The Australian airline passenger liability cap will be raised by $225,000 to $725,000 under a new aviation insurance bill introduced in Parliament last week.

The Aviation Legislation Amendment (Liability and Insurance) Bill has passed its second reading in the lower house and now moves to the Senate.

All domestic airlines will have to increase their cover to the new limit, which has been raised in line with the changes to the consumer price index. The $500,000 cap was set in 1994.  

Transport Minister Anthony Albanese told Parliament last week the change will ensure victims of accidents are adequately compensated.

“The new level will reflect 21st century realities, not those of almost 20 years ago,” he said.

“While Australia has a proud aviation safety record, it is important that the Government puts in place this much-needed increase in compensation for domestic passengers affected by aviation accidents.”

Mr Albanese says the Government has been advised insurance is only a small component of the total cost of operating a domestic airline.

The insurance bill is estimated only at 2-3% of total costs for small operators and considerably less for major airlines.

“Raising the mandatory passenger insurance requirement would only have a modest impact on insurance premiums,” he said.

“But it will represent a significant improvement in the compensation available to a passenger in the event of an accident.”

The new bill brings Australian legislation in line with international standards by excluding compensation for mental injuries arising from a domestic flight.

Another provision reduces compensation payments for a victim when they were partly responsible for an aircraft accident.

“It rectifies an anomaly in the Damage By Aircraft Act where a defendant could not previously mitigate their loss by proving contributory negligence on the part of the victim,” Mr Albanese said.

“The Government recognises it would be very rare a third-party victim could be considered partly negligent in causing the damage that they suffered.”

He says defendants will retain the opportunity to argue why their liability should be reduced if they can show that the victim was partly negligent in causing the damage.

“The bill has also been strengthened so defendants can seek a contribution towards damages for which they are liable from other parties who have contributed to the damage claimed under the Act.”