WHATS HAPPENING IN SPACE LAW AND WHY.docx

1、WHATS HAPPENING IN SPACE LAW AND WHY10-WTR Air & Space Law. 1Air and Space LawyerWinter, 1996*1 WHATS HAPPENING IN SPACE LAW AND WHY?Stephen Tucker FNaCopyright (c) 1996 by the American Bar Association; Stephen TuckerApproximately $25 billion in government funding and commercial financing is current

2、ly spent each year on space-related matters in the United States. As is the case with any endeavor involving this kind of money, disputes that cannot be resolved by the parties will arise. With respect to space, these disputes generally fall into the following categories: Those related to first-part

3、y insurance Cases involving liability of space product manufacturers Patent-related matters Regulatory issuesThis article provides an overview of types of space-related litigation/arbitration currently under consideration and suggests why these disputes are arising in the first place. The article fo

4、cuses on certain insurance matters handled by my firm, namely, the Westar IV/V litigation and the ASC-2 arbitration, comparing and contrasting the effectiveness of procedures used to attempt to move these individual matters toward resolution.*13 First-Party InsuranceTo better understand the disputes

5、 underlying the specific litigation and arbitration to be discussed, some brief background on these four problem areas follows below.Wording of Insuring AgreementsAt a recent conference, Stephen Le Goueff, a noted legal adviser to a well-known satellite operator in Europe, made the following passion

6、ate observation:. words are the weapons, the “Trojan horse”, sneaking in our policies. They sometimes appear as a gift of clarity in the kingdom of darkness, that some policies have become. Nevertheless, here they are, with their obscure meanings, loaded with weapons, one after the other, slowly cre

7、eping in, hiding in the text amongst so many other words of similar shape or form that they can go unnoticed. . Unless the guards of the policy, such as myself, are vigilant and bar their entrance into the policy or find and expel those words that have gone unnoticed. Unless those words admitted int

8、o the policy have valid papers and are kept under strict surveillance amongst a group of allied words, then our coverage, our cherished coverage, will inexorably shrink.Contract law provides that in order for a valid and binding contract of insurance, or for that matter any contract, to be formed, m

9、utual assent of the parties is necessary. The wording of the Insuring Agreement clause, in the case of an insurance policy, is key to determining whether mutual assent or a “meeting of the minds,” has been achieved.In many past disputes involving insuring agreements, in which there have been some qu

10、estions about whether there had indeed been a mutual assent of the parties, the controversies involved either (1) agreements with terms that were not sufficiently specific or were conditional in nature, or (2) agreements containing ambiguous terms.The following is an example of an Insuring Agreement

11、 that would fall into category (1):Underwriters will indemnify the assured if the power output on the satellite transponders relay channels fails to meet a level to be later agreed.Such a wording can be characterized as an “agreement to agree” and would be generally unenforceable until such time as

12、a “level” is agreed by the parties.The following is an example of an Insuring Agreement (see (2) above) that contains a term that is so ambiguous that a court might be forced to “reform” the language to conform to the intent of the parties in order to find a valid contract:Underwriters will indemnif

13、y the assured if the power output on the transponders falls below a usable level.The word “usable” is the main problem in this example. If this wording were to become the subject of litigation, one could rest assured that, depositions of the producing and placing brokers and representatives of insur

14、ers and insured would be necessary to attempt to find the true intent of the parties in the choice of the word “usable.”Requirements Associated with Proving a LossSpace insurance policies generally contain a provision that requires that in the event of a loss, as soon thereafter as is practicable, a

15、 Proof of Loss must be filed in such form and including such information as underwriters may reasonably require and request. In these policies, there is also usually a requirement that after the insured files a Proof of Loss, a certain amount of time will be available for insurers to investigate the

16、 claimed loss. Under United States law, there is also an implied condition in all, including so-called all-risk, insurance policies that a fortuitous event must occur in order for a loss to be covered. After all, insurance is a game of chance, not a guarantee.In the respected legal treatise Couch on

17、 Insurance, the following language appears:The purpose of a provision for proof of loss is to afford the insurer an adequate opportunity for investigation, to prevent fraud and imposition upon it, and to enable it to form an intelligent estimate of its rights and liabilities before it is obligated t

18、o pay. Its object is to furnish the insurer with the particulars of the loss and all data necessary to determine its liability and the amount thereof.The purpose is also to advise the insurer of facts surrounding the loss for which claim is being made. The proof of loss also is used by the insurer t

19、o make an estimate as to whether and under what factual circumstances recovery under the policy would be warranted. FN1Space insurers generally require, at a minimum, *14 eleven items to be contained in a Proof of Loss see box.The requirement in item 2 above tends to make a generic Proof of Loss for

20、m practically impossible to compose. The reason for this difficulty is that a generic form would have to take account of the almost infinite variety of underlying scenarios for every possible type of loss (e.g., power-related, fuel-related, transponder-related, housekeeping-related, etc.). Space-pol

21、icies are often described as all-risk in nature. The term “all-risk” is actually a misnomer, because all-risk polices are not “all-loss” policies. FN2 All-risk policies have an implied exclusion that a loss must occur as a result of a fortuitous event. The requirement of a fortuitous event is a “fun

22、damental principle of law in interpreting insurance contracts.” FN3 If the courts were to allow recovery under insurance policies without the fortuity requirement, public policy would be violated and fraud would be encouraged. Simply stated, an insurance policy is not a warranty of soundness.Damage

23、associated with a loss has generally been found by the U.S. courts to be fortuitous if neither party knew or contemplated that there was any defect at the time of the issuance of the insurance contract. A fortuitous event is one, so far as both parties to the contract are aware, is dependent on chan

24、ce.Due Diligence RequirementsThe most well-known case dealing with the subject of due diligence, as applied to a satellite insurance policy, is Hughes Aircraft Company v. Lexington Insurance Company, FN4 which was filed by Hughes in 1986 in Los Angeles California Superior Court. The ultimate result

25、in the case reflects what a strong duty can be imposed on an insured to avoid or diminish a loss.By way of background, after reciting certain facts relating to the insurance policy and other contracts underlying the dispute, Hughes Second Amended Complaint For Breach of Insurance Contract, Breach of

26、 Covenant of Good Faith and Fair Dealing, Breach of Statutory Duties and Breach of Fiduciary Duty against Lexington alleged, in pertinent part:11. The underlying Contract required the Satellite to be at a synchronous altitude of approximately 22,000 miles. The Satellite as of the date of filing of t

27、his action was in a useless and deteriorating orbit of approximately 160 miles and was not acceptable to the U.S. Navy. The Satellite has at all relevant times since April 13, 1985 been a “Total Loss” as defined by the Lexington Policy. No “reasonably practicable” measure (as defined in Section 5(a)

28、 of the Lexington Policy) existed which, within a reasonable time or any time, could enable the Satellite to achieve Successful Orbit. Indeed, the only possibility for attempting to salvage the Satellite was an untested and unprecedented salvage mission by another space shuttle, the cost of which wa

29、s estimated to approach one-quarter of the total cost of the Satellite. The implementation of such a speculative salvage mission was not a “reasonably practicable measure “to avoid or diminish any loss” as required by clause 5(a) of the Lexington Policy.12. On or about April 20, 1985, plaintiffs gav

30、e due and timely notice of the Total Loss of the Satellite to Lexington. Plaintiffs also submitted a sworn statement and proof of loss claiming the full Lexington Policy proceeds of $4 million (the “Claim”). Plaintiffs notice and proof of loss complied in all respects with their notice and proof of

31、loss obligations under the Lexington Policy.13. On or about May 14, 1985, Lexington denied the Claim. Lexington has failed and refused and continues to fail and refuse to pay the $4 million due to plaintiffs under the Lexington Policy.14. As a direct and proximate result of Lexingtons failure to pay

32、 benefits due under the Lexington policy, plaintiffs have been damaged in the amount of $4 million, together with interest thereon.Attached to the Second Amended Complaint was a copy of the insurance policy. Condition 5(a) of the policy reads:In the event of an occurrence likely to result in claim, the Named Insured shall:(a) Use due diligence and do and concur in doing all things reasonably practicable to avoid or diminish any loss under this policy.After the satellite was marooned in low orbit, Hughes entered negotiations with NASA to repair it. Thirteen