Did you know that airlines are supposed to provide financial compensation if they lose your luggage? Federal regulations allow people to collect up to $3,300 for luggage that the airline lost, (as well as for the contents of the luggage). It has to do with liability.
Every business, no matter what it sells, serves, or provides, should have a good amount of liability insurance. This type of insurance gives the business some protection in case certain problems occur.
According to Investopedia, business liability insurance is “Insurance that protects a company and/or business owner in the event of a formal lawsuit or third-party claim. Coverage includes any financial liability incurred in addition to expenses related to the company’s legal defense.” It goes on to note that there are three types of business liability insurance: general liability, professional liability, and product liability.
Airlines are businesses, and therefore, should have purchased some sort of liability insurance. If they lose someone’s luggage, and the person sues them, then the airline’s liability insurance could, theoretically, help the airline pay for court costs, lawyer’s fees, and settlement fees.
The Montreal Convention is a set of regulations that establish uniformity and predictability of rules in relation to the international carriage of passengers, baggage, and cargo. It requires all airlines to carry liability insurance. It also sets a maximum liability of airlines for lost baggages to a fixed amount, (that is not based on the weight of the luggage).
In addition to these rules, there is a federal regulation that requires airlines to pay out up to $3,300 in compensation to a passenger if the airline loses that person’s luggage. I bet you didn’t know about that.
Some airlines are intentionally keeping quiet about this particular regulation. Instead of telling you about this federal requirement, they may show you wording that implies that if they lose your luggage, the only thing they have to pay back to you is the fee you paid to have that baggage checked.
Delta airlines got penalized $100,000 in 2010 by the Department of Transportation. This is because the airline was handing out pamphlets that told passengers that the airline was limited to $25 a day in liability.
The pamphlets also said the total liability the airline would have to pay out was $125. The airline also suggested that “reasonable expenses” might be paid out, (which it limited to $50 for the first day, and $25 for each day after that.) It never once mentioned the federal regulation that requires airlines to pay up to $3,300 for lost luggage. It has been said that Delta worded it in a “deliberate misstatement”.
Image by Kenneth Lu on Flickr