House Passes Terrorism Insurance Bill

Senate to Take Up Measure Called Vital to Economy

By Edward Walsh

Washington Post Staff Writer

Friday, November 15, 2002; Page A01

The House passed legislation last night to provide up to $100 billion to help the insurance industry cover claims from future terrorist attacks, sending the measure to the Senate, where Majority Leader Thomas A. Daschle (D-S.D.) has promised prompt action.

The voice vote was a victory for President Bush, who made the legislation's passage a priority in recent weeks, and for the insurance industry and developers of major, high-profile real estate projects. They have said the difficulty in obtaining affordable terrorism insurance has threatened many of their projects and undermined the overall economy.

Racing to wind up its lame-duck session after the Nov. 5 midterm elections, the House derailed another major bill, to overhaul the nation's bankruptcy laws. On a procedural vote, lawmakers blocked consideration of the measure, effectively killing it for this Congress.

Early today, in a parliamentary maneuver that critics likened to "the legislative equivalent of a fraternity stunt," the House reversed itself, dropped a controversial provision dealing with abortion clinics and sent the bill to the Senate, where foes said it would die.

The House agreed to a five-week extension of unemployment benefits for laid-off workers, over protests from Democrats that it was too little in light of high jobless rates in many areas. The Senate last night passed a more generous unemployment package that would extend benefits through March, raising the possibility of an end-of-the-session snag between the two houses.

Meanwhile last night, White House and Senate negotiators agreed on legislation to create an independent commission to investigate the Sept.11 terrorist attacks. But an effort to revive a scaled-back version of Bush's proposal to bolster faith-based charities fizzled in the Senate when Democrats tried to add provisions, prompting a partisan deadlock.

The key issue in the terrorism insurance debate centered not on the bill's insurance provisions but on Republicans' longstanding efforts to curb large jury awards in liability lawsuits. The House earlier passed a version of the bill that would have prohibited victims of terrorist attacks from seeking punitive damages from companies and real estate owners.

Courts sometimes assess punitive damages -- on top of awards for monetary loss or pain and suffering -- to punish a company, manufacturer or other party deemed to have recklessly caused injuries or death. The Senate omitted the proposed ban, and the White House last month backed down from insisting on a ban on punitive damages.

But the compromise bill that House and Senate negotiators agreed to did not satisfy House Republican leaders, who strongly supported the ban on punitive damages. They held up consideration of the measure by the full House until last night. But in the end, virtually all opposition to the compromise bill evaporated as the House passed the measure by voice vote.

The bill would provide as much as $100 billion over three years to cover 90 percent of future terrorism-related insurance claims. Government aid would kick in when terrorism-related losses exceed minimum levels of an insurance company's premiums. The threshold levels to qualify for the aid would be 7 percent of premiums in the first year, 10 percent in the second year and 15 percent in the third year.

The measure would consolidate civil lawsuits stemming from a terrorist attack in a single federal court for trial under the laws of the state where the attack took place. That provision, supported by Republicans, is designed to prevent defendants such as property owners and insurance companies from facing multiple claims in several jurisdictions from the same event.

House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) portrayed the bill as vital for economic development. He said a recent survey estimated that real estate projects worth more than $15 billion have been canceled or are being delayed because of a lack of terrorism insurance coverage.

"This bill is absolutely necessary to the well-being of the American economy," Oxley said. "We need this backstop now."

The only criticism of the bill was voiced by House Majority Whip Tom DeLay (R-Tex.), reflecting disappointment that the punitive-damages provision had been dropped.

He said the measure will provide "no protection from predatory trial lawyers." He said Bush agreed that this was a shortcoming in the bill and had promised to work to correct it.

"We're going to lock the door to the federal treasury against trial lawyers," said DeLay, who will be House majority leader in the next Congress.

There has been considerable debate over the need for the government to intervene in the insurance market to help companies and real estate developers obtain coverage for acts of terrorism. After last year's attacks on the World Trade Center and the Pentagon, many insurance companies stopped offering such coverage, while others steeply increased premiums.

But in recent months, more terrorism coverage has become available. Some consumer groups charged that the federal legislation was little more than an insurance industry bailout.

"It's a handout and it's way too generous," J. Robert Hunter, director of insurance for the Consumer Federation of America, said when House and Senate negotiators announced a compromise.

Earlier this week, New York City Comptroller William C. Thompson Jr. issued a report detailing a steep increase in insurance premiums and a sharp drop in the availability of insurance coverage there after the Sept. 11 attacks. He said premiums on some expensive Manhattan properties rose by 73 percent.

"Insurance companies are taking advantage of New Yorkers," Thompson said. "They are not helping the city right now, and this is undermining our ability to retain and attract new business. Once again, New Yorkers are being penalized."

In other congressional action yesterday, the Senate approved a bill meant to deter terrorism at the nation's 361 seaports. The House extended a law to prevent automatic cuts in Medicare and other entitlement programs and extended the 1996 welfare law through March.

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