N001449
Tuesday, January 08, 2002 12:43 PM
Objection to the proposed regulations for the Victims'
Compensation Fund
SIRS:
I am writing this to object to the proposed regulations for the Victims' Compensation Fund. The settlement is inadequate in all regards. It is minimal in economic damage and heartless in compassion for the extraordinary pain and suffering and loss of companionship the 9-11 WTC destruction caused.
I am concerned about two aspects of the proposed regulations for the Victims' Compensation Fund. One it is very cheap in comparison to jury awards and two that the definition of family is so restrictive. It smacks like a cookie cutter approach to get the survivors out of the way. Much the way Vietnam Vets were handled.
The Families of September 11 of which I am a member and which represents many families that are affected by these proposals has made a very careful analysis of the gross inadequacies of the interim regulations. I urge you, if you have a soul to take it to heart.
Concerns of Families of September 11 with DOJ's Interim Final Regulations Governing the September 11th Victim Compensation Fund
Families of September 11 has serious concerns with the interim final regulations issued by the Department of Justice (DOJ) and the Special Master to govern payments under the September 11th Victim Compensation Fund established by Congress as part of the Air Transportation Safety and System Stabilization Act, Public Law 107-42.
Families of September 11 is a non-profit organization of injured victims and families of those killed in the recent terrorist attacks. We represent hundreds of victims' families from 26 states. The group's mission is to ensure that the victims' and families' interests are protected and to advocate public policies that will improve the prevention of and response to terrorism. More information is available at www.familiesofseptember11.org.
Our primary concern with the interim final regulations is that DOJ has ignored the fundamental mandate of the Act to provide full and fair compensation to victims and their families and instead has concocted a bureaucratic response that bases compensation on irrelevant federal programs. The purpose of the regulations appears to be to hold down the amount of the awards, rather than to carry out the intent of Congress so clearly set forth in the law.
We ask your help in urging DOJ to abandon its misguided proposal and to issue new regulations that fulfill, rather than flout, the legislative mandate of Congress.
Background
The Victim Compensation Fund was created by Title IV of the airline bailout bill passed by Congress shortly after the September 11 attacks. The Act gave the airlines $15 billion of taxpayers' money and capped the airlines' liability for the crashes at the limits of their insurance coverage. Thus the airlines face no out-of-pocket expenses for the widespread death and destruction caused by the crashes of their aircraft into the World Trade Center, the Pentagon, and a field near Shanksville, Pennsylvania.
Acknowledging the fact that this airline liability cap severely restricted the victims' right to sue the airlines, Congress created the Compensation Fund to provide victims and their families with full payment for a wide range of specified non-economic damages (e.g., pain and suffering, loss of enjoyment of life, loss of consortium between husband and wife, and more) and full restitution for economic damages (e.g., lost future income), minus collateral payments. In this way, Congress sought to ensure that the airlines' bailout would not be funded by the victims' families, who had already suffered the most from the horrible tragedy of September 11.
Unfortunately, DOJ was unmoved by Congress's compassionate and reasoned approach and, perhaps goaded by the Office of Management and Budget, determined that it could abandon the statutory framework in favor of a bean-counting mentality that limits awards with no basis in law. Congress's unmistakable intent was not carried out by DOJ, and we need your help to correct these problems by January 22, 2002, the end of DOJ's comment period on the regulations.
News media reports that families will receive an average of $1.65 million are inaccurate, because this estimate fails to account for deductions of collateral payments, such as life insurance and pension plans. Actual payments from the Fund would be substantially less, and many families would get nothing under the parsimonious interim final regulations because collateral payment deductions required by the statute would wipe out their entire award. (A recent New York Times article quoting the Special Master suggested that he was considering a minimum payment of $250,000, regardless of collateral deductions. This amount is still far too low to compensate for the damages the victims and their families have suffered.)
The three primary defects in the interim regulations concern the valuation of non-economic damages, the calculation of economic damages, and the provisions for hearings.
Proposed Non-Economic Awards Are One-Tenth Those Made in Comparable Cases
The DOJ's proposed awards for non-economic damages ($250,000 per victim plus $50,000 for a spouse and each dependent) are only one-tenth the level paid in comparable cases. In other cases of airline crashes and terrorism, non-economic damage awards of $2 million to $5 million are typical, and much higher awards have been made in some cases. Moreover, Congress explicitly enumerated a broad range of non-economic damages for which victims and their families shall be compensated:
physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), hedonic damages, injury to reputation, and all other nonpecuniary losses of any kind or nature. Sec. 402(7).
In the case of a victim killed in the attack, all of the above except physical impairment, disfigurement, and injury to reputation are applicable and payable to the victim's estate or (as in the case of loss of consortium and loss of society and companionship) to members of the surviving family. Thus there are at least eight relevant elements cited in the statute: (1) physical pain, (2) emotional pain, (3) suffering, (4) inconvenience, (5) mental anguish, (6) loss of enjoyment of life, (6) loss of society and companionship, (7) loss of consortium, and (8) hedonic damages, in addition to the catch-all "all other non-pecuniary losses of any kind or nature."
In fact, Congress enumerated more kinds of non-economic damages than are normally paid in any single state jurisdiction. Thus, it would be reasonable to expect that payments made under the Victim Compensation Fund would be at least as high, if not higher, than previous awards for non-economic damages. As one example, in the case of the Lockerbie bombing, a spouse was awarded $5 million in non-economic damages. Under DOJ's plan for the September 11th Fund, a widow and two surviving dependent children would receive only $400,000, subject to reduction by the collateral offset provision.
Shockingly, DOJ tacitly admits that it did not even look at the elements of non-economic damages that Congress required to be compensated. Rather, in the only justification for the presumed award, DOJ's notice states that "the $250,000 figure is roughly equivalent to the amounts received under existing federal programs by public safety officers who are killed while on duty, or members of our military who are killed in the line of duty while serving our nation." The regulation then cites to the statutory provision for a group life insurance program under which servicemembers can elect to purchase policies with a death benefit up to a maximum of $250,000, commonly known as the Servicemembers' Group Life Insurance (SGLI) program, and a newly amended federal statute under which the government pays to the families of fallen public safety officers $250,000-on top of any other amounts they may receive from other sources.
Neither of these programs was intended to, nor does, compensate a victim's family for the full range of non-economic damages identified by Congress in the statute establishing the Fund. DOJ flouted Congress's specific mandate and instead replicated existing, inapposite, and limited federal death-benefit programs.
The absurdity of DOJ's approach is illustrated by its reliance on SGLI as the basis for the amount awarded. If a serviceman killed at the Pentagon had elected the SGLI at $250,000, the offset of life insurance proceeds required by the Act would wipe out the non-economic damages entirely (unless there were a spouse or other dependents, at $50,000 each under the DOJ scheme). DOJ's approach therefore assumes that Congress intended the non-economic damages to be merely illusory-to be given with one hand and then taken away with the other. Not only is this clearly incorrect-it flies in the face of basic principles of statutory construction. In short, it is the epitome of an arbitrary and capricious approach to implementing the Act.
Presentations made at a recent meeting of the National Association of Forensic Economists support our contention that DOJ's presumed non-economic damage awards are unreasonably low.
Another problem with respect to non-economic damages is the Special Master's insistence on using the probate laws of the various states to determine the distribution of the entire award among family members and other claimants. While appropriate for some damages (e.g., pain and suffering of the victim), this approach fails to recognize that other non-economic losses are incurred by specific claimants, not by the estate. For example, the surviving spouse suffers loss of consortium. Under the DOJ plan, payments for loss of consortium could be divided among the heirs and, where there is a will, might be awarded entirely to a claimant other than the spouse. While the Special Master reserves the right to overrule the probate courts, it is unreasonable to force a claimant to plead extraordinary circumstances and appeal to the Special Master to prevent such an inappropriate distribution of funds.
DOJ's Plan Significantly Undervalues Economic Damages
DOJ's proposed awards for economic damages significantly underestimate actual economic losses. We have asked DOJ and the Special Master for all of the assumptions and methodology used in calculating the "presumptive awards," in order to better understand and analyze them, because DOJ has provided only general guidance on how it determined these award levels. Even before we receive this detailed information, however, it is clear that there are major problems with DOJ's approach.
The National Association of Forensic Economists recently participated in a conference at which experienced economists pointed out significant flaws in DOJ's methodology. For example, DOJ unnecessarily relied almost exclusively on federal government data that was out of date and inapplicable to the groups to which DOJ applied it. One forensic economist with experience in air crash cases (for both plaintiffs and defendants) indicates that actual life-cycle earnings for firefighters are 27% higher than the DOJ estimate, the actual life-cycle earnings of all college educated workers are 30% higher than DOJ indicates, and the actual life-cycle earnings growth of college-educated Securities and Financial Services workers is more than 100% higher than the DOJ estimate. Moreover, DOJ also seriously underestimates "real" (beyond inflation) increases in earnings by administrative support and clerical workers.
Rather than utilizing aggregated national data, this experienced economist stated that the Special Master could use readily available data to create 8-12 prototype earning patterns, based on occupation and education, that would much more closely match the expected earnings patterns of the victims.
In the case of high-income victims, the undervaluation of increases in compensation is exacerbated because the regulations arbitrarily cap a victim's income at $225,000 a year. Thus, DOJ starts off with an artificially depressed earnings level, and then uses unrealistically low models for projecting increases from that level. This cap, for which there is no justification in the statute, would result in some families receiving severely reduced compensation for their actual economic losses. The only justification DOJ has offered for capping incomes is that not doing so would result in awards greater than what the families "need." But DOJ has provided no explanation of how it determined these needs. The human cost of the income cap is that many widows and some widowers will have to sell their homes, deplete their children's college funds, give up their plans of being full-time parents while their children are young, and make other wrenching adjustments at a time when they already have more than enough burdens to bear.
In general, there is a significant underestimation of promotions and other increases in earnings for victims. DOJ apparently relied on the Boards of Actuaries of the federal civil service and military retirement systems, which track federal worker incomes and pension requirements, not the higher-paying private sector career paths. Experts at the NAFE conference pointed out that data on federal workers is irrelevant for assessing private sector earnings projections. DOJ's error, coupled with its emphasis on past 3 years of income (which the Special Master "may average"), makes it appear that DOJ used a federal pension approach to ascertaining economic damages , rather than considering the likely income-earning potential of the decedent, as is routinely done in wrongful death cases. Sadly, this DOJ/OMB approach appears to be an attempt to distort the tort-based provisions of the Act into just another bureaucratic, formulaic, federal program based on concepts the agencies are already familiar with, rather than what the law requires. One economist dubbed the failure of DOJ to tailor its economic loss model to the actual circumstances of the victims the "Reverse Cinderella Effect" -- where DOJ is trying to make one shoe fit all of the feet.
Other problems pointed out by the economists are the fact that the worklife estimates used by DOJ are seriously outdated, particularly for women. DOJ's aggregation of this outdated data means that its worklife estimates are low for both men and women, thus underestimating awards for both genders. There is also a serious underestimation of the economic value of household services performed by victims, particularly women. These, along with the use of pre-tax discount rate, further widen the gap between DOJ's flawed approach and a proper valuation of economic loss.
DOJ Makes a Mockery of the Right to a Hearing
A particularly insidious notion inherent in the interim final regulations is that a family's award may be increased above the "presumptive" award only by a showing of "extraordinary circumstances"-beyond those suffered by other victims or victims' families. This makes the hearing or appeal to the Special Master a mere charade. DOJ has constructed a scheme that provides extremely low awards to those who lost loved ones due to the extraordinary events of September 11, and then declares that only in cases that are extraordinary, beyond those already extraordinary events, will awards be increased. This is virtually an impossible standard to meet, especially in light of the Special Master's statements that he cannot and will not make "Solomon-like" distinctions between the suffering of individuals or families. The problem is that the presumptive award levels are so low, they do not compensate the families adequately for the extraordinary suffering they and their loved ones endured and continue to endure. Absent a change in the regulations, these award levels will not be increased to reflect the compensation contemplated by the Act for the actual damages suffered by each victim and family.
What is extraordinary is the suffering inflicted on all of the victims and their families on September 11-not differences in degrees of suffering among them. Victims aboard airplanes suffered through a kidnapping/highjacking and horrific plane crashes. Victims at the World Trade Center suffered through the trauma of the plane crash and a raging fire (so intense and unbearable that some victims thought it better to jump 100 stories to their certain death than to endure the fire), and others suffered from the unthinkable collapse of the massive towers upon them. Victims at the Pentagon suffered a horrible death from the impact of the plane into their "secure" offices or by burning in the raging inferno of jet fuel. Family members themselves have had to endure the inescapable coverage and regurgitation of these events on TV, in the newspapers, and even in ordinary discourse with neighbors, acquaintances, and others.
It is fundamentally unfair for DOJ to trivialize the extraordinary suffering of each victim and family (for example, by valuing non-economic damages at 10% of the level of compensation in comparable cases and valuing economic damages at less than 50% in some cases) and then to state that only upon distinguishing a claim from all of the other claims that are also undervalued by DOJ will an award be increased. Instead, the standard should be that DOJ compensate each victim and family for the types of damages enumerated by Congress at levels comparable to those recoverable in the tort system the Fund was designed to replace.
Conclusion
During the 30-day comment period, Families of September 11 will work with DOJ and the Special Master to try to improve the payment levels to reflect the provisions of the Act. Your assistance will be most helpful in persuading DOJ and the Special Master to follow the Act. If the interim final regulations are not substantially changed by DOJ, the victims' families may have to challenge the regulations in court in order to ensure compliance with the law. And many families, seeing no adequate remedy from the Fund, may decide to sue the airlines and others, despite the handicap of the liability limits.
DOJ can and should avoid such unfortunate confrontations by recognizing the need to make significant revisions to conform the regulations to the statutory requirements. Please urge DOJ to do so, and eliminate the need for the families to go to court in order to implement the clear congressional intent for fair, compassionate compensation. Specifically, we want DOJ to (1) increase its non-economic loss award by an order of magnitude (from 10% to 100%), to properly reflect the damages that Congress has determined are compensable, (2) correct the methodological flaws in its calculation of economic damages and use accurate, up-to-date data in making those calculations, and (3) recognize that a claimant should not have to show "extraordinary circumstances" to increase the "presumed award," but rather, should only have to show that the "presumed award" does not accurately reflect the damages incurred by the victim and his or her family.
We strongly believe that if the nation can find $15 billion to bail out the airlines, which may have been responsible for the attacks because of lax security, it can provide the full amount necessary to fairly compensate the families of the innocent victims of the attacks.
Thank you in advance for your assistance on this pressing matter.
Individual Comment
Newton MA