Early Observations Tested: The Russian Aircraft Lessor Policy Claims Four Years On

Three days after Russia invaded Ukraine on February 24, 2022, Holland & Knight published "Briefing Sheet on EU Sanctions and Aviation Insurance Prohibition," identifying insurance issues arising from the crisis. Approximately 600 aircraft leased by Russian airlines from foreign lessors were at risk.

On June 11, 2025, Mr. Justice Butcher of the English High Court handed down judgment in AerCap Ireland Ltd v AIG Europe SA & Ors (Russian Aircraft Lessor Policy Claims) following a 12-week trial. The claims were by six aircraft leasing companies under their lessor policies in respect of 147 aircraft and 16 engines, with an aggregate insured value exceeding US$4.5 billion. The total judgment recovery across all remaining claimants (following pre-judgment settlements) has been reported in the legal press as exceeding US$1.5 billion including judgment interest.

This article compares the observations made in February 2022 against the court's findings, considers additional issues resolved by the judgment that were not anticipated by the briefing, and provides an update on the forthcoming appeal and the OP trial, which began in October 2026.

In this article, "LP" means the lessor policies (the contingent/possessed policies) and "OP" means the Russian operator policies.

Summary

Contingent Policies as the Primary Route to Recovery

All five remaining claimants succeeded under their contingent cover, confirming the briefing's call that these policies "should be reviewed urgently."

The key contested issue was the meaning of the contingent cover triggers. Butcher J held that the requirement that the insured "is not indemnified" under the principal insurance simply meant not paid – rejecting insurers' arguments that it required legal irrecoverability under the operator policy. He also rejected the contention, advanced by certain insurers, that contingent cover merely "mirrored" the cover required under the lease. On the contrary, the scope of contingent cover could be broader.

Sanctions Did Not Bar Recovery

The briefing observed that AVN 111 may be "less problematic" under contingent/possessed policies.

That proved correct: AVN 111 operated to cease EU insurers' participation in the operator policies but did not prevent recovery under the lessors' own contingent cover. Butcher J concluded that neither EU nor U.S. sanctions prevented the LP insurers from indemnifying the lessors.

The Unsettled Question of AVN 67B

The briefing identified as unsettled "whether continuing coverage under AVN 67B creates a separate policy in favor of the lessor/lenders or is contingent upon the underlying policy still being in place."

Butcher J resolved it. AVN 67B effected composite insurance under which the lessor was insured for its own rights and interests – not merely an interest noted on the operator's policy. The aviation finance market had operated for decades without judicial authority on the point.

The judge noted that this conclusion is consistent with the view expressed in a widely cited 2013 legal article, "AVN 67: What Can You Buy for $100? Issues Arising Out of AVN 67B," by the late Ross Williams of Clyde & Co. Whether AVN 67B has the same effect under Russian law, which governs the operator policies, is a question for the OP trial.

Possessed Cover: The Limits Defined

The briefing warned that lease termination "should cause the termination of coverage under AVN 67B" and that lessors should take insurance into account when formulating their termination strategy – the implication being that the contingent/possessed policy would become live.

Several lessors argued that their aircraft were lost under the possessed cover of their policies, as their aircraft were "in the course of repossession" following lease termination and demands for redelivery. There may have been strategic reasons to argue that the contingent or possessed cover was applicable since contingent and possessed coverages were subject to different terms.

Butcher J rejected all possessed cover claims. "In the course of repossession" requires overt acts directed at an actual or imminent physical repossession; termination notices, tracking and preliminary arrangements were merely precursors. In 2024, U.S. courts in Minnesota and California had reached similar conclusions in LP claims, and Butcher J endorsed the Californian court's reasoning.

When Did the Loss Occur?

The briefing warned that "a critical question will be when the loss occurred" and it might be "difficult to determine" whether any loss fell within the policy period. The timing of loss was one of the most contested issues at trial.

Butcher J held that the aircraft were lost on March 10, 2022, the date GR 311 – a formal ban on the export of aircraft – was published. GR 311 was the proximate cause, constituting a "restraint" or "detention" within the WR cover. The test was whether, on the balance of probabilities, the deprivation of possession was permanent over the commercial lifetime of the aircraft.

The judgment endorsed the "grip of the peril" doctrine: Where the insured was deprived of possession by an insured peril operating on the aircraft during the policy period, the insurer remained liable even if the loss crystallized after the policy expired or Russia ceased to be a covered location. For several lessors whose WR cover had been cancelled or amended to remove Russia as an insured location before March 10, 2022, this doctrine was essential to recovery.

War Risks, Not All Risks

The briefing identified hull WR cover – "confiscation, nationalization, seizure, restraint, detention, appropriation, requisition for title or use" – as the likely basis for recovery but warned that "it may not be clear whether the 'all risks' or war risks policies are responsible" depending on the manner of state involvement.

Butcher J resolved this decisively. GR 311 was a "restraint" or "detention" within the WR cover, and all losses were caused by a WR peril. No losses were caused by an AR peril.

Aggregate Limits

The lead claimant's WR cover carried a US$1.2 billion aggregate limit; its net losses exceeded US$2 billion. The aggregate therefore materially constrained recovery – confirming the briefing's warning that aggregate limits could have a significant practical impact.

The second limb of the observation – how aggregate limits would be shared among multiple lessors – was not tested in the LP claims, where each claimant had its own policy. It may, however, become directly relevant in the OP claims. The operator policies, under which multiple lessors claim as additional insureds in respect of the same airline fleet, are also likely to contain aggregate limits. If the WR reinsurers are held liable in the OP trial, the question of how a finite aggregate is to be allocated among competing lessors – each with different agreed values and different numbers of aircraft on the same policy – will arise in a form that has no clear precedent. That observation, made in February 2022, thus remains live.

OP Claims Remain Unresolved

The briefing flagged the reinsurance layer as a source of distinct complexity – questioning the effectiveness of cut-through clauses and whether lessors have a direct claim against OP reinsurers. Those questions remain open and are central to the OP trial, which began on October 5, 2026.

Other Issues Resolved by Judgment

The judgment also resolved several other issues, including:

• The Legal Test for Loss. The court held that the standard is permanent deprivation of possession over the commercial lifetime of the aircraft, rejecting the marine constructive total loss test of unlikelihood of recovery within a reasonable time.
• Causation and Concurrent Causes. The judgment analyzed whether airline decisions to retain aircraft (an AR peril) and Russian state action (a WR peril) were independent concurrent causes, concluding that they were not truly independent and the WR exclusion in the AR cover applied.
• The Effect of Russian Insurance Settlements. The lead claimant recovered approximately US$1.3 billion through settlements with Russian airlines and their insurers, and the court held that these reduced but did not extinguish the right to claim under contingent cover.
• Quantum Deductions. The treatment of maintenance reserves, security deposits and maintenance letters of credit as between insured losses and uninsured losses such as unpaid rent.

Looking Ahead: The Appeal and the OP Trial

In relation to the English High Court judgment of Butcher J in the LP claims, following applications from WR insurers, the Court of Appeal granted permission to appeal on grounds including construction of the contingent cover and the test for total loss. A hearing has been scheduled for February 2027. The grounds of appeal do not include peril/causation, and there is accordingly no prospect of AR insurers being found liable in place of WR insurers.

The OP trial began in the English High Court on October 5, 2026, and will address the remaining claims, including the reinsurance, cut-through clauses and aggregate allocation issues that the 2022 briefing flagged as unresolved. Russian law will govern those claims. The court will therefore need to consider the effect of AVN 67B under Russian law (the LP judgment having considered it under English law) and determine whether lessors can claim as additional insureds under the operator policies and whether they have a direct claim against reinsurers.

If you have any questions, please contact the author or another member of Holland & Knight's Asset Finance Group.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.