Leave to appeal has been refused against the Aercap Ireland v AIG Europe and Others judgment. The judgment is lengthy and complex but in essence dealt with insurance claims made by leading aircraft companies regarding 147 aircraft and 16 aircraft engines leased to airlines operating in Russia. Following Russia’s invasion of Ukraine, the Russian lessees did not return the aircraft and engines. The insured lessors (in England, Ireland and elsewhere) claimed under their insurance policies for their loss.
The aircraft were insured in respect of all-risks and war risks. The court had to decide which of those two risks applied to the losses.
If the loss was due to the Russian government prohibiting the aircraft from being returned, then the war risk cover would apply. If the airlines independently decided to keep the aircraft, the all-risks policies would respond.
The court found that the political perils extension under the war risks insurance did not cover acts of the government itself so there was no political peril in that regard. Under the government peril clause, the terms “restraint” and “detention” required an act by government resulting in some form of compulsion, the effect of which was to restrain or detain the insured aircraft.
The court held that those terms did not require an official order of the government. And the order of the government did not need to be legally or constitutionally valid.
The court rejected the war risks insurers’ argument that restraint or detention existed only if the airlines wanted the return of the aircraft but were prevented from doing do. The correct enquiry was what happened to the property and not the airlines intention.
In considering the basis for the indemnity the court considered the question of proximate loss.
On the facts the all-risk cover was made subject to a war risk exception so that a loss proximately caused by the operation of a war risk peril would be indemnified under the war risk cover and not the all-risks cover. There was no evidence to suggest the airlines decided to keep the aircraft before the publication of the Russian government’s export ban via a Government Resolution Notice. The Government Resolution made it impossible for lessors to recover the aircraft legally. The marine concept of “grip of the peril” or “death blow” applied in cases of deprivation of possession of the insured property, even in non-marine cases.
In the circumstances the proximate cause of the loss was a war risks peril. There were not two concurrent causes of equal efficiency. Even if that were the case however, the war risks exception in the all-risk cover applied.
The aircraft were lost when the relevant Government Resolution was implemented, and the loss was permanent at that point because there was only a slim chance that the aircraft would be recovered. By then the insureds had already taken reasonable steps to recover them without success.
While notices of the review of the geographic limits issued by the war risk insurers to lessors following the invasion accelerated the date on which the relevant cover for Russia expired, that did not alter the scope of any cover provided for losses occurring after expiry. The insureds had been deprived of possession of their property during the policy period. That deprivation had become permanent as a result of a sequence of events occurring after the end of the policy period, but the insureds were entitled to an indemnity under the war risks cover.