S. 1751 (107th): Terrorism Risk Insurance Act of 2001

107th Congress, 2001–2002. Text as of Nov 30, 2001 (Introduced).

Status & Summary | PDF | Source: GPO

S 1751 IS

107th CONGRESS

1st Session

S. 1751

To promote the stabilization of the economy by encouraging financial institutions to continue to support economic development, including development in urban areas, through the provision of affordable insurance coverage against acts of terrorism, and for other purposes.

IN THE SENATE OF THE UNITED STATES

November 30, 2001

Mr. GRAMM (for himself, Mr. ENZI, Mr. BENNETT, Mr. BUNNING, and Mr. ALLARD) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs


A BILL

To promote the stabilization of the economy by encouraging financial institutions to continue to support economic development, including development in urban areas, through the provision of affordable insurance coverage against acts of terrorism, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ‘Terrorism Risk Insurance Act of 2001’.

SEC. 2. CONGRESSIONAL FINDINGS AND PURPOSE.

    (a) FINDINGS- The Congress finds that--

      (1) property and casualty insurance firms are important financial institutions, the products of which allow mutualization of risk and the efficient use of financial resources and enhance the ability of the economy to maintain stability, while responding to a variety of economic, political, environmental, and other risks with a minimum of disruption;

      (2) the ability of businesses and individuals to obtain property and casualty insurance at reasonable and predictable prices, in order to spread the risk of both routine and catastrophic loss, is critical to economic growth, urban development, and the construction and maintenance of public and private housing, as well as to the promotion of United States exports and foreign trade in an increasingly interconnected world;

      (3) the ability of the insurance industry to cover the unprecedented financial risks presented by potential acts of terrorism in the United States can be a major factor in the recovery from terrorist attacks, while maintaining the stability of the economy;

      (4) widespread financial market uncertainties have arisen following the terrorist attacks of September 11, 2001, including the absence of information from which financial institutions can make statistically valid estimates of the probability and cost of future terrorist events, and therefore the size, funding, and allocation of the risk of loss caused by such acts of terrorism;

      (5) a decision by property and casualty insurers to deal with such uncertainties, either by terminating property and casualty coverage for losses arising from terrorist events, or by radically escalating premium coverage to compensate for risks of loss that are not readily predictable, could seriously hamper ongoing and planned construction, property acquisition, and other business projects, generate a dramatic increase in rents, and otherwise suppress economic activity; and

      (6) the United States Government should provide temporary financial compensation to insured parties, contributing to the stabilization of the United States economy in a time of national crisis, while the financial services industry develops the systems, mechanisms, products, and programs necessary to create a viable financial services market for private terrorism risk insurance.

    (b) PURPOSE- The purpose of this Act is to establish a temporary Federal program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism in order to--

      (1) protect consumers by addressing market disruptions and ensure the continued widespread availability and affordability of property and casualty insurance for terrorism risk; and

      (2) allow for a transitional period for the private markets to stabilize, resume pricing of such insurance, and build capacity to absorb any future losses, while preserving State insurance regulation and consumer protections.

SEC. 3. DEFINITIONS.

    In this Act, the following definitions shall apply:

      (1) ACT OF TERRORISM-

        (A) CERTIFICATION- The term ‘act of terrorism’ means any act that is certified by the Secretary, in concurrence with the Secretary of State, and the Attorney General of the United States--

          (i) to be a violent act or an act that is dangerous to--

            (I) human life;

            (II) property; or

            (III) infrastructure;

          (ii) to have resulted in damage within the United States, or outside of the United States in the case of an air carrier described in paragraph (3)(A)(ii); and

          (iii) to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.

        (B) LIMITATION- No act or event shall be certified by the Secretary as an act of terrorism if--

          (i) the act or event is committed in the course of a war declared by the Congress; or

          (ii) losses resulting from the act or event, in the aggregate, do not exceed $5,000,000.

        (C) DETERMINATIONS FINAL- Any certification of, or determination not to certify, an act or event as an act of terrorism under this paragraph shall be final, and shall not be subject to judicial review.

      (2) BUSINESS INTERRUPTION COVERAGE- The term ‘business interruption coverage’--

        (A) means coverage of losses for temporary relocation expenses and ongoing expenses, including ordinary wages, where--

          (i) there is physical damage to the business premises of such magnitude that the business cannot open for business;

          (ii) there is physical damage to other property that totally prevents customers or employees from gaining access to the business premises; or

          (iii) the Federal, State, or local government shuts down an area due to physical or environmental damage, thereby preventing customers or employees from gaining access to the business premises; and

        (B) does not include lost profits, other than in the case of a small business concern (as defined in section 3 of the Small Business Act (15 U.S.C. 632) and applicable regulations hereunder) in any case described in clause (i), (ii), or (iii) of subparagraph (A).

      (3) INSURED LOSS- The term ‘insured loss’--

        (A) means any loss resulting from an act of terrorism that is covered by any type of commercial or personal property and casualty insurance policy or endorsement, including business interruption coverage, issued by a participating insurance company if such loss--

          (i) occurs within the United States; or

          (ii) occurs to an air carrier (as defined in section 40102 of title 49, United States Code), regardless of where the loss occurs; and

        (B) does not include any loss covered by any type of life or health insurance policy.

      (4) PARTICIPATING INSURANCE COMPANY- The term ‘participating insurance company’ means any insurance company, including any subsidiary or affiliate thereof--

        (A) that--

          (i) is licensed or admitted to engage in the business of providing primary insurance in any State; or

          (ii) is not so licensed or admitted, if it is an eligible surplus line carrier listed on the Quarterly Listing of Alien Insurers of the National Association of Insurance Commissioners, or any successor thereto;

        (B) that offers in all of its property and casualty insurance policies, coverage for insured losses;

        (C) that offers property and casualty insurance coverage for insured losses that does not differ materially from the terms, amounts, and other coverage limitations applicable to losses arising from events other than acts of terrorism; and

        (D) that meets any other criteria that the Secretary may reasonably prescribe.

      (5) PERSON- The term ‘person’ means any individual, business or nonprofit entity (including those organized in the form of a partnership, limited liability company, corporation, or association), trust or estate, or a State or political subdivision of a State or other governmental unit.

      (6) PROGRAM- The term ‘Program’ means the Terrorism Insured Loss Shared Compensation Program established by this Act.

      (7) SECRETARY- The term ‘Secretary’ means the Secretary of the Treasury.

      (8) STATE- The term ‘State’ means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, American Samoa, Guam, and each of the United States Virgin Islands.

      (9) UNITED STATES- The term ‘United States’ means all States of the United States.

SEC. 4. TERRORISM INSURED LOSS SHARED COMPENSATION PROGRAM.

    (a) Establishment of Program-

      (1) IN GENERAL- There is established in the Department of the Treasury the Terrorism Insured Loss Shared Compensation Program.

      (2) AUTHORITY OF THE SECRETARY- Notwithstanding any other provision of State or Federal law, the Secretary shall administer the Program, and shall pay the Federal share of compensation for insured losses in accordance with subsection (c).

    (b) CONDITIONS FOR FEDERAL PAYMENTS- No payment may be made by the Secretary under subsection (c), unless--

      (1) a policyholder that suffers an insured loss, or a person acting on behalf of that policyholder, files a claim with a participating insurance company;

      (2) at the time of offer, purchase, and renewal of each policy covering an insured loss, the participating insurance company provides, as soon as practicable following the date of enactment of this Act, clear and conspicuous disclosure in the policy to the policyholder of the premium charged for insured losses covered by the Program and the Federal share of compensation for insured losses under the Program;

      (3) the participating insurance company processes the claim for the insured loss in accordance with its standard business practices, and any reasonable procedures that the Secretary may prescribe; and

      (4) the participating insurance company submits to the Secretary, in accordance with such reasonable procedures as the Secretary may establish--

        (A) a claim for payment of the Federal share of compensation for insured losses under the Program;

        (B) written verification and certification--

          (i) of the underlying claim; and

          (ii) of all payments made to policyholders for insured losses; and

        (C) certification of its compliance with the provisions of this subsection.

    (c) SHARED INSURANCE LOSS COVERAGE-

      (1) FEDERAL SHARE- Subject to the limitations in paragraph (2), the Federal share of compensation under the Program, to be paid by the Secretary, shall be--

        (A) for insured losses resulting from an act of terrorism occurring during the period begin ning on the date of enactment of this Act and ending on December 31, 2002, 90 percent of the aggregate amount of all such losses in excess of $10,000,000,000;

        (B) for insured losses resulting from an act of terrorism occurring during the period be ginning on January 1, 2003, and ending on December 31, 2003, 90 percent of the aggregate amount of all such losses in excess of $10,000,000,000; and

        (C) if the Program is extended in accordance with section 6, for insured losses resulting from an act of terrorism occurring during the period beginning on January 1, 2004, and ending on December 31, 2004, 90 percent of the aggregate amount of all such losses in excess of $20,000,000,000.

      (2) CAP ON ANNUAL LIABILITY- Notwithstanding paragraph (1), or any other provision of Federal or State law, if the aggregate insured losses exceed $100,000,000,000 during any period referred to in subparagraphs (A) and (B) of paragraph (1) (or the period referred to in subparagraph (C) of paragraph (1) if the Program is extended in accordance with section 6)--

        (A) the Secretary shall not make any payment under this Act for any portion of the amount of such losses that exceeds $100,000,000,000; and

        (B) participating insurance companies shall not be liable for the payment of any portion of the amount that exceeds $100,000,000,000.

      (3) NOTICE TO CONGRESS- The Secretary shall notify the Congress if estimated or actual aggregate insured losses exceed $100,000,000,000 in any period described in paragraph (1), and the Congress shall determine the procedures for and the source of any such excess payments.

      (4) FINAL NETTING- The Secretary shall have sole discretion to determine the time at which claims relating to any insured loss or act of terrorism shall become final.

      (5) DETERMINATIONS FINAL- Any determination of the Secretary under this subsection shall be final, and shall not be subject to judicial review.

    (d) FUNDING-

      (1) PAYMENT AUTHORITY- This Act constitutes payment authority in advance of appropriation Acts and represents the obligation of the Federal Government to provide for the Federal share of compensation for insured losses under the Program.

      (2) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the Secretary such sums as may be necessary to pay the administrative expenses of the Program.

SEC. 5. GENERAL AUTHORITY AND ADMINISTRATION OF CLAIMS.

    (a) GENERAL AUTHORITY- The Secretary shall have the powers and authorities necessary to carry out the Program, including authority--

      (1) to investigate and audit all claims under the Program; and

      (2) to prescribe regulations and procedures to implement the Program.

    (b) INTERIM RULES AND PROCEDURES- The Secretary shall issue interim final rules or procedures specifying the manner in which--

      (1) participating insurance companies may file, verify, and certify claims under the Program;

      (2) the Secretary shall publish or otherwise publicly announce the applicable percentage of in sured losses to be paid by participating insurance companies and the Federal share of compensation for insured losses under the Program;

      (3) the Federal share of compensation for in sured losses will be paid under the Program, including payments based on estimates of or actual aggregate insured losses;

      (4) the Secretary may, at any time, seek repayment from or reimburse any participating insurance company, based on estimates of insured losses under the Program, to effectuate the insured loss sharing schedule and limitations contained in section 4;

      (5) participating insurance companies that incur insured losses shall pay their pro rata share of insured losses in accordance with the schedule and limitations contained in section 4; and

      (6) the Secretary will determine any final netting of payments for actual insured losses under the Program, including payments owed to the Federal Government from any participating insurance company and any Federal share of compensation for insured losses owed to any participating insurance company, to effectuate the insured loss sharing schedule and limitations contained in section 4.

    (c) SUBROGATION RIGHTS- The United States shall have the right of subrogation with respect to any payment made by the United States under the Program.

    (d) CONTRACTS FOR SERVICES- The Secretary may employ persons or contract for services as may be necessary to implement the Program.

    (e) CIVIL PENALTIES- The Secretary may assess civil money penalties for violations of this Act or any rule, regulation, or order issued by the Secretary under this Act relating to the submission of false or misleading information for purposes of the Program, or any failure to repay any amount required to be reimbursed under regulations or procedures described in section 5(b). The authority granted under this subsection shall continue during any period in which the Secretary’s authority under section 6(d) is in effect.

SEC. 6. TERMINATION OF PROGRAM; DISCRETIONARY EXTENSION.

    (a) TERMINATION OF PROGRAM-

      (1) IN GENERAL- The Program shall terminate, on December 31, 2003, unless the Secretary--

        (A) determines, after considering the report and finding required by this section, that the Program should be extended for one additional year, until December 31, 2004; and

        (B) promptly notifies the Congress of such determination and the reasons therefore.

      (2) DETERMINATION FINAL- The determination of the Secretary under paragraph (1) shall be final, and shall not be subject to judicial review.

      (3) TERMINATION AFTER EXTENSION- If the Program is extended under paragraph (1), this Act is repealed, and the Program shall terminate, on December 31, 2004.

    (b) REPORT TO CONGRESS- Not later than 18 months after the date of enactment of this Act, the Secretary shall submit a report to Congress--

      (1) regarding--

        (A) the availability of insurance coverage for acts of terrorism;

        (B) the affordability of such coverage, including the effect of such coverage on premiums; and

        (C) the capacity of the insurance industry to absorb future losses resulting from acts of terrorism, taking into account the profitability of the insurance industry; and

      (2) that considers--

        (A) the impact of the Program on each of the factors described in paragraph (1); and

        (B) the probable impact on such factors and on the United States economy if the Program terminates on December 31, 2003.

    (c) FINDING REQUIRED- A determination undersubsection (a) to extend the Program shall be based on a finding by the Secretary that--

      (1) widespread market uncertainties continue to disrupt the ability of insurance companies to price insurance coverage for losses resulting from acts of terrorism, thereby resulting in the continuing unavailability of affordable insurance for consumers; and

      (2) extending the Program for an additional year would likely encourage economic stabilization and facilitate a transition to a viable market for private terrorism risk insurance.

    (d) CONTINUING AUTHORITY TO PAY OR ADJUST COMPENSATION- Following the termination of the Program under subsection (a), the Secretary may take such actions as may be necessary to ensure payment, reimbursement, or adjustment of compensation for insured losses arising out of any act of terrorism occurring during the period in which the Program was in effect under this Act and as to which a determination has been made in accordance with the provisions of section 4 and regulations promulgated thereunder.

    (e) Study and Report on Scope of the Pro-Gram-

      (1) STUDY- The Secretary, after consultation with the National Association of Insurance Commissioners, representatives of the insurance industry, and other experts in the insurance field, shall conduct a study of the potential effects of acts of terrorism on the availability of life insurance and other lines of insurance coverage.

      (2) REPORT- Not later than 1 year after the date of enactment of this Act, the Secretary shall submit a report to the Congress on the results of the study conducted under paragraph (1).

SEC. 7. PRESERVATION OF STATE LAW.

    Nothing in this Act shall affect the jurisdiction or regulatory authority of the insurance commissioner (or any agency or office performing like functions) of any State over any participating insurance company or other person--

      (1) except as specifically provided in this Act; and

      (2) except that--

        (A) the definition of the term ‘act of terrorism’ in section 3 shall be the exclusive definition for purposes of compensation for insured losses under this Act, and shall preempt any provision of State law that is inconsistent with that definition, to the extent that such provision of law would otherwise apply to any insurance policy relating to terrorism risk in the United States;

        (B) during the period beginning on the date of enactment of this Act and ending on December 31, 2002, rates for terrorism risk insurance covered by this Act and filed with any State shall not be subject to prior approval or a waiting period, under any law of a State that would otherwise be applicable, except that nothing in this Act affects the ability of any State to invalidate a rate as excessive, inadequate, or unfairly discriminatory; and

        (C) during the period beginning on the date of enactment of this Act and for so long as the Program is in effect as provided in section 6 (including any period during which the Secretary’s authority under section 6(d) is in effect), books and records of any participating insurance company shall be provided, or caused to be provided, to the Secretary or his designee upon request by the Secretary or his designee notwithstanding any provision of the laws of any State prohibiting or limiting such access.

SEC. 8. SENSE OF THE CONGRESS.

    It is the sense of the Congress that the insurance industry should build capacity and aggregate risk to provide affordable property and casualty coverage for terrorism risk.

SEC. 9. PROCEDURES FOR CIVIL ACTIONS.

    (a) FEDERAL CAUSE OF ACTION- There shall exist a Federal cause of action for property damage, personal injury, or death arising out of or resulting from an act of terrorism, which shall be the exclusive cause of action and remedy for claims for property damage, personal injury, or death arising out of or resulting from an act of terrorism. All State causes of action of any kind for property damage, personal injury, or death otherwise available arising out of or resulting from an act of terrorism, are hereby preempted, except as provided in subsection (f).

    (b) GOVERNING LAW- The substantive law for decision in an action for property damage, personal injury,

or death arising out of or resulting from an act of terrorism under this section shall be derived from the law, including applicable choice of law principles, of the State, or States determined to be required by the district court assigned under subsection (c), unless such law is inconsistent with or otherwise preempted by Federal law.

    (c) FEDERAL JURISDICTION-

      (1) IN GENERAL- Notwithstanding any other provision of law, not later than 90 days after the occurrence of an act of terrorism, the Judicial Panel on Multidistrict Litigation shall assign a single Federal district court to conduct pretrial and trial proceedings in all pending and future civil actions for property damage, personal injury, or death arising out of or resulting from that act of terrorism.

      (2) SELECTION CRITERIA- The Judicial Panel on Multidistrict Litigation shall select and assign the district court under paragraph (1) based on the convenience of the parties and the just and efficient conduct of the proceedings.

      (3) JURISDICTION- The district court assigned by the Judicial Panel on Multidistrict Litigation shall have original and exclusive jurisdiction over all actions under paragraph (1). For purposes of personal jurisdiction, the district court assigned by the Judicial Panel on Multidistrict Litigation shall be deemed to sit in all judicial districts in the United States.

      (4) TRANSFER OF CASES FILED IN OTHER FEDERAL COURTS- Any civil action for property damage, personal injury, or death arising out of or resulting from an act of terrorism that is filed in a Federal district court other than the Federal district court assigned by the Judicial Panel on Multidistrict Litigation under paragraph (1) shall be transferred to the Federal district court so assigned.

      (5) REMOVAL OF CASES FILED IN STATE COURTS- Any civil action for property damage, personal injury, or death arising out of or resulting from an act of terrorism that is filed in a State court shall be removable to the Federal district court assigned by the Judicial Panel on Multidistrict Litigation under paragraph (1).

    (d) APPROVAL OF SETTLEMENTS- Any settlement between the parties of a civil action described in this section for property damage, personal injury, or death arising out of or resulting from an act of terrorism shall be subject to prior approval by the Secretary after consultation with the Attorney General.

    (e) LIMITATION ON DAMAGES- Punitive or exemplary damages shall not be available in any civil action subject to this section.

    (f) CLAIMS AGAINST TERRORISTS- Nothing in this section shall in any way limit the ability of any plaintiff to seek any form of recovery from any person, government or other entity that was a participant in, or aider and abettor of, any act of terrorism.

    (g) OFFSET- In determining the amount of money damages available under this section, the court shall offset any compensation or benefits received or entitled to be received by the plaintiff or plaintiffs from any collateral source, including the United States or any Federal agency thereof, in response to or as a result of the act of terrorism.

    (h) EFFECTIVE PERIOD- This section shall apply only to actions for property damage, personal injury, or death arising out of or resulting from acts of terrorism that occur during the effective period of the Program, including, if applicable, any extension period under section 6.

SEC. 10. REPEAL OF THE ACT.

    This Act shall be repealed at the close of business on the termination date of the Program under section 6(a), but the provisions of this section shall not be construed as preventing the Secretary from taking, or causing to be taken, such actions under sections 4(c)(4), (5), sections 5(a)(1), (c), (e), section 6(d), and section 9(d) of this Act and applicable regulations promulgated thereunder. Further, the provisions of this section shall not be construed as preventing the availability of funding under section 4(d) during any period in which the Secretary’s authority under section 6(d) is in effect.