AerCap reportedly faces a long and lengthy battle with its insurers to secure $3.5 billion it believes it is owed by its insurers following the seizure of more than 100 of its aircraft by the Russian Government.
The battle, as chronicled in the Financial Times, pits the Dublin-based leasing company against two groups of Insurers, one being the “all-risk” insurers and the other being “war-related risks”.
After the EU imposed sanctions on Russia, AerCap allegedly informed the Russian airlines on February 25th, a day after Russia’s invasion of Ukraine, that it had effectively terminated its leases with them and asked them to return the aircraft, (numbering 116 aircraft and 23 spare aircraft) which they failed to do. These aircraft were re-registered by the Russian Government and have flown ever since.
Russia’s Transport Minister had previously confirmed that 1,140 planes had been newly registered in the country as a result of the seizure.
Under AerCap’s policies, as seen by the Financial Times, different risks such as normal damage to the aircraft, war damage and harm to passengers and cargo is covered by separate groups of insurers, “all-risks” and “war-related risks”.
AerCap believed that the all-risks insurers should accept the claim yet according to the filings, both groups of insurers insist the seizure did not constitute a loss of insurance purposes.
Furthermore, as the FT states, the all-risk insurers believe that the decision to retain the aircraft was a political one – meaning that it put the claim outside the scope of coverage they provide. Alternatively, the war-risks insurers insist that they would only be liable if the aircraft was destroyed, even if the court deemed that the event was covered within their policies.
With the trial expected to have an initial case management conference in 2023, an official judgement will not be expected until the following year, the verdict of which will be closely watched by corporates and (re)insurers.
Mark Pring, a partner at Reed Smith, specialising in insurance issues pointed out to the FT, “the insurance fallout from the ongoing war in Ukraine has only just begun”.