Official UPSC Format

Which of the following statements about insurance in aviation sector is/are correct ?
1. 'Aviation Hull Insurance' covers the physical aircraft, including the body, engine, and on-board equipment.
2. Under the Montreal Convention, adopted in 1999 by over 130 countries, including India, airlines are strictly liable to pay compensation to the family/nominee of every deceased passenger without requiring the family to prove fault.
Select the answer using the code given below :

1. 'Aviation Hull Insurance' covers the physical aircraft, including the body, engine, and on-board equipment.

2. Under the Montreal Convention, adopted in 1999 by over 130 countries, including India, airlines are strictly liable to pay compensation to the family/nominee of every deceased passenger without requiring the family to prove fault.

⚡ Quick Recall Snippet

In the aviation sector, Hull Insurance protects the physical aircraft against damage. Meanwhile, international passenger rights are governed by the Montreal Convention, which mandates strict liability, requiring airlines to compensate victims' families without them having to prove the airline's negligence.

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Detailed Solution & Authority Citations

Correct Answer is Option C
The aviation industry is governed by specialized financial and international legal frameworks:
  • Statement 1 is Correct: In commercial insurance terminology, Aviation Hull Insurance is the specific property policy that covers physical loss or damage to the actual aircraft itself—protecting the fuselage (body), propulsion systems (engines), and avionics. This is distinct from 'Liability Insurance', which covers damage to third parties or passengers.

  • Statement 2 is Correct: The Montreal Convention (1999) modernized global airline liability rules. A cornerstone of this treaty (ratified by India) is the imposition of a two-tier liability system. For the first tier (up to a designated financial limit), airlines face strict liability. This means the victims' families have an absolute right to compensation and are not legally required to prove negligence or fault on the part of the airline to receive that initial payout.
    • Conclusion: Both statements accurately describe the financial and legal safeguards of the aviation sector.

    🚨 The Examiner's Trap

    This question tests advanced domain knowledge. Candidates might intuitively doubt Statement 2, assuming that in law, one always has to prove fault to win compensation, making the concept of 'strict liability' seem like a trick statement if they aren't familiar with international treaties.

    Active Recall Flashcard

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    Under the Montreal Convention (1999), what legal principle requires airlines to compensate the families of deceased passengers without them having to prove the airline was negligent?

    Strict Liability.

    Concept Flow Mapping

    Aviation Hull Insurance
    Covers
    Physical Aircraft Damage
    Montreal Convention
    Imposes
    Strict Liability
    Strict Liability
    Does Not Require
    Proof of Fault

    Logic Quest

    "Why does the Montreal Convention use 'strict liability'?"

    Not analyzing core concepts like Aviation Economics and International Liability through the lens of Previous Year Questions is a serious miss-out. This PYQ engine is specifically designed to help you decode the examiner's mindset and master highly probable Economy questions for your upcoming Prelims.