W000475

Wednesday, November 21, 2001 2:53 PM
AIA's Comments in Response to Notice of Inquiry

Dear Mr. Zwick,

Attached are the comments of the American Insurance Association, a national trade association representing property casualty insurance companies. We appreciate the opportunity to participate in the policy-setting process for this very important undertaking.

We wish you and your family a wonderful Thanksgiving.

Attachment 1:
November 20, 2001

BY E-MAIL (victimcomp.comments@usdoj.gov)

Kenneth L. Zwick
Director, Office of Management Programs
Civil Division
U.S. Department of Justice
Main Building
Room 3140
950 Pennsylvania Avenue, N.W.
Washington, DC 20530

Re: Comments - Department of Justice Notice of Inquiry and Advance Notice of Rulemaking - September 11th Victim Compensation Fund of 2001 - 28 CFR Part 104 (published in Federal Register, Vol. 66, No. 214, Page 55901-55905)

Dear Director Zwick:

The American Insurance Association ("AIA") appreciates this opportunity to provide comments on the implementation of §§ 401-407 of the Air Transportation Safety and System Stabilization Act ("Act"), otherwise known as the "September 11th Victim Compensation Fund of 2001." ("Fund"). AIA is a national trade association representing more than 370 property and casualty insurers that write all lines of property and casualty insurance in every jurisdiction in the United States. Their U.S. premiums exceed $87 billion each year. Because of our members' business, we are uniquely positioned to assist the Department of Justice ("Department") with the administrative and substantive matters discussed in the November 5 Federal Register Notice. These comments will focus on a number of the substantive issues raised in that Notice, and we will address administrative issues under separate cover.

The purpose of the Fund is to provide compensation to individuals (or relatives of deceased individuals) who were physically injured or killed in the September 11, 2001 terrorist attack, arguably the single most horrific and tragic event in United States history. In the aftermath of this tragedy, there has been an unprecedented outpouring of support for the victims and their families and a new trust and confidence among Americans in our government. As a policy expression of this Administration, the Fund presents an opportunity to cement the Federal Government's renewed bond of trust with the American people and to handle the delicate compensation matters presented with compassion, fairness, and efficiency. We believe that the success or failure of the Fund will depend on whether it is perceived as a fair, compassionate and efficient compensation scheme that will garner public support and avoid recourse to the courts. This was our objective as we prepared the comments and suggestions that follow.

Comments


Page 55902 - Consequences of Statutory Requirement of Withdrawal from Civil Action Where Claimant is Determined to be Ineligible under the Fund

Section 405(c)(3)(B)(ii) of the Act does not preclude individuals who withdraw from a pending civil action within 90 days after promulgation of the regulations from later participating in litigation if the Special Master determines that they are not eligible for the Fund. The various provisions of subsection 405(c) need to be read together, not in isolation. According to subsection 405(c)(1), to be eligible for compensation from the Fund, one must satisfy two conditions: (1) be an individual described in subsection 405(c)(2) (i.e., determination of eligible individual) and (2) satisfy the limitations described in subsection 405(c)(3) (i.e., determination of eligibility for compensation). One of these subsection 405(c)(3) limitations is the withdrawal from pending civil actions within 90 days following rule promulgation. Thus, when both conditions are satisfied, the eligibility determination process is complete.

To preserve the integrity of this process while remaining mindful of the statutory 90-day time period for withdrawal, the Department should mandate the following procedure for individuals involved in pending civil litigation. First, an individual will not be reviewed for eligibility under subsection 405(c)(2) absent evidence of conditional withdrawal from pending litigation, such as the attachment of a notice of dismissal without prejudice or the filing of an equivalent stipulation. Second, a determination that the individual meets the subsection 405(c)(2) conditions should trigger the filing of an unconditional withdrawal from pending actions (i.e., notice of dismissal with prejudice), which, when submitted, will permit the Special Master to review the submitted claim and determine compensation under subsection 405(b). Third, if the Special Master should determine that the individual does not satisfy the subsection 405(c)(2) conditions, that individual can then refile any previously-dismissed action because that dismissal was accomplished without prejudice.

Page 55904 - Claimant eligibility (Topic #5)

The Department has requested comment on the scope of certain terms in subsection 405(c)(2) used to determine the eligibility of individuals. These scope issues include:

We believe "to be present at" and "in the immediate aftermath" mean to have been in the zone of danger on September 11, and for rescue workers only (both paid and volunteer) on subsequent days throughout the duration of the rescue period involved in the direct rescue effort during the rescue period (as opposed to the recovery period). Collectively, these two groups would be those individuals that were present at the crash sites or in the "immediate aftermath" of the crashes.

The physical harm suffered by these individuals and compensable under the Fund must involve tangible injury to the body and resulting psychological injury, not mental injury alone or mental injury that results in physical consequences. We stress that the Fund was not created to respond and compensate everyone who was impacted in the United States, but only those September 11 victims who directly suffered physical harm or death flowing from the terrorist-related crashes.

"Physical harm" should not be limited to serious injuries, but should include all physical injuries requiring compensation. The citation to New York Insurance Code section 5102(d) should not limit the scope of the Fund to serious injuries. Under New York no-fault law, severity of injury is the threshold to tort litigation, not the ground for eligibility for compensation. As such, it is an inappropriate comparison to the Fund. However, the Fund should be limited to currently identifiable (as opposed to latent) physical injuries, as the Fund is statutorily limited to a prescribed time frame and inclusion of latent injuries may violate these restrictions and extend the Fund's reach unnecessarily.

Page 55904 - Personal Representative

A precursor to clarifying requirements for the "personal representative" is to define the group of eligible survivors for whom the representative will speak. Section 403 states that the purpose of the law is to "provide compensation to any individual (or relatives of a deceased individual)..." Survivors eligible for compensation, then, are presumptively limited by the Act to relatives of the deceased. State wrongful death laws generally further limit beneficiaries to the decedent's current spouse, dependent minor children, children between the ages of 18 and 23 if enrolled full-time in an educational program, and parents (if they were financially dependent on the decedent for more than one-half of their care). State precedent is compatible with the Act, and we recommend that the Fund adopt this definition of eligible dependents.

In some cases, a decedent will have been unmarried and have no eligible dependents. The Fund has a variety of options it may wish to consider in these cases, including making a contribution to the decedent's estate or making an award in the decedent's name to a memorial fund for all victims of the tragedy.

The obligation for determining the rightful representative of the survivors must rest with the survivors, not with the Fund. That representative may be any individual of legal age and competence selected by the survivors, including a spouse, adult child, unmarried partner, relative, or fiduciary. As part of the claim application process in all death claims, the applicant should be required to submit the identifying information of all eligible survivors, along with signed statements from each acknowledging their acceptance of the applicant as the decedent's personal representative and their understanding that they are waiving their right to litigation upon determination of Fund eligibility. It is not the role of Fund administrators to select a personal representative among competing claimants. Rather, all competing claims should be rejected until the dispute is resolved outside the aegis of the Fund.

While the Fund should avoid naming the personal representative, any proposed regulations should invest that representative, once named, with complete and exclusive authority to file the claim for all of the decedent's economic and noneconomic damages, and give the representative the responsibility of distributing those damages among the estate and eligible survivors as specified in the award. The regulations should clearly state that the personal representative acts on behalf of the decedent's estate and all eligible survivors.

Page 55904 - Nature and Amount of Compensation - Economic and Noneconomic Loss; Treatment of Collateral Sources (Topic #6)

Economic Loss

Economic loss, as defined under state law, includes lost income, the cost of medical diagnosis and treatment, costs of vocational and occupational rehabilitation, in-kind services provided at the home, medical equipment, transportation needs, and costs to accommodate physical disability. To calculate future economic losses, we recommend that guidance be solicited from respected economists within an academic setting, who are acknowledged experts in this field. These advisers can develop guidelines for computing future income potential, as well as criteria for determining the projected cost of personal support that is customarily deducted from future income. Competent and credible guidance on future medical costs can be obtained in consultation with experts at the rehabilitation facilities around the United States that comprise the National Institutes of Health's ("NIH") regional spinal cord and brain trauma centers.

Noneconomic Loss

Pain and grief do not vary by income strata or occupation, and the Fund's approach to compensating for non-economic loss should implicitly recognize this reality. Compensation guidelines should also be consistent with democratic principles of equality under the law. We therefore recommend that ranges be established, differing by type of claim, to compensate for non-economic damages. For example, in a death case, $100,000-$125,000/year might be paid to a surviving spouse for the decedent's life expectancy. For a severe injury, the range per year might be $200,000-$250,000 in recognition of the extraordinary pain the individual will experience throughout his or her lifetime. Ranges are preferable to fixed amounts in order to create the flexibility necessary to respond to special circumstances. Establishing guidelines for non-economic loss will allow individuals to make an informed election on whether to pursue a claim with the Fund or file litigation. It also minimizes disputes during the claim process and speeds the process.

In wrongful death actions, a commonly recognized element of damage is the decedent's pain and terror before death. Without doubt, most who died in the September 11 attacks must have appreciated that they were in mortal peril. In recognition of this horror, the Fund may wish to award a set amount to all such victims, regardless of their location at the moment of death (i.e., on one of the airplanes or on a particular floor in the World Trade Center or Pentagon). We do not advise differentiating among decedents based on the particular circumstances of their death. Amassing the elaborate proof and incurring its cost would unnecessarily burden claimants, prolong the claims process, virtually require claimants to obtain counsel, and obligate the Fund to verify, and at times counter, this proof. Surely the Fund administrators do not wish to subject survivors, nor embroil themselves, in demonstrations and contests of minute-to-minute terror and pain. Examination on these issues at trial is one of the drawbacks of litigation and, conversely, one of the benefits of proceeding in a no-fault compensation system like the Fund.

Collateral Sources

AIA recommends that the Fund designate the following as deductible collateral sources: (a) life insurance and pensions (as modified by our suggestion below), (b) workers' compensation benefits, (c) health insurance and (d) disability insurance. Collectively, they constitute the largest percentage of collateral funding likely to be available to victims, and can be verified relatively simply. This approach preserves and protects the Fund's limited assets. In the case of workers compensation, it has the added virtue of reinforcing employers' statutory subrogation rights by leaving undisturbed this state compensation scheme.

We recommend, however, that the Department not include charitable and in-kind contributions as collateral sources. It is likely to be extremely difficult to verify the amount of charitable donations, which may be provided to victims from a variety of sources, including individuals as well as charitable entities. In contrast to life insurance and the other recommended collateral sources, charitable donations are likely to represent a comparatively small portion of the funds available to victims. While substantial amounts have been collected by charities, some of these groups may be donating funds to a broader category of victim than is contemplated by the Act (those who were laid off as a result of the tragedy, for example). Moreover, it is likely that donors of the charitable funds did not expect that those funds would replace compensation that the victims would otherwise be entitled to receive. Indeed, including charitable funds as a collateral source would create a disincentive for a victim to utilize the Fund when such donations might not be deducted from an award in litigation. If the Department decides that charitable contributions should be included, they should be included only above a fairly high amount, such as $250,000.

The Department should deduct collateral sources only from the economic loss calculation, not the gross value of the claim. No category of collateral source listed in Section 402(4) is intended to offset noneconomic loss. Further, our position on this issue is consistent with New York's statute on collateral source deductions in personal injury, property damage, or wrongful death cases. See McKinney's CPLR § 4545(c). Under New York law, in such cases, the court must reduce the amount of any economic loss damages award where the economic loss will, with reasonable certainty, be replaced by or indemnified from any collateral source, such as health insurance benefits (minus those collateral sources that are liens against any recovery of the plaintiff).

Finally, while the Act decrees that life insurance and pensions be considered collateral sources, deducting the full value of these assets will be controversial. A middle ground that might be considered is the deduction of only the value of these assets that were funded by a victim's employer, disregarding pension and life insurance assets paid for by the victim.

Summary and Conclusion


As noted above, these comments focus on substantive issues identified by the Department in the November 5 Federal Register Notice, and our comments on the procedural and administrative aspects of the Fund will follow under separate cover. Our recommendations can be summarized as follows:

Our recommendations are made with one eye towards ensuring that the Fund provides a fair, compassionate, and efficient alternative to litigation and with the other eye towards achieving a balance between the civil justice system and a no-fault compensation mechanism. We urge the Department to keep these goals in sight when developing proposed regulations to establish and carry out Sections 401 through 407 of the Act, and AIA looks forward to continued service as an experienced resource in this process. Please do not hesitate to contact us with any questions, and we will not hesitate to contact you should we have any additional input that might prove valuable to the success of the September 11 Victims' Compensation Fund.

Respectfully submitted,

/s/

Comments By
American Insurance Association
Washington, DC

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