The recent judgment of Aercap Ireland Limited v AIG Europe S.A. & Others relates to claims made under insurance policies by aircraft leasing companies in respect of aircraft and aircraft engines, which the leasing companies contended had been lost to them following the Russian invasion of Ukraine in February 2022.

The claim was for the “loss” of the insured’s aircraft under a policy which insured against “physical loss or damage.”

It was not in dispute that a permanent loss or disposition would constitute “physical loss.”

The court following a thorough review of existing case law as part of a 230-page judgment, said that the best formulation of the test to be applied is whether the deprivation of possession is, on a balance of probabilities, permanent.

The court said that where the question is answered in the affirmative that answer would be consistent with what would commonly and reasonably be regarded as a “loss” by deprivation under property insurance.

In the context of insurance of an aircraft, “permanence naturally means, for the commercial life of the aircraft.”  The court said that the fact there is a possibility of return during the lifetime of the aircraft does not exclude that the insured may be able to show, on the balance of probabilities, that the deprivation is permanent.

The court said it is misconceived to suggest that there is only deprivation of possession if the insured is unable to exercise any of the benefits of ownership, for example, by agreeing to sell the aircraft or to continue the leasing of the aircraft.

An insured may be deprived of possession while retaining and indeed exercising some benefits of ownership. The court gave the example of a thief who steals a car. The insured could still sell title in the car to a third party. The amount they may be able to receive is another matter but the fact that the insured has lost possession and cannot give possession does not prevent the selling of title as an owner. Nor does the act of selling the title in some way re-confer possession of the car on the insured.

In considering how the court should approach the question of determining when and whether a “loss” occurred and on the basis of what evidence, the court said on the facts it had little alternative to considering, for all the potentially relevant dates, whether as at each date, the deprivation of possession was, on the balance of probabilities, permanent. The court will carry out a notionally forward-looking assessment as at the date in question, that is to say an exercise designed to assess, judged at the relevant date, the probability of the deprivation proving to be permanent. The court will look at the actual facts as at that time and not simply at the facts as they may have then appeared.

The court may have regard to material which was not yet available to the parties as at the relevant dates.

There may have been first a period of evidential “wait and see.” The court could make its assessment on whether there had been a loss on day one taking into account the evidence which had become available during the “wait and see” period. And the court could also have regard to subsequently occurring matters, including matters at the end of any evidential “wait and see” period, as a sense check on a preliminary conclusion reached as to whether or not there was a loss on day one.

Aecap Ireland Limited v AIG Europe S.A. & Others [2025] EWHC 1430 (Comm)