London High Court rules war-risk carriers on hook in AerCap lessor suit

By Michael Jones

June 11 - (The Insurer) - Aviation war insurers will be liable for recoveries from claimants under their contingent covers in association with the Russian aircraft lessor "mega-trial", London's High Court ruled on Wednesday.

Launched in October 2024, the so-called mega-trial was a concurrent trial of six actions brought by individual lessors including AerCap, Dubai Aerospace Enterprise (DAE), Merx Aviation, KDAC Aviation Finance and Falcon against (re)insurers including Lloyd's of London, AIG, Chubb and Swiss Re.

The judgment handed down by Justice Butcher related to 147 aircraft, 16 standalone engines and one other piece of equipment, court documents showed. The insured value of these amounted to more than $4.5 billion, the documents said. Some settlements with domestic Russian and international insurers, albeit at prices below the insured value, are thought to have reduced the value to nearer $3.0 billion.

AerCap, DAE and their fellow claimant lessors sought compensation under contingent and possessed policies, which provide cover under a broad all-risks clause or under a more specific war-risks clause.

Justice Butcher ruled that the claimants were entitled to recover under the contingent covers and not under the possessed covers.

Another point at issue in the case was whether the aircraft had been lost to the claimants and, if so, when and what caused the loss. More than 500 aircraft worth an estimated $10 billion have been stranded since the invasion, according to figures from S&P.

All-risk and war-risk insurers disputed whether the cause of any loss was a commercial decision of Russian airlines, in which event all-risk insurers would be liable, or through an act or order of the Russian government, which would see war-risk insurers liable.

Justice Butcher said the aircraft have been lost, and that this loss occurred on March 10, 2022, when a piece of Russian legislation banned the export of aircraft and aircraft equipment from Russia.

Given the timing and the cause of the loss, Justice Butcher ruled that claimants could make their recoveries from their war-risk insurers, not their all-risks insurers.

The judgment also ruled that EU or U.S. sanctions did not prevent insurers from indemnifying claimants for the loss of aircraft which had been leased to Russian airlines.

The English hearing is the second in a series of worldwide mega-trials on contingent and possessed claims. The first started in Dublin on June 11, 2024. Many others in various U.S. jurisdictions, including Florida, Connecticut, New York, California and Minnesota, are set to begin in 2025.

A second English trial regarding operator policy claims under Russian law is also due to be heard next year.