[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.
                                 <all>