Australian Government reviews air carrier liability and insurance laws

For the first time in a decade the Australian Government is considering major changes to the laws governing air carrier liability and insurance. The Government has now released a Discussion Paper which identifies a range of “Preliminary Findings” which it is proposed will be implemented “to refine and improve Australia’s system of carrier’s liability and insurance”. As part of the process the Government will now consult with industry stakeholders and it has invited submissions on the Discussion Paper by 26 June 2008.

The Preliminary Findings contained in the Discussion Paper make for interesting reading and some will, if adopted, result in significant changes to air carrier liability laws and insurance arrangements. Some of the changes may result in higher verdicts in relation to passenger claims, (for example by raising the unbreakable limit on domestic carriage passenger injury damages from A$500,000 to A$725,000). Other changes (such as adoption of State modified damages laws, and restricting a passenger’s ability to claim for psychological damage) may result in significant savings.

Contained among the 30 Preliminary Findings are the following:

  • The Government should require international carriers servicing Australia to implement the International Air and Transport Association (IATA) agreements, whereby carriers waive the caps instituted under the Warsaw system, and to waive the Warsaw defences up to a threshold of 100,000 SDR. This requirement should be implemented by linking the requirement to the system of IALs. This measure would replace the higher caps that the Civil Aviation (Carriers’ Liability) Act 1959 (CACL Act) currently imposes on Australian carriers operating under the Warsaw system.
  • The Government should not apply the Montreal Convention to domestic travel at this stage, and instead maintain a separate system of strict and capped liability.
  • The Government should increase the domestic passenger liability cap to $725,000 to reflect changes in the cost of living.
  • The Government should ensure consistency between the international and domestic passenger liability frameworks in relation to the treatment of mental injuries by limiting the domestic system to compensation for “bodily injuries”.
  • The Government should maintain the system of strict and unlimited liability for carriers who cause damage to third parties on the surface.
  • The Government should explore the possibility of amending the Damage By Aircraft Act (DBA Act) to clarify that it provides the exclusive remedy available to third party victims, so that they are prevented from mounting legal proceedings based on alternative areas of law.
  • The Government should consider amending the DBA Act to disallow claims to compensation for mental injury suffered by air crash witnesses.
  • The Government should consider amending the DBA Act to clarify whether consequential damages are available under the Act, noting the overall objectives of the carriers’ liability and insurance framework.
  • The Government should amend the CACL Act and the DBA Act to ensure that damages are assessed in accordance with state government civil liability regimes.
  • The Government should increase the level of mandatory passenger insurance for domestic travel to $725,000 per passenger, in line with the proposed increase to the cap on liability.
  • The Government should give consideration to working closely with industry to develop a system of mandatory insurance for third party surface damage, modelled on the minimum insurance standards required in the EC.
  • The Government should give consideration to working closely with industry to develop a system that requires carriers to obtain insurance with coverage scope that is as broad as possible, by mandating the use of the AVN52E write back clause in conjunction with the AVN48B exclusion clause.
  • The Family Assistance Code continues to serve a useful purpose and should not be abandoned.
  • The Family Assistance Code should continue to oblige airlines to make an “advance payment” to family members in the event of a passenger death.

We will monitor developments regarding the implementation of these significant proposed changes, and will keep readers informed in future Bulletins.

Anyone wishing to read the full Discussion Paper can find it at www.infrastructure.gov.au/aviation/international/liability.aspx

Written by Simon Liddy, Partner