A multibillion-dollar legal battle over who will foot the bill for hundreds of aircraft stranded in Russia will kick off in London this week as their owners try to secure payouts from insurance companies in one of the most complex and costly cases to be heard by the high court.
Groups including AIG, Chubb and Lloyd’s of London are facing what one litigant has described as a “mega trial” over claims that they have refused to cover the owners of mainly Boeing and Airbus jets that were stuck in the country after it invaded Ukraine.
Owners of the planes – including the world’s biggest commercial aircraft leasing company, AerCap – are seeking a combined total of about $3 billion from insurers in proceedings that are due to get under way on Wednesday and have been scheduled to last until Christmas.
Parallel proceedings covering reinsurance are also advancing, with a UK high court hearing scheduled for November.
The aviation insurance sector is facing potentially the biggest loss in its history, with losses topping those after 9/11. More than 500 aircraft worth an estimated $10 billion were stranded in Russia following the invasion of Ukraine in February 2022.
Western lessors managed to recover some of the aircraft, but most remain in Russia and are still being flown by Russian airlines.
“The interests of the London insurance market are directly pitted against those of the aviation industry, with hugely important financial consequences.”
— Ned Beale, co-head of commercial disputes at law firm Hausfeld
In the trial, due to take place at a “super court” in central London, several of England’s most prominent commercial barristers are expected to argue on insurers’ behalf that it is too early to declare a total loss, not least because the aircraft have not been destroyed and may yet be recovered.
They are expected to point out that the conflict between Russia and Ukraine could still be resolved, depending partly on the outcome of the US election, and also to highlight that the way the insurance policies were worded means the lessors are not covered.
Ned Beale, co-head of commercial disputes at law firm Hausfeld, said: “The interests of the London insurance market are directly pitted against those of the aviation industry, with hugely important financial consequences.”
The case is the latest legal dispute involving the insurance industry, which has also faced a wave of lawsuits over non-payment of business interruption claims following the Covid-19 pandemic.
Data from litigation analysis group Solomonic shows plaintiffs last year filed lawsuits at the UK high court worth a combined total of at least £10.2 billion in the insurance sector, the largest total of any industry.
As well as determining whether the aircraft lessors have insurance cover, the court will need to determine which insurers are liable and under which types of policy: war or “all risks” cover.
To do so, the judge will seek to rule on the legal “cause” of any loss – whether the aircraft were seized by the Russian state or stolen by the airlines.
Several lessors, including AerCap, are also involved in the related battle over reinsurance claims. These relate to policies taken out by Russian airlines with Russian primary insurers, which in turn took out reinsurance with western companies, including AIG.
The western reinsurers had argued that the case should be heard in Moscow, but the high court ruled in March that it could proceed in London.
AerCap declined to comment on this week’s upcoming trial, in which it is seeking damages for more than 100 aircraft.
The lessor has separately struck some settlements with a number of Russian airlines and their insurers. It recovered a total of $1.3 billion in 2023. AIG, Chubb and Lloyd’s also did not comment. – Copyright The Financial Times Limited 2024
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