US air crash victims favoured

Dominican families "unlikely" to sue

Airline insurers received more bad news on Monday when a plane crashed into New York City.

The crash - which tragically killed many passengers returning home to the Dominican Republic - also highlighted that some nationals are worth more than others in insurers eyes.

It's a sad fact of life that those who are financially empowered are probably going to get higher payouts than those who are not

Julian Bray
Editor, Lloyds List

The American Airlines flight 587 bound for the Dominican Republic came down near John F Kennedy Airport, shortly after take-off on Monday morning, killing all 260 on board.

Insurers reportedly face $200m in claims from the crash, an unwelcome blow after the massive losses following the September 11 terrorist attacks on the US.

But past compensation shows insurers expect the loss to be less than some recent US commercial air crashes because 90% of the passengers were Dominican.

"It's a sad fact of life that those who are financially empowered are probably going to get higher payouts than those who are not," Julian Bray, editor of Lloyds List, told BBC News Online.

"You're probably not going to have them (the Dominican families) suing the airline company, unlike the 11 September crashes, which had some high net worth individuals - Washington lobbyists and television producers," Mr Bray adds.

If the crash is found to be a result of mechanical failure, as investigators said early evidence suggests, insurers would be liable for all claims - and the terror and war exclusions introduced after 11 September would not apply.

Under an international convention, the families of air accident victims usually recieve a payment of about $140,000, before any lawsuits.

Industry averages

The industry average for an American passenger - with a relatively high "net worth" and backed by aggressive lawyers - is between $3m to $4m in compensation each.

This was reflected in early industry estimates for the flight 587 crash of about $1bn, which has now been revised down to $200m.

Compensation from the Concorde crash set a precedent

By comparison, an estimated $800m payout was made after the crash of a Swissair flight 111 off Nova Scotia in 1998, which killed 229 of mainly US and European origin.

In Europe, the size of the payout for the 101 German victims of the Concorde crash outside Paris last year set a precedent, because the families threatened to sue in the US.

They received an average of $1.5m per passenger. But the pay-out was cloaked in secrecy until Air France's insurance company, La Reunion Aerienne, admitted it had paid out about $150m.

Claims can be made in a US court if the flight was destined for or leaving the US, or if a US company owns the airline, built the plane or was otherwise involved.

Payout convention

"The bottom line is that the airlines only have to pay out what's required by the Warsaw Convention, but more powerful people can sue," said Mr Bray

Under the 1929 Warsaw Convention and the 1975 Montreal Protocol amendment, airlines are only liable for about $140,000 per passenger if they accept a prima facie liability.

American families of Swiss Air flight 111 passengers were initially favoured

The US has not ratified the Montreal Protocol.

In the US, families can seek unlimited compensation from airlines based on the victims' potential lifetime income, provided they can prove the airline could have prevented the crash.

That means the chief executive of a big company will probably get a bigger payout than a child.

US law also allows compensation for pain and suffering, loss of love, affection, companionship and family guidance, which are not recoverable in Europe and elsewhere.

Convention exemption

But even the Warsaw Convention is not strictly enforced as shown by the initial payouts by SwissAir to the victims of the Nova Scotia crash.

The airline's insurers advised SwissAir to make payments of $134,000 for each US passenger that died, but to pay a collective sum of $134,000 to the families of non-US passengers, no matter how many died.

"We had a big hassle and clash with the insurers over this," said SwissAir's lawyer Hans Peter Berchtold after the case was settled.

Swiss media accusations that American lives were considered more valuable than European ones resulted in the company extending the offer to the families of all passengers.