Airport Insurance Requirements (2023)

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1   Purpose of This Guide 1.1 What Is This Guide About? ACRP recognizes the importance of identifying and communicating best practices in insur- ance purchasing, insurance programs, and contractual risk transfer for airports throughout the United States. An airport’s insurance program is an important component of its overall risk management strategy that can also include safety and loss control, claims, and other risk management activities. The factors and considerations faced by an airport regarding the structure of its insurance program and contractual risk transfer have increased in complexity over the past decade. This is attributed to the growing number of air passengers, the high cost of ramp incidents, the hard insurance market, the COVID-19 pandemic, and the growing threat of business interruption losses arising from cyberattacks. Even as the airport risk environment changes, though, airports must maintain compliance with federal regulations while continuing to meet airport grants and other contractual requirements. The primary purpose of this guide is to establish best practices for an airport’s insurance program and to set reasonable insurance requirements for third parties that do business with airports across the country. Third-party insurance requirements are discussed in detail in Chapter 4 and include recommended minimum coverage limits and contractual provisions for consideration. This guide provides insights on the following topics: • Top risks faced by airports around the country and how they are addressed; • Best practices for establishing an airport’s insurance program with a perspective on the insurance purchasing practices of other airports around the country; and • A framework for setting contractual insurance requirements with third parties, including type of coverage, limits, and recommended language for these contracts. The guide also offers a road map for airport risk managers, treasurers, controllers, financial managers, and legal representatives on how to best navigate and address risks faced by their organization. Importantly, the guide also presents materials useful to inform third parties on an airport’s contractual insurance requirements. The guide is intended to be a practical and useful resource for all stakeholders involved in addressing a wide variety of airport insurance administration and contractual risk-related issues. 1.2 Why Was This Guide Written? Large airports typically have full-time professional risk management staff to oversee insur- ance program management and compliance with third-party vendor insurance requirements. In contrast, many general aviation and small and medium hub airports do not have dedicated C H A P T E R 1

2 Airport Insurance Requirements risk specialists and staff. The staff at these airports can wear many hats and are often responsible for a wide range of airport programs, which can include airport insurance programs as well as risk management activities and initiatives. Keeping current with evolving trends in airport risk management or best practices can be demanding on the part-time risk manager. Researching information on airport insurance purchasing practices and obtaining relevant insurance requirement templates can be time-consuming. Learning proven techniques and best practices for administering these important risk management initiatives can be challenging. Some airports have developed and implemented successful insurance and contractual risk transfer programs, while other airports can benefit from their experience and examples. This guide describes airport insurance best practices, as developed through literature research and surveys and interviews with airport risk managers, to support and promote effective airport risk management practices. The guide is intended as an insurance and risk manage- ment resource for all categories of airports including nonhub, small hub, medium hub, and large hub. At large hub airports it is not uncommon to manage insurance programs in response to risks or losses experienced over past years and even decades. Sometimes airports manage their insurance programs by taking recommendations from their insurance broker, who identifies risks and appropriate limits of liability to protect both landside and airside assets and opera- tions. Airports of all sizes have sought guidance to identify, analyze, prioritize, monitor, and manage risks to protect assets and operations. Consider a medium hub airport that has experienced significant passenger growth and renews its insurance program with the same insurance limits of liability year-over-year while facing increased premiums and reductions in coverage. How does the airport know it is buying enough coverage? Or buying too much? What do peer airports buy? How do similar size airports keep up with the changing insurance marketplace? These items are highlighted in Chapter 3 of this guide. Additionally, an airport may not have recent experience in how to effectively transfer finan- cial responsibility for a project or service to another party through contractual provisions to ensure that protections are in place for the benefit of the airport. Vendors operating at an airport often have questions regarding the airport’s indemnity and insurance sections of their contract. These contractual provisions can be enhanced through frequent review in collaboration with airport legal counsel and sometimes through consultation with an expert risk management professional to ensure compliance. Consider a large hub airport needing to restructure its ground transportation service contract to accommodate the changing rideshare industry while keeping current with related changes in state and local regulations. In doing so, the airport realizes that the insurance requirements have not been updated in many years. Ground transportation presents significant risks, includ- ing accidents that may result in property damage, bodily injury, and an eventual insurance claim. It is critical that airports contractually require every transportation operator at the airport to maintain sufficient insurance coverage. Recommended coverage for ground transportation operations is outlined in Chapter 4. To obtain information on best practices and copies of insurance requirement templates, airport operators commonly contact peers at similar airports, as there is no single or easily accessible source for this information and documents. This guide provides a consolidated clearinghouse for important information regarding airport insurance requirements and risk management.

Purpose of This Guide 3 1.3 How This Guide Was Researched The research for the development of this guide included a review of literature relevant to airport insurance requirements and airport risk management. The literature review identified more than 80 journal articles, books, presentations, reports, and blog posts. Relevant conference presentations on airport insurance requirements and ACRP Synthesis 30: Airport Insurance Coverage and Risk Management Practices (Rakich et al. 2011) were important components of the literature review. Materials included presentations on contractual risk transfer practices from the annual Airports Council International—North America (ACI-NA) risk management conferences. Additionally, some documents were obtained on the basis of the survey and inter- views conducted for the project. Key information gathered through this literature review is incorporated into the guide and included in the reference section. A broader, annotated list of relevant literature is presented in Appendix A. A survey on airport insurance and risk management was conducted to obtain information directly from airport risk managers throughout the United States to support the development of this guide. Eighty-six individuals were identified and contacted; 24 responded with a completed survey (a 28% response rate): four nonhub airports, four small hub airports, six medium hub airports, and 10 large hub airports. The respondents also represent a broad geography; there were at least two respondents from each of seven of the FAA regions, including representatives from airports in, California, Colorado, Florida, Minnesota, Missouri, Ohio, New York, Texas, Virginia, and Washington State. The survey topics were organized in three sections: • An airport’s risk management department and its top airport risks, • Insurance purchasing practices, and • Airport contractual risk transfer practices. The survey findings are presented and discussed throughout Chapters 2 and 3 of this guide. Detailed interviews were also conducted to supplement the surveys with additional in-depth information for development of the guide. Twenty potential interviewees were identified and contacted, of whom 15 ultimately participated in the interviews. Of the 15 interviewees, nine were airport risk managers, four were leading airport insurance brokers, and four were leading commercial aviation insurance underwriters. The participating airport risk managers were from general aviation, small hub, medium hub, and large hub airports; the brokers and underwriters were from key national insurance firms with extensive experience and specialization in the aviation industry. The cross section of interviewees provided an important range of stakeholder perspectives. Airport risk managers were asked how they establish limits of liability for their insurance program, how they purchase insurance, whether there were any trends in airport claims, and how third-party vendor insurance requirements were established. Commercial aviation insurance brokers and underwriters were asked how they recommend limits of liability for an airport. The brokers and underwriters were also asked about top airport risks, how insurance purchasing decisions were made, trends in airport claims, and top emerging risks. The results of this information and data collection from airport risk managers, commercial aviation insurance brokers, and aviation underwriters is presented and discussed in Chapters 2 and 3. An interim report was prepared and submitted for review to ACRP following completion of the literature review, survey, and interviews. The interim report included a preliminary summary of the research conducted to date; an annotated list of literature reviewed; a draft guide outline; and key findings based on the research team’s efforts to date. The guide incorpo- rates comments provided by ACRP and the project panel for the interim report. Key findings of the research are briefly summarized below.

4 Airport Insurance Requirements 1.3.1 Literature Review: Key Findings The literature search identified a limited number of recent articles specifically on insur- ance purchasing practices and decisions at U.S. airports. The research team found only a few publications or web postings on airport contractual risk transfer practices and insurance requirements for third-party airport vendors. However, more general but relevant materials on risks and insurance regarding natural disasters, cyberattacks, economic downturns, and third-party agreements were identified. The research team also identified, reviewed, and used presentations from annual ACI-NA risk management conferences on contractual risk trans- fer topics and ACRP Synthesis 30: Airport Insurance Coverage and Risk Management Practices (Rakich et al. 2011). Together with the survey and interview findings, the compilation of literature supported a synthesis of risk and risk management from an airport’s perspective that was incorporated into Chapters 3 and 4 of this guide. 1.3.2 Survey: Key Findings The survey results identified the top three risks faced by airports as identified by the respon- dents: slips and falls, natural disasters, and cyber and privacy breaches. The survey also confirmed and helped characterize that the top risks are different for different-sized airports. Not surpris- ingly, the survey results confirmed that many large hub airports have the experience, knowledge, and resources to administer effective risk management practices. This is in contrast to nonhub and small and medium hub airports, which look to peers (other similar-sized airports) for information regarding insurance purchasing and best practices for contractual risk transfer. 1.3.3 Interviews: Key Findings The research team interviewed airport risk managers, commercial aviation insurance brokers, and insurance underwriters to obtain information on risk management practices, insurance buying decisions, and third-party contractual insurance requirements. Following are key findings from these interviews: • Airport risk managers share common practices in how they determine the appropriate limits of liability for their organizational insurance programs. These practices can vary, however, depending on geography and jurisdiction. • Commercial aviation insurance brokers indicated that airports are concerned with a wide range of risks. One specific ongoing concern is the availability of adequate cyber insurance coverage and reduced insurer capacity in the marketplace. This issue was echoed in the inter- views with commercial aviation insurance underwriters. • Commercial aviation insurance underwriters indicated a significant increase in payouts for airport liability claims in the past several years due to higher jury awards and social inflation. These claims range from slip and fall accidents to employment-related claims to personal injury claims. 1.4 Who Is the Intended Audience for This Guide? This guide is intended for airports of all sizes and regions within the United States (including nonhub, small hub, medium hub, and large hub airports) that provide commercial, general aviation, or reliever service and are seeking a resource that can assist in education about and planning for airport risk management through insurance and contractual risk transfer. The target audience includes

Purpose of This Guide 5 • Airport administrators. The guide provides an overview of both insurable and uninsurable risks faced by airports throughout the United States as well as key contractual risk transfer practices important in managing an airport’s risk. • Airport procurement staff. The guide contains standard recommended insurance require- ments for use in third-party contracts. It also includes a five-step process in developing an appropriate set of contractual insurance requirements on the basis of the scope of work and related risks within a contract. • Airport legal staff. The guide offers important contractual insurance requirements and provisions (including specific contractual language) applicable to a variety of third parties for use in airport contracts. • Airport financial staff. The guide provides an overview of risk management practices and procedures for airports, including examples of insurance program structure and insurance buying practices. 1.5 What This Guide Contains The guide is organized into four chapters: • Chapter 1, “Purpose of This Guide,” provides research background and content overview of what the intended audience will find throughout the publication. • Chapter 2, “Risks Faced by Airports,” lays out the top risks collectively facing airports and discusses various risks and how each risk is typically addressed. This chapter also considers some risks that cannot be addressed through traditional insurance or through the contractual risk transfer process. • Chapter 3, “Airport Risk Management Practices,” describes general airport risk management practices and contractual risk transfer practices throughout the United States. The chapter also outlines insurance purchasing decisions by coverage type and provides additional important context to be used in the risk management process. • Chapter 4, “Third-Party/Vendor Insurance Requirements,” reviews the major categories of contracts let by airports and describes a five-step process for developing successful insurance requirements that address property and casualty risks for various contracts. 1.6 What This Guide Does Not Contain This guide does not contain information on risks associated with construction projects or unique risks that may warrant special review. For example, an airport performing a major remodel, renovation, or addition of a new terminal must comply with special operational guidelines and FAA regulations. There may even be a specific insurance program related solely to construction-related risks. Risks related to these types of activities are not covered in the guide. Loss control, loss prevention, and safety measures are other important aspects of any risk management program. This guide also does not include recommended best practices for these risk control measures. For further information on airport safety issues, readers are advised to refer to the following publications: • ACRP Web-Only Document 50: Research Roadmap on Safety Issues (Neubauer et al. 2020), • In-Time Aviation Safety Management: Challenges and Research for an Evolving Aviation System (NASEM 2018), and • ACRP Synthesis 115: Practices in Airport Emergency Plans (Murphy et al. 2021).

6 Airport Insurance Requirements 1.7 Disclaimer This guide is designed to provide accurate and authoritative information about the subject of contractual risk transfer for U.S. airport operations. This is the first publication by ACRP on airport insurance purchasing practices and contractual insurance requirements for U.S. airports. The guide is designed to be user-friendly, informative, and comprehensive. Some information has been generalized to appeal to a wide audience and airports of all sizes. Airport organiza- tions do not all have the same risk management needs. Also, the guide was not researched for or intended to provide legal advice related to risk.