Business

Germanwings crash cause means recoveries ‘uncapped’

The families of passengers on the doomed jet operated by Deutsche Lufthansa’s Germanwings would able to seek unlimited recoveries from the carrier because the co-pilot might have deliberately crashed the plane into the French Alps, lawyers said.

“The liability for the victims would be uncapped,” said George Leloudas, a lecturer at Swansea University College of Law, who specialises in aviation law. “From the perspective of the airline, it’s difficult. There are no real defences you can use. It is irrational. That is why you buy insurance.”

The crash on Tuesday, which killed all 150 passengers and crew, mystified investigators because the plane flew in normal daylight conditions and had undergone routine checks. French investigators on Thursday said Andreas Lubitz, the 27-year-old co-pilot, allegedly locked the pilot out of the cockpit and intentionally flew the aircraft into a mountainside.

On Friday, investigators said they found a torn-up doctor’s note in Lubitz’s house that certified he was unfit for work on the day of the crash. Authorities believe Lubitz, who was undergoing treatment, hid his medical condition from his employer, according to a statement from Dusseldorf prosecutors, who are leading the investigation in Germany.

Because the flight from Barcelona to Dusseldorf was international, it was governed by the 1999 international accord, known as the Montreal Convention, lawyers said. Under that agreement, crash victims’ families are entitled to as much as $ 156,785. In 2009, the so-called strict-liability damages payable in the event of a passenger death under the convention was increased 13 per cent.

“That does not limit a person’s recovery,” said Kevin P Durkin, an air crash liability attorney with Chicago’s Clifford Law Offices.

Should a claimant seek more, the burden would be on Germanwings to prove some entity other than it was the only cause of the occurrence, he said. Recoveries in European cases are lower than in the US, where punitive damages are often available.

“We believe there is at least $ 1 billion of insurance cover on offer for Germanwings,” said James Healy-Pratt, an aviation lawyer at Stewarts Law LLP in London.

“We have actually assessed the likely overall compensation to be about $ 350 million.”

Germanwings would be insured “even if it is proved that intentional pilot conduct or suicide was the cause of this tragedy,” he added.

The “insurance remains valid unless there is cast-iron evidence that the senior management at Germanwings actively colluded in the alleged criminal activities of the co-pilot”.

French prosecutors have already launched a criminal investigation into the circumstances of the crash.

Allianz, Europe’s biggest insurer, on Tuesday said its Allianz Global Corporate & Specialty industrial insurance unit was the lead insurer for the crashed Germanwings plane for aviation hull and liability, sharing the coverage with a number of co-insurers. Aviation coverage is provided by a consortium that could comprise more than 10 insurers, led by a lead insurer. The so-called hull insurance could involve insured amounts of as much as $ 250 million, depending on the plane’s value, according to Steven Schmidt, a senior underwriter for aviation insurance at Munich Re, the world’s biggest re-insurer. The insurance cover for passenger liability could be as much as $ 2.5 billion a plane, depending on the size of the aircraft and individual passengers’ wealth and family situations, he said. Munich-based Allianz, also was the lead insurer for the two Malaysia Airlines planes lost last year, said its claims from these were about Euro 30 million ($ 33 million) each.

Lufthansa chief executive Carsten Spohr said the co-pilot had passed all medical tests and checks, and had started training in 2008, both in Bremen (northern Germany) and Phoenix. All cockpit personnel underwent examination, Spohr said at a press conference on Thursday. He termed the incident a “tragic, isolated case”.

The company didn’t immediately respond to questions about its potential liability after the crash.

Lufthansa, which had operated the aircraft before it was handed over to Germanwings at the beginning of 2014, said the cockpit had fortified doors with video surveillance to prevent unauthorised entry, a measure that became mandatory after the 9/11 terror attacks in the US. While pilots have a security code that lets them open the door from outside, the person remaining in the cockpit could still deny access.

While the amount of liability payments wasn’t limited, the question of what counted as damages was governed by national rules, said Elmar Giemulla, a lawyer and professor of aviation law at Berlin’s Technical University. Under German law, this includes payouts for psychological treatments and burial costs. If a victim was the breadwinner for a surviving family, the airline has to make up any cost of living payments for dependents, such as alimony payments for children until they are 27. Giemulla estimates this is about EURO 6,000 per child, a year.

“These are not big sums, nothing threatening for the airline,” he said. “And, of course, this is insured anyway…Normally, these cases do not go to court; the airlines are willing to pay, and they do pay.”