How the confirmed piece of MH370 wreckage affects insurance negotiations

How the confirmed piece of MH370 wreckage affects insurance negotiations | Insurance Business

How the confirmed piece of MH370 wreckage affects insurance negotiations
Official confirmation that the aircraft part discovered in the southern Indian Ocean belongs to Malaysia Airlines Flight 370 will not materially affect negotiations over insurance payments to families of passengers that were killed when the plane disappeared last year.

According to various aviation attorneys and insurers, the July discovery of the section of wing belonging to the plane does not yet offer enough clues to determine the cause of the flight’s disappearance – a key piece to settling any insurance claims.

Instead, equipment such as the jet’s black boxes will need to be found before authorities issue official judgment on why the flight went off course and eventually crashed in the ocean.

Until then, negotiations between family members of victims, Malaysia Airlines and the company’s insurance provider will likely be forestalled, says Kuala Lumpur aviation lawyer Jeremy Joseph.

“I don’t think the discovery of the debris would have any real impact on the position of the insurance claims unless further discovery is made…that would give some indication of what exactly happened,” Joseph told the Wall Street Journal.

Currently, tenants of the international Montreal Convention limit liability payments from airlines at US$175,000 per passenger regardless of whether the airline is at fault.

While many families have accepted settlements from the airlines, others have held off, reasoning that if Malaysia Airlines is proven to have been negligent the payment will be higher.

The airline’s insurers – Allianz Global Corporate & Specialty and Lloyd’s of London unit Atrium – have already paid more than US$300 million for claims related to the crash.

Both companies have issued statements saying the discovery of part of the wreckage has not changed the situation, nor their willingness to pay valid claims.

However, Joseph Wheeler – special counsel for aviation at Maurice Blackburn Lawyers – said that liability could shift to Boeing if the wreckage of the 777 jet indicates evidence of a design or manufacturing flaw.

If that is the case, “we will be recommending to families to pursue claims against those particular entities,” Wheeler said.

The aircraft had been flying under Malaysia Airlines since May 2002 without mechanical or computer troubles. The communications systems aboard the plane were also operating normally until radio and transponder signals stopped during Flight 370.