United Airlines Sues AIG For 9/11 Loss Claims

AIG, which now has 20 days to respond to the United Airlines complaint, declined to comment on the lawsuit.

The $25 million United is seeking from Insurance Company of the State of Pennsylvania, part of New York-based AIG, is the policy's liability limit and is a small amount compared to some $1.2 billion the airliner suffered in the loss of income following terror attacks.

Robert Hartwig, senior vice president and chief economist at the Insurance Information Institute in New York, said it was unclear why the suit has only now been filed.

"There is still very little information to go on here. There have been business interruption lawsuits after 9/11, but I am not aware of any past disputes like this between airlines and their insurers specifically," he commented.

United's lawsuit, filed in Manhattan's U.S. District Court, states in its complaint that the airline is seeking a "declaration that defendant is obligated to indemnify plaintiff for its loss of gross revenue as a result of the enormous damage caused by the 9/11 events."

These events include, United Airlines explained, the "total shutdown of the U.S. aviation system by the Federal Aviation Administration (FAA) and related charges" resulting in a loss of income to United Airlines and its parent company UAL approaching $1.2 billion.

United pointed out that the policy coverage includes loss of gross earnings–and extra expenses in excess of the deductible–from terrorism, sabotage, mutiny, insurrection, rebellion or Coup d'Etat, as well as other losses caused by actions of lawful authorities to control these events.

Recounting its losses, United Airlines noted that within moments of terror attacks, which included hijacking and crashing of two United planes–one into the south tower of the World Trade Center and another into a field in Sommerset County, Pa.–the FAA issued a formal notice closing operations at all U.S. airports.

"UAL suffered a staggering loss of gross earnings," the company stated, "because, in response to and in order to suppress or minimize the consequences of these terrorist attacks, the FAA ordered the cessation of all aviation activity in the United States, for the fist time in the history of this country."

And in making its case against AIG, United Airlines pointed out that FAA's action caused "damage" within the meaning of the policy, including a total loss of access to all of UAL's domestic terminals.

Two days after the shutdown, U.S. airports began a "phased" resumption of operations. But United Airlines suffered further damages because Boston's Logan Airport and Ronald Reagan National Airport in Washington, D.C.–two of UAL's highest grossing terminals–took longer to resume their business.

"Since 9/11 events, United Airlines has continued to incur related business losses," Mr. McAndrews said. Eight days after the 9/11 events, UAL began to furlough some 20,000 workers and retire many of its Boeing planes. And last December, the company filed for the Chapter 11 bankruptcy code.