Missing MH370 no obstacle to compensation, lawyers say

Relatives of a passenger onboard the missing Malaysia Airlines flight MH370 cry inside a hotel they are staying, in Putrajaya March 10, 2014. — Reuters pic
Relatives of a passenger onboard the missing Malaysia Airlines flight MH370 cry inside a hotel they are staying, in Putrajaya March 10, 2014. — Reuters pic

KUALA LUMPUR, March 20 — Twelve days without sign of missing Malaysia Airlines flight MH370 is raising the possibility the plane with 239 on board may never be found.

But lawyers said the families of those on Beijing-bound flight MH370 can already start claiming for compensation despite the absence of the plane and its passengers.

At a minimum, an international aviation treaty allows the next-of-kin of the plane’s 227 passengers to seek up to US$175,000 (RM573,475)  without proving any fault with MAS.

Beyond that amount, lawyers said they must furnish proof of negligence.

According to Floyd Wisner, a US aviation lawyer, airlines need not wait any period before issuing payments, as long as families can show the company was negligent.

"The airline and its insurers may choose to pay compensation to the victims' families before the wreckage or bodies are found and even if the wreckage or bodies are never found," Wisner, whose firm acted for families of the 2009 Air France Flight 447 crash in the Atlantic Ocean, told The Malay Mail Online in an email interview.

Most of the wreckage and bodies in the Air France flight were not recovered until nearly two years after the crash.

Wisner also cited the Adam Air Flight 574 crash in January 2007, where his firm reached an agreement with the airline’s insurers to compensate families within four weeks of the plane’s loss, also before the wreckage or bodies were found.

Shailender Bhar, a lawyer at a Malaysian law firm specialising in insurance claims, similarly said all that was required for compensation to be paid out by an airline’s insurer is a “presumption that the aircraft cannot be found” and that all passengers are presumed dead.

"Hence, even with the lack of evidence, airlines can pay out compensation based on their coverage policies. Compensation can be paid out immediately," the Brijnandan Singh Bhar & Co senior associate told The Malay Mail Online in a recent email interview when commenting on a scenario where no dead bodies and plane wreckage is found.

Compensation even if terrorist act

While investigators probing the disappearance of MH370 do not believe that terrorist organisations were involved, the lawyers said this would not prevent the airline’s insurer from paying out even if it later turns out to be the case.

Shailender said the airline would still pay compensation to the passengers' families "even where an aircraft is crashed due to terrorist act" as the passengers are "not at fault", citing the Pan American Flight 103 crash in Lockerbie, Scotland in 1988.

Wisner said the policy limits of MAS's insurers could be US$1 billion (RM3.28 billion), citing his previous experience when saying that international airlines operating large passenger jets such as the Boeing 777 have liability insurance up to that amount and also carry terrorism insurance.

"I expect the claims of the passengers of Malaysia Airlines 370 could total $500 million to $750 million," he said. This would amount to between RM1.64 billion and RM2.46 billion under current exchange rates.

German group Allianz confirmed last Monday that it is the lead insurer for the missing Boeing 777-200 ER plane used in the MH370 flight, but did not disclose its exposure or reveal other insurers.

Compensation capped unless crash is airline's fault

But even without the airline’s insurers paying out additional claims to the families of passengers, the lawyers noted that MAS is already bound by an international convention to pay claims up to an estimated figure of between US$175,000 to US$178,500.

David Fiol, another US lawyer, said Malaysia has adopted the Montreal Convention which regulates claims for wrongful death against airlines, with MAS having to pay a strict liability up to proven damages of about US$175,000 (RM 573,475) for each passenger.

"For damages above that amount, if proven by the family, the airline is liable unless it proves the accident was not the result of its own fault," Fiol — who was involved in lawsuits over the Lockerbie plane crash and other plane crashes —told The Malay Mail Online in a recent email interview.

Shailender explained that under the convention, MAS cannot contest claims up to 100,000 Special Drawing Rights (SDR) and should offer payments within six months of the plane’s scheduled date of arrival.

He added that Article 16 of MAS’ own terms and conditions of carriage with passengers said the airline would only start limiting its liability for deaths once the claim exceeds 113,100 SDR.

The current exchange rate against the Malaysian ringgit under the International Monetary Fund is set at 5.095.

When is payment due?

Airlines are bound by the Montreal Convention to offer compensation within six months from the date of a flight’s schedule arrival, Shailender said, but conceded there is no penalty if the airline fails to or chooses not to do so.

In such cases, what is left for families who still want to claim compensation is to go to court within two years, with the same time limit set under both the Montreal Convention and MAS’s own terms and conditions, he said.

Wisner explained that airlines are not bound to pay compensation unless the courts find that their negligence caused a plane crash, stressing that it was a matter of the airline’s liability rather than the date of declaration of a plane crash.

“There is no time period by which an airline must pay compensation other than the date a court orders it to make payment. A declaration or finding that the plane is missing or has crashed does not trigger the date for the airline to pay compensation,” he said.

Wisner said there was no law on how long a search can go on, but noted that a “continued search or any failure to declare the plane as having crashed” would not stop families from exercising their right to “immediately seek compensation” from MAS.

Wisner also explained that while claims against the airline and its insurer was possible even without the plane, families could face problems pursuing compensation elsewhere.

He said that the "absence of dead bodies may present administrative difficulties for the families in presenting wills or making claims for life insurance benefits", saying that this will be determined by the law of the country which the victim was living in or the terms of life insurance contracts.

What about the crew members?

For the 10 cabin crew and two pilots of MH370, their families' ability to claim would be tied to employment laws and their contracts with MAS, Wisner and Shailender said.

Claims under the Montreal Convention and to MAS's insurers would likely not apply to the crew members' families.

"The claims of the crew members against Malaysia Airlines are different as they will be governed by workers’ compensation laws," said Wisner.

“It will be necessary to see their employment contracts to see the terms stated there. Nonetheless, it will be safe to presume that they will be covered by some form of insurance by their employers,” Shailender said.

The MH370 Beijing-bound flight — which set out from Kuala Lumpur on March 8 with 227 passengers and 12 crew members on board — has been missing for over 12 days, with the number of countries searching for it swelling to 26.

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