[Ferry Disaster] Ferry victims, families face hopeless compensation war

In addition to the desperate rescue attempts and the escalating blame game, the Sewol ferry victims and their family members are now expected to face a hard and complicated battle on damage compensation.

Although the passengers, both the survivors and those who died in the accident, are all covered by a number of insurances, the actual compensation process is likely to be long and painful.

Normally, life insurance clauses would exclude those who are recorded as missing as they require an official death confirmation within a year.

But when it comes to special disasters such as an aircraft crash or ship sinking, the police may acknowledge the death even when the corresponding body has not been recovered, considering the special circumstances.

The bigger issue here is that, in addition to this insurance-based compensation, victims may choose to file individual or class action suits against the shipping company for failing to put in place the necessary security measures, the shipping crew for abandoning the ship or the government for neglecting its supervisory duty.

But not only do the consequent legal processes stretch on for years, they also tend to be hard on the plaintiffs, as was in the case with the Costa Concordia, an Italian cruise ship which sank at a sea off Tuscany in January 2012, resulting in the loss of 32 lives.

The massive ship, carrying 4,252 passengers, was departing on a Mediterranean cruise when it hit the seafloor while approaching the shore. The captain, Francesco Schettino, fled the sinking ship in a lifeboat, while a number of passengers were still on board.

As compensation, the shipping company Costa offered a sum of 11,000 euros ($15,197) per uninjured passenger and made separate individual proposals to the families of the dead and missing, according to an Associated Press report at the time.

A number of dissatisfied surviving passengers, however, immediately filed a lawsuit against the cruise line, demanding compensation of $10 million and punitive damages of $450 million, CNN reports said.

Though the capsized Italian ship had full insurance coverage of up to 450 million euros, Costa did not consent to the amount and the corresponding lawsuit is still ongoing. Only 65 percent of the passengers had accepted the company’s offer, as of April 2013, according to Italian media.

In the case of the Sewol, the legal outlook is even dimmer as the company has been hard-pressed over recent years, recording a net operating loss of 790 million won last year.

Also, CEO Kim Han-shik, claiming to be hit with health issues, is currently staying out of public view after offering a brief apology on Wednesday.

Cheonghaejin Marine had taken out insurance from the Korea Shipping Association, with death insurance of 350 million won ($337,089) per person.

Danwon High School, too, had subscribed to traveler’s insurance with Dongbu Fire & Marine Insurance for the students, with a compensation limit of 100 million won.

“We will make sure that rapid and adequate (insurance) compensation is made to all victims and their families,” said the Financial Services Commission and the Financial Supervisory Service in a statement.

By Bae Hyun-jung (tellme@heraldcorp.com)