No evaluation of risk-managing the nation's infrastructure would be complete without an examination of air—that we breath, we fly through in aircraft—and the solid earth over which and onto which that air or craft returns. Exploring the air and outer space takes us full circle to the first of this series and the discussion of clean energy, if our earth is to survive, we must have fresh, clean and healthy air.
But along with an unpolluted atmosphere, we must have the ability (since the early 20th century) to move safely through the air in something faster than a balloon—and, in the latter half of that century and the remainder of the current one—the ability to move through our solar system. It is all infrastructure, from the trees that convert carbon dioxide (CO²) to oxygen, and the scrubbers on power plant smoke stacks to the luxurious jetliners that fly us over the nation and to foreign lands, to the rocket ships that will one day carry us to Mars. All of it is expensive and at great risk, and that risk must be managed.
Man has always yearned to fly. Icarus didn't make it. Leonardo da Vinci designed a helicopter of sorts. As this column was taking shape, Felix Baumgartner, a sky-diving dare-devil, jumped out of a balloon up in the stratosphere and became the first human to break the sound barrier without a plane. I once met Chuck Yeager, who broke the sound barrier in a Bell X-15 Rocket. I also met one of the Apollo astronauts who'd been around—but not on—the moon. Even that had become so commonplace back in the 1970s that I have since forgotten his name, though it might have been Frank Borman.
The Air We Breath
Perhaps the most reviled federal agency, by at least one of the political parties, is the Environmental Protection Agency (EPA). Created by Congress to monitor and assess land, water and air pollution, the EPA formulates regulations designed to prevent pollution of these resources. Entire chapters of my insurance claims textbooks deal with how to handle various types of pollution claims, and an entire insurance industry segment has developed to insure against such claims. The courts are full of disputes over those policy wordings: what is, or is not, a "pollutant" under a CGL policy? When does the coverage apply, in a long-term leak? Not all courts agree. Despite political bickering and finger-pointing, protection of the environment has a huge impact on the nation and every industry including aviation, and not just insurance must deal with environment.
I referred to this when discussing the problem of burning fossil fuels to produce electricity in my January column. Those electric company smokestacks are not alone in belching out the pollutants, as our automobiles, homes, factories, and even our animals produce gases that pollute. Humans alone account for tons of methane gas produced annually.
It was the release of methyl isocyanine insecticide gas that caused the Bhopal, India, disaster a few decades ago, the effects of which are still being felt by the victims and by Union Carbide India Corp. and the insurers involved. Nuclear contamination is what has left much of Fukushima, Japan and Chernobyl, Ukraine, uninhabitable. But these are rare events. It is a local "puff" of a toxic gas that has led to many claims where adjusters scour neighborhoods to seek out and, if possible, buy out claims before they reach the class action level. It is only when governments and large groups get to court that the real hazards associated with air pollution become evident.
Lots of Legal Advice
At least once a year the Defense Research Institute in Chicago, Ill. runs an issue of For the Defense on Toxic Torts and Environmental Law, with a diverse collection of articles such as the pros and cons of genetic testing of plaintiffs, a litigation guide to environmental issues involving nanoproducts, climate change nuisance litigation or the fallacies of experts in asbestos claims. Lest anyone think this is peripheral to managing infrastructure risk and claim adjusting, consider how many television ads you have seen recently for lawyers seeking mesothelioma and asbestosis victims.
The American Bar Association's Tort & Insurance Section also covers the subject of environmental pollution at least once a year in their quarterly, The Brief. A year ago they warned, "The Supreme Court has held that CO² qualifies as an air pollutant and the EPA can regulate new motor vehicle greenhouse gas emissions." Consider, also, the American Electric Power Co. v. Connecticut decision (131 S.Ct. 2527 [2011]), which held that, while plaintiffs cannot bring global warming claims under aspects of the Clean Air Act, and hence there is no right for a federal common law action, the same is not true for state common law actions.
Surprisingly, "global warming" did not occupy much attention of the candidates in the televised campaign debates last October. But there are still members of Congress who believe global warming is a lie and that the earth is less than ten thousand years old; we are perhaps doomed to debate more dumb issues in Washington. When the Potomac overflows the Tidal Basin and Foggy Bottom becomes Soggy Bottom, perhaps these remaining members of the Flat Earth Society will wake up to the 21st century. One may suspect that what is at the center of their disbelief are the lobbyists for polluting industries, such as coal and power.
Maintaining an Airline
Having flown by airline (and on a few military aircrafts) all over America and much of the rest of the world, I have experienced both good and bad airlines. One I labeled the "Johnnie Come Lately Line," because it always came lately and the Johnnie never worked. After a major crash, it disappeared into another airline. The worst-maintained airline I've ever ridden was on an Aeroflot flight from Leningrad to Moscow. There is only one major U.S. city airport I've never visited (Minneapolis/St. Paul). Some are efficient and well-managed, while others are literal nightmares. Remember the ad where passengers shuffled forward in a long line with a tin plate onto which some goofy-looking guy dumped a lump of what was supposed to be food, to be carried onto the plane? I experienced that line at LaGuardia in New York on one flight; I won't name the airline, but it is still getting a bad press as this is being written.
When living in Miami, I had frequent claims involving Eastern, National, Pan Am, and a few of the Latin American lines. There was plenty of material in those claims for a number of columns, such as the "black panther" Super Constellation with the torn linen wing and the story of the loose snake or the insured's back-hoe that ripped up National Airlines' reservation computer cable a few hours before the start of a three-day holiday weekend. Remember airlines named Braniff, Capital, or TWA or the regionals like Allegheny, Piedmont, Lake Central or Mohawk? Some got merged into other airlines, others just vanished. I have been on airlines flying 1926 Ford Tri-motors, Hawker-Sidleys, DC-3s, and every make and model of jet except the de Havilland Comet and the Concorde. I even rode the Goodyear blimp once.
Aviation Insurance – A Major Market
National Underwriter recently ran an article on aviation insurance by Bill Soldan, president of Aero Alliance Insurance Services. He recommends four steps for managing the aviation risk, whether for private jets or international airports, including everything from air ambulances, television helicopters and blimps. Included in his recommendations are a complete understanding of the risk, and working with experts. Aviation insurance is not cheap; it is complex, and often is written by aviation insurance pools, with specialty coverage, such as war risks written by Lloyd's.
Airlines spend millions of dollars maintaining their aircraft. The planes and their maintenance facilities are part of the infrastructure. But they also spend millions teaching the crews how to handle the aircraft, even pilots already trained by the Navy or Air Force. They, too, are part of the infrastructure resources requiring risk management. It is the human side of risk control. Without pilots like C. B. Sullenberger who landed a jet on the Hudson River when birds knock out both engines, there would be more fatalities. Now the debate is whether airline accidents should be considered criminal negligence as well as tort claims, with Cozen O'Connor attorney Richard Dunn and others suggesting that "many firmly believe that the trend in aviation accidents of applying criminal penalties for what amount to negligent conduct is counterproductive." (The Brief, Spring, 2009.)
There are still some risks for which airlines must rely on the government for control. The four aircraft lost to terrorists on September 11, 2001, and the near losses since illustrate the symbiotic relationship between commercial aviation and government security. A plane full of passengers is only as safe as the attention of the Homeland Security agents monitoring the passengers and luggage at the check-in screening.
If airlines maintained their aircraft like many (if not most) Americans maintain their automobiles, then there would be far more losses. The modern aircraft is a sophisticated computerized air vessel with unique mechanical, electrical and communications equipment that in many cases are multiple and redundant. A dual-engine plane can fly on one engine, but that is only in emergencies. The pilots must know what to do when emergencies arise. A recent study reported in Malcolm Gladwell's Outliers found that, on an airline flight deck, courtesy and manners can be a hazard rather than a blessing. It found, in reviewing air crashes such as one on Korean Airlines, that a co-pilot's polite deference to the captain when the co-pilot knew the captain was making an error allowed the aircraft to crash. This was found to be more prevalent in certain societal relationships than in others, and an attitude that "the boss is always right" is not necessarily good. In emergencies the crew must often take steps that seem illogical at the time, but in a storm, who knows what's up and what's down unless one trusts the instruments—and they may not always be right.
Who Owns The Airport?
In most cases, airports are owned by the municipality they serve. Airports may be "international," but all that means is that they have a U.S. Customs office for any foreign flights, not that they are owned by some international corporation or national agency. The Federal Aviation Administration (FAA) may man the tower and control traffic on the ground and in the air, but the running of the airport and all but Homeland Security Agency operations are local.
Cities often get in financial difficulties with airports. Awarding of concession contracts become political, with the mayor's nephew ending up running the food court or the local legislators hitting the taxpayers with an assessment for a new runway that wasn't needed, but which helped somebody's cousin who was appointed the contractor. That, too, is part of the risk management process. Risk financing a major airport can be a key element in that airport's safety, solvency, and success.
Depending on its location, airports can have a major impact on a city or other political entity that owns it. An on-site fire and rescue station must be considered, local police must patrol the concourses watching not so much for terrorists as for crimes or vagrants or people in distress. In times of war (and even in peace) most large airports have a U.S.O. that aids traveling servicemen. Many have chapels and chaplains who are vitally important if there should be a crash and families are awaiting word of survivors. These chapels are totally non-denominational, and in many cities are frequently used by Muslims for their regular prayer sessions.
In many large airports various terminals or concourses are connected by trams or trains, usually automatic horizontal glorified elevators. At O'Hare, Miami, Atlanta, Kennedy, LAX and other major airports one could walk for miles inside the terminals, easily becoming lost and missing a scheduled flight. Air transportation in the 21st century is not for the weak or bewildered. Signs and announcements must often be made in many languages; even these can be confusing. Luggage is the responsibility of the airline, but millions of travelers end up leaving the airport without their suitcases each year. They don't call it "lug"gage for nothing. One lugs it here, one lugs it there, and hopes it gets where it is supposed to be when it is supposed to be there.
Privatizing Outer Space
Now that NASA is contracting with outside rocket manufacturers and operators to supply the space station and the "shuttles" have become museum pieces along with the Wright Brothers' "Flyer" and Lucky Lindy's Spirit of St. Louis, the future of space travel will be more frequently placed in corporate hands. NASA has certainly done a marvelous job since the first post-WWII rockets, and undoubtedly new and greater things than the Mars Rover are on the way. The Hubble Telescope has discovered much about our universe, and we are all wiser than we once were.
As a kid, I started a star gazing club at my elementary school. Our mentor was the high school science teacher who took us to several university observatories to see the planets and other objects in the sky. I talked my parents into visiting observatories, often placed high on mountain tops out West, and could discuss any astronomical issue. In my college astronomy class at Case Western Reserve I was amazed that I could understand the mathematics and physics of the Doppler effect and the spectrograph, even though I was not a math or science major. But with job seeking and being drafted, new avocations took the place of astrophysics. Reading about both inner and outer space, however, is still of interest, and the infrastructure of space is crucial in our 21st century world.
Consider, for example, our dependence on satellites: they show us the weather, they provide our Global Positioning System (GPS), they spy on our enemies, and they watch over us day and night. They are expensive to build, to launch, to monitor, and if one fails, the loss is in the multi-millions. Many are insured; consider being assigned the claim of a company that builds a rocket that is to transport a new satellite into space to track commercial enterprises. Such systems are vital and expensive. But if the rocket explodes on the launch pad, killing ten people and delaying the project for 14 months, it is direct and indirect loss, and the adjuster for the insurer or insurers who are involved must resolve each and every aspect of it.
Were it a NASA rocket, it would be the taxpayer who would suffer the loss; but in the 21st century this type of infrastructure is increasingly private enterprise, and insurers are involved. Without excellent risk control, the risk-financing would be much more expensive. Keeping the control and financing aspects of risk in balance is what risk management is all about. It may seem like all that is involved is air and space, but the reality is that humans, hardware, government and private enterprise are all involved.
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