Malaysia Airlines Jet Crash Insurance May Pose Quandary

 
on July 17 2014 5:49 PM
Malaysia 777 MH17
Malaysia Airlines Boeing 777 flight MH-17 with the registration number 9M-MRD flies over Poland from Amsterdam to Kuala Lumpur in this April 12, 2012 photo. REUTERS/Tomasz Bartkowiak

(Reuters) - Insurance on the Malaysian airliner brought down over Ukraine on Thursday is likely to pay out relatively quickly, provided that the cause of the crash is firmly determined, but observers say insurance for the loss of 295 lives and other liability will likely be complex and lengthy.

Malaysia Airlines said air traffic controllers lost contact with flight MH-17 at 1415 GMT as it flew over eastern Ukraine toward the Russian border, bound for Asia with 280 passengers and 15 crew aboard. Flight tracking data indicated it was cruising at 33,000 feet when it disappeared, apparently struck by a missile.

Investigators will try to determine whether plane actually was hit by a missile or blew up of its own accord, and that should be fairly easy, said Robert Cohn, an aviation attorney and partner at Hogan Lovells in Washington, D.C.

"Then the interesting issue is who do you go after as the malefactors?" he said. "Are you going to sue a rebel?"

Ukraine accused "terrorists" - militants fighting to unite eastern Ukraine with Russia - of shooting down the Malaysia Airlines plane, a Boeing 777, with a heavy, Soviet-era SA-11 ground-to-air missile as it flew from Amsterdam to Kuala Lumpur.

Leaders of the pro-Russian Donetsk People's Republic rebels denied any involvement, although around the same time their military commander said his forces had downed a much smaller Ukrainian transport plane.

In some ways, the investigation will mirror the search for the Malaysia Airline flight that went missing in March, when Malaysia had jurisdiction and other countries assisted.

The U.S. National Transportation Safety Board, which often investigates air accidents overseas and must be invited to join, said it was still determining its possible involvement in probing the Ukraine loss.

"We are communicating with other government agencies and evaluating what our role will be," the agency said in a statement.

U.S. and European air regulators warned in April that airlines should avoid flying over the Crimean Peninsula and parts of Ukraine.

However, some airlines were routinely flying over the northern part of Ukraine, said Mark Duell, vice president of operations at FlightAware.com, a flight-tracking website.

Lufthansa AG, Air India and Malaysia Airlines are among the airlines that have flown there, according to FlightAware's data.

"It doesn't seem anyone's been avoiding Ukraine," Duell said. "I don't see airlines going over Crimea, but I don't see anyone avoiding the rest of Ukraine."

Cohn said he expected regulators to issue broader warnings about Ukraine airspace, and that airlines would more cautious in the area, even if regulators did not expand such warnings.

On Thursday, the Federal Aviation Administration said U.S. airlines "have voluntarily agreed not to operate in the airspace near the Russian-Ukraine border."

"The FAA is monitoring the situation to determine whether further guidance is necessary," the agency said.

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