Insurance giant Lloyds is facing a second multi-million-pound claim

Insurance giant Lloyds is facing a second multi-million-pound claim relating to the loss of commercial aircraft retained by Russian airlines since the country’s invasion of Ukraine. Dubai Aerospace Enterprise (DAE) is suing Lloyd’s of London, along with 10 other insurers including AIG and Swiss Re, for the loss of roughly $600m of aircraft and equipment marooned in Russia. The claim comes just four months after the world’s largest aircraft leasing company AerCap Ireland filed a $3.5bn legal claim relating to the loss of up to 141 aircraft and 26 engines in similar circumstances to those suffered by DAE.
Both claims centre on retention of billions of pounds worth of aircraft and parts by Russian airlines post the invasion of Ukraine. Many of these aircraft were reregistered with the Russian aviation authorities rather than with the Irish or Bermudan authorities where they were originally registered.
According to the DAE claim, the policy it is claiming under was “All Risks” including war and other related events such as terrorism.
The Aercap claim is similar, if for a much larger sum of around $3.5bn. It relates to the alleged loss of 141 aircraft and 26 aircraft engines leased to Russian airlines at the date of Russia’s invasion of Ukraine. The Aercap claim form explains how 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.
The actions by the Russian authorities and airlines have rendered the planes to “to all and intents and purposes lost” according to the AerCap claim form. On this basis the 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 states that changes on the ground in Ukraine and Russia could still lead to the equipment being recovered in some form. The defence draws on statements issued by the Russian airlines which suggest they do intend to return the planes and engines. The defence 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.”
The defence in the DAE claim has not yet been filed.

Mactavish comment: Perhaps the most interesting part of these two claims is buried on paragraph 28 of the DAE Particulars of Claim. In it, the aircraft leasing company claims that certain – unnamed – insurers served notice shortly after the Russian invasion of Ukraine “amending aspects of their policies”. Specifically, the Particulars of Claim states: “Following the invasion of Ukraine on 24 February 2022 and/or the imposition of the Sanctions, certain War Risks Insurers served notices purporting to amend the Geographical Restrictions under the War Risks Policy to exclude, among other places, Russia, with the effect that cover for Russia would, upon the expiry of a 7-day period following service of the notice, be cancelled.”
To the man on the street the idea that an insurer might withdraw cover for a certain event, upon that event materialising, may seem a little surprising. This is, however, something Mactavish has seen before. A well written policy should make it impossible for this to happen. It will be interesting to see in the DAE case who prevails on this point. Insurer or insured.