W000742
November 26, 2001
Kenneth L. Zwick
Directory, Office of Management Programs
Civil Division
U.S. Department of Justice, Room 3140
950 Pennsylvania Avenue, N.W.
Washington, DC 20530
Re: September 11th Victim Compensation Fund of 2001
Dear Mr. Zwick:
The member companies of the American Council of Life Insurers
commend the Department of Justice in their public outreach in the
initial determination of the structure of the September 11th Victim
Compensation Fund 2001 (the "Fund"). The American Council of Life
Insurers is the principal trade association representing the life
insurance industry. We have 426 member companies, which account
for 80 percent of the life insurance premiums and 81 percent of
annuity considerations in the United States among legal reserve
life insurance companies. After review of the Notice of Inquiry
and Advance Notice of Rulemaking published in the Federal Register
on November 5, 2001, our members would like to contribute their
thoughts in connection with payments to be made from the Fund.
It is our understanding that Congress intended that this Fund
provide assistance to victims and families of victims and that the
amounts to be awarded are based, in part, on the future economic
losses sustained as a result of the injury or death. In light of
this purpose, we would suggest that the Special Master making the
awards be permitted to order that the amount be paid as an annuity.
The use of an annuity in payment of compensation intended to
replace future income or provide for future expenses is well
established and is customarily utilized in a variety of similar
situations, including awards and settlements under the Federal Tort
Claims Act and the National Vaccine Injury Compensation program (42
USC Section 300aa- 15(f)). In addition, annuities are often used
in settlement of state personal injury claims.
An annuity is an excellent means to provide for future expenses.
The periodic payments replace the lost income. The payments are
made in a predictable manner upon which the victims families will
be able to rely. As articulated by the Claims Court in Lov V.
Secretary of Dept. of Health and Human Services, 22 Cl.Ct, 430
(1991):
An annuity insures that the beneficiary receives a steady stream of
income throughout his entire life. An annuity protects the trust's
corpus from mismanagement or waste by the parent of guardian.
Thus, an annuity eliminates any fear that the compensation might be
invested in an unprofitable manner.
In Lewis v, Secretary of Health and Human Services, 90-968V, U.S.
Claims Court, Office of the Special Masters (July 9, 1992), 1992 WL
178640 (Cl.Ct.), the Special Master determining the form of a
compensation award under a vaccine case noted that:
An annuity, however, does provide a guaranteed level of benefits
for the life of the beneficiary, regardless of fluctuations in
rates of return in investments. A conservator cannot provide this
assurance. Thus, where the award is turned over to a conservator
to manage, it is conceivable that the beneficiary may outlive the
trust corpus if projected rates of return are not realized or if
she exceeds her projected actuarial life expectancy. An annuity
provides protection for the beneficiary that is not otherwise
available. With an annuity, the benefits are provided for the
entire life of the beneficiary, regardless of the duration of that
life. A steady stream of payments for the beneficiary is ensured.
The corpus of the award is essentially secure from any putative
mismanagement or unforeseen investment error.
Annuity issuers are mindful of the need for prompt resolution of
claims made under this Fund. They are prepared to work with your
Department in arranging expeditious payments for annuity awards.
Annuity issuers are experienced in making periodic payments to
annuity beneficiaries. They have the mechanisms in place to manage
the payment streams and to assist payees with their payments over
a long period of time. Annuity issuers provide lifetime guarantees
of both payments as well as customer service. Our members suggest
that permitting the Special Master to make awards using annuities
will greatly benefit the families and will facilitate resolution of
the claims from this national tragedy.
We would like to work with you in connection with the use of
annuities in the September 11th Victim Compensation Fund. Thank
you for your attention to this issue.
Comments by:
American Council of Life Insurers