FULLERTON : Insurers Must Pay for Satellite Failure

A Superior Court jury has found that three aerospace companies were not responsible for the failure of a $45-million telecommunications satellite, deciding that three insurance firms are not entitled to get back the $5.6 million they paid to cover the loss.

After a five-month trial, the panel decided Tuesday that McDonnell Douglas Corp., Morton Thiokol Inc. and Gardena-based Hitco were not negligent in the design and construction of the Palapa B-2 satellite, which was deployed from the space shuttle on Feb. 6, 1984.

The satellite, which was owned by the government of Indonesia, was intended to orbit at 22,000 nautical miles above Earth, but only went about 600 miles because the upper-stage booster rocket burned out prematurely. Another satellite, Westar VI, which was owned by Western Union, suffered a similar failure when deployed on the same mission three days earlier.

Both satellites were retrieved by the space shuttle in November, 1984.

Because Indonesia agreed to assume the risk of satellite failure, it obtained $75 million in insurance from more than two dozen companies, attorneys said. Three of those firms--Lexington Insurance, Northbrook Excess and Talbot, Bird & Co., which paid a total of $5.6 million--sued the manufacturers for repayment, contending that the cost should be borne by the firms that built the spacecraft and its engine.

The defendants contended that the satellite was well within industry standards and pointed out that 18 similar satellites were successfully launched before the Westar VI and the Palapa B-2. They also argued that space missions would be gravely curtailed if all parties refused to share the risk.

By a 10-2 vote, jurors absolved McDonnell Douglas, which built the upper stage of the satellite; subcontractor Morton Thiokol, which designed and built the rocket motor, and Hitco, which made the motor’s nozzle exit cone.

The panel did find, however, that Morton Thiokol should pay $37,099 for breaching a warranty in the contract.

McDonnell Douglas, Morton Thiokol and Hitco were also sued by insurance companies for the failure of the Westar VI, but the case was dismissed. It was believed to be the first lawsuit over property damage in space. Upholding the dismissal, the 4th District Court of Appeals ruled last September that the sales contract between Western Union and McDonnell Douglas precluded the insurers from recovering their money.