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Aviation Insurance
Sunday, February 1, 2004
Better deal for passengers

The latest Convention slated to replace the Warsaw Convention, has been signed at last by the USA and Cameroon bringing the number of signatories to 31. This means that Montreal 1999 came into force from 4th November 2003.

South Africa signed it several years ago but has yet to ratify it.
This makes the umpteenth Montreal convention/protocol or whatever. Kind of makes you wish the borings that bring these things in could be a bit more exciting about the names. There are 2 Hagues as well, which serves to confuse the chattering masses, as they are probably intended to drum up more lawyers’ fees.
Monty 99 keeps the basics of Warsaw combined with Hague and Guadalajara (just be thankful you don’t have to type this name 20 times like I had to). The basic compensation has been increased to SDRs 100 000, which is at the moment as near as you can get to R1 million without a calculator. This tidies up our legislation that currently demands R1million insurance cover per passenger, but allows carriers to get away with only R100 500 compensation under Warsaw.
A significant change is the move to make carriers liable for unlimited damages unless the carrier can prove he wasn’t negligent. This improves on the Warsaw position where the carrier had limited compensation unless the passenger could prove reckless conduct.
Generally welcomed it is a pity that the authors could not get to grips with the jurisdiction angle. Under Warsaw there are only four jurisdictions where a passenger can have his claim brought:
1. Where the carrier is resident.
2. Ditto has his principal place of business.
3. Ditto has an establishment by which the contract was made
4. The destination.

Monty 99 adds another – where the passenger has his principal or permanent residence and where the carrier operates. This last one is going to cause all sorts of rumpuses (?rumpi?) especially with the global citizen who spends equal time in various places.
It’s a shame they could not agree to using the passenger’s citizenship as delineated by his passport that he uses to board the aircraft. Every airline has to check every passenger’s passport to ensure that said pax has the right to disembark  at the other end. If pax is not in possession of correct visas and so on the airline gets thumped US $100 000 in fines.
My point is that the passenger would get the compensation according to the courts of his own country and not a hugely inflated amount by using the courts of a different legal regime such as the US or the UK.
The Commercial Aviation Association of Southern Africa (CAASA) is currently working on this as part of the attempt to straighten out the convoluted legal issues in SA Aviation law. The Carriage By Air Act lays down liability but does not enforce any insurance. The Air Services Licensing Act lays down minimum insurance levels but does not enforce any compensation.

Premiums drop

In what must be one of the weirdest argumentative twists in a reinsurance seminar (and they can get pretty weird anyway), brokers have been lambasted for “talking down” aviation premiums.
It seems this is the standard result when premiums start to soften. I don’t see the problem; it’s supposed to be the underwriters’ job to set the rates, not the brokers.
On the other hand, it is the brokers’ job to find the best deal (which would not necessarily be the lowest cost).
Smells to me like the Tariff is on its way back, and which we don’t need one little bit.
This was aired at the reinsurance bash at Baden-Baden. But take it with appropriate salinity, as at the same seminar reinsurers were at pains to down talk their ratings, which have turned downwards. Now it seems that reinsurers don’t think you should take much notice of ratings.
Perchance they protesteth too much?

Insurable interest problem

One of the worst problems especially in aviation insurance is paying out large gobs of hard earned money for insurance and then finding that the policy doesn’t work after all.
It has been said, and by me on many occasions, that insurance is a commodity which you cannot see, feel, or smell and the only time you find out if it works is when it doesn’t.
Of recent months a number of cases have come to court where some poor sod who thought he was covered finds he isn’t, and that his money has gone down the tube. A typical case is where the insurer, having taken the money, then turns round and says, “Ah, but you have no insurable interest.”
Typically, an aircraft charterer will lease an aircraft and the arrangement is that the owner will have it insured, not only for the value of the hull, but also for the liabilities that fall on the charterer in terms of the law. The owner forgets (or his broker does) to add the charterer as an additional insured.
The aircraft crashes and then - stap me! - the insurer subrogates against the charterer because his pilot was foolish enough to make an error of judgment and damages the aircraft. There is no excuse for this; it is such a simple thing to achieve.  If you borrow or lend an asset make sure the agreement is in writing – one page is more than enough – and that it is clear who is to carry the insurance; both parties to have their interest recorded; and a copy of the insurance document faxed or emailed as proof. If the broker can’t do this in 24 hours then find one who can do the job properly!
By Henry Tours

Copyright © Insurance Times and Investments® Vol:17.1 1st February, 2004
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