[2025] EWHC 1430 (Comm)

As set out above, AerCap’s primary case is that it is entitled to recover under its Contingent Cover, and only as an alternative under its Possessed Cover. That is so, AerCap contends, whether any causative peril was an AR Peril, in which case it would be cover under Section One of its policy, or a WR Peril, in which case it would be under Section Three.

AerCap contended that what it needs to show, in order for there to be cover under its Contingent Cover, is as follows:

AerCap contended that all those requirements are satisfied in relation to the AerCap Aircraft:

On these bases, AerCap contended that its ability to claim under its Contingent Cover is straightforward.

A number of different arguments to the effect that there is no cover under AerCap’s Contingent Cover were advanced by the Defendants. These may be grouped as follows:

I will consider these arguments in more detail in turn.

The first limb of the Fidelis primary case was that the Contingent Cover taken out by AerCap was intended by all parties to cover a minimal exposure at a minimal premium. Its objective, Fidelis argued, was simply to give the Lessor the reassurance that it would have the cover which the relevant Lease required, and which the OP should have provided. Contingent Cover is intended only to provide cover for the Lessor when something ‘has gone wrong’, for example if there was no OP in force, ‘or perhaps there was but it fails to respond as required by the lease’. As Fidelis’s counsel put it, ‘the parties aimed for the confined exposure of a “mirror policy” [viz one mirroring the cover required by the lease], no more and no less’.

The second limb of the Fidelis primary case was that the Leases did not require cover for any of the risks which AerCap alleges occurred in this case (whether by way of AerCap’s primary case that an AR Peril caused loss, or its alternative case that a WR Peril caused loss). This is because the Leases’ insurance provisions required lessees: (i) to maintain the Hull AR and WR cover which a prudent operator would hold; and (ii) to incorporate the terms of AVN 67B or C into the required insurance. What was thus required by the lease was an insurance taken out by the lessee which:

In support of the first limb of this argument, Fidelis made a number of different points.

In the first place, it was said that there was a market understanding, or widespread market practice or background knowledge, to the effect that Contingent Cover was designed to mirror the cover required to be effected by the lessee pursuant to the lease. In this regard, the Defendants relied on expert evidence from Mr Farmer, and on statements in a number of books, publications and other sources. The Defendants also relied on the existence of a type of insurance, namely Non Repossession Insurance (or ‘NRI’), a type of Political Risks insurance. This, they contended, was cover complementary to Contingent Cover, and would have covered losses of the present sort, where the lessee was left in possession of the aircraft; but such cover was not taken out here.

Secondly, it was said that the fact that the cover was, and was intended to be, minimal was shown or at least indicated by the very low premiums charged for it. The Defendants pointed to the fact that for the 2021-2022 cover the Hull AR rates for AerCap were 0.00217617 for the Contingent Cover, but 0.033852 (<3m), or 0.026598 (>3m) for Possessed Cover; while the WR rates were 0.00186793 for Contingent Cover, but 0.009340 for the Possessed Cover. The disparity with the Possessed Cover was itself significant. In addition, the Contingent Cover rate should be compared with rates for NRI. The Defendants calculated, on the basis of an indicative premium rate for NRI which AerCap had received, that the comparative premium rates for AerCap for a limit of US$100 million for one year would have been: Contingent, US$1,868; Possessed, US$9,340; and NRI, US$900,000. The Defendants argued that AerCap, and the other Claimants, had chosen not to take out NRI, thereby saving themselves very significant sums by way of premium; but also leaving themselves uninsured in relation to the events which had happened.

Thirdly, it was argued that the interpretation of the Contingent Cover advanced by the relevant Defendants was supported by an examination of the detailed terms of the AerCap Policy.

Fourthly, it was said that AerCap’s interpretation lacked commercial sense. It lacked commercial sense that lessors should wish to obtain, by way of back up cover, insurance beyond what they had stipulated for in the leases. Its lack of commercial sense was further illustrated by consideration of the issue of deductibles. OPs would have a deductible, which the lease would require the lessee to bear. But on AerCap’s case, the Contingent Cover would respond to the amount of that deductible if the lessee did not pay it.

As to the second limb of the Fidelis primary case, the relevant Defendants contended that the purpose of the insurance which was to be taken out by the lessee pursuant to the relevant lease was to protect against loss of or damage to the aircraft while in the possession of the lessee. Loss and damage which occurred whilst in the lessee’s possession was physical damage and deprivation of possession which affected the party in possession. Consistently with this, the leases did not require the lessor to be a full composite insured on the hull policy, in contrast with the position on the liability insurance. Instead they required only that the airline obtain insurance with anti-avoidance provisions, generally by use of standard endorsement AVN 67B or C. The relevant Defendants further contended that whilst AVN 67 gives certain rights under the policies to lessors, it does not allow the lessor to claim when the lessee has not suffered a loss. AVN 67 does not make the lessor a full composite insured for its own interests under the hull policies. AVN 67C expressly does not provide cover for theft by the lessee, which clearly indicates an intention that the lessor is not given rights to claim for a loss which the lessee has not suffered. On its proper construction, so the Defendants argued, AVN 67B also gives no cover to the lessor for theft by the lessee.

The Fidelis alternative case was that, regardless of its relationship with the Principal Insurance, the Contingent Cover, on its proper construction, provided cover for ‘loss’ by deprivation of possession only when it was the airline which was in possession when the peril struck and it was the airline which was deprived of possession thereby.

This alternative case was said to be supported by the fact that the Contingent Cover was premised on the aircraft being in the lessees’ care, custody or control. It was outside the scope of the cover for there to be a loss under the Contingent Cover by reason of deprivation of possession where the party intended to have possession of the aircraft – viz the airline – still had possession. The proposition that a ‘loss’ under the Contingent Cover must affect the lessee was, it was said, supported by Piraeus Bank AE v Antares Underwriting Ltd [2022] Lloyd’s Rep IR 441. It was also said to be supported by the adaptation of the standard form ‘outside the control’ provisions which are typically included in aviation insurances in a non-leasing structure to add a reference to the operator. Thus, the WR exclusion from the AR cover in the AerCap Policy excludes from the AR cover losses occurring while the aircraft are ‘out of the control of the Insured or operator’ by reason of a WR Peril, and the WR cover in the policy is expanded to cover losses occurring while the aircraft are ‘out of the control of the Insured or the Operator’ by reason of a WR Peril. The addition of the word ‘operator’ indicated that under the Contingent Cover any loss by way of deprivation of possession by a WR Peril must take the aircraft out of the control of the Operator.

Chubb’s case had certain similarities with the Fidelis primary case, but also certain significant differences, and a different objective. Entities within the Chubb group are AR and WR LP Insurers of AerCap, but are not reinsurers in any of AerCap’s ongoing War Risks OP claims. Its commercial interest will therefore be served if there is found to be no cover under the LPs but that there is cover under the War Risk OPs.

Chubb’s case was that if there was a loss of aircraft and engines, it was caused by a WR Peril. Accordingly, in relation to the issue of whether there was Contingent Cover, it focussed on the ‘triggers’ in Section Three of the AerCap Policy.

Chubb’s case was that the contingency on which the Contingent Cover depends is whether a claim falls within the scope of the cover provided by the OP (re)insurance which the relevant Lessees put in place in relation to the relevant aircraft. If the claim fell within those policies, then AerCap should look to that coverage and cannot recover under the Contingent Coverage in its LP insurance. Chubb’s position was that the claim does fall within the WR cover of the OP insurance. It does not agree with or rely on Mr Farmer’s evidence as to a market understanding of the intended width of OP covers, or the proposition that cover under the OP policy must be viewed from the perspective of the lessee.

Chubb contended that AerCap’s argument that it can rely on ‘trigger’ (1) in Section Three if there is simply a failure of the Principal Insurance to indemnify, necessarily means that, on that case, AerCap’s right to recover under Section Three would arise immediately on its suffering a relevant loss. That would mean that the LP Contingent Cover was primary cover, not contingent in any meaningful sense, and that it would be open to AerCap simply to choose which cover to claim under. This would be inconsistent with the factual context in which the Contingent Cover was placed, namely that the leases required the taking out of policies which are intended to be the lessor’s primary source of recourse, and the Contingent Cover was intended to be a ‘back up’ for that.

Chubb further contended that AerCap’s construction of the ‘triggers’ in Section Three meant that ‘trigger’ (1) swallowed up ‘triggers’ (2) and (3) robbing the latter two of any meaning. Indeed, on AerCap’s case, there was no need for Section Three to contain any contingency wording at all: it could simply have been framed as primary cover for any loss of the aircraft as a result of a WR Peril. AerCap’s case was also said to be inconsistent with Endorsement 12, which gives Chubb 150 days to ‘investigate’ any claim following a denial of cover under the Principal Insurances. That was inconsistent with AerCap having an immediate right to an indemnity under the LP policy simply because it has not received payment under the Principal Insurance. Equally, Chubb argued, the notification requirements in General Condition 1(a) of the AerCap policy are inconsistent with AerCap’s case. If that case were right, there would be no need or reason for such requirements.

Chubb say that contingency, or ‘trigger’, (1) should be construed so that ‘is not indemnified’ is read as ‘is not indemnified because there is no entitlement to an indemnity under the Principal Insurance’.

In relation to Section One of the AerCap Policy, AerCap’s case suffered from the same essential flaws as its case in relation to Section Three. Specifically, on AerCap’s case, the absence of immediate payment under the Principal Insurances would result in the contingency at Section One (1)(1)(i) being satisfied, which would render the contingencies in both (1)(1)(ii) and (1)(2) redundant. This was symptomatic of the fact that AerCap’s case converted contingency into primary cover. Chubb contended that the contingency in (1)(1)(i) conveys ‘that there is no cover available or that an indemnity is otherwise not payable under the policy’. It was said that this is reinforced by the usage of the phrase ‘may not respond’ in General Condition 1. Thus contingency (1)(1)(ii) ‘addresses the situation where it is clear after 90 days that the Principal Insurance does not respond i.e. that there is no coverage…’. Alternatively Chubb contended in its written opening that (1)(1)(ii) applied where ‘no response at all has been given by the Principal Insurer to any claim (within 90 days) – i.e. no acknowledgement of the claim, no email receipt, no contact via the broker or similar examples.’ Chubb subsequently modified this to a suggestion that the reference was to a failure properly to engage with a claim.

Chubb therefore argued that, on a proper analysis of the contingency ‘triggers’, cover is provided under the Contingent Cover only if there is legal irrecoverability under the Principal Insurance. AerCap would have to demonstrate that its claims are irrecoverable under the OPs. This is not a question of whether AerCap has taken reasonable steps or whether a reasonable time has elapsed. The issue of whether AerCap’s claims are (ir)recoverable under the OPs is a matter which has to be addressed at Phase 2 of these proceedings. Alternatively, Chubb contended that the contingency in Clause 1(1)(i) of AerCap’s cover is not triggered until AerCap has taken ‘any and all reasonable steps to obtain an indemnity under the [OPs] but has been unable so to make a financial recovery in respect of its losses.’

Chubb also contended that, even if AerCap’s case on ‘not indemnified in whole or in part’ were correct, that contingency has not been satisfied in relation to the aircraft in respect of which AerCap has received payments pursuant to Russian Insurance Settlements, because AerCap has been ‘indemnified … in part’.

The Kennedys Defendants and AESA put forward an alternative case, adopted for the most part by Fidelis and TMK/HDI, if the Fidelis Primary and Alternative Cases are not accepted. This was that under Section Three of the AerCap policy, ‘trigger’ (1) (‘in the event that the Insured is not indemnified in whole or in part under the Principal Insurance’), is engaged only once AerCap is on the balance of probabilities practically unable to obtain an indemnity in respect of its claim.

This construction of ‘trigger’ (1) is, it was argued, supported by the terms of Exclusions 6(f)(1) and (2) in Section One. The first of those is incorporated into Section Three by Condition (4)(4).

The issue of whether AerCap is, on the balance of probabilities practically unable to obtain an indemnity under the Principal Insurance is fact sensitive and will depend on the outcome of the OP Claims and whether AerCap is entitled to an indemnity in those claims. On this approach, it was argued, as the outcome of the claims under the OPs is not known, and as it cannot be said at this trial that AerCap is practically unable to obtain an indemnity under the OP (re)insurances, the Contingent Cover is not ‘triggered’.

Alternatively, as a matter of construction or an implied term, the AerCap Policy should be read as requiring AerCap to take reasonable steps to recover under the OP, and whether that has been done is not a matter which can be decided in Phase 1.

The essential issues which arise are issues of construction of the AerCap Policy, and in particular of the ‘triggers’ or contingencies stipulated in Section One (1), and Section Three (1)(a).

In what follows I intend first to identify the main principles of construction which fall to be applied. I will then consider the key provisions in the AerCap Policy and their context. Next I will consider the various cases made by the Defendants as to why AerCap’s Contingent Cover is not engaged. I will then give my overall conclusions on the issue.

There was no significant dispute as to what are the principles of construction which the court should employ, but it is convenient to refer to certain statements of the correct approach.

In Wood v Capita Insurance Services Ltd [2017] UKSC 24, Lord Hodge said, at [10]-[13]:

[10] The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning. In Prenn v Simmonds [1971] 1 WLR 1381 (1383H-1385D) and in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (997), Lord Wilberforce affirmed the potential relevance to the task of interpreting the parties’ contract of the factual background known to the parties at or before the date of the contract, excluding evidence of the prior negotiations. When in his celebrated judgment in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Lord Hoffmann (pp 912-913) reformulated the principles of contractual interpretation, some saw his second principle, which allowed consideration of the whole relevant factual background available to the parties at the time of the contract, as signalling a break with the past. But Lord Bingham in an extra-judicial writing, A new thing under the sun? The interpretation of contracts and the ICS decision Edin LR Vol 12, 374-390, persuasively demonstrated that the idea of the court putting itself in the shoes of the contracting parties had a long pedigree.

[11] Lord Clarke elegantly summarised the approach to construction in Rainy Sky at para 21f. In Arnold all of the judgments confirmed the approach in Rainy Sky (Lord Neuberger paras 13-14; Lord Hodge para 76; and Lord Carnwath para 108). Interpretation is, as Lord Clarke stated in Rainy Sky (para 21), a unitary exercise; where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But, in striking a balance between the indications given by the language and the implications of the competing constructions the court must consider the quality of drafting of the clause (Rainy Sky para 26, citing Mance LJ in Gan Insurance Co Ltd v Tai Ping Insurance Co Ltd (No 2) [2001] 2 All ER (Comm) 299 paras 13 and 16); and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest: Arnold (paras 20 and 77). Similarly, the court must not lose sight of the possibility that a provision may be a negotiated compromise or that the negotiators were not able to agree more precise terms.

[12] This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated: Arnold para 77 citing In re Sigma Finance Corpn [2010] 1 All ER 571, para 10 per Lord Mance. To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each.

[13] Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type. The iterative process, of which Lord Mance spoke in Sigma Finance Corpn (above), assists the lawyer or judge to ascertain the objective meaning of disputed provisions.

In FCA v Arch Insurance (UK) Ltd [2021] UKSC 1, Lords Hamblen and Leggatt JJSC identified the essential approach as follows, at [47]:

The core principle is that an insurance policy, like any other contract, must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean. Evidence about what the parties subjectively intended or understood the contract to mean is not relevant to the court’s task.

One matter which can form part of ‘the background knowledge which would reasonably have been available to the parties’, is a market practice or understanding, if it is shown that there was one. This was recognised, for example, in Crema v Cenkos Securities plc [2010] EWCA Civ 1444, especially at [42]-[47] per Aikens LJ. As Aikens LJ there stated, at [46], it will be necessary for the court to consider whether and what ‘market practice’ is established by the evidence, and, if there was one, whether it is useful background evidence against which to construe the contract in question. Evidence of what is usually done in a market may not assist in resolving the particular issue of construction with which the court is confronted. By way of example, in Ted Baker plc v AXA Insurance UK plc [2012] EWHC 1406 (Comm), it was held (at [93]) that the evidence of ‘practice’ could not displace the ordinary meaning of the words used, and could not incorporate an exclusion by implication.

I also consider the following statement to be sound and a useful guide, from LCA Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17, in the Federal Court of Australia, per Derrington and Colvin JJ at [15]:

The ease with which an insured may establish matters relevant to its claim for indemnity may influence questions of construction … a construction which advances the purpose of the cover is to be preferred to one that hinders it.

Finally I bear in mind that recently the ‘pick and mix’ approach which is sometimes taken to drafting insurance contracts has been identified and recognised as relevant to their construction. In Bellini N/E Ltd v Brit UW Ltd [2024] EWCA Civ 435 at [34] Sir Geoffrey Vos MR described the ‘pick and mix’ approach as follows:

Insurance policies are, as the judge said at [31], often somewhat repetitive. They are also sometimes clumsily drafted. Without giving evidence, I think it is fair to say that this can arise, even if it did not in this case, from the "pick and mix" approach to the insertion of various possible clauses that insurers sometimes adopt.

In International Entertainment Holdings v Allianz [2024] EWCA Civ 1281, Males LJ quoted the passage from Bellini and described how a ‘pick and mix’ approach might affect the exercise of contractual construction:

Where a contract shows signs of having been drafted as a coherent whole, it must be construed accordingly, and it is often a reasonable inference that terminology has been used consistently as between the various clauses. But it is commonly the case that insurance policies are not drafted in this way. Rather, as in the present case, they appear to include a selection of different clauses adopted from other contracts, with no attempt to ensure that language is used consistently throughout the policy. This 'pick and mix' approach means that the inference of consistent usage has little or no force, and that reference to the same or similar language in other clauses of the policy may shed little light on the meaning of the term in question. As Mr Charles Dougherty KC for the insurer recognised, there is an obvious danger in trying to find coherence between clauses which have been stitched together with no attempt to ensure such coherence.

It is convenient to start with the words used in both Section One and Section Three. AerCap relies principally on the ‘trigger’ (1)(1)(i), ‘that the Insured is not indemnified in whole or in part under the Principal Insurance’. It also relies, on the basis that the causative peril was an AR Peril, on ‘trigger’ (1)(1)(ii), ‘that the Principal Insurance fails to respond to any claim within 90 days after the Insured has made a written claim’. As set out above, the (1)(1)(ii) ‘trigger’ does not appear in Section Three of the policy. There was no evidence as to why this was so, and no party put forward any plausible explanation as to why that ‘trigger’ appears only in the AR and not in the WR Section of the AerCap Policy.

AerCap’s contention is that ‘is not indemnified’ means ‘not paid’. It also contends, by way of primary case, that it means ‘not paid’, whether or not a claim had been made by it under the Principal Insurance. But AerCap submitted that it made no difference if it was implicit that a claim had to be made under the OPs before it could be said not to have been indemnified, because a claim had been made.

AerCap’s interpretation of ‘is not indemnified’ was disputed by the Defendants. WR Insurers referred to the case of Sobrany v UAB Transtira [2016] Lloyd’s Rep IR 266, in which it had been said, obiter, that the words ‘any claims that you are indemnified for under any other policy of insurance’ referred to claims for which the second policy provided an indemnity according to its terms, whether or not the insurers had honoured those terms: in other words they looked to whether there was a contractual entitlement to an indemnity, not whether there had been a payment.

There are, in my view, at least three senses in which the words ‘is (or is not) indemnified’ is used in an insurance context, and which is the one which is being employed depends on context. One is that illustrated by Sobrany, namely whether or not a party has a contractual entitlement to an indemnity. Another is whether the party has been held harmless against a loss. This usage reflects the legal position that under an indemnity policy, the insurers’ obligation to indemnify arises at the point at which a loss occurs which is proximately caused by the insured event: see for example Callaghan v Dominion Insurance Co Ltd [1997] 2 Lloyd’s Rep 541. With this usage, a person can be said to be ‘not indemnified’ as soon as a loss occurs which is not immediately paid. The third usage looks at whether a party has or has not been paid after an interval since the loss, and usually after a claim has been made in respect of it.

In the present case, it is to my mind clear that ‘indemnified’, in the relevant ‘triggers’, is not being used in the first sense. Light on how the term is being used is shed by Exclusions (6)(f)(1) and (2) in Section One. (6)(f)(1) refers to an indemnity being ‘obtained as a claim’ under the Principal Insurance, and (6)(f)(2) to an indemnity under the Principal Insurance not being obtained due to the insolvency of the insurers of the Principal Insurance. Those provisions are clearly not looking at whether the insured can obtain a contractual right to an indemnity, but rather are looking at whether the insured has been paid (or otherwise held harmless e.g. by repair) in respect of a loss which has occurred.

I do not, however, consider that the words ‘is not indemnified’ are used to denote a situation in which the insured has not been paid, irrespective of whether it has made a claim. That the insured must at least have made a claim on the Principal Insurance appears to me to be supported by the terms of Exclusion (6)(f)(1), which envisages that ‘an indemnity’ will be obtained by the making of a claim. This interpretation also appears to me to be more consistent with the contingent nature of the cover.

It is also more consistent with the juxtaposition of ‘trigger’ (1)(1)(i) with ‘trigger’ (1)(1)(ii) in Section One. While there was some argument as to what ‘trigger’ (1)(1)(ii) involves, I think that its clear meaning is that the Principal Insurance should have failed to pay a claim, or at least to have responded positively by way of an accepted liability to pay a claim, within 90 days after the Insured has made such a claim. On that basis, both ‘triggers’ (1)(1)(i) and (ii) are looking at a failure of the Principal Insurance to provide an indemnity in response to a claim. Though, on this approach, they very significantly overlap, they can be read together, with (1)(1)(ii) providing a clear ‘cut off’ date after which the Insured can claim on the Contingent Cover, without there being the possibility of argument as to whether it has done enough or waited long enough to establish that it ‘is not indemnified’ for the purposes of ‘trigger’ (1)(1)(i).

There are three other matters of principally textual and contextual construction which need to be addressed at this stage.

The first is as to the meaning of ‘Principal Insurance’. This is defined in Definition (16) as ‘the insurance or insurances to be effected by the Operator pursuant to the provisions of the Lease Agreement (inclusive of insurances such as hull deductible insurances as may be necessary to meet the lease requirements).’

There can, in my view, be no doubt that ‘Principal Insurance’ is used to refer to actual, not simply hypothetical insurances. That is most conspicuous in the terms of Exclusions (6)(f)(1) and (2) of Section One. As is clear from those provisions, the ‘Principal Insurance’ is one which can be claimed under, and which has Insurers who may become insolvent after the commencement of the AerCap Policy. In the second place, nowhere in the AerCap Policy is there any express contemplation of a case in which the ‘Principal Insurance’ is other than the physical damage policy(ies) actually taken out by the lessee. Accordingly, third, before balancing against it the implications of Fidelis’s primary case, the ‘triggers’ in Sections One (1)(1) and Three (1)(a)(1) can be read without difficulty as referring to non-payment under the policies actually effected by the lessee, i.e. the relevant OPs.

The second is the obvious negative point that neither the ‘triggers’ in Sections One (1)(1)(i) or that in Section Three (1)(a)(1) contain any express language to the effect that the ‘trigger’ only operates when there is non-indemnification under the Principal Insurance ‘when there should have been’. Equally the ‘trigger’ in Section One (1)(1)(ii) contains no language to the effect that it operates only where there is a failure of the Principal Insurance to respond to a claim ‘to which it ought to respond’. The ‘triggers’ say nothing expressly about the reasons why there is non-indemnification or non-response.

The third relates to an argument advanced by Chubb. This is to the effect that Endorsement 12 shows that the non-payment under, or non-response of, the Principal Insurance cannot itself ‘trigger’ coverage under the Contingent Coverage of the AerCap Policy. It is said that Endorsement 12 makes it clear that, if the Insurers of the Principal Insurance deny the Insured coverage or fail to investigate, adjust, defend or enter into settlement negotiations within 150 days after the Insured has submitted a written request thereto, the Contingent and Possessed Insurers will investigate and defend any such claim. Chubb further argues that the obligation on the Contingent and Possessed Insurers is not to investigate a claim on the Contingent Cover, but to investigate the claim on the Principal Insurance; and it is an obligation to investigate, not to pay. Chubb argues that the purpose of that investigation is as to the Principal Insurers’ reasons for not paying.

This argument appears to me to be unsound. Endorsement 12 is, to my mind, concerned with claims by third parties against AerCap, and which might be relevant to the liability coverage under the AerCap Policy (Section 2). It is because it is concerned with third party claims that it is headed ‘Investigation and Defence’, and it envisages that the OP Insurers should ‘investigate adjust [or] defend’ such claims. The Endorsement provides for the circumstances in which the Contingent and Possessed Insurers must take on the investigation and defence of such third party claims. It would clearly make no sense for AerCap to be agreeing that the Insurers must ‘defend’ AerCap’s own claim, whether that claim is supposed to be against the Principal Insurers or the Contingent and Possessed Insurers. Furthermore, if Chubb’s construction of the Endorsement were correct, it would be inconsistent with the ‘trigger’ in Clause 1(1)(ii) of Section One. The incorporation and wording of Endorsement 12, which sits easily alongside the Section Two liability insurance but uneasily alongside the Sections One and Three hull insurance, seems likely to be an instance of the ‘pick and mix’ tendency in insurance contracts identified in paragraph [274f.] above.

As I have said, in support of the first limb of its primary case Fidelis contended that there was a relevant market practice or understanding. This was said to be supported by the expert evidence of Mr William Farmer, who is a retired insurance broker, consultant and underwriter. Mr Farmer’s evidence in his first report was, in summary, that there was a market practice and understanding that Contingent Cover gives the lessor comfort that the required insurance protections under the lease will remain available for its interests, regardless of the actual operator’s insurance; and that contingent policies do not provide cover wider than that which is required to be taken out under the leases, unless, exceptionally, there are express words in the Contingent Cover itself which specifically extend cover.

I did not consider that I could rely on Mr Farmer’s evidence as establishing any market practice or understanding in the relevant market at the time the AerCap Policy was placed. In the years 2007 to 2021 Mr Farmer had no direct involvement in the contingent aviation insurance market, as he accepted. Further, his evidence was contradicted by that of Ms Catherine Quinlan, who has long experience of aviation insurance in the aviation industry. Specifically, she worked at Ansett Worldwide Aviation Services as Head of Insurance, where she was responsible for all aviation and non-aviation insurance matters from 2011 until 2016, and subsequently for her own aviation insurance training and consulting business, which has provided training and consultancy services to various lessors. This was more recent relevant experience and involvement in contingent aviation insurance than Mr Farmer’s. Her evidence was that there was no market practice that coverage under contingent policies is limited by (a) what was required to be taken out under the leases, or (b) what was in fact taken out by the lessee. Her evidence was that ‘the market understands that the scope of the Contingent cover can be broader than the cover provided by the Principal Insurances and there is no market understanding that controls or limits what can be agreed.’

Fidelis relied in addition on a number of different statements in lectures or publications. Several of these appeared to me to be capable of being read as supporting either side’s case. Thus, an article by Rod D. Margo, ‘Aspects of Insurance in Aviation Finance’, in Journal of Air Law and Commerce, 62(2) (1996), says not only that ‘contingent hull all risks and war risk insurance is designed to protect the financier in circumstances where the hull all risks or hull war risk coverage of the financed airline is cancelled or not renewed for any reason’, but also ‘In addition, coverage will exist if the policy limits of the airline’s policy prove to be insufficient to meet liabilities or if the airline’s liability policy fails to respond for any reason.’ Fidelis draws attention to the limited circumstances of protection (cancellation or non-renewal) referred to in the first passage; while AerCap points to the words ‘for any reason’ in the second, and contends that contingent liability insurance is not relevantly different from contingent hull or war insurance. The same applies to Margo on Aviation Insurance, (4^th ed) [28-60 - 28-61].

Fidelis referred to an internal Insurance Review Report prepared by Mr Treacy of AerCap in August 2014. This had stated that the Contingent Covers were ‘designed to respond to a claim in the event that the Lessees’ insurance policy fails to operate for any reason including cancellation, non renewal, placement error etc. The coverage is contingent upon failure of an operator’s policy and provides the same range of protections as the aviation covers required of Lessees …’. That does indicate an understanding of a close relationship between the cover under the Principal Insurance and under the Contingent Cover, but it is non-exhaustive as to what ‘failures [of the lessees’ insurance] to operate’ are referred to, and the phrase ‘same range of protections’ is a rather broad one. Its use was clearly not intended to rule out that there might be wider cover provided under the Contingent Cover, as indeed is shown by the following reference in the paragraph to Technical Records coverage.

Similarly with a presentation to Lloyd’s made by Mr Treacy on 8 October 2015. In it he referred to Contingent Cover as ‘basically provid[ing] a backstop against situations where the Lessee’s cover fails to operate’, and to there being ‘a minimal exposure … but … an exposure nonetheless’. While doubtless, as he said in evidence, Mr Treacy did not say anything he believed to be untrue at the lecture, it is obvious that he was seeking to persuade his audience (formed substantially of insurers) that the price of Contingent Cover should come down. The presentation was neither an exhaustive description of Contingent Cover nor, because of Mr Treacy’s desire to make the point about premium, entirely free from advocacy.

Fidelis also relied on certain brokers’ presentations. One was authored by Robert Normand of Aon and dated 18 September 2019. It referred to contingent insurance ‘protect[ing] against the inability to recover fully from the operator’s insurance policies’ and ‘cover[ing] perils required to be insured by the operator’. These statements do not, again, seek to describe a precise limit to the circumstances in which a Contingent Cover would respond. Moreover, an ‘inability to recover fully from’ the OP is capable of being read as arising when there is such an inability other than for the narrow range of reasons for which Fidelis contends.

Fidelis pointed to another Aon presentation, to BOC Aviation of August 2021. This referred to ‘the concept of contingent insurance [as being] that it will respond if there is a failure in the operator’s policy: it is a mirror policy’, and to ‘whatever insurance requirements are imposed upon the Lessee within the lease will be mirrored in the Lessors programme’. These form part of a very brief summary of the nature of Contingent Cover: a summary which is not exhaustive, or precise. It should also be noted that the policy which Aon was considering that it might put in place for BOC Aviation ‘as a core product’, was one on terms similar to those of the Merx Policy, not of the AerCap Policy in the present case. The Aon presentation may also be compared with Marsh’s equivalent presentation to BOC Aviation in August 2021. This stated that ‘Marsh’s contingent cover serves as a back-up policy for the financial institution where primary insurers do not pay a claim for reasons other than insolvency of the insurer. These circumstances can include breach of cover, breach of warranty or non-disclosure or mis-disclosure of facts by the lessee/operator.’ The first sentence does not place a limit on the situations in which non-payment of a claim by the primary insurers would lead to a claim on the Contingent Cover, and the second sentence is expressly non-exhaustive as to those circumstances. Further, the Marsh presentation contains, later, an example, said to relate to a Mexican operator, where ‘the Lessor presented a claim to the Lessee’s insurers for the loss of the aircraft and engines [but] regrettably, the Lessee’s policy denied cover to the Lessor’; but that Marsh then entered into negotiations with the contingent insurers and ‘following protracted negotiations, Marsh was able to secure a multi-million dollar settlement on behalf of the Lessor.’ It is not stated as to why the primary insurers had denied cover; but this example, taken with the earlier text, would, in my view, lead the reader to think that Contingent Cover might be useful in a range of circumstances in which the Principal Insurance did not pay, although the ambit of that range was not clearly delimited.

This and other material referred to by Fidelis does show, I conclude, that participants in the market regarded contingency cover broadly as ‘back up’ cover; that it would not respond if the Principal Insurance responded; and that the principal risks it typically covered were that the Principal Insurance was not properly in place or was defective. What I do not consider that it shows is that there was a universal, or near unanimous, understanding as to the circumstances in which a Contingent Cover would respond to a loss if the Principal Insurance did not do so, nor that there was a particular understanding of what the phrases ‘is not indemnified’ or ‘fails to respond’ meant in the context of a Contingent Cover.

Fidelis also relied, as I have said, on the existence of NRI. That, Fidelis argued, was a type of insurance which was and was understood by the market to be complementary to Contingent Cover, and to insure risks not covered by Contingent Cover, the key one being inability to repossess due to government action. That, Fidelis contended, would have been the type of insurance which would have been expected to cover losses of the present type, but it was not taken out by the Claimants, in whole or in part because it would have been very expensive.

The existence of other types of insurance which might have covered the relevant risks, but which was not taken out, is an uncertain guide to the ambit of cover which was taken out.

The materials which were relied on by Fidelis to show that NRI was understood as complementary to Contingent Cover – Aon’s presentation of 18 September 2019, Marsh’s proposal to BOC Aviation of 13 August 2021, and Margo’s textbook at [28.41] – all treat the subject in a general way. They do not provide a detailed analysis of how NRI cover would relate to Contingent Cover provided by any particular form of policy wording. Furthermore, Mr Treacy’s evidence in cross-examination was that he considered that the perils which might be insured under NRI were adequately covered under the lessees’ policies.

I am accordingly not persuaded that there was any market practice or understanding that NRI was necessarily complementary to, rather than overlapping with, Contingent Cover, nor that losses of the present type would be covered under NRI and not under Contingent Cover.

The second principal matter relied on by Fidelis as part of the first limb of its primary case was the point as to the low level of premiums for Contingent Cover, both by comparison with Possessed Cover, and by comparison with NRI.

It is hazardous to attempt to draw inferences as to the ambit of insurance cover from the premium charged. The premium rate may not accurately or adequately reflect the extent of the risk for a number of reasons, which can include misapprehension as to the nature of the risk assumed by the contract.

In the present case, the experts were effectively in agreement that the reasons why premium rates for Contingent Cover had historically (i.e. up to the invasion of Ukraine) been relatively low included the fact that in the majority of cases a relevant loss would be covered and paid under an OP and/or would be indemnified by the lessee under the lease, and that there had not been a significant history of claims. That position does not, by itself, shed any meaningful light on the ambit of coverage actually afforded by the contingent policies at issue here.

Furthermore, what has happened since the invasion is that premiums for Contingent Cover have been very significantly increased. In the case of AerCap, between its 2021/22 and 2022/23 insurance programmes there was a 42-fold increase in the premium for Contingent WR Cover, and a 25-fold increase for Contingent AR Cover, while restrictions on the cover were also imposed. I consider that AerCap (and others) were correct to say that if the level of premium charged is relevant to the cover provided, or to the market understanding about the scope of Contingent Cover, as Fidelis’s own case suggests, then the logic of that is that the higher premiums in 2022/23 must have been for wider coverage than in previous years. Yet that is a suggestion for which there is no support and which is implausible. What this tends to indicate is rather that the level of premium being charged is a very uncertain guide to the scope of cover.

Insofar as Fidelis relied on the disparity of premiums between Contingent Cover and NRI, I was not persuaded that this revealed very much about the risks assumed by each. I accept AerCap’s argument that it is likely that the disparity arises because contingent insurers consider it unlikely that they will ultimately have to bear the cost of a loss, either because the OP Insurers will pay a claim without any recourse being made to the Contingent Cover, or because, if contingent insurers have to pay, they will have subrogated or contribution claims against the OP Insurers, and possibly subrogated claims against third parties.

The third principal matter relied on by Fidelis was a series of points as to the wording of AerCap’s Contingent Covers. I will consider the principal points made in turn.

One is that ‘all risks of physical loss and damage’ in the first paragraph of Section One (1) is a reference only to the ‘physical damage’ for which coverage is required to be provided under the Principal Insurance, referred to previously in the same sentence.

I consider that the words ‘all risks of physical loss or damage howsoever occasioned’ are ordinary words of an AR cover, and have their usual meaning. They denote that the property in question is covered against all risks of fortuitous loss or damage: see British and Foreign Marine Insurance Co Ltd v Gaunt [1921] 1 AC 41. I do not consider that they can be read as limited by the previous words, ‘in respect of which physical damage coverage is required to be provided under the Principal Insurance’. Those words are part of the identification of the property covered, and are a provision that the relevant aircraft or spares and equipment should be the subject of physical damage cover, without specifying what that physical damage cover is or needs to be.

The second is that the words ‘not indemnified … under the Principal Insurance’ in Section One (1)(1), and the equivalent in Section Three, mean ‘not indemnified under the Principal Insurance when it should have been’. That, however, is a significant interpolation, with significant ramifications. In my view, it imposes a constriction on ‘is not indemnified’ which is not implicit in the words themselves. Those words, to my mind, most naturally look to the factual question of whether the Insured has received, from the Principal Insurance, an indemnity for the physical loss or damage which it has sustained. Had it been intended to limit the cover under the Contingent Cover to a case in which there was actually an obligation under the Principal Insurance, which had not been performed, it would in my view have been necessary for it to be said.

Fidelis contends, however, that the reading for which it argues, is supported by the terms of Section One (1)(ii) and (2). As to (1)(ii), a ‘failure to respond’ is not, in my view, and as a matter of ordinary usage, confined to a case in which the Principal Insurance should have responded. The clause says nothing about the reasons for the ‘failure’. A justified and an unjustified ‘failure to respond’ can equally be said to be ‘failures’. To introduce the notion that there would only be a ‘failure to respond’ if it was unjustified would be to make (1)(ii) a ‘trigger’ of difficult and uncertain application, when, on its face, it appears to be straightforward and easy to apply.

Fidelis also relies strongly on the terms and existence of ‘trigger’ (1)(1)(2). I accept that (1)(1)(2) will, on AerCap’s construction of the ‘triggers’ add nothing to (1)(1). I do not however consider that this point would cause a reasonable person to understand the words in (1)(1)(i) and (ii) to mean other than I have set out above.

Fidelis also makes the point that cover under ‘trigger’ (1)(1)(2) only arises where the lack or insufficiency of required insurance is due to error or accidental omission. It argues that that is in keeping with the principle that Contingent Cover in general only responds where the required insurance itself should have responded, but failed to do so. In my judgment, the scope of ‘trigger’ (1)(1)(2) does not shed any clear light on that of the ‘triggers’ in (1)(1), and is not sufficient to displace the ordinary meaning of the words used in (1)(1).

Fidelis also made a more general case that the interpretation advanced by AerCap lacks commercial sense. It illustrated this contention by referring, in particular, to the issue of deductibles, as I have referred to above.

I do not consider that AerCap’s construction can be said to lack commercial sense. Subject to the issue of its price, it cannot be said to lack commercial sense for a lessor to take out insurance coverage which is independent of and wider than the Principal Insurance. It is equally not lacking in commercial sense for an insurer to provide such cover, subject, again, to its being content with the premium.

Equally, I do not consider that the specific instance of deductibles indicates that AerCap’s construction is uncommercial. It is not lacking in commercial sense that lessors should wish to protect themselves against exposure to the amount of deductibles under the OPs. Cover for failure of a lessee to pay a deductible was one of the benefits of contingency cover mentioned by Mr Treacy in his presentation to Lloyd’s in October 2015. Nor is it lacking in commercial sense that Contingent Cover insurers should agree to insure this exposure, again, subject to being satisfied with the price. In this regard, it may be noted that the leases provide that the lessee should pay the deductibles under the OPs, and so the exposure of Contingent Cover insurers is likely to be limited.

The second limb of Fidelis’s primary argument, to recap, is that the hull and spares insurances required by the leases to be taken out by the lessees are ones which do not require the Lessor to be insured for its own rights and interests, and accordingly do not require cover under which the lessor has suffered a loss of possession but the lessee has not.

Fidelis’s argument is that leases typically provided for the lessee to take out insurance under which: (i) the lessee alone settles claims with insurers, and the lessor was a ‘loss payee’, with limited rights in the case of a partial loss; (ii) the lessor is to be an ‘Additional Insured’, but, unlike in the case of the required liability insurance, there is no requirement for a severability of interest clause, and thus no full composite insurance. Further, in the case of leases which provide for the use of AVN 67B or C endorsements, those forms do not allow a claim by the lessor where there is no loss suffered by the insured.

The question of the coverage which the AerCap leases require is a question of English law. All AerCap’s relevant leases were expressly governed by English law, save four. Those four were governed by the law of California, but no party pleaded or suggested that the law of California was materially different from English law.

In my judgment, Fidelis’s argument is wrong. The leases required that AR and WR insurance be effected. The lessors were to be named as additional insureds. In all or almost all the AerCap leases this requirement was specified as being that the lessor should be named ‘as additional insureds for their respective rights and interests.’ This is language which indicates that the policy will be a composite one, under which the lessor would be entitled to be indemnified for a loss sustained to its own interest in the property lost or damaged: General Accident Fire & Life Assurance Corp Ltd v Midland Bank Ltd [1940] 2 KB 388, 408 per Sir Wilfred Greene MR.

Insofar as the leases specified the use of AVN 67B or C, the position is no different. Each of those forms stated, in the opening paragraph that ‘it is noted that the Contract Party(ies) have an interest in respect of the Equipment’ … ‘Accordingly … in respect of the said interest … it is confirmed that the Insurance afforded by the Policy is in full force and effect.’ Each also provides that the Contract Parties are included as Additional Insureds. I consider that these provisions have materially the same effect as the wording considered in the last paragraph. It is also consistent with the contracts to be provided being ones of composite insurance that each of AVN 67B and C contains a clause (3.2) whereby the cover afforded to each Contract Party is not to be invalidated by any act or omission of any other person or party unless the Contract Party has caused, contributed to or condoned that act or omission.

Fidelis relies on the facts that AVN 67B and C provide (in 2.1) that in respect of liability insurance, the cover is to ‘operate in all respects as if a separate Policy had been issued covering each party insured’, and that that provision does not appear in relation to Hull and Aircraft Spares Insurances in clause 1. I do not consider that those points give rise to the conclusion that the hull and equipment insurance is not composite. As I have said, in my view the opening paragraph of the Endorsement makes it clear that it is. In addition, the AVN 67B and C (Hull War) Endorsements contain no equivalent of clause 2.1 of the AVN 67B and C Endorsements. I do not think that they can be read as if they did contain such a provision. If, without such a provision, those Endorsements effect composite insurance, it is difficult to see how the existence of such a provision in AVN 67B and C, in relation to liability cover, means that there is not composite insurance in relation to hull cover.

This conclusion, it may be noted, is consistent with the view expressed in a 2013 article ‘AVN 67: what can you buy for $100? Issues arising out of AVN 67B’, where the author, Ross Williams of Clyde & Co, opines that the contract of insurance between the Contract Party and the Underwriters containing the provisions of AVN 67B would normally be characterised as part of a contract of composite insurance; and that it would be unlikely that the AVN 67B Hull and Spares Insurance would be held by an English court not to be composite in nature.

Given that what the leases require is that the lessor should be insured in respect of its own interests under a composite policy against all risks and war risks, in my judgment the leases do require the provision of cover which, at least in some circumstances, will respond where the lessee remains in possession of the aircraft or equipment. To my mind this is clear in the case of some war risks. If there were a government order for the grounding and impounding of an aircraft in a state hangar, there seems no reason why, if the deprivation were sufficiently permanent, the lessor should not be able to recover for it. If, instead, the government ordered the grounding of the aircraft, and that it should be kept in the lessee’s possession, then I would consider, again assuming the deprivation to be sufficiently permanent, that the result should be the same. To attempt to draw a distinction between the two cases would appear to me to be unrealistic and uncommercial.

More debatable is the question of whether an AR cover would, unless it is excluded, cover the lessor in respect of theft of the property by the lessee. It was common ground that, if the insurance was to be on the terms of Endorsement AVN 67C there would be no such cover. The controversy was about whether a lease which provided simply that there should be all risks cover without any restrictions specified, and also that the lessor should be insured for its own rights and interests, or one which provided for AR cover and for the use of AVN 67B, required cover for theft by a lessee.

Given that a decision on this point is not necessary in order to reject Fidelis’s primary argument, and will make no difference to my final decisions in this case, I consider that it is preferable not to express a view on this point.

The argument with which I am dealing here is the contention that, irrespective of the relationship between the Contingent Cover and the Principal Insurance, as a matter of the proper interpretation and construction of the Contingent Cover, there is no cover under it if the lessee has possession of the aircraft. The argument is that, under the Contingent Cover, any claim for loss by deprivation of possession falls to be assessed from the perspective of the lessee and requires that the lessee should have been deprived of possession.

I do not consider that this argument is correct. There is nothing in the AerCap Policy to limit the scope of the AR and WR Cover provided in the Contingent Cover in the manner suggested. The lessors, not the lessees, are the named Insureds under it; and the Contingent Cover is taken out in respect of the lessor’s insurable interest, not the lessee’s. The AR and WR Perils are unlimited in material respects, and there are no relevant exclusions. In those circumstances it is difficult to see how the limitation contended for by Fidelis can be read into the Contingent Cover.

Part of Fidelis’s argument is that the Contingent Cover is ‘premised on the Aircraft being in the Lessees’ care, custody or control’. I do not consider that is correct either. What the Contingent Cover provides is that the aircraft or equipment should not be in the care, custody or control of the lessor or its agents. In any event, there is nothing which has the effect that if aircraft are in the care, custody or control of the lessee the lessor cannot have a claim. Fidelis referred to the decision in Piraeus Bank AE v Antares Underwriting Ltd [2022] EWHC 1169 (Comm) to suggest that the issue of deprivation of possession had to be judged from the perspective of the lessee. In my view Fidelis gained no assistance from that authority. The reason why, there, loss had to be judged from the perspective of the owners, not the bank, was because of the definition of ‘loss’ in the MII policy, which bore the meaning adopted by the war risks policy; and because the interest insured under the MII policy was the Bank’s interest as assignee and loss payee, not mortgagee, and the Bank only suffered a loss to that interest when there was an event which would have been a CTL as between the owners and their insurers. That reasoning is inapplicable to the present case, which has differently worded cover and different commercial relationships.

The other point made by Fidelis was by reference to the so-called ‘outside the control provisions’. In Attachment No. 1 in the AerCap policy, the AVN 48B provision, it is provided: ‘Furthermore this insurance [i.e. the All Risks cover] does not cover claims arising whilst the Aircraft or Non-Owned Aircraft is outside the control of the Insured or operator by reason of any of the above [war] perils’, while the War Risk Coverage Section contains an equivalent provision to the effect that it does cover claims arising from occurrences whilst the aircraft and equipment are ‘outside the control of the Insured or the Operator’ by reason of the WR Perils. These, Fidelis points out, are an amendment of standard form ‘out of the control provisions’ as found in insurances in non-leasing structures (i.e. an insurance in which the insured is both owner and operator) by adding ‘or operator’. This, Fidelis says, indicates that any loss by way of deprivation of possession by a WR Peril must take the aircraft out of the control of the operator.

This appears to me to be a non sequitur. At most these provisions provide that the further exclusion from the AR cover would not apply to an AR Peril (such as a bird strike) which occurred whilst the aircraft or equipment remained in the possession of the operator. It does not indicate that, more generally, there can be no claim for loss of possession if the aircraft or equipment remains in the possession of the operator; and it does not appear to me to bear on a case in which the lessor may have been deprived of possession by a WR Peril which itself proximately causes the loss.

For those reasons, I do not accept Fidelis’s alternative case.

I have already summarised Chubb’s case, and have already considered significant parts of it in what I have said up to now.

I have given reasons why I consider that the meaning which should be accorded to ‘is not indemnified’ is that there should not have been payment after a claim has been made. Equally I have already given reasons as to why I do not consider that Endorsement 12 provides support for Chubb’s position.

While Chubb can fairly point to the fact that AerCap’s interpretation of the ‘trigger’ in Section One (1)(1)(i) makes the ‘triggers’ in (1)(1)(ii) and (2) largely if not entirely redundant, and the same applies in relation to the ‘triggers’ in Section Three (1)(a)(2) and (3), the presence of those additional ‘triggers’ would, I consider, be understood by a reasonable person to be providing clarity as to particular situations.

Further, the meaning of the ‘trigger’ in Section One (1)(1)(i) and Section Three (1)(a)(1) necessarily takes some colour from its juxtaposition with the ‘trigger’ in Section One (1)(1)(ii). If that ‘trigger’ has no reference to whether the claim was in fact and law covered under the Principal Insurance, then that adds some support to the contention that the parties were not requiring legal (or factual) recoverability in using the phrase ‘is not indemnified’. I have already said that, in my view, ‘failure to respond’ is a reference to a failure to pay or accept responsibility to pay. I do not consider that it can be read to mean ‘that there is no coverage’: that is not the natural meaning of the words. Nor do I consider that Chubb’s case gains any support from General Condition 1. That Condition provides that further notice of developments will need to be given to insurers if the Insured becomes aware or suspects that the Principal Insurance may not ‘respond to’ the claim, or ‘may delay the settlement of a claim to which this Insurance applies’. The provision is consistent with my interpretation of ‘not respond’: its first part provides that notification needs to be given if it becomes apparent that the Principal Insurance will not pay or accept responsibility for a claim made; and the second part covers a situation in which, even though the Principal Insurance may have accepted responsibility for the claim, it delays settlement thereof.

Chubb makes an overarching point, to the effect that AerCap’s case, especially in relation to the non-indemnification ‘trigger’, makes the Contingent Cover primary insurance, and that this is inconsistent with the commercial context and intended role of a Contingent Cover. This argument overlaps with Fidelis’s primary case, which I have already considered. I would add here, that, even on the interpretation I favour of the ‘triggers’, a Contingent Cover such as this will still be, in a real way, contingent. There was no dispute before me that, in the ordinary way, lessees will make insurance claims under their OPs in respect of loss or damage, and they will be dealt with by the (re)insurers under the OPs without any involvement of the lessors or their LP Insurers. Second, in the present case, on the construction I favour, the Contingent Cover will respond under Section One (1)(1) or Section Three (1) if there has been no payment under the Principal Insurance after a claim is made. I do not consider that there will be cover even without a claim made on the Principal Insurance. Thus the Principal Insurance remains that which is first looked to and which, if and to the extent it pays, will preclude recovery under the Contingent Cover. Third, and fundamentally, the contingencies on which there is cover under the Contingent Coverage depend entirely on what was agreed between the parties. While it is necessary to take into account the commercial context and factual matrix, the ultimate question remains one of construction, and the features Chubb draws attention to do not cause me to reach a different conclusion than the one I have expressed as to the construction of the ‘triggers’.

Chubb made an alternative case to the effect that the ‘trigger’ for coverage in Clause 1(1)(i) of Section One is not satisfied unless AerCap can establish that it has taken any and all reasonable steps to pursue an indemnity under the OPs. Chubb’s case is that these steps must have been taken prior to making a claim under the Contingent Cover. In my judgment this cannot be read into the ‘trigger’ in Section One (1)(1)(i), or Section Three (1)(a)(1). I accept, as I have said, that it is implicit in this ‘trigger’ that the Insured should have made a claim, and AerCap had in fact made claims under the OPs in respect of all aircraft prior to the issue of the present proceedings. But I do not consider that it is possible to say, either as a matter of construction, or by way of an implied term, that the insured should have taken all reasonable steps to obtain a recovery before it can claim under the Contingent Cover. The language of ‘is not indemnified’ does not itself imply that all reasonable steps have been taken. Such a requirement would, in my view, need to have been stated, especially given that the Section One (1)(1)(ii) ‘trigger’ envisages that there will be cover on the expiry of 90 days from the making of a written claim, without any reference to whether the insured has taken reasonable steps to secure the payment of the claim.

I should add that Chubb sought to rely again, in the context of this argument, on Endorsement 12, contending that it contained an express obligation on AerCap to use best efforts to pursue a claim under the OPs. I have already given reasons why I consider that Endorsement 12 is concerned with third party claims against AerCap. It imposes an obligation on AerCap to use its best efforts to get the OP Insurers to investigate, adjust, defend or enter into settlement negotiations in respect of a third party claim. It does not, in my view, impose an obligation on AerCap as to the progress of its own claims under the OPs. It would not make sense for AerCap to have an obligation to use best efforts to make OP Insurers ‘investigate’, still less ‘defend’ AerCap’s own claim against them.

Chubb makes a further alternative case, to the effect that, given that AerCap has made certain recoveries under insurance settlements with a Russian insurer of certain lessees, it has been indemnified ‘in part’ under the Principal Insurance (for the purposes of the Section One (1)(1)(ii) and Section Three (1)(a)(1) ‘triggers’), and thus it cannot claim on the Contingent Cover. On this argument, although AerCap has given credit for the sums recovered, it would not be entitled to succeed in its claim for the balance because of the partial indemnity.

I consider this argument to be unfounded. I leave on one side the question of whether it avails Chubb to point to these recoveries, given that they occurred after the point at which AerCap’s claim under the Contingent Cover was first made. I also assume, for these purposes, that the recoveries can be said to be ‘an indemnity under the Operator Policies’. The short answer to Chubb’s point appears to me to be that it rests on an unsustainable interpretation of the Contingent Cover. The ‘trigger’ is that ‘the Insured is not indemnified in whole or in part under the Principal Insurance’. That naturally and in context would be understood to mean that AerCap is entitled to recover under the Contingent Cover if and to the extent that it has not received a full indemnity for its loss under the Principal Insurance.

As AerCap submits, there are two ways of reading the phrase, depending on how the words ‘in whole’ are understood, namely whether they refer to all or to nothing. Thus, one reading is that the Contingent Cover is triggered if AerCap receives nothing under the Principal Insurance (i.e. it is ‘not indemnified in whole’), or if the payment under the Principal Insurance has provided only a partial indemnity (i.e. ‘not indemnified in part’). The other is that the Contingent Cover is triggered if AerCap is not fully indemnified under the Principal Insurance (‘not indemnified in whole’), but this is qualified such that, to the extent that AerCap receives a partial indemnity, then its claim under the Contingent Cover relates to the remaining ‘part’ that has not been indemnified. I prefer the second reading, but either way I regard the sense as clear. What the clause does not mean is that any payment under the Principal Insurance prevents the Contingent Cover from being triggered. This would have the entirely uncommercial result that a payment of US$100 by way of a ‘partial indemnification’ under an OP would prevent any recovery under the Contingent Cover.

The essence of these alternative cases is that AerCap cannot recover under the Contingent Cover unless it can show, on a balance of probabilities, practical irrecoverability under the OP.

I do not consider that this requirement can be read in, or into, the terms of the AerCap Contingent Cover. It is not stated. It would be an unclear requirement, which would present difficulties of application. It was not readily apparent what would be sufficient to satisfy it. Mr Railton KC for WR Insurers suggested that practical irrecoverability might be established if an insured ‘has gone to court and has lost, has no prospects of an appeal’, or ‘has obtained an enforceable judgment against the operator policy insurers which remains unsatisfied despite all enforcement avenues being pursued.’ That submission envisages that AerCap must take very extensive steps to seek recovery under the OPs before there can be recovery under the Contingent Cover. Had that been intended by the parties, however, I consider that it would have needed to be stated. As with Chubb’s alternative case, considered above, this suggested requirement is also difficult to reconcile with the fact that the AerCap Policy contains the 90-day trigger in Section One (1)(1)(ii). That indicates that it was not envisaged by the parties that there should necessarily be extensive efforts to obtain recovery under the OP.

WR Insurers relied in particular on the terms of Exclusion 6(f)(1) in Section One. It was said that that provision targets not only past recoveries, but ongoing and future recoveries, and that the reference to an indemnity which is obtained ‘as a claim’ indicates an intention that the claim process should have been sufficiently pursued that it can be said, if the exclusion is not to apply, that there is practical irrecoverability. In my judgment this is to seek to read too much into the Exclusion. On its face, it excludes loss and damage for which an indemnity ‘is obtained’, which I consider is naturally directed to whether there has been a payment by the time that the Contingent insurers are being called on to pay. The reference to ‘as a claim’, while, as I have said, supporting a construction of the non-indemnification ‘trigger’ whereby there should have been a claim made on the OP, says nothing about that claim having to have been progressed to any particular extent.

WR Insurers also rely on Exclusion 3(2) in Section Three. They contend it gives an example of practical irrecoverability; the argument being that it envisages that the insured has to pursue an indemnity under the OP up to the point at which recoverability is resolved before Contingent Cover is obtained. Again, it appears to me that this attributes too much significance to this provision. In context it is to be read as dealing with a particular circumstance in which there is non-payment of the claim under the Principal Insurance, rather than indicating what must be shown in relation to any claim under the Contingent Cover. In circumstances where the Principal Insurance has failed to respond at the first instance to a claim for indemnity, and it is at least possible that that failure is due to the insolvency of the Principal Insurers, then it is comprehensible that Contingent Cover insurers should not be obliged to indemnify the Insured until the reason for the Principal Insurers’ failure has been ascertained. However, in my view both the existence and the limits of this exclusion themselves seem to indicate that there is no broader principle that no indemnity under the Contingent Cover would be available until the outcome of a claim to the Principal Insurers, and the reasons for that outcome, have been ascertained.

Having considered both the text and context of the key insuring provisions in the AerCap Policy, and the various arguments addressed by the Defendants, including reference to a wider market context and to commercial considerations, and having gone back to consider whether any such considerations alter my construction of the key insuring provisions, my conclusion is that AerCap’s case on construction of its Contingent Cover is to be preferred.

In those circumstances it is not necessary to address AerCap’s alternative case as to Possessed Cover.