Malaysian Airlines—An Insurance Perspective
The Malaysia Airlines Flight 370 story has had me fascinated from day one. Every night, I turn on the national news to ensure I hear the latest updates from the day.
The story is so fascinating. First, I think in any situation where lives are lost, let alone losing 239 people, is just plain tragic. My heart aches for all the families and friends of the victims. Second, airplanes don’t crash every day. It’s actually a pretty rare occurrence. Yet, most people have a slight fear of flying due to the possibility of their airplane crashing. And third, how in the world does an airplane go missing?
On Monday, the Malaysian Prime Minister announced that they had concluded beyond a reasonable doubt that all lives on board were lost. Well, what if the investigators had not come to this conclusion? Would the victims be considered legally alive since they have no conclusions as to where the airplane is located and no bodies to tell us otherwise? If someone is not legally dead, how would the families be able to make a death claim for the victim’s life insurance policies?
Turns out, that’s not the case. In the United States and Malaysia, a missing person can be declared dead after they’ve been absent, without evidence they’re alive, for seven years. In China, it’s two years. However, in many situations, a judge is able to declare the victims legally dead within months or a couple of years. This is what happened in the September 11 terrorism attacks.
As far as the claims being paid out, Malaysia Airlines insurance carrier, Allianz, has addressed that each family has received initial financial assistance of $5,000 for “strain caused by the long search for the plane.”
On top of that, even if they never find the plane, Malaysia Airlines will pay the families of the victims roughly $175,000 per passenger. This is due to the Montreal Convention of 1999, an international treaty that states the carriers are required to pay damages for each passenger killed or injured in an accident, even if the cause is unknown. In this instance the insurance carrier, Allianz, will likely have to pay $40 million. If the airline cannot prove it took all the necessary measures to prevent a crash, further damages could be filed.
If the wreckage is found, there is a greater possibility that a cause will be determined. In this event, there could be further lawsuits filed—some involving other parties.
If the cause is the manufacturer of the plane, Boeing, the families of the victims could potentially file claims against their company. If the cause were deemed to be terrorism, lawyers would turn to recover funds from terrorist groups and their supporters.
While likely not a top priority right now, at some point the families will want to check on life insurance policies of the victims. Initial reports estimated that 47 of the 50 Malaysians on board had life insurance policies.