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The world’s biggest commercial aircraft owner AerCap is in line for a payout of more than $1bn after the High Court in London ruled that insurers had to cover losses from planes stranded in Russia, one of the largest sums ever awarded by the English courts.
Insurers including AIG, Lloyd’s of London and Chubb have been told to provide cover for 147 planes, owned by six aircraft leasing companies, that were stuck in Russia following the country’s full-scale invasion of Ukraine.
AerCap, which owned 116 of the planes, was awarded a payout of $1bn. This was lower than the $2bn the company had sought during the case, which lasted five months and concluded earlier this year.
The judge, Mr Justice Butcher, found that the aircraft should be covered under a “war risks” policy rather than an “all risks” policy, which would have resulted in a higher award.
Other aircraft leasing companies, including Merx Aviation and Dubai Aerospace Enterprise, are also set for payouts under the “war risks” policy, although the final sum is yet to be determined.
The case was among the most complex and costly ever heard by the High Court and Wednesday’s ruling has global implications.
Aircraft lessors have demanded billions of dollars from insurers after more than 500 aircraft were stranded in Russia following its invasion of Ukraine in February 2022.
Western leasing companies managed to recover some of the aircraft, but most remain in Russia and are still being flown by Russian airlines.
London is a main legal battleground but parallel litigation is proceeding in the US and Ireland.
Several settlements have been reached in the disputes. One of the claimants in the London case, KDAC Aircraft Leasing, reached an agreement with its insurers in the middle of the High Court trial.
Insurers put forward various arguments to limit their liability, including that the assets could yet be recovered if the conflict between Russia and Ukraine is resolved.
A central question in the case was which insurers were liable and under which types of policy. The judge had to rule on the legal “cause” of any loss — whether the aircraft were seized by the Russian state or stolen by the airlines.
In a summary of his judgment on Wednesday, Mr Justice Butcher said the aircraft had been lost in March 2022, when Russian legislation banned the export of aircraft from the country.
The cause of the loss was “an act or order of the Russian government” and should be covered by the “war risks” policy, the judge ruled.
He added that EU or US sanctions did not prevent the insurers from paying out to the leasing companies for the loss of aircraft leased to Russian airlines.
Law firm Herbert Smith Freehills Kramer, representing AerCap, said the company had secured a $1.035bn payout “in addition to substantial recoveries achieved in prior settlements”.
AerCap said that following the judge’s decision its total “pre-tax recoveries” relating to the Ukraine conflict came to around $2.5bn.
The company said it would continue to “vigorously pursue” separate, ongoing claims against insurers and reinsurers under other policies.
