Indemnification of delegates and authorised persons by CASA
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Indemnification of delegates and authorised persons by CASA
Only just discovered this on the CASA web site:
Raises some interesting concepts...............
Letter to all delegates and authorised persons
Background
In January 1992, the former Civil Aviation Authority (CAA) issued CAAP Admin 1. In that document, the CAA agreed to provide an indemnity to all authorised persons and delegates of the CAA against liability arising from the exercise of their delegated powers.
When the CAA was abolished in 1995 the “obligations” of the CAA became “obligations” of CASA in accordance with section 9 of the Civil Aviation Legislation Amendment Act 1995. Legal advice is that CAAP Admin 1 did not impose any “obligations” on the CAA and so there were no legal obligations transferred to CASA under CAAP Admin 1. Nevertheless, CAAP Admin 1 was not revoked and has been accepted as part of CASA’s inherited policy from the CAA.
CASA is currently considering whether the indemnity under CAAP Admin 1 should continue to be provided to persons who are not direct CASA employees.
Withdrawal of indemnity
CASA believes that there are a number of good reasons for withdrawing CAAP Admin 1.
First, most authorised persons and delegates use their appointments to earn income in the form of salary or fees. At the moment, CASA is effectively providing a group of professionals within the industry with a very generous professional indemnity insurance policy at the broader industry’s expense. There seems to be no good reason why CASA should provided “free” professional indemnity insurance.
Secondly, some authorised persons and delegates presently have private professional indemnity insurance, while others appear to rely on the protection provided by CAAP Admin 1. Given that some authorised persons and delegates compete in the marketplace for work, those people who have private professional indemnity insurance operate at a competitive disadvantage. To restore neutrality, either the indemnity offered by CAAP Admin 1 needs to be more widely explained and publicised, and reliance upon the indemnity needs to be encouraged, or the indemnity needs to be withdrawn. CASA prefers the latter alternative.
Thirdly, while CASA’s present insurance arrangements cover delegates and authorised persons, the additional risks involved in covering non-employees are reflected in CASA’s premiums. Insurers have indicated that premiums - are set to increase significantly if the indemnity is retained. CASA would prefer not to divert funds to extra premiums but to direct funds to programs that directly benefit aviation safety.
Fourthly, many authorised persons and delegates are employees of large commercial operators and undertake their delegated functions solely for the benefit of those operators. It is inappropriate for CASA to assume vicarious liability for the employees of these operators in relation to such activities. Responsibility for the actions of these employees rests properly with their employers.
Finally, CAAP Admin 1 was not a conscious policy decision of CASA,. In this regard, it should be noted that CASA is in a fundamentally different financial position to the former CAA which issued CAAP Admin 1. The CAA was a GBE and was able to pass on any costs arising from CAAP Admin 1 to industry through an increase in a variety of different charges. CASA, as a budget funded organisation, is significantly more restricted in this respect and currently has no effective mechanism to charge industry for the rising insurance costs associated with the unlimited continuation of CAAP Admin 1.
Affected parties
Removal of the indemnity would affect non-employee delegates and authorised persons who do not presently have commercial insurance cover. Accordingly. some delegates and authorised persons may decide to either relinquish their appointments or increase their charges to cover the additional insurance costs.
A reduction in the numbers of non-employee delegates and authorised persons may result in greater workload for CASA. However, it is also likely to result in a commercial opportunity for those fewer non-employee delegates and authorised persons who decide to retain their appointments.
Activities of delegates
There appears to be a perception in industry that all delegates and authorised person act on CASA’s behalf, provide a service to CASA and should be indemnified by CASA.
The reality is that the majority of delegates utilise delegations and authorisations for their own operational or financial benefit. Certainly, delegates with major operators use their delegations for the benefit of the operators. These operators have significant insurance cover and it is unreasonable for CASA to have to subsidise these operators in relation to delegates who undertake functions for the benefit of the operators.
Many other industry delegates also run a commercial business on the basis of their delegations and authorisations and exercise their delegated responsibilities for their own business purposes.
There will, of course, be some individual delegates and authorised persons who do perform functions that assist CASA. In these cases, CASA would propose to retain the indemnity, but provide a limit on the indemnity.
Options
There are a number of options available to CASA.
Option 1
Retain the current arrangements
Do nothing and retain the status quo, and bear the increased cost of Aviation General Liability (AGL) premiums;
Retain the status quo but remove the beneficiaries of CAAP Admin 1 from the scope of the AGL policy, thereby reducing insurance costs and self-insure this risk;
Retain the status quo but remove the beneficiaries of CAAP Admin 1 from the scope of the AGL policy but seek a deed of indemnity from the Commonwealth to cover this risk on the basis that it is in the public interest to indemnify such delegates/authorised persons.
In CASA’s view, none of these options is a viable proposition from CASA’s perspective as they do not address the fundamental issue. In each of these options CASA continues to provide free insurance cover to persons who effectively run a business from holding delegations and authorisations.
Option 2
Withdraw the indemnity entirely:
a. for all delegates/authorised persons; or
b. for specified delegates/authorised persons (eg those working for commercial organisations);
c. for all delegates/authorised persons except for specifically exempted delegates/authorised persons.
This option is probably the most advantageous to CASA. However, it does not recognise that there may be some delegates/authorised persons who may perform their functions for CASA’s benefit and may not be using their authorities primarily for business purposes. For such persons CASA may want to retain some level of indemnity cover.
Option 3
Retain the indemnity for individuals who do not primarily run a business from the use of their delegations/authorisations but make the indemnity subject to a financial limit eg limit CASA’s liability to a fixed amount eg $250,000
Preferred option
At this stage CASA’s preference is for a combination of options 2 and 3.
In CASA’s view, there is no justification for CASA indemnifying commercial organisations or individuals, who use delegations solely for their own benefit and who should have insurance as part of their normal business operations.
On this basis CASA would propose to continue to indemnify individual delegates and authorised persons who do not primarily run a business from the use of their delegations and authorities, subject to a limit on liability of $250,000.
Consultation
CASA wil make its final decision about whether the indemnity should be continued in December 2005. If you would like to make any other comments in relation to this matter, please write to:
Peter Ilyk
General Counsel
Civil Aviation safety Authority
GPO Box 2005
CANBERRA ACT 2602
Fax 02 6217 1607
Email [email protected]
by 30 November 2005.
All written comments received before close of business on 30 November 2005 will be considered by CASA before a final decision is made.
There are 2 additional matters that I should bring to your attention.
First, even if CASA does decide to withdraw the indemnity, it will not do so without giving appropriate notice to those affected. The notice period will give those people who presently do not have commercial insurance an opportunity to obtain insurance should they wish to continue to hold their appointments.
Finally, the withdrawal of the indemnity will coincide with a general reissue of instruments of delegation and appointment. Of course, in the absence of CAAP Admin 1, some people may decide not to be re-appointed.
I look forward to receiving your comments.
Bruce Byron
Chief Executive Officer
September 2005
Raises some interesting concepts...............
Letter to all delegates and authorised persons
Background
In January 1992, the former Civil Aviation Authority (CAA) issued CAAP Admin 1. In that document, the CAA agreed to provide an indemnity to all authorised persons and delegates of the CAA against liability arising from the exercise of their delegated powers.
When the CAA was abolished in 1995 the “obligations” of the CAA became “obligations” of CASA in accordance with section 9 of the Civil Aviation Legislation Amendment Act 1995. Legal advice is that CAAP Admin 1 did not impose any “obligations” on the CAA and so there were no legal obligations transferred to CASA under CAAP Admin 1. Nevertheless, CAAP Admin 1 was not revoked and has been accepted as part of CASA’s inherited policy from the CAA.
CASA is currently considering whether the indemnity under CAAP Admin 1 should continue to be provided to persons who are not direct CASA employees.
Withdrawal of indemnity
CASA believes that there are a number of good reasons for withdrawing CAAP Admin 1.
First, most authorised persons and delegates use their appointments to earn income in the form of salary or fees. At the moment, CASA is effectively providing a group of professionals within the industry with a very generous professional indemnity insurance policy at the broader industry’s expense. There seems to be no good reason why CASA should provided “free” professional indemnity insurance.
Secondly, some authorised persons and delegates presently have private professional indemnity insurance, while others appear to rely on the protection provided by CAAP Admin 1. Given that some authorised persons and delegates compete in the marketplace for work, those people who have private professional indemnity insurance operate at a competitive disadvantage. To restore neutrality, either the indemnity offered by CAAP Admin 1 needs to be more widely explained and publicised, and reliance upon the indemnity needs to be encouraged, or the indemnity needs to be withdrawn. CASA prefers the latter alternative.
Thirdly, while CASA’s present insurance arrangements cover delegates and authorised persons, the additional risks involved in covering non-employees are reflected in CASA’s premiums. Insurers have indicated that premiums - are set to increase significantly if the indemnity is retained. CASA would prefer not to divert funds to extra premiums but to direct funds to programs that directly benefit aviation safety.
Fourthly, many authorised persons and delegates are employees of large commercial operators and undertake their delegated functions solely for the benefit of those operators. It is inappropriate for CASA to assume vicarious liability for the employees of these operators in relation to such activities. Responsibility for the actions of these employees rests properly with their employers.
Finally, CAAP Admin 1 was not a conscious policy decision of CASA,. In this regard, it should be noted that CASA is in a fundamentally different financial position to the former CAA which issued CAAP Admin 1. The CAA was a GBE and was able to pass on any costs arising from CAAP Admin 1 to industry through an increase in a variety of different charges. CASA, as a budget funded organisation, is significantly more restricted in this respect and currently has no effective mechanism to charge industry for the rising insurance costs associated with the unlimited continuation of CAAP Admin 1.
Affected parties
Removal of the indemnity would affect non-employee delegates and authorised persons who do not presently have commercial insurance cover. Accordingly. some delegates and authorised persons may decide to either relinquish their appointments or increase their charges to cover the additional insurance costs.
A reduction in the numbers of non-employee delegates and authorised persons may result in greater workload for CASA. However, it is also likely to result in a commercial opportunity for those fewer non-employee delegates and authorised persons who decide to retain their appointments.
Activities of delegates
There appears to be a perception in industry that all delegates and authorised person act on CASA’s behalf, provide a service to CASA and should be indemnified by CASA.
The reality is that the majority of delegates utilise delegations and authorisations for their own operational or financial benefit. Certainly, delegates with major operators use their delegations for the benefit of the operators. These operators have significant insurance cover and it is unreasonable for CASA to have to subsidise these operators in relation to delegates who undertake functions for the benefit of the operators.
Many other industry delegates also run a commercial business on the basis of their delegations and authorisations and exercise their delegated responsibilities for their own business purposes.
There will, of course, be some individual delegates and authorised persons who do perform functions that assist CASA. In these cases, CASA would propose to retain the indemnity, but provide a limit on the indemnity.
Options
There are a number of options available to CASA.
Option 1
Retain the current arrangements
Do nothing and retain the status quo, and bear the increased cost of Aviation General Liability (AGL) premiums;
Retain the status quo but remove the beneficiaries of CAAP Admin 1 from the scope of the AGL policy, thereby reducing insurance costs and self-insure this risk;
Retain the status quo but remove the beneficiaries of CAAP Admin 1 from the scope of the AGL policy but seek a deed of indemnity from the Commonwealth to cover this risk on the basis that it is in the public interest to indemnify such delegates/authorised persons.
In CASA’s view, none of these options is a viable proposition from CASA’s perspective as they do not address the fundamental issue. In each of these options CASA continues to provide free insurance cover to persons who effectively run a business from holding delegations and authorisations.
Option 2
Withdraw the indemnity entirely:
a. for all delegates/authorised persons; or
b. for specified delegates/authorised persons (eg those working for commercial organisations);
c. for all delegates/authorised persons except for specifically exempted delegates/authorised persons.
This option is probably the most advantageous to CASA. However, it does not recognise that there may be some delegates/authorised persons who may perform their functions for CASA’s benefit and may not be using their authorities primarily for business purposes. For such persons CASA may want to retain some level of indemnity cover.
Option 3
Retain the indemnity for individuals who do not primarily run a business from the use of their delegations/authorisations but make the indemnity subject to a financial limit eg limit CASA’s liability to a fixed amount eg $250,000
Preferred option
At this stage CASA’s preference is for a combination of options 2 and 3.
In CASA’s view, there is no justification for CASA indemnifying commercial organisations or individuals, who use delegations solely for their own benefit and who should have insurance as part of their normal business operations.
On this basis CASA would propose to continue to indemnify individual delegates and authorised persons who do not primarily run a business from the use of their delegations and authorities, subject to a limit on liability of $250,000.
Consultation
CASA wil make its final decision about whether the indemnity should be continued in December 2005. If you would like to make any other comments in relation to this matter, please write to:
Peter Ilyk
General Counsel
Civil Aviation safety Authority
GPO Box 2005
CANBERRA ACT 2602
Fax 02 6217 1607
Email [email protected]
by 30 November 2005.
All written comments received before close of business on 30 November 2005 will be considered by CASA before a final decision is made.
There are 2 additional matters that I should bring to your attention.
First, even if CASA does decide to withdraw the indemnity, it will not do so without giving appropriate notice to those affected. The notice period will give those people who presently do not have commercial insurance an opportunity to obtain insurance should they wish to continue to hold their appointments.
Finally, the withdrawal of the indemnity will coincide with a general reissue of instruments of delegation and appointment. Of course, in the absence of CAAP Admin 1, some people may decide not to be re-appointed.
I look forward to receiving your comments.
Bruce Byron
Chief Executive Officer
September 2005
Moderator
Interesting, isn't it ?
A couple of other considerations not specifically mentioned...
(a) delegates generally are CASA folk and, as far as I understand, act AS the Regulator in respect of the regulations for which they are delegates.
(b) the Authorised Person usually is from Industry and is required to operate generally in accordance with the directions and policies of CASA in exercising the appointment's privileges. This was always a point of contention re PI for those of us who held ANR40 and then CAR35 appointments.
(c) getting PI is difficult enough for the larger companies practicing in aviation .. for the small or sole practitioner it is extremely difficult. What this proposal will mean is that consultants will structure themselves to be distanced from their assets and rely on that to protect their personal interests.
(d) putting the philosophy to one side, it would be interesting if Peter were to indicate how many claims have been made against the CASA PI policies in respect of Industry Authorised Persons by discipline ...
A couple of other considerations not specifically mentioned...
(a) delegates generally are CASA folk and, as far as I understand, act AS the Regulator in respect of the regulations for which they are delegates.
(b) the Authorised Person usually is from Industry and is required to operate generally in accordance with the directions and policies of CASA in exercising the appointment's privileges. This was always a point of contention re PI for those of us who held ANR40 and then CAR35 appointments.
(c) getting PI is difficult enough for the larger companies practicing in aviation .. for the small or sole practitioner it is extremely difficult. What this proposal will mean is that consultants will structure themselves to be distanced from their assets and rely on that to protect their personal interests.
(d) putting the philosophy to one side, it would be interesting if Peter were to indicate how many claims have been made against the CASA PI policies in respect of Industry Authorised Persons by discipline ...
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Torres & Gaunty. Byron's proposal relates solely to authorised persons "...who are not direct CASA employees..."
I suspect John is on the money. The cost of a CAR35 engineer or similarly authorised person is about to rise dramatically - if you can find one!!
The proposal will do nothing to improve accountability within CASA employed ranks.
Woomera
I suspect John is on the money. The cost of a CAR35 engineer or similarly authorised person is about to rise dramatically - if you can find one!!
The proposal will do nothing to improve accountability within CASA employed ranks.
Woomera
Originally Posted by john_tullamarine
Interesting, isn't it ?
A couple of other considerations not specifically mentioned...
This was always a point of contention re PI for those of us who held ANR40 and then CAR35 appointments.
(c) getting PI is difficult enough for the larger companies practicing in aviation .. for the small or sole practitioner it is extremely difficult. What this proposal will mean is that consultants will structure themselves to be distanced from their assets and rely on that to protect their personal interests.
A couple of other considerations not specifically mentioned...
This was always a point of contention re PI for those of us who held ANR40 and then CAR35 appointments.
(c) getting PI is difficult enough for the larger companies practicing in aviation .. for the small or sole practitioner it is extremely difficult. What this proposal will mean is that consultants will structure themselves to be distanced from their assets and rely on that to protect their personal interests.
A problem with PI insurance is that individuals need to continue it for their whole life. If I did some engineering work in 1980 which results in a claim in 2020 I can't claim against the policy I might have held in 1980. "Once a policy has expired, so has all cover. However the policy may be extended to cover claims arising from liability incurred prior to the current policy period." Might be cheaper to have a one way ticket to a remote island with a chest of gold bars and a shovel.
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Torres, we started to discuss this back in September 05 here
http://www.pprune.org/forums/showthread.php?t=191564
Pity too few took any notice at that time.
tipsy
http://www.pprune.org/forums/showthread.php?t=191564
Pity too few took any notice at that time.
tipsy
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not holding my breath, but if CASA's insurance fees are about to drop dramatically if they change this then I suppose they can pass the saving on to us in the form of reducing the medical fees and such 
