August 23, 2012

A Bill to alter domestic air passenger injury compensation rights was yesterday introduced to Federal Parliament by transport minister Anthony Albanese to “address some of the shortcomings in the current framework”.
The Bill amends both the Civil Aviation (Carriers’ Liability) Act 1959 (“CACLA”)- dealing with passenger injuries and cargo losses – and the Damage by Aircraft Act 1999 (“DBA”) which covers ground losses from aircraft accidents. The headline change is to increase the cap on carriers’ liability for proven domestic passenger death or injury losses from $500,000 to $725,000. Airlines must also increase insurance coverage for domestic carriage to the same amount per passenger.

Last adjusted since 1994 – with an average annual inflation rate of 2.7% – the overall cost of living has increased more than 47% since then.

The compensation regime covers all manner of passenger injuries arising from commercial air transport: air crashes, embarkation & disembarkation accidents, cabin injuries and turbulence. It applies equally to airlines, commuter aircraft and charter flights. Complimentary state laws mean the new limits will apply also to intra-state travel.

But although the increased limit barely keeps pace with inflation, passengers will have to trade-off existing rights to lock this increase in. So as to “harmonise” with international passenger air carriage law, the new law excludes psychological injuries that a passenger might suffer as a result of, for example, an in-flight disturbance unless physical injuries are also sustained in the same event. Compensable instances include where the psychological injury is suffered as after-effects from severe burns or adjustment disorders from being unable to work.

The changes to be achieved by the Aviation Legislation Amendment (Liability and Insurance) Bill 2012, will be accomplished by altering the CACLA definition of “personal injury” to “bodily injury”. Claims for “purely mental injury” are also be abolished for on-ground victims eg eyewitnesses to a calamity, as changes to the coverage of the DBA, will henceforth require proof of concurrent physical injury or property loss.

“This addresses concerns raised by industry in relation to the exposure of carriers to potentially very large groups of claimants who could witness an air crash”, said the Minister. Although enacted to prevent claims by so-called “witnesses from afar”, close-by eyewitnesses will also be swept up in the change.

The DBA Act will still allow air carriage style compensation – including compensation for mental injury – to anyone with a relatively direct link to an air crash and who suffers physical injuries or property damage in connection with Australian international or inter-state aviation accidents or those occurring in federal territory.

Compensation for mental injury for intra-state accidents remains subject to state laws. The federal law changes do not prevent tort-based nervous shock claims at common law, regardless of where the accident occurs. Contributory negligence – to reduce DAA compensation if the ground victim was partially responsible for the damage – and “contribution” claims among airlines and for example airports, will be introduced to the ground damage liability regime.

Airlines and smaller operators voiced support for the compensation system and the coverage changes, noting that insurance costs represent only a small component of an airline’s overall cost base. With insurance representing no more than 3% of total overhead – significantly less for larger operators – coverage for  115 passengers aboard a Boeing 737,  is are estimated to increase by around 16% as compared to the 45% increase in the liability cap.

This translates to less than 0.5% on the cost of airline tickets (about 16c on a $200 airline fare). As much was stated by Mr Albanese in his second reading speech. The Bill has passed the House and is currently winding its way through the Senate. Only passengers injured after the date the new law comes into effect will benefit from the higher limits.

Categories: Litigation & Law Practice , Aviation Law

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