Aircraft accidents, though rare, leave a devastating impact that extends far beyond the wreckage of lives. Compensation becomes not only a matter of monetary redress, but a crucial step toward accountability, closure and rebuilding lives.
In the aftermath of last week's AI 171 tragedy, Air India offered ₹1 cr as compensation per deceased person to his or her next of kin. While this announcement was prompt and appears generous, the airline could be on the hook for a much higher amount. Families may have significant claims, depending on how the investigation unfolds.
India has ratified the 'Montreal Convention' - Convention for the Unification of Certain Rules for International Carriage by Air - by incorporating it into the Carriage by Air Act 1972. This provides for a 2-tier compensation system defined in terms of special drawing rights (SDR), an international reserve asset created by IMF to supplement official reserves of its member countries. Accordingly:
The airline must compensate the kin of the deceased passengers up to SDR 128,821 (₹1.6 cr), regardless of any fault or wrongdoing by the airline. This compensation is the absolute minimum, without exception. Some media reports have indicated that the ₹1 cr offered by AI is separate, and in addition to the SDR amount required under the convention.
Kin of the deceased may seek compensation over and above this SDR amount, based on actual loss. This would be calculated on lost income, and companionship of victims who sustained their families and dependents. AI could avoid higher compensation only if it proves there was no negligence, wrongful act or omission by the airline (including its servants or agents, which include various third parties engaged by the airline to service the aircraft or assist with the flight).
Alternatively, the airline could defend itself if the accident occurred solely due to wrongful acts, or omissions of a third party, such as in the case of terrorism. The legal burden is on the airline to prove that the mishap did not occur due to its conduct, or that it occurred due to the conduct of a third party.
In such cases, families of Indian victims could also approach consumer fora under the Consumer Protection Act 2019. The consumer protection law is in addition to remedies available under the Montreal Convention as read with the Carriage by Air Act.
For families of foreign passengers, legal options extend beyond India. Since the convention applies almost globally, they could file lawsuits in their home countries, where compensation standards may be higher.
Air India has also offered ₹1 cr to the families of the deceased medical college students and staff, and people on the ground. Securing higher compensation is more challenging for families of victims on the ground. Both Carriage by Air Act and Consumer Protection Act are meant for passengers on the ill-fated aircraft. The next of kin of ground fatalities would have to approach a civil court in India seeking compensation under Fatal Accidents Act 1855, which provides compensation to the family of a person who dies in the case of wrongful accidents.
Another option is a tort law claim, where damages for negligence could be sought. In both these options, Air India would be liable if it's at fault - that is, if the accident was a result of its act, omission or oversight. The total compensation payout to victims could well exceed ₹1,000 cr. Beyond victim compensation, Air India also faces significant costs for property damage, aircraft loss, emergency response and disrupted flights.
Globally, the compensation payout in cases of similar incidents has touched ₹4,500 cr ($500 mn). Air India likely maintains adequate insurance coverage that would cover these costs, or at least a substantial part. But if claims exceed coverage, the financial hit could be severe.
Vaidyanathan is managing partner, and Sarvankar is senior associate, BTG Advaya
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
In the aftermath of last week's AI 171 tragedy, Air India offered ₹1 cr as compensation per deceased person to his or her next of kin. While this announcement was prompt and appears generous, the airline could be on the hook for a much higher amount. Families may have significant claims, depending on how the investigation unfolds.
India has ratified the 'Montreal Convention' - Convention for the Unification of Certain Rules for International Carriage by Air - by incorporating it into the Carriage by Air Act 1972. This provides for a 2-tier compensation system defined in terms of special drawing rights (SDR), an international reserve asset created by IMF to supplement official reserves of its member countries. Accordingly:
The airline must compensate the kin of the deceased passengers up to SDR 128,821 (₹1.6 cr), regardless of any fault or wrongdoing by the airline. This compensation is the absolute minimum, without exception. Some media reports have indicated that the ₹1 cr offered by AI is separate, and in addition to the SDR amount required under the convention.
Kin of the deceased may seek compensation over and above this SDR amount, based on actual loss. This would be calculated on lost income, and companionship of victims who sustained their families and dependents. AI could avoid higher compensation only if it proves there was no negligence, wrongful act or omission by the airline (including its servants or agents, which include various third parties engaged by the airline to service the aircraft or assist with the flight).
Alternatively, the airline could defend itself if the accident occurred solely due to wrongful acts, or omissions of a third party, such as in the case of terrorism. The legal burden is on the airline to prove that the mishap did not occur due to its conduct, or that it occurred due to the conduct of a third party.
In such cases, families of Indian victims could also approach consumer fora under the Consumer Protection Act 2019. The consumer protection law is in addition to remedies available under the Montreal Convention as read with the Carriage by Air Act.
For families of foreign passengers, legal options extend beyond India. Since the convention applies almost globally, they could file lawsuits in their home countries, where compensation standards may be higher.
Air India has also offered ₹1 cr to the families of the deceased medical college students and staff, and people on the ground. Securing higher compensation is more challenging for families of victims on the ground. Both Carriage by Air Act and Consumer Protection Act are meant for passengers on the ill-fated aircraft. The next of kin of ground fatalities would have to approach a civil court in India seeking compensation under Fatal Accidents Act 1855, which provides compensation to the family of a person who dies in the case of wrongful accidents.
Another option is a tort law claim, where damages for negligence could be sought. In both these options, Air India would be liable if it's at fault - that is, if the accident was a result of its act, omission or oversight. The total compensation payout to victims could well exceed ₹1,000 cr. Beyond victim compensation, Air India also faces significant costs for property damage, aircraft loss, emergency response and disrupted flights.
Globally, the compensation payout in cases of similar incidents has touched ₹4,500 cr ($500 mn). Air India likely maintains adequate insurance coverage that would cover these costs, or at least a substantial part. But if claims exceed coverage, the financial hit could be severe.
Vaidyanathan is managing partner, and Sarvankar is senior associate, BTG Advaya
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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