The disaster is expected to cost the insurance industry hundreds of millions. Under an international treaty, the Montreal Convention, if passengers are confirmed dead, Malaysia Airlines must pay relatives of each deceased passenger an initial sum of between $150,000 and $175,000. Monica Kelly, a lawyer at Ribbeck Law Chartered, who plans to file suit against Malaysia Airlines and Boeing, told CNNMoney last week that families could receive between $400,000 and $3m in damages. Credit Suisse predicted last week that insurers would have to pay out about $500m to $600m for the aircraft. The insurance loss for the aircraft hull is estimated to be $100m.
“As with the AF447 Air France crash of 2009, the Malaysian flight (MH370) had no working external data collection system and so it is proving hard to establish exactly where and more importantly why the plane disappeared. The precise reason for its disappearance may make an enormous difference to the level of potential payouts,” said Jonathan Chambers, a specialist aviation barrister at Quadrant Chambers.
The Montreal Convention imposes strict liability on airlines for death or personal injury caused by “accident” during a flight. Damages are limited to about $175,000 per person if, and only if, the airline can show they had done nothing wrong, whether by wrongful acts or negligence, or it was because of a third party’s fault. Otherwise the airline's liability for damages is unlimited.
This pressures the airline to prove they were not at fault, so if the root cause of the accident is never established they may be open to the unlimited liability. “This is why so much energy is being put into establishing the cause of the disappearance of the Malaysian plane at the moment. A lesson the industry might learn from this is the importance of external data collection and I wouldn't be surprised if there is a call for this technology to be fitted as standard after this," said Chambers.
The paucity of data available for airliners – particularly while they are flying over the world’s oceans, when they may appear to faraway outsiders only as dots on a radar screen, as well as occasional bursts of information to satellites – points towards a need to implement better communications systems for the future.
To improve the data available in such cases, the aviation industry could learn communications lessons from the marine industry, which has placed legal obligations for ships over a certain size to constantly transmit fixed and dynamic data, such as position, course, destination and cargoes, via the Satellite AIS system, implemented in
If something of this kind was added to the systems already in an airliner’s black box flight recorder, more immediate data might be made available. Someone hijacking the plane would be unable to turn off the tracking, or if systems were turned off for innocent grounds, the reasons for this could also be communicated to those on the ground.
This story will not go away anytime soon, because the victims of the MH370 disaster and their families will have the next two years to launch their claims, giving plenty of time for the sector to ponder improvements in aviation risk management.