For Malaysia Airlines, compensation is next issue

After a long, grueling search that captivated the world, Malaysia Airlines has announced that its Flight 370 crashed in the southern Indian Ocean and that passengers likely didn't survive.

And though some families are still holding out hope for a miracle, the focus for others now turns to holding the airline responsible for the tragedy. But what that means in terms of compensation is still unclear.

Already, the airline has given $5,000 to the families of each of the 239 passengers. It's also paying for hotel, meals and transportation for up to five family members of each passenger, and it plans to continue doing so for as long as the families need it, The Associated Press reports.

And while $5,000 doesn't seem like much, that's just the initial financial support for the families' immediate needs. Much bigger payouts are set to come later. The airline has also assigned two caregivers per family to offer 24-hour counseling and support.

The airline will pay families up to $175,000 under international treaty. Families will likely also file insurance claims and lawsuits. Then a period of negotiations will begin, and eventually the airline's insurer will probably make each family an offer to settle the claims, CNN reports.

During this time, experts will take on the heartbreaking task of determining what a person's life is worth. Were they married or single? Have children? What was their profession? How old were they, and where did they live?

Experts have given wildly varying estimates for potential compensation, ranging from just $400,000 to as much as $10 million per person.

Finding the plane and analyzing the wreckage would shed some light on the legal situation, especially if investigators can pin down what exactly happened. Theories range from an on-board mechanical malfunction to a terrorist attack to criminal actions by the crew. Any sign of a mechanical flaw could bring the plane's manufacturer, Boeing (BA), into the claims picture as well.

Where the families bring their claims will also make a difference. International treaty says families can choose to file lawsuits in the country where the ticket was bought, where the airline is based or where the flight was headed, CNN reports.

For many passengers, that means lawsuits will surface in China or Malaysia. Only three Americans were on board, and their claims will likely be heard in the U.S., where the compensation will likely be much higher than in any other country.

"If the claim is brought in the U.S. courts, it's of significantly more value than if it's brought into any other court," Terry Rolfe, leader of the aviation practice at Integro Insurance Brokers, told CNBC. "And for U.S. citizens there is no problem getting into the U.S. courts."
  • Kim Peterson

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