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Will AirAsia Seek A Cheap Way Out?

AirAsia offered victim’s families $125,000 for their loss after the deadly Flight 8501 disaster. Their insurance companies may be using an obsolete law to calculate damages for their own benefit.

Will families still suffering from the catastrophic news be victimized a second time?

It is no secret that families of passengers lost in airplane crashes suffer tremendous grief and anger, often in addition to substantial economic losses. In the early days after such a disaster, family members are often so distraught, and plagued by so many unanswered questions, that they become vulnerable to those who seek to gain an advantage over them.

In the case of AirAsia Flight 8501, news reports say that the airline is offering the families $125,000 or so for each loss. The precise details of the offer are not yet made public, as far as I know. At first blush, this might seem like a large sum, but AirAsia and its insurers know differently. Wrongful death claims in airline accident cases usually settle for the equivalent of at least 1 million U.S. dollars, or more, depending on the facts of an individual case.

AirAsia and its insurers (the lead insurance company is Allianz, SE), know that settlements in cases such as this, routinely reach figures much larger than the offer that is being reported. Is it possible that they are hoping that a significant number of families, while still suffering from the effects of the devastating news, or simply because they are not sophisticated, might accept such an offer without having had professional advice from a representative of their own who has the knowledge and expertise to help them, and who has only their interests at heart?

Allianz might argue that the airline is not governed by the more modern Montreal Agreement, but is bound only by the outdated and repressive Warsaw Convention of 1929. The airline and its insurer might argue that the Warsaw convention limits recovery to about $8,300 for each death, so the $125,000 offer, they will likely claim, is generous. But, that argument fails the test of analysis.

There is actually no limit in the treaty where the conduct of the airline was reckless or it was guilty of willful misconduct. It is likely that this flight took off without authorization to fly that segment that day, had not been properly briefed on the weather it was likely to face, and continued flight into dangerous thunderstorms when it needed to turn back.

It is my opinion that AirAsia/Allianz cannot keep the lid on the right to recover a fair amount for each loss under modern-day standards – and I think they know it. In that light, the reported offers might just appear to be an attempt by Allianz and AirAsia to find a cheap way out of their financial responsibilities to the grieving families.

If that is true: shame on them.


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