High Court finds in favour of lessors in Russian Aircraft Lessor Policy Claims: Brief Summary

The High Court has today handed down judgment in the Russian Aircraft Lessor Insurance Policy Claims. Herbert Smith Freehills Kramer represented AerCap, the world's largest aircraft leasing company, claiming from its insurers the loss of 116 aircraft and 23 engines which had been on lease to Russian airlines and which could not be recovered following Russia's invasion of Ukraine.

A copy of the judgment can be found here. In summary, the High Court found that all AerCap assets were lost and covered under the War Risks section of its insurance policy. Factoring in prior settlements, AerCap is entitled to USD 1.035 billion from War Risk insurers.

Please find below a brief summary of the background and the Court's findings. We have also published a full analysis of the judgment which can be viewed here.

BACKGROUND

AerCap insured its interest in its aircraft and engines under an aircraft hull, spares and equipment all risks and war risks insurance policy for the period 1 November 2021 – 31 October 2022 (the Policy). The Policy provided cover for AerCap's wider fleet of aviation assets under five separate sections, relevantly:

• All Risks – Aircraft Hull and Spares Equipment cover (All Risks Cover), and
• War Risks – Aviation War and Allied Perils (War Risks Cover).

Within each section there were two principal types of cover:

• Contingent cover which is designed to cover the assets while they are on lease with the lessees (Contingent Cover), and
• Possessed cover which is designed to cover the assets once they have returned from lease (Possessed Cover).

In addition, as is standard in aviation leasing, the leases oblige the airlines to take out their own insurance for the assets while on lease, with AerCap added as an additional insured via a standard form AVN67B/C endorsement (Airline Finance/Lease Contract Endorsement) (the Operator Policies).

Prior to the war in Ukraine, AerCap leased 141 aircraft and 29 engines to various Russian airlines. However, as a result of the various sanctions imposed on Russia by the EU, UK and US authorities, AerCap and other lessors were obliged to terminate the leasing.

All lessors including Aercap issued termination notices to those Russian airlines and requested redelivery of their assets. While some airlines complied, the vast majority did not and despite its best efforts AerCap was unable to recover 116 aircraft and 23 engines from Russia. AerCap therefore claimed against its insurers under the Policy in March 2022. As insurers did not pay the claim, AerCap commenced proceedings against them in the Commercial Court in June 2022.

AerCap's proceedings were case managed with the claims of six other lessors who had similarly lost aviation assets in Russia following the invasion of Ukraine (the LP Claims). Since it had by far the largest claim, AerCap acted as lead claimant in these proceedings. The LP Claims trial was heard as part of a 'mega trial' in the High Court before Mr Justice Butcher between October 2024 and mid-February 2025, involving 13 legal teams, 24 witnesses and 14 experts. Judgment was handed down on 11 June 2025.

Before turning to the judgment itself, it is worth noting that in parallel to its claims under the Policy, in April and May 2022 AerCap submitted claims under the Russian airlines' Operator Policies and, from February 2023 onwards, commenced proceedings against insurers and reinsurers under these policies in the English High Court. The English court accepted jurisdiction (despite the fact that there were Russian jurisdiction clauses in the Operator Policies) and the trial is scheduled to begin in October 2026. Those Operator Policy and reinsurance claims are not the subject of the latest decision.  However, they are relevant because: (a) Butcher J had to consider the relationship between the Operator Policies and the lessor's policy; and (b) prior to the start of the 'mega-trial' AerCap - with the approval of the relevant sanctions authorities - entered into settlements of some of the Operator Policy claims with the Russian airlines and their insurers (the Russian Insurance Settlements), which reduced AerCap's overall losses.

OVERVIEW OF THE COURT'S FINDINGS

In summary the key conclusions of the High Court judgment were as follows:

1. Contingent cover – Consistent with AerCap's primary case, this cover was found to be triggered simply by a claim being made under the airlines' Operator Policies which was not paid:
    
   1. Insurers attempted to argue that there was no cover as (i) notwithstanding the express terms of the Policy contingent cover only responds to losses required by the leases to be insured under the Operator Policies and (ii) as a matter of fact the leases did not oblige the airlines to insure the lessor for a political / government peril where the assets otherwise remained in the possession of the lessee. The Court found against insurers on both these points.
       
   2. The Court also held that while AerCap had been indemnified in part under the Russian Insurance Settlements this did not prevent the contingent cover being triggered.
       

2. Possessed cover – This was found not to have been triggered despite there being express cover for assets "in the course of repossession". The Court held that this wording requires "a process involving actions directed to securing the possession of a particular aircraft at a particular location and returning it to the lessor's chosen aircraft". Lessors other than AerCap argued that the possessed cover should respond as their primary case.  The Court disagreed and held the contingent cover responded as AerCap suggested.

3. Test for loss – Loss of property in a non-marine insurance context requires 'permanent deprivation on the balance of probabilities'. The test of 'no realistic prospect of recovering the property' put forward by insurers was too high a bar and too hard to meet in practice.  

4. Independent concurrent causes – The Court held, obiter, that the principle in Wayne Tank & Pump Co. Ltd v Employers Liability Incorporation Ltd [1974] QB 57 applies to independent concurrent causes. Where there is a loss caused by a covered and an excluded cause, coverage is excluded even when they act independently.  This was not a necessary conclusion for the overall decision due to the Court's finding of a single proximate cause of the loss.

5. Political risk perils – War risk perils in standard aviation endorsement AVN48B (War, Hi-Jacking and Other Perils Exclusion Clause) are interpreted broadly.

   1. "Act for political purposes" covers acts both for and against a government.

   2. "Restraint [or] detention… by or under the order of any Government" does not require a legally binding order or a physical restraint.

6. Peril/Causation – For all assets the loss was found to result from a War Risk peril namely Russian Government Resolution 311 on 10 March 2022 (which banned the export of aircraft and aircraft engines). This was found to be the sole proximate cause of the loss. Although there were other operative causes before this date (namely the government instruction at/before a 26 February 2022 meeting with the airlines and 5 March 2022 message from the Russian Federal Air Transport Agency (FATA)) which were 'restraints', these were found to be only interim restraints and not operative causes. The airlines' decision not to return the aircraft was found not to be an operative cause. 
    
7. Grip of the Peril – Notices of Review of Geographic Limits issued by War Risk insurers to Lessors other than AerCap following the invasion of Ukraine were insufficient to oust the Grip of the Peril principles. The Court found that where an insured is deprived of possession of its property in the policy period by the operation of an insured peril and that deprivation develops into a permanent deprivation by way of a sequence of events following in the ordinary course after the end of the policy period, then the insured is entitled to an indemnity.
    
8. Sanctions – US and EU sanctions do not prohibit payment of an insurance claim to a non-sanctioned entity under its own insurance policy. The purpose of the sanctions was to put pressure on Russia and there was nothing in the wording/guidance to suggest that any prohibition would extend to preventing an insurance payment to a Western lessor under its own policy. For EU sanctions, the UK Court of Appeal judgment on UK sanctions in Celestial Aviation Services Ltd v Unicredit Bank SA [2024] EWCA Civ 628 was held not to be relevant given the EU regulations came first, Celestial concerned payments under letters of credit, and there is no EU licensing regime allowing for approvals to be obtained from the authorities. In this case UK sanctions defences were abandoned by all insurers by oral closings so are not considered in Butcher J's judgment.
    
9. Russian Insurance Settlements – Insurers were not prejudiced by these since AerCap had acted reasonably in entering into them, being the only option for it to recover value in the circumstances.
    
10. Financial recoveries – As to whether insurers were entitled to offset from the claim the various financial recoveries AerCap was able to obtain from the airlines:
     
    1. Supplemental rent previously paid by the airlines to AerCap for the maintenance of the aircraft which AerCap retained following the loss was found not to offset its claim (other than for those leases which require return of 50% if there is no unremedied payment default or Event of Default).
        
    2. AerCap was entitled to offset amounts received under security deposits and letters of credit against the rent which the airlines had failed to pay. As such these amounts did not go to offset the claim for the aircraft.

Note: in July 2025 War Risks Insurers applied for permission to appeal this decision.