Air India Crash Report: Insurance Liability Could Shift If Cause Is Traced To Mechanical Fault

The aviation insurance claim arising from the crash of Air India flight AI171 may face a shift in liability if the final investigation finds that a mechanical failure, and not pilot action, triggered the loss of power, a senior insurance broker said during a panel discussion on NDTV Profit.

Chetan Kashyap, head of aviation and specialty lines at Prudent Insurance Brokers, said the current finding—that the engines shut down due to fuel cut-off—does not immediately alter insurer responsibility. However, he added that the nature of the failure could eventually change how liabilities are distributed.

“If it is a machine malfunction or maybe a lock mechanism failure, then the OEM may also come into the picture from a liability aspect,” Kashyap said. “The liability stands wide open.” He noted that a determination of fault in the final Aircraft Accident Investigation Bureau (AAIB) report could lead reinsurers to consider bringing original equipment manufacturers into the claim settlement process.

The preliminary AAIB report, released on Saturday, said the aircraft’s fuel cut-off switches moved from the ‘RUN’ to the ‘CUTOFF’ position seconds after take-off, causing both engines to lose thrust. Neither pilot acknowledged activating the switches, and while one engine restarted briefly, the other did not. The aircraft crashed 32 seconds after take-off from Ahmedabad, killing 241 of 242 people onboard and 19 on the ground.

The crash is expected to become India’s most expensive aviation insurance claim, with potential losses ranging from $211 million to $280 million. That translates to a liability of up to Rs 2,400 crore, according to insurance industry estimates.

These claims would typically fall under the hull all-risk and liability sections of an airline’s insurance policy. “An aircraft like a 787 can have third-party liability coverage of up to a billion dollars,” Kashyap said.

GIC Re Chairman Ramaswamy Narayanan earlier said the incident would activate both hull and liability claims. Amit Agarwal, CEO and MD of Howden India, estimated the insured value of the aircraft—including configuration, age, and equipment—would fall within the $211 million to $280 million range.

The AAIB’s final report is expected within the 12-month window recommended by the International Civil Aviation Organization. Investigators are working to determine whether the fuel shut-off was triggered by inadvertent human input or a technical fault.