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INSIGHT: Space Travel and Liability—The Next Frontier

Aug. 3, 2020, 8:00 AM

While the world recently marveled at Elon Musk sending two astronauts into orbit as part of SpaceX’s public-private partnership with NASA, lawyers wondered what they always wonder about: liability.

When NASA retired its space shuttle fleet in 2011, it opened the door for private companies to fill a void in U.S. space travel. NASA’s unprecedented partnership with SpaceX raises critical issues as space travel evolves from a single shuttle occupied by NASA astronauts to multiple vessels carrying private citizens.

The final frontier of space travel is now moving at warp speed, pushing the limits of laws developed centuries ago, creating a rapidly expanding universe of legal issues and unknowns.

As space travel—and eventually space tourism—becomes commonplace, liability of this public-private partnership to third parties will merit substantial exploration and consideration, not just by scholars, but by those in the insurance industry.

Sovereign Immunity Weakening

Historically, the U.S. could not be sued without its consent pursuant to a legal doctrine called sovereign immunity. This might lead one to believe that SpaceX, or any other non-governmental entity boldly going where no one has gone before, would bear the brunt of the tort liability in a private or public-private partnership setting. While this is generally true, the U.S. also partners in sharing the risk.

The doctrine of federal sovereign immunity has weakened substantially over time with the U.S. Court of Appeals for the Seventh Circuit noting in a 1994 decision, Pullman Constr. Indus. V. United States, that the concept of federal sovereign immunity was “nothing but a condensed way to refer to the fact that monetary relief is permissible only to the extent Congress has authorized it.”

In a decision by the U.S. Court of Appeals for the Ninth Circuit the following year, Alaska v. United States, the court held that “despite the label ‘immunity,’ federal sovereign immunity is not best characterized as a ‘right not to stand trial altogether.”

Numerous other decisions have either limited the scope of federal sovereign immunity or held it to apply in a limited factual context creating a very fact-specific inquiry as to its application in any given situation.

FAA Plays a Role in Insurance

Fortunately, some of the initial concern and confusion as to who would be liable in a SpaceX-NASA partnership is alleviated by federal regulations passed to address the liability associated with space travel. 14 CFR §440.9 requires that any licensee (i.e., a recipient of authorization from the Federal Aviation Administration (FAA) to launch or re-enter a launch or reentry vehicle) must maintain certain insurance. This includes liability insurance that must comply with the requirements outlined in 14 CFR §440.9.

Essentially, the FAA has sole discretion to determine how much insurance each licensee must carry for third-party claims for bodily injury or property damage resulting from a potential space flight. This insurance requirement is capped at $500 million but may be less if the FAA deems a lesser amount “reasonable.”

These insurance requirements are coupled with mandatory claim waivers. The requirements apply not only to the licensee, but also to the licensee’s customers, in other words, those passengers who may someday pay SpaceX for leisure or commercial space travel. These customers “must enter into a reciprocal waiver of claims agreement under which each party waives and releases claims against all the other parties to the waiver and against any other customer.”

At least on paper, these waivers reduce the potential sphere of liability for SpaceX and NASA, eliminating nearly all liability between them and any parties willfully embarking in space travel.

Lastly, the U.S. expressly agrees to pay “successful covered claims…of a third party against a licensee [and a] customer…of each involved in licensed activities…to the extent provided in an appropriation law or other legislative authority….”

Although there are a number of additional qualifying and limiting conditions, with this the U.S. is agreeing to serve as excess coverage to the extent required by statute. This clarifies the issue of federal sovereign immunity to some extent, as the U.S. is placing itself in a position to pay in connection with a third-party claim for bodily injury.

The current liability framework in the U.S. will quickly unravel as more private entities look to the great unknown. The waiver system will not be sufficient or practical with a larger number of passengers, and the laws and regulations governing bodily injury and other forms of liability will need to develop and expand to address the myriad scenarios that could result in an insurance claim.

Similar to what has happened with car and air travel liability over the past century, these laws will need to evolve to address this new reality.

But if SpaceX’s recent accomplishments tell us anything, we will need these developments sooner than we think.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Eric Conn is a shareholder in the Segal McCambridge Detroit office and serves as chair of the firm’s Transportation practice group. He focuses his practice on transportation, premises liability, and product liability.

Geoffrey Leskie is a senior associate in the Segal McCambridge Detroit office focusing his practice on transportation, commercial litigation, and professional liability.

Thomas Lurie is an associate in the Segal McCambridge Detroit office focusing his practice on transportation and employment litigation.

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