Terrorism: September 11 Transportation and Premises Liability –

Trial or Arbitration of Claims

 

Carroll E. Dubuc†

 

I.

Introduction

 

The tragedies of September 11, 2001, that destroyed New York’s World Trade Center, damaged the Pentagon, and killed thousands in those buildings and in the four hijacked and crashed aircraft used to perpetrate the destruction, have generated numerous Congressional initiatives designed to prevent the reoccurrence of such devastating terrorist activity.  Many of these new laws and their attendant regulations have been directed toward better airport and aircraft security through the federalization of airport baggage screeners and increased aircraft security measures.  Congress has also created provisions for operating and insurance subsidies for the airlines which may be in economic jeopardy as a result of these events, instituted a new arbitration procedure as an alternative to litigating anticipated claims by victims’ next-of-kin, and established a new Transportation Security Administration.

This article addresses some of the obligations and liability exposures of transportation and commercial entities – such as aviation-related companies, railroads, cruise ship terminals, trucking companies, real estate companies, and owners and lessees of commercial buildings, sports stadiums, arenas, and retail shopping malls – in light of this newly-enacted legislation.  Integral to this inquiry are considerations of whether these entities should be required to implement security protocols similar to those now mandated for airlines and airports, and whether the economic trade-off of providing minimal security is worth the risk of extensive liability in the event of a terrorist attack.  Further consideration is given to whether these aviation industry security concepts should be applicable to transportation and commercial entities only in “high risk” areas such as New York, Washington, D.C., Los Angeles, San Francisco, and Chicago, and whether the risks are similar in more remote, “lower profile” locations.  This risk assessment may depend upon whether the case-specific totality of the circumstances suggests the possibility that terrorists might perceive that the questioned entity’s security is lax, thereby providing an invitation for attack.

 

II.

New Security Regulations for Airlines and Airports

The Aviation and Transportation Security Act[1] (“Security Act”) signed by President Bush on November 19, 2001, establishes the Transportation Security Administration (“TSA”) within the Department of Transportation.[2]  The TSA is directed by the Under Secretary of Transportation for Security who is tasked with overseeing the security of “all modes of transportation.”[3]  The TSA is responsible for performing pre-employment background checks, hiring, training, and supervising all security personnel, and purchasing essential security equipment.[4]  It is also required to cooperate fully with other governmental agencies.[5]

The Security Act addresses an extensive array of actual or perceived deficiencies that exist in transportation safety protocols.  For example, the Act federalizes all baggage screeners, reinforces provisions for background checks on baggage screeners and airport ramp personnel.[6]  It mandates processing of all checked baggage through explosive detection equipment for domestic and international flights by December 31, 2002,[7] tightens restrictions on various carry-on items that might become potential weapons,[8] and increases the identification requirements for potentially dangerous passengers by cross-referencing to FBI security lists.[9]  The Act also provides for increased questioning and screening of passengers as they board the aircraft,[10] authorizes the hiring and training of air marshals to be deployed on every domestic and international flight,[11] and creates provisions for assessing and rating security systems at airports in other countries.[12]

The Security Act further requires additional flight crew training,[13] mandates fortification of aircraft cockpit doors,[14] provides for increased use of video cameras on aircraft and in airports,[15] and authorizes arming flight deck crews with “less-than-lethal” weapons.[16]  Existing laws mandating the use of magnetometers and other electronic devices for carry-on luggage and passenger screening,[17] explosive detection and trace monitoring procedures,[18] and strict control of admittance to airport security areas[19] remain in full effect, except as strengthened by post-9/11 legislation.  Section 201 of the Security Act amends the previously enacted Air Transportation Safety and System Stabilization Act[20] by extending government limitations on exposure to lawsuits stemming from the September 11 tragedies to aircraft manufacturers, airports, property interests in the World Trade Center, New York City, and temporary war risk insurers.

Other recent congressional legislation enhances rules and requirements for airline and airport security in effect long before September 11 that may have been inadequate.  For example, the recently enacted law for Uniting and Strengthening America by Providing Adequate Tools Required to Intercept and Obstruct Terrorism (“The Patriot Act”),[21] modifies existing statutes by increasing the prison term to twenty years for carrying a weapon or explosive device aboard an aircraft, or conspiring to do so.[22]  It also increases the penalties for interference with a flight crew to twenty-five years and $50,000,[23] and adds provisions to obtain jurisdiction over aircraft hijackers under section 46505 of title 49 of the United States Code.[24]  The Patriot Act takes additional steps by conferring national wiretapping authority on the Department of Justice (“DOJ”), augmenting other investigative procedures,[25] and enlarging DOJ and Treasury authority to track money used by terrorists.[26]  It tightens immigration procedures to facilitate more accurate terrorist identification,[27] and thwart certain terrorist intelligence procedures.  The Act provides for the inclusion of domestic as well as international terrorism in criminal statutes[28] that authorize additional enforcement power for the DOJ.

Beyond the realm of congressional action, the Attorney General has issued regulations facilitating the arrest of suspected terrorists and their detention for extended periods without bail.[29]  The President of the United States has also issued Executive Orders permitting the use of military tribunals in the trial of identified terrorist offenders.[30]

 

III.

The Terrorist Threat May Be Foreseeable

 

One reason for upgrading existing procedures was a realization that the existing rules and regulations were not being enforced as designed. A more compelling justification lies in the growing awareness that the events of September 11 indicate that the terrorist threat includes scenarios not previously contemplated by existing security systems and protective agencies. The principal argument used to defend the collective failure to discover these terrorist plots is that the scenarios were not foreseeable.

Commentators have noted that even if the checked baggage of every passenger on the four flights involved in the September 11 attacks had been processed through explosive detection machines, and even if the carry-on baggage screeners had seen the “box cutters” in the terrorists’ carry-on bags, existing security measures would not have prevented the terrorists from boarding the aircraft.[31]  Because explosives were not utilized in the hijackings and, prior to September 11, box cutters did not appear on the list of prohibited items, there were no measures in place to guard against these “hidden” threats. Furthermore, guidelines for screening passports based on countries of origin were extremely vague because of prohibitions on “profiling” based on race, religion, and national origin.

Despite the flurry of administrative and legislative activity immediately following September 11, serious questions remain regarding the effectiveness of efforts to identify and protect against remaining terrorist scenarios in the aviation environment. The December 2001 attempt by Richard Reid (a/k/a Tariq Reja) to damage an American Airlines aircraft and injure its passengers by igniting explosives in his shoes suggests that these efforts have not been entirely successful.

The aviation industry security threat model prior to September 11 involved a simple scenario.  Hijackers would use the threat of explosives in a baggage compartment, or use firearms, grenades, and other conventional weapons in the passenger cabin, to coerce the aircraft crew into landing at a neutral site, and thereafter extract ransom money or the release of other terrorists in Western custody.  Flight crews were instructed to comply with the demands of these “traditional” terrorists and to land as instructed in order to avoid personal injury or death to passengers or crew.

Although this model appears typical of the thinking of Western culture pre-September 11, it is clearly no longer accurate.  Coupled with complacent application of existing security regulations, this paradigm led to the single most devastating terrorist attack in history.

The September 11 scenario chosen by the Al Qaeda terrorists was a model of creative thinking.  By exploiting the conventional security threat paradigm to gain control of the aircraft, the terrorists were able to execute a strategy that had been previously unanticipated.  The terrorist community has demonstrated increasingly imaginative tactics over the past three decades.  For example, terrorists using a small boat to simulate a supply craft were able to approach the U.S.S. Cole and detonate a large explosive charge, damaging the ship and causing dozens of fatalities.  A truck bomb damaged the World Trade Center in a 1992 attack, and similar tactics caused damage and fatalities at the United States Air Force barracks in Saudi Arabia.  Terrorists downed a Pan American Airlines aircraft over Lockerbie, Scotland[32] when baggage screeners in Frankfurt failed to detect explosives placed in baggage checked from a remote departure point in Malta.  Hundreds were injured and killed in the baggage claim area of the Tel Aviv airport when three Japanese Red Army terrorists retrieved guns and grenades from baggage checked in Rome.[33]  Armed hijackers, who ultimately forced an Air France aircraft to fly to Entebbee, entered the Intransit Airlines lounge in the Athens airport through an unguarded door used by Intransit passengers to cash travelers’ checks and change money.[34]  This allowed them to avoid passing through magnetometers.  “Pizza bombs” stashed in a briefcase caused an incident on a TWA flight from Athens.[35]  Most recently, Richard Reid attempted to damage an American Airlines aircraft and injure its passengers by igniting explosives in his shoes.[36]  The conventional model must be re-evaluated if travel and business entities are to avoid future liability.

The enormous concentration of effort and statutory authority surrounding the airline industry suggests that it would be increasingly difficult for terrorists to attempt another aviation-related September 11 scenario.  Consequently, law enforcement and transportation security officials should consider alternative terrorist scenarios that might be selected.  Although government agencies bear the initial responsibility for preventing further terrorist activity, commercial entities should consider their potential exposure to liability to their business invitees as a result of terrorist attacks.  Aviation industry risk managers are already deeply involved in resolving liability problems, assessing future insurance coverage for general third party liability as well as terrorism and war risk, and evaluating security requirements to deal with the terrorist threat.  Other transportation entities – such as railroads, cruise ships, subways, trucking companies, and bus lines – are also examining the rules and regulations required in the aviation environment to determine whether these regulations are applicable to their operations.

If improved security procedures are not effectuated, the owner or operator of one of these “other transportation entities” may be unable to defend lawsuits initiated by business invitees injured in a terrorist attack.  The argument that “the attack was not foreseeable” or that “the government should be responsible for failing to discover the terrorist plot” may not work.  Furthermore, if one of these entities initiates “some” security measures, this action may be viewed as tacit recognition of the foreseeability of the threat, and may create additional liability if the security measures are inadequate.  Congress has provided the airline industry – including support entities such as airports – and property interests in the immediate “ground zero” area of the September 11 attacks with insurance protection and economic relief in the form of the Aviation and Transportation Security Act.[37]  The government, however, may not provide “bail-out” funds for other entities for future terrorist attacks if they fail to initiate heightened security procedures.  The war risk insurance legislation stalled in Congress is indicative of the federal government’s reluctance to proceed in this area.

Corporate risk managers and their attorneys should therefore be assessing their exposure.  In that process, one primary task will be to evaluate the impact of developing premises liability law in various jurisdictions.  A second, and perhaps more difficult, task will be to determine security standards for buildings, businesses, and other transportation entities that are not part of the airline industry, and to evaluate whether the airline model provides appropriate standards for these entities.

 

IV.

Premises Liability Expanded by September 11 Events

 

A. New Definitions of Terrorism

Terrorist targets both inside and outside the United States have not been limited to airlines and airports.  The Oklahoma City bombing, the 1992 World Trade Center bomb attack, the bomb incident at the 1996 Atlanta Olympics, the “dive bombing” parachutist at the Bowe/Holyfield boxing match in Las Vegas, and many less publicized bombing and arson cases may also be considered “terrorist” incidents.  Similar “terrorist” attacks occur somewhat regularly in Britain, Israel, France, Germany, and Ireland.  With the exception of the 1992 World Trade Center prosecution, however, the incidents in these cases were not formally labeled as “terrorism.”  Instead, they were considered criminal acts and were prosecuted under general criminal statutes. The Department of Justice has indicated that, to date, it has not utilized the term “terrorism” in its prosecutions of various criminal statutes such as murder, arson, espionage, kidnapping, and aircraft piracy.[38]  A cursory review of Title 18 of the United States Code as it existed prior to September 11 reveals that “domestic terrorism” was not defined as a crime, although a definition of “international terrorism” appears in the statutory language.[39] Provisions also appear in the code related to “international terrorism” included kidnapping, transfer of money, and conspiracy.[40]

The Britannica dictionary defines “terrorism” as: (1) the act of terrorizing; (2) a system of government that seeks to rule by intimidation; and (3) unlawful acts of violence committed in an organized attempt to overthrow a government.”[41]  This definition suggests that an “intent” to achieve some political gain or to intimidate political adversaries is a necessary element of an act of terrorism. This concept is part of the definition of a terrorist act that would trigger the proposed United States government war risk insurance guarantees.  The precise House and Senate definitions are somewhat different.  In the House version, the triggering act must (1) be unlawful; (2) cause harm to a person, property, or entity in the United States; (3) be committed by a group or persons who are not a foreign government, and who are recognized by the Department of State as a terrorist group; and, (4) have the purpose of overthrowing or destabilizing the government of a county or influencing or coercing the government of the United States.[42]  The definition in one of the Senate bills requires that the triggering act is (1) dangerous to human life, property, or infrastructure within the United States, or outside if it involves an air carrier, (2) committed by individuals acting on behalf of a foreign power, and (3) part of an effort to coerce the civilian populace of the United States or to affect government policy.[43]

Both definitions create a distinction between a previously defined criminal act such as murder requiring mens rea to kill, and the terrorist type of murder requiring the additional intent for political effect. The Patriot Act has amended the prior statutes and added section 1993 to title 18, making domestic terrorism a crime when related to arson, fire, derailment, use of biological or other dangerous weapons, and interference with or conspiracy to attack transportation entities.[44]  Statutory definitions have also been amended to include as “terrorism,” acts occurring primarily within the territorial jurisdiction of the United States that are dangerous to human life and are a violation of the criminal laws of the United States or any state, and that appear intended to intimidate or coerce a civilian population or affect the conduct of a government.[45]

If a criminal act initially appears based on terrorist motivations, but the requisite political intent is not shown, the related legal and insurance issues may not be covered by the proposed war risk relief. Where the questioned activity is not demonstrably terrorist-initiated, and not designated as such by the President, Secretary of the Treasury, or the Attorney General, insurance providers may reserve rights and withhold coverage.  Pan American World Airways, Inc. v. Aetna Casualty & Surety Co.[46] discussed the distinction between negligent activity, war activity, and terrorism.  In determining the correct application of war risk and all risk insurance coverage for an accident caused by a terrorist bomb on a Pan American flight, the court concluded that unless “war” had been officially “declared” by a nation, terrorist activity was not covered by war risk insurance.  Only claims made under “all” risk policies would therefore be valid.[47]

B. Effect on Premises Liability

The revised statutes criminalizing “terrorist” activity will be extremely useful in prosecuting terrorists for non-aircraft-related domestic offenses and may assist discovery efforts in related civil damage cases.  The existence of criminal statutes, however, has no bearing on the exposure of transportation and commercial entities to liability for the injury or death of business invitees under scenarios where the questioned criminal activity might be foreseeable or anticipated based on the “totality of the circumstances” doctrine of premises liability.  Commercial entity liability may differ significantly from airline liability where international treaties such as the Warsaw Convention provide for strict liability in airline disaster cases and case law makes the treaty-based claim exclusive.[48]  In the event of an attack on a commercial entity, where no statutes or security regulations exist similar to those governing the airline industry, the task of proving liability may therefore become more difficult.  Lawsuits for damages resulting from terrorist activity against owners and operators of commercial entities have been infrequent, and recovery has been even less common.  Relatively simple, foreseeability-based defenses, however, may no longer be possible in light of the events of September 11.

A terrorist attack on a commercial entity in the United States may fall under one or more of the many new criminal statutes, but the entity’s civil liability would generally depend upon proof of common law negligence on the part of the owner or operator.  Foreseeability of harm to one situated similarly to a claimant is a required element in a action for negligence.  Palsgraf v. Long Island Railroad Co.[49] created the benchmark for establishing foreseeability.  In Palsgraf, a railroad passenger dropped a package of fireworks while boarding the train with the assistance of a conductor.  The resulting explosion upended a scale on the other end of the platform, injuring Mrs. Palsgraf.  Chief Judge Cardozo, writing for the majority, held that because the plaintiff was not within the area in which the conductor was providing assistance, her injury was not foreseeable and, therefore, the railroad was not negligent.  His “[t]he risk reasonably to be perceived defines the duty to be obeyed”[50] thereafter became a mantra for first year law students and perhaps the claimants involved in the September 11 disaster.

If, however, explosive materials were prohibited from railroad stations by security regulations and adequate measures has not been taken to screen passengers, it is likely that the result in Palsgraf would have been different – injury to anyone on the railroad platform would become foreseeable based on the overall circumstances.  Under this scenario, establishing the security protocols required for enforcing the regulations would imply some degree of foreseeability.[51]  There are, however, few security regulations for commercial entities similar to those imposed on airlines and airports that would provide a foundation for a negligence claim by persons killed or injured by terrorist activity.

In the post-September 11 environment, anticipation of a potential terrorist attack is a reality in many locations, and failure to have security protocols in place may simplify the required proof of negligence in cases where individuals are injured as the result of such an attack.  Damage awards may also include punitive damages, if failure to take precautions is deemed egregious enough, because there appear to be no statutory bars to such awards.  Although various security protocols have been implemented by a number of non-airline transportation and commercial entities, with varying degrees of success, the nature and scope of security deployed in the aviation industry is clearly absent.

If premises liability arising from terrorist activity requires foreseeability of the potential harm in order to render the transportation or commercial entity liable to business invitees entering the premises, the events of September 11 may provide that element.  Prior to recent events, isolated criminal activity in buildings or on property would not generally establish liability unless the owner or operator of the property had a special relationship with the injured party.  Most business invitees, however, qualify under the special relationship test,[52] and courts usually impose a duty of reasonable care on the property owner or operator, treating the potential for criminal activity as a "defect" if information is available and reasonable analysis suggests the need for protective action against possible threats.  If a security review suggests possible defects in the process of responding to information about potential threats, liability will typically be established.[53]  The cases indicate a tendency toward foreseeability.[54]

Based upon increased terrorist activity, the blunderbuss of security efforts brought to bear by Congress, and the establishment of federal entities such as the Director of Homeland Security and the Transportation Security Administration, many government officials apparently believe that future attacks are foreseeable.  The President and the Secretary of State have publicly stated that there is a “war” on international terrorism in progress, and warnings have regularly been issued regarding the need for enhanced security.  This belief supports the duty/foreseeability "totality of the circumstances" approach taken by several courts.[55]  Under this approach, information regarding potential or anticipated criminal or terrorist activity, general risk in the particular area of concern, and a failure to exercise reasonable care under these circumstances will typically create liability.[56]

 

V.

What Standard Will Apply for Premises Liability Security Issues?

In a cause of action brought by persons injured or killed by criminals or terrorists in a jurisdiction recognizing either the premises liability doctrine or some other breach of duty/negligence theory of recovery, the court must determine what standard of care to apply under the "totality of the circumstances." The defendant in such a case would argue that liability for criminal acts by third parties, including terrorists, should not be imposed because these events are unusual and unforeseeable, and no law or regulation requires additional security procedures similar to those required for airports and airlines. In light of recent events and the enactment of criminal statutes anticipating such crimes, however, transportation and commercial entities should be aware that they are potential targets, and they should recognize that the threat of criminal activity and terrorism not only exists, but that it might surface anywhere.

Owners and operators should also be aware of the security measures mandated by Congress to prevent damage to aircraft and injury to airline passengers. Whether aviation industry security standards may reasonably be considered benchmark standards for other transportation and commercial entities is a question of some debate. Many argue that imposing such rigorous standards would create unachievable objectives and unaffordable expenses for transportation and commercial entities. Others take the position that these standards are reasonable because regulations for all transportation entities fall within the authority of the Transportation Security Administration, and commercial entities are similarly regulated by the Homeland Security administration.

Because aviation industry procedures have established at least one “standard for security,” other transportation and commercial entities have a duty to provide some level of security beyond that which presently exists to retain any hope of defending against claims by parties injured or killed by terrorists or other criminal elements. Some examples of selective compliance with the aviation industry security benchmarks currently exist. Most federal buildings and courthouses, and some commercial establishments, use magnetometers to screen entrants. Carriers running elite trains between London and Paris via the Channel Tunnel use screening procedures and magnetometers to check baggage. Select U.S. railway stations have implemented heightened security procedures in response to the recently enacted legislation directed toward “transportation safety.” Hotels may employ selective personal and baggage screening during periods of elevated threat.

When these limited procedures are measured against aviation industry security requirements, however, they appear inadequate to prevent or even warn of potential threats. Inadequate security will be alleged in future cases filed as a result of terrorist or criminal activity, and the aviation industry benchmark will likely be used by claimants as evidence of available security measures in order to demonstrate departures by defendants from the standard of reasonable care under the “totality of the circumstances.” Although protective countermeasures are undoubtedly expensive, their cost pales in comparison to the damages that can result from negligence litigation.

 

VI.

Will CGL Insurance be Available for Terrorist Activity

 

Many transportation and commercial entities may believe that liability insurance will cover the defense of terrorism-induced claims and perhaps pay the resulting damages.  They therefore believe that little incentive exists to provide additional security measures.  The negative publicity flowing from such a position when disclosed in litigation could create serious damage to a defendant’s “Reputation Equity” and, in the case of a public company, its stock value.  A defendant considering such an approach should also be aware that many insurance policies contain coverage exclusions for "war” (declared or undeclared), invasion, rebellion, insurrection, war-like operations, civil commotion, and criminal acts.  Eloquent arguments have been advanced supporting the proposition that terrorist activities may fall within the exclusion clauses of commercial general liability insurance policies.[57]  Although coverage for terrorism claims prior to September 11 was often initially excluded and subsequently provided in many policies through “buy-back” agreements, most insurance companies cancelled coverage for terrorist acts after the September 11 tragedies.[58]

 

A. Cancellation of War Risk Coverage

The insurance industry’s reluctance to provide insurance for terrorist attacks at pre-September 11 coverage levels has created a void for transportation and commercial entities that wish to minimize their liability exposure, and that may be required to provide coverage as a precondition to a lease, operations contract, or loan agreement.  In the absence of available coverage, some entities may seek to incorporate indemnity and hold harmless provisions into their operating agreements in order to protect against claims arising out of terrorist and criminal activity.

The airlines involved in the September 11 hijackings had insurance coverage for property damage and third party liability under all risk and war risk policies.  Terrorism was not, therefore, an excluded risk. Because the airlines carried $1.5 billion in coverage per aircraft, per incident, $3 billion was available to cover claims arising out of the World Trade Center incidents, with an additional $1.5 billion available to cover claims related to each of the Pentagon and Pennsylvania crashes.  Airline insurers have determined that the four crashes constituted four separate “occurrences” for the purposes of evaluating coverage.[59]  Conversely, although the World Trade Center apparently carried $3.6 billion in coverage per occurrence, its insurers have taken the position that the two crashes at the World Trade Center site constituted a “single occurrence,” creating a dispute as to whether the total available coverage is $7.2 billion or $3.5 billion.[60]  Regardless of how this dispute is finally resolved, given the magnitude of the catastrophe, the airlines, property owners, the Bush Administration, and the United States Congress have all determined that the insurance available to dispose of the resulting claims will be totally insufficient.  Without adequate insurance to cover terrorist attacks, the proliferation of resulting airline bankruptcies would drive the aviation industry to a standstill.[61]

 

B. Air Transportation Safety and Systems Stabilization Act Insurance Provisions

Within ten days of the September 11 events, Congress enacted the Air Transportation Safety and Systems Stabilization Act.[62]  That: law provides for:

(1)   a $15 billion financial bail-out for United States air carriers;[63]

(2)   limited exposure and capped recovery on third party claims to the coverage amounts, including war risk coverage, carried by the airlines on September 11;[64]

(3)   amending of the United States Code to allow the Secretary of Transportation to provide insurance and reinsurance for aircraft operations, and to provide reimbursement to the airlines for insurance coverage increases for up to 180 days after September 11 to give insurers the opportunity to assemble a financial pool covering the war risk insurance that was canceled shortly after the September 11 events;[65]

(4)   capping United States air carrier liability to third parties for terrorist attacks occurring between September 22, 2001 and March 21, 2002, limited airline responsibility for any resulting losses to $100 million, and created U.S. government liability for any excess amount;[66]

(5)   establishing a federal cause of action for claims arising out of the September 11 aircraft crashes and placed jurisdiction in the District Court for the Southern District of New York for litigating those claims;[67]

(6)   creating the Victims Compensation Fund of 2001 to provide an alternative to litigation for claimants wishing to expedite their claim resolution through an arbitration procedure;[68] and

(7)   providing an additional $3 billion for airline safety and security enhancement to augment the funding authorized by the Aviation and Transportation Security Act.[69]

 

This package conditioned relief on agreement by the airline industry to a two-year moratorium on salary increases for employees whose total compensation exceeded $300,000 in calendar year 2000.[70]  The Air Transportation Safety and Systems Stabilization Act was intended to keep the airlines flying, to provide economic support during an interim period while the public adjusted to its new-found fear of flying, and to provide the insurance guarantees and liability limitations necessary to ensure the industry’s economic security.  Almost immediately following the Act’s enactment, lobbyists for other transportation and commercial industries sought similar economic bail-outs for losses their constituents incurred as a result of the airline industry’s nearly complete shut-down.

 

C. Terrorism Risk Protection Act Proposal for War Risk Insurance

Congress has not yet reached final agreement on liability limitations and government guarantees for aviation industry war risk insurance.  It has included in the Air Transportation Safety and Systems Stabilization Act a $100 million cap on terrorism and war risk exposure, and provided government subsidies to limit future exposure and excess premium payments for airlines and related industries for a limited period of 180 days.[71]  The insurance industry and the Bush Administration have proposed various plans to Congress to implement ongoing war risk and terrorism coverage for other businesses as substitutes for coverage canceled by virtually all insurance companies immediately after September 11.  The Senate, however, has opposed some of the provisions included in the Bill passed by the House of Representatives, HR 3210, and enactment of that legislation has therefore been delayed.

The Terrorism Risk Protection Act provides loan guarantees and government cost-sharing for insured losses in excess of $1 billion resulting from terrorist activity.[72]  The bill requires insurers to pay losses incurred because of the September 11 events to the extent of existing coverages, but provides government subsidies for ninety percent of the difference between the actual incurred losses and $5 million, with a maximum coverage of $100 billion.[73].  The legislation establishes a formula for allocating losses among all insurers participating in the plan, delegates assessment responsibility to the Secretary of the Treasury, and obligates insurers to repay benefits received under the Act.[74]  It further establishes an exclusive federal cause of action for losses due to terrorism, excludes recovery for punitive damages, apportions non-economic damages according to fault, and caps attorneys fees at twenty percent of any recovery.[75]

On the Senate side three bills somewhat similar to the House measure have been introduced.[76]  All three have similar provisions as the House bill for up to $100 billion in federally guaranteed funding for aggregate insurance industry losses due to terrorist activity.  They differ as to the method of reimbursement.  One of the Senate bills creates an exclusive federal cause of action for property damage, personal injury or death caused by an act of terrorism.[77]  Two of the three contain provisions limiting recoveries of punitive damages in claims for damages resulting from terrorism.[78]

Differences between the punitive damage and repayment provisions in the various bills have thus far prevented passage of comprehensive war risk coverage legislation. Although the airline industry is operating under the temporary government guarantees, other transportation and commercial entities will be required to operate without war risk coverage or pay excessive premiums until Congress acts.

 

VII.

Dispute Resolution under the Air Transportation Safety and Systems Stabilization Act

In addition to airline and insurance industry subsidies, the Air Transportation Safety and Systems Stabilization Act provides new litigation limitations and establishes an arbitration process to expedite handling of victims’ claims.[79]  The Act also created the Victims Compensation Fund to pay arbitration awards to the victims of September 11.[80]  By creating and funding this process, the federal government may be signaling its willingness to become involved in the resolution of future large-scale catastrophes that may have a significant impact on the United States economy.

 

A. The Alternatives

Victims eligible to bring claims under the Air Transportation Safety and Systems Stabilization Act include the next-of-kin of persons on the hijacked aircraft or in the vicinity of the crashes, and persons in the vicinity of the crashes who suffered physical harm.[81]  These individuals have the option of filing a federal lawsuit, under the normal procedures applicable to airline disasters, in the United States District Court for the Southern District of New York, or waiving the right to litigate and proceeding with the arbitration procedures established in the Act.[82]  Victims filing a lawsuit would be required to establish negligence on the part of the airlines in order to recover, unless the victim was an airline passenger holding an international ticket, in which case, as previously noted, the Warsaw Convention would establish strict liability.  Litigation recoveries, including punitive damages, would generally be unlimited to the extent insurance coverage was available.  Once coverage has been exhausted, however, victims choosing to litigate may be awarded judgments without the ability to collect.  None of the legislation previously mentioned requires the government to subsidize such an individual.

Alternatively, victims filing claims under the arbitration procedure would avoid the liability issue completely and instead arbitrate only the issue of damages.  Although recovery for punitive damages would be excluded, the federal government would pay the entire damage award irrespective of insurance coverage limitations.  The Interim Rules for Arbitration, released December 21, 2001, indicates that families of married decedents with children would receive at least $500,000 in damages, and families of single decedents would receive about $300,000, before deducting collateral sources with a minimum of at least $250,000 per decedent after those deductions.[83]  The guidelines for determining damages under the Act’s arbitration provisions include consideration of all economic losses, including pecuniary loss of income, medical expenses, lost services, burial costs, and loss of business and employment opportunities.[84]  The guidelines also allow recovery for non-economic losses such as pain and suffering, mental anguish, loss of society and companionship, loss of consortium, inconvenience, and physical impairment.[85]  Non-economic losses are “presumed” to be $250,000 for a decedent, and an additional $100,000 for a spouse and each dependent child.[86]  These guidelines are considerably more liberal than those contained in most state wrongful death statutes.

Damages awarded under the arbitration process must be reduced by the amount of any collateral source funds available to the victim’s family, such as life insurance proceeds, pension proceeds, and possible other company death benefits.[87]  Furthermore, the Special Master appointed to oversee the arbitration process and the DOJ have indicated that recoveries under the arbitration procedure will not necessarily parallel those in other airline accident or mass tort cases. The Special Master has suggested that recoveries in the arbitration process would likely average approximately $1.6 million, but that average may represent the gross award prior to deduction of collateral sources.

The families of victims choosing to arbitrate must submit their claims on forms developed by the Special Master.[88]  Advance payments of $50,000 for a deceased victim, and $25,000 for a severely injured victim, will be made upon application by the victim’s family, or by the victim if the claim is for personal injury.[89]  A two-year statute of limitation has been established for arbitrating claims and, once a claim has been filed, it must be resolved within 120 days.[90]  Thus, because the statute of limitation began to run when the regulations were published on December 21, 2001, all arbitration claims must be filed before December 21, 2003 and resolved on or before April 19, 2004.  The Act does not provide a statute of limitation for litigated claims, indicating that this issue will be governed by applicable conflict of law rules.

These alternative recovery procedures present a difficult choice to victims or their next-of-kin because they conflict in both benefit and result.  For example, the family of a high-income decedent with a large life insurance policy and pension plan may receive an expedient but worthless arbitration settlement because the collateral source rule may reduce the resulting damage award to zero.  Litigation, on the other hand, may produce a substantial damage award – assuming that adequate insurance coverage exists – but may take a number of years to resolve.  Because damages awarded under the arbitration procedure appear to form a matrix based on the decedent’s actual and collateral source income, the family of a high-income decedent would likely be forced into litigation in order to receive a recovery commensurate with the loss of the decedent’s income.  In any case, it is doubtful that damages awarded from the Victims Compensation Fund will even closely approach the recoveries awarded to the families of deceased passengers on the American Airlines flight that crashed in Rockaway, New York, only a few weeks after the September 11 tragedies.

Critical examination of the arbitration procedure reveals several additional considerations beyond the matrixed recovery issue.  First it is questionable whether potentially thousands of death and personal injury claims can be resolved by the statutory April 2004 deadline, and whether every claimant entitled to a hearing will therefore actually receive one.  The 120-day period for resolution of claims may have to be extended.  Additionally, it is unclear whether the statute of limitation can be tolled for infancy or incapacity.  Furthermore, the matrixed damage structure may be extremely unfair when applied to a severely injured minor requiring lifetime medical care.  Since arbitration awards are not subject to review under the Act, disenchantment with recoveries may become a political issue in later election years.

 

B. Possible Challenges by Claimants

Significant issues exist regarding potential conflicts generated by the exclusive federal cause of action created by the Air Transportation Safety and Systems Stabilization Act.  For example, the next-of-kin of seventy-eight British airline passengers killed in the September 11 hijackings have exclusive litigation rights in the United Kingdom under the Warsaw Convention – a treaty between approximately 140 nations that establishes an exclusive cause of action for passengers holding international tickets.  Similarly, the exclusivity provisions of the Act may not bind victims on the ground.  Furthermore, after-the-fact enactment of arbitration provisions may raise ex post facto questions under Article I, due process questions under Article IV, and deprivation of jury trial questions under Article VII of the United States Constitution.  Although these issues were likely thoroughly researched prior to Congressional enactment, it is unclear whether the legislation will survive a challenge by an injured plaintiff that is awarded an unenforceable judgment.

The arbitration provisions of the Air Transportation Safety and Systems Stabilization Act present another problem: they were enacted without direct or implied pre-event consent to submit to arbitration proceedings in lieu of litigation.  The Supreme Court’s recent decision in Circuit City Stores, Inc. v. Adams[91] indicates that virtually any “agreement to arbitrate” is enforceable under the Federal Arbitration Act.  The operative word, however, is “agreement.”  Whether parties have “agreed” to arbitrate is an often-litigated issue.

The automobile industry has had in place for several years an arbitration procedure for the disposition of warranty claims.  Under this procedure, automobile purchasers and lessees can file a warranty claim in arbitration, obtain a hearing by a single arbitrator, request a vehicle inspection by an expert if necessary, and generally receive an award within a month.  If the customer accepts the award, he enters into an “arbitration agreement” that becomes binding on the manufacturer, and the vehicle is replaced, repurchased, or repaired.  If the customer rejects the award, he then has the right to proceed to litigation and the manufacturer is allowed to defend the claim utilizing whatever evidence is available.  The arbitration procedures are confidential, although evidence is available at trial if it would otherwise have been discoverable prior to arbitration.  The process provides the consumer with an “informed choice” after the arbitration has been conducted and the extent of the award becomes known.  Whether arbitration under the Act provides a similarly “informed choice,” or whether victims will be forced to make an uninformed choice because insurance coverage is inadequate to support litigation verdicts, is a question that will be answered as litigation unfolds.

The arbitration and exclusive federal jurisdiction provisions of the Air Transportation Safety and Systems Stabilization Act apply only to victims who were passengers on the aircraft hijacked on September 11 or those present at the crash sites who reported to hospitals and the like within seventy-two hours, with no time limit for police, firefighters and rescue workers.[92]  Claims related to business or other collateral losses are not covered by this legislation and therefore must be litigated under ordinary court procedures where limited third party insurance may be available.  Other transportation and commercial entities affected by the events of September 11 are likely to lobby Congress for procedures to resolve these claims similar to those contained in the Act.  Finally, future criminal or terrorist acts may create a new generation of loss claims.  If these claims are not covered by war risk or terrorism insurance, or if government entities fail to recognize the acts as “terrorist,” renewed requests to Congress for federal relief may be required.

Whether congressional response to these requests will be as rapid and as favorable as that received by the airline industry remains to be seen.  However, it would appear that other business entities must provide additional security measures – perhaps even measures patterned on the “aviation standard”– in order justify further expenditure of public funds.  If Congress adopts a Senate version of the War Risk Insurance Bill, punitive damages would be recoverable but uninsured.  It therefore appears prudent for transportation and commercial entities to implement improved security protocols to help defend against claims for punitive damages and to justify government insurance guarantees.  Recent legislative activity may signal the beginning of increased government regulation of various business entities, and this possibility creates a host of commercial and political ramifications that extend beyond the boundaries of insurance litigation.

 

VIII.

Conclusion

The events of September 11 have already generated a number of lawsuits that will challenge the notion that airline liability is limited to the amount of available insurance coverage.  In the event that litigation recoveries against one or more airlines cannot be satisfied by available insurance, proceedings directly against the air carriers seeking to increase the recovery “cap” may again place the economic stability of the industry in jeopardy.  Such a result would likely require additional congressional intervention.  Because the arbitration process provided as an alternative to assist the September 11 victims may be challenged on various grounds, this alternative may provide the airlines with little relief.  The use of damage matrixes in the arbitration procedure may result in awards lower than those received in “traditional” disaster litigation and dissatisfaction with inadequate awards may lead to political turmoil.

Potential objections to the arbitration process may be eliminated by providing victims opting for this alternative with the “informed choice” of accepting the arbitration award or proceeding to litigation after damages have been determined.  Including this “opt out” provision may attract potential litigants to the arbitration process and stave off future litigation.

Continued government subsidies for terrorism and war risk insurance will likely be necessary because the insurance industry, having already canceled existing war risk coverage after the events of September 11, has admitted to having difficulties in pricing this product in the current risk environment.  A more compelling rationale for continued subsidies is that short-term insurance capacity is insufficient to cover the stated risk without government assistance, and the premium increases of three to four hundred percent required to generate sufficient capacity will be unacceptable to most policy holders.

Owners and operators of other transportation and commercial businesses should carefully examine the security procedures mandated for the aviation industry to determine whether their businesses are realistically at risk from terrorist attack.  They must also determine whether they have implemented security procedures adequate “under the totality of circumstances” to provide sufficient protection to business invitees and to defend against damage claims by persons injured in a potential attack.  Although aviation industry practices may not be economically feasible for many other businesses, it appears that these protocols are destined to become the security “standard” for all businesses.  Emerging regulations and case law will determine the accuracy of this conclusion.

Finally, the federal government’s deepening involvement in guaranteeing insurance coverage for war risk and terrorism losses suggests that future government regulation is likely, especially in the areas of war risk insurance and loan services providing insurers with temporary relief from exposure to terrorist attacks.  Whether this involvement will lead to more expansive federal regulation remains to be seen.  By requiring collateral for $10 billion worth of loan guarantees provided by the Air Transportation Safety and Systems Stabilization Act, the federal government appears to be taking an equity position in the airlines’ operations, suggesting that at least partial re-regulation of the airline industry may be inevitable.

ENDNOTES

 


†            Submitted by the author on behalf of the FDCC Transportation Section.

[1]           Aviation and Transportation Security Act of 2001, Pub. L. No. 107-71, 115 Stat. 597 (2001) [hereafter Pub. L. 107-71].

[2]           Id. § 101, 115 Stat. 597.

[3]           Id.

[4]           Id., 115 Stat. 597-603.

[5]           Id., 115 Stat. 598.

[6]           Id. § 110, 115 Stat. 616.

[7]           Id., 115 Stat. 615.

[8]           Id. § 137(a), 115 Stat. 638.

[9]           Id. § 129, 115 Stat. 633.

[10]          Id. § 106, 115 Stat. 608.  See also 19 U.S.C. § 1431 and 49 U.S.C. § 44909 regarding computerized assisted passenger pre-screening systems.

[11]          Pub. L. No. 107-71 § 105, 115 Stat. 606-07.

[12]          Id. § 101, 115 Stat. 598.

[13]          Id. § 107, 115 Stat. 610.

[14]          Id. § 104, 115 Stat. 606.

[15]          Id.

[16]          Id. § 126, 115 Stat. 632.

[17]          49 U.S.C. § 44901 (2001) and 49 C.F.R. 1544.209, .211 and .213 (2002).

[18]          49 U.S.C. § 44913 (2001).

[19]          Id. §§ 44904, 44914.

[20]          Pub. L. No. 107-42, 115 Stat. 230 (2001) [hereafter Pub. L. 107-42].

[21]          Pub. L. No. 107-56, 115 Stat. 272 (2001) [hereafter Pub. L. 107-56].

[22]          Id. § 801, 115 Stat. 374.

[23]          Id. § 811, 115 Stat. 382.

[24]          49 U.S.C. 26502 (2001); Pub. L. 107-56 § 810, 115 Stat. 381.

[25]          Pub. L. 107-56 § 201, 115 Stat. 278.

[26]          Id. §§ 311-377, 115 Stat. 298-342.

[27]          Id. §§ 411-418, 115 Stat. 345-355.

[28]          Id. § 802, 115 Stat. 376.

[29]          Laurie P. Cohen, Egyptian Dentist, Held on Visa Charges, Illustrates Terror Detainees’ Plight, Wall St. J., Nov. 28, 2001, at B.1, 2001 WL-WSJ 29679079.

[30]          66 Fed. Reg. 1435652 (Nov. 13, 2001).

[31]          E.g., Carol Eisenberg et al., “System Failed Miserably” Lessons of Flights 103, 800 Still Aren’t Fixed, Newsday.com (Sept. 16, 2001); Stephen Powers & Gret Hitt, Airline Security Industry Fights for Its Life, Wall St. J., Oct. 31, 2001, at A.26, 2001 WL-WSJ 29676472.

[32]          In re Air Disaster at Lockerbie, Scotland on December 21, 1988, 928 F.2d 1267 (2d Cir.), cert. denied, 502 U.S. 920 (1991).

[33]          In re Tel Aviv, 405 F. Supp. 154 (D. P.R.), aff’d sub nom.,Hernandez v. Air France, 545 F.2d 279 (1st Cir. 1976).

[34]          See Karfunkle v. Compagnie Nationale Air France, 427 F. Supp. 971 (S.D.N.Y. 1977).

[35]          Ospina v. Trans World Airlines, Inc., 975 F.2d 35 (2d Cir. 1992). See also In re Inflight Explosion on Trans World Airlines, Inc. Aircraft Approaching Athens Greece on April 2, 1986, 778 F. Supp. 625 (E.D.N.Y. 1991).

[36]          Ken Maguire, Bomb Scare over Atlantic Thwarted, Milwaukee Journal-Sentinel. Dec. 23, 2001, at A1.

[37]          Pub. L. No. 107-71.

[38]            Respectively, 18 U.S.C. §§ 1111, 3295, 794, 1201, 2332b (2001).

[39]          18 U.S.C. § 2331 (2001).

[40]          Id. § 2332 - 2339B (2001).

[41]            Britannica World Language New Practical Standard Dictionary 1346 (1956).

[42]            Terrorism Risk Protection Act, H.R. 3210, § 19(1)(B) 107th Cong. (1st Sess. 2001).

[43]            Terrorism Risk Insurance Act of 2001, S. 1748, § 3(1) 107th Cong. (1st Sess. 2001).

[44]          P.L. 107-56, §802, 115 Stat. 376.

[45]          Id.

[46]          368 F. Supp. 1098 (S.D.N.Y. 1973).

[47]          See also Parish v. Truman, 603 P.2d 120 (Ariz. Ct. App. 1979).

[48]            Convention for the Unification of Certain Rules Relating to International Transportation by Air, Oct. 12, 1929, 49 Stat. 3000, T.S. No. 876, 137 L.N.T.S. 11 (1934), reprinted in note following 49 U.S.C. § 40105 (1997), modified by Montreal Protocol No. 4, ratified by U.S. Senate on Sept. 28, 1998, S.P. Exec. Rep. No. 105-20 (1998); and see El Al Israel Airlines Ltd. v. Tseng, 525 U.S. 155 (1999).

[49]          162 N.E. 99 (N.Y.1928).

[50]          Id. at 100.  Some jurisdictions, a minority, only require the perception of an unreasonable risk of some harm to someone, meaning that there Mrs. Palsgraf would have made it past the duty phase of her negligence action.  See e.g., A.E. Inv. Corp. v. Link Builders, Inc., 214 N.W.2d 764 (Wis. 1974).

[51]            Osborne v. Stages Music Hall, Inc., 726 N.E.2d 728 (Ill. App. Ct. 2000); American Guar. & Liab. Ins. Co. v. 1906 Co., 273 F.3d 605 (5th Cir. 2001) (employer/owner liability for failure to check employee and prevent misuse of camera to invade models privacy covered by GCL policy); Pinsonneault v. Merchants & Farmers Bank & Trust Co., 789 So. 2d 762 (La. Ct. App. 2001) (bank responsible for murder of invitee customer making a night deposit because of foreseeability of problem demonstrated by prior robberies); but cf. Dudas v. Glenwood Golf Club, Inc., 540 S.E.2d 129 (Va. 2001) (no liability to warn business invitee of potential danger of criminal assault (shooting) despite three similar incidents in prior month).

[52]          See Restatement (Second) of Torts § 344 (1965).

[53]          Jenkins v. Ehmer, 707 N.Y.S.2d 738 (App. Div. 2000); L.A.C., v. Ward Parkway Shopping Ctr., Co., 2001 WL 376347 (Mo. Ct. App. 2001) (abduction and rape in mall parking lot created liability for mall because of prior similar crimes exception); but cf. Murphy v. Second Street Corp., 48 S.W.3d 571 (Ky. Ct. App. 2001) (security procedures resulted in ejection of wrongdoer from a bar after pushing plaintiff but identification not obtained).  See also Restatement (Second) of Torts § 315 (1965); Antrum v. Church's Fried Chicken, Inc., 499 A.2d 807 (Conn. Super Ct. 1985); Maguire v. Hilton's Hotel Corp., 899 P.2d 393 (Haw. 1995); Hernandez v. Rapid Bus Co., 641 N.E.2d 886 (Ill. App. Ct. 1994); Walkoviak v. Hilton Hotels Corp., 580 S.W.2d 623 (Tex. Civ. App. 1979); McKee v. Gilg, 645 N.E.2d 1320 (Ohio Ct. App. 1994); Mitchell v. Pearson Enterprises, 697 P.2d 240 (Utah 1985); Ember v. B.F.D., Inc., 490 N.E.2d 764 (Ind. Ct. App. 1986).

[54]          See, e.g., Taco Bell, Inc. v. Lannon, 744 P.2d 43 (Colo. 1987); Jardee Co. v. Hughes, 523 A.2d 518 (Del. 1987); Publix Super Markets, Inc. v. Jeffery, 650 So. 2d 122 (Fla. Dist. Ct. App. 1995); Brown v. J.C. Penney Co., 688 P.2d 811 (Or. 1984); Seibert v. Vic Regnier Builders, Inc., 856 P.2d 1332 (Kan. 1993); see also Isaacs v. Huntington Mem’l Hosp., 695 P.2d 653 (Cal. 1985); Morris v. Barnette, 553 S.W.2d 648 (Tex. Civ. App. 1977); Maguire v. Hilton Hotels Corp., 899 P.2d 393 (Haw. 1995). See also Nallan v. Helmsley-Spear, Inc., 407 N.E.2d 451, 457-58 (N.Y. 1971); Jenkins v. Ehmer, 707 N.Y.S.2d 738 (App. Div. 2000) (prior criminal attacks at hotel but no liability if no prior acts); Camp v. Loughran, 727 N.Y.S. 2d 471 (App. Div. 2001) (assault in ski lodge); Osborne, 726 N.E.2d 728 (bar patron attacked by intoxicated persons); McClung v. Wal‑Mart Stores, Inc., 270 F.3d 1007 (6th Cir. 2001) (shopping malls premises liability may include entire mall and parking lot); cf. Hunter v. Cabe Group, Inc., 535 S.E.2d 248 (Ga. Ct. App. 2000) (bar owner not liable to patron injured by another intoxicated patron when no evidence of prior notice to owner of the wrongdoer’s proclivity to violence). But cf. MacDonald v. PKT, Inc., 628 N.W.2d 33 (Mich. 2001) (at outdoor concert merchants obligation was to respond reasonably by calling police, but not required to provide security personnel).

[55]            Merchants Nat’l Bank v. Simrell’s Sports Bar & Grill, Inc., 741 N.E.2d 383 (Ind. Ct. App. 2000) (tavern owner had no duty to patron murdered on sidewalk outside tavern); Wright v. St. Louis Produce Market, Inc., 43 S.W.3d 404 (Mo. Ct. App. 2001) (special circumstances include intentional injury, frequent/recent occurrences of violence, misfeasance of owner as to an invitee); Staples v. CBL & Assocs., Inc., 15 S.W.3d 83 (Tenn. 2000) (customer in shopping mall stalked/abducted when other different crucial instances occurred); cf. McClung v. Wal‑Mart Stores, 2001 WL 1355356 (6th Cir. 2001); Pinsonneault v. Merchants Farmers Bank & Trust, 703 So. 2d 762 (La. Ct. App. 2001); Riedel v. Sheraton Bal Harbor Assoc., 806 So. 2d 530 (Fla. Dist. Ct. App.. 2001) (hotel was liable to diabetic patron who died after receiving treatment from physician retained by hotel that created zone of risk); Kaechele v. Kenyon Oil Co., 747 A.2d 167 (Me. 2000) (store liable for assault on plaintiff by another customer in parking lot after an argument in store for failing to call for police protection in light of prior incidents);  but cf. Jackson v. A.M.F. Bowling Centers, Inc., 128 F. Supp. 2d 307 (D. Md. 2001) (applying Maryland law, stabbing of plaintiff outside premises after altercation inside determined there was not sufficient knowledge of wrongdoer’s prior altercation, nor proclivity to violence toward plaintiff).

[56]          Cf. King v. Lindsay, 622 N.E.2d 396 (Ohio Ct. App. 1993); Reitz v. May Co. Dept. Stores, 583 N.E.2d 1071 (Ohio Ct. App. 1990).

[57]          See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098 (S.D.N.Y. 1973), 505 F.2d 989 (2d Cir. 1974).

[58]          Policy Considerations May Ground Aircraft, Business Ins., Sept. 24, 2001, at 1.

[59]          Whether WTC Attack is One Event or Two Debated, Business Ins., Oct. 1, 2001. at 22.

[60]          Carl J. Pernicone & James T.H. Deaver, Insurance Implications of the World Trade Center Disaster, 31 The Brief 23, 27 (Spring 2002).

[61]          The total liability for airline passengers, persons on the ground and in buildings, business interruption, life insurance is estimated at between $20 billion and $50 billion. Christopher Oster & Devon Spurgeon, Insurers’ Loss Estimate Soars Above $20 Billion, Wall St. J., Sept. 13, 2001, at C2; Christopher Oster, Today, Bush Will Prod Congress ti Act Soon on Terror Insurance, Wall St. J., Apr. 8, 2002, at C1.

[62]          Pub. L. 107-42, 115 STAT 230 (2001) [hereafter Pub. L. 107-42].

[63]          Id. § 101, 115 Stat. 230.

[64]          Id. § 408, 115 Stat. 240.

[65]          Id. § 201, 115 Stat. 234-35.

[66]          Id. §

[67]          Id. § 408, 115 Stat. 241.

[68]          Id. § 405, 115 Stat. 238-40.

[69]          Id. § 501, 115 Stat, 241.

[70]          Id. § 104, 115 Stat. 233.

[71]          Id. § 201, 115 Stat. 235.

[72]            Terrorism Risk Protection Act, H.R. 3210, 107th Cong. (1st Sess. 2001).

[73]          Id., § 6.

[74]          Id.

[75]          Id., § 15.

[76]          National Terrorism Reinsurance Fund Act, S. 1743, 107th Cong. (1st Sess. 2001);  Terrorism Insurance Act, S. 1744, 107th Cong. (1st Sess. 2001);  Terrorism Risk Insurance Act of 2001, S. 1748, 107th Cong. (1st Sess. 2001).

[77]          Id., S. 1748, § 9.

[78]          Id., S. 1748, § 9(e); S. 1744, § 11.

[79]          Pub. L. 107-42, Title IV, 115 Stat. 236-41.

[80]          Id.

[81]          Id. § 405(c)(2), 115 Stat. 239.

[82]          Id. § 405(c)(3)(B)(I), 115 Stat.240; § 408(b)(3), 115 Stat. 240.

[83]            September 11th Victim Compensation Fund of 2001, Final Rule 67 Fed. Reg. 11233, §§ 104.41, 104.43, 104.44 (Mar. 13, 2002) [hereafter Final Rule].

[84]          Id. § 104.43.

[85]          Id. § 104.44.

[86]          Id. §§ 104.44, 104.45.

[87]          The Interim Final Rule, 67 Fed. Reg. 66274, § 104.47 (Dec. 21, 2001), included Social Security benefits, worker’s compensation and charitable contributions as collateral sources, but the Special Master’s comments in the Final Rules excluded those items. Final Rule, 67 Fed. Reg. 11239-42.

[88]          Final Rule § 104.21.

[89]          Id. § 104.22.

[90]          Id. §§ 104.62, 104.22.

[91]          121 S. Ct. 1302 (2001).

[92]          Final Rule §§ 104.2, 104.45.

 

(Author’s bio)

Carroll E. Dubuc is President of Carroll E. Dubuc & Associates, of Counsel to the Arlington, Virginia law firm of Cohen Gettings, P.C.  He is a mediator and arbitrator certified in the Virginia court system, and works on both court-referred and private mediations.  Mr. Dubuc is qualified by the National Association of Securities Dealers as a mediator and arbitrator, the New York Stock Exchange as an arbitrator, and has served on the American Arbitration Association’s Commercial and International panels.  For more than 35 years he specialized in litigation, having acted as lead trial counsel in numerous well-publicized national and international aviation accident and product liability cases, including complex multiparty national litigation and terrorism cases.  Mr. Dubuc has written numerous articles and lectured widely on litigation and ADR issues.  He is currently Vice Chair of the Defense Research Institute ADR Committee and has served as a Director and Corporate Secretary of a large aviation insurance pool.  Mr. Dubuc is the former Chair of the FDCC ADR Section, the former Chair of the IADC ADR Committee, the former Chair of the TIPS Aviation and Space Law Committee.  He is a member of the State Bars of New York, the District of Columbia, and Virginia, and is admitted to the bars of United States Supreme Court, and the Courts of Appeals for the First, Second, Fourth, Fifth, Sixth, Seventh, Ninth, District of Columbia, and Federal Circuits.  He is a member of the Association of the Bar for the City of New York, the International Bar Association where he serves as Vice-Chair of the Travel and Tourism Committee, the International Society of Air Safety Investigators, and the Association of Defense Trial Attorneys.