Aircraft passenger liability insurance is often misunderstood. As a consequence, the significant emotional and physical impact of an aircraft crash is compounded by uncertainty over whether insurance cover will be met.
There are two broad themes in aircraft passenger liability insurance, namely the difference between private and commercial operators, and the role of the policy of insurance. Complex legislation requires certain operators to hold minimum passenger liability insurance cover of R1million per seat. This insurance relates to claims of passengers or their dependants against the operator. In light of the increasing costs of medical treatment and the impact injuries may have upon a person’s earning capacity, R1million is not sufficient. Whilst this minimum cover is prescribed in the regulations to the two licensing Acts, not every operator in South Africa is required to carry this cover. Only commercial operators are under a legal obligation to carry this cover. Private or licensed operators who do not fly passengers for reward are not legally obliged to have passenger liability insurance cover, and often don’t. Passengers and their families should therefore be aware that when flying with an unlicensed operator at no cost, there is a possibility that there is no insurance cover aimed at covering passengers for injury or death.
An insurance policy is a contract between an insured (such as an operator) and its insurer. Any obligation on an insurer to indemnify or cover an operator is an obligation that is owed to the operator only. Generally, in the absence of insolvency, a passenger or their dependents have no right to claim directly against an insurer. The passenger liability cover is written as a benefit to the insured, not as a stipulatio in favour of a passenger. The rights of the passenger or their dependents are limited to making a claim against the direct wrongdoer, who may be the operator, pilot, maintenance organisation, etc. Once a passenger or their dependents make a claim against the wrongdoer, it is for the latter to then claim indemnity from their insurers.
Insurers grant cover to operators, including liability cover, on certain conditions. These are set out in the policy. As with any contract, these terms and conditions must be complied with before obligations detailed in the contract are created. If an operator fails to comply with any condition, an insurer may reject the claim for indemnity resulting in no payment being made by the insurer. In this instance, an operator will still be liable to a passenger or their dependents, but it will not have the benefit of insurance cover. One can liken the situation to a person who has caused damage to another person’s motor vehicle. The fact that the responsible person does not carry motor vehicle third party liability insurance does not vitiate the claim of the person whose car was damaged. The innocent party is however exposed somewhat in that the financial position of the uninsured person may not be sufficient to cover the claim.
Commonly, in terms of an insurance policy an operator would be obliged to comply with all air navigation and airworthiness orders, to give ongoing notice to their insurer of any change to their operations that may vary their risk profile, to give their insurer immediate notice of any event that may give rise to a claim and to operate only within set boundaries both geographical and with regard to the type of flights. If an operator breaches any condition of their insurance policy, the insurer may be entitled to reject the claim.
Passengers should also be aware of any ticket conditions which would form a contract between the passenger and the operator. Operators often seek to enforce limitations on their liability to a passenger or their dependants when issuing tickets. Most insurance policies require commercial operators to limit their liability to passengers to the equivalent of R100 500 (a limit prescribed in the Warsaw Convention). In South Africa, subject to provisions of the Consumer Protection Act being met, it is possible for parties to agree contractually to exclude or limit the claim of one party against another for domestic carriage. International carriage from South Africa is slightly different in that it is governed by a different set of rules set out in the Montreal Convention. Where tickets are issued or terms and conditions are agreed to online or otherwise, passengers must be aware of and look out for any limitation or exclusion of claims that they may make against the operator. Any insurance cover may also be adversely affected or limited where an operator fails to issue tickets limiting their liability towards passengers as required by the policy.
One last point worth mentioning is that where passenger liability cover is held by an operator, it is generally placed together with third party liability cover in what is called a combined single limit. The third parties in the third party liability cover would be persons whose property is damaged or who themselves are injured as a result of an aircraft accident, or any object falling from an aircraft. These parties would have a claim against the operator for the repair or replacement costs of their property, or medical expenditure, etc. related to their injuries. In the event that the operator carries third party liability insurance, they would look to their insurers to indemnify them for these types of claims. The result of the third party liability and passenger liability cover being placed as a combined single limit is that where an operator faces claims from both passengers and third parties, and looks to their insurer to indemnify them for these claims, there is only one pot from which these claims will be paid. This pot may not be sufficient to cover all the claims and will be paid on a first come first served basis. In the event that the pot is depleted by other claims by the time a party (be it a passenger, their dependents or a third party) makes a claim against the operator, the operator is essentially uninsured. The R1million per seat requirement on commercial operators does not ring fence liability cover placed on a combined single limit basis for the benefit of passengers only. Whilst it is possible that passengers may hold personal accident cover, many life, disability and heath policies exclude aviation events.
Passengers and others would be wise not to simply assume the existence of insurance coverage given the numerous factors impacting upon it. Steps such as negotiating conditions of carriage, and appreciating the category the flight and operator fall into are within the control of the passenger to consider. A better appreciation of the circumstances surrounding a particular flight and the role and interplay of insurance coverage in the event of any claim may alleviate the anxiety and frustration of a person facing the aftermath of a crash.
Article first appeared in African Pilot
