Dana Air Crash and Insurance Compensation: Matters Arising

12 Dec 2012

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 Dana plane

Six months after the crash of Dana Airlines flight 992 in Lagos, the payment of insurance compensation to the affected families is still enmeshed in controversy, Nnamdi Duru reports

Dana Airline’s Boeing MD 83 aircraft flight no. 992 crashed on June 3, 2012 in Iju area of Lagos State, killing all the 153 passengers and crew members on board as well as another 10 on the ground. 
The aircraft, which crashed in a densely populated area, also destroyed many properties on ground including a house, where occupants including a man and his wife died, making their three young children orphans.
Following the agitation of Nigerians who alleged negligence on the part of the airline’s management, the Federal Government suspended the operational licence of the airline and restored it four months after. The airline is back in business.
However, while the airline has made good its operational structures, at least in the eyes of the regulators and government, relatives of victims of the air crash are still battling to ensure that the insurers of the ill-fated aircraft make good their promise under the aviation insurance contract.

Dana Airlines Insurance Account

The management of Dana Airlines and insurance companies, both local and foreign, agreed to insure its fleet of aircraft at a premium of $1,448,206, an equivalent of N225.92 million.
A reliable source confirmed that the deal, which was brokered by Aon Plc saw Lloyds of London taking 70 per cent of the premium which amounts to N158.14 million ($1,013,745) while 30 per cent amounting to N67.78 million was retained by the local insurers.

For the local market, Prestige Assurance Plc is lead insurer and took on 8 per cent of the risk. The co-insurers include Leadway Assurance Company Limited which took on 7 per cent of the risk; NEM Insurance Plc took on 5 per cent of the risk and Sterling Assurance Plc that took 3 per cent of the risk.
The other co-insurers are Continental Reinsurance Plc with 3 per cent of the risk, Aiico Insurance Plc which absorbed 2 per cent of the risk and Standard Alliance Insurance Plc with 2 per cent.
The premium was said to have been paid to Prestige Assurance which remitted the 70 per cent due to Lloyds but was alleged to have failed to remit the remaining 22 per cent of the premium to its co-insurers before the accident occurred.

Also, the management of Prestige Assurance was said to have complained that its co-insurers were yet to contribute their own portion after it has paid as much as N2.609 million six months after the accident.
All these allegations and counter allegations were in the realms of rumour as none of the co-insurers is making noise about its grievances.  Also the insurance law does not hold the co-insurers liable for any claims even as the lead insurer has since assumed legal liabilities for 100 per cent of the claims as is the usual practice in the insurance market all over the world.

The co-insurers and reinsurers make sense to only the lead insurer as the insured has nothing to do with them.  Also their relationship with the lead underwriter is a matter of convenience, sharing premium and losses at the same rate with the lead insurers who entered into the contract with the insured.
The regulator as well is not interested in any arrangement between the lead insurer and co-insurers or reinsurers, it holds the lead insurer liable for 100 per cent of the risk and in this case the National Insurance Commission (NAICOM) held Prestige Assurance responsible for the total loss. 
The latter has since taken responsibility for 100 per cent of the Dana air crash liabilities.

Complaints of Irregularities

Some relatives of the crash victims alleged irregularities and deliberate delay in the payment of the initial compensation on the trio of the management of Dana Airline, Prestige Assurance Plc and the foreign reinsurer, Lloyds Syndicate of London, represented by Clyde and Co and its Nigerian representatives, Yomi Osikoya & Co.
While some raised an alarm that their names were advertised as having collected the $30,000, they were yet to receive any such money from any of the parties others alleged that they were short-changed by the trio, having been paid $15,000 instead of the full amount.

Some others accused Dana Airlines and Yomi Osikoya & Co were threatening them to withdraw the suit they instituted against Dana Airlines in the United States even as another would-be beneficiary alleged that the airline’s management and legal representative of the reinsurer forced him to go through a DNA test and secure a Letter of Administration but still refused to pay him or his proxy the said $30,000 initial compensation.
Meanwhile the legal representatives for relatives of 40 of the crash victims, M. O. Awoyemi & Co. alleged that the Dana group and their insurers were deliberately frustrating the payment process to the detriment of the victims’ relatives.

The firm called on the National Assembly, the Aviation Minister and President Jonathan Goodluck to prevail on Dana Airlines and the local and foreign insurers to speed up the payment process with a view to alleviating the suffering of those who lost their loved ones in the accident.
Giving details of how his clients were affected, the law firm’s Managing Partner, Mr. Bunmi Awoyemi, said out of the 40 families he is representing, only 13 had been paid the initial $30,000; four of them were paid $15,000, with the remaining 27 victims’ families yet to receive a dime six months after the air crash.
He recalled that the Dana Airline’s management said 80 victims’ families were paid $30,000, including two of his clients, Messrs. Femi Sobowale and Ahmed Dukawa, who were yet to be paid anything but were fraudulently listed by Dana Airlines and its local and international insurers while their families as having been paid without any proof of payment to anybody else.
Awoyemi also appealed to NAICOM to prevail on the reluctant insurers to pay compensation to the relatives of victims of the air crash.

“What can be deduced from S. 48(3) of the Civil Aviation Acts is that Dana Airline is not given an alternative other than to pay $30,000 within the stipulated time of 30 days. We have tried severally and in vain, via written and oral communication, to get the airline and its insurer’s solicitors, who are responsible for giving the cheques to the families of the victims to pay our clients their monies as stipulated in the Act failed.
“We therefore, on behalf of our clients, crave your indulgence by registering your committee’s kind intervention in this matter with a view to putting pressure on them to pay the above-stated money, and also to bring this development to the floor of the Senate, giving the Senate opportunity to look into this matter,” Awoyemi said.

Payment So Far

The lead insurer on the Dana airlines account, Prestige Assurance, confirmed that 81 relatives of crash victims had received the initial $30,000 as at December 1, 2012, adding that the remaining 70 per cent of the claims would be paid to them when they meet the necessary claims conditions including presentation of valid letters of administration from the state government.
In essence, none of the victims’ families have received compensation in full, including the man who claimed he has submitted a letter of authority empowering him to administer the estate of his late daughter.

Prestige Assurance Absolves Self

The lead underwriter for the Dana airlines, Prestige Assurance has absolved itself from all blame regarding delays in payment of the initial compensation to relatives of the crash victims.
It said it was neither responsible for negotiating nor verifying claims made by the bereaved families and that its duties under the contract stops at contributing its share of verified claims.
Managing Director of the company, Dr. Anand Mittal, responded to allegations made against the insurers and absolved Prestige Assurance from blame with regard to the complaints of the stakeholders.
He said Prestige Assurance has paid $2.609 million dollars, being compensation to victims of the deceased and legal fees to relevant organisations handling various aspects of the claims.
Explaining what the insurer did so far with regard to compensating the victims’ families, Mittal said as soon as the company got wind of the accident, the insurer’s officials attempted to physically inspect the crash site but were stopped by security officials who warned that it was not safe for them to do so.
The company thereafter summoned an emergency management meeting to deliberate on how to meet the expected claims and notified the main insurer and reinsurer, Lloyds Syndicate of London, which appointed Clyde & Co to handle all the legal formalities alongside its Nigerian representatives, Messrs. Yomi Osikoya & Co.

The management of Dana Airlines also set up two crisis centres in Lagos and Abuja respectively in line with legal and regulatory requirements, he added.
According to him, the payment of the initial $30,000 compensation to families of the crash victims ran into trouble when multiple relatives started laying claims to the benefit of some victims.
According to him, Prestige Assurance role stops at paying its share of verified claims on the advice of the legal representative of the reinsurer, Lloyds of London, Yomi Osikoya & Co. which is the firm handling all the claims on behalf of its principal.
He explained that, it is the responsibility of the reinsurer based in London to verify and negotiate claims arising from the accident through its Nigerian agent in line with the insurance contract as approved by NAICOM.
Mittal emphasised that under the insurance contract, the job of Prestige Assurance in its capacity as lead underwriter is limited to making available 30 per cent of every verified claims  on behalf of all the co-insurers; adding that it was not concerned about how the reinsurer and its representatives arrive at the final claims figures.

Keeping to Contract Terms

In the face of all the allegations, Mittal insisted that Prestige Assurance did not breach any aspect of the terms of the insurance contract it entered into with Dana airline’s management.

According to him, "the global best practice in aviation insurance is that the reinsurer takes full control of the claims process and appoints relevant professionals to help in verifying and negotiating claims filed by relevant stakeholders."
He stressed that Prestige Assurance did not enter into any contract with victims of the air crash and as such its duty stops at indemnifying the insured (Dana Group) to the extent of liabilities incurred as a result of the accident and neither to negotiate individual claims with relatives of victims nor to pay the victims’ families directly.

Mittal also dismissed any irregularity in the case of those who were paid $15,000 as against the mandatory $30,000, explaining that those were cases where two sets of beneficiaries are entitled to the compensation for same victims.
To this extent, he said the lead insurer on the account did not breach any aspect of the contract or any aspect of aviation insurance law as well as international best practice in aviation insurance.

Complainants Challenged

On the various allegations of irregularities on the part of the legal representative for Dana Group and Lloyds, the Prestige Assurance boss said those making the allegations should come up with proof of the misbehaviours as alleged.
According to him, it is not the job of Prestige to start prying into how the reinsurer investigates the claims and how he negotiates with victims’ families to arrive at the amount of the claims, particularly the liabilities claims which amount could only be determined by the court or through negotiation with all the parties affected.

Mittal said Prestige Assurance was concerned with the complaints of the relatives of the crash victims because these were giving the company and other co-insurers as well as the Nigerian insurance industry a bad image while they have not done anything wrong under the contract.
He said the best Prestige Assurance could do in this regard is that if the complainants can show concrete evidence of any form of irregularities or willful delays in payment of their claims, it will in its capacity as lead insurer in the accident, take their complaints up with the reinsurers in London who would be prevailed upon to caution its representatives and ensure claims are paid without unnecessary delays.

Tags: Business, Dana Plane Crash, Featured, Nigeria

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