Lloyds and AIG reject $3.5bn Russian aircraft claim

By 6th October 2022 October 25th, 2022 Claims Litigation

Insurance giant lloyds Insurance Company (LIC) has rejected a $3.5bn insurance claim relating to the alleged loss of aircraft and engines retained by Russian airlines following the country’s invasion of Ukraine. LIC, along with AIG, were sued by aircraft leasing group AerCap Ireland after failing to pay out on the original insurance claim for the loss of the aircraft and parts.

In legal documents AerCap claims that up to 141 aircraft and 26 aircraft engines were leased to various Russian airlines at the date of Russia’s invasion of Ukraine in February this year. Sanctions imposed by the UK and EU against Russia led to AerCap and other leasing companies recalling the planes. The planes were not returned, leading to various civil aviation authorities withdrawing their certificates of airworthiness. Some of the aircraft have been since been reregistered in Russia.

The actions by the Russian authorise and airlines have rendered the planes to “to all and intents and purposes lost” according to the AerCap claim form. On this basis leasing company is claiming on behalf of itself and on the behalf of all others insured under the same insurance policy to be reimbursed for the loss of its aircraft.

In its defence the insurers have challenged key aspects of the AerCap claim. They argue there has not been a total loss as the aircraft and parts could still be recoverable, as such any insurance claim would have to take into account the value of such recoveries.

A dispute has also broken out over the extent to which the leasing companies making the claim have correctly listed the planes and engines they claim to have lost to the Russian action. The defence form states that changes on the ground in Ukraine and Russia could still lead to the equipment being recovered in some form. The defence document draws on statements issued by the Russian airlines which suggest they do intend to return the planes and engines.

The defence document states: “In the absence of any claim that any of the aircraft or engines have been destroyed, a total physical loss could only occur if the claimant proves that, as at the date of the issuance of the claim form, there had been irretrievable deprivation of possession of the aircraft and engines.”

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