In United Air Lines v. Ins. Co. of the State of Penn., No. 05-2144CV, 2006 WL 401632 (2nd Cir. N.Y. Feb. 22, 2006), a U.S. court of appeals ruled that United Air Lines was not entitled to business interruption coverage for losses "that were not a direct result of physical damage at either the insured's property at its 'insured locations' or any 'adjacent properties.'"

 United suffered business interruption losses due to the terrorists attacks that occurred on September 11, 2001. It suffered a loss of earnings when its facilities at Washington National Airport were subject to a temporary shutdown.

 United argued that its policy contained a Suppression Damages Clause, which covered its lost earnings even if its airport property suffered no physical damage. The court, however, said that no such clause existed.

 While United asserted that the policy provided indemnity for four different categories of damage—property damage, loss of gross earnings, extra expense, and "other damage caused by an act of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of" terrorism, sabotage, mutiny, insurrection, rebellion, or coup d'etat—the court said that the "suppression" provision was not a separate category, but merely described triggering events that might cause damage.

 Because United's property at the airport was not physically damaged, the court said that it could not recover for "damage to or destruction of the Insured Locations resulting from Terrorism."

 The airline also sought recovery under the policy's civil authority clause for gross earnings lost due to government suspension of flights. The court said that United "must show that it was denied access to its 'locations' at the Airport 'as a direct result of damage to adjacent premises.'" United claimed that the damaged, adjacent premises was the Pentagon.

The court said it did not need to resolve whether the Pentagon was adjacent to United's property because the airline could not show that the airport "was shut down 'as a direct result of damage to' the Pentagon." The reopening of the airport hinged on its ability to comply with more stringent safety standards, not on repairing the damage to the Pentagon. Thus, United's loss of income was not due to damage to adjacent premises.

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