Insurers are playing "pass the liability parcel" in a desperate fight against multi-billion dollar claims over aircraft stranded in Russia since the invasion of Ukraine two years ago, lawyers for aviation lessors told a London trial on Wednesday.
Mark Howard, a lawyer for the world's largest aircraft lessor AerCap (AER.N), opens new tab, told the first day of a keenly anticipated trial that insurers must know there was no realistic prospect that Western-owned jets and engines would be returned.
"The reality is ... that the aircraft and engines are lost," he said.
In one of the largest insurance disputes to be heard in London, AerCap, Dubai Aerospace Enterprise (DAE), Merx Aviation, KDAC Aviation Finance and Falcon are pitched against insurers including AIG (AIG.N), opens new tab, Lloyd's (SOLYD.UL), Chubb (CB.BN), opens new tab and Swiss Re (SRENH.S), opens new tab.
The fast-tracked case, which is due to close by year-end, is seen as a bellwether for parallel lawsuits in Ireland and the United States over who should pay for around 400 planes, valued at almost $10 billion, left in Russia after the West imposed sanctions over the war.
The London lawsuit centres on claims related to around 140 jets, along with some engines, that were originally valued at up to around $4.7 billion. But some settlements with Russia - albeit at prices below the insured value - have trimmed the value to nearer $3.0 billion.
Insurers argue in part there is no evidence the aircraft have been destroyed or damaged, that the assets are no longer subject to lease agreements or that policies do not cover the events leading up to their failure to return.
Lessors said in court filings they had sought compensation from Russia. DAE said its president, David Houlihan, took a one-week trip to Moscow in March 2022 to meet with lessees - to no avail, documents show.
Lessors are claiming compensation under "contingent and possessed" policies that can provide cover under a broad, all-risks clause for loss or damage to aircraft or under a more specific war-risks clause.
AerCap, which says it has lost 116 aircraft and 15 engines, is suing for $2.06 billion under its all-risks insurance policy or, alternatively, $1.2 billion under its capped war-risks policy, pending further deals with Russia, court filings show.
DAE values its claim for 22 aircraft, one engine and one piece of equipment at $737.8 million. Merx is claiming $184 million for six aircraft, while Falcon is claiming $43.4 million for two aircraft and KDAC is suing for $21.5 million over the loss of one jet, court filings show.
Lessors have separately taken on reinsurers, some of which lost a battle in March to have the case moved to Moscow, and some are also tackling insurers over jets stuck in Ukraine.
"These are complex, hard fought claims where the stakes are high and the long-lasting impact could be seismic," said Garbhan Shanks, a partner at law firm Fladgate.
"Neither side will want to be left writing the cheques - and that's because the exposure is enormous."
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