As part of the Certified Cargo Screening
Program, the Transportation Security
Administration required 50 percent of all
cargo transported on passenger aircrafts be
screened by Feb. 3, 2009. Screening will be
mandatory for 100 percent of cargo by Aug.
3, 2010. Avalon Risk Management recognizes
that cargo screening is well underway but
would like to inform our clients about the
additional liability exposures a Certified
Cargo Screening Facility (CCSF) faces.
To prevent delays, cargo can be screened by
a CCSF prior to arriving at the airport and
still meet the regulatory requirement.
Businesses that transport cargo directly to
a freight forwarder or air carrier can apply
to become a CCSF. Types of businesses that
may qualify include: manufacturers,
warehouses, distribution centers, third
party logistics providers, indirect air
carriers, airport cargo handlers and
independent cargo screening facilities.
CCSFs need to recognize the additional risks
they may encounter and should take steps to
limit their legal liability.
According to the Federal Register, the final
rule implementing the Safety Act became
effective in July 2006 to promote
development and deployment of anti-terrorism
products and services.The
Safety Act limits legal liability for
sellers of qualified
anti-terrorism
technologies (QATT) including: products,
services and intellectual property such as
software. The action of screening cargo by a
CCSF is considered a service, which allows
the CCSF to qualify for protection as part
of the Safety Act. Sellers of anti-terrorism
technologies need to apply to have
their products qualified. The two levels of
qualification are designation and
certification. For more information on how
to apply, please visit
www.safetyact.gov.
The next step to limiting your liability is
reviewing your current insurance program.
Your local Avalon office is available to
help review your coverage and answer
questions. Businesses interested in working
with anti-terrorism technologies should
consider the following when reviewing
coverage:
-
The
Safety Act does not afford coverage
– At the designation level of liability
protection, the Department of Homeland
Security (DHS) determines the amount of
liability insurance the seller is
required to carry. The seller’s
liability for these “designated
technologies” is then limited to the
amount DHS requires.
At the certification level of
liability protection, the seller can utilize
the Government Contractor Defense for claims
arising out of terrorism acts. The certified
product will also be added to DHS’s
Approved Products List for Homeland
Security.
-
QATT seller’s liability
– According to DHS’s interpretation of
the Safety Act, only the seller of QATT
can be sued for third-party injuries
occurring as a result of terrorism.
Besides maintaining the levels of
liability insurance required by DHS,
businesses should also obtain Product
Liability Insurance,
Errors & Omissions and
Transit Liability coverage. Products
Liability Insurance covers bodily injury
or property damage resulting from a
faulty product. Errors & Omissions
coverage responds to claims and lawsuits
your clients may suffer as a result of
your alleged negligence such as mistakes
made during the screening process
including: obtaining a false positive
reading or not completing the screening
confirmation correctly. Transit
Liability provides liability coverage
for loss and damage to cargo shipped
under your house bill of lading, air
waybill, warehouse receipt or freight
receipt.
-
Request an indemnification agreement
– CCSFs are encouraged to ask the
manufacturer of the anti-terrorism
equipment to sign an indemnification
agreement and request to be added as an
additional insured on their insurance
policy. This option may not be realistic
for all contracts or projects, but could
significantly reduce the risk involved
with anti-terrorism equipment.
-
Many insurance policies contain
terrorism exclusions
– Companies should check with their
insurance agent to ensure their
insurance policies
do NOT contain terrorism exclusions
as
coverage could be denied if a claim
occurs from handling anti-terrorism
products.
-
Policy territory
– When dealing with air
cargo, it is important to check how
international airspace is covered. Most
policies only cover international
airspace when the points of transit are
within the policy’s territory. CCSFs
working with international cargo need a
policy with a coverage territory that
includes all cargo destinations as well
as the airspace between them.
-
Insurance policies may need to be
modified –
Most insurance companies will need to
know the insured’s insurable interest
regarding the equipment. An insured with
a policy covering personal property of
others might need to provide the
insurance company with replacement cost
of equipment or contractual liability.
Policy premium may need to be adjusted
to include coverage for additional
exposure.
It is important to recognize that CCSFs
may incur liabilities that do not fall
within the protection of the Safety Act. The
Safety Act only provides liability
protection for acts of terrorism. If a loss
occurs and terrorism was not the cause,
CCSFs may find that they have significant
liability. For example, assume a CCSF
screens a shipment containing oxygen
generators, which needed to be shipped by
ocean but were inadvertently sent by air
freight as a result of a shipper error. The
CCSF screens the cargo and misses the
presence of the oxygen generators. The
aircraft subsequently crashes during flight
and an investigation reveals the crash was a
result of the oxygen generators heating and
causing a fire. This is clearly not a
terrorist act; therefore, liability would
not be limited to the amount of insurance
the CCSF was required to carry. Issues such
as these should thoroughly be discussed and
analyzed when making the decision to become
a CCSF.
For more information about the Safety Act,
please visit
www.safetyact.gov. If you have questions
regarding the exposure and/or risk involved
with handling anti-terrorism products,
please contact legal counsel.
As a premier provider of innovative
insurance and surety solutions for the
transportation industry, Avalon understands
your business and its changing needs. We
have strong relationships with many insurers
to find you the best insurance program for
your unique needs. Avalon can provide you
with
General Liability,
Product Liability,
Errors & Omissions and Transit Liability
Insurance
to help protect against
the additional exposures of a CCSF. |
