Bloomberg News

Berkshire Agrees to Settle Australia Suit Over Chopper Crash

September 14, 2011

(Updates with Berkshire claim in sixth paragraph.)

Sept. 14 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc. agreed to settle Australian insurance claims stemming from a 2005 crash by a Royal Australian Navy helicopter in Indonesia in which nine people were killed.

The Australian government and the Defence Force sued Berkshire and other insurers in December for refusing to pay A$19.8 million ($20.5 million) in claims the government and the defense department incurred in compensating families of the victims and in the legal costs of a Navy Board inquiry.

The government and the insurers reached a settlement in mediation last month, Shamus Toomey, the government’s lawyer, told Federal Court Justice Geoffrey Flick at a hearing in Sydney today. Terms of the settlement are confidential, Toomey said after the hearing.

Berkshire was a primary insurer, responsible for 29.75 percent of any payouts, according to court documents. Great Lakes Re (UK), a unit of Muenchener Rueckversicherungs AG, and Converium Insurance UK Ltd., a unit of SCOR Holding Switzerland AG, each covered 27.25 percent of the policy. The rest of the coverage was shared by 21 other insurers.

The Australian Navy Sea King helicopter Shark 02 crashed April 2, 2005, on the island of Nias while transporting a medical team on a rescue mission to help civilians affected by a March 2005 earthquake.

Maintenance

The insurers had claimed the policy was void because it required the aircraft to be flight worthy at the start of each flight and the Australian Navy, in a 2007 report, said a series of errors and non-compliance with maintenance regulations were to blame for the accident.

The crash was caused by a failure of mechanical linkages within the flight control system, because a nut was fitted incorrectly, according to the report.

The government had argued that reasonable care was taken to ensure the helicopter was airworthy and it didn’t breach the policy.

The government and the defense department paid A$17.8 million to the families of those killed and sought to recoup A$2 million of the A$8.8 million that was spent on an inquiry following the crash. The A$2 million is the maximum coverage provided by the insurers for legal costs, according to the court documents.

The case is Commonwealth of Australia vs Berkshire Hathaway International. NSD1715/2010. Federal Court of Australia (Sydney).

--Editors: Dave McCombs, Terje Langeland

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net


Reviving Keynes
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus