Prudential Guarantee settles historic P7.5-B claims

Prudential Guarantee Assurance Inc. (PGAI) has settled claims amounting to P7.5 billion ($165 million) in the United States between the heirs of the victims of the ill-fated Air Philippines Flight 541 in Davao eight years ago and the aircraft lessors of the Boeing 737 plane.

In a press statement, PGAI chairman and chief executive officer Robert Coyiuto Jr. said the amicable settlement eked out between the US lawyers of the victims and the aircraft lessors—AAR Aircraft and Fleet Business Credit Corp.—“is by far, the biggest aviation insurance payout in the Philippines.”

The settlement closed the legal issue that 110 heirs of the 131 passengers and crew that perished in the Air Philippines flight 541 crash pursued in Chicago, Illinois against the aircraft lessors on allegations that the Boeing was poorly maintained when it was leased to the airline.

Flight 541 of Air Philippines, the budget airline of Philippine Airlines (PAL) owner tycoon Lucio C. Tan, crashed in Samal Island, Davao on April 19, 2000. After the crash, 78 heirs of the victims accepted the indemnity from PGAI as per the Philippine Damage Law.

However, some of those who accepted the insurance indemnity joined the US suit against AAR Aircraft and Fleet Business Credit. There were a total of 110 heirs of the victims that pursued the case through US lawyers who negotiated the amicable settlement ahead of a scheduled trial this September.

The remaining 21 victims’ families are now exploring the possibility of sharing in the P7.5-billion insurance payout.

The amicable settlement closed the issue that the victims pursued against the aircraft lessors. It was the contention of the victims’ lawyers that the aircraft was not maintained well resulting in the accident.

What emerged as the real issue was that the airframe of the aircraft was buried allegedly prematurely without giving the lawyers of the victims’ families an opportunity to inspect it for any evidence of mechanical defect. The Air Transportation Office and a Philippine government commission approved the said burial.

The Philippine government commission finding was that the accident was caused by pilot error and absolved the airline of any liability regarding the alleged condition of the plane or any mechanical malfunction. This finding was completely disregarded by the US court.