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Germanwings' insurers liable for crash claims

Germanwings' insurers liable for crash claims

The insurers of the Germanwings plane that crashed last week killing all 150 people on board will be liable to pay claims of about $300 million even if it is established that the co-pilot deliberately crashed the flight.

The Germanwings Airbus A320 flight from Barcelona, Spain, to Dusseldorf, Germany, crashed into the French Alps Tuesday killing all 144 passengers and six crew on board.

Reports suggest that the co-pilot on the flight had hidden sick notes that said he was not fit to fly, locked his fellow pilot out of the cockpit, and deliberately crashed the plane into the mountainside.

Aviation sources said the airline would be liable, and its insurers would pay claims, if the cause of the flight were found to be pilot suicide.

Allianz Global Corporate & Specialty S.E., a unit of Allianz S.E., is the lead insurer of the hull and liability insurance coverage for Germanwings, which is a budget airline operated by Deutsche Lufthansa A.G.

Lufthansa operates a captive insurer, Delvag Luftahrtversicherungs A.G., which retains a portion of the loss, sources said.

Several sources who asked not to be named said that the crash could result in liability for Allianz and its co-insurers of about $300 million.

Under the Montreal Convention of 1999, Lufthansa automatically is liable to pay about $150,000 per passenger to the families of the victims, sources said.

Lufthansa late last week said it would pay an initial €50,000 ($54,450) per person to the families of the victims and said that payment would not affect any potential future claims the families might make.

Clive Garner, a partner at law firm Irwin Mitchell L.L.P. in Birmingham, England, said that under Article 21 of the Montreal Convention, which governs aviation compensation, Germanwings will be required to compensate the families of victims of the crash and that it is unlikely that the airline could mount a defense to prove that it was not liable.

Clive O’Connell, a partner at law firm Goldberg Segalla L.L.P. in London, said that even if the tragedy is found to be the result of pilot suicide, the airline is vicariously liable for the actions of the pilot that caused the crash.

The airline and its insurers likely will act swiftly to resolve the claims of the victims’ families, Mr. O’Connell said, and settlements likely will take into account all the families’ potential claims against the airline.

The hull loss of about $6.5 million likely will be covered by Lufthansa’s war risk policy, which is underwritten by a consortia led by Lancashire Holdings Ltd.’s Lloyd’s of London unit Cathedral Underwriting Ltd.

A spokeswoman for Cathedral confirmed that the company leads the war risk consortia for Gernmanwings but declined to comment further.

If a plane is downed by a malicious or hostile act, then the hull loss is covered in the aviation war risk market, sources explained.

Pilot suicide likely would be considered such an act, they said.

In a statement, Allianz said that while the war risk policy may cover the hull portion of the loss, “the liability element of the policy would be unaffected and will continue to be covered by Allianz Global Corporate & Speciality and its co-insurers.”

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