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Aviation Insurance
Sunday, April 1, 2007
Massive increase in liability

In a quiet unannounced move, the SA Government ratified Montreal Convention 1999 (M99) on 14th December 2006, some eight years after signing it. The SA Legislation was subjected to The Carriage By Air Amendment Act.

This means that on the 60th day after ratification (11th Feb 2007), M99 comes into force and it seems that neither the authorities that govern aviation, nor the associate bodies of Aviation, have either noticed this nor can be bothered to give any warnings about it.
But M99 needs your immediate attention if you are in the commercial aviation field – almost overnight your liability exposures rose ten times!
Anyway, just to give you a brief outline of the difference between the old Warsaw Convention that applied until 11th February 2007 and M99 this is what it’s all about. You must understand that the Convention language is far from plain, as you would expect from lawyers. The following is a very broad translation – please refer to the actual Act for specific detail.
It only applies to International flights. These are defined as any flight that starts in one country and touches down in another, providing that one of the States is a Convention member. It seems that if neither state is a Member then M99 will not apply – but then some other convention is likely to apply such as Warsaw. It must be remembered that there are very few M99 signatories or ratifications in Africa.
1. M99 makes the Carrier liable for passenger injury with an award of SDR100,000 (Special Drawing Rights – SDR – are about US$1.5:SDR1 or say R11.25) i.e. about R1,125,000, without any defence.
2. The Carrier will then be liable for any amount awarded over SDR100,000 unless it can prove that it was not negligent or that the accident was entirely the fault of a third party - e.g. – a manufacturer or maintenance organisation (AMO).
3. Delay is now included for passengers, baggage or cargo for damages of up to SDR4 150 = US$6 225 = R47 000.
4. Passenger baggage liability has shot up from Warsaw R100,50 per kg for checked baggage (or about R3 000 for 30kg allowance) to SDR1 000 = US$1 500 = R11 250 for the whole lot. Unchecked baggage was R2 010 in all but now there does not seem to be any difference between checked and unchecked. The passenger can make a special declaration of value above these amounts but there seems to be no allowance for the carrier to refuse to accept such a declaration.
5. Cargo liability is for SDR17 per kg = US$25 = R191. Previously this was R100,50 per kg.

The carrier may not reduce any of the limits or contract out of any of the provisions of the Convention.
• Claims notification (The Convention refers to them as Complaints) =
• 7 days for baggage;
• 14 days for cargo;
• 21 days for delay;
• 2 years for injury.

Jurisdiction – the claimant can go for jurisdiction to:
• The place where carrier has domicile; or
• The principal place of business;
• The place where the carrier has business and made the contract;
• The destination (it doesn’t say whether this is ultimate destination or destination of the leg on which the accident happened); or,
• The place where the passenger has his permanent domicile if the carrier also has premises and operates a service.

This is where the nightmare starts as it means that many claims can be directed to places like the USA where the legal system can be very adverse to the carrier.
Punitive damages are not allowed under M99. Some areas have added their own bend to M99. The EU has issued its own limits which are so huge it is doubtful you could insure for them. Perhaps the Brussels Sprouts will come to their senses soon.
Now think how much insurance you are going to need and compare it to what you have got and then think about the extra premium costs you are going to have to pay. Talk to your broker or consultant ASAP. By Henry Tours

Copyright © Insurance Times and Investments® Vol:20.3 1st April, 2007
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