The High Court of the United Kingdom recently ruled that insurance companies must pay compensation to charterers and owners for aircraft seized by Russia after the Russia-Ukraine conflict. This ruling may expose the insurance industry to claims worth billions of dollars. The case involves 147 aircraft and 16 engines, with a total insurance claim amount reaching 4.5 billion US dollars. Judge Christopher Butcher determined that after Russia legislated to ban aircraft exports in March 2022, the relevant aircraft had been regarded as “lost”, and the lessor could claim compensation from war risk policies but not through comprehensive insurance policies.
This judgment sets a precedent for similar disputes worldwide. Plaintiffs such as aircraft leasing giant AerCap Holdings NV and Dubai Aerospace Enterprise Ltd. have accused insurance companies such as AIG and Lloyd’s of London of refusing to compensate for the aircraft seized by the Russian side. Although some cases have been settled, AerCap’s claim amount is still as high as approximately 2 billion US dollars, and its war risk insurance cap is 1.2 billion US dollars. As of February last year, Aeroflot was still using 116 AerCap aircraft held by 15 airlines, including Aeroflot.
The insurance company argued that the plane was not “lost” as it was still in operation and the exclusion clause of the policy was applicable. But the plaintiff’s lawyer, Julian Acratopulo, emphasized that the aircraft seizure caused by the Russia-Ukraine conflict “was exactly the situation that the policyholders expected to cover”. This ruling may affect pending lawsuits in many places such as the UK and the US, further clarifying the boundaries of insurance liability.
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