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Terrorism and the Aviation Industry: Insights from the 1929 Warsaw Convention View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by UND Scholarly Commons (University of North Dakota) North Dakota Law Review Volume 78 Number 4 Article 2 2002 Terrorism and the Aviation Industry: Insights from the 1929 Warsaw Convention Speedy Rice Shana Fitzpatrick Follow this and additional works at: https://commons.und.edu/ndlr Part of the Law Commons Recommended Citation Rice, Speedy and Fitzpatrick, Shana (2002) "Terrorism and the Aviation Industry: Insights from the 1929 Warsaw Convention," North Dakota Law Review: Vol. 78 : No. 4 , Article 2. Available at: https://commons.und.edu/ndlr/vol78/iss4/2 This Article is brought to you for free and open access by the School of Law at UND Scholarly Commons. It has been accepted for inclusion in North Dakota Law Review by an authorized editor of UND Scholarly Commons. For more information, please contact [email protected]. TERRORISM AND THE AVIATION INDUSTRY: INSIGHTS FROM THE 1929 WARSAW CONVENTION SPEEDY RICE* SHANA FITZPATRICK** I. INTRODUCTION The terrorist acts of September 11, 2001, (September 11) crippled the domestic and international airline industry and its insurance carriers., Were it not for government intervention in the United States and abroad, air carriers would have been forced to shut down due to the insurance and financial crisis. 2 The insurance industry cancelled policies, and then drastically revised its offerings, exclusions, policy limits, and charges. 3 Because of this and the stated intent of the terrorist organizations to destroy or cripple the economies of the West, the aviation industry now faces a risk level not seen since its earliest days.4 Since its conception, aviation has established itself as one of the most essential means of transportation and has expanded the global financial market. The first strides were made in communication and mail carriage, but as aviation progressed, people and shipments of goods could travel greater distances in relatively short periods of time. In the late 1920s and early 1930s, the industry grew at an exponential rate. 5 In a mere five years, passenger carriage increased over 6000%, from 8679 passengers in 1927 to 522,345 passengers in 1931.6 Airplane manufacturing increased as commercial demand soared. In 1930, there were roughly 800 local "air- . Professor, Gonzaga University School of Law; B.A., Furman University, South Carolina, 1976; J.D., California Western School of Law, summa cum laude, 1986. Speedy Rice would like to thank Sasha of Podgorica, Montenegro, for his assistance in finding resources in his beautiful country. Research Assistant, Gonzaga University School of Law, J.D. expected 2003; B.A., University of Alaska, cum laude, 1999. 1. Andrew Ross Sorkin & Simon Romero, A Day of Terror: The Insurers; Reinsurance Companies Wait to Sort Out Cost of Damages, N.Y. TIMES, Sept. 12, 2001, at C6 [hereinafter A Day of Terror]. 2. Id.; Keith L. Alexander & Frank Swoboda, Deal Near on Federal Help for Airlines; $15 Billion in Grants, Loan Guarantees, WASH. POST, Sept. 21, 200 1, at A3. 3. Mark Pilling, Industry Seeks Mutual Insurance Deal, AIRLINE BUSINESS, Mar. 1, 2002, at ]I. 4. U.S. Congress, White House Agree on $15 Billion Airline Aid Bill (Sept. 21, 2001), available at http://www.aviationnow.com. 5. George W. Ball, Compulsory Airplane Insurance, 4 J. AIRL. 52, 53 (1933). 6. Id. NORTH DAKOTA LAW REVIEW [VOL. 78:713 taxi" services that utilized over 1000 airports around the country. 7 Individuals and cargo could travel long distances across numerous states and borders. There were as many as thirty-eight companies responsible for interstate air carriage of passengers, and approximately 8000 airplanes supported the aviation industry in the early part of the twentieth century.8 As the aviation industry grew, the concern over liability risks intensi- fied. In 1927, twelve individuals per hundred thousand passengers died in airplane-related accidents, and five years later, the figure dropped slightly to five deaths per hundred thousand passengers. 9 The relatively high number of fatalities concerned industry experts. Accidents were not uncommon, and the rise in air traffic litigation reflected this trend.10 In 1931, Colonial Western Airways received an unfavorable $89,000 judgment when one of its planes crashed and killed fourteen passengers." In a similar suit, Northwest Airways was ordered to pay $60,000 when one if its planes crashed and injured five people.12 Curtis-Wright Flying Service was also found liable for $25,000 in damages for the death of a single passenger in an airplane-related accident.13 These examples demonstrate that juries were awarding substantial damages to injured passengers. While the airline industry was showing signs of becoming financially independent, there were still concerns from industry leaders that liability risks would halt or substantially slow its growth.' 4 A string of well-timed accidents, or a single catastrophic event with numerous causalities, was not unrealistic.15 The resulting damage awards could quite possibly have bankrupted vulnerable airlines and negatively impacted the new aeronautical field. Furthermore, the standard of care in liability litigation was unclear, and varied by country and jurisdiction.16 Shareholders, inves- tors, insurance companies, and governments were apprehensive about finan- cially backing the industry because of its unclear liability and regulatory 7. Fredrick B. Rentschler, Important of Uniform Aeronautic Regulatory Laws of the Aircraft Industry, 2 AIR L. REv. 222, 223 (1931). 8. Id. 9. Id.;Ball, supra note 5,at 53. 10. See Ball, supra note 5, at 53 (discussing the death rate per airline passenger between 1927 and 1931). 11.Id. at 52 (citing Hagymasi v. Colonial W. Airways, 1931 U.S. Av. R. 7 (1931)). 12. Id.(citing Foot v. Northwest Airways, 1931 U.S. Av. R. 66 (1931)). 13. Id.at 53 (citing Williamson v. Curtis-Wright Flying Serv., 51 S.W.2d 1047, 1049 (Tex. Civ. App. 1932)). 14. G.L. Lloyd, Legal and Other Problems Confronting Aviation Insurance Underwriters, 1 J. AIRL. 543, 543 (1930). 15. Ball, supra note 5, at 53-54. 16. Fred D. Fagg, Jr., A Survey of State Aeronautical Legislation, I J. AIR L. 452, 452-53 (1930). 2002] TERRORISM AND THE AVIATION INDUSTRY 715 schemes.17 These concerns echoed internationally.18 Commercial leaders and aviation law experts theorized on possible liability schemes that would balance the needs of the infant industry with concerns for consumer safety and corporate responsibility. 19 As a result of these concerns, liability limits were proposed and adopt- ed in the Warsaw Convention of 1929.20 The international agreement reflected the Warsaw Convention's two goals: (1) to create uniform and predictable regulations governing interstate air carriage that promote com- pensation, and (2) to limit the large-scale liability threatening the young in- dustry. 21 Under this convention, air carriers were able to limit their liability unless they could prove all necessary and reasonable precautions had been taken. 22 However, injured plaintiffs could obtain unlimited recoveries if they could prove an accident was the result of an air carrier's willful misconduct. 23 The economic growth of the twentieth century was inextricably inter- twined with the development of aviation.24 This began after World War I, when the rise in popularity of both private and commercial airline travel started.25 In the seventy years since the Warsaw Convention was ratified, international liability laws and their limits have been severely modified with good justification. 26 Sentiments and the financial strength of the industry changed, and the liability limits imposed by the Warsaw Convention were seen as unfairly deferential to the airline industry. 27 Beginning in The Hague in 1955 and ending in Montreal in 1999, liability limits underwent significant changes, and were finally all but eliminated. 28 17. John R. Bullock, Jr., Note, Aviation-Liability of Owners of Airplanes to Passengers, I AIR L. REV. 407, 407-08 (1930). 18. Andreas F. Lowenfeld & Allan I. Mendelson, The United States and the Warsaw Convention, 80 HARV. L. REV. 497, 499-500 (1967). 19. Id. at 499-501. 20. Convention for the Unification of Certain Rules Relating to International Transportation by Air, art. 22, 49 Stat. 3000, 3019 (1934) [hereinafter Warsaw Convention]. 21. Domangue v. E. Airlines, Inc., 722 F.2d 256, 261 (5th Cir. 1984). 22. Warsaw Convention, supra note 20, art. 20. "23. Id. art. 25. 24. See Bullock, supra note 17, at 407 (stating that "aviation is destined to have a profound effect on the commercial life of the [United States]"). 25. Andre Kaftal, Liability and Insurance-The Relation of Air Carrierand Passenger, 5 AtRL. REV. 157, 157 (1932). 26. Pablo Mendes DeLeon & Werner Eyskens, The Montreal Convention: Analysis of Some Aspects of the Attempted Modernization and Consolidation of the Warsaw System, 66 J. AIR L. & COM. 1155, 1156-59 (2001). 27. Id. 28. Tamara A. Marshall, The Warsaw Convention: A Cat with Nine Lives Walks the Plank One More Time, 22 N. ILL. U. L. REV. 337, 339-41 (2002). NORTH DAKOTA LAW REVIEW [VOL. 78:713 On September 11, the terrorist acts were domestic in nature and would not have been subject to liability limitations even under the 1929 Warsaw Convention.2 9 However, the domestic and international effect on the airline industry was equivalent to the worst fears of the promoters of the Warsaw Convention-a series of high-profile air crashes that crippled the industry. 30 It quickly became clear that without government intervention and immediate assistance, including some type of a liability shield, most airlines would not have the foundation to navigate through the months following the attacks. 31 The federal government quickly passed aid packages that included air carrier liability limits. 32 Air carrier liability limits were not a new concept, but have been around since the fledgling stages of the aviation industry.
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