Of course they are covered by insurance. All I'm saying is that this chain of events where people sue or expect compensation for things has, in turn, driven up the cost of risk (expected losses), which in turn has driven up insurance premiums for the airline, and you know that ends up in higher ticket prices. Or, in the case where the market just can't bear a higher price, airlines actually go out of business. Not saying this settlement will put this airline out of business - it's a relatively small portion of the total loss - but this entitlement that people feel and this expectation that the airline must compensate them for every single cent they are out, plus pain and suffering - that attitude is what continues to drive up costs.
Having said that, though, it would be interesting to know what the fine print on the ticket or US Air's website says. It's possible that the airline accepts liability up to a certain amount for baggage, and in that case that amount would be expected as a reimbursement. This would fall under "lost luggage", I guess. They shouldn't have to compensate anyone beyond that.