Irish aircraft leasing company sues insurers for $28M over jet held in Russia

An Irish aircraft leasing company has sued a Lloyd’s of London syndicate and another insurer for $28.7 million in London to cover the loss of a plane detained in Russia following the country’s war with Ukraine.

The Russian government retaliated against aircraft leased from foreign companies after the West imposed sanctions.

Fidelis Underwriting Ltd. and a specialist Lloyd’s syndicate have refused to issue a reimbursement for the Airbus passenger jet after Russia moved to broadly ban leased planes from being returned, according to a lawsuit filed at the High Court on Nov. 30.

The Russian government retaliated against aircraft leased from foreign companies after the West imposed sanctions on the Kremlin. Many commercial aviation lessors have been attempting to get insurers to pay out for the aircraft after months of failed attempts to get the lost assets returned.

The Irish company suing the insurers, Zephyrus Capital Aviation Partners 1D Ltd., claims the regional Russian airline that leased the plane insured it locally, and that its policy was then reinsured by Fidelis and the Lloyd’s syndicate.

The terms included an “all-risks policy” and a “war and allied risks” section, which covers situations including war, hijacking, expropriation and nationalization, Zephyrus said. The Russian government’s actions “constitute an insured peril” under the policy, according to the claim.

Zephyrus is suing alongside Wilmington Trust SP Services (Dublin) Ltd., which owns the plane as trustee, and UMB Bank NA, a U.S. lender.

The plane was leased from Wilmington by Joint-Stock Company Yamal Airlines in January 2019. Zephyrus later bought a beneficial interest in the plane.

Zephyrus issued a default notice on Yamal on March 4, 2022, which required the airline to deliver the aircraft to Istanbul international airport in Turkey the next day. Yamal failed to return the plane following measures by the Russian government to ban the “export” of some assets abroad, according to the claim.

Yamal claimed that returning the plane could violate Russian law, and attempts to negotiate the aircraft’s return have failed, Zephyrus said. The plane has since been registered for flights inside Russia.

The cost of making the plane airworthy would exceed its value even if it was eventually delivered, according to the lawsuit.

The case is one of many filed by aircraft lessors against insurers for indemnification after Russia invaded its European neighbor. The world’s largest aircraft lessor, AerCap, also sued Lloyd’s and AIG in June for up to $3.5 billion after they refused to indemnify a range of aircraft and engines that the Irish aviation giant had leased to Russian airlines.

In that case, the insurers have argued that they don’t have to pay out because the planes might be returned.

Another lessor, Dubai Aerospace Enterprise, has written off almost $598 million worth of planes tied to Russian customers. It sued Lloyd’s of London and other insurers for up to $875 million in October as it sought to cover the loss of its fleet.

Lloyd’s and Fidelis did not immediately respond to requests for comment.

The claimants are represented by Tom Weitzman KC and Kate Holderness of 3VB, instructed by Peter Sharp and Paul Mesquitta of Morgan, Lewis & Bockius UK LLP.

Counsel information for the defendants was not available.

The case is Zephyrus Capital Aviation Partners 1D Ltd. and others v. Fidelis Underwriting Ltd. and another, case number CL-2022-000637, in the High Court of Justice of England and Wales. law360.com