Insurers Must Pay Up for Jets Seized by Russia, UK Judge Rules | Company Business News
Insurance companies must compensate aircraft lessors and owners for planes that Russia seized when it took counter-sanction measures after the invasion of Ukraine, a UK judge ruled potentially leaving insurers on the hook for billions in payouts.
The verdict comes after a years-long legal stand off between aircraft lessors and owners including AerCap Holdings NV and Dubai Aerospace Enterprise Ltd., who sued the insurers, such as units of AIG and Lloyd’s of London, over allegations they failed to cover the hundreds of leased planes that were held by Russia after sanctions forced termination of the deals.
The ruling relates to 147 planes and 16 engines that had insurance claims worth $4.5 billion attached. While it’s a victory for the lessors, the judge clarified what kind of insurance policies covered the losses, meaning not everything would be covered.
“The judgment concludes that the aircraft have been lost” after Russian legislation that banned the export of the planes and equipment in March 2022, Judge Christopher Butcher said in a summary of the ruling.
The lessors can claim compensation for the lost jets from their policies that covered war risks but not under policies that covered all risks, the judge said.
The UK High Court ruling could set the tone for other similar high-stakes legal battles in the UK as well as Ireland and the US. Russia transfered hundreds of foreign-owned jets to its own aircraft register after contracts were terminated. But a number of insurers and lessors reached settlements for some aircraft before and during the trial.
AerCap’s initial case for $3.4 billion was cut to around $2 billion after settlements and claims by other lessors ran into hundreds of millions of dollars, according to court filings. Aercap’s cover under war risks is limited to $1.2 billion, according to the judgment.
Until February last year, AerCap’s 116 jets and 15 engines remained in Russia, used by 15 airlines including Aeroflot.
Insurers denied the claims during the hearing. The planes weren’t lost as Russian airlines continued to use them and specific exclusions in the policies applied, lawyers for some of the insurers argued.
“It’s a reassuring outcome,” said Julian Acratopulo, a lawyer for aircraft lessors, including Dubai Aerospace. Vladimir Putin’s “invasion of Ukraine and subsequent restraint of over 400 commercial aircraft was the paradigm scenario the owners thought that they had insured against.”
AIG declined to comment while spokespeople for Aercap and LLoyd’s of London didn’t respond to requests for comment.
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