P000324
Congress of the United States
Washington, D.C. 20515
January 28, 2002
Mr. 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: Interim Regulations Promulgated December 21, 2001 for P.L.
107-42
Dear Mr. Zwick:
We are writing today to offer comments and feedback on the Interim Regulations ("Regulations")
governing the September 11 Victims Compensation Fund ("Fund"). While we recognize the
complexity of this unprecedented undertaking, we believe the Regulations are at odds with the
Air Transportation Safety and System Stabilization Act ("Act") and, in certain respects, are
contrary to the intent of Congress when it established the Fund.
As you know, Congress devised the Fund to provide fair economic and non-economic
compensation for those persons who suffered direct physical injury or families who lost a loved
one in the disaster. Congress placed no caps or limitations on individual awards or the amount of
money that would be dedicated to the Fund in order to achieve these goals and offer an
alternative to litigation for affected families.
The Regulations, particularly the presumptive economic and non-economic awards, may
provide little or, in some cases, no benefits to a large number of decedents' families. Indeed, the
possibility exist that the small awards would force some families to sell their homes, pull
children out of schools and drastically alter their already devastated lives.
The following is a list of the primary areas in which the Regulations violate the statute,
are unconstitutional or have been left so unclear as to cause most potential claimants to hesitate
to file a claim with the Fund:
Collateral Source Deductions:
Under the Act, certain collateral sources are used as offsets to potential awards. However,
the Regulations offer an ambiguous definition of collateral sources and, in some cases, define
items as collateral sources above and beyond what was defined by Congress. The Regulations
only list things that may constitute a collateral source (e.g., pension), but they do not provide any
guidance on which type of pension constitutes a collateral source. Under the Act, a collateral
source must directly replace, match or indemnify a particular loss that is compensable under the
wrongful death statute before it may be considered an offset. See, e.g., Oden v. Chemung Co.
Indus. Dev. Agency, 637 N.Y.S. 2d 670 (1995). Only under that definition of collateral source is
the double recovery avoided (over compensation) without incurring under compensation.
Without such a definition, the Regulations lead to unfair results, as follows:
- Employee contributed pensions and Social Security are both largely deferred income
for a wage earner deducted form the pay check, lowering his/her yearly income, but
repaid in retirement. Neither should be considered collateral source income. The
reduction from the wage earner's income, by pension contributions, reduces the earnings
at the started point for the Regulations' matrix, resulting in a lower presumptive award.
It is unclear if the Regulations will adequately address the loss of pension benefits as a
loss of income or reduce an award by declaring it a collateral source.
- The New York State legal authorities recommended that workers' compensation not be
considered a collateral source because of the unpredictability associated with future life
events, such as remarriage or children reaching majority, that can cause future workers'
compensation to be terminated. The total amount of future compensation is difficult, if
not impossible, to ascertain because it is subject to termination, reductions and
reimbursement, and it should not be considered a collateral source payment. Workers'
Compensation is typically a monthly annuity that is generally terminated once any third
party compensates the injured party for his/her loss. There is also usually a lien on any
amounts recovered requiring the recipient to repay all or a portion of the workers'
compensation received prior. Here, however, 104.63 of the Regulations does not allow
such a lien in specifying that awards from the Fund do not constitute a tort award to
recovery form a third party. This does not, however, solve the problem that future
workers' compensation will be terminated and thus should not be a collateral source.
The Regulations must be amended to define collateral source as a payment which is a
direct replacement or indemnification of an economic loss that is compensated under the Fund.
That definition would solve the problem of how to deal with payments made to non-claimants.
As the Regulations currently stand, City and State rescue workers are in danger of
receiving either no recovery or perhaps only the non-economic loss award. This fails to account
for the true definition and treatment of their pension as deferred income and not a collateral
source. It also fails to recognize part-time jobs and second careers that most of these rescue
workers had or would have had, upon retirement at ages prior to the expiration of their work life
expectancy. This must be addressed.
Income Loss and Income Growth Rates
- The Regulations improperly look backward on a 3 year average of income rather than
forward. Rather than focus on the yearly income at the time of death, the starting point is
reduced and the punishing reduction is repeated forward each and every year through
retirement. In most cases, this results in a large understatement of the decedent's true
earnings. This unfairly devalues the loss.
- It is unclear how fringe benefits paid by the employer, such as health care and pension
contributions will be considered. Normally economists consider these benefits to be
additional income at a rate of approximately 20-25% of the employee's W-2 income.
Many families will be without health insurance as a result of the wage earner's death and
will be forced to obtain coverage. As far as pensions are concerned, the Regulations
currently note that some premiums paid by employers will be considered, but offers little
guidance beyond that.
- Income growth rates of government and military employees are inappropriate to
determine growth rates of workers in the private sector. The Regulations do not account
for the much higher income growth rates that the decedents would have enjoyed based on
promotions, inflation and historical growth in the private sector. This information is
publicly available and past income growth rates and industry parallels are also available
on a case by case basis. Alternatively, if a uniform growth rate is more desirable, even if
skewed, a higher rate is more appropriate than the 4.2% to 6.6% growth range the
regulations currently envision, accounting for only an unrealistic .7 to 3% growth after
inflation due to merit, performance or promotions.
- The Regulations deduct taxes form the gross income based on today's tax rates. Tax rates
change on a regular basis and courts and economists are reluctant to predict what tax rate
would apply 10 or 20 years from now. No one can dispute that tax on gross income is
also reduced by deductions, exemptions, deferred income, losses and other non-taxable
income. It is not clear if this is being taken into account when reducing the award for
taxes. Furthermore, if New York law is the applicable law for economic loss, it appears
the regulations violate New York law because New York law prohibits deduction or
consideration of income taxes. Coleman v. NYCTA, 37 NY2d 137, 371 NYS2D 663
(1975); NY Pattern Jury Instructions 2:280.
- The Regulations disregard earnings in the top two percentile of income and thus
constitute a cap on damages. New York law on economic loss is clear in prohibiting caps
and this is in direct violation of the New York Constitution. New York Const. Art 1,
516 prohibits any limitation on the amount of wrongful death recovery. Section 408 of
the Act defines economic loss according to applicable state law. Yet the Regulations
violate that law and violate the New York Constitution.
Non-Economic Loss
While it is difficult to place a value on non-economic loss or compare one family's loss of
a loved one to another's, or the suffering of a decedent before death, offering $250,000 plus
$50,000 per spouse and child grossly undervalues this category of injuries based on verdicts
and
settlements throughout the United States. Once again, the Regulations, in placing a cap on this
loss, violate New York law. Furthermore, non-economic loss is separate and distinct from
economic loss and should not be reduced by collateral source income, taxes or reduced to
present
value.
In an effort to meet the goals established by Congress, we believe the Special Master
should review the current cap on non-economic damages with an eye towards raising the limit.
A higher amount is not only fair and supported by law, but would encourage, if not ensure, the
vast majority of families to opt for the Fund rather than to pursue litigation. The non-economic
loss award in the Fund is a creature of the federal law, unaffiliated with any state law for its
substance. Accordingly, we would encourage the Special Master to reevaluate and clarify the
claimants eligible to receive compensation under the Fund. See Dixon v. Serodino, Inc.,331
F.2d
668 (6th Cir. 1964); Petition of United States, 418 F.2d 264 (1st Cir. 1969); Spiller v. Lowe,
466
F.2d 903 (8th Cir. 1972); Green v. Ross, 338 F. Supp. 365 (S.D. Fla. 1972); Stissi v.
Interstate
and Ocean Transp. Co. of Phil., 590 F.Supp. 1043 (E.D.N.Y. 1984); Thompson v. Offshore
Co,
440 F.Supp. 752 (S.D. Tex. 1977); Boswell v. Bludworth Bond Shipyard, 854 F.Supp. 461
(S.D.
Tex 1994)
In addition, when Congress passed the Act establishing this Fund, up to 10,000
Americans were presumed to have lost their lives due to the events of September 11th. Today,
thankfully, that number has been reduced to under 3,000. In light of this and all of the above, it is obvious that increasing the current cap on non-economic loss will not have a financial impact
beyond what was anticipated or intended when we created this Fund in September of last year.
We want to thank you in advance for your attention to this important matter. We look
forward to hearing form you soon.
Sincerely,
Comments by:
Vito J. Fossella
Peter King
Carolyn McCarthy
Frank Pallone Jr.
Chris Smith
Nita Lowey
Steve Israel
Felix Grucci
Jose Serrano
Major Owens
Frank Wolf
Nydia Velazquez
Edolphus Town
Carolyn Maloney
Gary Ackerman
James Maloney
Rosa DeLauro
Benjamin Gilman
Tom Reynolds
cc: Kenneth Feinberg