Airport
Council
International
The 16th Annual Risk
Management Conference
January 14 – 16, 2015
San Diego, CA
Avoiding Pitfalls and
Liabilities:
The Standard Ground
Handling Agreement
and What it Means to You
Christopher B. Kende
Cozen O’Connor,
45 Broadway, Suite 1600
New York, NY 10006
2
Roadmap
• Introduction and General Purpose of the
SGHA
• Description of structure and various
parts
• Discussion of liability and indemnity
provisions running between ground
handlers and carriers
3
• Pitfalls and problems in connection with
litigation between ground handlers and
carriers
• Conclusions and suggestions for
possibly simplifying procedures involving
disputes between grounds handlers and
carriers
4
Introduction
• The SGHA is part of the Airport
Handling Manual (AHM), promulgated
by the International Air Transport
Association (IATA), an international
trade body that serves to promote and
develop contract standardization, among
other things, among the global air
transport industry
5
• The SGHA is found at chapter 810 of
the AHM
• The SGHA has been in effect for many
years and has been subject to a number
of amendments, the most recent being
in 2004, 2008 and 2013
6
• Main purpose of the SGHA is to
standardize procedures with regard to
ground service providers (GSPs) and to
specify the functions of the handling
services required
7
• The term “standard” in the title of the
SGHA essentially means that the
agreement cannot be modified;
however several amendments, as
discussed further below, have impacted
the standard terms
8
• In addition to standardizing practices
and procedures, the SGHA also defines,
limits and controls the various
responsibilities running between carriers
and GSPs, in the event of death or injury
of individuals, including employees of
the GSPs or airlines, and the property of
both
9
• The liability and indemnification
provisions will be the focus of this
presentation
10
Structure of the SGHA
• The SGHA is made up of three parts:
– A main agreement
– Annex A
– Annex B
• Annex B can be amended and adapted
to meet the needs of the parties
• If there are differences between the
standard agreement and the annexes,
the language in the annexes will control
11
• With regard to liability issues, there is a
fourth component provided for in Annex
B, entitled “Liability and Indemnification
Agreement”
• Although the SGHA generally runs
between a terminal operator and a
ground handler, the liability and the
indemnification agreement generally
runs directly between the GSP and the
carrier
12
• The Liability and Indemnification
Agreement specifically implements the
liability provisions of Annex B, as will be
discussed further on
13
The Main Agreement
• The main agreement, which is the
standard form promulgated by IATA,
covers the following areas:
– Definitions
– Provision of services
– Fair Practices
– Subcontracting services
– Carrier representation
– Standard of work
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– Remuneration
– Accounting and settlement
– Liability and indemnity
– Arbitration
– Stamps, duties and registration fees
– Duration, modification and termination
• The focus of this discussion will be the
liability and indemnity provisions found
in Article 8
15
Overview of Liability and Indemnity
Provisions in the Main Agreement
• Article 8 defines the liability and
indemnity obligations running between
the GSP and the carrier
• Section 8.1 provides that the carrier may
not make any claim against the GSP
and shall indemnify the GSP against any
legal liability for claims or suits (including
costs and expenses, which means legal
defense costs) in respect of:
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– Delay, injury or death of persons carried by
the carrier
– Injury or death of any employee of the
carrier
– Damage to or delay or loss of baggage,
cargo or mail
– Damage to or loss of property owned or
operated by or on behalf of the carrier and
– Any consequential loss or damage
17
• The indemnity obligation does not apply if it
can be shown that the GSP acted
intentionally or recklessly with the
knowledge that the damage, death, delay
or injury would probably result
• The indemnity obligation requires that the
GSP must notify the carrier of any claim or
suit “without undue delay” and must also
furnish the carrier with any required
assistance in the defense of the claim
18
• Finally, the indemnity provides that, in the
event a court determines that the
limitations and defenses under the
Montreal Convention do not apply, the
indemnity itself is subject to those
limitations and defenses
• In other words, the carrier will be able to
invoke the limitations and defenses of the
Montreal Convention, even where they
would not normally apply, because the
injury, death or delay was caused by the
GSP 19
• Paragraph 8.2 precludes the carrier from
making a claim against the GSP with
regard to damage, death, delay, injury or
loss to third parties caused by the
operation of the carrier’s aircraft as a
result of an act or omission by the GSP
unless, again, the injury or death was
done with intent to cause damage or
recklessly with the knowledge that such
damage would probably result
20
• Section 8.3 allows the carrier to assert
any defense or limitation under the
contract of carriage with regard to any
claims which the carrier must indemnify
under Section 8.1
• Section 8.4 limits the ability of the GSP
to make a claim against the carrier and
requires it to indemnify the carrier for
liability for claims or suits, including
defense costs, for:
21
– Injury or death to any employee of the GSP
its servants, agents, and some
subcontractors and
– Damage to or loss of property owned or
operated by or on behalf of the GSP and
consequential damages as a result thereof,
all of which arise from any act or omission
of the carrier in the performance of the
SGHA, unless those acts were done with
the intent to cause damage or were carried
out recklessly
22
• Section 8.5 provides that the handling
company will be required to indemnify
the carrier for physical loss or damage
to the carrier’s aircraft caused by the
GSP’s negligent act or omission (note:
simple negligence is a basis for
indemnity here, not gross negligence)
23
• Section 8.5, however provides that the
handling company’s liability will be
limited to an amount not exceeding the
deductible of the carrier’s hull or all risk
policy, which shall not in any event
exceed $1.5 million, and that any loss
below $3,000 shall not be indemnified
24
• Finally, Section 8.3 specifies that the
carrier shall have no ability to claim
against the handling company for any
and all consequential loss or damage
“howsoever arising” as a result of
damage to carrier’s property
25
• Paragraph 8.6 (which appears to have been
added in 2008) further provides that the
handling company will be required to
indemnify the carrier for loss or damage to the
carrier’s cargo, caused by a negligent act or
omission of the handling company1
• However, any liability of the GSP is limited to
the terms of the Warsaw Convention, to wit,
17 SDR per kilo or the actual compensation
paid out by the carrier, whichever is less, with
a maximum limit of $1 million
26
1This is an exception to the limitation on claims for consequential damages
• Further, any cargo claim must be
submitted within the jurisdictional time
limits of the Warsaw Convention, that is,
two years
27
Annex A
• Annex A essentially provides for the
services to be performed by the GSPs
• It has eight sections which describe the
categories of services which GSPs are
normally expected to provide. It does
not contain any provisions regarding
liability or indemnification and is not
relevant to this discussion
28
Annex B
• Annex B is often considered the “real
agreement” since it actually sets forth
the contract terms relating to ground
handling, including liability and
indemnity obligations
• Although the denominated title is
“Standard Ground Handling Agreement
– Simplified Procedure”, it is far from
that
29
• If anything, in this litigator’s view, the
liability and indemnity provisions set
forth in Annex B, which are meant to
supersede in part the liability provisions
in the main agreement, only provide an
extremely fertile ground for dispute and
litigation
30
• Paragraph 12 of Annex B, entitled
“Indemnity and Limits of Liability”,
specifically provides that,
notwithstanding the provisions of the
Main Agreement certain terms will be
substituted
31
• Paragraph 12.2 requires that the handling
company (GSP) indemnify, defend and hold the
carrier harmless from claims, including defense
costs, which may be suffered or accrued by or
chargeable to the carrier due to loss or damage
to property of any person, except property
owned or leased by the carrier, and operated by
the handling company, or injury or death of any
person arising out of the negligence or willful
misconduct in the handling company and the
furnishing of services pursuant to the
agreement
32
• The handling company is not liable to
the carrier for consequential or indirect
damages of any kind, and the carrier
agrees to waive, defend and hold the
handling company harmless from any
such damages or claims
33
• The carrier agrees to waive, defend and
hold the handling company harmless
from any claims or damages on account
of loss or damage to property owned or
leased by the carrier and operated by
the handling company, whether or not
such loss or damage arose out of the
acts or omissions of the handling
company
34
• Further, the handling company will be
responsible for damage to property
owned or leased by the carrier and
operated by the handling company,
caused by the gross negligence or willful
misconduct of the handling company
35
• Paragraph 12.13 specifically requires
that the carrier agree to the liability and
indemnity obligations to the handling
company under Article 8 of the main
agreement (even though that article is
amended by Article 12 of Annex B) for
all claims with a maximum limit of
liability of $1,500,000
36
• Paragraph 12.13 further requires the entry
into a specific agreement between the
carrier and the handling company
implementing the terms of paragraph 12.13
• That agreement specifically provides that the
liability provisions will be governed
exclusively by Article 8 of the main
agreement as published by the IATA and
that the liability referred to in paragraph 8.5
of Article 8 is limited to $1,500,000
37
• Finally, the separate agreement
provides that the handling company is a
specific third party beneficiary of the
terms and conditions of paragraph 12 of
Annex B
• As can be seen by the foregoing, it is
virtually impossible to read Article 8 of
the main agreement and Article 12 of
Annex B together in a consistent way
38
• The only thing that appears clear is that,
under no circumstances, can the
handling company be responsible for
consequential damages incurred by the
carrier unless it is guilty of willful
misconduct or recklessness
39
State Law Considerations
• Many states have limitations on the
ability to indemnify parties, particularly if
the indemnitee is negligent
40
• For example, New York General Obligations
Law, Section 5-322-1 provides that a
covenant, promise or agreement “in
connection with or collateral to a contract or
agreement relative to the construction,
alteration, repair or maintenance of a building
structure, appurtenances or appliances” which
purports to indemnify and hold harmless the
indemnitee against liability for damage for
bodily injury or property is void against public
policy where the indemnitee is negligent
41
• The section generally applies to
indemnification agreements between
contractors and subcontractors in the
construction industry
• However, there are a number of cases in
New York which would tend to support the
proposition that aircraft maintenance is
considered encompassed by this provision
42
• See e.g. Bishop v. Port Authority of N.Y.
& N.J. 170 A.D. 2d, 565, 566 N.Y.S. 2d
341 (App. Div, 1st Dept.,1991) (Airline
could not obtain contractual
indemnification to the extent its own
negligence contributed to the injured
plaintiff’s accident)
43
• Therefore there is a reasonable chance
an indemnity provision in favor of a
ground handler, involving either
maintenance or service to an aircraft
might be void against public policy under
New York law, where the GSP is wholly
or partially negligent
44
Issues for Consideration in Litigating
Disputes Under the SGHA
• Report of “incidents” and/or “accidents”
to the FAA
• Willful misconduct or gross negligence
• Use of adjusters and experts
• Discovery issues, particularly in
connection with foreign carriers
• Issues relating to spoliation of evidence
• Incremental costs, estimates and
consequential damages
45
General Conclusions
• Disputes under the SGHA can be
expensive, time consuming and complex
• Issues of indemnification, gross
negligence and applicable state law can
frequently subsume the merits
• By definition, these disputes involve
amounts equal to or under $1.5 million
46
• A “loser pays” clause might discourage
frivolous suits and encourage alternative
forms of resolution
• Mandatory ADR procedures, such as a
requirement that chief executives of the
GSP and carrier confer prior to the
initiation of litigation, as well as
mandatory mediation clauses, may well
reduce costs and increase the likelihood
of amicable resolution of such disputes
47
• GSPs and carriers should be viewed as
business partners and many disputes
should be resolved on the basis of a
business relationship rather than who
has the best or most aggressive
attorney
• This is especially true in the context of
aviation safety
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QUESTIONS?
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THANK YOU FOR YOUR ATTENTION.
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