MH370: Q&A on insurance and lawsuit claims by families

The following are some frequently asked questions, in a Q&A format, on the claims family members may be making in coming days:

First comes the insurance claims, both personal and with the airline. So far Malaysian and Chinese companies have reportedly started processing claims and have started payments to families of passengers on board the plane.

Airlines are also liable under the 1999 Montreal Convention, an international treaty that covers air travel, to pay damages for every passenger killed or injured in an accident. This claim can be made even if the plane is not found and the cause of its supposed crash remain unestablished.

The convention is adopted by members of the International Civil Aviation Organisation (ICAO) – of which Malaysia is a council member.

Thirdly, families can also bring MAS to court in a lawsuit to claim that loss of life was to due the airline’s negligence.

“Like the authorities are saying, this case is ‘unprecedented’, not just in Malaysia but worldwide and I can’t say for sure how they will launch their suit, it would probably be a class action where a group of families act under one or two firms, and not individuals,” a senior Malaysian lawyer told Astro AWANI.

Lawyers said that instead of going to court, families could also get compensation by negotiating directly with the airline’s insurers instead.

The size of the total compensation will not be known until assessors – including the insurance companies, and the courts – determine the payout.

Factors in a lawsuit include things such as such a passenger's occupation, number of dependents, nationality and the law used to calculate damages. A lawyer said that age and family members the deceased was providing for counts as well.

Under the Montreal Convention, an airline must at least pay an initial compensation of between US$150,000 and US$175,000 (RM494,000 and RM578,000) to relatives of each passenger killed in an air crash. In total MAS’s liability could stand at more than RM132.12 million.

Monica Kelly, an attorney at aviation law specialists Ribbeck Law Chartered, was quoted by CNN as saying each family could receive between US$400,000 (RM1.3 million) and US$3 million (RM9.9 million) in damages.

Kelly is filing a suit for families from China, Malaysia and Indonesia, against MAS and Boeing.

Kelly on Wednesday told reporters in Kuala Lumpur that the total damages that are being claimed against MAS and Boeing would come up to RM4.95bil.

David Fiol, a US lawyer who represented families in the Pan American Flight 103 crash in Lockerbie, Scotland in 1988, told The Malay Mail that courts would try to project the amount the deceased would have provided the family—meaning “the more professionally successful the person, the more his or her family will receive”.

Datuk Brijnandan Singh Bhar also told The Malay Mail online that airline’s insurers would determine compensation based on the passengers’ class of travel, instead of factors such as their age or nationality.

“Normally first-class passengers will get the highest compensation, followed by business class and then economy class. This is because a certain portion of your airline ticket price goes towards the insurance,” the lawyer specialising in personal injury and accident compensation claims was quoted as saying.

So far MAS has given a "special initial financial assistance" of USD 5,000 (some RM16,000) to the family of each passenger on MH370. These payments was to help families cope with the immediate financial strain caused by a long search for the plane.

According to Life Insurance Association of Malaysia (LIAM), families insured can now file life insurance claims without having to wait for a death certificate. So far, claims processing have started for families 47 out of 50 Malaysians as well as six non-Malaysians.

It was reported that China Life, the biggest life insurer in the country, has estimated that it would pay out a total of 9 million yuan (RM4.77 million) covering 32 passengers on the plane and a total of 74 policies.

On Thursday, Xinhua reported that seven passengers received 4.17 million yuan (RM2.49 million) in compensation.

Ping An Insurance Co. said it had 53 policyholders on flight MH370. So far, it agreed to pay a total of US$1.7 million (RM5.62 million) to 24 clients after the declaration by the Malaysian authorities.

“Those are normally excluded from insurance policies, unless you can show that the relevant authorities were negligent in the sense that if they had been more careful it would have prevented the incident,” said a senior Malaysian lawyer.

The Montreal Convention says that if an airline can prove that it was negligent or that that the fault lies solely with third parties such as the airplane’s maker or terrorists – then its liability is capped at $175,000. Otherwise it could be much higher.

“It’s a chicken and egg story in the sense that now as it is, those people are now considered dead, but question is how did it happen, was it due to negligence or was it not? The amounts would be different already. If it is something that cannot be explained, MAS would then have better leverage,” a lawyer told Astro AWANI.

He said that “at the end of the day you still need to know what actually caused it” to formulate a case, though he added that in this case MAS “cannot run away”.

Though other lawyers have said that despite the legal challenges, cases have been successfully brought to court without bodies or wreckage.

"We've had successful cases where the plane, the victims or even the black box were not found," Kelly had reportedly said.

Most country’s courts also allow for assumption of death if bodies are not recovered in months.

Insurance claims would come much faster, and as in the 2009 Air France crash, the airline started paying the families of passengers just days after the plane disappeared.

A lawsuit against MAS and other parties, on the other hand, could take years.

One lawyer said it could be a minimum of two years before families see the money.

In aviation accidents, more often than not, the authorities would try to ‘settle’ with the families, lawyers have cautioned.

“While I don’t think MAS will deny liability, there have been cases where families are given an early settlement and signs off on a document that prevents them from taking the matter to court,” said the local lawyer.

Lawyers have told families to be careful that documents they are asked to sign do not result in them losing their rights to more compensation.

“In many cases in which my law firm has been involved, the airline or its insurer has made fairly nominal payments to families in need of financial aid in exchange for the families signing a document which releases the airline and all other potentially responsible parties from liability. This is unfair and should not be allowed,” US aviation lawyer Floyd Wisner told The Malay Mail online.

Lawyers say that the lawsuits can be filed in several countries as there were at least 14 nationals on board the flight.

Under the Montreal Convention, lawsuits are limited in a number of places, including where the ticket was bought, where the carrier has the main place of business; the place of final destination or the residing address of the person.

“But that is for the carrier’s liability only. If you can build your case on product liability, such as Boeing, then you are not bound by limitation of Montreal convention,” Aviation lawyer based in Amsterdam Berend Crans told Astro AWANI.

Crans said that most lawyers would prefer the cases to be heard in the US as it is where damages claimed are highest, and the only way is to find fault with Boeing.

“If the US convince the courts that it is more convenient that a case against the airline is joined with the case with the manufacturer, you suddenly find that the case is heard in the US,” said the lawyer who has dealt with several air crashes.

Aviation lawyer Mike Danko told CNN that in the US, plaintiffs tend to be awarded sums touching US$6 million to US$8 million.

Terry Rolfe, leader of the aviation practice at Integro Insurance Brokers, told CNBC that a US court could pay out between $8-10 million per passenger basis, but compensation in China could come up to less than $1 million per passenger.

Experts expect the cases to be mostly filed in Malaysia and China, the home countries of most of the passengers on ill-fated plane.

“Our court system in terms of damages may be too little plus it is Malaysian Ringgit. Considerations include impartiality, whether you decide by virtue on nationality, or the nationality of the carrier or do you decide by virtue of the maker of the plane, or do you decide on the fact that it fell in the Indian ocean off Australia? Or just where is the most convenient location because it involves so many people from different countries,” said a lawyer.

MAS could be liable for the actions of the pilots, the plane, the security, the maintenance of equipment, but other parties could be held liable as well, including the government.

“If you ask me, we can’t help but equate MAS to the Malaysian government and inevitably, you are talking about the Malaysian government being involved as well,” said the Malaysian lawyer.

A Reuters report on Thursday has raised the possibility of the government having to bailout MAS, but if it itself was sued, it may need to go to court as well.

“If you want to drag the government to court, you will need to show that its actions or inactions did not meet reasonable expectations of their duties and failed to prevent the tragedy,” said the Malaysian lawyer.

Depending on the cause of a plane crash, families may be able to sue the companies that built the plane or provided its component parts, the lawyers said.

Aside from MAS, the family may try to seek compensation from any other party responsible for the loss and this may include Boeing, as the manufacturer of the aircraft, Rolls Royce, as the engine manufacturer and other aircraft component manufacturers.