Insurers are facing a “mega trial” in London’s High Court next year after they refused to pay billions of dollars of claims made by aircraft leasing companies with planes stranded in Russia by its invasion of Ukraine.
AerCap, the world’s largest owner of commercial aircraft, is taking action against insurance groups AIG, Lloyd’s of London and Fidelis after its planes were stranded in the chaotic aftermath of the invasion.
After UK and EU sanctions were imposed on Moscow, AerCap issued notices to a number of Russian airlines to return leased aircraft. The airlines did not comply, re-registering the aircraft in Russia and continuing to fly instead.
Overall, hundreds of western-owned planes were stranded, triggering a legal battle between leasing companies and their insurers over who should be liable for billions of dollars in costs.
The insurers have argued that the seizure of the aircraft does not constitute a loss for insurance purposes and have refused to pay.
AerCap lodged a lawsuit in London’s High Court against its insurers last June, seeking up to $3.5bn in relation to 116 stranded aircraft and 23 engines. The company claims it is owed $3.5bn under a broader all-risks insurance policy or $1.2bn under a specific “war risks” policy, led by Lloyd’s, if the larger claim fails.
Other aircraft-leasing companies with planes stranded in Russia have brought claims in London’s High Court.
On Monday, Mr Justice Christopher Butcher ruled that the AerCap litigation, along with another lawsuit brought by Dubai Aerospace Enterprise against 11 insurers including AIG — together with a further two lawsuits — should be dealt with in one large trial which “will save a considerable amount of time”.
AerCap had argued against one “mega trial”, which would be one of the biggest in UK insurance for years. Mark Howard KC, barrister representing AerCap, said that a single big trial “would be a procedural nightmare” and told the court that AerCap wanted its case to be heard as soon as possible.
“[The] evidence is that we are out of pocket by either $1bn or $3bn . . . this is a colossal sum of money,” he said.
However Gavin Kealey KC, representing AIG, argued that the trials should be consolidated saying there was an overlap of issues.
Aviation is one of the biggest areas of expected insurance losses from the Ukraine war. For Lloyd’s of London, just under half of the £1.6bn the market has set aside because of the conflict relates to aviation claims.
“I don’t think anything is going to happen spectacularly quickly,” Lloyd’s chief executive John Neal told the FT last week, highlighting the complexities of the coverage and the question of whether an insurable loss has occurred.
