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LONDON-Aviation war risk underwriters do not have to pay a $150 million claim by Kuwait Airways Corp. for spare parts the Iraqi government took during the invasion of Kuwait in 1990, a British Court of Appeals has ruled.
When Kuwait was invaded by Iraq in the early morning of Aug. 2, 1990, there were 15 Kuwait Airways aircraft at the airport valued at $692 million and spare parts valued at about $300 million. Iraqi troops removed the aircraft and spare parts over several days.
Just over a month later, Kuwaiti insurers and London-led aviation war risk reinsurers paid Kuwait Airways $300 million, which was the maximum ground limit per occurrence, per location under the hull war risk coverage.
Kuwait Airways had recovered some of the aircraft and spare parts from Iraq since the end of the Gulf War but sought an additional $500 million from war risk underwriters for the aircraft and spare parts that were lost, contending that the loss was more than one occurrence.
In a 1995 ruling, High Court Justice Rix agreed with the underwriters that the airline could not recover any more money from the underwriters under its policy because the loss was a single occurrence. Kuwait Airways decided not to appeal the decision with regard to the lost aircraft but did appeal to recover $150 million in lost spare parts.
Late last month, the Court of Appeal agreed with one of the airline's arguments, finding that the $300 million ground limit only pertained to the aircraft and not to the spare parts, which had a separate limit of $150 million.
However, the Court of Appeal in a 2-1 decision ruled last week that the claim for the spare parts is excluded because underwriters never intended to indemnify spare parts for war risks on the ground under the policy, only for parts lost in transit.
"I would prefer to read the policy provisions as saying that the loss of spares on the ground by war is excluded, which must have been what was meant," ruled Lord Justice Staughton.
Kuwait Airlines might appeal the decision to the House of Lords.