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A significant legal dispute worth billions is set to unfold in London this week, as owners of aircraft try to recover losses from insurance companies for hundreds of planes stranded in Russia—one of the most intricate and expensive cases to be handled by the High Court.
Insurers such as AIG, Chubb, and Lloyd’s of London are facing what one participant has referred to as a “mega trial” over claims that they have declined to provide coverage for the owners of primarily Boeing and Airbus jets that remained in Russia post-Ukraine’s invasion.
Aircraft owners—including AerCap, the largest commercial aircraft leasing company in the world—are seeking a total of about $3 billion from insurers in a case set to begin on Wednesday, projected to continue until Christmas.
Related reinsurance proceedings are also progressing, with a High Court hearing scheduled for November.
The aviation insurance sector could be facing its largest losses ever, surpassing those after 9/11. Over 500 aircraft valued at approximately $10 billion have been stranded in Russia since the invasion of Ukraine in February 2022.
While some aircraft have been recovered by Western lessors, a significant number remain in Russia and are still operated by Russian airlines.
The trial will take place in a “super court” in central London, where several of the UK’s top commercial barristers are expected to argue for the insurers, stating that it is premature to declare a total loss, especially since the aircraft are undestroyed and could potentially be reclaimed.
They may argue that the ongoing conflict between Russia and Ukraine still holds possibilities for resolution, particularly influenced by the upcoming US election, and stress that the wording of the insurance policies suggests that the lessors lack coverage.
Ned Beale, co-head of commercial disputes at law firm Hausfeld, noted: “There is a direct clash between the interests of the London insurance market and those of the aviation industry, with extremely significant financial repercussions.”
This case adds to the trend of legal disputes facing the insurance sector, which has also been hit by a flood of lawsuits regarding non-payment of business interruption claims stemming from the Covid-19 pandemic.
According to litigation analysis firm Solomonic, plaintiffs filed lawsuits in the High Court totaling at least £10.2 billion last year within the insurance industry, the highest total among all sectors.
In addition to determining whether the aircraft lessors are insured, the court will also need to decipher which insurers are responsible and which types of policies apply: whether war or “all risks” coverage.
The judge will look to establish the legal “cause” of any loss, determining whether the aircraft were seized by the Russian government or appropriated by the airlines.
AerCap and other lessors are also entangled in a related dispute concerning reinsurance claims. These involve policies acquired by Russian airlines from local primary insurers, which in turn secured reinsurance from Western firms, including AIG.
The Western reinsurers contended that the case should be processed in Moscow, but the High Court ruled in March that the proceedings could continue in London.
AerCap declined to comment on the upcoming trial, where it is seeking compensation for over 100 aircraft.
Additionally, the lessor has reached several settlements with various Russian airlines and their insurers, resulting in a total recovery of $1.3 billion in 2023. AIG, Chubb, and Lloyd’s also refrained from commenting.