Letter Decision No. LET-A-107-1999
Liability insurance requirements for licensees and date recognition exclusion clauses
As you are aware, the requirement for air carriers to have adequate passenger and public liability insurance in respect of publicly available air transportation services is an important and ongoing licensing requirement. Details on this requirement are provided in Attachment I to this letter.
It has come to the attention of the Canadian Transportation Agency (Agency) that most liability insurance policies for licensees have, or will soon have, exclusion clauses commonly referred to as date recognition exclusion clauses. Reference can be made to Attachment II for a copy of AVN 2000, the date recognition exclusion clause issued by London market insurers.
The Agency is also aware that some licensees have obtained, or are in the process of obtaining, limited write-backs of insurance coverage upon satisfying participating insurers that they have demonstrated adequate date recognition conformity and compliance. Reference can be made to Attachment III for a copy of AVN 2001, the date recognition limited coverage clause issued by London market insurers.
Date recognition exclusion clauses are not permitted pursuant to subsection 7(3) of theAir Transportation Regulations (ATR). Accordingly, notwithstanding any date recognition limited coverage clause which might be available, a date recognition exclusion clause which is attached to a licensee's liability insurance policy must only apply to the passenger and public liability insurance coverage provided in excess of the minimum limits set forth in section 7 of the ATR.
The Agency is of the opinion that an endorsement like that of AVN 57C (Canada), when attached to an insurance policy which contains exclusions which are not permitted pursuant to the ATR, including date recognition exclusion clauses, will ensure continued compliance with the liability insurance requirements of section 7 of the ATR. It is apparent from discussions with representatives of leading aviation insurance underwriters and brokers in the major insurance markets that AVN 57C or equivalent endorsements are routinely attached to liability insurance policies of air carriers holding licences issued by the Agency. Such endorsements provide that the terms, conditions, limitations and exclusions of the policy apply to claims made under the policy which are in excess of the minimum limits of coverage required by section 7 of the ATR or which are not governed by section 7 of the ATR. Reference may be made to Attachment IV for a copy of AVN 57C (Canada).
Licensees have an obligation to ensure that they continue to comply with the liability insurance requirements of the ATR. Given the scope and importance of date recognition exclusion clauses, the Agency requires Canadian and foreign air carriers holding licences issued by the Agency to submit a written statement signed by their insurance broker or underwriter confirming that their liability insurance policy has been endorsed with AVN 57C (Canada) or an equivalent endorsement which amends the policy in the manner described above. In this regard, the Agency recommends that licensees provide the Attachment V form to their insurance broker or underwriter for completion and subsequent filing with the Agency.
The Agency requires that the foregoing written statement be submitted by each licensee who holds an active licence by May 31, 1999, whether or not the licensee is actually operating pursuant to its licence. The statement may be submitted by mail to the Agency's mailing address or by facsimile to (819) 953-5562, with an original to follow by mail. The submission should be addressed to the attention of Rosangela Guerra, Manager, Licensing. Failure to submit the statement may give the Agency reason to believe that the licensee does not have liability insurance coverage in accordance with section 7 of the ATR. This will result in the Agency requiring the licensee to show cause why its licence should not be suspended or cancelled for failure to have prescribed liability insurance coverage.
Licensees who apply to the Agency for reinstatement of suspended licences should provide the foregoing written statement with their application.
If you have any questions concerning this matter which are not of a legal nature, you may contact Mary-Jane Gravelle at telephone number (819) 953-8952 or Steve Aubut at telephone number (819) 953-9808. If you have any questions of a legal nature, you may contact Shelley Appleby-Ostroff at telephone number (819) 953-0788.
For copies of the attachments, you may contact the CTA.