Airline liability laws undergo revamp

By CHRIS DANIELS

In four weeks, global rules covering liability and compensation for the airline industry will undergo their biggest overhaul in 70 years.

On November 4, the 1929 Warsaw Convention, derided as hopelessly outdated and irrelevant, will be replaced by the 1999 Montreal Convention, which brings into law the principle of unlimited liability for airlines in the event of a crash.

It also gives extra scope for crash victims and their families to sue for damages in their home countries.

But the opportunity for passengers to take legal action against airlines in their home countries only applies if the airline flies to that country.

For instance, a New Zealander would be able to sue an airline in a local court for a crash or incident in Europe, so long as that airline also flew to New Zealand.

The injury or death of international air travellers is one of the few areas not covered by ACC laws, so victims or their families can sue for damages.

Remarkably, the push for "unlimited liability" coverage came from the airlines themselves, responding to lengthy and financially crippling litigation launched by victims and their families after air crashes.

Anthony Mercer, special counsel, aviation, at law firm Buddle Findlay, said there had been a degree of altruism in the airlines accepting unlimited liability, but there was also self-interest.

"They resulted in very expensive litigation sagas in the US," said Mercer.

"They were finding that an awful lot of money was going into defence, paying attorney fees over a number of years."

The airlines decided it was inappropriate to continue arguing the issue of liability, which was being fought over precisely because the old Warsaw Convention only provided for compensation of US$20,000 ($33,560).

This meant that if a victim's family thought they deserved more compensation, they had to try to prove the airline had wilfully or recklessly caused the accident.

Since 1996, many airlines, including Air New Zealand, have waived the Warsaw Convention in an attempt to stave off the long and costly litigation.

"If a family wanted anything more than the $20,000, then they had to try and prove the wilful misconduct," said Mercer.

"The carrier would, of course, defend this rather than running the risk of paying out too much money."

Now, in the event of a crash, the airline, through its insurers, will try to work out how much it would pay victims, hoping to settle the matter quickly, rather than having damages determined by a jury or a judge after a lengthy court battle.

From next month, airlines will have no choice but to be covered by the Montreal Convention, that lays down the unlimited liability.

Another change to the international law coming into force on November 4 is the way compensation for lost bags is determined.

Previously it was judged on the weight of the bags lost, but now a maximum of around $2400 for all baggage has been introduced.

A maximum of $10,000 is coming into force for flight delays.

Air NZ spokeswoman Rosie Paul said the airline already had extensive liability insurance and the ratification of the Montreal Convention merely formalised existing arrangements.