The UK High Court has refused permission for Western insurers to appeal a ruling requiring them to pay aircraft lessors more than USD1 billion under war risks insurance policies for jets stranded in Russia since the invasion of Ukraine in February 2022, because of Western sanctions.

This was confirmed to ch-aviation by a spokeswoman for the UK Courts and Tribunals Judiciary (Judicial Office), who said that Judge Christopher Butcher of the Commercial Court on September 16 verbally denied the insurers permission to appeal on all grounds, but reserved all further judgment on legal costs. She said no date had been set for the handing down of the written judgment.

The affected insurers and reinsurers include AIG, Lloyd's, Chubb, Swiss Re, Fidelis Underwriting Limited, Fidelis Insurance Ireland DAC, Fidelis Insurance Bermuda Limited, Liberty Mutual Insurance Europe, and Lancashire Insurance Company (UK) Limited.

On June 11, Judge Butcher had found that six lessors, AerCap, Dubai Aerospace Enterprise (DAE Capital), Merx Aviation Finance, KDAC Aircraft Leasing, Falcon 2019-1 Aircraft 3 Limited, and Genesis Aircraft Services, could recover losses under war risks cover. However, he rejected AerCap’s attempt to claim a higher payout under uncapped all-risks policies. Each of the lessors had leased aircraft, and in some cases engines, to Russian airlines or airlines which operated in Russia.

According to Reuters, the case, which centres on 147 aircraft, 16 engines, and one other piece of equipment together once valued at up to USD4.7 billion, is among the largest commercial disputes ever heard in London and has become a test case for similar lawsuits in the United States and elsewhere.

Six separate insurance disputes were before the court at the start of the trial, each involving lessors suing their insurers:

  • AerCap sued insurers under its policy on behalf of itself and other AerCap group companies regarding the loss of 116 aircraft and 15 engines;
  • DAE sued insurers for 22 aircraft (19 of which were lost in Russia and three recovered), one engine, and one piece of equipment;
  • Falcon sued insurers for the loss of two aircraft;
  • Merx and others sued insurers for the loss of six aircraft; and
  • Genesis sued insurers for the loss of one aircraft.

During the course of the trial, KDAC settled with its insurers, and its action was dismissed, while Merx settled with Chubb.

AerCap, the world’s largest lessor and the biggest claimant, has reported legal expenses of about GBP81 million pounds (USD110.5 million).

The case is AerCap Ireland Limited versus AIG Europe S.A. and another (case number CL-2022-000294).