[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1751 Introduced in Senate (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.
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