UPSC Prelims 2026 Q96: Aviation Hull Insurance & Montreal Convention
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.
- 1 only
- 2 only
- Both 1 and 2
- Neither 1 nor 2
Answer: (c) Both 1 and 2
Statement-wise explanation
- 1: correct — Hull insurance is the aircraft owner's or operator's own cover for physical loss of or damage to the aircraft itself. It covers the airframe (the body), engines, avionics, landing gear and fixed on-board equipment, usually on an agreed-value, all-risks basis. Injury to passengers or third parties is not part of hull cover. That is handled by separate aviation liability insurance, and war risks are usually covered separately too.
- 2: correct — The Montreal Convention was adopted on 28 May 1999. India deposited its instrument of accession with ICAO on 1 May 2009 as the 91st state, and the Convention came into force for India on 30 June 2009 through the Carriage by Air (Amendment) Act, 2009. Under its two-tier system (Article 21), the carrier is strictly liable for a passenger's death or bodily injury from an accident on board or during embarking or disembarking, up to a fixed limit, so the family does not have to prove fault. The limit was 100,000 SDR at the start and is 151,880 SDR since 28 December 2024. Above that limit, the carrier escapes liability only if it proves the damage was not due to its own negligence.
How to eliminate
Statement 1 is close to a definition. 'Hull' is the body of a ship or aircraft, so hull insurance has to be about the machine itself. Basic insurance vocabulary makes it safe to accept, which leaves only (a) and (c). Statement 2 needs actual knowledge. Read alone, the phrase 'strictly liable … without requiring the family to prove fault' sounds too absolute, but it is exactly the point of the Convention's first tier. The facts to remember: Montreal Convention 1999, India acceded in 2009, two-tier liability, strict liability up to about 1.5 lakh SDR, and above that the airline must prove it was not negligent. The trap is mixing it up with the Montreal Protocol (1987, ozone) or the older Warsaw Convention (1929), where the burden worked differently and limits were far lower.
Know more
Aviation insurance: main covers
| Cover | What it protects | Who claims |
|---|---|---|
| Hull (all risks) | Airframe, engines, avionics, fitted equipment | Owner / operator / lessor |
| Hull war & allied perils | Hull loss from war, hijack, terrorism | Owner / operator |
| Passenger legal liability | Death or injury of passengers, baggage loss | Passengers / families |
| Third-party liability | People and property on the ground | Third parties |
| Cargo liability | Goods carried | Shippers |
Air carrier liability law: how it evolved
- Warsaw Convention, 1929 (amended by the Hague Protocol, 1955): low caps (about USD 20,000 for death). India applied it through the Carriage by Air Act, 1972.
- Montreal Convention, 1999: brought the scattered 'Warsaw System' together into one treaty. It raised compensation roughly sevenfold (PIB, 2008). It also added a fifth jurisdiction, the passenger's principal residence if the airline operates there, so Indian families can sue in India.
- Two-tier liability for death or injury (Arts. 17, 21):
- Tier 1: strict liability up to the limit. The carrier can reduce it only by proving the victim's own contributory negligence.
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Tier 2: no upper cap. The carrier avoids paying only if it proves it was not negligent, or that a third party was solely at fault.
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Limits are reviewed for inflation every 5 years (Art. 24): 100,000 SDR → 113,100 SDR (2009) → 128,821 SDR (2019) → 151,880 SDR (28 Dec 2024).
- Other features: carriers must pay advance payments to meet immediate needs where national law requires them, compulsory insurance for carriers, liability for delay, and a two-year limit for bringing claims.
- SDR (Special Drawing Rights) is the IMF's reserve unit, based on a basket of five currencies.
In the news
After the Air India AI171 crash in Ahmedabad on 12 June 2025, there was wide public debate on how families would be compensated. The government said final compensation would be worked out under the Carriage by Air Act and the Montreal Convention, and payouts would rest on the airline's hull and liability insurance.
NCERT Concepts to Revise
- Montreal Protocol: Statement 2 names the 1999 Montreal Convention on air carrier liability. Do not confuse it with the 1987 Montreal Protocol on ozone-depleting substances.