
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, February 14, 1991                   TAG: 9102140585
SECTION: VIRGINIA                    PAGE: B-6   EDITION: EVENING 
SOURCE: Associated Press
DATELINE: ARLINGTON                                LENGTH: Medium

USAIR HAD CUT ITS INSURANCE ON DAY OF LOS ANGELES CRASH

Officials at USAir Inc. decided to cut insurance to its 423-airplane fleet effective Feb. 1, the date its Boeing 737 jetliner crashed at Los Angeles International Airport.

Effective the day of the crash, the carrier lowered its insurance from $33 million to $16 million, officials said.

USAir's decision to reduce its coverage was prompted in part by a sharp increase in premiums. Insurance companies that cover the world's commercial fleets are struggling to recoup years of losses.

USAir's premium rate had jumped from 4.84 cents for every $100 insured to 10.81 cents, officials said.

The carrier was also looking at another reality, David Shipley, spokesman for the carrier, said. Declining traffic and a massive recession in the airline industry had forced the carrier to delay deliveries of new aircraft and reduced the likelihood that a lost aircraft would be replaced, he said.

USAir then decided that buy what is called "hull" insurance for the book value of the fleet, which is about $9 billion rather than its replacement value of $12 billion. The net savings was approximately $3.3 million annually, according the carrier.

Airlines usually carry two types of insurance - hull insurance, which covers the aircraft, and liability, which covers the cost of paying damages in an accident such as the collision in Los Angeles. USAir cut its liability insurance coverage also from $1 billion per occurrence to $850 million.

The airline's insurance cuts were reported earlier this week in the trade publication Business Insurance.

It is not immediately clear if the carrier will suffer any actual loss due to the reduction in insurance coverage. A preliminary investigation reveals that an air traffic controller cleared the 737 to land on a runway occupied by a Skywest commuter plane. That suggests that a portion of the blame will fall upon the federal government.

Jonathan M. Hoffman, an aviation attorney based in Portland, Ore., said that in air crashes, most passengers receive prompt settlements, and then the airliner and the Federal Aviation Administration, which employed the controller, decide how much each pays.

by CNB