19008 Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 198

[Docket No. 28893; Notice No. 97–5]

RIN 2120–AF23

Aviation Insurance

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking

(NPRM).

SUMMARY: The FAA is proposing to

revise Title 14 Code of Federal

Regulations (CFR) part 198 to provide

for the issuance of insurance for certain

types of flight operations and for the

issuance of insurance for certain ground

support activities essential to flights

insured under the Aviation Insurance

Program. Also, the amendments would

redefine the activation of insurance

coverage, revise the process for

amending insurance policies, increase

the binders for non-premium insurance

coverage, and reflect new statutory

authority. the proposed amendments

would allow the FAA to be more

responsive to the aviation industry

when commercial insurance coverage

cannot be obtained on reasonable terms,

and the insurance coverage can be

provided by the Aviation Insurance

Program.

DATES: Comments must be received on

or before June 2, 1997.

ADDRESSES: Comments on the proposed

rule should be mailed or delivered in

triplicate to: Federal Aviation

Administration, Office of the Chief

Counsel, Attn: Rules Docket (AGC–200),

Docket No. 28893, 800 Independence

Avenue, SW., Washington, DC 20591.

Comments may also be sent

electronically to the following Internet

address: nprmcmts@faa.dot.gov.

Comments may be examined in the

Rules Docket, Room 915G, weekdays

between 8:30 a.m. and 5:00 p.m., except

on Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Eleanor Eilenberg, Office of Aviation

Policy and Plans, APO–330, Federal

Aviation Administration, 800

Independence Avenue, SW.,

Washington, DC 20591, telephone (202)

267–3090.

SUPPLEMENTARY INFORMATION:

Comments Invited

Interested persons are invited to

participate in the making of the

proposed rule by submitting such

written data, views, or arguments as

they may desire. Comments relating to

the environmental, energy, federalism,

or economic impact that might result

from adopting the proposals in this

notice are also invited. Substantive

comments should be accompanied by

cost estimates. Comments should

identify the regulatory docket or notice

number and should be submitted in

triplicate to the Rules Docket address

specified above.

All comments received on or before

the closing date for comments specified

will be considered by the Administrator

before taking action on this proposed

rulemaking. The proposals contained in

this notice may be changed in light of

comments received.

All comments received will be

available, both before and after the

closing date for comments, in the Rules

Docket for examination by interested

persons. A report summarizing each

FAA-public contact, concerned with the

substance of this rulemaking, will be

filed in the docket. Commenters wishing

the FAA to acknowledge receipt of their

comments submitted in response to this

notice must include a preaddressed,

stamped postcard on which the

following statement is made:

‘‘Comments to Docket No. 28893.’’ The

postcard will be date and time stamped

and mailed to the commenter.

Availability of NPRM

An electronic copy of this document

may be downloaded using a modem and

suitable communications software from

the FAA regulations section (telephone:

703–321–3339), the Federal Register’s

electronic bulletin board service

(telephone: 202–512–1661), or the

FAA’s Aviation Rulemaking Advisory

Committee Bulletin board service

(telephone: 202–267–5948).

Internet users may reach the FAA’s

web page atlhttp://www.faa.gov or the

Federal Register’s webpage at http://

www.access.gpo.gov/suldocs for

access to recently published rulemaking

documents.

Any person may obtain a copy of this

NPRM by submitting a request to the

Federal Aviation Administration, Office

of Rulemaking, ARM–1, 800

Independence Avenue, SW.,

Washington, DC 20591, or by calling

(202) 267–9680. Communications must

identify the notice number of this

NPRM.

Person interested in being placed on

the mailing list for future NPRM’s

should request, from the above office, a

copy of Advisory Circular No. 11–2A,

Notice of Proposed Rulemaking

Distribution System, which describes

the application procedures.

Background

In 1951, the Congress amended the

Civil Aeronautics Act of 1938 by adding

a new Title XIII which authorized the

Secretary of Commerce, with the

approval of the President, to provide

aviation war risk insurance adequate to

meet the needs of U.S. air commerce

and the Federal Government. This

insurance could only be issued when

the Secretary of Commerce found that

war risk insurance was commercially

unavailable on reasonable terms and

conditions.

The war risk insurance program was

established to provide the insurance

necessary to enable air commerce to

continue to the event of war. This was

needed because of several factors:

commercial war risk insurance policies

contained automatic cancellation

clauses in the event of major war; the

geographical coverage of commercial

war risk insurance could be restricted

upon reasonable notice to air carriers;

and rates for commercial war risk

insurance could be raised without limit

upon reasonable notice to air carriers.

The Aviation Insurance Program was

incorporated in Title XIII of the Federal

Aviation Act of 1958. Statutory

responsibility for the program was

subsequently transferred to the

Department of Transportation at the

time of its creation in 1967. The

Secretary of Transportation later

delegated this authority to the Federal

Aviation Administrator (39 CFR

1.47(b)).

The definition of war risk in Title XIII

was that traditionally employed by

commercial underwriters and, as a

matter of policy, the FAA had always

conservatively interpreted the

definition. In the early 1970’s, this

definition led to uncertainty about the

extent of the Administrator’s statutory

authority to provide insurance against

loss or damage arising from, for

example, undeclared wars, hijackings,

and terrorist acts. Because of a

combination of the progressive

exclusion of these new risk from

commercial all risk policies, and the

failure of the traditional definition of

war risk to cover these risks, a potential

gap in insurance coverage occurred with

the possibility of abrupt termination of

important air services in emergency

situations.

In recognition of the fact that the

Administrator needed broad insurance

authority in extraordinary

circumstances to insure air services

determined to be in the national

interest, Congress amended Title XIII on

November 9, 1977. These amendments,

included in Public Law (Pub. L.) 95–
Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules 19009

163, removed from Title XIII all

references to risk categories. They

authorized the Administrator to provide

insurance against loss or damage due to

any risk arising from operations of

aircraft in foreign air commerce or

between two points outside the United

States deemed by the President to be in

the foreign policy interests of the United

States. However, such insurance could

only be issued if commercial insurance

for those operations was not available

on reasonable terms and conditions. The

January 15, 1986, amendment to part

198 reflected the 1977 amendments to

Title XIII.

Between 1975 and 1990, there was

little use of the insurance authority. The

FAA, insured without premium, about

50 military charter flights from the

United States to Central America in

1983 and 1984. Otherwise, commercial

insurance for flights to most areas of the

world was available. Since 1990, the

Aviation Insurance Program has been

used much more than in the 1975–1990

period, but air carriers can usually still

obtain commercial insurance.

Since 1990, the Aviation Insurance

Program has been mostly used to

provide insurance for civil aircraft

chartered by the military. The

Department of Defense (DoD) under the

National Airlift Policy relies on civil air

carriers to meet its airlift requirements.

Under the Civil Reserve Airfleet (CRAF)

program, DoD contractually obligates

airlines to provide aircraft and flight

crews to meet mobilization transport

requirements in exchange for shares of

peacetime DoD transport business. This

saves the DoD the expense of

purchasing, operating, and maintaining

a large standby transport aircraft fleet.

Although the CRAF program is

available, DoD usually can meet its

transport requirements with aircraft and

crews volunteered by the CRAF airlines

without formal activation of the

program. In fact, the CRAF has been

activated only once in its history—

during Operation Desert Shield/Storm.

Gaps between the FAA and

commercial insurance coverage

appeared during Operation Desert

Shield/Storm as a result of the CRAF

activation and the long post-Vietnam

hiatus in program activity. Two such

gaps could not be closed without new

legislation. The more significant was the

inability to cover domestic CRAF flight

segments. Most of the airlines’

commercial hull or liability war risk

insurance policies excluded coverage

for all CRAF flights while, by law, FAAissued non-premium insurance could

cover by only international flight

segments. Thus, the airlines had to rely

on direct indemnification from the DoD

for coverage of CRAF domestic flight

segments (e.g., usually ferry flights to a

military base to pick up troops and

supplies destined for the theater of

operations). In addition, flights

transporting armed forces and military

materiel on behalf of and pursuant to an

agreement between the U.S. government

and a foreign government, but not

operated under a U.S. government

contract, could not be covered by nonpremium insurance. Title IV of the

Airport and Airway Safety, Capacity,

Noise Improvement and Intermodal

Transportation Act of 1992, Pub. L. 102–

581, gave FAA the authority to provide

non-premium insurance coverage for

these two previously uncoverable

categories of flights. The FAA has been

able to fill other coverage gaps

administratively with successive

revisions to its insurance policies, such

as the costs of search and rescue

attempts, runway foaming, and damage

while the aircraft is outside the

insured’s control.

In 1994, Congress codified the Federal

Aviation Act including the Aviation

Insurance Program and related statutes

into the main body of Title 49, United

States Code (USC) at Chapter 443.

Aviation Insurance Program

Currently, Chapter 443 authorizes the

Secretary of Transportation, subject to

approval by the President, to provide

aviation insurance coverage for

American aircraft or foreign-flag aircraft

operations deemed necessary to carry

out the foreign policy of the United

States and for which commercial

insurance is unavailable on reasonable

terms. This is a discretionary program.

This insurance can be issued in two

forms:

• Non-Premium Insurance is issued

for American aircraft under contract to

any Federal department or agency

which has an indemnity agreement with

the Department of Transportation

(DOT). Applicants currently pay a onetime binder fee of $200 per aircraft for

non-premium insurance. This fee has

not been adjusted since 1975. The

Presidential approval required for the

issuance of non-premium insurance is

demonstrated by the standing

Presidential approval of the

indemnification agreements with the

other Government agencies. In order to

minimize the time needed to provide

non-premium insurance coverage, upon

receipt of the application from the

carrier, the FAA will issue the carrier a

standby non-premium insurance

coverage, upon receipt of the

application from the carrier, the FAA

will issue the carrier a standby nonpremium policy which lists the

registered aircraft of that carrier. Actual

coverage for operations of these aircraft

commences upon formal activation

notice from the FAA which will detail

the conditions and limits of the

activated policy.

• Premium Insurance is provided for

American aircraft or foreign-flag aircraft

for regular commercial scheduled or

charter service. The U.S. Government

assumes the financial liability for claims

in exchange for a premium. The

Presidential approval required for

premium insurance must be separately

obtained for a period of not more than

60 days. The Presidential approval may

be renewed for additional 60 day

periods if so approved before each

additional period. Under certain

circumstances, this renewal authority

has been and may be delegated to the

Secretary of Transportation. As a

general policy, premium insurance will

not be made available for a U.S.

government agency, whereas such

agencies may request non-premium

insurance.

Non-premium and premium

insurance do not necessarily differ in

risks covered for any given flight. The

differences are in the categories of

flights which may be covered and in the

approval process. As noted above,

wholly domestic flights may be covered

by non-premium insurance whereas

premium insurance may cover only

flights between a U.S. point and a

foreign point or between two foreign

points. Presidential approval is specific

to flights within the scope of each

request for premium insurance, while

Presidential approval is generic to all

non-premium flights for agencies which

have completed an indemnification

agreement with the FAA.

Two basic types of coverage are

offered under the FAA’s Aviation

Insurance Program, with limits of

liability provided as follows:

• Hull insurance covers the loss of or

damage to an aircraft hull. Coverage

may not exceed the reasonable value of

the aircraft as determined by the

Secretary.

• Liability insurance covers bodily

injury, personal injury, or death, and

damage to or loss of property, including

cargo, baggage, and personal effects.

Coverage may not exceed the registered

limits of liability on file with the FAA

or the corresponding commercial

coverage in effect on the date of loss.

Recent Experience

The FAA issued non-premium war

risk insurance for over 5,000 flights in

support of Operation Desert Shield/

Storm. These flights were utilized to

carry both troops and supplies into the
19010 Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules

Middle East and evacuate American

citizens from the area. Premium war risk

insurance also was provided during

Operation Desert Shield/Storm for 36

flights.

The FAA also has issued nonpremium insurance for flights

supporting recent humanitarian and

peacekeeping operations. The FAA

insured 155 flights by 11 different air

carriers carrying troops and supplies to

and from Somalia during Operation

Restore Hope from December 1992 until

early 1994. In 1993, the FAA insured

troop and cargo flights to Kuwait City in

support of Operation Desert Caravan. In

1994, the FAA insured flights in support

of Operation Provide Hope providing

humanitarian relief supplies to the

Republic of Georgia. Commonwealth of

Independent States. In September and

October 1994, the FAA insured flights

into Haiti in support of Operation

Uphold Democracy. In April 1996, the

FAA began insuring troop rotation

flights between Tuzla, Bosnia, and

Germany.

Prior to 1990, the last extensive use of

FAA-issued insurance to cover

commercial flight operations was in

1975. Since that time, commercial

insurance industry practices evolved

well beyond those prevailing in 1975

and earlier. The differences between

coverage available from the commercial

insurance industry and the coverage

permitted under the Aviation Insurance

Program’s statutory authority has

created insurance coverage gaps.

The coverage gaps were highlighted

by the partial activation of the Civil

Reserve Air Fleet (CRAF) during

Operations Desert Shield/Storm, the

first activation since the program’s

inception. A majority of the civil air

carriers providing the airlift for

Operation Desert Shield/Storm had their

commercial war risk insurance

automatically canceled upon CRAF

activation. As a result, the air carriers

depended on FAA-issued insurance.

The coverage gaps and the carriers’

dependence on FAA-issued insurance

caused Congress, the air carrier

industry, and the FAA to review the

aviation insurance program’s statutory

authority. Section 401(a) of Public Law

102–581 (October 31, 1992), expanded

the FAA’s authority to issue nonpremium insurance coverage for

domestic flight segments; for goods and

services (i.e., spares support, refueling,

etc.) in direct support of operations

conducted under contract to the

indemnifying agency; and for transport

of military forces or materiel on behalf

of the United States under an agreement

between the Government and the

government of a foreign country and for

goods and services in direct support

thereof. The FAA further addressed

coverage gaps by adopting new

procedures and policies: e.g., the

revision of the FAA’s standard nonpremium hull and liability policies and

the development of endorsements to

those policies to meet the specific

insurance needs of DOD contract

carriers. Additionally, the FAA is

proposing, in this document, to provide

insurance for all insurable interests

consistent with current commercial

aviation insurance practice.

The Aviation Insurance Program has

been used repeatedly over the last five

years as the U.S. continues its

involvement in international

peacekeeping and humanitarian

endeavors, and as DOD continues its

reliance on civil aircraft. This

continuing frequent use has

significantly increased the

administrative cost of maintaining the

Aviation Insurance Program. In order to

conform insurance program practices to

changes in implementation authority, to

improve program efficiency, and to

offset incurred administration cost due

to increased frequency of utilization of

the Aviation Insurance Program, the

FAA proposes the following

amendments.

Explanation of Proposed Changes

In general, the FAA has broad

discretion and judgment in determining

the acceptable level of risk to be insured

against under a given set of

circumstances, and the policies and

procedures to be followed in the

administration of the insurance

program. The proposals contained

herein would not compromise this basic

premise.

Section 198.1

Section 198.1 would be published

with editorial changes reflecting

language used in the codification of the

Federal Aviation Act.

Section 198.1(b) would be revised to

expand the operations covered under

the Aviation Insurance Program. This

proposed amendment would include, as

eligible operations, those in domestic or

foreign air commerce if non-premium

insurance is sought.

Section 198.3

Section 198.3(b) would be revised to

expand the authority to cover flights

operated pursuant to an agreement

between the United States and a foreign

government. A requirement for the

airline to have a current copy of its

commercial insurance policy on file

would be added. In addition, this

section would be changed to explain

when insurance policies are actually in

force and when they are in standby

status. The section would be divided

into paragraphs that clarify and correct

the intent of the section.

Section 198.5

Section 198.5 would be published

with editorial changes reflecting

language used in the codification of the

Federal Aviation Act, and would clarify

that any other insurable item may be

insured if eligible for insurance under

§ 198.1.

Section 198.7

Section 198.7 would be published

with editorial changes reflecting

language used in the codification of the

Federal Aviation Act, and with the

deletion of prior language requiring the

approval of the agency on whose behalf

contract air services are to be performed.

Section 198.9

Section 198.9 would be revised to add

flexibility for applicants applying for

insurance. The FAA office

administering the Aviation Insurance

Program would provide guidance and

necessary forms to apply for insurance.

Appendix A would be removed. Also, a

requirement that the applicant provide

evidence of the unavailability of

commercial insurance would be added.

A provision that the standby nonpremium policy only provides actual

coverage when formally activated by the

FAA has been included.

Section 198.11

Section 198.11 would be revised to

reflect editorial changes, and to include

language relating to other insurable

items.

Section 198.13

Section 198.13 would be changed to

reflect administrative payment

procedures. The proposed language

would provide generic instructions for

greater flexibility of this section.

Section 198.15

Section 198.15 would revise the

current $200 binder for non-premium

insurance, established in 1975, updating

it for the inflation by the annual

cumulative Consumer Price Index (CPI)

rounded to the nearest $25. For

example, using the latest annual

cumulative CPI available, (2.760 for

1995), the binder would be $550

(calculation: $200 × 2.2760, rounded to

the nearest $25) per aircraft or other

insurable item. In the future, the binder

amount would be adjusted annually for

newly registered aircraft and other

insurable items to reflect future
Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules 19011

increases in the CPI, rounded to the

nearest $25. The binder would continue

to be a one-time charge, so that, once an

aircraft operator registers an aircraft or

other insurable item, no additional

binder charge would be due while the

operator continues to operate that

aircraft or other insurable item.

After publication of the final rule, the

binder that is set forth in the final rule

would be adjusted not more frequently

than annually based on changes in the

Consumer Price Index of All Urban

Consumers (CPI) published by the

Secretary of Labor. The adjusted binders

would also be published in the ‘‘Notice’’

section in the Federal Register. This

procedure would permit binder

adjustments in a timely manner.

However, in no event would an adjusted

binder exceed the FAA’s cost for

providing a service. The adjusted

binders would become effective in

accordance with the notice which sets

forth the adjusted binders. The

increased binder would apply only to

each insured carrier’s aircraft and other

insurable items registered after the

effective date of the final rule.

Section 198.15(d) would be added to

state FAA’s long standing policy that

when an operator acquires an aircraft

previously covered under another

operator’s policy, the new operator must

register it in the same manner as an

aircraft not previously covered. The

insurance registrations are not

transferable.

Section 198.17

Section 198.17 would be revised to

reflect the coverage of goods and

services provided in direct support of

aircraft operations as allowed now by

law.

Appendix A to Part 198—Form of

Application to Section 198.9

Appendix A would be removed to

simplify administration of the Aviation

Insurance Program. The FAA office

administering the program would

provide forms upon request.

Paperwork Reduction Act

Information collection requirements

in the proposed rule have been

previously approved by the Office of

Management and Budget (OMB) under

the provisions of the Paperwork

Reduction Act of 1995 (44 U.S.C.

3507(d)) and have been assigned OMB

Control Number 2120–0514.

International Civil Aviation

Organization (ICAO) and Joint Aviation

Regulations (JAR)

The FAA has determined that a

review of the ICAO Standards and

Recommended Practices and JAR’s is

not warranted because there are no

existing comparable rules.

Regulatory Evaluation Summary

Proposed changes to Federal

regulations must undergo several

economic analyses. First, Executive

Order 12866 directs Federal agencies to

promulgate new regulations or modify

existing regulations only if the expected

benefits to society outweigh the

expected costs. Second, the Regulatory

Flexibility Act of 1980 requires agencies

to analyze the economic impact of

regulatory changes on small entities.

Third, the Office of Management and

Budget directs agencies to assess the

effect of regulatory changes on

international trade. In conducting these

analyses, the FAA has determined that

this proposed rule: (1) Would generate

benefits exceeding costs; (2) is not

‘‘significant’’ as defined in the Executive

Order and DOT’s Regulatory Policies

and Procedures; (3) would not have a

significant impact on a substantial

number of small entities; and (4) would

not constitute a barrier to international

trade. These analyses, available in the

docket, are summarized below.

Through the proposed changes, the

FAA would attempt to recover some of

the costs of providing current services

from the beneficiaries of these services.

The proposed rule would not impose

additional costs on society. The cost of

administering the insurance program in

1995 amounted to about $475,000. If the

current $200 binder is updated, as

proposed, by the latest annual

Consumer Price Index (CPI), 1995, and

adjusted to the nearest $25, the binder

would be $550. This figure, multiplied

by the number of aircraft newly

registered each year, which is estimated

at 80, yields $44,000. The increase is far

less than the cost of administrating the

program; it amounts to 9.3% of 1995

administrative costs. The FAA has

determined that the proposed change in

the binder for non-premium insurance,

if implemented, is equitable.

Regulatory Flexibility Determination

The Regulatory Flexibility Act of 1980

(RFA) was enacted by Congress to

ensure that small entities are not

unnecessarily or disproportionately

burdened by Government regulations.

The RFA requires a Regulatory

Flexibility Analysis if a rule is expected

to have a significant (positive or

negative) economic impact on a

substantial number of small entities.

Based on the standards and thresholds

specified in FAA Order 2100.14A,

Regulatory Flexibility Criteria and

Guidance, the FAA has determined that

the proposed rule would not have a

significant economic impact on a

substantial number of small entities.

Unfunded Mandates Reform Act

This proposed rule does not contain

any Federal intergovernmental or

private sector mandate. Therefore, the

requirements of Title II of the Unfunded

Mandates Reform Act of 1995 does not

apply.

International Trade Impact

The Office of Management and Budget

directs agencies to assess the effects of

regulatory changes on international

trade. The proposed rule would not

have any impact on international trade

as the registration fee would be the same

for all carriers, foreign as well as

domestic.

Federalism Implications

The regulations proposed herein

would not have substantial direct effects

on the States, on the relationship

between the national government and

the States, or on the distribution of

power and responsibilities among the

various levels of government. Therefore,

in accordance with Executive Order

12866, October 4, 1993, it is determined

that this proposal would not have

sufficient federalism implications to

warrant the preparation of a Federalism

Assessment.

Conclusion

For the reasons discussed above,

including the findings in the Regulatory

Flexibility Determination and the

International Trade Impact Analysis, the

FAA has determined that this proposed

regulation would not be significant

under Executive Order 12866,

Regulatory Planning and Review, issued

October 4, 1993. In addition, the FAA

certifies that this proposal, if adopted,

would not have a significant economic

impact, positive or negative, on a

substantial number of small entities

under the criteria of the Regulatory

Flexibility Act. This proposal would not

be considered significant under DOT

Regulatory Policies and Procedures (44

FR 11034, February 26, 1979) and Order

DOT 2100.5, Policies and Procedures for

Simplification, Analysis, and Review of

Regulations, of May 22, 1980. An initial

regulatory evaluation of the proposal,

including a Regulatory Flexibility

Determination and International Trade

Impact Analysis, has been placed in the

docket. A copy may be obtained by

contacting the person identified under

FOR FURTHER INFORMATION CONTACT.
19012 Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules

List of Subjects in 14 CFR Part 198

Aircraft, Freight, Reporting and

recordkeeping requirements, War risk

insurance.

The Proposed Amendment

In consideration of the foregoing, the

Federal Aviation Administration

proposes to revise 14 CFR part 198 as

set forth below:

PART 198—AVIATION INSURANCE

Sec.

198.1 Eligibility of aircraft operation for

insurance.

198.3 Basis of insurance.

198.5 Types of insurance coverage

available.

198.7 Amount of insurance coverage

available.

198.9 Application for insurance.

198.11 Change in status of aircraft.

198.13 Premium insurance—payment of

premiums.

198.15 Non-premium insurance—payment

of registration binders.

198.17 Ground support and other coverage.

Authority: 49 U.S.C. 106(g), 40113, 44301–

44310; 49 CFR 1.47(b).

§ 198.1 Eligibility of aircraft operation for

insurance.

An aircraft operation is eligible for

insurance if—

(a) The President of the United States

has determined that the continuation of

that aircraft operation is necessary to

carry out the foreign policy of the

United States;

(b) The aircraft operation is—

(1) In foreign air commerce or

between two or more places all of which

are outside the United States if

insurance with premium is sought; or

(2) In domestic or foreign air

commerce, or between two or more

places all of which are outside the

United States if insurance without

premium is sought; and

(c) The Administrator finds that

commercial insurance against loss or

damage arising out of any risk from the

aircraft operation cannot be obtained on

reasonable terms from an insurance

carrier.

§ 198.3 Basis of insurance.

(a) Premium insurance may be made

available if the requirements of § 198.1

are met.

(b) Subject to § 198.9(c), standby

insurance without premium may be

made available if all of the following

conditions are met:

(1) A department, agency, or

instrumentality of the U.S. Government

seeks performance of air services

operations, pursuant to a contract of the

department, agency, or instrumentality;

or transportation of military forces or

materiel on behalf of the United States,

pursuant to an agreement between the

United States and a foreign government.

(2) Such department, agency, or

instrumentality of the U.S. Government

has agreed in writing to indemnify the

Secretary of Transportation against all

losses covered by such insurance. Such

an agreement, when countersigned by

the President constitutes a

determination that the continuation of

that aircraft operation is necessary to

carry out the foreign policy of the

United States.

(3) A current copy of the aircraft

operator’s applicable commercial

insurance policy or policies is on file

with the FAA, including every

endorsement making a material change

to the policy. Updated copies of these

policies must be provided upon each

renewal of the commercial policy. Every

subsequent material change by

endorsement must be promptly

provided to the FAA.

(c) Insurance is activated, placing the

insurance in full force, as specified by

the FAA’s written notification to the

operator and remains in force until such

time as either of the following occurs:

(1) The requirements in § 198.1 are no

longer met; or

(2) In the case of non-premium

insurance, an aircraft operation is no

longer performed under contract to a

department, agency, or instrumentality

of the U.S. Government; or pursuant to

an agreement between the United States

and a foreign government.

(d) Insurance policies revert to

standby status upon written notification

by the FAA to the aircraft operator. A

policy will remain in standby status

until either—

(1) The insurance is activated by

written notice; or

(2) The policy is canceled.

§ 198.5 Types of insurance coverage

available.

Application may be made for

insurance against loss or damage to the

following persons, property, or interests:

(a) Aircraft, or insurable items of an

aircraft, engaged in eligible operations

under § 198.1.

(b) Any individual employed or

transported on the aircraft referred to in

paragraph (a) of this section.

(c) The baggage of persons referred to

in paragraph (b) of this section.

(d) Property transported, or to be

transported, on the aircraft referred to in

paragraph (a) of this section.

(e) Statutory or contractual

obligations, or any other liability, of the

aircraft referred to in paragraph (a) of

this section or of its owner or operator,

of the nature customarily covered by

insurance.

§ 198.7 Amount of insurance coverage

available.

(a) For each aircraft or insurable item,

the amount insured may not exceed the

amount for which the applicant has

otherwise insured or self-insured the

aircraft or insurable item against damage

or liability arising from any risk. In the

case of hull insurance, the amount

insured may not exceed the reasonable

value of the aircraft as determined by

the FAA or its designated agent.

(b) Policies issued without premium

may be revised from time to time by the

FAA with notice to the insured, to add

aircraft or insurable items or to amend

amounts of coverage if the insured has

changed the amount by which it has

otherwise insured or self-insured the

aircraft or itself.

§ 198.9 Application for insurance.

(a) Application for premium or nonpremium insurance must be made in

accordance with the applicable form

supplied by the FAA.

(b) Each applicant for insurance with

premium under this part must submit to

the FAA with its application a letter

describing in detail the operations in

which the aircraft is or will be engaged

and stating the type of insurance

coverage being sought and the reason it

is being sought. The applicant must also

submit any other information deemed

pertinent by the FAA.

(c) Each applicant for premium or

non-premium insurance must submit to

the FAA evidence that commercial

insurance is not available on reasonable

terms for each flight or ground operation

for which insurance is sought. Each

aircraft operator who has a standby nonpremium insurance policy must submit

evidence to the FAA that commercial

insurance is not available on reasonable

terms before the FAA activates that

policy. The adequacy of the evidence

submitted is determined solely by the

FAA.

(d) The standby non-premium policy

issued to the aircraft operator does not

provide actual coverage until formally

activated by the FAA.

§ 198.11 Change in status of aircraft.

In the event of sale, lease,

confiscation, requisition, total loss, or

other change in the status of an aircraft

or insurable items covered by insurance

under this part, the insured party must

notify the office administering the

Aviation Insurance Program within 10

working days after the change in status.

§ 198.13 Premium insurance—payment of

premiums.

The insured must pay the premium

for insurance issued under this part
Federal Register / Vol. 62, No. 74 / Thursday, April 17, 1997 / Proposed Rules 19013

within the stated period after receipt of

notice that premium payment is due

and in accordance with the provisions

of the applicable FAA insurance policy.

Premiums must be sent to the FAA, and

made payable to the FAA.

§ 198.15 Non-premium insurance—

payment of registration binders.

(a) The binder for initial registration

is $550 for each aircraft or insurable

item. This binder is adjusted not more

frequently than annually based on

changes in the Consumer Price Index of

All Urban Consumers published by the

Secretary of Labor.

(b) An application for non-premium

insurance must be accompanied by the

proper binder, payable to the FAA. A

binder is not returnable unless the

application is rejected.

(c) Requests made after issuance of a

non-premium policy for the addition of

an aircraft or insurable item must be

accompanied by the binder for each

aircraft and insurable item.

(d) When an operator acquires an

aircraft or insurable item that was

previously covered under an active or

standby policy, the new operator must

register the aircraft or item on its policy

and pay the binder for each aircraft and

insurable item.

§ 198.17 Ground support and other

coverage.

An aircraft operator may apply for

insurance to cover any risks arising from

the provision of goods or services

directly supporting the operation of an

aircraft that meets the requirements of

§ 198.3(b).

Issued in Washington, DC, on April 14,

1997.

John M. Rodgers,

Director, Office of Aviation Policy and Plans.

[FR Doc. 97–9957 Filed 4–14–97; 4:05 pm]

BILLING CODE 4910–13–M