English High Court Judgment Offers Rare Examination of War Risks Insurance

In a 230-page judgment handed down by Mr Justice Christopher Butcher in the English High Court on June 11, 2025, six aircraft leasing companies secured “one of the largest sums ever awarded by the English courts” (according to the Financial Times) after a “mammoth trial in one of the biggest insurance disputes ever heard in London” (Reuters). More than just the scale of the dispute and payout awarded, the judgment is a rare examination of war risks insurance, particularly in the aviation sector, and provides a valuable update on several English insurance law fundamentals as they apply to war risks.

Background

In the aviation sector, a large number of aircraft operated by airlines tend to be leased. They are owned by leasing companies primarily based in Dublin or Dubai, and at the time of Russia’s invasion of Ukraine in February 2022, over 500 aircraft were on lease to Russian airlines.

With the invasion came the sanctions response, chiefly from the U.S., EU and UK, and a scramble by the lessors to terminate leasing and demand return of the aircraft. With a very few exceptions, those aircraft never left Russia and are still operating within its borders.

With the aircraft stuck in Russia, some lessors turned to their lessor hull insurance policies (LPs) to recover their losses. Six companies — AerCap, DAE, Falcon, KDAC, Merx and Genesis (the latter represented by McGuireWoods) — commenced legal proceedings in the English High Court against the insurers of their all risks and war risks LPs, which culminated in a 49-day trial between Oct. 2, 2024, and Feb. 14, 2025.

The Outcome

Butcher J ruled that the claims against war risks insurers should succeed:

1. The lessors were entitled to immediate possession of the aircraft from the moment of default by the airlines under the leases.
2. The aircraft had been subject to the war risk peril of restraint/detention by or under a government order from March 5, 2022, which continued until they were deemed lost on March 10, 2022.
3. The March 5 restraint consisted of an official information message issued by the Russian Federal Agency for Air Transport (FATA or Rosaviatsiya) on its website, that “recommended” that Russian airlines with non-Russian registered aircraft on lease from non-Russian owners stop international flights due to the risk of detention or arrest. Although described as a recommendation, Butcher J concluded that the FATA message, issued in response to western sanctions, was in fact an instruction that was expected to be complied with.
4. The cause of the losses on March 10 was the coming into force of Russian Government Resolution No. 311, under which aircraft and aircraft engines were subjected to an export ban.

Takeaways

The key legal and policy construction issues in the judgment are:

1. The lessors could claim under the contingent cover in the LPs because the airlines’ own hull policies had “failed to respond.” The scope of “failure to respond” goes beyond unjustified failures to respond, and it is sufficient for an insured to demonstrate it has used reasonable measures to get the airline’s policy to respond; it is not necessary to take all reasonable measures, though.
2. The “political purposes” peril in the war risks LP does not extend to acts of the government of the place where the loss occurred, but is instead aimed at acts of those who oppose or are acting against the local regime.
3. The “government perils” provision with respect to restraint/detention is not restricted to official orders of the government, but could be read as “by, or under the order of, any government.” It applies in cases when government power is exercised by less formal means.
4. There are three required elements for a restraint/detention: action of or emanating from a government or authority; giving rise to some element of compulsion; and which creates the effect of restraining or detaining the property in question. Restraint is assessed by what happens to the property (the aircraft) rather than the wishes of the person using the property (the lessee airlines).
5. The operative peril for insurance purposes is the proximate cause of loss, and all risks insurers should not be liable for losses proximately caused by a war risks peril.
6. The question of whether there has been a loss does not require the leases to have been terminated.
7. Notices of review/cancellation from the insurers did not oust the application of the grip of the peril principles, but did serve to accelerate the date by which war risks coverage expired for Russia and, therefore, also the date by which the peril must have gripped. Grip of the peril principles still apply in a scenario in which pre-expiry deprivation/restraint develops into a loss after early cancellation.
8. Neither U.S. nor EU sanctions prevent insurers from making payments to lessors under the LPs.
9. Notices of review/cancellation issued under war risks cover must comply with the requirements of the policy wording to ensure that they have the intended effect, particularly so far as the authority of the party issuing the relevant endorsement is concerned. The Court is, and was in this case, prepared to apply a strict reading of the policy requirements in this context, hence why the followers on the Genesis LP were not bound by the leader’s cancellation endorsement.
10. For those lessors that drew down security deposits and/or maintenance reserves letters of credit:

While bringing into focus the race between the time when war risks perils arise and when insurers cancel coverage, the judgment underlines the fact that war risks insurance must serve a purpose and provides reassurance that claims under war risks policies can, and do, succeed. A theme in the judgment comes from a useful, pro-policy holder addition to the pantheon of principles of construction in the form of Butcher J’s approval of the statement in the Australian case of Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17, that “a construction which advances the purpose of cover is to be preferred to one that hinders it.”