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What could be the biggest aviation insurance payout in the
Philippines, possibly in Asia, has resulted from the crash of Air
Philippines Flight 541 that on Samal Island, Davao, eight years ago.
The airline was the low-cost carrier of Philippine Airlines owned by
tycoon Lucio Tan.
Robert Coyiuto Jr., the Chairman and Chief
Executive Officer of Prudential Guarantee & Assurance Inc.,
recently announced that the insurers have since agreed to settle
with the heirs of the passengers on board Flight 541 for $165
million or P7.5 billion.
A total of 110 heirs of the passengers and crew
who perished in the Air Philippines flight pursued a case in
Chicago, Illinois, against the firm that leased the aircraft to Air
Philippines.
Prudential Guarantee, the leading aviation
insurer in the country, had insured Air Philippines.
The record-setting aviation insurance claim was
reached when lawyers negotiating on behalf of aircraft lessors
agreed on the settlement ahead of a scheduled trial in September
this year.
Earlier, immediately after the crash, Prudential
Guarantee settled the claims of 78 families under the Philippine
Damage Law. Some of the families, though, joined in the filing of
the US case, leaving behind 21 heirs, who are exploring the
possibility of sharing in the $165-million insurance settlement.
Defective parts
According to unproved allegations of US lawyers
for the victims’ families, the Boeing plane that crashed on Samal
Island was not maintained well and had several defective parts. The
amicable settlement closed this issue.
The lawyers also scored the aircraft lessors,
AAR Aircraft & Engine Group and Fleet Business Credit Corp., for
leasing aging aircraft to developing countries.
Immediately after the accident, a government
investigation commission formed by then-President Joseph Estrada
found that the accident was caused by pilot error and absolved the
airline of any liability over the alleged condition of the plane or
of any mechanical malfunction. This finding was completely
disregarded by the US court.
What emerged as the real issue which eventually
persuaded the parties to an amicable settlement was that the
airframe of the aircraft was allegedly buried prematurely, without
giving the lawyers of the victim’s families an opportunity to
inspect it for any evidence of mechanical defect, notwithstanding
that the burial had been approved by the Air Transportation Office
and the government commission.
Prior to the burial, the wreckage of the
aircraft had been left on the site for a number of months.
Before the plane was leased to Air Philippines,
it was operated for 20 years by Southwest Airlines.
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