Court: US Airways Can’t Collect Insurance for 9/11 Disruption

US Airways cannot collect insurance for post-9/11 business losses because it already received money for that purpose from the federal government, the Virginia Supreme Court ruled March 3.

The Tempe, Ariz.-based air carrier received $310 million under a law passed by Congress to stabilize the airline industry after the Sept. 11, 2001, terrorist attacks. The Supreme Court said that amount had to be deducted from US Airways’ insurance claim.

PMA Capital Insurance Co.’s maximum liability under its policy with US Airways was $2.5 million. A provision in the policy said any losses would be reduced by all “salvages, recoveries, and payments … received prior to a loss settlement.”

Because the insurance company’s potential liability was far less than the amount received from the government, the company owes nothing, the court ruled.

The unanimous decision reversed a ruling by Arlington County Circuit Court Joanne Alper, who had ruled that the federal aid did not meet the legal definition of a “payment.” The high court said the compensation did, however, meet the definition of “recoveries.”

The case stemmed largely from losses US Airways suffered because of the Federal Aviation Administration’s closure of Reagan National Airport in northern Virginia after one of four hijacked airliners crashed into the Pentagon a few miles away. The shutdown prevented US Airways from flying into or out of Reagan from Sept. 11 to Oct. 4.

US Airways claimed $58 million in losses under its contract with six insurers, but the limit on its policy was $25 million. PMA underwrote 10 percent of the coverage.

Congress passed the Air Transportation Safety and System Stabilization Act 11 days after the terrorist attacks, appropriating $5 billion to compensate airlines for their economic losses.