South-Western Legal Studies in Business

Terrorism Insurance Did Not Cover Losses Due to Forced of Operations after 9/11

Appeals court held that United Air Lines could not recover under its terrorism insurance policy for losses of business when the airline was forced to suspend operation for several days after the 9/11 attacks. The government suspended operations to prevent future attacks.

Topic Insurance Law
Key Words

Business Interruption; Terrorism; Direct Result

C A S E   S U M M A R Y

United Air Lines had “Property Terrorism & Sabotage” insurance with ISOP. The policy stated it would indemnify for “property damage, loss of gross earnings, and extra expense … resulting from terrorism.” The policy “insures against loss resulting directly from the necessary interruption of business caused by damage to or destruction of Insured Locations [which include United's facility at the World Trade Center ] resulting from Terrorism.” ISOP refused to pay United for its losses suffered by the shutting down of the airline industry after the terrorist attacks on the World Trade Center on 9/11. United sued. The district court held for ISOP; United appealed.


Affirmed. United does recover for the loss of its facility in the World Trade Center , but the interruption to commercial airline business following 9/11 were not the “direct result” of damage to the World Trade Center attack. The government order to shut down the airline industry for several days was based on fears of future attacks, not because of the loss of the World Trade Center .


United Air Lines v. Insurance Co. of the State of Penn. , 439 F.3d 128 (2 nd Cir., 2006)

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