This week a legal battle, with costs mounting multiple billions of dollars, begins in London to determine who will bear the cost for several hundred aeroplanes marooned in Russia. The companies who hold ownership of the planes are moving to acquire insurance settlements in what constitutes one of the most intricate and priciest cases the high court has ever seen.
Companies such as AIG, Chubb, and Lloyd’s of London have been summoned to what some participants have referred to as a ‘mammoth trial.’ These insurers are being accused of denying coverage for owners of primarily Boeing and Airbus aircraft that were grounded in Russia following its invasion of Ukraine.
Among those anticipating compensation from insurers are the biggest leasing company of commercial aircraft worldwide, AerCap. Altogether, these owners are pursuing roughly $3 billion from insurance companies, with the trial set to commence on Wednesday and planned to continue until Christmas season.
Separate proceedings concerning reinsurance are concurrently moving forward, with a high court hearing anticipated in November in the UK. The aviation insurance sector faces possibly its largest loss ever, with damages surpassing those that occurred post-9/11. Following Russia’s conflict with Ukraine in February 2022, over 500 planes totalling approximately $10 billion in value were left in Russia.
While Western lessors have managed to recapture some aircraft, the majority remain in Russian hands and are still being operated by Russian airlines. Law firm Hausfeld’s co-director of commercial disputes, Ned Beale, noted this case pits the financial interests of the London insurance industry directly against those of the aviation business.
The lawsuit is just the latest legal contest involving the insurance sector, which has also been dealing with numerous lawsuits following the non-payment of business interruption claims arising from the Covid-19 pandemic. Seasoned legal professionals are anticipated to represent the insurers, arguing it is premature to declare a total loss as the aircraft can potentially be retrieved and are still intact.
Research conducted by Solomonic, a litigation analysis firm, revealed that lawsuits filed in the UK’s supreme court totalled a minimum of £10.2 billion in the insurance industry in the preceding year, outstripping all other sectors.
Alongside evaluating whether the aeroplane leasing companies possess insurance coverage, the court is required to ascertain the insurers responsible and the specific policy-type applicable: either war or comprehensive risk.
To achieve this, the presiding judge aims to establish the legal reason for any losses – whether the aeroplanes were confiscated by the Russian authorities or taken illegally by the airline companies.
Numerous leasing firms, including AerCap, have also played a part in the ensuing dispute revolving around reinsurance claims. These claims are associated with policies obtained by Russian airline companies with Russian primary insurers, which then reinsured with western firms such as AIG.
These western-based reinsurers have made the assertion that the case should be brought to court in Moscow, however, the high court decided in March that it may proceed in London.
Refraining from any commentary in regard to the imminent trial this week, AerCap is pursuing damages for over 100 aircraft.
Simultaneously, the leasing firm has managed to negotiate some agreements with various Russian airlines and their respective insurances, resulting in a recovery of a total of $1.3 billion in 2023. AIG, Chubb and Lloyd did not provide any statement either – The Financial Times Limited 2024.