Liability of insurance contracts: Spacecraft
From 1 December 2014 the Finance Act 1994 was amended to include the following:
Schedule 7A paragraph 7A(1) which exempts a contract:
…if it relates only to the operation of a spacecraft and is a contract of general insurance of a relevant class.
Paragraph 7A(2) defines a relevant class:
…if it insures against risks arising from or in relation to
(b) goods in transit,
(c) fire or natural forces,
(d) damage to, or loss or malfunction of, property, or
(e) general liability to third parties,
(and no other risks).
Paragraph 7A(3)(a) and (b) of Schedule 7A defines:
(a) the ‘operation of a spacecraft’ means the launch, flight, orbit or re-entry of a spacecraft, and
(b) ‘spacecraft’ includes all component parts of its launch vehicle.
Definition of risks
‘Goods in transit’ only covers those goods damaged whilst the spacecraft is in launch, flight, orbit or re-entry.
‘Malfunction’ includes the failure of a spacecraft.
‘General liability to third parties’ includes:
- Third party liabilities arising directly from the operation of a spacecraft. For example, a spacecraft colliding with another whilst in orbit or causing damage or injury to either property or persons during launch,
- Liabilities of the carrier (that is, the spacecraft owner) in respect of the carriage of the cargo to the cargo owner and carrier risks relating to passengers.
‘General liability to third parties’ does not include:
- Any consequential third party risks of, or relating to, the cargo owner. For example, any liability the cargo owner may have to other third parties in the event the cargo is damaged.
- Miscellaneous financial loss of any third party. For example, the liability for the financial losses of companies who use the functionality of a satellite (for example to provide broadcasting services).
Business interruption cover
The exemption extends to business interruption cover taken out by the spacecraft owner or operator, that is for the loss of business revenue arising from damage to or malfunction of the spacecraft after launch (but not for any third party business interruption liability).
Policies covering risks arising prior to launch
This exemption applies only to cover for risks arising after launch (as defined below) and does not therefore apply to any risks relating to the construction of the spacecraft. Where, however, a policy relates to the transportation of a spacecraft from its place of construction in the UK to a non-UK launch site, from a place outside the UK to a launch site within the UK or from a construction site outside the UK to a launch site also outside the UK, cover relating to loss of or damage to the spacecraft will be exempt under the exemption for contracts relating to goods in foreign or international transit.
Definitions of ‘operation of a spacecraft’ and ‘spacecraft’
‘Launch’ includes the start of the launch process and intentional and terminated ignition.
‘Orbit’ includes the control of a spacecraft whilst it is in orbit.
‘Spacecraft’ covers man-made objects that are intended to travel into space (manned or otherwise) and includes, for example, satellites, cubesats, rockets and probes. Exemption applies to both the craft itself and its launch vehicle, including all their component parts.