A UK court has handed down a decisive ruling in a high-stakes dispute between aircraft lessors and global insurers over Russian aircraft losses, reshaping the landscape for aviation insurance claims.
In a judgment delivered by the High Court of Justice, Business and Property Courts of England and Wales, Commercial Court, some of the world’s largest aircraft leasing companies - including AerCap Ireland Limited, Dubai Aerospace Enterprise (DAE) Ltd, Falcon 2019-1 Aircraft 3 Limited, KDAC Aircraft Trading 2 Ltd, Merx Aviation Servicing Ltd, and GASL Ireland Leasing A-1 Limited - brought claims against insurance giants AIG Europe S.A., Lloyd’s Insurance Company S.A., Chubb European Group SE, and others. The litigation followed the loss of aircraft in Russia.
At the heart of the case were questions about the scope and operation of aviation insurance policies—specifically, the distinction and interplay between “all risks” and “war risks” coverage. The court was tasked with resolving disputes over the commencement date and rate for pre-judgment interest, the allocation of legal costs among parties, and applications for permission to appeal.
The facts were clear: after the loss of aircraft in Russia, the lessors sought recovery from their insurers. The insurers challenged the claims, raising issues about when coverage was triggered and the correct interpretation of policy terms.
The court’s ruling examined insurance contract language, citing that “insurance contracts are treated in law as contracts to hold the insured harmless against liability or the loss insured against; therefore insurers are in the absence of contrary provision in breach of contract as soon as the insured liability or loss occurs.” The court, however, exercised discretion as to when interest should begin, stating it was reasonable for insurers to have a short period to consider their position after a loss, especially in complex cases.
On pre-judgment interest, the court adopted the US Prime rate as the default for dollar-denominated awards, in line with recent Commercial Court practice. Arguments for a lower rate, based on the lessors’ borrowing costs, were rejected due to insufficient evidence and lack of proper pleading. The court stated: “the appropriate rate to take for pre-judgment interest is the default rate for US$ awards in the Commercial Court, namely US Prime.”
The judgment also addressed the allocation of legal costs, reflecting the multi-party nature of the litigation. Costs were apportioned according to each party’s success on key issues, with reductions where parties lost on significant points. The court noted that AerCap’s total costs were said to be approximately £81 million, and determined that interim payments should be conservative given the size and complexity of the case.
Most notably for the insurance industry, the court denied permission to appeal. The judge emphasized the need for finality, stating, “it is desirable, if there are no points which have a realistic prospect of success, that there should be finality as soon as possible, so that the market knows where it stands, not least because of the forthcoming OP trial.”
For insurance professionals, this ruling is significant. It clarifies how English courts will approach the timing of claims, the calculation of interest, and the allocation of costs in large, multi-party insurance disputes—particularly those arising from geopolitical events. The decision underscores the importance of clear policy wording and robust claims handling.
