Should We Eliminate The Montreal Convention, And Stop Protecting Airlines From Consumer Liability?

A Ryanair received second degree burns from buy on board pasta that a crewmember dropped on her during her flight from Marseille to London last week.

The 37-year-old retired US Air Force pilot said she was sitting in her seat on the plane, when a member of staff spilled the pasta over her while passing it across from the trolley, she claimed.

The hot food landed on Brie’s upper leg, as well as spilling onto some of her belongings next to her. …[She] claimed she asked for medical assistance but that her appeal fell on deaf ears as the crew carried on serving food to other passengers.

Another passenger ended up stepping in to help Brie who was left in tears while walking through the airport without her trousers on due to the pain of the material rubbing against her burn.

It “took them 45 minutes to an hour to even open their first aid kit.” She went to the hospital on arrival in London.

Mateusz Maszczynski says “Brie could be in line for a big compensation payout” under the Montreal Convention (since airlines are held liable for injuries on board, unless they are the fault of the passenger or another individual not acting for the airline) and offers examples of $4000 compensation from Ryanair and over $60,000 compensation from Turkish Airlines for spills of hot tea. For multibillion dollar companies these actually seem like paltry sums, too small to influence behavior and yield new precautions.

Normally when a business engages in a tort, the customer can sue. An the business may be subject both to compensatory damages (making up for the loss) and punitive damages. The scale of these damages can be scary, and a strong regulator of behavior. Businesses that last don’t take chances when they face tort liability for their actions. On the other hand businesses whose liability is capped face far less of an incentive to ensure their products don’t cause harm. Airline liability is capped.

The Montreal Convention limits liability for injuries or death to a maximum of $164,686.65. The case reminds me that we really should be discussing whether limiting airline liability is something we should still be doing at this point? Why should the government be protecting airlines from the discipline of common law?

This story reminds me of two famous cases of tort law, which you’re no doubt familiar with, but where I first learned ‘the rest of the story’ from George University professor John Hasnas.

  • McDonald’s Coffee. 79 year old Stella Liebeck spilled McDonald’s coffee in her lap while sitting in her car, after receiving it from the drive through. She sued and was awarded nearly $3 million (though compensatory damages were reduced 20% due to her own negligence and exemplary damages were reduced by the court by $2.2 million and her total award was actually just $640,000).

    Ms. Liebeck had removed the top from the coffee to put in cream and sugar, and held the coffee cup between her knees when taking off the lid. That’s when the hot liquid spilled and caused third degree burns on her thighs and buttocks. At the time McDonald’s heated its coffee to 180 – 190 degrees (a temperature range which can cause third degree burns in 3-12 seconds).

    One of the reasons for the large award was that McDonald’s customers had received over 700 burns from coffee spills in the previous 10 years, settling claims for around half a million dollars each, and they hadn’t changed their practices. The award represented two days’ of McDonald’s coffee sales at the time.

    The day after the verdict was announced, McDonald’s reduced the temperature at which it serves coffee, and other major retailers followed suit. Coffee cups have been redesigned as well. The verdict was a strong safety regulator – stepping into an area where government agencies had failed to consider restaurants handing customers products that risk third degree burns in a matter of moments.

  • BP Oil Spill: BP’s Deepwater Horizon drilling rig exploded in the Gulf of Mexico twelve and a half years ago, killing 11 crewmembers and causing serious injuries to 17 other crew. In total over 3 million barrels of oil spilled into the Gulf. It took 87 days to cap the well. Deepwater Horizon was drilling nearly a mile under the water.

    This is risky and expensive but also encouraged by the federal government. An oil spill was the most foreseeable risk imaginable, and one nearly impossible to counteract (indeed it took nearly 3 months!). Strict liability would make it uneconomic, and the activity uninsurable. So the federal government not only entered into oil and gas leases, they passed the 1990 Oil Pollution Act which limited oil company liability for spills to clean-up cost plus $75 million, except in cases of gross negligent.

    They also established the Minerals Management Service as a regulatory body to oversee drilling. It lacked the staff and resources to do so, and was charged both with promoting drilling (and collecting royalties) and regulating safety. Like so many regulatory agencies it was subject to capture by the industry it oversaw.

    While the BP oil spill is regulatory failure (in a way that agencies often fail) it was set up by replacing common law liability with regulation in the first place, freeing companies from market discipline.

Regulation is something that comes usually after enough bad things have already happened, with little foresight. On the other hand companies are always scared of litigation and liability. Maybe they’re too scared – but when you engage in tort reform, caps on awards for damages, you’re shifting away from overregulation that occurs in common law legal systems to a less powerful and effective regime of administrative regulation. What you’re saying is that the market regulates too much and that the government should intervene on behalf of companies to protect them.

1999’s Montreal Convention updated the 1929 Warsaw Convention (which was itself was updated multiple times). Civil liability might have prevented the development of the nascent airline industry – it was genuinely dangerous to fly and insurance companies wouldn’t extend coverage at the beginning. Technology has advanced and the industry has matured but we still protect it from civil liability.

The arguments for still doing this would be that if airlines were subject to greater liability, then ticket prices would rise. Maybe. Or maybe the federal government wouldn’t have to regulate every minute aspect of the industry and we’d see more innovation and lower prices as a result.

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