W000342
Wednesday, November 14, 2001 12:34 PM
Comments on September 11th Victim Compensation Fund
November 14, 2001
VIA FACSIMILE
Kenneth L. Zwick, Director
Office of Management Programs
Civil Division
U.S. Department of Justice
Main Building, Room 3140
950 Pennsylvania Avenue, NW
Washington, DC 20530
Re: September 11th Victim Compensation Fund of 2001
Dear Mr. Zwick:
I write to provide some thoughts on how the September 11th Victim Compensation Fund of 2001 could be structured to assure its success. My perspective comes from the rapid resolution of claims arising out of several disasters, including the largest oil spill in the Port of Los Angeles, the division of settlement proceeds among several large groups of clients, and 20+ years of personal injury litigation experience for both plaintiffs and defendants.
SPEEDY RESOLUTION OF CLAIMS
The most valuable feature of the September 11th Victim Compensation Fund of 2001 is its potential for a speedy resolution of all claims. Rapid payment can make the Victim Compensation Fund superior to any other form of compensation, including tort litigation. Naturally, any compensation program that values a death or an injury will be imprecise. But the degree of acceptable imprecision will be much greater if the payments are made quickly. As such, the proposed implementation of "interim final rules" and the "waiver" of the 30-day effective date are essential to the success of this program.
TRUST
The non-adversarial character of this fund is also a critical feature in encouraging a speedy resolution. From my experience in settling 600 claims within 2 weeks of a major oil spill and all 2,000+ claims within 3 months, I know that trust is critical. It is hard to generate trust when parties believe their "opponent" is actively seeking an "adverse" outcome. To rapidly resolve the claims, claimants must believe we are all on the "same side of the table" and are all actively seeking the same fair outcome.
FAIRNESS
In distributing the Victim Compensation Fund, the "balancing factor" is not the interests of the government or an individual claimant's needs. The limits on an acceptable range of payments is an overall "fairness." How much each claimant should receive is governed by what is "fair" to all of the other claimants and the taxpayers of the United States government. "Fair" compensation must also reflect the compassion built into this compensation program that does not require proof of a liable, solvent, and available defendant. In other words, a higher or lower payment must be judged against consistent standards applied to all claimants in an overall just manner.
SIMPLICITY
To achieve the goals of a speedy and fair distribution, the program must be kept as simple as possible. While a tremendous amount of detailed information could be gathered for each claimant, greater detail will slow the process, diminishing the principal value of this program -- speed.
BASIC INFORMATION
With speed, fairness, and simplicity in mind, the following basic information should be gathered:
(a) Identification of the Claimant. Each claimant should be required to provide his/her name, Social Security Number, date of birth, and contact information (address, telephone, fax, and e-mail). This should be coupled with the presentation of the claimant's government issued I.D. (e.g., driver's license) and proof of the claimant's eligibility to receive compensation (e.g., affidavit from an employer certifying the claimant's or decedent's presence at the affected area at the time of the tragedy, identification by the government of claimant's presence or decedent's death in the affected area at the time of the tragedy, medical records, death certificate, court order appointing claimant as a decedent's personal representative). This basic information will assure that the claimant is the right person to pay.
(b) Past Income for Five Years. The claimant should provide his/her or the decedent's personal income for the past five years with proof in the form of tax returns or other acceptable economic information. If five years of income data is unavailable, the claimant should state why it is not possible to provide this information and offer substitute information. [Five years should reduce incentives for frivolous or fraudulent claims.] In addition, a personal representative on behalf of a decedent should provide the decedent's family's (or other dependents') total income for the same period and the source of that income. [This information will aid in the economic assessment of the amount of the decedent's income that should be attributed to the decedent's own consumption.]
(c) Proof of Contribution. In the case of an unmarried decedent, there should be proof that a single decedent would have likely contributed to the support and care of others (e.g. parent, sibling, etc.) and the amount of that support, as shown by past conduct. The personal representative should also provide proof of the decedent's annual expenses for the past two years. [This is again an important factor in assessing the relative amount of expected consumption by the decedent.] Evidence of education, profession, licenses, and other indicators of future income would also be helpful.
(d) Medical/Burial Expenses. To the extent the claimant has sustained medical or burial or other costs associated with the terrorist attacks, those amounts should be identified and documented.
(e) Collateral Source Benefits. Each claimant should identify their entitlement to, or receipt of, any collateral source benefits from rights created before the September 11, 2001 (e.g. life insurance, medical insurance, unemployment compensation, social security benefits, pension funds, government benefit programs). Charitable payments and gifts received in the wake of the September 11th attack should not be considered. While it is unfair to consider any collateral source benefit (since it penalizes those who prepared and rewards those who did not prepare), the statute clearly requires deduction of collateral source benefit rights created before September 11. On the other hand, no one is "entitled" to pure charity and it would be difficult - practically and morally - to measure all of the charitable giving that a claimant may receive. As such, eliminating a deduction for charitable proceeds makes sense and would be a reasonable interpretation of the statute.
(f) Dependents. Dependents (e.g. children, spouse, parents, etc.) should be identified by name, date of birth, and the special needs of any of the dependents. [This would again affect the ratio applied for the decedent's consumption.]
(g) Other Information. Any other information that may be relevant to the appropriate amount of compensation should be provided as well with as much documentation as possible. To the extent stories about the family have been written in media publications (e.g. New York Times), the claimant may attach the article and state, under penalty of perjury, which portions of the article are true and correct.
PERSONAL REPRESENTATION OF A DECEDENT
The "personal representative" of a decedent should be designated by an order of a court of competent jurisdiction. The identification of all heirs, the allocation of funds among heirs, and the legal effect of wills and trusts are too complex to be administered by the Victim Compensation Fund. The state courts could develop simplified procedures for processing "personal representative" appointments but the state courts should remain in control of probate issues.
ELECTRONIC WRITTEN RECORDS
As much as possible, the information gathered should be in writing and in electronic form. Claims could be started by entry on a web page, faxes, or calls into central phone banks (where electronic written records would be initiated for review and approval by the claimant). Centers could be set up for receiving paperwork and scanning the paperwork into each claimant's file. Central scanning would assure consistent procedures for digitizing paper documents. All of the information submissions should be made under penalty of perjury.
RELEASE FORMS AND CROSS-CHECKS
Release forms for documents from third party sources should be utilized to gather information for each claim.
Computer cross-checks of payments to claimants should be conducted with other relief funds, insurers, employers, and government agencies to assure fair distribution of the Victim Compensation Fund. Release forms should be used to permit access to this information.
ECONOMIC LOSS FORMULA
An economic loss formula should be created by a group of economists that would allow the insertion of a claimant's basic financial data and a calculation of the claimant's total economic loss (medical/burial expenses, past lost income, future lost income/support, etc.). Total past loss up to the date of the claim are easy to calculate. Future loss, however, must be projected with an appropriate inflation factor and present value discount factor based on the difference between the claimant's past income and present income with appropriate adjustments for anticipated bonuses, promotions, and changed economic conditions. This will be a more difficult calculation that may need an economist's input to appropriately adjust the number for reasonably expected future changes.
To the extent more complicated economic loss calculations must be performed, the government should retain forensic economists who can perform these calculations. At a minimum, these economists must have a bachelors degree in economics and experience in calculating wrongful death damages.
CONSUMPTION FACTOR
In the case of decedents, a consumption formula would need to be developed. This would be the amount of income that would have been consumed by the decedent had he/she lived. This factor will be affected by the total family income, total number and age of the decedent's dependents, and the special needs of any of the decedent's dependents.
NON-ECONOMIC LOSS FORMULA
A formula should also be developed for non-economic loss. This would be based on the claimant's or decedent's economic loss or other equivalent factors (e.g. parental claim for loss of support by unmarried child). Two different schedules should be created, one for injuries and another for deaths. Each of the schedules should be based on the total economic loss (or equivalent factors) incurred with a range that would permit adjustment for special situations (e.g., number of dependents, special needs, and other special circumstances). The formula should also be based on jury verdict experience in the affected areas. A single formula should be applied to all deaths. No formula will be perfect but a rough formula would assure a more even distribution of the Victim Compensation Fund, would speed resolution of the claims, and would appropriately acknowledge the compassion built into this no-fault program.
For example, the non-economic loss injury schedule may be as follows:
1. For economic losses of $250 or less, non-economic loss will be $250 - $1,000.
2. For economic losses between $251 and $500, non-economic loss will be $500 - $1,500.
3. For economic losses between $500 and $1,000, non-economic loss will be $750 - $3,500.
For deaths, the non-economic loss may be as follows:
1. For economic losses less than $25,000, non-economic loss will be $50,000 - $150,000.
2. For economic losses between $25,001 and $50,000, non economic losses will be $100,000 - $250,000.
3. For economic losses between $50,001 and $100,000, non-economic losses will be $250,000 - $400,000.
These are not proposed numbers. The exact numbers should be arrived at by a consensus of the panel discussed below looking at actual jury verdicts and settlements. But a formula similar to the foregoing would allow claimants to quickly know exactly how much they will receive and would assure a relatively fair distribution among all claimants.
Of course, there will be special cases that will not easily fit within this structure. As we all know, jury verdicts are driven by the unique facts of each case. Still, a general matrix will help organize the facts of each case into similar categories so that this program can efficiently serve most of the claimants on a speedy and fair basis. Moreover, the panel may decide to reduce the complexity of this program even further by awarding lump sums to different categories in light of the compassionate goals of this program.
PANEL TO DECIDE FORMULAS AND CRITERIA
A panel of expert forensic economists, personal injury lawyers (plaintiff and defense), potential claimants, and judges, should be convened to recommend: (1) the limitations on the location of eligible claimants; (2) the criteria for eligible injuries; (3) the information/documentation/forms required; (4) date of "filing"; (5) the hearing and appeal process; (6) the schedule of payments and criteria for payment; (7) the required qualifications for hearing officers, economists, and others who may be needed to evaluate the claims to be presented, and (8) the default state law to be applied (a single state's laws should be utilized to assure uniform application of the program; New York probably has the most developed law among the affected states).
PANEL TO RECOMMEND PAYMENTS
Several additional panels of economists, personal injury lawyers, judges, and interested lay people (not claimants) should be convened to advise the Special Master on specific payments in difficult cases and to provide the Special Master with recommended actions on appeals.
"FILING"
A claim should not be deemed "filed" until all of the information and paperwork has been received, the claimant has been deemed eligible for compensation, an initial compensation payment has been determined, and the claimant has accepted or appealed the compensation payment. It is unfair to force a claimant to forego litigation rights without knowing their eligibility or likely compensation.
HEARING OFFICERS
Hearing officers should be trained to help claimants file their claim. A background in claims adjustment, personal injury investigation, paralegal work, or law would be helpful. But the guidelines for the program should be specific enough to direct the hearing officer in gathering the information required and determining the amount to be paid in compensation. Since this is a non-adversarial process, the goal is to be on the "same-side-of-the-table" as the claimants and help claimants put together the information and paperwork to fairly compensate them for their loss. The hearing officers may be available in person, by phone or by e-mail.
FIRST DETERMINATION
I would recommend the following procedure for payment of claims:
1. The amount of compensation to be paid should be first recommended by the hearing officer assigned to a claimant.
2. The payment recommendation should be stated and justified in writing by reference to the schedule and formulas prepared for all claimants.
3. The recommendation should be approved by a supervisor and may require further approval by a panel for amounts in excess of $1 million.
4. The hearing officer should notify the claimant of the first determination (after appropriate approval or modification of the recommendation) within 10 days of a claimant's submission of all paperwork.
5. The hearing officer should then ask the claimant to choose to accept, appeal, or reject the compensation payment. If the claimant accepts, payment should be issued within one week. [If possible, payment should be issued immediately.] If the claimant appeals, the determination on the appeal must be made within 120 days. An appeal should be deemed a "filing" of the claim. If the claimant rejects the compensation payment, the claimant should be deemed not to have "filed" and may pursue other remedies.
6. The claimant should have 30 days within which to accept, appeal, or reject the compensation payment. Failure to act within 30 days of notification of the first determination will result in the compensation payment being deemed rejected.
7. Upon rejection, the claimant may reapply within the statutory two-year period but no new compensation figure will be calculated absent proof of new evidence and manifest injustice in the original computation determination. If new evidence and legitimate grounds for a finding of manifest injustice are presented to the satisfaction of the hearing officer, a new compensation figure may be calculated.
APPEAL
An appeal process for the assessed compensation payment should be provided. The appeal should be based on putting the claimant in a higher category (that can be justified as fair with respect to all other claimants). An appeal is a "filing" as defined by the statute. The appeal will be heard by a panel who will make a recommendation to the Special Master. The Special Master will make the final determination within 120 days of the appeal and may change procedures based on the appeal provided that the change consistently affects all who file (before and after the appeal).
POST-PAYMENT ADJUSTMENTS
Compensation payments to claimants may be adjusted upward upon a change in compensation policy after a claimant receives a payment. The payment will not be adjusted downward even if a later change in policy would have resulted in a lower compensation payment to a claimant who has already received their payment. [This will encourage early filing and allow for flexibility in the latter stages of the program.]
ORAL RECORDINGS UNNECESSARY
Oral recordings (other than claims submitted by phone) are unnecessary. The claim should be based upon the written submissions under penalty of perjury. Hearing officers may help claimants prepare the written submissions but it will be the written submissions that will govern the amount of the compensation payment.
RAPID PAYMENT
In order to encourage rapid resolution of all claims, the compensation payment should be issued as soon as a claimant accepts the calculated total payment and "files" his/her claim under penalty of perjury. Although the statute provides 120 days for evaluation of the claim and 20 days for payment upon determination of eligibility and the amount of payment, the central strength of this program is speed. This central strength will be diluted by any delay in payment and will not encourage early filing by potential claimants. [In the oil spill where we settled 600 claims in 2 weeks and all 2,000+ claims in 3 months, we paid within 24 hours of our damage assessment and immediately upon presentation of all necessary paperwork. This was a critical factor in the rapid resolution of all of the claims.]
TAX LIABILITY PENALTY
All claimants should agree upon filing of a claim that any false statements will result in an automatic tax liability to the federal government in a maximum amount ten times the excessive amount received by the false statement. The government will give the claimant notice before any assessment and give the claimant 60 days to show why the tax assessment should not be granted by a court of competent jurisdiction. The multiple should be adjusted depending upon the degree to which the false statement was knowing and intentional. The burden of proof should be on the claimant to show why the assessment should not issue.
FEES
Only fees and costs incurred by the government in processing and evaluating claims should be paid. No fees or costs incurred by a claimant should be paid. Each claimant may use their own consultants and lawyers but compensation for those services should not be imposed upon the government.
SETTLEMENT WITH POTENTIAL DEFENDANTS
To alleviate concerns about the collateral source rule, settlement should be achieved with the airlines and potential defendants (under the statute's subrogation rights) to pay differences that may be created by the statute's collateral source rules.
PURPOSE OF FUND
Finally, the Victim Compensation Fund should make its purpose clear. Liability, solvency, and the availability of a culpable defendant are not issues in this program. The program compassionately seeks to supplement existing rights of claimants to minimize the suffering caused by this tragedy. This compensation program will not be perfect and will not satisfy everyone. But it should strive to speedily and fairly help victims move forward so that all of us can begin to heal as quickly as possible. Again, speed is critical.
I hope these comments are helpful.
Very truly yours,
Individual Comment
Los Angeles, CA