Law of International Insurance Contracts - Essay Example

An Essay Discussing How the Courts In the United s and in the United Kingdom view and define the word “accident” in relation to Article 17 Warsaw Convention I. Introduction Insurance protects the individual or entity from devastating loses which can occur through accidents and other relatively uncommon yet events devastating events (Gollier, 2003). To be insurable, the risk insured must meet certain criteria including the nature of the incident and the damage suffered, the time, place and cause of the incident, severity of the damage caused and the laws define the terms and conditions of the contract of insurance between the parties (Gollier, 2003). In airline travel, the Warsaw Convention signed in 1929 set rules and regulations regarding the liabilities of international carriage towards their passengers, their luggage and other belongings. The Convention recognized the inherent risks of the aviation industry, thus, it seek to protect the airline companies by putting limitations on its liabilities towards it passengers and cargo. To strike a balance between protecting the interest of the airline companies and protecting the welfare of the passengers, the framers of the Warsaw Convention 1929 instituted provisions that define the certain terms. Section 17 of the Warsaw convention specifically said that, “The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking. “ The definition of “accident” according to the Warsaw Convention has been the subject of many debates and arguments in and outside of the courts for several years. In settling arguments, the courts have defined the word “accident” in many decided cases both in the United States and the in the United Kingdom. To get a clearer picture of how the courts define the word “accident” and how this definition has affected the insurable interests of aircrafts and their passengers, let us take a closer look at the leading cases decided by the Courts. II. Defining What Constitutes an Accident The definition of the word “accident” in the airline industry is the same in both the United States and the United Kingdom. Note that the Warsaw Convention was meant to establish a uniform liability of airline companies towards their passengers thus, the courts, in defining the word “accident” according to Article 17 of the convention, adopt a more or less interpretation. According to the provisions of the Warsaw Convention, it is not enough that the carrier failed to convince the court that it took all necessary measures to protect its passengers in order for the passengers to recover compensation. Before a passenger can recover compensation for the airline, he or she must be able to prove in court that he or she sustained damages due to an accident on board the aircraft or when he or she was embarking or disembarking from the aircraft (Section 17 Warsaw Convention). Moreover, the damage sustained must not be the accident itself but rather, the result of the accident. In case of DeMarines v. KLM1, the court defined an accident as “…an event, a physical circumstance, which unexpectedly takes place not according to the usual course of things.” In the British case, Air France v. Saks2 and in the American case, Olympic Airways v. Husain3, both courts clarified that the under Article 17 of the Warsaw Convention, the airlines’ liability towards the passenger only arises when the injury caused while on board the aircraft is a result of “…an unexpected or unusual event or happening” (Air France v. Saks4; Olympic Airways v. Husain5) which the passenger has no control over or has no means to control whatsoever, and “not where the injury results from the passenger’s own internal reaction to the usual, normal, and expected operation of the aircraft (Olympic Airways v. Husain6.)” In other words, an “accident” can only be an unexpected happening, thus, if the incident is something that can be foreseen or can be controlled, it cannot be classified as an accident under Article 17 Warsaw Convention. Based on these rulings of the court in the case of DeMarines v. KLM7, Air France v. Saks8 and Olympic Airways v. Husain9, for the airline company to be liable for the accident, the accident must occur on board the aircraft or while the passengers are embarking or disembarking from the aircraft. However, this requirement is not absolute in itself and there are instances when the courts allowed passengers to recover damages for injuries. In the case of Herman v TWA10 the court ruled that where an aircraft is hijacked and the passengers therein were detained on or near the aircraft, the airline company is still liable for the damages caused even if the flight has come to an end. According to the court in this case, the events that followed after the hijacking incident constitute a continuing accident for which the airline company must be held answerable. Note that in this case, the incident started inside the aircraft and even though the passengers were asked to leave the aircraft, they were not allowed to go free. Since the passengers are still under the control of the hijackers, there is continuity of the incident that happened inside the aircraft. As it is, the passengers may still hold the airline company for damages and injuries related to the incident even though these injuries and damages were sustained while they were detained by the hijackers outside or near the aircraft. Following the logic of the court in deciding the case of Herman v TWA11, in the case of Husserl v. Swiss Air Transport Company12, the court said that the airline company must be held liable for accidents that happened on board the vessel from the time the passenger boarded the aircraft at the point of origin to the time that the passenger disembarked from the aircraft at the point of destination. In this same case, the court also said aviation risks have changed drastically in the last several years, thus, damages and injuries caused by terrorism activities such as hijacking are now deemed covered under Article 17 of the Warsaw Convention (Husserl v. Swiss Air Transport Company13). Note in cases of hijacking where the hijackers commandeers the airplane, the passengers and the crew of the craft are at the mercy of the hijackers and even they are allowed to leave the plane, if they are kept under the control of the hijackers, the contract between the passengers and the airline company subsists, thus the hostage passengers are still considered as passengers of the airline. Aside from being responsible for injuries and damages sustained by passengers while inside the aircraft, the airline company is also liable for damages and injuries sustained by passengers in cases of accidents. In defining the airlines’ liabilities for accidents that occur during embarkation and disembarkation, the court said n the case of Day v. TWA14 the location of the accident, the activity which caused the injury and the control of the airline company over the location and the activities of the passengers. The three-way test established by the court in this case effectively defines the extent of the liability of the aircraft towards their passengers. The court said in this case that when the carrier begins to perform its obligations as carrier and take control over the passengers’ activities, it assumes responsibilities towards the passengers. However, the responsibilities of the aircraft are limited to the injuries and damages caused by aviation related incidents (Price v. British Airways15) and not otherwise. In deciding the case Day v. TWA16, the court said that since the passengers are no longer free agents roaming around the terminal, the carrier now has control over their activities as well as the location of their activities. Given this situation, the carrier assumes responsibilities towards the passengers, thus, the carrier may now be held liable for the injuries suffered by the passengers. In contrast to the case of Day v. TWA17, the court ruled in the case of MacDonald v. Air Canada18 ruled that the claimant is not eligible for compensation for injuries sustained when she fell while standing near the baggage pick-up area. Note that in this case, the claimant has already finished disembarking from the aircraft and was free to move around the terminal as she pleased so the court said that since the claimant is now a free agent; the airline company is no longer responsible for her injuries. The difference between the two cases is that in the case of Day v. TWA19, the airline company has control over the activities of the passenger thus is still has an insurable interest over the passenger but in the case of MacDonald v. Air Canada20, the passenger has already finished disembarking from the aircraft thus the contract of carriage between the passenger and the aircraft has been severed. Note that the passengers and the airline companies enter into a contract of carriage when the passengers buy the tickets and boarded the plane. The contract between the passengers and the airline company subsists only until the passengers disembark the aircraft at the point of destination (MacDonald v. Air Canada21). Once the contract between the passengers and the airline company expires, the aircraft is no longer responsible for the welfare of the claimant and it cannot be held responsible for the injuries sustained by the claimant. III. Limitations of Liability in Relation to the Definition of “Accidents” Although the courts have a common agreement as to what incidents are to be considered as accidents in accordance with Article 17 Warsaw Convention, the courts have somewhat conflicting opinions as to what injuries resulting from accidents are compensable. In defining the term accident, the US and the Us Courts also instituted several exemptions in which cases the airline company may not be held liable even if such event occurred inside the airplane when the passengers are still inside the terminal preparing to embark or to disembark from the aircraft. Moreover, even if the claimant successfully proves to the court that he or she suffered from an accident on board the aircraft, he or she is not automatically entitled to compensation. According to the English court in the case of Morris v KLM22, a passenger cannot claim for compensation from the airline company for purely psychological injuries. Note that under the provisions of the convention, the claimant must suffer physical injuries due to the accident and not just psychological injury. Since the 15 year old girl in this case of Morris v KLM23 only cited in her complaint that she suffered from clinical depression after she was sexually assaulted by a co-passenger in the aircraft, the court denied her claim for compensation. The court said that although the incident of sexual assault falls under the definition of “accident” under Article 17 Warsaw Convention, the said article considers only the physical injuries of the victim when awarding compensation. As it is, claim for damages due to clinical depressed is not allowed under Article 17 of the Convention. In contrast to the decision of the court in the case of Morris v KLM24, the House of Lords in England in the case King .v. Bristow Helicopters25 allowed the plaintiff’s claim for compensation for psychological injury leading to physical injury. Unlike in the case of Morris v KLM where the plaintiff wanted to recover compensation for psychological damages brought about by the accident, the complainant in the case of King .v. Bristow Helicopters26 for compensation for physical injuries sustained due to a traumatic experience while riding a helicopter. Note that in this case, the engine of the helicopter that the claimant was riding suddenly failed shortly after take off and although the helicopter landed safely and did not crash, the claimant suffered from post traumatic stress disorder and later on developed peptic ulcer. Since the claimant in this case asked for compensation for physical injuries suffered after the accident, the court said that such claim for compensation under Article 17 of the Warsaw Convention is still tenable sense the damage suffered was a direct result of the accident. Notice that what governs here is the kind of injury that the complainant suffered due to the accident. Since the Convention specifically mentioned physical injuries only, then psychological injuries are deemed excluded. The case of King .v. Bristow Helicopters27 should be distinguished from the American case of Eastern Airlines v. Floyd28. Note the in the case of Eastern Airlines v. Floyd29, the aircraft lose power while on its way to the Bahamas and it descend at a terrifying rate but on the last minute, the pilots were able to restart the engines and the aircraft landed safely just like in the case of King v Bristow Helicopters. However, the difference between these two cases is that the passengers of Eastern Airlines asked for compensation for mental stress which is not allowed under the Convention. While the claim of the plaintiff in the case of King .v. Bristow Helicopters was granted, the claims of the plaintiffs in the case of Eastern Airlines v. Floyd were denied by the court. On the other hand, the courts are of different opinions as to when in-flight illnesses becomes an accident. According to the American court in the case of Fisher v Northwest Airlines30, if the aircraft carries and uses a defective defibrillator or if it uses a functional defibrillator incorrectly, such action constitutes an accident and the airline company is liable for compensation for injuries and damages suffered by the passenger. However, if the aircraft did not carry a defibrillator on board, the court said in this case that the accident may not have occurred. Another American case, Segurian v. Northwest Airlines31, the court said failure on the part of the airline company to provide adequate medical care to a passenger who is having a heart attack can be considered an accident. However, the English Court is not as liberal as the American court in interpreting cases involving in-flight illnesses. According to the English court in the case of Deep Vein Thrombosis and Air Travel Group Litigation32, the airline company is not liable to compensate a passenger who suffered from deep vein thrombosis cannot recover compensation under Article 17 Warsaw convention since such in-flight illness is not what is contemplated by the provision. While the courts consider some types of in-flight illnesses to be accidents, passenger-to-passenger interaction on board the airplane is another matter. In the case of Price v British Airways33, the American court said that when a passenger engages in a fist-fight with another passenger, such incident cannot be considered as an accident under Article 17 Warsaw Convention even if the persons involved in the fight sustained injuries. However, in the case of Tsevas v Delta Airlines Inc34, the court ruled an assault by a passenger on a fellow passenger to be an accident since the airline failed to prevent the incident from happening by putting the complainant in another seat. IV. Conclusion In defining the word accident in relation to Article 17 Warsaw Convention, the English and the American followed more or less the same trend. However, there are instances when the English courts tend to be stricter in its interpretation of the law than the American courts. Both courts however, interpret the word “accident” as an unexpected incident which can be compensable when it happens on board the aircraft or during the embarkation or disembarkation process. Moreover, both courts agree that for the “accident” to be compensable, the plaintiff must suffer physical injuries or damages and not just psychological injuries or damages. Bibliography Book 1. Gollier C. (2003). To Insure or Not to Insure?: An Insurance Puzzle. The Geneva Papers on Risk and Insurance Theory Laws 1. Warsaw Convention 1929 Table of Cases 1. Air France v. Saks (1985), 470 U.S. 392, 105 S.Ct. 1338 2. Day v. TWA (1975) A.Ct., 528 F.2d 31 3. Deep Vein Thrombosis and Air Travel Group Litigation 2005] UKHL 72 4. DeMarines v. KLM (1978) A.Ct., 580 F.2d 1193 5. Eastern Airlines v. Floyd (1991) 499 US 530 6. Herman v TWA (1972), 12 Avi. 17,634 (1972) and 12 Avi. 17,304 7. King .v. Bristow Helicopters (2002) 2 AER 565 HL 8. MacDonald v. Air Canada (1971) A.Ct., 439 F.2d 1402 9. Morris v KLM (2002) UKHL 7 10. Olympic Airways v. Husain 540 US 644 11. Price v British Airways No. 91 Civ. 4947 JFK, 1992 WL 170679 (S.D.N.Y. 7July 1992), 23 Avi 18,465 12. Price v. British Airways No. 91 Civ. 4947 JFK, 1992 WL 170679 (S.D.N.Y. 7 July 1992), 23 Avi 18,465 13. Segurian v. Northwest Airlines (1982), 86 A.D.2d 658, 446 N.Y.S.2d 397 (2d Dep’t), aff’d, 57 N.Y.2d 767, 454 N.Y.S.2d 991, 440 N.E.2d 1339 14. Tsevas v Delta Airlines Inc No. 97 C 0320, 1997 WL 767278 (N.D. III. 1 December 1997) Read More