Treasury Releases Final TRIA Litigation Rule

Treasury Releases Final TRIA Litigation Rule

By Matt Brady, NU Washington Bureau

NU Online News Service, July 24, 4:12 p.m. EDT, Washington?The Treasury Department has released its final rule to implement the litigation management provisions of the Terrorism Risk Insurance Act, making a key clarification sought by the industry.[@@]

Set to take effect Thursday, July 29, the final rule will serve as a supplement to the guidelines for insurers to follow in filing claims and receiving their payments from the federal government under the program.

"The rule is designed to protect taxpayer resources by ensuring that claims made under the program are bona fide, as well as to facilitate expedited compensation for legitimate losses covered under the Act," Treasury said in announcing the final rule.

According to Treasury, "The final rule ensures that taxpayer dollars will not be used to compensate for punitive damages as set out in TRIA, protects the subrogation rights of the United States with regard to any payments made under the Program, balances Treasury's operational needs with insurer reporting requirements, and clarifies related aspects of the Program."

In a discussion of the final rule printed in the Federal Register, the Treasury said it received four comment letters, one from an ad hoc industry working group comprised of industry organizations, companies, trade associations and their members, suggesting several changes.

One change sought by the industry was the clarification of the "settlement pre-approval" requirements.

In the discussion of the rule, Treasury noted that the prior approval requirement extends "only to settlements for insured losses arising from third-party claims against an insured for property damage, personal injury or death."

"Coverage disputes involving contract rights are not included in the scope of the causes of actions requiring advanced settlement approval by Treasury," the department said in its discussion of the rule.

"Such disputes involve causes of action that are based on contract law, not on property damage, personal injury or death, and are not subject to prior approval by Treasury," the department said.

However, Treasury noted that some of those commenting on the rule sought a specific inclusion of the distinction.

"After consideration of these comments," Treasury said it clarified the section of the final rule to say that "the advance approval requirements apply to any proposed agreement to settle or compromise any Federal cause of action for property damage, personal injury or death, asserted by a third-party or parties against an insured."

For the industry, the clarification resolved what could have been a troublesome issue to deal with in the already difficult period after an attack.

The American Insurance Association said it was pleased that Treasury clarified "that the rule's 'settlement pre-approval' requirement is limited to third-party liability actions," according to Gary Karr, a spokesman for the group.

"This is a good development which will ease the potential burdens of the rule. Insurers have had a good working relationship with Treasury since TRIA began, and we look forward to continuing that working relationship in the future," Mr. Karr said.