Insurance Liabilities for Malaysia Airlines Flight 370

The disappearance of Malaysia Airlines Flight 370 has captivated the world’s attention and brought up more questions than have been solved. Sadly, a total of 239 passengers disappeared with the flight and despite the latest technology and a multi-national search, authorities still are not certain what happened to the plane. Malaysia Airlines itself has officially announced that the plane crashed in the southern Indian Ocean, but the remains of the plane have not been located.

The disaster leaves many unanswered questions going forward. The absence of the plane’s final location and its missing physical remains open quandaries regarding the life insurance policies for those who were passengers and crew on the flight. The complexity of the situation is increased by the fact that passengers on the plane came from many different countries, and the collection paths family members have to take vary greatly depending on the nation of a passenger’s origin.

Initial Insurance Payments

Though the plane itself has not been found, initial payouts from the disaster have already begun. Malaysian Airlines has already given $5,000 to the families of each of the 227 passengers and 12 crew aboard the flight. The airline is also providing funding to meet the meals, hotel and transportation needs of grieving family members. Malaysia Airlines is providing this service for up to five family members for each passenger and doing so for as long as the families require those services. The airline has also assigned two caregivers to each family. These caregivers are providing 24-hour support and counseling.

Malaysia Airlines will also pay families almost $176,000 under a multilateral treaty called the Montreal Convention.

Expectations for Insurance Payouts

Families of the 227 passengers and 12 crew members are expected to file lawsuits and insurance claims related to the tragedy, and while each family has received similar compensation from the airline to this point, subsequent lawsuits and insurance claims results could differ dramatically.

The cases will not be settled as a group. In fact, each case could be settled individually, and the total amount negotiated will depend on many factors including the person’s age, marital status, number of children, profession and home country. Experts expect some of these settlements could be as low as $400,000 but they could also spiral all the way to $10 million depending on the circumstances and the person involved. Those numbers could also increase if the plane is found and the cause of the crash is judged to be, all or in part, because of mechanical error. This would then tie the plane’s manufacturer, Boeing, into the claims picture.

The location where the claim is filed could also impact compensation. Under international treaty, families have the right to file any subsequent lawsuit in the country where the airline is based, the ticket was purchased or the destination of the flight. Cases filed in the United States are expected to have the highest payouts, but non-American citizens may have difficulty filing their case here.

What About Travel Insurance?

It is possible travel insurance providers may pay settlements in the case of Malaysia Airlines 370, but it is unlikely. Travel insurance policies are generally written to provide compensation in the event of a trip being canceled or luggage being misplaced. Some policies can also include a medical portion, but this aspect generally applies to assistance with hospital bills for injuries suffered overseas.

Some travel insurance plans offer a policy known as flight insurance. Flight insurance is specifically designed to provide compensation in the event that a plane crashes with a policy holder on board. This policy is rarely purchased but family members of passengers aboard Flight 370 who purchased such a policy could expect a payment.

Airline Insurance and Liabilities

While the multilateral Montreal Convention treaty applies across airlines and nations, further compensation varies case by case and airline by airline. Financial settlements are often the product of negotiation rather than a set policy, and some law firms specialize in representing victims' families in airline disasters.

Category: Industry News

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    Robert Wayne Lewis May 3, 2014 Reply

    I imagine there are two ways this could play out: either the Malaysian airline drags this out as long as possible while they determine the final destination of the plane and the fate of the passengers, or they will quickly settle these legal claims with the victims' families to stop any bad press that they would inevitably get for fighting them in civil court.

    The strategy depends on the Malaysians. I'm not sure if the public in that country will put up a strong enough outcry to force anything to happen. Here there would be a media firestorm, but I'm not sure if the same is true in Malaysia or not.

    Perhaps the Chinese outcry will be big enough to force something though--China is a big dog in that region and in the world, and 200+ passengers on that airplane were Chinese. The plane was headed for Beijing, after all.