Ethiopian Federal policemen stand at the scene of the Ethiopian Airlines
Flight ET 302 plane crash, near the town of Bishoftu, southeast of
Addis Ababa, Ethiopia on March 11, 2019. PHOTO | REUTERS
Boeing Co’s insurers face big claims from families of the
victims of the Ethiopian Airlines crash, coming less than six months
after the crash of the same type of Boeing aircraft in Indonesia,
insurance and aviation sources said.
An Ethiopian
Airlines passenger jet bound for Nairobi crashed minutes after take-off
on Sunday, killing all 157 people on board, raising questions about the
safety of the Boeing 737 MAX 8, a new model that also crashed in
Indonesia in October.
While the initial insurance
payments will be made by Ethiopian Airlines’ insurers, they may look to
recoup their money from Boeing’s insurers if they can prove that the
aircraft was faulty, the sources said.
Initial payments
to the passengers’ families are bound by the Warsaw and Montreal
conventions, but those pay-outs could be much higher if families pursue
legal claims, particularly through US courts, said Clive Garner, head of
law firm Irwin Mitchell’s travel litigation group in London.
“If
there were to be anything defective in terms of the plane or any of its
components, then it would be possible to bring a claim against the
manufacturer as well as the airline,” he added.
Risks cover
Insurers typically form a consortium to share the risks of large
claims, with the lead insurer taking a larger proportion of the risk.
The insured value of the plane itself was likely around $50 million, according to industry sources.
Willis
Towers Watson was the insurance broker for Ethiopian Airlines, while
Chubb was the lead insurer, a Willis spokeswoman said on Monday. A Chubb
spokesman declined to comment.
Britain’s Global
Aerospace was the lead insurer for Boeing and also for Lion Air, which
operated the plane that crashed in October, said Global Aerospace Chief
Executive Nick Brown.
Marsh was Boeing’s insurance broker, two sources told Reuters. None of the sources gave financial details of the policies.
Boeing shares fell 5.6 per cent on Monday.
US lawsuits possible
Boeing
self-insures an initial layer of coverage before the Global Aerospace
coverage kicks in, said Justin Green, a New York-based aviation lawyer
who has represented families in cases against Boeing. Boeing declined
comment on its insurance cover.
It is not uncommon for
the planemaker, which is headquartered in Chicago, to face lawsuits in
the United States, where legal compensation payments for the crash
victims could run around $2 million to $3 million per person, depending
on the law applied, compared to about $200,000 in Ethiopia, said Green.
US
courts often throw out such lawsuits, given the difficulty of finding
witnesses overseas, but the fact that eight US citizens were killed in
the Ethiopian Airlines crash increases the likelihood that litigation on
behalf of all victims’ families could be heard by a US court, Green
said.
Initial compensation costs for all 157 passengers
who died on the flight could be around $25 million, according to
Reuters calculations based on the terms of the Montreal convention.
The
Montreal convention provides for a maximum of 113,100 special drawing
rights, currently worth $1.39, for death or injury of each passenger,
although not all countries are joined up to the convention.
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