Insurers face ‘mega trial’ over planes stranded in Russia

Insurers are going through a “mega trial” in London’s Excessive Courtroom subsequent yr after they refused to pay billions of {dollars} of claims made by plane leasing firms with planes stranded in Russia by its invasion of Ukraine.

AerCap, the world’s largest proprietor of business plane, is taking motion towards insurance coverage teams AIG, Lloyd’s of London and Fidelis after its planes have been stranded within the chaotic aftermath of the invasion.

After UK and EU sanctions have been imposed on Moscow, AerCap issued notices to a variety of Russian airways to return leased plane. The airways didn’t comply, re-registering the plane in Russia and persevering with to fly as a substitute.

General, a whole bunch of western-owned planes have been stranded, triggering a authorized battle between leasing firms and their insurers over who must be responsible for billions of {dollars} in prices.

The insurers have argued that the seizure of the plane doesn’t represent a loss for insurance coverage functions and have refused to pay.

AerCap lodged a lawsuit in London’s Excessive Courtroom towards its insurers final June, looking for as much as $3.5bn in relation to 116 stranded plane and 23 engines. The corporate claims it’s owed $3.5bn beneath a broader all-risks insurance coverage coverage or $1.2bn beneath a selected “warfare dangers” coverage, led by Lloyd’s, if the bigger declare fails.

Different aircraft-leasing firms with planes stranded in Russia have introduced claims in London’s Excessive Courtroom.

On Monday, Mr Justice Christopher Butcher dominated that the AerCap litigation, together with one other lawsuit introduced by Dubai Aerospace Enterprise towards 11 insurers together with AIG — along with an additional two lawsuits — must be handled in a single massive trial which “will save a substantial period of time”.

AerCap had argued towards one “mega trial”, which might be one of many largest in UK insurance coverage for years. Mark Howard KC, barrister representing AerCap, mentioned {that a} single huge trial “can be a procedural nightmare” and advised the courtroom that AerCap needed its case to be heard as quickly as doable.

“[The] proof is that we’re out of pocket by both $1bn or $3bn . . . it is a colossal sum of cash,” he mentioned.

Nevertheless Gavin Kealey KC, representing AIG, argued that the trials must be consolidated saying there was an overlap of points.

Aviation is without doubt one of the largest areas of anticipated insurance coverage losses from the Ukraine warfare. For Lloyd’s of London, slightly below half of the £1.6bn the market has put aside due to the battle pertains to aviation claims.

“I don’t suppose something goes to occur spectacularly shortly,” Lloyd’s chief govt John Neal advised the FT final week, highlighting the complexities of the protection and the query of whether or not an insurable loss has occurred.