Basic Principles of aviation Insurance by Sunny Adeda



Aviation Insurance:
In a discussion on basic principles of Aviation Insurance in a fora like this, we shall examine certain aspects of the business as the subject is very wide.
Considering the time at our disposal, I will limit the presentation to certain areas:

– Basic Covers in Aviation insurance
– Liability regimes
– Passenger Liability Claims
– The role of media in major losses
– Some Important Agencies

Aviation as an industry is international in nature and therefore aviation insurance is effected in the international market more than any other branch of insurance
To practice in this market, a knowledge of laws governing air transport in various countries both locally (Nigeria) and internationally is important to keep abreast of changes in this class of business.
Who has sovereignty over the Air Space
On the high seas is agreed that the airspace is free
A State has complete sovereignty in the airspace above it as well as over its territorial waters.
People fly both locally and international and therefore the question now is in the event of loss or death of a passenger, which law will be applicable for purposes of jurisdiction.
Since after the first world war, there was very rapid advancement in Aeronautical engineering.
Today, the size and type of aircraft in operation is unimaginable. The recent advances in aircraft manufactured today in terms of number of passengers, load carried and distances covered when compared to some 20 years ago is also unbelievable. That also means that these aircrafts are high valued and therefore value at risk is quite high. You need an insurer with a lot of financial strength to play in this class of business. Even locally, strict regulations by the Insurance Regulator is in place for any operator that wants to participate in aviation business.
The nature of aviation business makes it imperative for some form of code of international regulations to be put in place.

i) Passenger and Passenger baggage Legal Liability Insurance
This type of cover is effected by an air operator or Airline to protect itself against any sum or sums which they would be liable to pay in respect of any accidental bodily injury/Death/Loss of baggage to any person being a passenger and holding a ticket.
These liabilities applies when the person is entering into, is being carried in or is alighting from the aircraft. The insurer indemnifies the insured against all sums he is legally liable to pay whether according to international law or local legislation. Subject to a maximum limit of liability agreed at inception of the policy. Standard exclusions include the crew which are normally covered under a separate policy.
ii) Third Party Legal Liability
This is effected by an aircraft operator to indemnify himself against all sums the insured would become legally liable to pay in respect of accidental injury/Death or accidental Property damage to third parties or to the public caused directly by the aircraft or falling of objects there from. The limit of liability is usually agreed at inception of the policy. Various countries have set minimum limit for aircraft that would overfly their air space. This type of insurance is sometimes referred to as public legal liability insurance
iii) Aviation Cargo
This insurance normally indemnifies an operator for loss or damage (including delays) to goods shipped by him. The document under which the goods are transported is called the Airway Bill (AWB). Acceptance of cargo with a poorly executed airway bill or incomplete can impose unlimited liability on the carrier.

❖ Warsaw Convention 1929
❖ Hague Protocol 1955
❖ Montreal Agreement 1966
❖ Montreal Protocols 1,2,4 1975
❖ IATA Inter Carrier Agreement
❖ Montreal Convention 1999
❖ European Legislation
❖ National Law e.g. NCAA
The purpose of the regime/Convention is for the unification of certain rules of international carriage by Air

The various conventions established
a) Rules governing flight over and between different States and also affirmed the complete and exclusive sovereignty of every State over the airspace above its territory
b) Laid down rules governing the fitness of aircraft & crew and rules of navigation
The first of such conventions was the Paris Convention in 1919. This was followed with the Warsaw Convention in 1926, Rome 1933 & 1952, Chicago – 1944, Montreal – 1966 & 1999
Please note the convention does not apply to Internal or Local flights within a State or territory which is not international as defined in the protocol
We shall now examine in details some aspect of the liability regimes.

The Carriage of Passengers
The duty and responsibility of the carrier and passenger are well spelt out in the various conventions i.e. the Warsaw and Montreal (1999). Any condition in the contract of Carriage attempting to relieve or lower the limits are null & void.
The carrier is obligated to effect an insurance with a minimum CSL to indemnify the passengers for death /Bodily injury/loss or damage to baggage or cargo or delay suffered by the passenger while the aircraft or during the course of embarking or disembarking
The carrier must deliver to the passenger before the flight a passenger ticket containing the following:
1. Place and date of issue
2. The place of departure and destination
3. The Agreed stopping places
4. The Name and address of the carrier
5. A statement that the carrier is subject to the rules relating to liability established by the convention
A typical ticket contains a Notice of baggage liability limitations and advice to international passengers on limitations of liability

Defences Available to the carrier
(i) There is no liability if the carrier proves his servant or agent took all necessary measures to avoid the damage or that it was impossible for him or them to take such measures
(ii) Carrier proves contributory negligence on the part of the injured person
(iii) Time barred i.e. No right of Action lies 2 years after the date of arrival at the destination or date of accident
(iiii) If he proves that the loss or damage did not occur on the aircraft or in the course of the operations of embarking or disembarking. However, the carrier is still liable at common law if he is shown to have been negligent

Key Elements of the Warsaw Convention & Hague Protocol
Article 1. Defines International carriage
Article 1 (3). Deals with transportation by successive carriers
Article 3. Sets out the minimum requirement which a passenger ticket must contains
Article 4. Provides that the carrier must deliver a baggage check.
Article 5. Provision for Air way bill in respect of cargo
Article 17. Imposes strict liability on the carrier in the event that a passenger suffers death or injury during embarkation, disembarkation or while on board the aircraft.
Article 18. Imposes strict liability on the carrier for loss or damage to baggage and goods provided the cause took place during the transportation by air
Article 21. The defence of contributory negligence is available to the carrier
• Warsaw – Balance of Interest between carriers and passengers
Montreal – Favours consumers Interest and need for equitable compensation
Warsaw Convention​​​​– 152 parties
Hague​​​ ​​​– 137
Montreal Convention ​​​​– 103
• The Conventions Applies only to “international” carriage by air

The current local legislation in Nigeria is the NCAA Act 2006 Act
The minimum combined single liability insurance (CSL) for domestic operations is as shown below:
Third Party Limit Using MTOW of aircraft
A/C MTOW (kg)
Third party
Up to 499
500 – 999
1,000 – 2,699
2,700 – 5,999
6,000 – 11,999
12,000 – 24,999
25,000 – 49,999
50,000 – 199,999
200,000 – 499,999
500,000 plus

Note: The proposed limits shown in the table above are for domestic operations only, while the international operation shall be a multiplication of the proposed domestic limits by the prevailing SDR (Special Drawing Right) at any point in time.
The CSL cover for an aircraft e.g. A Beoeing 737 with 115 passenger seat capacity will be calculated thus:
3rd Party Category see table above
Plus​$100,000 X 115​​​=​11,500,000
​$1,000 X 115 (baggage)​​​115,000
Third Party ​​​​​​150,000,000
Plus $20 per kg of cargo carried​​​
Total CSL​​​​​​161,615,000
The minimum CSL for this aircraft is $161,615,000
The carrier must submit his insurance certificate to the NCAA before they can operate a domestic flight

(a) Passenger Legal Liability
Immediate notification to the airline who in turn will inform the insurance company. Obtain the passenger manifest together with the Nationalities of the passengers. Specimen Air ticket, passenger flight coupons Obtain statement of claim Names of injured passengers
Obtain medical report in case of bodily injury/Hospitals were treated. Copies of any correspondence with the next of kin or passenger legal representative. Death/Burial Certificate Name and addresses of the next of kin and the Passengers.
Limit of liability is governed by applicable local/international laws or convention. Insurers in handling liability claims employ the services of experts to assist.
They may include External Solicitors, Surveyors, Quantity Surveyors, Engineers, Medical Personnel etc.
Passenger liability claims fall under two main categories:
i. Claims for death, injury, loss or damage to property or delay arising out of carriage under a contract of carriage with a commercial carrier.
ii. Claiming arising for death etc occurring on flights where the passengers are guests in a private aircraft or there is no contract of carriage.
Further subdivision under carriage under contract will include:
a. Carriage subject to international laws
b. Carriage subject to statutory conditions imposed by a state e.g. NCAA Act 2006.
c. Carriage subject to IATA conditions of carriage
d. Carriage subject to such conditions as the operator may impose.
Passengers flying on an international flight enters into a contract of carriage governed by international laws and conventions. Claims under a contract of carriage forms the bulk of the passenger liability claims.

(b) Passenger Baggage Claims
Passenger baggage is divided into two separate categories-:
a) Checked (Registered) baggage
b) Unchecked (or unregistered ) baggage
Checked baggage is handed over to the carrier, weighted and a receipt issued (luggage tag) Unchecked (hand baggage) is retained by the passenger and taken into the aircraft (max. 10kg) and consist of small items, brief cases, Hand bags, coats etc. The warsaw convention holds the carrier liable for loss or damage to baggage including damage occasioned by the delay of checked baggage unless the carrier is able to prove that
(1) He took all necessary steps to avoid the loss
(2) That there was contributory negligence on the part of the passenger
(3) That the loss or damage was caused by the negligence of the aircrew.
All checked in luggage must be weighted. When insurers deal directly with claimants, the first tasks is to establish the main cause of the claim which may be due to
(i) Mis handling
(ii) Pilferage
(iii) Delivery to wrong destination.

The NCAA act prescribes for loss of baggage claim at US $20 per kilo. The total weight multiply by US $20 gives the maximum liability for unchecked luggage it is limited to 10kg Maximum liability.
Usually, items of value e.g. cameras, telecoms equipment etc. are valued separately and an All Risk insurance is taken to cover loss or damages.
Claims for temporary loss of baggage necessitating purchase of essential clothes, toilet articles etc. for use until the mislaid baggage is recovered are usually accepted by insurers. The carrier has unlimited liability if it is established that the carrier failed to issue a properly completed baggage check or there has been willful misconduct on the part of the carrier or his employees.

In the event of a major loss, the media is very critical in the handling of information
The first step in handling a major loss is to activate an emergency loss plan
– Brokers, Insurers, Lawyers and Surveyors will be working with the insured/Policyholder/Carrier from the outset
– Laison with airline, Brokers, Insurers and Surveyors to assess the situation
– Instruction of local correspondents
– Initial communications with the media by the carrier
– Obtain factual information
– Collection of passenger information e.g. manifest. This must be accurate and sorted usually on a Nationality basis
– Ticketing information is important to ascertain applicable liability regime
– Continued collection of passenger/Next of Kin information
– Visit to accident sites
– Press release
– Television interviews by CEO or other Board members of the carrier
– Obtain and publish official accident report from the accident Investigation Bureau (AIB)

Nigerian Civil Aviation Authority (NCAA)
Civil aviation is a highly regulated industry all over the world. In Nigeria the NCAA is the regulator. Every single Technical personnel, equipment and airport must be certified and monitored by competent regulatory agencies. NCAA oversees the activities of all airlines and their Pilots & Crew, Airport, navigation aids, all service providers including training institutions.

The NCAA in turn are assessed and monitored by the International Civil Aviation Organisation (ICAO) and other international bodies

The NCAA issues guideline requirements for grant of Airline
Operating Permit (AOP. Amongst other requirement is that every airline operator providing air transport services for hire/reward must have adequate insurance for passenger/cargo and third party. The insurance requirement is a minimum of US$100,000 (One Hundred Thousand dollars) per passenger in case of death or injury.

Accident Investigation Bureau (AIB)
The Civil Aviation Act 2006 established the AIB as an autonomous agency that reports to the Presidency through the Honourable Minister of State (Aviation). It is headed by a Commissioner who is the CEO. It’s main responsibility is to investigate any civil aircraft accident whether minor or serious incidents arising out of or in the course of air navigation and occurring either in or over Nigeria, or occurring to Nigerian aircraft elsewhere.
The fundamental objectives of the investigation is to improve aviation safety by determining the circumstances and causes of air accidents and serious incidents. Providing safety recommendations intended to prevent reoccurrence of similar accidents. The purpose is not to apportion blame or liability.
The results are usually made public.
Serious Incident: Aero Contractors Boeing 737-500 5W –BLE 5th June 2015.
There was an air accident on 5th June 2015 involving an Aero-Contractor Boeing 737. This incident was not officially notified but the AIB got to know of the incident the following day 6th June 2015 through the media.

Always pay attention to flight attendants safety briefing at the beginning of any flight and also read the safety briefing card.
Ensure that your life jackets are under your seat and seat belts fastened always.
Do you want to report an accident

We were on board a Bellview flight from Senegal to Lagos via Ghana. A sick passenger dies on board in Ghana just before takeoff.
What is the law applicable?
What further information do we need?

A medical Emergency
Passenger suffers chest pains and later dies on board international flight. Flight continues to destination and does not divert. The family is holding the airline responsible. Please advice.
What is the law?
What further information do we need?
Montreal Convention 1999. Article 17.1
The Carrier is liable for damage sustained in case of death or bodily injury of a passenger upon condition only that the accident which caused the death or injury took place on board the aircraft or in the course of any of the operations of embarking or dis embarking.
In summary, in order to succeed the claimants will need to prove
1. There was an “accident” and
2. The “accident” caused or exacerbate the allege injuries
United state law has discussed the question in-flight medical emergencies and allegations of failure to divert extensively
– An important point under US law (In Contrast to the position in England) is that “inaction” on the carrier’s part of a chain of causes can constitute an “accident” so that a failure to divert can be an accident – depending on the circumstances

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