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Harrah's Entertainment Inc. takes a very active hand concerning insurance, aircraft maintenance and pilot training when it comes to independent charter flight companies that want to bring in groups of people to a Harrah's facility.
Harrah's risk management department tracks dozens of charter operators that fly planeloads of guests to its properties more than 1,000 times each year, said Marc Kamler, manager of insurance and risk services for the Memphis, Tenn.-based gaming company.
The risk management department also purchases first-dollar hull and liability coverage for Harrah's own aircraft from a New York-based underwriting pool, U.S. Aircraft Insurance Group. Harrah's owns six aircrafteach of which costs tens of millions of dollarsthat are capable of transcontinental flights. The aircraft mainly transport Harrah's employees, but occasionally they also transport guests.
A limited number of insurers provide hull and liability insurance for such a fleet, Mr. Kamler said. But Harrah's Las Vegas-based aviation department helps ease coverage renewals by maintaining a top-notch operation that puts underwriters at ease, Mr. Kamler said.
The risk management department takes USAIG underwriters, and any other insurers providing a renewal quote, on a tour each year to examine the flight operations.
"I can take them out there unannounced any day and not have to worry," Mr. Kamler said. "They run a tight ship."
The annual insurer tours are mandatory, added Lance J. Ewing, Harrah's vp-risk management.
For private charter flights, the risk management department works to mitigate potential liability that could arise if an aviation accident were to occur involving a charter operator that sold a trip to one of Harrah's casinos.
Liability could follow if the operator used one of Harrah's brand names to market the excursion. Additionally, managers for individual Harrah's properties often provide charter flight groups with incentives, such as hotel room discounts or free meals, Mr. Kamler said.
To mitigate any potential liability, the risk management department, along with its aviation brokerWillis of Illinois, a unit of Willis Group Holdings Ltd.maintains a list of charter operators that Harrah's has approved. Plane type and age are among factors determining whether an operator's aircraft makes the list.
Harrah's also requires that charter flights provide a certificate of insurance showing appropriate liability coverage limits and naming Harrah's as an additional insured.
The minimum insured liability limits are set at about $4 million per passenger seat, an amount based on historical loss records for aviation accidents, Mr. Kamler said.
While the charter operator's insurance would provide primary limits in case of an accident, Harrah's insurance purchased from USAIG would come into play above the charter's coverage.
As a result, Harrah's teams with USAIG to set insurance requirements for charters, Mr. Kamler said. Above the limits provided by USAIG, Harrah's own excess general liability coverage would apply.
Charter flights that let their coverage lapse "immediately get yanked off the approved list until they prove to us they have renewed their insurance," Mr. Kamler said.
After all, a lack of sufficient insurance can be a sign of other problems. "If they are placing their insurance on the cheap, and not really putting in what the market sees as standard (coverage), where else are they cutting costs?" Mr. Kamler asked rhetorically.
To ensure charter operators are not cutting corners in areas other than insurance purchasing, Harrah's sets plenty of additional requirements and tracks pertinent data. The company conducts "background audits," for example, to make sure charter pilots have a certain level of training and flight time. If the operators are cited for violating Federal Aviation Administration rules, "we get notified," Mr. Ewing said.