UNITED STATES DEPARTMENT OF TRANSPORTATION FEDERAL AVIATION ADMINISTRATION

HIROKAI NISHIO
COMPLAINANT 

# v. W ASIDNGTON, DC

SAIPAN INTERNATIONAL AIRPORT (COMMONWEALTH PORTS AUTHORTY)
RESPONDENT FAA Docket No. 16

- 13-03

DIRECTOR'S RESPONSE TO RESPONDENT'S CORRECTIVE ACTION PLAN
On April 29, 2016, the Director ofthe FAA Office of Airport Compliance & Management Analysis issued the Director's Determination pursuant to 14 CFR Part 16 finding the Commonwealth Ports Authority (Respondent or Authority) to be in violation of its federal grant obligations with respect to Grant Assurance 22, Economic Nondiscrimination. The Authority was directed to submit a Corrective Action Plan (CAP) demonstrating how the Authority will comply with the pre s cribed corrective actions

. On June 16, 2016, the Respondent submitted its proposed Corrective Action Plan. Upon review, the Director identified a concern with the Resp ondent's proposed aircraft liability insurance requirements for GA aircraft operators that will require clarification.
General Aviation Aircraft Liability Insurance Coverage
The second directive in the Director's Determination required the Respondent to "develop and apply an aircraft liability insurance requirement for general aviation aircraft operators that is commensurate with the level ofcoverage available on the market to general aviation aircraft operating in the CNMI." [Director's Determination, pg. 39) The basis for the Director's finding was, in part, due to the Respondent's failure to sufficiently justify its $10M minimum liability insurance rate for general aviation users ofthe airport as reasonable. [Director's Determination, pg. 38]
CAP Proposal: In its CAP, the Respondent proposes to revise its Airport Rules and Regulations and to reduce its general aviation aircraft liability insurance requirement from $1OM to $4M. The CAP states tha t the "

...difference is based on the availability of aircraft liability insurance identified in the record of and in the Determination, the recommendation ofthe Authority's consultant, and the Authority's proprietary right to protect itself from exposure to liabi lity. "FAA Response: In developing the proposed $4M insurance requirement, the Respondent appears to rely heavily on the inve stigation and findings in Issue 2 ofthe Director' s Determination. In Issue 2, the Director found that certa in commercial operators ofGA aircraft have obtained $1OM in liability insurance and that , to some degree, liability insurance levels as low as $1M may be available toGA aircraft operators. [Director's Determination, pg. 31] The findings were based on the Compl ainant's own insurance coverage history, liability insurance coverage held by existing operators at GSN, and the Director's brief investigation into GA aircraft insurance availability in the CNMI market. [Director's Determination, pgs. 27

- 31] 2

However, the Director's investigat ion did not establish , confirm , or eliminate an acceptable minimum liability insurance requirement, nor was it the Director's role or intent. Rather, the Director's investigation simply established that, based on a sampling ofthe varying levels of coverage available to (or already o btained by) aircraft operators in the CNMI, there was insufficient evidence to substantiat e the Complainant's claim ofunreasonable denial of
access due to the unavailability of insurance. [Director's Determination, pg. 31] The Director's investigation was not an all-encompassing evaluation ofthe aircraft liability insurance market in the CNMI and should not be construed as such. Further, the Respondent did not provide any insight, rationale, methodologies, or other justifications used by its risk management consultant (or otherwise) in determining the revised $4M insurance requiremen t , nor did it provide any evidence tha t the requirement is commensurate with general aviation liability insurance availability in the CNMI market , as required. [D irector's Determination, pg. 39] Significantly, the Director' s Determination noted that the Respondent has recently allowed an existing commercial operator of Cessna 172 aircraft

- the same aircraft type as the Complainant- to maintain only $2M in liability insurance even as a commercial operator is required by the Airport Rules and Regulations to maintain $1OM in insurance coverage
. (Director's Determination, pg. 28] Such a finding demonstrates that $2M in liability insurance is not only available in the CNMI market for this type of aircraft, but also is evidence that $2M apparently is acceptab le to the Respondent. The CAP did not address this discrepancy and further demonstrates that the Respondent has not been effective in the management and application of its insurance requirements or its Airport Rules and Regulations. Accordingly, as outlined in the Director's Determination, the Respondent's aircraft liability insurance requirements must be consistently applied , must not be arbitrary , and must be commensurate with insurance availability in the CNMI market. [Director' s Determination, pg. 31] By all appearances , $2M in aircraft liability insurance is avai !able in the CNMI and is currently maintained by an operator a t the Airport. While the sponsor i s not necessarily required to mandate the lowest available liability insurance on the market , the sponsor must provide a justification for the reason ableness ofthe proposed higher $4M minimum insurance requirement for general aviation users. This is particularly relevant in light ofthe existing lower insurance amount obtained by a commercial user ofthe airport. The Respondent must also demonstrate that it has taken the necessary steps to be consistent in the application and interpretation o f its Airport Rules and Regula tions across all aircraft operators at the airport.Conclusion
The Resp ondent is hereby directed to provide a detailed j u stification for the revised minimum liability insurance requirement for general aviation aircraft operators, to include any market research, risk-based assumptions, and/or other documents and methodologies sufficient to justify the Respondent ' s proposed corrective action. In all cases, the Respondent's documentary evidence must be relevant to particular risks posed by the conditions and operations existing at GSN and directly related to general aviation aircraft operations. The Respondent is also directed to identify and address the aforementioned discrepancies in the application ofits liability insurance requirements across all types of operations at the airport, including aircraft similar in type to those being used by the Complainant. Please submit the applicable justifications and supporting documentary evidence within 60 days ofthe date ofthi s correspondence.

Sincerely,

Dire or, Office of Airport Compliance and Management Analysis 

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### CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on December 22 , 2016 , I caused to be sent via certified U.S. Mail a true copy ofthe foregoing document addressed to: HIROAKI NISHIO P.O. BOX 5910 CHRB SAIPAN, MP 96950 Complainant 

### Maryann Q. Lizama Acting Executive Director Commonwealth Ports Authority Saipan Interna tio nal Airport P.O. Box 501055 Saipan, MP 96950

- 1055 Respondent
Robert Tenorio Torres Attorney at Law P.O. Box 503758 CK Saipan, MP 96950 Counsel to the Respondent Copy to: FAA Part 16 Airport Proceedings Docket FAA Airports Compliance Division, AC0- 1 00 Western Pacific Region A irports Division , AWP-600 Honolulu A irports District Office

Claudia Roberts Office ofAirport Compli ance

and Management Analysis 4