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Compensation For Victims Of MH17 Disaster

Compensation For Victims Of MH17 Disaster

Liability for Passenger Death

Liability for the deaths of the Australian passengers is governed by an international convention known as the Montreal Convention 1999.  Passengers of other nationalities may be covered by various iterations of another convention known as the Warsaw Convention 1929 since it is each passenger’s original ‘place of departure’ and final ‘place of destination’ that determines which treaty applies.  The flight itself was from Amsterdam to Kuala Lumpur, but the Australians on board were connecting to other flights to return to Australia.  However, the Netherlands, Malaysia and Australia are all parties to the Montreal Convention, so that is the Convention that applies for anyone with both departure and destination in those countries.

Under the Montreal Convention, liability arises in the circumstances set out in Article 17:

The carrier is liable for damage sustained in the 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.

The important point to note here is the requirement that the deaths were caused by an ‘accident’.  That term is not defined within the Convention itself, but the definition has been considered by Courts around the world.  The authoritative definition is now widely accepted to have been pronounced by the Supreme Court of the United States in the case of Air France v Saks 470 US 392 (1985) [link: http://www.worldlii.org/us/cases/federal/USSC/1985/43.html] in which O’Connor J said that liability arises when:

a passenger’s injury is caused by an unexpected or unusual event or happening that is external to the passenger.

Although his Honour was referring to the Warsaw Convention, the same text appears in the Montreal Convention, and it is generally considered to have the same meaning.  Applying this meaning seems to suggest that whatever occurred to MH17 was an ‘accident’ for these purposes, and so the carrier is, at first glance, liable.

Extent of Liability

Under the Warsaw Convention, liability was capped.  That is not the case under the Montreal Convention, where liability is potentially unlimited.  There are some practical controls on this, however.

Article 21 of the Montreal Convention structures liability of the carrier into two ‘tiers’, and different rules apply in each tier.  In the first tier, which applies to any claim for damages amounting to less than 113,100 Special Drawing Rights (which is about A$183,500), the carrier cannot exclude or limit its liability.  This means that the passenger need not prove that the carrier was negligent (but, of course, must show that requirements of Article 17 are met, including that the event was an ‘accident’).  It also means that the carrier is liable even if it was not negligent.

In the second tier, for claims amounting to more than 113,100 SDRs, the carrier is liable unless it can show it was not negligent.  This reverses the traditional onus of proof – normally, it is a plaintiff (or person making a claim) who must show the defendant (the person against whom the claim is made) was negligent.

Solely Due to the Negligence or Wrongful Act of a Third Party?

In the second tier, a carrier may also escape liability if it can show that the ‘accident’:

was solely due to the negligence or other wrongful act or omission of a third party.

In the circumstances of MH17, there may be defences available to Malaysia Airlines under Article 21.  First, it may be argued that Malaysia Airlines was not negligent at all.  Secondly, the carrier may argue that the accident was solely caused by the wrongful act of the person who launched the missile.

Discussion has already begun about the negligence question.  It is unclear whether Malaysia Airlines was right to use the airspace over eastern Ukraine at that time.  Some international carriers had stopped flights through that airspace, choosing instead to divert around it.  Others continued to fly through it.  The question will be whether a reasonably prudent carrier would have flown through the airspace, and the answer at this point is not clear.

The Carrier may also point to the pro-Russian separatists who are believed to have launched the missile, saying that the accident was due solely to their wrongful act.  Less has been said about this, but it is quite clear that the act was wrongful.  What is less clear is whether it was the sole cause of the accident.  The release of the preliminary report points to the accident being caused by the hull of the aircraft being punctured by several high-energy objects.  However, while this is undoubtedly the immediate cause of the accident, the final report may reveal further, less immediate causes, which may be attributable to the carrier.

Aviation War Risk Insurance

Insurance is available in the international insurance market for aviation war risks.  Carriers can insure themselves against two kinds of war risk, known as ‘aviation war hull risk’ and ‘aviation war liability risk’.  Aviation war hull risk insurance covers the carrier for the loss of the aircraft.  It is known [link:  http://www.ainonline.com/aviation-news/ain-air-transport-perspective/2014-08-08/airline-war-risk-insurance-premiums-sky-rocket] that Malaysia Airlines was covered by a Lloyd’s syndicate for its aviation war hull risk.

Aviation war liability risk covers the liability of the carrier in relation to the loss, damage, injury or death suffered by third parties, including passengers aboard the aircraft.  It is believed that Malaysia Airlines also has this coverage.

Following the terrorist attacks on 11 September 2001, the international insurance industry withdrew essentially all aviation war risk insurance from the market.  Various governments stepped in to indemnify carriers for their war risks.  From the end of 2013, the insurance cover was reintroduced into the market.  However, it is still common practice for insurers issuing liability policies to exclude war risks using the Lloyd’s AVN 48B standard wording, or something similar.  The AVN 48B wording includes the following paragraphs:

This policy does not cover claims caused by:

a)      War, invasion, acts of foreign enemies, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, martial law, military or usurped power or attempts at usurpation of power;

d)      Any act of one or more persons, whether or not agents of a sovereign power, for political or terrorist purposes and whether the loss or damage resulting therefrom is accidental or intentional;

e)      Any malicious act or act of sabotage…

This clause, when inserted into an insurance policy, clearly excludes the insurer from liability against any risk arising from a war-like situation.  Furthermore, the exclusions would mean that the insurer is not liable in light of what is thought to have occurred to MH17.

However, not all insurers include this exclusion in their policies, and there is also a Lloyd’s ‘write back’ wording (known as AVN 52D or AVN 52E) for war risk liability.  The AVN 52D/E clause is added to an insurance policy as an endorsement and is used to delete provisions of the AVN 48B clause as specified in the endorsement.  That means that the AVN 52D/E clause is not standard, but is highly customisable, and its effect depends upon how it is used in a specific insurance policy.  Where the AVN 52D/E clause deletes paragraphs of the AVN 48B clause, the effect is to remove the exclusion from the policy, thus extending cover to the items listed in the deleted paragraphs.  The Malaysia Airlines insurance policies would need to be read to discover whether the carrier’s insurance would cover its liability arising from MH17.

Whether or not Malaysia Airlines has an aviation war liability risk policy, or it has the AVN 52D/E endorsement on its ordinary aviation liability policy does not affect the legal liability of Malaysia Airlines itself.  Although it is believed that Malaysia Airlines is covered, the effect if it has no insurance for the war liability risk, is that the carrier must then bear the damages itself.  The question will then be whether Malaysia Airlines has sufficient funds or assets to meet the claims.

Where Can Claims Be Made?

Claims against carriers under the Montreal Convention can be made in any one of ‘five forums’, being:

  • The domicile of the carrier (i.e., Malaysia);
  • The carrier’s principal place of business (i.e., Malaysia);
  • Where the carrier has a place of business through which the contract of carriage was made;
  • The passenger’s place of destination (for Australians, Australia);
  • The passenger’s principal place of residence, BUT only if the carrier operates services to that jurisdiction AND the carrier conducts business from leased or owned premises there.

As such, Australians are likely to be able to make their claims in Australian courts.  Carneys Aviation Team is working closely with United States firm Kreindler & Kreindler LLP, which has experience in litigation arising from international air disasters , most notably  for families of victims of the bombing of a Pan Am Boeing 747 aircraft over Lockerbie, Scotland.  Carneys Lawyers is also a member of AvLaw International, an international network of aviation specialist technical consultants and lawyers.  AvLaw International gives firms such as Carneys access to international expertise in aviation matters.

Authors:

John Dawson, Partner

Bradley Hayward, Solicitor

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