Air India crash: Victims entitled to compensation, regardless of fault

Experts say Air India crash victims will receive compensation regardless of fault, with the insurance payout unaffected by pilot error or systemic failures

With the initial findings of the Aircraft Accident Investigation Bureau (AAIB) on last month's Air India crash in Ahmedabad not explicitly attributing the incident to pilot error, insurance industry experts said insurance payouts would not be affected even if that were the case.

 

“The insurance amount has to be paid by the airline because even if it was an error by the pilot that caused the accident, it is covered in the policy. The insurance amount has to be paid irrespective of the scenario. Also, some of the victims have approached a UK law firm to get better compensation,” an insurance broker Business Standard spoke to said.

 

The only case where there could be a change in insurance payout is if Air India’s management were found to be aware of the accident and the accident was deliberate. 

 

“Pilot’s mistake does not change anything. The insurance is still payable. Only if the management has deliberately crashed the aircraft or were aware of the pilot’s condition, people might be eligible for higher compensation. But, it is too early to comment on it,” another insurance broker told Business Standard.

 

Typically, an aviation claim includes three kinds of liabilities: damage to the aircraft; loss of lives who were aboard the aircraft, including the crew members, and third-party liability because of loss of lives where the aircraft crashed; and cargo liability.

 

The third-party liability compensation for those who lost their lives is governed by the Montreal Convention, which applies to most international flights. Under the Convention, airlines are strictly liable for damages up to a certain threshold — currently around SDR 128,821, or approximately ₹1.50 crore per passenger — and can be held liable for higher amounts if negligence, including pilot error, is proven. 

 

Industry experts have estimated insurance claims to the tune of $475 million, with $125 million for the hull and the remaining $350 million for liability, which includes third-party liability as well. Major part of the claims will likely be borne by global reinsurers, as aviation policies are typically structured with primary insurers transferring a significant portion of the risk through reinsurance arrangements.

 

State-owned GIC Re will pay about 5.15 per cent of the $475 million — 4 per cent from obligatory cession and 1.15 per cent written through its London branch. it will make the provision in Q1, which will be less than ₹200 crore.