United Airlines v. Insurance Co. of State of Pa., 03 Civ. 5189(RMB).
| Decision Date | 01 April 2005 |
| Docket Number | No. 03 Civ. 5189(RMB).,03 Civ. 5189(RMB). |
| Citation | 385 F.Supp.2d 343 |
| Parties | UNITED AIRLINES, INC., Plaintiff, v. INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Geoffrey J. Greeves, Greenberg Traurig, L.L.P., Washington, DC, John Francis Triggs, III, Greenberg Traurig, LLP, New York, NY, Peter M. Gillon, Ronald W. Kleinman, Greenberg, Traurig, L.L.P., Washington, DC, for plaintiff.
Eugene Wollan, Jeffrey Steven Weinstein, Mound, Cotton, Wollan & Greengrass, New York, NY, for defendant.
DECISION AND ORDER
On July 11, 2003, United Air Lines, Inc. ("Plaintiff" or "UAL") filed a complaint ("Complaint") against the Insurance Company of the State of Pennsylvania ("Defendant" or "ISOP") alleging that UAL is entitled to business interruption insurance coverage for its system-wide loss of revenue resulting from the September 11, 2001 terrorist attacks at the World Trade Center ("WTC") and the Pentagon, including losses related to "the total shutdown of the United States aviation system by the Federal Aviation Administration (the `FAA') and related charges resulting in a loss of income to UAL approaching $1.2 billion." (Complaint ¶ 3.) An amended complaint was filed on November 21, 2003 ("Amended Complaint" or "Am. Compl.") seeking a declaratory judgment pursuant to 28 U.S.C. § 2201(a) and damages for breach of contract "in an amount not less than $25 million." (Am. Compl. at 7-9.)1 On December 8, 2003, ISOP answered the Amended Complaint and submitted seven counterclaims, seeking declaratory judgment that ISOP is not obligated to UAL on the claims alleged in the Amended Complaint. (Answer, Amended Affirmative Defenses, and Amended Counterclaims dated Dec. 8, 2003 ("Answer and Counterclaims").)
On June 1, 2004, UAL moved for summary judgment ("UAL Motion") pursuant to Federal Rule of Civil Procedure ("Fed. R. Civ.P.") 56 as to all claims in the Amended Complaint and counterclaims one through five filed by ISOP. (UAL Motion at 1.) On July 9, 2004, ISOP opposed UAL's Motion and cross-moved for summary judgment on all claims, including counterclaims six and seven ("ISOP Opp'n").2 UAL filed Plaintiff's Reply Memorandum of Law in Further Support of its Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment on July 26, 2004 ("UAL Reply"), and ISOP filed its Reply Memorandum of Law in Further Support of its Cross-Motion for Summary Judgment on August 9, 2004 ("ISOP Sur-Reply"). By letter to the Court dated March 4, 2005, the parties waived oral argument. For the reasons below, UAL's motion for summary judgment is denied and ISOP's cross-motion for summary judgment is granted.
UAL is a commercial airline and Delaware corporation with its principal place of business in Illinois. ISOP is a Pennsylvania corporation licensed to conduct the business of insurance in the State of New York.
UAL and ISOP entered into the Policy for the period of May 3, 2001 to May 3, 2002. (ISOP 56.1 Resp. ¶ 4; Policy at 00009.) UAL paid all required premiums and the Policy was in full force and effect from May 3, 2001 until May 3, 2002. (ISOP 56.1 Resp. ¶¶ 8-9.) The Policy is governed by New York law, id. ¶ 13, and states, in relevant part:
• "I. Insuring Agreement
A. The Company will indemnify the insured for property damage, loss of gross earnings, and extra expense ... resulting from the following incidents, and any ensuing fire damage, damage from looting, or other damage caused by an act of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of any of the following incidents ...
1. Terrorism ...
C. Business Interruption
1. Gross Earnings. This policy insures against loss resulting directly from the necessary interruption of business caused by damage to or destruction of the Insured Locations, resulting from Terrorism ...
This section is specifically extended to cover a situation when access to the Insured Locations is prohibited by order of civil authority as a direct result of damage to adjacent premises, not exceeding, however, two (2) consecutive weeks.
In the event of loss, the Company will be liable ... for only such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair or replace such part of the Insured Location(s) as has been damaged or destroyed ..."3
(Policy at 00009-11, 00013.) Endorsement # 2 of the Policy, dated June 16, 2000 ("Endorsement 2"), states, in relevant part:
• "It is hereby noted and agreed that Insured's properties located in U.K. territories are completely excluded from physical damages coverage ... the Business Interruption coverages ... will remain valid for Insured's properties in the U.K. territories."
(Endorsement 2, Policy at 00003.)
As is well known, between approximately 8:46 a.m. and 10:10 a.m. on September 11, 2001, four hijacked aircraft crashed into both towers of the World Trade Center, the Pentagon, and a field in Pennsylvania. At approximately 10:15 a.m., the Metropolitan Washington Airports Authority ("MWAA") made the decision to close Reagan Airport. At approximately 10:39 a.m., the FAA issued a Notice to Airmen closing all operations at all airports nationwide. (UAL 56.1 Resp. ¶ 10.) The FAA's order "was an act of a lawfully constituted authority." (ISOP 56.1 Resp. ¶ 32.) Although the FAA "ground stop" order was lifted nationwide on September 14, 2001, Reagan Airport remained closed until October 4, 2001. (ISOP 56.1 Resp. ¶ 34; Stipulations ¶¶ 2-3.)
UAL's ticket counter in the WTC was destroyed on September 11, 2001. (ISOP 56.1 Resp. ¶ 37.) UAL also claims that its "gate property at Washington Reagan National Airport was physically impacted by the terrorist attack at the Pentagon, resulting in the accumulation of ash at the United gates." (UAL 56.1 Stmt. ¶ 38.) ISOP "denies that UAL's `gate property' at Washington Reagan National Airport was physically impacted by the terrorist attack at the Pentagon." (ISOP 56.1 Resp. ¶ 38.)
On July 9, 2003, UAL submitted to ISOP a "sworn proof of loss" stating, among other things, "September 11-related losses through December 31, 2001 totaled approximately $1.2 billion." 4 UAL's damages expert, Daniel M. Kasper, estimated "net losses sustained by United as a result of the FAA mandated shutdown of the national aviation system" from September 11-14, 2001 to be $98,247,387.00. (Affidavit of Daniel M. Kasper dated May 24, 2004 ("Kasper Aff.") ¶¶ 33-34; see also UAL Reply at 8 ().) UAL claims that it "sustained a loss of gross earnings at [Reagan Airport] of approximately $4.7 million for the two week period commencing on September 11, 2001." (Supplemental Declaration of Frances DeBlasio dated Nov. 20, 2003 ¶ 4.) On September 25, 2003, ISOP issued a letter to UAL disputing "UAL's interpretation of the Policy insofar as UAL claimed that it was entitled to reimbursement for loss not directly related to the destruction of the ticket kiosk in the World Trade Center." (ISOP 56.1 Resp. ¶ 55.)
Federal Rule of Civil Procedure 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material issue of fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see Sec. Ins. Co. of Hartford v. Old Dominion Freight Line, Inc., 391 F.3d 77, 82 (2d Cir.2004). "[A] district judge must view the evidence in the light most favorable to the non-moving party and must draw all inferences in favor of that party." K. Bell & Assocs., Inc. v. Lloyd's Underwriters, 97 F.3d 632, 636-37 (2d Cir.1996).
When cross-motions for summary judgment are made, the standard is the same as that for individual motions. See Morales v. Quintel Entm't, Inc., 249 F.3d 115, 121 (2d Cir.2001); Elite Brands, Inc. v. Pa. Gen. Ins., No. 02 Civ. 5623, 2004 WL 1945732, at *3 (S.D.N.Y. Sept.2, 2004). The court must consider each motion independently of the other. Morales, 249 F.3d at 121.
"Under New York law, the court determines the proper construction of an insurance contract, as with other contracts, as a matter of law." Elite Brands, 2004 WL 1945732, at *3.5 Whether ambiguity exists in a contract is a threshold question of law to be resolved by the Court. See, e.g., Compagnie Financiere De Cic Et De L'UNION Europeenne v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 232 F.3d 153, 158 (2d Cir.2000). A contract is ambiguous when its terms are "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Seiden Assocs., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir.1992) (citation omitted). Conversely, contract language is unambiguous, and summary judgment may be granted, when it has "`a definite and precise meaning, unattended by danger of misconception in the purport of the contract...
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