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COMAIR LOSSES MAY NEAR $100 MILLION

Posted On: Jan. 19, 1997 12:00 AM CST

DETROIT-Despite causing 29 deaths and hull and liability losses that could reach nearly $100 million, the crash of a Comair commuter plane outside Detroit is not expected to drive up commuter aviation insurance rates.

Because of the large capacity in the aviation market, the crash is unlikely to boost aviation rates, said a spokesman for the Alexander Howden Group in London. "One single incident, however severe, is not going to force a change in rating levels," the spokesman said.

Bill Behan, president of AirSure Ltd., an aviation insurance broker in Golden, Colo., said liability claims from the crash could reach $3 million per fatality, or about $90 million total, but "it's not enough to make a difference in the market."

As for hull losses, Fort Lauderdale, Fla.-based Embraer Aircraft Corp., which manufactured the Emb 120 Brasilia turboprop plane, estimated the value of the aircraft that crashed at $4.1 million to $4.3 million.

Cincinnati-based Comair has $200 million in liability coverage, placed by a unit of Willis Corroon Group P.L.C. led by U.S. underwriters (BI, Jan. 13).

Alexander Howden's spokesman said that Comair's rates are not likely to increase. "There is DETROIT-Despite causing 29 deaths and hull and liability losses that could reach nearly $100 million, the crash of a Comair commuter plane outside Detroit is not expected to drive up commuter aviation insurance rates.

Because of the large capacity in the aviation market, the crash is unlikely to boost aviation rates, said a spokesman for the Alexander

Howden Group in London. "One single incident, however severe, is not going to force a change in rating levels," the spokesman said.

Bill Behan, president of AirSure Ltd., an aviation insurance broker in

Golden, Colo., said liability claims from the crash could reach $3 million per fatality, or about $90 million total, but "it's not enough to make a difference in the market."

As for hull losses, Fort Lauderdale, Fla.-based Embraer Aircraft Corp., which manufactured the Emb 120 Brasilia turboprop plane, estimated the value of the aircraft that crashed at $4.1 million to $4.3 million.

Cincinnati-based Comair has $200 million in liability coverage, placed by a unit of Willis Corroon Group P.L.C. led by U.S. underwriters (BI, Jan.

13).

Alexander Howden's spokes-man said that Comair's rates are not likely to increase. "There is not a knee-jerk reaction from underwriters based on a single accident," he said.

"It will have some impact, but I doubt it will have be sizable one for the shareholders," agreed AirSure's Mr. Behan.

Although the full crash investigation from the National Transportation

Safety Board will take months to complete, flight data recorders recovered from Flight 3272 have helped the board piece together its final moments.

According to an NTSB spokesman, the turboprop was flying normally until

38 seconds prior to the crash. At that time the plane was on its descent into Detroit Metropolitan Airport, before it's nose began to dip and the plane rolled to the left.

The spokesman also said the plane's crew did not comment about any system or engine problems.

The NTSB has not ruled out any causes of the crash.

Although Comair's lead insurer, United States Aviation Insurance Group in New York, has not yet established a liability reserve, one Lloyd's of London aviation underwriter estimated the Comair loss alone could offset the total worldwide premiums collected from smaller airlines. If liability losses total about $90 million from the Comair loss, that far exceeds estimated total premiums from smaller, commuter airlines of only $65 million, the underwriter said.

Writing commuter airline hull and liability insurance "is a minefield," said the Lloyd's underwriter. "It just doesn't pay enough money."

"We are writing relatively few regional airlines, not because of (the state of their) operations but because the market is weak" and premiums are down, said Graham Nichols, chief executive and chief underwriter for Westminster Aviation Insurance Group in London.

Hull and liability insurance losses for these smaller airlines dropped dramatically last year to an estimated $68 million from $206 million in 1995. Of that, hull losses plummeted to $43 million last year from $108 million; while liability losses plunged to $25 million from $98 million, according to airline analyst Airclaims Ltd. This reduction in losses for smaller airlines came despite an increase in overall aviation losses in 1996, which rose 25% to $1.6 billion and is one of the worst years on record.

The Comair crash is not the first fatal crash of an Emb 120 plane, NTSB records show. On April 5, 1991, an Emb 120 flown by Atlantic Southeast Airlines crashed in Brunswick, Ga., killing all 23 people on board.

All 14 people aboard a Continental Express flight died when it crashed in Eagle Lake, Texas, on Sept. 11, 1991, when the turboprop broke apart during flight.

More recently, eight people died Aug. 21, 1995, when another Atlantic Southeast Airlines flight crashed in Carrollton, Ga., en route to Gulfport, Miss., from Atlanta.

An NTSB investigation determined the crash resulted from a fracture of the left propeller.

Aviation lawyers said the cause of the Comair crash will be critcal in deciding who will be named in any crash litigation. Who is sued "depends on what failed," said David Kupets, an attorney with Rapoport & Kupets in Rosemont, Ill., who represents air crash victims and their families. "The causes of the clash will determine whether Comair is the sole defendant or other defendants need to be brought in."

Other possible defendants include: any outsourced aircraft maintenance companies; aircraft manufacturer Embraer; or the manufacturers of any component of the plane that fails, such as the engine, propeller or hydraulic systems.

Also, if ice was a cause of the crash, the manufacturer of the anti-icing system may face liability. According to the NTSB, other planes in the area of the crash reported icing problems.

Besides whom to sue, lawyers will look at where to bring a suit.

"Some states have more favorable damages laws that provide for better verdicts to the plaintiff," Mr. Kupets said.

"My guess is the case will eventually be litigated in Detroit," said Jack Harrington, an aviation defense lawyer with Blatt, Hammesfahr & Eaton in Chicago, because that is where the crash occurred and where most of the witnesses live.

The lawyers said victims with high incomes and families generally receive the highest awards in crash litigation, based on lost future earning. They said awards could reach a few million dollars per person. Mr. Harrington agreed that with 29 fatalities, the awards could total $30 million to $90 million.

The lawyers said most of the cases will settle. "A lot of times one case will go to trial and the plaintiffs will test the waters. Both the plaintiffs and defendants will then look at that, and based upon that case, you will see a lot of settlements," Mr. Harrington said.

Stacy Shapiro contributed to this report.