Global insurers fight London court over jets seized in Russia

Insurers are playing “to pass the buck” in a desperate fight against multibillion-dollar claims over aircraft stuck in Russia since the invasion of Ukraine two years ago, lawyers for the aviation lessors said Wednesday in a lawsuit from London.

Mark Howard, a lawyer for the world’s biggest aircraft lessor, AerCap, said on the first day of a much-anticipated trial that insurers need to know there is no realistic prospect of the Western-owned planes and engines being returned.

“The reality is that the aircraft and the engines were lost,” he said.

In one of the biggest insurance disputes to be heard in London, AerCap, Dubai Aerospace Enterprise, Merx Aviation, KDAC Aviation Finance and Falcon are up against insurers including AIG, Lloyd’s, Chubb and Swiss Re.

The fast-track case, which will conclude by the end of the year, is seen as a benchmark for parallel lawsuits in Ireland and the United States over who should pay for about 400 planes, valued at nearly $10 billion, that remain in Russia after West imposed sanctions for the war.

The London trial focuses on claims related to about 140 planes, along with some engines, which were originally valued at about $4.7 billion. But some deals with Russia — albeit at prices below the insured value — brought the value down to nearly $3.0 billion.

The insurers argue in part that there is no evidence that the aircraft were destroyed or damaged, that the assets are no longer subject to leases, or that the policies do not cover the events that led to their non-return.

The lessors said in court filings that they sought compensation from Russia. DAE said its president, David Houlihan, made a weeklong trip to Moscow in March 2022 to meet with tenants — to no avail, the documents show.

Lessors claim compensation under “contingent and possessed” policies which may provide cover under a broad, all-risks clause for loss or damage to the aircraft or under a more specific war risks clause.

AerCap, which says it has lost 116 aircraft and 15 engines, is suing for $2.06 billion under its all-risks insurance policy, or alternatively $1.2 billion under its war risk policy, pending new agreements with Russia, court filings show.

DAE values ​​its claim for 22 aircraft, one engine and one piece of equipment at $737.8 million. Merx is seeking $184 million for six planes, while Falcon is seeking $43.4 million for two planes and KDAC is suing for $21.5 million for the loss of one plane, court filings show.

The lessors have separately taken on reinsurers, some of whom lost a battle in March to have the case moved to Moscow, and some are also approaching the insurers over the planes stuck in Ukraine.

“These are complex, hard-fought claims where the stakes are high and the long-term impact could be seismic,” said Garbhan Shanks, partner at law firm Fladgate.

“Neither side will want to be left writing the checks — and that’s because the exposure is enormous.”

(Reporting by Kirstin Ridley and Sam Tobin, additional reporting by Carolyn Cohn; Editing by Barbara Lewis)

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Carriers Russia London