IAI sues insurance cos over Amos 6 explosion

Amos 5 launch

The insurers have paid IAI only $215 million, due to a dispute about their legal liability.

Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) today filed a NIS 300 million lawsuit at the Central District Court against Lloyd's of London underwriters, the insurers of the Amos 6 satellite; Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL) subsidiary Peltours Insurance Agency; and UK broker Marsh.

The lawsuit involves the explosion of the Amos 6 satellite in September 2016 before its scheduled launch from Cape Canaveral, Florida, and the insurance compensation due to IAI from the satellite's loss. Following the explosion of the satellite and negotiations between the parties, the insurers paid IAI $215 million in compensation. A dispute remains between the parties over the NIS 300 million not yet paid to IAI, for which a lawsuit has now been filed.

The insurers main argument is that the satellite exploded during a test of the launching rocket's engines at a time when the satellite was connected to the rocket. They assert that they were not notified that the satellite would be attached to the rocket during the test, and that the insurance coverage should therefore be reduced by the increased rate of risk.

Through Advocates Ilan Sofer, Guy Wilf, and Jonathan Dori from the Goldfarb Seligman law firm, IAI is arguing that the explosion did not take place during a test of the engines, according to the statement by the SpaceX company, owned by Elon Musk, which was responsible for launching the satellite into outer space, and that by law and under the terms of the insurance policy, no notice was required, as claimed by the insurers.

IAI further asserts that it is entitled to receive full insurance compensation under a series of provisions in the Insurance Contract Law, and in view of the fact that notice of the test when the satellite was connected to the rocket was provided to all of the parties in the chain - the insurers, Peltours, and Marsh - who were notified of the test, and knew about it in real time.

In its statement of claim, IAI wrote, "The claim involves a grave case in which an insurer is disclaiming liability at the most difficult time for the policyholder, and is trying to invent in retrospect, with a lack of good will, various peculiar reasons why it is not obligated to pay the policyholder the full compensation due to it."

The statement of claim also asserts, "None of the respondents really disputes (IAI's) entitlement to full insurance compensation, but each of them is trying to put the blame on the other respondents and disavow its individual liability."

The Amos 6 was a communications satellite in the Amos satellite series developed by IAI for Spacecom Satellite Communications Ltd. (TASE:SCC), owned by Shaul Elovitch. The satellite was completely destroyed when the Falcon 9 launcher exploded two days before the satellite's scheduled launch into orbit around the Earth.

Since the Amos 6 was insured by IAI, the company received $215 million in compensation following the satellite's prelaunch explosion.

The communications satellite was designed to expand Spacecom's activity. For example, Facebook planned to use it to promote its venture for hooking up large areas in Africa to the Internet. Following the loss of the satellite before its launch, Spacecom contracted in recent months with US company Boeing to buy a replacement satellite.

The traumatic explosion of the rocket that was to have borne the Amos 6 into space led to the forming of a special professional committee headed by Ministry of Science, Technology, and Space director general Peretz Vazan to consider Israel's standing in the field of communications satellites.

The committee recommended a series of measures to preserve IAI's knowledge and production action in communications satellites. The committee's main recommendations were the allocating of tens of millions of shekels and a national multi-year program in which IAI would develop four communications satellites.

Published by Globes [online], Israel Business News - www.globes-online.com - on January 28, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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