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In wake of Lockhart balloon crash, a legal battle looms

Even as investigators continue to piece together what went wrong when a hot air balloon caught fire and slammed into a field outside Lockhart two weeks ago, killing all 16 people aboard, questions about liability will move front and center in the tragedy’s aftermath.

The country’s worst balloon crash left families without children, parents, breadwinners. All the victims lived in Texas, including a couple from Wimberley.

Heart of Texas Hot Air Balloon Rides, the balloon’s owner, was insured, but the policy likely involved coverage far less than the families of the deceased might hope for, the American-Statesman has learned.

Standard balloon operator insurance policies — the type of policy carried by 95 percent of operators, according to the country’s biggest balloon insurer — have limits of $100,000 per person for bodily injury, with a typical cap of $1 million per episode.

That means the families of the 16 people who died in the wreck, including the pilot’s family, might have to split a total payout of $1 million.

Robert Welker, whose San Diego-area firm insured Heart of Texas Hot Air Balloon Rides, declined to comment.

Heart of Texas Hot Air Balloon Rides is owned by the mother of the balloon pilot, Alfred “Skip” Nichols, said Eric Weiss, a spokesman for the National Transportation Safety Board.

Messages left with the company by the Statesman weren’t returned.

There is no federally mandated aviation insurance and none in the Texas insurance code, according to a spokesman for the Texas Department of Insurance. Some states, like California, mandate commercial aviation insurance.

“Insurance coverage will matter enormously,” said Charles Silver, who teaches liability issues at the University of Texas Law School. “I fear that there is far too little of it to compensate the victims’ families. Shortfalls are incredibly common. Like pretty much all other states, Texas allows most businesses that operate risky ventures to carry far less coverage than needed to satisfy their maximum liabilities.”

A million-dollar insurance policy “just doesn’t go very far,” said Mark Hanna, spokesman for the Insurance Council of Texas, a trade group. And the insurance company could balk at payouts if the balloon operator misrepresented himself.

Nichols had been previously convicted four times of drunken driving and for drug distribution. The driving offenses prevented him from driving a car but not operating a balloon.

Federal investigators have said there’s no indication at this point that alcohol played a role in the crash.

Since the crash, one major balloon operator insurer has decided to require commercial balloon operators to submit to a drug test on an annual basis, said Bruce Lavorgna, spokesman for the Central Texas Ballooning Association.

Investigating liability

Investigators have yet to determine the cause of the crash — such a determination could take months — but they believe Nichols was aiming to quickly descend through a break in clouds, apparently without realizing there were power lines below, The Wall Street Journal has reported.

Investigators have already said there is “no evidence of pre-existing failures, malfunctions or problems” with the balloon involved in the crash.

Still, families looking for some kind of compensation beyond the pilot’s insurance or the life insurance of the victims to replace lost salaries or to deter future negligence will investigate whether liability extends beyond the pilot.

If the balloon had any defects that were recently repaired, for example, the repair person could be on the hook, said Michael Sean Quinn, an Austin attorney and authority on insurance law. He isn’t involved in the Lockhart incident.

“The balloon didn’t just fall out of air; it ran into wires,” Quinn also noted. “There could be lawsuits brought against the owners of the wires — accusations they did something wrong or failed to do something right.”

Clara Tuma, a spokeswoman with the Lower Colorado River Authority, which owns and operates the power lines in the area, said the utility “follows all applicable (federal) regulations pertaining to aviation markings on transmission infrastructure. In this particular location, aviation markings are not required, given its distance from the nearest airport.”

Claims could run into the seven or eight figures — but the families will be able to collect only if they can show liability beyond the balloon operator, and if the liable parties have money or insurance to be collected, Quinn said.

“In all likelihood most of the cases will be settled — it all depends on who’s got money,” said Quinn. “If the owner of the balloon has all the money in the world, the cases will drag on.”

Austin attorney Michael Slack, an expert in aviation-related personal injury cases, said he expects families to retain attorneys within the next two months. Settlements could be struck any time in the next 18 months to five years.

The insurance situation can mean “potentially no real recovery back,” said Dallas-based plane crash lawyer William Angelley, who isn’t representing any of the families of the Lockhart balloon victims. “Families are most likely going to be limited by this small policy. It’s a horrible, horrible deal.”

And the pilot’s own history — including at least one previous settlement involving a hard landing a couple of years ago — mean that it will be more difficult to collect from third parties.

A ‘sad conversation’

Two decades ago, Slack, who doesn’t represent anyone in the Lockhart case, was involved in another hot air balloon case.

During a trip to Phoenix, his client, an Austin businessman, had gone on a balloon sightseeing tour. The balloon made a hard landing; as it dragged along the ground over a distance longer than a football field, according to a federal accident report, the gondola, bearing at least a half-dozen people, tumbled. There was a conflagration, and at least one person’s hair caught fire; two people died, and Slack’s client, whose name he declined to release, was seriously burned.

But when it came time for Slack’s client and others to collect money, there was little: The balloon operator’s insurance was scant, and no one other than the operator appeared to be at fault.

“If it’s the balloon operator who has exclusive legal responsibility for the outcome (of the incident), that’s a terribly tragic and sad conversation” to have with a client, Slack said.

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