The Crash of Air Philippines 541

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Chicago Lawyer: The settlement works out to about $1.5 million for each of the victims how does that match with other settlements?

Nolan: When Air Philippines first made offers of settlement to Philippine families, they were offering $20,000. Roughly six months after this crash, there was the Singapore Airlines crash. Singapore Airlines immediately offered families $400,000, so we had a disparity in 2000 between what the London market was offering Filipinos and what they were offering other Asian families.

What we’ve seen take place is the globalization of how claims are valued. We have a history of low payments internationally for crashes from the London market which is being challenged, and we have seen from the $20,000 offer to six months later the $400,000 offer, to what this case is in terms of a settlement of $1.5 million per decedent, a trend in international cases that is the beginning of an equalization of how claims are being handled and evaluated.

For that reason alone it’s significant for how London and U.S. insurers are going to assess premiums and approach air disasters in the future. From what I’m told, $165 million is believed to be the largest foreign domestic settlement for Asia.

Chicago Lawyer: Aside from the size of the settlement, what is the significance, if any, of this case?

Nolan: The issue of aged aircraft being sold or leased by American companies to foreign countries is a continuing problem of international dimension, and the problem it creates is not only a disaster, but the problem of foreign countries not having the sophistication or experience to legally resolve the international disputes.

As the American fleet has aged, those planes are being dumped into foreign markets. Those aged aircraft that are recycled for foreign airlines will ultimately have Americans flying on those airplanes in domestic situations. This is a problem aged aircraft are not only a problem in the U.S., but it’s magnified when those products are brought to a foreign country not equipped to handle the loss.

When those old airplanes crash in foreign countries, they represent the worst aviation tragedy those countries have ever faced the greatest loss of life.

On an increasing basis people are turning to courts in the U.S.; they are looking to the U.S. for the sophistication of our legal system because they are not equipped by law and precedent to attend to cases of the magnitude of an air crash disaster. Many of their laws are outdated and have not dealt with mass torts.

When you have a truly international setting, the forum of the U.S. is something they look to because we have experience in resolving mass disasters and sophisticated international tort claims. The Circuit Court of Cook County has become a leader in handling those claims, through the efforts of Law Division Judge [William] Maddux.

When Boeing moved to Chicago, it brought international focus to this courthouse for claims involving Boeing aircraft, which are in fleets worldwide. Judge Maddux has supervised a number of lawsuits with complexities unique to air disasters which have come from these foreign crashes.

Air Philippines represents one of those foreign cases. The suit was originally brought in the Circuit Court of Cook County, the defendants appealed the ruling of Judge Kathy Flanagan that this was a convenient forum, and the case came back down, where it was ultimately settled before Judge Jennifer Duncan-Brice.

There are international aspects to it with respect to how claims are resolved. It has importance for American leasing companies as a precedent because American leasing companies view the leasing of commercial aircraft the aged American fleet as in part a financial transaction and yet, a company like AAR, which is international as well, provides other services. It’s a leader in the industry.

We have in this case a clashing of reviewing product liability and leasing law from a legal standpoint, and how that interfaces with the financial leasing industry, and what obligations exist for a finance company that turns to leasing of aircraft. Our product liability law and negligence law for negligent entrustment view responsibility differently from how financial companies historically have looked at these issues.

The importance of the case was reflected by how London views the results of the case.

The London and American insurers are reviewing this case because, historically, premiums were assessed to lessors in a different, lesser capacity than as to airlines, so this case was closely watched by insurance markets to see how it would be resolved.

Chicago Lawyer: Beyond the insurance issues, what do you think is the broader significance of the case?

Nolan: We believe this case is significant because insurers, lessors, and operators will focus more on safety and prevention when entering into transactions than they had in the past. We also believe that there will be more safety audits conducted by lessors of operators to whom they intend to lease, and the requirements for keeping with FAA standards will more likely take place.

In this instance, there was no safety audit conducted by AAR or Fleet of Air Philippines prior to the crash to know what their own safety practices were, and never any safety audits to determine whether Air Philippines was meeting FAA standards.

As globalization takes place, this case will be one that’s considered in requiring the safety audits that are common practice in U.S. airlines. I think this case will help in terms of globalizing safety for domestic foreign routes. Hopefully, cases like this will help to increase safety.

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