Air India Plane Crash: What Determines Insurance Compensation After An Air Crash?

The tragic Air India plane crash that led to the death of 241 passengers has shed light on the compensation that air crash passengers are supposed to receive. In case of death in a plane crash, a passenger will receive substantial compensation according to the Montreal Convention in case of international flights. In the case of this crash, Air India has also said that they will pay an interim compensation of Rs 25 lakh and an ex-gratia payment of Rs 1 crore to the family of the deceased.

How The Montreal Convention Comes Into Play In Case Of An Air Crash 

“The Montreal Convention is a crucial international treaty that guides the liability of airlines in case of any accidents involving international flights. It consists of a two-tier system for compensation,” says Sajja Praveen Chowdary, director, Policybazaar for Business. 

First Tier (Strict Liability): For damages up to a certain threshold, currently set at 128,821 Special Drawing Rights (SDRs) (a group of international currencies), the airline will be held liable. This means that the victim’s family would not need to prove anything against the airline to receive the initial compensation. This works out to be about Rs 1.5 crore. 

Second Tier (Presumed Liability): For claims that exceed the SDR threshold, the airline is held responsible for unlimited damages. To avoid this, the airline must prove that the accident was not due to its negligence or that it was completely due to a third party. If the airline is still proven guilty, it faces unlimited liability for the proven damages.

“In case of the Air India crash, the action against the airline can be brought either in India (flight origin country) or the UK (flight destination country,” says Hari Radhakrishnan, expert, IBAI.

What Will Travel Insurance Pay You In Case Of An Air Crash 

“Travel insurances usually have personal accident coverage besides medical coverage. These are paid to the nominee or legal heirs upon death or disablement of the passenger,” says Radhakrishnan. 

Travel insurance thus plays an important role in terms of providing financial security. “However, it doesn’t really affect the compensation from the airline. In case of the death of a passenger, in cases like the Air India crash, the payout is made under the Accidental Death cover. Beneficiaries receive a lump sum payout—typically Rs 10-15 lakh for a $150,000 policy,” says Chowdary.