United Airlines, Inc. v. Insurance Company of the State of Pennsylvania

On September 11, 2001, hijacked airplanes flew into the World Trade Center in New York City and the Pentagon in Arlington, Virginia. United Air Lines, Inc.’s (United) (plaintiff) ticket office in the World Trade Center was destroyed. United’s facilities at Ronald Reagan Washington National Airport were not physically damaged. All air traffic in the country was halted prior to the Pentagon attack, and, fearing future local attacks, Reagan airport remained shut down for several extra weeks. United received $782 million in federal aid but had $400 million remaining in unreimbursed losses. United had a $25 million business-interruption insurance policy with Insurance Company of the State of Pennsylvania (ISOP) (defendant) covering terrorism-related property damage, lost earnings, and extra expenses. The policy insured against lost earnings from (1) damage to insured’s property and (2) for up to two weeks, inability to access insured’s property when prohibited by civil order due to damage to adjacent premises. The policy had another provision that United deemed the suppression-damages clause, which covered other damage caused by government efforts to suppress or minimize the consequences of terrorism. United filed a declaratory judgment and breach-of-contract suit seeking recovery for losses related to the national disruption of flight service and the shutdown of Reagan airport. The district court denied United’s claim, finding that the policy excluded losses unrelated to physical damage to United’s property or to physical damage to an adjacent property. United appealed.