Over the past two weeks, more than 300 people have died in air crashes. The first was on July 17, when Malaysia Airlines Flight 17 was shot down in Ukraine and all 298 people on board died. The second was on July 23 when a TransAsia plane crashed in Taiwan due to a typhoon and 48 people lost their lives. While no amount of monetary compensation can make up for the loss to lives, passengers and their families must be aware of what they are entitled to in case of an airline accident.
Earlier, airlines were governed by an international agreement called the Warsaw Convention, drafted in 1929. According to it, damages for injury or death were capped at $8,300 a passenger. This was replaced by the Montreal Convention, 1999. The limits prescribed in this were first revised in 2003 and then later in 2009.
While the Montreal Convention gives consumers better protection and compensation, not all countries have ratified it. India is a signatory and, hence, the rules will apply to Indian passengers. The various provisions of the Montreal Convention include details on what is the airline's liability and what compensation passengers are entitled to in case of death and injury to passengers, damage to baggage, and damage and delay to cargo.
The provisions of the Convention say: "The carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or disembarking."
Compensation in case of death or injury
According to Article 21 of the Montreal Convention, in case of death of passengers, the airline is liable to pay up to 1,13,100 Special Drawing Rights for each passenger. This works out to approximately $1,74,000 at current rates. (In Indian rupees this works out to approximately Rs 1.04 crore). If there is demand for compensation higher than this limit, the airline can contest it. If it is proved that such damage was not due to the negligence or other wrongful act or omission or the airlines, its staff or agents, or if such damage was solely due to the negligence or other wrongful act or omission of a third party then the airline is not liable to pay the higher amount. But it cannot contest if the claim is within the limit.
Compensation in case of delay
Article 19 of the Convention says if any damage is caused to passengers due to delay, then airlines are bound to pay 4,694 SDRs for each passenger. This works out to $7,221. In case of destruction or damage to baggage, the airlines are liable to pay 1,131 SDRs, which works out to approximately $1,740.
The value of the SDRs is calculated as defined by the International Monetary Fund (IMF). The prescribed limits will be revised every five years. This revision will be based on the weighted average of the annual rates of increase or decrease in the consumer price indices of the various countries. This is why if there are passengers of different nationalities in an air crash, the compensation amounts might vary. The convention also prescribes a certain limit for countries that are not part of the IMF.
Ramesh Vaidyanathan, founder and managing partner of Advaya Legal, says these amounts are determined, based on negotiations by countries. The limits are a cap, which means passengers can get less than the prescribed amounts.
"All airlines are covered by the mandatory insurance, which pays the compensation in case of such accidents. It is similar to the third-party insurance for motor vehicles. All airlines pay money, which goes to a pool and the payment is made out of this pool," says Vaidyanathan.
The final amount will depend on the Property and Causality Cover the particular airline has, says an insurance company official. "It will depend on who is the insurer and re-insurer of the airline. These depend on the personal treaty between the insurance companies and these treaties are customised."
There were reports that in the Ukraine crash, the airline might refuse to pay some part of the insurance on the ground that it was an act of war. However, the insurance company official says that is not the case. "When the aircraft (Malaysia Airlines Flight 17) flew over the zone, it was a safe zone. Only later was it declared a danger zone. It is possible this case might go into arbitration."
According to Vaidyanathan, the airlines will ensure the payment of compensation to the families of victims is smooth, given the severity of the situation. "While usually, there are rules like intimating within a certain time frame and so on, in such cases these rules could be waived."