The 2nd U.S. Circuit Court of Appeals said Whitman apparently made comments reassuring people about the safety around the site based on conflicting information and reassurances by the White House.
The appeals court said legal remedies are not always available for every instance of arguably deficient governmental performance.
A Department of Justice lawyer had argued late last year that holding the former head of the Environmental Protection Agency liable would set a dangerous precedent in future disasters because public officials would fear making public statements.
The ruling came in response to a lawsuit by residents, students and workers in lower Manhattan and Brooklyn who said they were exposed to hazardous dust and debris from the fallen twin towers after Sept. 11.
They said Whitman, who also is a former New Jersey governor, should be forced to pay damages to properly clean homes, schools and businesses.
A lower court judge had earlier refused to dismiss Whitman as a defendant, saying her actions were "conscience-shocking."