NTSB Petition For Reconsideration 

Granted!

On February 28, 2006, Dessault Aviation and Messier-Bugatti both submitted petitions to the National Transportation Safety Board (NTSB), requesting the Board’s reconsideration of their initial findings of probable cause of the events surrounding the aircraft accident on February 6, 2001 at Pinedale Airport, Pinedale, Wyoming. The accident involved a Dassault-Breguet Mystere Falcon 900 airplane that upon landing at Pinedale Airport, rolled off the left side of the 100 foot wide runway, causing the left main landing gear to collapse and damage to the left wing, left wing slats, and the No. 3 engine nacelle. On November 29, 2007, the NTSB granted Dessault’s and Messier-Bugatti’s petitions for reconsideration and reversed its probable cause determination.

The initial report issued by the NTSB regarding the Aircraft accident determined the probable cause to be a partial failure of the Anti-Skid Brake System in the plane’s landing gear. However, in response to the joint petitions, the NTSB has withdrawn this determinapersuasive. In light of the evidence presented, the NTSB has withdrawn its conclusion that an anomaly in the brake system caused the airplane to run off the runway. It’s revised Final Report states that absent a flight data recorder and the evidence it would have provided, the probable cause is “undetermined”. The NTSB nonetheless noted numerous issues with respect to the flight crew’s handling of the landing.

Having had the privilege of assisting Messier-Buggatti in these NTSB proceedings and the related litigation, we at Alimonti Law Offices are delighted with these results. As many of you know, convincing the NTSB to reverse itself is not an everyday occurrence!

NTSB ID: DEN01LA050

Premises Liability In Brief 

If you have been hit with a premises liability suit, but you are not sure where to begin your defense, the following may help.

  • First, the General Rule: A party cannot be held liable for an injury caused by a dangerous condition unless the party created the condition, had actual knowledge of its existence, or had constructive knowledge of its existence. See Goldman v. Waldbaum, 746 N.Y.S.2d 44, 44 (2nd Dep’t 2002). (NY case but true in most states)
  • Second, examine the facts of the case for any evidence that suggests that you had actual or constructive knowledge of the dangerous condition. In order to make a successful motion for summary judgment, your lawyer must be able to convince a judge that there was no actual or constructive notice, and be able to show that the client did not create the condition. Consider the following questions:
  • Did you (i.e., your agents/employees) create the condition? What protocols for premises inspections was followed? Do any maintenance records prove “actual notice” of the dangerous condition?
  • How visible and apparent was the dangerous condition? Do any of the facts indicate how long the condition existed? If so, was it for long enough to discover and correct before the accident occurred? (“constructive notice”) Does any evidence suggest that the dangerous condition was of a recurring nature? (also a type types of “constructive notice”)
  • Was the plaintiff’s injury caused by a dangerous condition created during a winter storm? If so, you may also be entitled to the “Storm in Progress” defense.
  • In the aviation and airline context, was the plaintiff a passenger traveling internationally? If so, Article 17 of the Warsaw Convention may apply.


Though these are far from comprehensive. This should nonetheless give you some idea on where to begin when defending a premises liability claim.

Subrogation Spotlight—Part One: Who is My Client? 

This is the first of a series of columns directed at the potential parties in a subrogation action. If you have even gotten past the title, I will assume you know what subrogation is and have likely participated in a subrogation claim in some manner. Like most other areas of the law, what is taught in law school falls short of capturing the reality and practicalities of practice.

The basic facts of a subrogation claim start with an insured loss and a payment of first-party benefits by the insurer. Let’s start with a simple hypothetical to illustrate our story.

IN OUR TIME AIRLINES, also known as IOT AIRLINES, operates a fleet of twin turboprops. In November of 2007, one of its aircraft suffered a prop strike requiring a replacement blade. Rather than purchase from the OEM, IOT Airlines purchase a replacement blade from C-Speed Propellers. On December 25, 2007, while in the course of run-up, the replacement blade fractured. No one was injured, but the aircraft was taken out of service; the engines suffered vibration damage and cracked mounts. The entire engine had to be removed, inspected, and overhauled. The cost of repair: US$500,000. Investigation of the propeller reveals that it was manufactured with an unapproved and substandard aluminum alloy clearly outside of the FAA Parts Manufacture Approval (PMA) authority for C-Speed.

IOT Airlines is insured by Swift Fleet Insurance Co., specializing in aviation.

As you can see, we have manufactured a pretty strong case for liability against C-Speed. Swift Fleet will no doubt decide to pursue a subrogation claim against C-Speed for the cost of repair and other out-of-pocket expenses. IOT, for its part, also wishes to recover its US$50,000 deductible, the cost of a replacement leased aircraft of US$200,000, US$100,000 it claims to be a diminution in value of the aircraft, and US$100,000 in lost revenue. IOT also seeks US$50,000 representing the increase in insurance premium it claims to be attributable to the accident.

We all know the mantra: A subrogated insurer “steps into the shoes” of the subrogor. As such, Swift Fleet can have no greater rights and remedies than its insured, IOT Airlines. This is just a starting place, but is not the first issue to be tackled in assembling this claim. In this author’s view, the starting place is nothing short of an ethical dilemma for which there is little specific guidance in case law or ethical literature. Beware, you may be about to represent two adverse parties.

In this simple fact pattern, both the insurer and the insured have adverse interests in the outcome of the “subrogation” claim.1 They both want to maximize their own portion of the recovery. A lawyer rushing in armed with little more that a subrogation receipt may be in for an unpleasant surprise when he finds he cannot settle the case without the insured’s signature on the release. Woe to he or she that has not dealt with this issue up front.

Critical Point – You Need a Sharing Agreement (and you had better not negotiate it!) Let’s go back to our fact pattern. The insurer has paid out a fixed sum of relatively ascertainable and tangible damages. For simplicity’s sake, we have limited the insurer’s claim to US$500,000 in repair costs. IOT Airlines claims the following (listed from “hard” to “soft”)”:

  1. It’s US$50,000 deductible (spent on repairs)
  2. US$200,000 for the cost of a leased replacement aircraft
  3. US$100,000 for lost revenue
  4. US$100,000 for diminution in value
  5. US$50,000 for increased insurance premium


Once you get passed #1, various elements of uncertainty and complexity creep in. The cost of a replacement aircraft is not the actual amount of damages. The “saved” operated costs from the original aircraft must be deducted to get a truer figure of actual damages. Lost revenue can only be estimated based upon past and anticipated future performance. Diminution of value is generally a crap shoot and a battle of experts.2 I have yet to see the increased insurance premium argument carry much weight.

Although a generalization, it is fair to say from the above that the insurer’s out-of-pocket damages will likely be easier to prove than most of the insurer’s softer damages. The insurer is subrogated to US$500,000. The insured’s claim [conveniently] totals the same US$500,000. As such, it may seem fair to simply enter into a 50/50 sharing agreement whereby the parties share equally in the cost of litigation and the [hopefully] eventual recovery. However, when it comes to making actual offers of proof, the insurer’s subrogated expenses based upon repair costs and the insured’s deductible contribution toward the repair costs are likely to be far more persuasive elements of the claim than many other elements of the insured’s loss. Accordingly, in order to carve an objectively fair sharing agreement, some discounting of the uninsured losses would be appropriate.

Nonetheless, absent the consent of both parties, counsels actively negotiating this agreement with the insured have several ethical pitfalls. If you purport to represent the insurer in negotiating an agreement with the insured, you have clearly taken an adversarial position vis-à-vis the insured. As such, you could only proceed to represent both parties in the subrogation claim with a conflict waiver from both parties. 22 NYCRR §1200.24 [DR 5-105(C)]. Similarly, you cannot properly represent both sides in the negotiation of the sharing agreement.3 22 NYCRR §1200.24 [DR 5-105(C)] As such, this is the time to back off. Let the insurer and its insured reach an agreement independently – assisted by different counsel if necessary. Once they reach an agreement and sign off, you now have your mandate to represent both IOT and its “A/S/O” insurer. This sharing agreement is as essential to your claim as the subrogation receipt from which the subrogated insurer derives its rights.

The sharing agreement should address two critical questions:
What is the split of costs and recovery; and
Who makes the final decision as to settlement, strategy etc.

This last one is as important as the first. No lawyer can serve to two masters. See N.Y. City Bar Op. 2001–2 (2001). (In order to overcome the conflict of interest that exists when one lawyer represents multiple parties to the same matter, the interests of both clients should be “generally aligned” and the lawyer must be able to represent both clients without creating a bias in favor of one or the other.) Having managed to stand clear of the negotiation of the sharing agreement, how unsatisfying would it be to nonetheless immerse yourself in another ethical dilemma as you try to negotiate strategy between your two clients?! Only one client can drive the bus.

In summary, the insurer and its insured should make an early determination as to how insured and uninsured losses will be shared along with litigation expenses. Counsel should let the insurer and insured sort this out directly. Thereafter, counsel can zealously represent the interests of both in the litigation. Counsel will likely report to both the insurer and the insured, but only one will ultimately make the decisions.4

Footnotes:

1 I put subrogation in quotes because from the perspective of the insured and his uninsured damages, he isn’t subrogated to anyone!


2 In essence, one side will argue that the damage history affects the value of the aircraft; the other will argue that the repair and overhaul has given you a better engine than before the accident.

3 It may well be left to counsel to draft the agreement as a “scribe” for both parties. This too is problematic, but is nonetheless routinely done. If counsel has managed to stay out of the negotiation process, he/she is a step ahead of many seasoned subrogation practitioners.

4 If this is the insurer, as it typically is, it becomes like an insurance defense counsel in which the insurer “controls” the defense. But unlike the defense scenario, the true client is usually both the insurer and the insured. There are few ethical guidelines for this particular twist on the counsel-insurer-insured “tripartite relationship,” and many hallmarks of this relationship in the defense context, e.g., insurer controls defense and retains the exclusive right to settle, are not directly applicable to a subrogation action.