The Columbia Space Shuttle Tragedy: Third-Party Liability Implications for the Insurance of Space Losses

By Manikowski, Piotr | Risk Management and Insurance Review, Spring 2005 | Go to article overview

The Columbia Space Shuttle Tragedy: Third-Party Liability Implications for the Insurance of Space Losses


Manikowski, Piotr, Risk Management and Insurance Review


ABSTRACT

Space flights are no longer rare events, but the commonplace is not necessarily safe. When disaster strikes, as in the Columbia Space Shuttle disaster of 2003, third parties as well as those directly involved are financially affected. This article considers how these issues are treated under international law. It also analyzes what products the insurance markets offer as protection against such third-party liabilities.

INTRODUCTION

On February 1,2003 the Columbia space shuttle, the oldest of a fleet of four, was destroyed during reentry into the earth's atmosphere, causing the death of all seven crew. The total damage is estimated at about US$3 billion. During the International Space Insurance Conference that took place in Florence (April 3-4,2003), Paul Pastorek, General Counsel of U.S. space agency NASA reported the latest findings of the investigations into the loss of the Columbia space shuttle (Stahler, 2003). NASA had recovered 45,000 pieces of wreckage from an area 100 miles long and 10 miles wide. The material recovered comprised in terms of weight almost half the lost shuttle. The initial suspicion was that one of the brittle ceramic tiles on the underside of the wing had been damaged during take-off, allowing heat to enter into the wheel chamber. A video tape was recovered, but this stopped transmitting shortly before the crew realized that there were problems with the re-entry. NASA subsequently recovered an instrument used on the shuttle to record a multitude of technical data during each flight. These data revealed that the build-up of heat inside the right wing came from the leading edge of the wing, which was made of an extremely hard and tough material. The initial ceramic-tile theory thus seemed to be disproved. However, the official report has yet to be released. Was Columbia the victim of a collision with space debris, of which thousands of items are now littering the earth's orbital paths? It may never be established with absolute certainty what really happened at a speed of 21,000 kilometers an hour in the upper layers of the atmosphere above Texas.

Debris from the space shuttle fell to the ground, but did not cause serious damage. However, it remains possible that space exploration could inflict harm on third parties on the ground. This could evoke the civil liability of the guilty party. It is possible to buy third-party liability insurance for space losses.

GENESIS OF SPACE (SATELLITE) INSURANCE

Until the mid-1960s the insurance market was not interested in the space industry, since it had been focused on the military aims of the United States and the Soviet Union. The launching of the first artificial earth satellite on October 4,1957 and the sending of the first man-Yuri Gagarin-into space on April 12,1961, accelerated the development of the space industry-including its commercial arm. It became clear to the insurance industry that there would soon be a commercial space market available for exploitation.

Insurance for space activities has evolved over many years through the collaboration of aerospace clients, brokers, and the underwriting community worldwide. The goal of that work was to provide flexible forms of insurance for a volatile class of exposure, which was not yet quantified by loss data.

In the formative years of the space age, projects were uninsurable: launch vehicles were unreliable and most of the payloads were experimental-the risk was self-insured by governments and space agencies that financed the flights. The first company to devote its attention to the use of this new technology for commercial purposes and to show an interest in obtaining insurance protection was American Communication Satellite Corporation (ACSC), founded in 1962. On April 6, 1965 ACSC obtained the first space insurance policy to protect the first commercial geostationary communication satellite Early Bird (Intelsat I-F1). The policy covered only material damages to the satellite prior to lift-off (pre-launch insurance for US$3. …

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