Liabilities of air carriers and their impact on aviation insurance costs: aviation insurance in Tanzania, with reference to Air Tanzania Corporation as a case study

The liabilities of air carriers have a marked impact on the cost of purchasing aviation insurance because the present insurance arrangements are based on these liabilities. Taken as such therefore there is an inevitable result in so far as accident victims are concerned- i.e., insufficient limits of compensations and the unsatisfactory basis of liability. This is particularly so where the Warsaw Convention 1 929 is followed as the law on the subject. The rationale behind the current limits of compensation had been none other than the protection of the then infant aviation industry against financial bankruptcy arising from inflated claims. Besides, it was felt that should the limits of compensation be improved, then fares would rise and correspondingly, the cost of insurance. This is not to be unmindful of another argument which suggested that if fares rose, poor passengers would be deprived of air travel. The basic law on the carriers legal liabilities, the Warsaw Convention 1929 was amended by the Hague Protocol 1955 by doubling the limits compensation of passenger liabilities. The Montreal Agreement 1966 also was an improvement on the compensation limit and the basis of liability but unfortunately it remains only applicable when a point of departure or destination in the U.S. is in question. In the is paper an attempt is made to show that where the Warsaw Convention 1929 remains applicable as in Tanzania the limits of compensation provided by the convention area, for sure, obsolete, Apart from that, negligence as the basis of establishing liability is a problem because of a number of defenses that are available to the carrier. The Hague Pratocol 1955 is better as regards limits of compensation but is not an improvement at all in the basis of liability. Negligence remains as the basis. It will be suggested in the course of this study that limits of compensation may safely be raised without depriving the carrier of the requisite profit margin. Alternatively, it will be recommended that should the current limits be sustained then it should be granted automatically upon proof of loss or injury. The Montreal Agreement 1966 limits of compensation. will be shown to be superb in industrialised states but a bit of a strain on young airline as Air Tanzania Corporation, but its strict liability basis of liability is highly appreciable: at least it guarantees the accident victim some recovery. Air carriers' liabilities are not only those established in the Warsaw Convention system or there are also those termed "ground risks", In essence these are liabilities which an air operator is exposed to in case his aircraft causes injury to persons or their property on the ground. The basis of liability is set out in the Civil Aviation Act 1977 as strict liability if there is no contributory negligence on the part of the injured party. Thus, the paper will endeavour to show that it is a contradiction in terms which negatives the whole idea behind the basis of liability' and a number of recommendations will pave our way out of this. The limits of compensation in this regard are no problem if the above contradiction is resolved. Finally, it may be observed that there is every reason at present to increase the limits of compensation and original insurers and air carriers alike need not worry about losses. After all, reinsurers undertake almost 80% of the risk and, depending on the nature of the reinsurance arrangement in questions leaving the original insurer with some reinsurance commission.