Nicholas Hughes and Vanessa Leigh explain some of the particular facets of this specialist market.
The satellite insurance market is global and, given the size of the risks involved, when a major commercial communications satellite is to be insured, most of the capacity of that global market may be involved.
However, unlike the aviation insurance market, satellite policies neither contain a leading underwriter clause nor does the space market have an invariable practice of recognising such a person according to which insurers would delegate claims handling authority to one, or possibly two of the larger insurers. Therefore, in the event of a major satellite loss, the insurers may decide to set up an ad hoc "Claims Coordination Committee" (the "CCC") to coordinate the handling of the claim. The CCC will be comprised of a workable number of those insurers who have the larger participations in the risk or who have specialist in house technical knowledge which could assist the CCC in handling the claim. The chairmanship of the CCC can be quite demanding and time consuming.
The CCC will consider the claim and liaise with the insured and the broker to provide a coordinated focus for the handling of questions regarding the claim and will instruct external experts or lawyers as necessary. The CCC usually have terms of reference which set out and define the scope of their role: for example, coordinating the investigation of the claim, appointing lawyers and experts (if necessary) and reporting arrangements with co-insurers and powers of decision. The CCC aims to provide a level of coordination so as to resolve the claim more quickly and efficiently for all concerned and provide a single streamlined channel of communication with the insured. We, operating with legal professional privilege, can assist dialogue.
Satellite insurance policies usually contain a provision requiring the insured to notify circumstances which could give rise to a loss and, if a loss materialises, to file a Proof of Loss within a certain time period. However, the immediate cause of a problem with a satellite, such as a loss of electrical power, may not be apparent and it may be some time before such information is available. Because of this policies often require the insured to conduct information and review sessions to update the insurers on the status of the investigations and allow the insurers to ask questions and request further information. In reality the circumstances often require evaluation by the satellite manufacturers. It is necessary that questions are focused if claims are to resolve.
Where the claim involves a US manufactured satellite, an important factor to consider are the US International Traffic in Arms Regulations or "ITAR" for short. These regulations are extremely complex and require that licences are obtained before regulated data (which will include much of the information required to assess an insured loss) can be exported to the insurers, their experts or their lawyers. The need to obtain appropriate licences can lead to delay in claims handling since the insurers, their experts and lawyers will all need to obtain individual licences.
At the present time, the normal practice is for the CCC to be set up post-loss after a major claim; there may however, be advantages in giving consideration to setting up a CCC at the placing stage and for the membership and the Terms of Reference to be recorded in the policy wording. Provision could also be made in the policy for the appointment of lawyers (in the jurisdictions of the law governing the policy, the insured and the manufacturer of the satellite) rather in the way that loss adjusters and lawyers are appointed in aviation policies. This would allow ITAR clearances to be obtained in advance if necessary and generally speed up the claims-handling process.
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.
