In this month’s blog we take a look at the some of the potential legal liability exposures for Ground Handlers.
The principal defensive weapon in the ground handler’s armoury is the contract between it and its airline clients (the Carrier). Typically, the contract will either take the form of one of the versions of the IATA Standard Ground Handling Agreement (SGHA) and its associated annexes or will be a modified version based on the SGHA. The history and development of the SGHA is beyond the scope of this blog, but it has been in use for many decades. The earlier versions provided very significant, and arguably disproportionate, protection to ground handlers for loss and damage caused to their airline clients’ property and cargo/passengers they transported. However, the trend in the drafting of the more recent versions of the SGHA has been to reduce the level of protection afforded to the ground handler. That said, even in the most recent, 2018 iteration, of the SGHA, provides a significant measure of protection for the ground handler.
A detailed analysis of the liability provisions in the SGHA is beyond the scope of this blog. However, its key provisions can be summarised as follows:
- The Carrier shall not make a claim against the ground handler and will indemnify it against
- Delay, injury, or death to its passengers;
- Damage, delay, or loss of baggage, cargo or mail carried by the Carrier;
- Damage to or loss of equipment owned or operated by the Carrier plus any consequential loss or damage arising out of the performance of the SGHA unless the loss or damage was caused intentionally or recklessly and with knowledge that damage would probably result.
- Notwithstanding the above, the ground handler will be liable for:
- loss or damage to the carrier’s aircraft if this was caused by the ground handler’s negligent act or omission. However, the ground handler’s liability will be limited to the lower of either USD1.5 million or the value of the Carrier’s Hull All Risk Policy deductible. No sum below USD3,000 will be indemnified. Liability for any and all consequential losses arising out of the damage to the aircraft is also excluded; and
- any direct loss or damage to cargo carried or to be carried by the Carrier caused by the negligent act or omission of the Ground Handler, but subject to the same limit as is imposed by article 22.3 of the Montreal Convention 1999 (approximately USD31/kg at the time of writing) or the actual amount of compensation paid out by the Carrier to cargo interests, whichever is the lower. In any event the ground handler’s liability shall not exceed USD1 million and no claim below USD500 will be indemnified.
In practice, and especially in common law jurisdictions, proving that any loss, damage, or bodily injury was caused “recklessly and with knowledge that damage will probably result”, imposes an onerous evidential burden on the Carrier. Without going into excessive detail, this is because, in many common law jurisdictions, the legal test for recklessness requires the perpetrator to have knowledge that what he was doing probably would cause damage, but nevertheless deciding to do it anyway i.e., a subjective test. In practical terms this means that the perpetrator would have to admit knowing what he was doing when he caused the damage. This is an unlikely eventuality in the writer’s experience.
Consequently, significant claims for, in particular, damage to aircraft caused by ground handlers, were being born by the Carriers (at least to the extent of the deductible on their insurance policies) and their insurers. This state of affairs was a significant driver behind the adoption of the carve outs for aircraft damage and damage to cargo set out above.
In recent years, perhaps driven by increasing insurance premiums and the adoption of larger deductibles by carriers to try to offset the impact of the same, Carriers have been trying to negotiate amendments to the SGHA on a case-by-case basis. These amendments usually seek to increase the ground handler’s exposure for aircraft damage up from the base line USD1.5 million in the SGHA as well as removing references to the Carrier’s deductible. In more extreme cases the requirement to prove “reckless with knowledge that damage would probably result’’ is replaced with a requirement only to prove negligence on the part of the ground handler. The extent to which such amendments can be resisted inevitably depends on the strength of the relative negotiating positions of the parties. However, based on the writer’s experience, it seems that ground handlers are facing an inexorable trend towards having to accept greater liability exposure, especially for high value aircraft damage.
Notwithstanding the provisions of the more recent versions of the SGHA, Ground Handlers are able to invoke the protections of the various conventions relating to international carriage of passengers and goods by air e.g., the Montreal Convention 1999 (MC99) (or its predecessor conventions if applicable). This is because, in most instances, ground handlers constitute agents of the Carrier for the purposes of these conventions. Thus, ground handlers can invoke the same limits of liability that the Carrier can. However, this can be something of a double-edged sword, at least in circumstances where MC99 applies. For cargo, MC99 imposes unbreakable limits of liability which are currently equivalent to about USD31/kg of cargo. These limits apply irrespective how the loss or damage occurred – even the extreme circumstance of theft by the ground handlers staff. But in relation to passengers there are no limits of liability, although there is a threshold above which some very limited defences may apply. Where the older conventions apply (determined by the routing of the cargo or the passenger’s ticket) breakable limits may apply to both passenger and cargo claims.
One issue to bear in mind when considering claims of this nature, is that the conventions only apply to a specific period during transportation by air of passengers or cargo. For passengers this encompasses the processes of embarkation, whilst on board the aircraft and during disembarkation. For cargo, generally it encompasses the period from when the cargo is handed to Carrier (or its agents) until it is delivered to the consignee. Loss or damage occurring outside of this timeframe would be subject to the application of local law.
To this point we have focused on claims by the ground handler’s clients, the Carrier’s passengers, or cargo interests. In reality a ground handler will have contractual relationships with a relatively small percentage of the businesses and personnel working within the airport environment. Absent any contractual protection, claims for personal injury, property damage from these entities etc will be subject to local law and local levels of damages. It should be noted that, at least in respect of claims by passengers and cargo interests, the limitation periods within which such claims can be brought are likely to be longer than those imposed by the international conventions which, in most cases, is two years.
Finally, we need to consider the relationship with the airport authority itself. In many instances ground handlers operate under the provisions of a licence issued by the airport authority. Whilst there is no standard form for these types of licence, invariably they contain quite onerous provisions. Aside from making the ground handler liable for any loss or damage caused by its own negligence, these licences frequently impose obligations on the ground handler to indemnify and hold harmless the airport authority for any claims made against it by third parties arising out of the provision of services by the ground handler at the airport. Such indemnities are usually reinforced by an obligation on the ground handler to take out liability insurance which will provide cover up to limits specified by the airport authority. In addition, it is not uncommon for the airport authority to insist on being named as an additional insured under the ground handler’s liability policy to protect itself from any subrogated recovery claims by the ground handler’s insurers.
With the multitude of potential exposures that ground handlers face in busy and dangerous airport environments, risk management is a vital element of revenue protection for any business. Contracts are, of course, the first legal line of defence, but cannot provide absolute protection for any and all eventualities. In the event that a major incident occurs, having the correct insurance cover in place with the appropriate levels of cover is vital. Adequate cover is not just appropriate financial support. Importantly it includes access to experienced industry professionals, especially from the legal or loss adjusting industry, who can guide you through the technical and legal issues. Your insurance brokers are key to helping you secure the best possible protection and support. Not just after an incident has occurred, but also to assist you to plan and prepare for the worst-case scenario.
Read more about Aviation insurance here or write to us at: aerospace@deinon.ae
