[2025] EWHC 1430 (Comm)

Genesis’s policies are rather different again.

The Genesis AR Policy provides that there will be Contingent Aircraft Hull cover for Aircraft not in the care, custody or control of the Insured or their agents in which the Insured has a Financial Interest (Clause 1.1). Possessed Aircraft Hull cover is stated to be for Aircraft: (a) awaiting commencement of a Lease Agreement, (b) returned on expiry/termination of a Lease Agreement; and (c) repossessed (or in the course of repossession) from a Lease Agreement (Clause 1.3). Clause 1.3 further provides:

In the event of a Lease Agreement being terminated, individual Aircraft are automatically covered from the time the Insured becomes responsible for such Aircraft, including non-renewal or cancellation of any coverage purchased by lessee for the benefit of an Insured hereon. All Additional Insureds and Loss Payees for each aircraft will transfer from Contingent to Possessed Coverage thereon.

Clause 1.10 provides, in relation to Contingent Cover, that:

This Policy does not cover

1.10.1

Claims which are recoverable under the Principal Policy;

1.10.2

Claims which are not recoverable under the Principal Policy by reason of the insolvency of any Insurer(s).

By Clause 3.10, it is provided that ‘Principal Policy’ ‘means the policy or policies required to be effected by the Operator pursuant to the provisions of the Lease Agreement…

In the Genesis WR Policy, by contrast, the Contingent Hull All Risks Cover provision (1.1) sets out a series of contingencies on which it operates. It provides that there is cover for Aircraft not in the care, custody or control of the Insured or their agents in which the Insured has a Financial Interest in the event that:

a)

the Principal Policy fails to respond and/or

b)

the Operator fails to fully insure the perils required under the Lease Agreement with the Insured.

c)

lack or insufficiency of required insurance is due to error or accidental omission.

The Possessed Cover provision of the Genesis WR Policy (1.3) is in essentially the same terms as the Possessed Cover provision in the Genesis AR Policy. The Genesis WR Policy has, in Endorsement 3, paragraph 3, a provision as to automatic cover in the event of a Lease Agreement being terminated in the same terms as that which forms part of clause 1.3 of the Genesis AR Policy, and which has been set out above. Paragraph 4 of Endorsement 3 of the Genesis WR Policy provides that coverage in respect of Contingent Cover ‘shall include Automatic movements between Contingent and Possessed coverage at pro rata Policy terms to be agreed by Insurers as soon as practicable.’ The definition of ‘Principal Policy’ is in the same terms as that in the Genesis AR Policy. The Genesis WR Policy has (at Clause 3.4) an exclusion as to loss or damage ‘recoverable as a claim’ under the Principal Policy, and (at Clause 3.5) an exclusion for loss not recoverable as a claim from the Principal Policy by reason of insolvency of its insurers.

Genesis’s primary case was that there was cover under the Possessed Cover, and alternatively that there was cover under the Contingent Cover.

The principal issue in relation to the Possessed Cover is as to the meaning of ‘course of repossession’. I repeat what I have said on that above. For similar reasons as in relation to other Claimants, I am not persuaded that the Genesis Aircraft was ‘in the course of repossession’. The steps relied on by Genesis as constituting the start of the course of repossession – the grounding notice of 28 February 2022 and the start of arrangements such as the engagement of a flight crew and CAMO, notification of a potential ‘Possessed’ section claim to insurers, discussions with NordStar about a potential consensual return of the Genesis Aircraft – were in my view all steps anterior to or preparatory for a course of repossession which never took place.

Genesis made, somewhat tentatively, the suggestion that there may have been an automatic transfer to the Possessed Cover, under the terms of the automatic cover provision in Clause 1.3 of the Genesis AR Policy or of Endorsement 3, paragraph 3 of the Genesis WR Policy. I do not consider that that automatic cover provision applies prior to the Lease Agreement being terminated. That I regard as the effect of the words ‘in the event of…’. Here, notice of termination of the leasing of the Genesis Aircraft was only served on 16 March 2022, the policy period (for both the Genesis AR and WR Policies) having terminated at latest on 15 March 2022. Accordingly I do not consider that there can have been any Possessed Cover provided pursuant to the automatic cover provision.

Genesis also made, again tentatively, the suggestion that their LP Insurers had agreed the transfer to Possessed Cover. Genesis pointed to a Certificate issued by US brokers, Crystal IBC LLC, in relation to the Genesis AR policy on 4 March 2022 which it suggested indicated an agreement by AR Insurers that Possessed Cover was in force; and contended that the WR insurance would be subject to the same agreement by reason of Section 4.1 of the Genesis WR Policy. As to this case, the evidence is very sparse. I am not persuaded that the Certificate indicates an agreement by Genesis's LP Insurers that the Genesis Aircraft should be on the Possessed Cover if it was not otherwise within the terms of the Possessed Cover. The Certificate clearly states that it is not intended to alter, amend or extend the coverage provided under the Policy.

For these reasons, I do not consider that the Possessed Cover was applicable to Genesis’s claim.

As to the alternative case under the Contingent Cover, it was, as I understood it, not disputed that the Genesis Aircraft was outside Genesis’s care, custody or control for the purposes of Clause 1.1 of the AR and WR Policies.

Although Fidelis is not a party to the Genesis claim, the Defendants have adopted Fidelis’s arguments, discussed above. As appears above, I do not accept those arguments.

One particular feature which arises in relation to the Genesis claim is that one contingency specified in the Genesis WR Policy is that the Principal Policy should have ‘failed to respond’. This language is similar to that found in the AerCap AR Cover, albeit without a specified 90 day period. I consider that it means here the same as it means there, namely that the Principal Policy fails to pay, or accept responsibility to pay, a claim made on it. As indicated above, I do not accept the aspect of Fidelis’s argument which would interpret a clause in these terms as meaning ‘fails to respond when it should have done’, or that the reference to the Principal Policy is other than to the actual policy or policies taken out by the operator in pursuance of its obligations under the lease.

Apart from the issue as to what ‘fails to respond’ means, I did not understand there to be any other dispute that the Principal Policy had failed to respond. It appears to me that it has. Genesis’s letter of claim on the OPs to the OP reinsurers was sent on 18 April 2023. There has been no payment under the OP nor acceptance of the claim. Genesis is pursuing OP Claims in this jurisdiction against OP reinsurers, who are defending the action.

The WR Insurers advanced their alternative case by reference to the exclusion as to losses recoverable as a claim under the Principal Policy. In circumstances in which none of the Defendants advances a positive case that there is recoverability under the Principal Policy, I consider that the exclusion is not applicable, and that there is no reason why the issue of potential recoverability should go to a Phase II hearing. Even if that is wrong, however, my interpretation of the exclusion for losses ‘recoverable as a claim’ is the same as in the case of the Merx Policy. If the touchstone is whether Genesis has taken reasonable steps to seek recovery under the OP (re)insurances, then I consider that it has.

One particular point relied on by the Defendants is the contention that Genesis should sue the Russian OP Insurers and reinsurers in Russia and cannot claim on its Contingent Cover without doing so and/or that such suit should be commenced pursuant to an implied term that Genesis should take all reasonable steps to recover under the OPs. For reasons already given, by reference to the judgment of Henshaw J in Zephyrus, I do not consider that it is unreasonable for Genesis not to have sued in Russia. Furthermore, I do not consider that there is any language in the Genesis Policies which can be said to make such suit a condition precedent or essential precondition for a successful claim under the Contingent Cover.