Opinion ID: 793431
Heading Depth: 3
Heading Rank: 2

Heading: Sabotage

Text: 20 3. Mutiny, Insurrection, Rebellion or Coup d'Etat Policy, § 1.A. We do not read this language as providing coverage separate and independent from that set forth elsewhere in the Policy. 21 The function of section I.A., read in the context of the Policy as a whole, is to serve as an introduction to the Policy. It indicates that the Policy covers three categories of damages: (1) property damage, (2) loss of gross earnings, and (3) extra expense. Section III of the Policy, titled Valuation, describes how these various types of damages should be calculated. For example, section III.B. (Buildings and Contents) details how to calculate the value of damages to physical property. Section III.C.1. describes how to calculate gross earnings. And section III.C.2. explains how to calculate extra expense. 22 United argues, however, that section I.A. of the Policy actually provides coverage for four different categories of damage: 1) property damage, 2) loss of gross earnings, 3) extra expense, and 4) 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. Thus, United contends that when the government closed the Airport in order to thwart possible airborne attacks, United suffered other damage caused by an act of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of . . . Terrorism, for which it is entitled to indemnification, under section I.A. of the Policy. We disagree. 23 This introductory section states that ISOP will indemnify United for certain specified types of damages resulting from certain specified causes. It sets forth three types of damages: physical damage, loss of gross earnings, and extra expenses. It then lists a variety of triggering events that may cause one or more of these kinds of damages. They are fire, looting, or acts of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of, inter alia, Terrorism. These are triggering events for the three categories of damages — physical damage, loss of gross earnings, and extra expenses — each of which is further explained and limited by subsequent sections III.B., III.C.1., and III.C.2., respectively. The triggering events are not further categories of damages for which United is entitled to indemnity for loss of gross earnings free of the restrictions contained elsewhere in the Policy. 24 In other words, the Policy states that whenever there is an act of, inter alia, terrorism — or terrorism-caused fire, terrorism-caused looting, or an act of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of [an incident of terrorism] — then United will be indemnified for its physical damages, loss of gross earnings, and extra expenses resulting therefrom. It does not provide that if there is an act of a lawfully constituted authority for the purpose of suppressing or minimizing the consequences of [an incident of terrorism], United is entitled to indemnity for any and all resulting loss, including loss of gross earnings, however caused and unlimited by the remaining terms of the contract. 25 Indeed, if the phrase suppression damages created a free-standing basis of coverage — one that was not restricted by the subsequent valuation sections — then, by the same logic employed by United here, any fire damage or damage from looting should also create a free standing right to recover loss of gross earnings unconstrained by the remainder of the Policy. The specific limitations contained in Section III of the Policy would then be surplusage. The Policy states that in calculating loss of gross earnings, United can recover for business interruptions caused by orders of civil authority in response to physical damage of an adjacent structure. There would be no need for such a specific provision — providing a two-week maximum duration of coverage — if the separate suppression damages clause that United finds in section I.A. covered all losses attributable to orders of civil authority designed to suppress the effects of terrorism for an indefinite period of time. Cf. Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 558 (2d Cir.2000) ([A]n interpretation that gives a reasonable and effective meaning to all terms of a contract is preferable to one that leaves a portion of the writing useless or inexplicable.). 26 There is therefore no merit to United's argument that the district court improperly inserted the word physical between the words other damages in section I.A. According to that provision, United can indeed recover loss of gross earnings, as contrasted with loss of property through physical damage to the property, that it suffers as a result of a government exclusion order. But the scope of the economic damages it can recover for that business interruption must be determined by cross-reference to the section of the Policy that specifically deals with loss of gross earnings. And that section — section III.C.1 — provides that, in order for ISOP to have the duty to indemnify United for lost earnings, the government action in question must either have physically damaged United's property or been caused by physical damage to adjacent property. 3 Similarly, if in attempting to suppress or minimize the consequences of terrorism, the government were to order that United's physical property be destroyed, then United would be able to recover for that physical damage by cross referencing to section III.B., which specifies how to valuate loss of buildings and their contents. And if the government's attempt to suppress damages caused by terrorism resulted in other expenses as defined by the insurance policy, those other expenses would be calculated by cross-referencing section III. C.2. 27 There is, in sum, no validity to United's argument that there arises under section I.A. of the Policy a duty for ISOP to indemnify United for any and all damages of any kind whatsoever that result from the government's efforts to suppress terrorism. There is thus no duty on the part of ISOP under the policy to indemnify United for all damages it incurred, including lost earnings, that resulted from the government's decision to shut down nationwide air service for several days, and the Airport for several weeks, in the wake of the September 11 terrorist attacks. 28