Air India crash: Victims entitled to compensation, regardless of fault

Business Standard

14 hours ago

While the initial findings of the Aircraft Accident Investigation Bureau (AAIB) into last month's Air India plane crash in Ahmedabad did not explicitly attribute the incident to pilot error, insurance industry experts have stated that, even if pilot error were the cause, it would not affect insurance claim payouts. Regardless of whether the cause is pilot error or any other form of systemic failure, the victims remain eligible for compensation, they said.
The Air India Boeing 787-8 Dreamliner crashed in Ahmedabad a month ago, killing 260 people, including those on board the flight and those on the ground, with only a single survivor from the incident.
'The insurance amount has to be paid by the airline because even if it was pilot error that caused the accident, that is covered in the policy. The insurance amount has to be paid irrespective of the scenario. Also, some of the victims have approached a UK law firm to get better compensation,' an insurance broker told Business Standard.
The only case where there could be a change in the insurance payout is if Air India's management were found to have been aware of the accident. Only if the accident was deliberate by the airline would there be any change in the payout.
'A pilot's mistake does not change anything. The insurance is still payable. Only if the management has deliberately crashed the aircraft or were aware of the pilot's condition, people might be eligible for higher compensation. But, it is too early to comment on it,' another insurance broker told Business Standard.
Typically, an aviation claim includes three kinds of liabilities: damage to the aircraft; loss of lives on board the aircraft, including the crew members; and third-party liability for loss of lives caused by the crash. It also includes cargo liability.
The third-party liability compensation for those who lost their lives is governed by the Montreal Convention, which applies to most international flights. Under the Convention, airlines are strictly liable for damages up to a certain threshold—currently around SDR 128,821, or approximately ₹1.50 crore per passenger—and can be held liable for higher amounts if negligence, including pilot error, is proven.
Industry experts have estimated insurance claims to the tune of $475 million, with $125 million for the hull and the remaining $350 million for liability, which includes third-party liability as well. The major part of the claims will likely be borne by global reinsurers, as aviation policies are typically structured with primary insurers transferring a significant portion of the risk through reinsurance arrangements.
State-owned GIC Re is responsible for about 5.15 per cent of the $475 million—4 per cent from obligatory cession and 1.15 per cent written through its London branch. It will make the provision in Q1, which will be less than ₹200 crore.
Air India had insured its fleet for $20 billion with Indian insurers, including TATA AIG General Insurance, ICICI Lombard General Insurance, New India Insurance, and other state-owned general insurance companies. TATA AIG has provided coverage for 30-40 per cent of the risk and is the lead insurer among the primary insurers.