[2025] EWHC 1430 (Comm)

I turn to address an issue which is specific to Genesis’s claim. This relates to whether Genesis’s WR Cover was validly amended to exclude Russia from midnight on 2/3 March 2022. The WR Insurers who insured Genesis, who did not include Fidelis, contend that it was. Genesis contends that it was not. If it was, then not only was there no subsisting cover as at the date when I have found that the Genesis aircraft was lost, but there would have been no cover as at the date, 5 March 2022, when I have found that there was an operative restraint or detention for the purposes of ‘grip of the peril’ principles.

The background to this dispute is as follows. On 1 February 2022, TMK Syndicate 510 sent a Notice of Review giving 7 days’ notice. Genesis, through its brokers Ed Broking LLP, agreed to amend the notice period from 7 days to 48 hours. The brokers prepared an Endorsement (No. 3), which embodied this change. It was prepared on a ‘Box 2’ basis, that is to say it was to be agreed by the leaders, and advised to all underwriters within 7 days. This endorsement was signed and stamped on behalf of TMK Syndicate 510 on 4 February 2022. On 16 February 2022, another Notice of Review was given, and, using the same process as before, the notice period was again amended, this time to 24 hours, by endorsement No. 4 signed and stamped on 4 March 2022. On 1 March 2022, TMK tendered 24 hours’ notice of amendment of terms, removing Russia and Belarus from the territorial limits of coverage with effect from 00.01 GMT on 3 March 2022.

After the service of that notice, Genesis’s brokers prepared Endorsement No. 6. This read:

RISK DETAILS

(Unaltered Except)

SITUATION: Amended to read:

Worldwide but excluding Ukraine, Crimea, Russia and Belarus.

All other terms, conditions, limitations and exclusions remain unchanged.

Information: Following issue of 24 hours’ notice of amendment of terms issued by the Leading Underwriter hereunder at 00.01 GMT 2nd March 2022 and with respect to Russia and Belarus, the exclusion of these territories was invoked.

This Endorsement No. 6 was again prepared on a ‘Box 2’ basis, and was signed and stamped by TMK Syndicate 510 on 4 March 2022. The brokers then distributed it to the following market.

Genesis denies that TMK Syndicate 510 had authority to issue this Endorsement, either on behalf of the rest of the market, or for itself. WR Insurers’ principal argument to the effect that TMK Syndicate 510 did have that authority and that the Endorsement is valid and binding in relation to all subscriptions to the risk, is that the Subscription Agreement in the Genesis WR Slip conferred such authority.

Insofar as material, that Subscription Agreement was in the following terms:

Slip Leader Slip Leader shall mean Tokio Marine Kiln 510 only, regardless of the market security structure attaching to this slip.

…

Basis of Agreement to Contract Changes: LEADING UNDERWRITERS’ CLAUSE (AVIATION BUSINESS) – AVS 100B, except as amended in this Subscription Agreement or in the submission to Insurers.

All Insurers to follow the Slip Leader in the application of any notices under AVN52E and reinstatement and/or amendments to the condition, rates, geographic limits in relation thereto shall be automatically binding on all Insurers without notice, upon agreement by the Slip Leader only.

…

In order to understand the debate as to the meaning and effect of this Subscription Agreement it is necessary to refer to two further matters. The first is the terms of AVS 100B. These were, in part, as follows:

All alterations and amendments (hereinafter called “alterations”) shall be dealt with by leading underwriters on the following basis:

Alterations will be submitted to the first two Lloyd’s and the first two Company underwriters (or the first two underwriters if the risk is placed on one market only).

The first leading underwriter will affix the following stamp to the endorsement concerned should this not be incorporated in the printed endorsement:

	AVS 100 B
Agreed by Ldrs. Only (1)	Agreed by Ldrs. But Advise All Uwrs. Within 7 Days from Date ……. (2)	To be Agreed by All Uwrs. (3)

Each of the leading underwriters will initial in the appropriate place in the above stamp and in section (2) the date of the agreement of the last of the leaders must be inserted.

…

The other matter is the terms of AVN 52E, referred to in the Subscription Agreement in the Genesis WR Slip. AVN 52E is entitled ‘Extended Coverage Endorsement (Aviation Liabilities)’. It provides for the deletion of various parts of the War, Hi-Jacking and Other Perils Exclusion Clause (Clause AVN 48B), and provides, amongst other things, that insurers may give 7 days’ notice to review premium and/or geographical limits. AVN 52E was not part of the Genesis WR Policy. It was part of the Genesis AR Policy, as Endorsement Three thereto. The effect of that Endorsement was that the AVN 48B exclusions (except for sub-paragraph (b)) were not to apply, and thus that even if liabilities were incurred as a result of a WR Peril (other than a sub-paragraph (b) peril) they would be covered under the AR Cover.

The Subscription Agreement in Genesis’s AR Policy was in the same terms as the Subscription Agreement of the Genesis WR Policy as to the ‘Basis of Agreement to Contract Changes’. It made reference to notices under AVN 52E. The relevant Notices of Review given by WR Insurers, which I have referred to above, could not have been given under AVN 52E, as that formed no part of the WR Cover.

The points which WR Insurers wished to make in relation to Endorsement 6, in their closing submissions, were three-fold. They wished to argue:

Genesis strongly opposed WR Insurers raising these arguments. It contended that these points were not open to WR Insurers: they were inconsistent with WR Insurers’ pleadings, were raised too late and could not be fairly considered, and in some respects were the same as a case which WR Insurers had sought to raise by way of an application to amend their Statements of Case early in the trial, but which had been refused. In any event, Genesis contended that each of the arguments could be seen, even on the material which was available to the court, to be wrong.

I have reached the conclusion that Genesis is right, on both counts.

As to the first, the starting point is WR Insurers’ Statements of Case. In their Rejoinder (paragraph 6) it is pleaded that ‘[u]nder AVS 100B, unless otherwise agreed, the default position is that two underwriters must agree any alteration or amendment to the policy. This default position does not apply to the issue of AVN 52E notices under the Genesis WR Policy or amendments to the “condition[s]” relating to such notices…’. Further in a response to a Part 18 Request served by Genesis, WR Insurers stated, in relation to how authority was conferred on Syndicate 510: ‘For the avoidance of any doubt, the War Risks Defendants conferred authority on Syndicate 510 to issue AVN 52E notices under the War Risks Policy and amendments to the “condition[s]” relating to such notices by the Subscription Agreement contained in the War Risks Policy.’ Those pleas were to the effect that AVS 100B did require multiple signatures, but that the Subscription Agreement made an exception in relation to notices under AVN 52E. They raised no case that the reference to AVN 52E was a mistake.

At the outset of the trial, WR Insurers sought to amend their Rejoinder. The proposed amendments included: (1) that the reference to “notices under AVN 52E” in the Subscription Agreement was an obvious error (paragraph 6); and (2) further or alternatively, that if Syndicate 510 had had no actual authority to enter into Endorsement 6 on behalf of other WR Insurers, those other WR Insurers had ratified Endorsement 6 (paragraph 6A). Genesis objected to those amendments, both those summarised in (1) and (2), on the basis that they would require factual and perhaps expert investigation, which it was too late to conduct. On 9 October 2024 I refused to permit the amendments, on the basis that they were very late, and involved new factual allegations which required at least consideration of whether there needed to be further disclosure, further witness evidence, and conceivably expert evidence.

As I have already said, in their closing submissions, WR Insurers put forward the three arguments I have summarised above. They are not arguments which are on WR Insurers’ pleadings, and are inconsistent with them, as is clear from the passages in the Rejoinder and the response to the Part 18 Request which I have set out above. Further, and significantly, I think that Genesis is correct in saying that each, to be dealt with fairly, would have required a factual investigation, and that it is prejudicial for WR Insurers to raise them without that having been conducted. Specifically, I consider that Mr Reeve KC, for Genesis, was correct to say that Genesis would have needed to be able to investigate whether there was material relevant to whether there had been a mistake in the reference to AVN 52E; and to consult the broker or an expert broker as to practice in relation to AVS 100B. It was too late, and not fair, for these points to be raised in closing submissions.

As to the merits of the three arguments, insofar as they can be gauged without an investigation of the context, my views are as follows. In relation to the first, it is not established, and cannot be assumed, that there was a mistake in the reference to AVN 52E. It is quite possible, as Mr Reeve KC submitted, that the Subscription Agreement provisions were part of a standard set of terms and conditions appended by the brokers to aviation insurance slips which were designed to accommodate a range of aviation coverage terms, including AVN 52E if incorporated into the policy. There is no evidence that the Subscription Agreement was individually negotiated for each slip. Furthermore, the Subscription Agreement can operate even if there can be no notices under AVN 52E, because of the provision that AVS 100B is to apply except as amended by the Subscription Agreement or the submission to insurers. In addition, even if the reference to AVN 52E was a mistake, it is not clear what the appropriate correction is. As Mr Reeve KC again submitted, one clear possibility, no less plausible on the available material than amendment to ‘any notices of review’, is deletion of the clause which refers to AVN 52E.

In relation to the second argument, this does not, in my judgment, work linguistically. This is because the words ‘in relation thereto’ must refer to notices under AVN 52E and it is therefore impossible to divide the clause into the two parts suggested by WR Insurers on this argument.

As to the third argument, this amounts to a contention that AVS 100B, as made applicable, is itself amended such that only the one leader’s agreement is necessary. Presumably, the same would apply to the identically worded Subscription Agreement in the AR Slip, and this would render the second paragraph of the ‘Basis of Agreement to Contract Changes’ clause redundant, even though AVN 52E was incorporated into that policy. ‘Slip Leader’ is not a term used in AVS 100B. Had it been intended by the Subscription Agreement to produce a result which altered the operation of AVS 100B in relation to all contract changes, language would surely have been used which engaged directly with that of AVS 100B. Instead, the Subscription Agreement is intelligible reading the provisions as to ‘Slip Leader’ as being significant only in relation to a particular class of changes, namely notices under AVN52E if relevant.

Accordingly I conclude that WR Insurers have not succeeded in the case open to them as to why TMK 510 had authority to enter Endorsement No. 6 on behalf of the other subscribing WR Insurers. On that basis, as far as those underwriters were concerned, the Genesis WR Policy did not exclude Russia or Belarus up to its expiry on 15 March 2022. On the other hand, I can see no sound basis for saying that the Notice of Review tendered on 1 March 2022 and Endorsement No. 6 were not effective in relation to TMK 510’s proportion of the risk. On that basis, as far as that underwriter was concerned, relevant cover had ceased before, on my findings, there was either a restraint/detention of the Genesis Aircraft by the FATA Message of 5 March 2022 or the loss of the aircraft on 10 March 2022.

This is also the appropriate point at which to consider an argument raised by WR Insurers which was said to be relevant to Genesis, but was also relevant in part to Merx’s claim, and possibly to AerCap’s. This argument is that there could not be a loss of the Aircraft and Engines for the purposes of the policy/ies, and possibly the Aircraft and Engines could not have been in the grip of a relevant peril, if, as at the date of the alleged loss or operation of the peril the leasing had not been terminated. WR Insurers’ argument was, in essence, that there could not be a loss of the Aircraft by the lessor unless it had a right of possession of the Aircraft at the relevant date. It was said to be relevant to Genesis, in that the notice of termination of leasing was given on 16 March 2022, and accordingly there could have been no loss (or operative peril) before that date and by that date the policy period had expired, irrespective of issues of Notices of Review and Endorsement No. 6.

Insofar as Genesis was concerned, it appeared to me that Mr Reeve KC was correct to say that, under the terms of the relevant lease, the lessor had an immediate right to take possession of the aircraft from the date of default, and that the first event of default occurred on 1 March 2022, when Genesis served a grounding notice on the basis of the invalidation of reinsurances required under the lease.

More fundamentally, however, I consider that WR Insurers’ argument is wrong in that it elides the question of whether there is a loss under the policy/ies (or operative peril) with the different question of rights of possession under the leases. That the submission can be seen to be wrong is in my view demonstrated by positing a case of nationalisation. Suppose that, on 26 February 2022, without any or much advance warning, and before lessors had served any notices of default or termination of leasing, the Russian Government had nationalised the airlines and with them all their aircraft. That would surely have constituted the loss of the aircraft. The same applies if the cause of the loss is assumed to be an AR Peril. If an airline had said to a lessor that it did not need to serve a notice of default, because the airline had decided, for good, not to give the aircraft back in any circumstances, that would surely constitute a loss of the aircraft.

Clearly, whether there is a loss depends on all the relevant circumstances, and whether the lessor will be permanently deprived of the aircraft. It does not, in my view, depend on the question of whether, as at the point of time when it is said that there is a loss, the leasing had been terminated.