ALTOONA, Wisconsin USA — Startling news today from the National Assocation of Rocketry as Sport Flyers, the entity that provide liability insurance to thousands of NAR members, announced it would be closing its doors for good.

To NAR Sections and Presidents:

It is my sad duty to inform you that Sport Flyers of America (SFA) intends to cease business operations as soon as practical, and to cancel our 2000 insurance coverage for the remainder of 2000. Cancellation is likely to be effective as of March 31, 2000.

Let me give you some background on the events that led up to this unfortunate occurrence -- plus an encouraging report on what I and your Board are hard at work doing to reinstate your coverage.

Why did this happen?

SFA was a family-run business. Approximately three weeks ago, SFA president Elliot Janas collapsed and died on a business trip to Seattle.

In addition, last Thursday, SFA was served with another lawsuit from the Academy of Model Aeronautics -- at least their second, possibly their third.

The family heirs decided to exit the operation and move on. While the option was open to them to simply cease selling insurance for the remainder of 2000, honor what insurance had been sold, and close out the policy at the end of the year, they simply decided to exit.

I expect to receive formal notice of the cancellation this coming week, and believe the likely effective date will be March 31, 2000.

What about other rumors I've heard?

During the past 45 to 60 days, I've received a wide variety of email and phone calls wondering if NAR insurance was still in effect. I've had people come to me with rumors to the effect that the NAR insurance didn't cover HPR, or that it wasn't in effect, or that the Tripoli Rocketry Association's search for their insurance led to the cancellation of our coverage. None of the above are true.

a. NAR 2000 insurance coverage was in effect. The 2000 premium had been paid by SFA to the insurance underwriter, GAINSCO.

b. NAR insurance covered all rocketry activities conducted under the NAR Safety Codes.

c. Tripoli's insurance search extended to contacts with GAINSCO. However, GAINSCO was not interested in writing additional hobby coverage at that time, due to a number of model-airplane-related losses they had incurred. However, they were willing to renew SFA's policy for 2000, and did so. Tripoli's search for insurance had absolutely no influence on SFA's decision to exit the market.

If you hear of more rumors floating around about the cancellation, please let me know. It's important for NAR members (and others) to know the complete story, and not blame either our activity or other organizations for the loss of coverage.

The bottom line is that a family business is shutting down -- bad for us, but probably good for them - and we simply got caught in this unfortunate death and lawsuit.

Did the NAR ever have coverage in 2000?

Yes. The coverage will extend from January 1, 2000 through the last effective date to be set by SFA -- most likely March 31, 2000. This means if you have launches scheduled prior to the cancellation date, you and your site owners will be covered by SFA insurance.

What about the payments we've made?
Do we get any of our money back from SFA?

First off, I don't expect either members or Sections to be out any money paying for coverage they didn't receive.

Any member or Section whose membership application or charter has been accepted by the NAR prior to this date and has paid for insurance will be insured until the cancellation date of our current policy.

It's my expectation that the NAR Board will be inclined to say to members and Sections, "Since you only received 25% of the coverage we expected to provide you, we'll credit you for the unspent 75% of your coverage. We'll either apply that against a new policy or refund the difference." We're certainly not looking to deny NAR members what we've promised them if there's any way humanly possible to do that. I will push the NAR Board hard to credit members for the "unused" portion of their insurance premium, regardless of whether or not we recover cash from SFA, and you shouldn't have to pay twice for coverage.

That having been said, the NAR itself may or may not be getting some money back from SFA, but in either case the amount is expected to be relatively minor, and nothing that would seriously affect our Association finances.

Contractually, under the terms of the policy, if cancellation had been by GAINSCO, premiums would be rebated on a pro rata basis.

Convesely, if the "First Named Insured" (i.e., SFA) cancels, the policy says the rebate "may be on a pro rata basis," implying it could be something else.

To date, the NAR has paid SFA roughly $13,500 in individual and Section premiums. Until we get more formal notice from SFA, we'll be holding back any further payments to SFA. Our initial computations show that this is in the ballpark of what we would have paid SFA anyway for one quarter's worth of coverage for all our paid members and Sections.

If you've paid NAR HQ for insurance, that coverage legally remains effective from the date your payment reached NAR HQ. Don't worry that HQ's non-payment means no coverage. We're simply a creditor of SFA in the short run.

When I find out from GAINSCO or SFA about the status of any rebate, I'll pass this information along to members.

Do you have any contacts in the insurance business or are we starting from scratch?

Some groundwork had been laid over the past two years in this area.

In 1998, I undertook a comprehensive search for insurance using the directory of liability insurance providers from the American Society of Association Executives (ASAE). The ASAE is a non profit organization supporting mostly professional staff of larger non-profits. I joined them shortly after becoming NAR president because I was looking for good places to steal management ideas.

My mailing to their insurance broker and underwriter list covered about 45 firms. One agency expressed interest and sought out coverage, but was unable to complete details in time for us to shift from SFA. I touched base with them again in the fall of 1999 as a potential backup to SFA. Many of you raised legitimate questions about our coverage in light of the earlier judgement against SFA obtained by the AMA. When the legal health of SFA became clear to me, I politely disengaged with the other agency, leaving doors open for future business.

Now I've asked that agency to seek out new insurance for the NAR. They're already up to speed on what we do, how many members, clubs, and launches we have, and so on -- all the basic data they'd need to begin a risk analysis and underwriting proposal.

We also have the option to explore using GAINSCO through SFA's former agent. I've not yet fully explored that avenue simply because that agent is so immersed in the details of SFA's shutdown that he can't take on new work for us until he's past some of theirs. The agent does believe there might be a market for the kind of insurance coverage we need, having been involved with SFA's policy since its inception in 1991, and has good contacts within GAINSCO's underwriting group.

I believe either of these two agencies can obtain coverage for us.

Why don't we simply use the Tripoli coverage?

First off, that policy is written specifically for their organization (i.e., Tripoli is the "first named insured").

More importantly, there are some critical differences between the old NAR policy and the Tripoli policy as described on their website -- differences that I'm not certain would satisfy many NAR Sections. (See discussion about policy elements below for more details).

We do however plan to use the lessons learned from our own insurance experience and the electronic debates over the terms of Tripoli's new coverage to help us find a policy that gives us what NAR members have said they want.

But the flying season is upon us, Bunny.
What are we going to do for insurance, especially for our fields?

Until I get a solid proposal to consider, I can't say exactly. I promise you I'll be making this our top priority until a good solution is found.

Assuming, however, that the agencies mentioned above do their homework, I think the worse-case scenario is that NAR Sections and members may be without coverage for a maximum of 30 to 45 days.

Based on my conversations since last Friday with both agents, I'm 100% convinced we can find adequate, affordable coverage for our launches in time to support most (perhaps even all) of the 2000 flying season.

What kind of coverage are we going to get?

I have some ideas about what I think people want in their rocketry insurance policy. I've told the agents the following features are important:

1. Site owner coverage is absolutely essential.
2. We'd prefer member coverage to be optional.
3. Member coverage should be "continuous" -- that is, synched up with a member's personal renewal month instead of January to December.
4. We want to operate ranges open to all flyers without regard to the status of their insurance.
5. Coverage should be for all sponsored activities: launches, meetings, conventions, and so on.
6. Primary coverage is for liability and property risks; medical coverage is considered a "very nice to have," but not essential.
7. The minimum insurance coverage needed is $2 million aggregate, $1 million occurrence.
8. The policy should cover member-to-member accidents.
9. Site owner coverage should be provided without site owners having to sign any documents.

If my suggested answers to what should be in a policy aren't what you and your Section members think should be in there, please let me know. If I've left something out, let me know that too.

Do you really think you can get coverage that does all that?

We don't know until we ask. If we don't ask, we're going to get whatever an insurance agent or underwriter thinks we want, or we'll get some off-the-shelf offering from the liability underwriter which might not meet our needs.

I thought it best to give our suppliers some idea of what coverage we want, and let them counteroffer as to coverage, rates, deductibles, restrictions, limits, and so forth.

If we could get all we wanted but it would cost us $200,000 annually, then we'll start making tradeoffs.

OK, even if I'm still concerned, I understand where you're going.
What should I do in the meantime?

First, share this information with your Section members and other NAR members you meet. I hope it's clear that we understand the urgency with which we need to move, and the professionalism of the folks we're working with. While we need to work quickly, it's not a panic situation in my humble opinion.

Second, let's seize the lemon we have (SFA shutting down) and make lemonade (a new, hopefully better policy) out of it. Help me out by telling me (so I can tell our insurance providers) what elements are most important in your mind for a new policy. Tell me what you can't live without in insurance. Tell me what you can live with, and what tradeoffs you're willing to make.

Third, please be patient with the process. I know full well how critical this aspect of NAR service insurance is, and you should understand that I'm pedaling as fast as I can. As soon as we have solid information, I'll be passing it along here to let you know.

You're welcome to contact me via email at my address below with your questions, ideas and concerns. We'll certainly keep all your comments in mind as we strive to solve this problem.

Any final thoughts, Bunny?

Well, I'm certainly sorry to have to had to bring you this message. And I'll report back here not later than Friday, March 3 with a status update.

Prior to this setback, it was my expectation that the NAR was poised for a record year in 2000. We've now got more members, more Sections, more programs, more volunteers, and more financial resources available to us than almost any time in our history. We've got a good solid legal position to take to court to improve the regulatory climate for HPR, we've got a new Section manual in the works, I'm certain that by year-end we'll have both new publication material for HPR and Junior members, there are outstanding national events planned, and tons of opportunity for NAR members to have fun flying rockets.

All of that is still true, and once we get over this insurance bump, we'll be ready to charge ahead on all those fronts. That tells me that we're still going to have a good 2000, and I hope I can count on your support to make that happen.

Mark B. Bundick, President
National Association of Rocketry