loss doctrine, whether applied pursuant to admiralty law or under Puerto Rican law (Under the economic loss rule, a party generally may not recover in tort when a defective product harms only the product itself, rather than a person or other property).

The District Court agreed and dismissed Isla Nena's negligence and strict liability claims. On appeal, the 1st Circuit Court of Appeals agreed with the Disctrict Court and affirmed the dismissal holding that Puerto Rican courts would apply the economic loss doctrine to bar the plaintiff's claims. The Court noted that "the damages claimed arose entirely from the parties' contractual relationship and would not have occurred apart from the parties' contract" and as a result, "under Puerto Rico law, Isla Nena's claims are barred by the economic loss rule." The Court did not reach the issue of whether the economic loss doctrine under admiralty law precluded Isla Nena's claims.

Posted by Greg

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