Malaysia Airlines in for tough insurance fight

Malaysia Airlines in for tough insurance fight | Insurance Business

Malaysia Airlines in for tough insurance fight
The Malaysia Airlines jet that crashed in Ukraine could end up costing the unlucky airline hundreds of millions of dollars in compensation claims and forthcoming legal battles, insurance experts say—particularly as the crash came just months after the disappearance of another jet, MH370.

The jet, which US officials now believe was shot down by a missile near the Ukrainian-Russian border, crashed last Thursday en route to Kuala Lumpur. All 298 people on board were killed.

The UK Civil Aviation Authority had warned airlines to avoid some of the Ukrainian airspace in June, particularly the war-torn eastern border.

That’s a problem for the airline, says Kevin Bartlett of the law firm Cooper Grace Ward Lawyers.

“The difficulty facing Malaysia Airlines here is that the passengers could argue that most airlines…knew the Ukraine airspace was a war zone and that two other aircraft had been shot down the previous week,” Bartlett told the Wall Street Journal.

Joseph Wheeler, an aviation lawyer with Shine Lawyers, added that given the complexity of the crash, liability for the insurer is particularly high.

Families may be able to take action against the airline, Russian and Ukrainian governments and aviation authorities, the Wall Street Journal report said. And depending on the nationality of the passenger, legal battles could go forward in a variety of international jurisdictions.

“This is going to be a very long, convoluted and politically charged compensation case for those families,” Wheeler told the newspaper. “In terms of a loss this size, you are looking at hundreds of millions.”

However, Malaysia Airlines may be afforded some protection thanks to an international aviation agreement called the Montreal Convention. The accord caps payouts at US$170,000 per passenger regardless of whether the airline is at fault.

Allianz Global Corporate and Specialty, the lead reinsurer of the Malaysia Airlines plane, insured the plane for hull and liability, with Aon PLC valuing the plane at $97.3 million.

“As leading reinsurer of Malaysia Airlines for aviation hull and liability coverage, Allianz Global Corporate & Specialty stands by to support our client as fully and quickly as possible,” Jacqueline Maher, a spokeswoman for the Munich-based reinsurer.

“It is much too early to comment on reports of this tragic incident while details are still being confirmed, except to extend our deepest sympathy to all those affected by this crash.”

Malaysia Airlines has said in a statement that it did not enter risky airspace. Malasia Airlines' MH17 flight plan was approved by Eurocontrol, who the airline says are solely responsible for determining civil aircraft flight paths over European airspace. Eurocontrol is the air navigation service provider for Europe and is governed under ICAO rules.

The airline said in a statement that the route over Ukrainian airspace where the incident occurred is commonly used for Europe to Asia flights.

"A flight from a different carrier was on the same route at the time of the MH17 incident, as were a number of other flights from other carriers in the days and weeks before," a spokesperson said.

"Eurocontrol maintains records of all flights across European airspace, including those across Ukraine. In April, the International Civil Aviation Organization identified an area over the Crimean peninsula as risky. At no point did MH17 fly into, or request to fly into, this area. At all times, MH17 was in airspace approved by the ICAO," the spokesperson said.

Australian Prime MinisterTony Abbott told the ABC on the weekend that his daughters had previously used MH17 on a return trip from Europe, and said he was 'angry' about Russia's potential involvement in the incident, although he said he would take a deliberate approach to a resolution.