8
Final Liability Limitation in Commercial Human Spaceflight: Benefits for Entrepreneurship, Partnership, and Policy Paul Eckert * The Boeing Company, Arlington, VA, 22202 James R. (Russ) McMurry The Boeing Company, Huntsville, AL, 35806 Rosanna Sattler Posternak Blankstein & Lund LLP, Boston, MA, 02199 Prospective commercial spaceflight operators suffer from excessive exposure to liability—for damage claims by private spaceflight participants (SFPs) for damages sought in relation to flight-related mishaps. An additional major concern involves constraint of collaboration between startup spaceflight operator ventures and established aerospace companies. This obstacle arises from potential for SFPs to seek damages not only from operators but also from large, established companies that have acted as manufacturers and suppliers and which have “deep pockets” of financial resources. Beyond this, it is clearly in NASA’s interest to have the option of purchasing services from commercial providers who have commercial as well as government customers. More customers might well mean lower costs paid by NASA for transportation services, thereby expanding the nation’s ability to maintain a robust and balanced space program, in the face of limited resources. SFPs are not included in the government-mandated cross-waivers arrangement applying to cargo, because current Federal legislation deals only with non-human cargo and the employees of the business parties who handle cargo-related operations. Operator liability associated with risk to SFPs (i.e., private citizens rather than U.S. Government employees), has not been limited effectively. Provision in Federal law for informed consent by SFPs may to some degree protect operators and vehicle manufacturers/suppliers with respect to the duty to warn. It does not, however, reliably protect against strict liability or negligence. State laws passed following the enactment of Federal statutory language addressing this issue— intended to strengthen the liability protection accorded to operators by SFP informed consent—still do not protect against court challenges. Tools available to limit business liability include: government-mandated cross-waivers of liability, government indemnification of operators, liability protection of operators based on the SFP’s informed consent, caps on maximum allowable liability claims, and private insurance coverage. Possible approaches to use of these tools include: state government legislation, Federal legislative preemption of state law, and Federal designation of launching state jurisdiction and governing state law. Given the complex mix of issues affecting commercial spaceflight liability, a dual strategy of simultaneously pursuing insurance and legislative initiatives could prove to be an effective approach. Desirable outcomes of dialogue could be greater ability of spaceflight operators to identify risks and insurance needs, as well as clearer specification by insurers of the kinds of insurance products they would make available and the premiums to be charged for such policies. A legislative initiative could involve crafting a proposal that selects optimally among the available tools and approaches for operator liability limitation, as well as taking into account Congressional committee jurisdiction. * International & Commercial Strategist, Space Exploration, 1215 S. Clark St., MC 793C-G031, AIAA member. Counsel, Network & Space Systems, Integrated Defense Systems, 950 Explorer Blvd. NW, AIAA member. Partner, Prudential Tower, 800 Boylston Street, AIAA member. 1 Copyright © 2009 The Boeing Company. All rights reserved. AIAA SPACE 2009 Conference & Exposition 14 - 17 September 2009, Pasadena, California AIAA 2009-6528 Copyright © 2009 by The Boeing Company. Published by the American Institute of Aeronautics and Astronautics, Inc., with permission.

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Page 1: [American Institute of Aeronautics and Astronautics AIAA SPACE 2009 Conference & Exposition - Pasadena, California ()] AIAA SPACE 2009 Conference & Exposition - Liability Limitation

Final

Liability Limitation in Commercial Human Spaceflight: Benefits for Entrepreneurship, Partnership, and Policy

Paul Eckert*

The Boeing Company, Arlington, VA, 22202

James R. (Russ) McMurry†

The Boeing Company, Huntsville, AL, 35806

Rosanna Sattler‡

Posternak Blankstein & Lund LLP, Boston, MA, 02199

Prospective commercial spaceflight operators suffer from excessive exposure to liability—for damage claims by private spaceflight participants (SFPs) for damages sought in relation to flight-related mishaps. An additional major concern involves constraint of collaboration between startup spaceflight operator ventures and established aerospace companies. This obstacle arises from potential for SFPs to seek damages not only from operators but also from large, established companies that have acted as manufacturers and suppliers and which have “deep pockets” of financial resources. Beyond this, it is clearly in NASA’s interest to have the option of purchasing services from commercial providers who have commercial as well as government customers. More customers might well mean lower costs paid by NASA for transportation services, thereby expanding the nation’s ability to maintain a robust and balanced space program, in the face of limited resources. SFPs are not included in the government-mandated cross-waivers arrangement applying to cargo, because current Federal legislation deals only with non-human cargo and the employees of the business parties who handle cargo-related operations. Operator liability associated with risk to SFPs (i.e., private citizens rather than U.S. Government employees), has not been limited effectively. Provision in Federal law for informed consent by SFPs may to some degree protect operators and vehicle manufacturers/suppliers with respect to the duty to warn. It does not, however, reliably protect against strict liability or negligence. State laws passed following the enactment of Federal statutory language addressing this issue—intended to strengthen the liability protection accorded to operators by SFP informed consent—still do not protect against court challenges. Tools available to limit business liability include: government-mandated cross-waivers of liability, government indemnification of operators, liability protection of operators based on the SFP’s informed consent, caps on maximum allowable liability claims, and private insurance coverage. Possible approaches to use of these tools include: state government legislation, Federal legislative preemption of state law, and Federal designation of launching state jurisdiction and governing state law. Given the complex mix of issues affecting commercial spaceflight liability, a dual strategy of simultaneously pursuing insurance and legislative initiatives could prove to be an effective approach. Desirable outcomes of dialogue could be greater ability of spaceflight operators to identify risks and insurance needs, as well as clearer specification by insurers of the kinds of insurance products they would make available and the premiums to be charged for such policies. A legislative initiative could involve crafting a proposal that selects optimally among the available tools and approaches for operator liability limitation, as well as taking into account Congressional committee jurisdiction.

* International & Commercial Strategist, Space Exploration, 1215 S. Clark St., MC 793C-G031, AIAA member. † Counsel, Network & Space Systems, Integrated Defense Systems, 950 Explorer Blvd. NW, AIAA member. ‡ Partner, Prudential Tower, 800 Boylston Street, AIAA member.

1Copyright © 2009 The Boeing Company. All rights reserved.

AIAA SPACE 2009 Conference & Exposition14 - 17 September 2009, Pasadena, California

AIAA 2009-6528

Copyright © 2009 by The Boeing Company. Published by the American Institute of Aeronautics and Astronautics, Inc., with permission.

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I. Introduction: Why This Matters

A major challenge facing prospective commercial spaceflight operators (referred to hereafter simply as “operators”) involves exposure to liability for damage claims by private spaceflight participants (SFPs) for damages sought in relation to flight-related mishaps. The risk is rendered even more serious by the fact that, in practice, the legal right of participants to pursue damage claims may extend to their heirs, administrators, assignees, next of kin, estates (i.e., of the SFPs), or anyone else who might attempt to bring a claim on their behalf, arising out of bodily injury or death. For this reason, in the context of the following discussion, “SFP” will be considered to carry this broader meaning. The need for limitation of the operators’ liability exposure is especially acute with regard to suborbital business initiatives, because transporting SFPs constitutes—at least initially—the greater part of the expected customer base. But even Earth-to-orbit operators, who contemplate most of their human space transportation business coming from government employees covered by government indemnification and cross-waiver arrangements, would benefit from limiting liability associated with flying non-government SFPs, which might increase future market opportunities.

Beyond the obvious liability barrier facing operators, there is a less visible—but no less problematic—difficulty. This involves impairment of capacity to enter business partnerships that might prove quite beneficial to startup company efforts. Established companies have often been reluctant to become involved as partners or even suppliers to entrepreneurial ventures involving human space transportation, because of exposure to liability in the event of a mishap involving harm to SFPs. A major concern involves potential for SFPs to seek damages not only from operators but also from large, established companies that have acted as manufacturers and suppliers and which have “deep pockets” of financial resources. With this risk in mind, it is best to proceed with the convention that whenever the term ”operator” is used, it applies not only to the operators themselves but also to their partners and suppliers.

In cases where a large established company foregoes involvement in a venture due to liability concerns, the company loses potential revenue and growth opportunities. Startup companies can suffer as well, because vitally important things they need from larger companies—capital, technology, expertise, supplier networks—are unavailable. The considerable negative impact of liability concerns on economic growth in the space sector is largely hidden, in the sense that the result is business that never materializes. The public, not knowing what might have been, is unaware of the opportunities that have been lost. If the risk of liability could be mitigated, capped or better controlled, and liability concerns could be reduced, more business opportunities might become available, resulting in accelerated expansion of space-related economic activity. A constructive and consistent legal framework is needed to facilitate investment, growth and U.S. competitiveness in the international market place. If liability limitation is not implemented in the United States, then commercial human spaceflight may move offshore, causing American industry to be shut out of what may eventually grow to be a new source of employment and business profits.

The importance of limiting operator liability issues extends beyond business growth and impacts the capacity to implement national policy in the civil space domain. NASA’s support for liability limitation could play a critically important role in legitimizing and justifying the effort. There is strong rationale for NASA to offer such support. It is clearly in NASA’s interest for operators, from whom the Agency might purchase services, to have commercial as well as government customers. A larger customer base could mean substantially lower costs paid by NASA for transportation services, thereby strengthening the nation’s ability to maintain a robust and balanced space program, in the context of severe budgetary constraints.

AIAA’s Commercial Space Group and the Space Enterprise Council’s Emerging Space Markets Working Group have initiated dialogue through ad hoc conference calls for issue identification by legal, risk management, and insurance experts, associated with both established and startup companies, beginning in May 2009. Members of the COMSTAC Risk Management Working Group have expressed interest in participation, and subsequently, the group may grow to include other important organizations, companies, and independent experts.

2Copyright © 2009 The Boeing Company. All rights reserved.

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II. Liability Challenges of Commercial Human Spaceflight

Simply stated, three types of business risk might confront operators, in the event of a spaceflight mishap: (1) risk associated with potential damage claims by members of the uninvolved public, for mishaps occurring during suborbital flight or during launch and reentry associated with orbital flight; (2) risk of potential claims by business parties against each other, associated with damage to non-human cargo and facilities, during suborbital flight, and the launch, on-orbit, and reentry associated with orbital flight; and (3) risk of claims by SFPs associated with mishaps taking place during any part of a flight.

As for the first type of risk, pertaining to the uninvolved public, the Federal Commercial Space Launch Act (“CSLA”) (as amended by the Commercial Space Launch Amendments Act of 2004 – the “CSLAA”),1 provides a remedy. Business liability associated with catastrophic risk of injury or death by the uninvolved public is already limited through a mixture of private insurance responsibility and Federal Government indemnification.

Regarding the second type of risk noted above, involving business parties’ relationships with each other, the CSLA requires that a launch licensee enter into an arrangement allowing for cross-waivers of liability.2 A waiver of liability between the licensee and his cargo (e.g., satellite) customer is such that the parties agree not to bring claims against each other for loss of or damage to property, as well as for bodily injury or death to personnel involved in launch services activities. The parties must also "flow down" the waiver to their respective contractors and subcontractors involved in launch services.3 Since the CSLA does not apply to on-orbit activities, business parties generally choose to use private contractual mechanisms to institute cross-waivers of liability, but there is no government requirement to do so. Whether or not the CSLA should be extended to include on-orbit cargo operations is beyond the scope of the present paper.

Beyond operator business risk associated with the uninvolved public and relationships among business parties pertaining to cargo, risk involving SFP is both more complex and more problematic. SFP are not included in the government-mandated cross-waivers arrangement just described, because CSLA deals only with non-human cargo and the employees of the business parties who handle cargo-related operations.4 In the case of U.S. Government employees participating in spaceflight (e.g., NASA astronauts being transported by a commercial provider from Earth to the International Space Station), risk is effectively addressed through provision of Government indemnification to operators. However, operator liability associated with risk to SFPs (i.e., private citizens rather than U.S. Government employees), has not been limited effectively.

In the event of a vehicle accident to passengers, there is potential for lawsuits for negligence, strict liability, defective products, defective operations, and failure to warn. Claims of negligence or strict liability could potentially be filed against the operators, crew, and manufacturers of the vehicle and it components. Products liability claims will be probably be filed against manufacturers, and component parts manufacturers or suppliers.

Provision, in the CSLAA and accompanying regulations, for informed consent by SFPs, may to some degree protect operators with respect to the duty to warn. It does not, however, reliably protect against strict liability or negligence. Federal legislation has not yet been enacted to pre-empt state tort law in the field of commercial human space flight. While states are prohibited under this CSLA from having laws inconsistent with it, the Act specifically grants the states the authority to implement law in addition to or more stringent than a requirement of, or regulation prescribed under, the Act. 49 U.S.C., Section 70117(c) (2008) provides: “A state or political subdivision of the state (1) may not adopt or have in effect, a law, regulation, standard, or order inconsistent with this [Federal law]; but (2) may adopt or have in effect a law, regulation, standard, or order consistent with this chapter that is in addition to or more stringent than a requirement of, or regulation prescribed under, this [Federal law].”5

State laws passed following the enactment of the CSLA/CSLAA, intended to strengthen the liability protection accorded to operators by SFP informed consent, still do not protect against court challenges. Virginia and Florida statutes contain additional provisions, which are more protective of the industry.6 However, the question is whether they go far enough and whether they will be applied to out of state participants, and even whether they would be upheld by the courts. The statutes do not contain language that is sufficiently clear, and the power of state governments to limit liability in this way is open to judicial challenge. Furthermore, there is of course no protection at all in states that have not enacted such statutes.

3Copyright © 2009 The Boeing Company. All rights reserved.

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III. Options for Limitation of Liability

Various options exist for limitation of SFP damage claims against operators. Several tools may be brought to bear, and various approaches for government use of such tools are available.

Tools available to limit business liability include: government-mandated cross-waivers of liability, government indemnification of operators, liability protection of operators based on the SFP’s informed consent, caps on maximum allowable liability claims, and private insurance coverage.

Possible approaches to use of these tools include: state government legislation, Federal legislative preemption of state law, and Federal designation of state jurisdiction.

A. Tools for Liability Limitation

1. Government-Mandated Cross-Waivers of Liability

Exposure to legal claims by aggrieved SFPs, during suborbital flight as well as orbital launch and reentry, might be reduced through amendments extending the current CSLA provisions for government enforcement of cross-waiver agreements among involved parties. Such extension would involve a waiver by SFPs of the right to seek damages from operators. With regard to activity in orbit, where the CSLA does not apply, current reliance on privately negotiated contractual cross-waivers would continue. Such orbital waivers would not, however, benefit from any special government guarantee of enforceability, beyond that afforded by general contract law. As noted earlier, consideration of extension of the CSLA beyond launch and reentry, to include on-orbit activity, is a matter beyond the scope of this paper.

2. Government Indemnification of Operators

Another means of liability limitation could involve extension of current CSLA Federal Government indemnification of operators for damage claims by SFPs against them.* However, consideration of the nature of SFPs suggests indemnification might prove politically untenable. After all, spaceflight at this early stage of its development is usually considered an ultra-hazardous activity, pursued by adventure enthusiasts. Unlike commercial aviation, where vehicles have been rated, and risks are managed in light of mature technologies, commercial space travel requires informed consent by SFPs and associated release of operators from liability, as a condition for participation in spaceflight. Beyond the space sector, reluctance to limit consumer liability claims has been primarily associated with situations in which consumers legitimately perceive risk as low and therefore should have a right to seek damages if mishaps occur. It may be that there would be much less inclination to prohibit such limitation of liability in cases where individuals engage in activity they know to be dangerous. In fact, the 2006 FAA regulations governing commercial human spaceflight not only require flight crew, remote operators, and all SFPs to execute a waiver of claims against the FAA,7 but also Appendices D and E to these regulations require the crew members and SFPs to indemnify the U.S. government and its agencies for claims arising out of bodily injury or death of the individual. Further, these Appendices define crew and SFPs to include the individuals as well as their

* It is a U.S. statutory requirement that the launch provider obtains third party liability insurance to cover the launch and that the insurance protect the launch provider and the satellite customer, as well as the parties’ respective contractors and sub-contractors involved in the launch. 49 U.S.C., § 70112(b); 14 C.F.R., § 440.17(b)-(e). See 14 C.F.R., § 440.17, Appendix B, art. 4 (2006). Under U.S. law, the maximum insurance requirement is $500 million. 49 U.S.C., § 70112(a)(3). The U.S. provides for government indemnification of third party liability in excess of the insured amount up to $2,500,000,000. 49 U.S.C., § 70113(a)(1)(B) ($1,500,000,000, as adjusted for inflation). This provision expires 12/31/09, although the industry is lobbying to prevent the sunset.

4Copyright © 2009 The Boeing Company. All rights reserved.

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heirs, administrators, assignees, next of kin, estates (i.e., of the individuals), or anyone else who attempts to bring a claim on their behalf, arising out of bodily injury or death.8

In light of the indemnities given to the Government, as set forth in these Appendices, government indemnification of operators might be viewed as inappropriate. This remedy, in effect, would obligate the public treasury to pay indirectly for damage claims by SFPs against operators, where the Government has declined to do so with respect to direct claims against it and its agencies.

3. Liability Protection of Operators Based on the SFP’s Informed Consent

Given such concerns, perhaps a more appropriate alternative to indemnification would be the prohibition of SFP liability claims altogether, provided that clearer and more rigorous standards of informed consent had been met. This approach places squarely on the SFP both the obligation to give informed consent responsibly and the obligation to accept whatever damages might result from mishaps, without recourse to the courts for relief. Such legislation could either fully prohibit any participant damage claims or impose caps on such damage claims—an option to be described in more detail shortly. Architects of the original CSLA/CSLAA legislative language might well wish to help guide an effort to amend this statutory framework, so as to ensure uniform national enforceability.

4. Caps on Maximum Allowable Liability Claims

If Congress proves reluctant to implement an absolute prohibition of all SFP damage claims, recourse might be made to limitation of liability through establishment of caps, setting maximum allowable claim amounts. The political feasibility of a caps regime can be assessed in part through reference to precedents and parallels outside the space domain. For example, Health Maintenance Organizations (HMOs) have been to a certain extent shielded from liability exposure associated with placing limits on availability of care for plan participants.* Similarly, manufacturers of medical devices have some degree of protection from liability, provided that they have received full FDA approval of their equipment prior to a mishap.9 Also, in some states where the law allows citizens to carry firearms, employers are shielded to some extent from liability.10

To be effective in promoting business growth, caps would have to be set with the limits of private insurance availability in mind. If a cap were set higher than the limit of availability of affordable private insurance coverage, then the gap between insurance coverage and liability exposure could constitute a disincentive for operators to engage in business activity.

An important caveat regarding the use of caps comes from the history of commercial air travel during the early to mid 20th century. This history may be especially relevant to suborbital commercial human spaceflight, because of operational similarities with aviation. Attempts to protect air carriers by placing caps on passenger liability claims proved ineffective protection for carriers in the courts. Caps were subsequently dropped, and unlimited liability was accepted as the de facto standard in determining availability and pricing of private insurance.† Affordability of

* On June 24, 2004, the U.S. Supreme Court ruled unanimously that patients cannot sue their HMO under state laws for failing to pay for doctor recommended care. Aetna Health v. Davila, 124 S. Ct. 2488 (2004). While they can bring a federal claim in Federal Court under the Employer Retirement Security Act of 1974 (ERISA) for reimbursement of amounts not authorized for payment, the federal statute prevents individuals from suing their HMOs for malpractice damages for failure to authorize payment for treatment, which failure results in serious injury or death. See 29 U.S.C. § 1001, et seq.† Convention for the Unification of Certain Rules for International Carriage by Air (Montreal, 28 May, 1999, “Montreal Convention”). The Montreal Convention took effect in 2003, when ratified by the United States. It was the first major revision to the Warsaw Convention Act since its inception in 1929. The Warsaw Act established international regulations for airline claims involving death, injury, or loss of or damage to cargo or baggage. The Montreal Convention establishes a two-tiered liability system. The first tier includes strict liability of up to $135,000 (U.S. dollars), regardless of an airline carrier’s fault. The second tier has no liability cap in cases where the airline is at fault. Under the Warsaw Act, liability was limited to $8,300 in those cases where a passenger is killed or injured.

5Copyright © 2009 The Boeing Company. All rights reserved.

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private insurance was eventually enhanced by decades of aviation experience, during which the risk of mishaps affecting air carriers proved to be exceedingly low.

The fundamental legal issue regarding caps, as with informed consent, is not their content or rationale; it is their ultimate enforceability. If enforcement can be set aside by the courts, then the insurance industry must in effect operate as though in a context of unlimited liability.

5. Private Insurance Coverage

However desirable legislative action might be, it involves complex and politically charged issues and could prove time-consuming to pass in Congress. Although efforts could begin immediately involving drafting of legislative language and introduction of bills, accompanied by appropriate advocacy efforts, private insurance must serve in the interim as the only means of achieving at least some degree of liability limitation. Beyond this interim role, private insurance will always have an important function to perform, as an added protection against risk for one or more involved parties, regardless of whatever legislative and regulatory framework may emerge.

The lack of operational flight experience will render insurers’ assessment of risk challenging, making very important the acquisition of detailed technical information from operators regarding vehicle design and architecture of support systems, as well as the contemplated operational scenarios for offering SFP services. Also challenging will be the current lack of standards that insurers could use to evaluate technical and operational quality. The Federal statutory framework currently in place has set a moratorium through 2012 on FAA regulations that might include establishment of such standards, and voluntary industry standards also have not been put in place. Nevertheless, an in-depth dialogue between operators and the insurance industry could result in at least some degree of liability limitation for operators.

B. Approaches to Liability Limitation

1. State Government Legislation

As noted earlier, a difficulty associated with addressing liability limitation at the state level is that spaceflight is likely to involve passage across the boundaries of multiple states. A mishap might occur in a state other than the one in which launch takes place. Even if the weaknesses of particular state’s statute were removed, ensuring the enforceability of liability limitations in that state’s courts, this would not provide protection if legal action were taken in another state. Options for Federal Government action to ameliorate this situation include Federal legislative preemption of state laws and Federal designation of state jurisdiction.

2. Federal Legislative Preemption of State Laws

Although Federal preemption of state laws might at first appear a simple and effective solution to the problem of conflicting state approaches, the principle of preemption itself has become a matter of debate, especially with the recent change of leadership in Washington. While President Bush had encouraged Federal Agencies to issue rules preempting state laws and declaring that a single federal standard should apply, President Obama is taking the position that state law is preempted only when there is a well-defined legal basis. Federal Agencies have been directed to review regulations from the past ten years to see if the government had improperly asserted federal preemption.* In light of this shift in the position of the Federal Government regarding preemption, it does not seem likely that new instances of full-blown preemption by Agencies would be applicable, unless there is a well-defined legal basis. Further, the U.S. Supreme Court in March of 2009 addressed the issue of FDA preemption of state laws, finding a company liable for a failure to warn claim under Vermont state law.11

* On May 20, 2009, President Obama sent to executive departments and agency heads a Presidential Memorandum entitled “Pre-Emption” (published at 74 Fed. Reg. 24693); the U.S. Supreme Court appears to be less deferential to federal regulations that interpret express pre-emption provisions contained in federal statutes. See, e.g., Riegel v. Medtronic, Inc., 128 S. Ct. 999, 1011 (2008) (stating that a FDA regulation interpreting the scope of a medical device-related statutory exemption provision “can add nothing to our analysis but confusion”).

6Copyright © 2009 The Boeing Company. All rights reserved.

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However, it might be argued that the current Administration would be unlikely to oppose Federal preemption if it were carried out, with a sound rationale, by Congress, rather than by Executive Branch Agencies. The Administration’s concern appears to be, not with Federal law passed by Congress but rather with Federal Agencies unilaterally issuing regulations to preempt state legislative action.

3. Federal Designation of State Jurisdiction

If the implementation of full Federal preemption proved to be politically unworkable, an alternative approach might be for a Federal statute to expressly provide for the international principle of responsibility for spaceflights being assigned to the “launching state,” regardless of the geographic locations within which a vehicle might operate.12 Such a Federal statute could also authorize, but not mandate, operator liability limitation by states, allowing each state to decide separately whether or not to adopt it. In such an approach, operators protected by a statute in the state where the flight originated, could have that protection extended to flight operations involving other states.

IV. Conclusion: A Way Forward

Given the complex mix of issues affecting commercial spaceflight liability, a double strategy of simultaneously pursuing insurance and legislative initiatives could prove to be an effective approach. The insurance initiative would involve convening a dialogue between private insurers and prospective operators, to arrange for consideration of technical and operational details of the operators’ business plans. This dialogue would be a two-way exchange, with operators informing insurers regarding safety features and procedures that might lead to lowered insurer perception of risk. Insurers could in turn provide valuable information to operators about how risk is assessed, which might lead operators to make technical or operational modifications resulting in enhanced risk reduction.

Desirable outcomes of dialogue could be greater ability of spaceflight operators to identify risks and insurance needs, as well as clearer specification by insurers of the kinds of insurance products they would make available and the premiums to be charged for such policies. If both insurers and operators were to conclude that private insurance could constitute a fully acceptable means of handling risk, then there would be no need for any legislative liability limitation initiative. If, however, the result of dialogue were insurability and premium levels precluding—or at least impairing—operators’ capacity to do business profitably, then a legislative initiative would be justified. Anecdotal evidence to date suggests that there is in fact a major liability challenge to the business viability of commercial human spaceflight, and it is unlikely that private insurance alone would constitute a fully affordable and effective means of facing this challenge. In recognition of the fact that private insurance, alone, is not even sufficient to cover traditional risks associated with commercial space launches and activities, the CSLA provides for cross-waivers and indemnities. The commercial human spaceflight insurance issues presented by the CSLA Amendments may present an analogous problem, which will need to be separately addressed.

A legislative initiative would involve crafting a proposal that selects optimally among the available tools and approaches for operator liability limitation. Beyond this, action in Congress would need to use legislative language specifically designed to limit Committee jurisdiction to the House of Representative’s Committee on Science and Technology and the Senate’s Committee on Commerce, Science, & Transportation, thereby avoiding complications and delay associated with assertion of jurisdiction by additional committees. As noted, the insurance group would need to supply clear justification for pursuing a legislative route, to the extent that exclusive reliance on private insurance were found to be inadequate (as it was found to be with regard to traditional commercial space launch activities, thereby necessitating the provision of cross-waivers and indemnities under the CSLA). The goal of the two groups’ efforts would be a balanced mix of private insurance and legal/regulatory liability limitation, rendering new business growth and job creation more rapid in the emerging commercial human spaceflight industry.

For both the insurance and legislative groups to succeed in their separate missions and in working together, a plan with schedule milestones would be needed. For example, the insurance group would need to generate as soon as possible, by the early autumn of 2009, at least a provisional assessment of insurability and premium costs, since this information would be vital to justifying the legislative group’s efforts. In order to preserve the opportunity for passage of legislation in the current Congress (i.e., by the end of the 2010 legislative session), it would be important

7Copyright © 2009 The Boeing Company. All rights reserved.

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8Copyright © 2009 The Boeing Company. All rights reserved.

to draft bill language no later than the close of 2009. This would allow for legislation to be introduced as soon as possible when Congress reconvenes in early 2010.

As for leadership of the respective groups, an insurer would be best suited to head the insurance group, whereas counsel for a prospective spaceflight operator would be most appropriate for heading the legislative group. A coordinator would also be required, to facilitate initial planning and ongoing execution of the plan, within schedule and resource constraints, effectively integrating the efforts of the two group chairs.

With such an approach, it appears possible to create a balanced framework of private insurance and legal/regulatory liability limitation, which would simultaneously promote space entrepreneurship, collaboration among established and startup companies, and achievement of national space policy goals. In effect, robust business and job growth could occur, while ensuring consumer protection, appropriately harmonized with consumer freedom of choice.

Acknowledgments

The authors thank the companies and organizations described in this paper for their contributions to progress in promoting entrepreneurship and investment.

References

1 49 U.S.C., § 70101-70121 (2004); see “Commercial Space Launch Amendments Act,” P.L. 108-492 (Dec. 23, 2004). 2 See 49 U.S.C., § 70102(4); 14 C.F.R., § 401.5. 3 49 U.S.C., § 70112(b); 14 C.F.R., § 440.17(b)-(e); see 14 C.F.R., § 440.17, Appendix B, art. 4 (2006), containing the required waiver form. 4 49 U.S.C., § 70102(17) (defining SFPs as individuals who are not crew carried within a launch or re-entry vehicle). SFPs are not customers for purposes of the statutory waiver requirements. 14 C.F.R., § 440.3 (2006). See49 U.S.C., § 70112(b)(2); 14 C.F.R., § 440.17(e) (2006); 14 C.F.R., § 440.17, Appendix E (2006), requiring the SFP to sign a waiver with the U.S. government. 5 49 U.S.C., § 70117(c) (2004); 6 Fla. Stat. § 331.501 (2009); Va. Code Ann. § 8.01-227.8-.10 (2007). 7 14 C.F.R., § 440.17(e), (f) (2006). 8 14 C.F.R., § 440, Appendices D and E. 9 Riegel v. Medtronic, Inc., 128 S. Ct. 999 (2008) (“[T]he solicitude for those injured by FDA-approved devices . . . was overcome in Congress’s estimation by solicitude for those who would suffer without new medical devices if juries were allowed to apply the tort law of 50 states to all innovations.” at 1009); Buckman Co. v. Plaintiffs’ Legal Committee, 121 S. Ct. 1012 (2001); see also Bates v. Dow Agro Sciences LLC, 125 S. Ct. 1788 (2005) (pesticide labeling – “[I]magine 50 different labeling regimes prescribing color, font, size, and wording of warnings . . . .” at 452). 10 See, e.g., Fla. Stat. § 790.251; GA. Code Ann. § 16-11-135. 11 Wyeth v. Levine, 129 S. Ct. 1187 (2009) 12 See Convention on International Liability for Damage Caused by Space Objects (1972), 961 U.N.T.S., art. II (providing that the “launching state” shall be absolutely liable for damage caused by its space object).