On 27 November 2012 the Australian Parliament passed the Aviation Legislation Amendment (Liability and Insurance) Bill 2012, which introduces important changes to the airline passenger and surface damage liability regimes in Australia. The Bill will commence as an Act of Parliament once it has received Royal Assent, which is expected in the next day or so.

Key Changes

  • Increase of Liability Limit for Passenger Claims from A$500,000 to A$725,000 (unbreakable limit).
  • Requirement for carriers to increase the amount of passenger liability insurance to A$725,000 for commercial domestic flights.
  • Passenger claims for Pure Nervous Shock Excluded from Domestic Carriage.
  • Exclusion of Nervous Shock Claims for Surface Damage Liability (‘eye witness claims’) unless person has suffered additional personal injury or property damage.
  • The right to claim contributory negligence and to seek contribution from other parties in Surface Damage claims under the Damage by Aircraft Act.

Timeframe for Implementation – Impact on Current Insurance Policies

One issue is the effect of the increase in the liability limit on current policies. The standard London insurance market endorsement (AVN57A (Aus)) wording may mean that an Insurer’s level of cover is automatically increased from A$500,000 to A$725,000 when the changes take effect. This is despite Insurers not having had the opportunity to rate the risk based on the higher limit of liability at the time of writing the policy.

The Department of Transport and Infrastructure is aware of the problem and has proposed an implementation date of 31 March 2013 to reduce the effect on current policies. At the latest, the changes have to take effect within 6 months of Royal Assent.