Malaysia Airlines sued over MH370 – what it means for insurers

Insurance companies covering Malaysia Airlines have already paid out for the loss of the craft and Treaty-mandated settlements for passengers. Now, they may be on the hook again

Insurance News


While the final hours of Malaysian Airlines Flight 370 remain shrouded in mystery nearly two years later, the lack of a clear understanding of the craft’s loss has not stopped relatives of passengers from filing lawsuits against Malaysia Airlines.

The brother of an American man who was on the March 2014 flight has sued the airline in US court this week. Thomas Wood is seeking as much as the $155,937 maximum automatically allowed under terms of the 1999 Montreal Convention, and more unless Malaysia Airlines can prove the death of his brother, Phillip Wood, was caused by something other than negligence.

Wood’s suit comes a year after the Malaysian Department of Civil Aviation declared the incident an accident. Investigators concluded that someone aboard the Boeing 777 intentionally disabled the craft’s tracking devices, turning the jet south before it plunged into the Indian Ocean and killed all 239 people aboard.

The plane has not been found, and the only solid evidence from the jet was a wing component that washed ashore in July on Reunion Island off the coast of Australia.

While Wood and his attorneys believe this is enough to win a suit against Malaysia Airlines – and consequently cost lead insurers of the company more than the $300 million they have already paid –various aviation attorneys and insurers do not.

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 $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 $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.

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.

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