Punitive DamageProvision Could Derail Terrorism Bill
Washington
Creating a federal role in the market for terrorism insurance remains a top priority for Congress this year, but the Senate remains at loggerheads over the issue of punitive damages, an industry representative says.
"I think [terrorism insurance] is on the must do list," said Carl Parks, senior vice president of federal affairs for the Des Plaines, Ill.-based National Association of Independent Insurers. "There is bipartisan support for getting something done, not for the insurance industry but for business and the economy in general."
Mr. Parks noted that in the House, the Financial Services Committee has already approved H.R. 3210, which would provide government loans to insurers to help pay for losses arising from a terrorist event. Moreover, House Majority Leader Dick Armey, R-Texas, and Committee Chair Mike Oxley, R-Ohio, held a joint press conference before the Thanksgiving recess to renew their pledge to get the bill through the House.
Rep. Oxley noted that insurance renewal notices were sent out recently, and businesses might have to face the choice of whether to operate without terrorism coverage. That, he said, could cause contractual problems with purchases, sales, mergers and financing. "To quote a trade group executive, Its an absolute mess out there," Rep. Oxley said.
But the situation in the Senate is problematic right now, Mr. Parks said, noting that the issue is whether non-economic and punitive damages should be barred in any lawsuits arising from a terrorist event. He said it is difficult to see how legislation that bars punitive damages can get 60 votes (the number needed to shut off a filibuster) in the Senate, but it is also hard to see how a bill that allows punitive damages can get 60 votes. "Thats the quandary they are in," Mr. Parks said.
Turning to another issue, Mr. Parks said NAII is pleased that H.R. 3210 contains mechanisms to help avoid the possibility of cross-subsidies among policyholders should the federal loan program become necessary.
He noted that in the bill's original version, the mechanism by which the loans would be repaid to the government called for the payments to be spread broadly across the industry, without regard to risk factors or exposure. This, he said, could have led to cross-subsidies.
However, he said, the legislation now gives the Treasury secretary guidance on how to allocate the assessments and surcharges so as to take risk factors into account and avoid cross-subsidies.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 26, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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