assignment of insurance aviation

Feasibility of Assignment of Aviation Insurance Claims

V&E Aviation Finance Update

The hundreds of aircraft stranded in Russia, the write-offs booked by many lessors and the anticipated litigation over whether such loss constitutes an insurable event under the contingent all-risk or contingent war risks policies have all been well documented. A different question we have been asked recently is whether a third party could acquire these claims. The feasibility of a market for Russian aircraft insurance claims depends largely on the jurisdictions, the legal systems involved and the structure of the potential assignment. Some commonwealth jurisdictions (including Ireland and the UK) have fairly antiquated champerty and maintenance rules which would be difficult to navigate. Other jurisdictions, namely a number of US states, provide more flexibility to parties in a litigation who want to sell their claims to an otherwise disinterested party.

The threshold questions to be answered are (a) where is the claim to be brought and (b) what is the law governing the claim. The majority of lessor contingency insurance policies are written out of London so, in the absence of an agreement to confer exclusive jurisdiction elsewhere, we would expect that claims against London-based insurers could be brought before the Courts of England. Anecdotally however, we are aware that at least some Irish-based lessors managed to agree in their insurance contracts that claims under their policies could also be brought before the Courts of Ireland. Similarly, while the majority of insurance contracts with London-based insurers are governed by the laws of England & Wales, some are in fact governed by the laws of Ireland and some even include a divergence between governing law (Ireland) and forum of choice (England).

The simplest fact pattern to analyze involves a claim brought against an insurer in a claim assignment-friendly US state (e.g., California) under a contract governed by Californian law. Absent any unusual features, such a claim should be freely assignable by the claimant. At the other end of the spectrum, claims brought before the Courts of Ireland would not in our view be assignable and any attempt to achieve the same result through clever structuring (e.g., transferring title to the aircraft, selling the aircraft-owning entity, issuing a derivative instrument linked to the success of the litigation) would likely fall foul of Irish champerty and maintenance rules and be rendered void.

The assignment of claims before the Courts of England may be achievable but is not free of challenges, thus requiring a deeper analysis of the facts in question and proposed structure. Of particular relevance would be the governing law of the insurance contract and the views the Courts in that jurisdiction take to the assignment of claims. Even if the governing law is not prohibitive, we would need to see which entity holds the claim, who is the loss payee on the insurance certificate and whether any terms of the insurance contract expressly prohibit assignment of claims.

In summary, whether or not it is possible to assign the rights to a claim against an insurer for failure to pay out on contingent all-risk or contingent war risk insurance relating to aircraft stranded in Russia will depend on a number of factors but the first question to ask is which jurisdictions are in play. We expect that most insurance claims will center around the laws of England & Wales, Ireland and several US states and will be brought before the Courts of those jurisdictions. We are aware of parties interested in acquiring these claims but first the facts need to be examined to ensure that it is feasible.

If you would like any further information or want to discuss further, please do not hesitate to contact our Aviation Finance partners, David Berkery or Niels Jensen .

Key Contacts

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.

• More Blog Popular
• Lexology Index
• Instruct Counsel
• My newsfeed
• Save & file
• View original
• Follow Please login to follow content.

add to folder:

• My saved (default)

Register now for your free, tailored, daily legal newsfeed service.

Find out more about Lexology or get in touch by visiting our About page.

In brief: insurance considerations for aircraft financing and leasing in Israel

Insurance and reinsurance

Summarise any captive insurance regime in your jurisdiction as applicable to aviation.

There is no captive insurance regime in Israel relating to aircraft. However, the Aviation Regulations (Requirement of Insurance in Commercial Operation of Aircraft) 2017 require that insurance be placed either with an insurer regulated under Israeli law or with a foreign insurer that is authorised to act under the applicable law in its jurisdiction.

Are cut-through clauses under the insurance and reinsurance documentation legally effective?

As a matter of general contract law, a cut-through clause should be enforceable if properly drafted in a manner that clearly establishes privity between the reinsurer and the party named as loss payee.

Are assignments of reinsurance (by domestic or captive insurers) legally effective? Are assignments of reinsurance typically provided on aviation leasing and finance transactions?

If the assignment of insurance is properly drafted, and proper notice and consent are provided as required by Israeli law, an assignment of insurances should typically be recognised by the courts.

Can an owner, lessor or financier be liable for the operation of the aircraft or the activities of the operator?

The owner of an asset or its financier may be liable in tort or on other grounds in Israel for damages caused in connection with the operation of the aircraft or the activities of the operator if sufficient linkage is established between the damage caused and the acts or omissions of the relevant entity under general principles of tort law.

Does the jurisdiction adopt a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft?

Israel has not adopted a regime of strict liability for owners, lessors, financiers or others with no operational interest in the aircraft. However, if the lessor is deemed to be the importer of the aircraft into Israel, it may have exposure under the Defective Products Liability Law 1980.

Are there minimum requirements for the amount of third-party liability cover that must be in place?

The Aviation Regulations (Requirement of Insurance in Commercial Operation of Aircraft) 2017 establish minimum requirements for each case and for each aircraft depending on the aircraft’s maximum weight.

Filed under

• Gottlieb, Gera & Co

Popular articles from this firm

Insurance considerations for aircraft financing and leasing in israel *, creating and registering security interests over aircraft in israel *, q&a: aircraft repossession and enforcement of security in israel *.

Related practical resources PRO

• How-to guide How-to guide: How to draft an antitrust–unfair trade practices compliance program (USA)
• Checklist Checklist: Preparing for a National Labor Relations Board representation hearing (USA) Recently updated
• How-to guide How-to-guide: Understanding the role of effective whistleblowing in fostering an ethical and open workplace culture Recently updated

Related research hubs