Congressional Record, Volume 148 Issue 77 (Wednesday, June 12, 2002)

[Congressional Record Volume 148, Number 77 (Wednesday, June 12, 2002)]
[Senate]
[Pages S5435-S5441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

UNANIMOUS CONSENT AGREEMENT--S. 2600

Mr. REID. I ask unanimous consent that at 10 a.m. tomorrow the Senate
proceed to the consideration of Calendar No. 410, S. 2600, the
terrorism insurance bill.
The PRESIDING OFFICER. Is there objection?
Mr. McCONNELL. Reserving the right to object.
The PRESIDING OFFICER. The Senator from Kentucky.
Mr. McCONNELL. Reserving the right to object, I ultimately will not
object, but I want to propose that the unanimous consent request be
amended to read as follows: I ask unanimous consent that at a time
determined by the majority leader, after consultation with the
Republican leader, the Senate proceed to the consideration of Calendar
No. 252, H.R. 3210, and it be considered under the following
limitations, the only amendments in order be the following: A
substitute amendment by Senator Gramm and myself, the text of which
will be printed in the Record upon the granting of the consent; three
relevant first-degree amendments to the substitute to be offered by
each leader or their designees, and that no motions to recommit be in
order; I further ask unanimous consent that, following a vote on or in
relation to the above-listed first-degree amendments and any debate
time, there be a vote on or in relation to the substitute amendment;
finally, I ask unanimous consent that when and if the bill is passed,
the Senate then insist on its amendment and request a conference with
the House on the disagreeing votes.
Mr. REID. Mr. President, it is my understanding----
The PRESIDING OFFICER. Does the Senator so modify his request?
Mr. REID. Mr. President, reserving the right to respond to the Chair,
I would simply say this: We have been through this now for months. I
have been down here on a number of occasions, trying to get something
that we believe will expedite this very important legislation. We have
tried one amendment on each side, two amendments on each side, three
amendments on each side. I think we finally got to five amendments on
each side. I think the best thing to do is just get to the bill. It is
an important piece of legislation and if it is as important as the
major industries believe it is, we are

[[Page S5436]]

going to complete this bill in a reasonable period of time. So I do not
consent to the modification.
The PRESIDING OFFICER. Objection is heard. Is there objection to the
request from the Senator from Nevada?
Mr. GRAMM. Reserving the right to object, Mr. President.
The PRESIDING OFFICER. The Senator from Texas.
Mr. GRAMM. I am not going to object. I just want to say we are
bringing up a bill that was not reported by the committee of
jurisdiction. There has been an effort underway by many of us to try to
reach a bipartisan consensus, and it may very well be that this is the
only route we can take. I happen to be one of the people around here
who believes that we should have passed the bill last year. I was for a
bill.
I would like to say today that this is a hard way to do it, and it is
going to mean we are going to have to do a lot of amendments on the
floor that we should have done in committee. I hope, therefore, that we
are not going to find ourselves in a position where we are going to
have an effort to cloture the bill.
If the bill had come out of committee, if there were some kind of
consensus, then I think you could understand that, if people were
raising extraneous amendments. But I am hoping we are going to have
time for debate. I think there will be a real possibility that we will
have to have maybe 10 or 12 or 15 real amendments on the subject,
amendments on which we will have to work our will. I hope we will not
have that process cut off with cloture.
The PRESIDING OFFICER. The Senator from Kentucky.
Mr. McCONNELL. Further reserving the right to object, let me add to
what the Senator from Texas has said. Ultimately I will not object,
either. But both of us believe that we have put together a proposal
that should have been the base bill. I think I can speak for the
Senator from Texas and myself: We have some direction from the
administration now as to what kind of legislation they might ultimately
sign. I have in my hand a letter addressed to the Republican leader,
signed by the Secretary of the Treasury, the Director of the Office of
Management and Budget, the Director of the National Economic Council,
and the Council of Economic Advisers indicating that a bill that makes
the victims of terrorist attacks a subject of punitive damages and that
opens up this whole area for further predatory lawsuits will not be
signed by the President. They will recommend to the President a veto.
I share the view of the Senator from Texas that the amendments to
this bill certainly ought to be germane to the subject. The amendments
that this Senator is going to offer will certainly be germane to the
subject. Just so everybody will know what the Senator from Texas and I
had put together, what we thought would be the best way to go as the
best bill that will be available to everyone, I ask unanimous consent
to have two things printed in the Record: First, the letter signed by
the Secretary of the Treasury, dated June 10.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Department of the Treasury,

Washington, DC, June 10, 2002.
Hon. Trent Lott,
Senate Republican Leader, U.S. Senate, Washington, DC.
Dear Senator Lott: The War on Terrorism must be fought on
many fronts. From an economic perspective, we must minimize
the risks and consequences associated with potential acts of
terror. No measure is more important to mitigating the
economic effects of terrorist events than the passage of
terrorism insurance legislation.
Last November 1, the Administration publicly agreed to
bipartisan legislation negotiated with Chairman Sarbanes,
Chairman Dodd, Senator Gramm and Senator Enzi. While the
House of Representatives quickly responded to this urgent
need by passing appropriate legislation, the Senate did not
act and has not passed any form of terrorism legislation in
the intervening seven months.
The absence of federal legislation is having a palpable and
severe effect on our economy and is costing America's workers
their jobs. In the first quarter of this year, commercial
real estate construction was down 20 percent. The disruption
of terrorism coverage makes it more difficult to operate,
acquire, or refinance property, leading to diminished bank
lending for new construction projects and lower asset values
for existing properties. The Bond Market Association has said
that more than $7 billion worth of commercial real estate
activity has been suspended or cancelled due to the lack of
such insurance. Last week, Moody's Investors Service
announced that 14 commercial mortgage-backed transactions
could be downgraded due to a lack of such insurance.
Without such insurance, the economic impact of another
terrorist attack would be much larger, including major
bankruptcies, layoffs and loan defaults. While we are doing
everything we can to stop another attack, we should minimize
the widespread economic damage to our economy should such an
event occur.
One important issue for the availability of terrorism
insurance is the risk of unfair or excessive litigation
against American companies following an attack. Many for-
profit and charitable entities have been unable to obtain
affordable and adequate insurance, in part because of the
risk that they will be unfairly sued for the acts of
international terrorists.
To address this risk at least two important provisions are
essential. First, provisions for an exclusive federal cause
of action and consolidation of all cases arising out of
terrorist attacks, like those included in the Air
Transportation Safety and System Stabilization Act, are
necessary to provide for reasonable and expeditious
litigation.
Second, the victims of terrorism should not have to pay
punitive damages. Punitive damages are designed to punish
criminal or near-criminal wrongdoing. Of course such
sanctions are appropriate for terrorists. But American
companies that are attacked by terrorists should not be
subject to predatory lawsuits. The availability of punitive
damages in terrorism cases would result in inequitable relief
for injured parties, threaten bankruptcies for American
companies and a loss of jobs for American workers.
It is also clear that the potential for massive damages
imposed on companies that suffer from acts of terror would
endanger our economic recovery from a terrorist attack.
Indeed, the added risks and legal uncertainty hanging over
the economy as a result of last September 11th are major
factors inhibiting a business willingness to invest and to
create jobs. It makes little economic sense to pass a
terrorism insurance bill that leaves our economy exposed to
such inappropriate and needless legal uncertainty.
The bipartisan public agreement reached between the
Administration and Chairman Sarbanes, Chairman Dodd, Senator
Gramm and Senator Enzi last fall provided these minimum
safeguards. We would recommend that the President not sign
any legislation that leaves the American economy and victims
of terrorist acts subject to predatory lawsuits and punitive
damages.
The American people and our economy have waited seven
months since our public agreement on legislation. The process
must move forward. Prompt action by the Senate on this
vitally important legislation is needed now.
Sincerely,
Paul H. O'Neill,
Secretary of the Treasury.
Mitchell E. Daniels,
Director, Office of Management and Budget.
Lawrence Lindsey,
Director, National Economic Council.
R. Glenn Hubbard,
Director, Council of Economic Advisors.

Mr. McCONNELL. We would like also to include the bill that Senator
Gramm and I had hoped would be the base bill that we took up, one that
we are confident the President would have embraced and signed. I ask
unanimous consent that be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

S. --

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 2002''.

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;

[[Page S5437]]

(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 costs of future terrorist events, and
therefore the size, finding, 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 form 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 the United States in the case of an air carrier or
vessel 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) Determination final.--Any certification of, or
determination not to certify, 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
thereunder) 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 primary property and casualty insurance,
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) or to a United States flag
vessel (or a vessel based principally in the United States,
on which United States income tax is paid and whose insurance
coverage is subject to regulation in the United States),
regardless of where the loss occurs; and
(B) excludes coverage under any life or health insurance.
(4) NAIC.--The term ``NAIC'' means the National Association
of Insurance Commissioners.
(5) 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, and was so licensed
or admitted on September 11, 2001; or
(ii) is not licensed or admitted as described in clause
(i), if it is an eligible surplus line carrier listed on the
Quarterly Listing of Alien Insurers of the NAIC, or any
successor thereto;
(B) that receives direct premiums for any type of
commercial property and casualty insurance coverage or that,
not later than 21 days after the date of enactment of this
Act, submits written notification to the Secretary of its
intent to participate in the Program with regard to personal
lines of property and casualty insurance; and
(C) that meets any other criteria that the Secretary may
reasonably prescribe.
(6) 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.
(7) Program.--The term ``Program'' means the Terrorism
Insured Loss Shared Compensation Program established by this
Act.
(8) Property and casualty insurance.--The term ``property
and casualty insurance''--
(A) means commercial lines of property and casualty
insurance;
(B) includes personal lines of property and casualty
insurance, if a notification is made in accordance with
paragraph (5)(B); and
(C) does not include--
(i) Federal crop insurance issued or reinsured under the
Federal Crop Insurance Act (7 U.S.C. 1501 et seq.); or
(ii) private mortgage insurance, as that term is defined in
section 2 of the Homeowners Protection Act of 1998 (12 U.S.C.
4901).
(9) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(10) 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.
(11) United States.--The term ``United States'' means all
States of the United States and includes the territorial seas
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
(e).
(b) Conditions for Federal Payments.--No payment may be
made by the Secretary under subsection (e), unless--
(1) a person that suffers an insured loss, or a person
acting on behalf of that person, files a claim with a
participating insurance company;
(2) the participating insurance company provides clear and
conspicuous disclosure 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--
(A) in the case of any policy covering an insured loss that
is issued on or after the date of enactment of this Act, in
the policy, at the time of offer, purchase, and renewal of
the policy; and
(B) in the case of any policy that is issued before the
date of enactment of this Act, not later than 90 days after
that date of enactment;
(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 tot he
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 for insured losses; and
(C) certification of its compliance with the provisions of
this subsection.
(c) Mandatory Participation; Mandatory Availability.--Each
insurance company that meets the definition of a
participating insurance company under section 3--
(1) shall participate in the Program;
(2) shall make available in all of its property and
casualty insurance policies (in all of its participating
lines), coverage for insured losses; and
(3) shall make available 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.
(d) Participation by Self Insured Entities.--
(1) Determination by the secretary.--The Secretary may, in
consultation with the NAIC, establish procedures to allow
participation in the Program by municipalities and other
governmental or quasi-governmental entities (and by any other
entity, as the Secretary deems appropriate) operating through

[[Page S5438]]

self insurance arrangements that were in existence on
September 11, 2001, but only if the Secretary makes a
determination with regard to participation by any such entity
before the occurrence of an act of terrorism in which the
entity incurs an insured loss.
(2) Participation.--If the Secretary makes a determination
to allow an entity described in paragraph (1) to participate
in the Program, all reports, conditions, requirements, and
standards established by this Act for participating insurance
companies shall apply to any such entity, as determined to be
appropriate by the Secretary.
(e) Shared Insurance Loss Coverage.--
(1) Federal share.--
(A) In general.--Subject to the cap on liability under
paragraph (2) and the limitation under paragraph (6), the
Federal share of compensation under the Program to be paid by
the Secretary for insured losses resulting from an act of
terrorism occurring during the period beginning on the date
of the enactment of this Act and ending at midnight on
December 31, 2003 shall be equal to 90 percent of that
portion of the amount of aggregate insured losses that
exceeds $10,000,000,000.
(B) Extension period.--If the Program is extended in
accordance with section 6, the Federal share of compensation
under the Program to be paid by the Secretary for insured
losses resulting from an act of terrorism occurring during
the period beginning on January 1, 2004 and ending at
midnight on December 31, 2004, shall be equal to 90 percent
of that portion of the amount of aggregate insured losses
that exceeds $20,000,000,000, subject to the cap on liability
in paragraph (2) and the limitation under paragraph (6).
(C) Pro rata share.--If, during the period described in
subparagraph (A) (or during the period described in
subparagraph (B), if the Program is extended in accordance
with section 6), the aggregate insured losses for that period
exceed $10,000,000,000, the Secretary shall determine the pro
rata share for each participating insurance company of the
Federal share of compensation for insured losses calculated
under subparagraph (A).
(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 subparagraph (A) and (B) of
paragraph (1)--
(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) Determination final.--Any determination of the
Secretary under this subsection shall be final, and shall not
be subject to judicial review.
(6) In-force reinsurance agreements.--For policies covered
by reinsurance contracts in force on the date of enactment of
this Act, until the in-force reinsurance contract is renewed,
amended, or has reached its 1-year anniversary date, any
Federal share of compensation due to a participating
insurance company for insured losses during the effective
period of the Program shall be shared--
(A) with all reinsurance companies to which the
participating insurance company has ceded some share of the
insured loss pursuant to an in-force reinsurance contract;
and
(B) in a manner that distributes the Federal share of
compensation for insured losses between the participating
insurance company and the reinsurance company or companies in
the same proportion as the insured losses would have been
distributed if the Program did not exist.

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 insured losses that is
the responsibility of participating insurance companies and
the percentage that is the responsibility of the Federal
Government under the Program;
(3) the Federal share of compensation for insured 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 provisions contained in section 4;
(5) each participating insurance company that incurs
insured losses shall pay its pro rata share of insured
losses, in accordance with 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
provisions 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 at midnight
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 midnight on December 31, 2004;
and
(B) promptly notifies the Congress of such determination
and the reasons therefor.
(2) Determination final.--The determination of the
Secretary under paragraph (2) shall be final, and shall not
be subject to judicial review.
(3) Termination after extension.--If the program is
extended under paragraph (1), the Program shall terminate at
midnight on December 31, 2004.
(b) Report to Congress.--Not later than 9 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 at midnight on
December 31, 2003.
(c) Finding Required.--A determination under subsection (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, in accordance with the
provisions of section 4 and regulations promulgated
thereunder.
(e) Repeal; Savings Clause.--This act is repealed at
midnight on the final termination date of the Program under
section (a), except that such repeal shall not be construed--
(1) to prevent the Secretary from taking, or causing to be
taken, such actions under subsection (d) of this section and
sections 4(e)(4), 4(e)(5), 5(a)(1), 5(c), and (e) (as in
effect on the day before the date of such repeal), and
applicable regulations promulgated thereunder, during any
period in which the authority of the Secretary under
subsection (d) of this section is in effect; or
(2) to prevent the availability of funding under section
9(b) during any period in which authority of the Secretary
under subsection (d) of this section is in effect.
(f) Sense of the Congress.--It is the sense of the Congress
that he Secretary should make any determination under
subsection (a) in sufficient time to enable participating
insurance companies to include coverage for acts of terrorism
in their policies for 2004.
(g) Study and Report on Scope of the Program.--
(1) Study.--The Secretary, after consultation with the
NAIC, representatives of the

[[Page S5439]]

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 9 months 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).
(h) Reports Regarding Terrorism Risk Insurance Premiums.--
(1) Report to the naic.--Beginning 6 months after the date
of enactment of this Act, and every 6 months thereafter, each
participating insurance company shall submit a report to the
NAIC that states the premium rates charged by that
participating insurance company during the preceding 6-month
period for insured losses covered by the Program, and
includes an explanation of and justification for those rates.
(2) Reports forwarded.--The NAIC shall promptly forward
copies of each report submitted under paragraph (1) to the
Secretary, the Secretary of commerce, the Chairman of the
Federal trade Commission, and the Comptroller General of the
United States.
(3) Agency report to congress.--
(A) In general.--The Secretary, the Secretary of Commerce
and the Chairman of the Federal Trade Commission shall submit
joint reports to Congress and the Comptroller General of the
United States summarizing and evaluating the reports forward
under paragraph (2).
(B) Timing.--The reports required under subparagraph (A)
shall be submitted--
(i) 9 months after the date of enactment of this Act; and
(ii) 12 months after the date of submission of the first
report under clause (i).
(4) GAO evaluation and report.--
(A) Evaluation.--The Comptroller General of the United
States shall evaluate each report submitted under paragraph
(3), and upon request, the Secretary, the Secretary of
Commerce, the Chairman of the Federal Trade Commission, and
the NAIC shall provide to the Comptroller all documents,
records, and any other information that the Comptroller deems
necessary to carry out such evaluation.
(B) Report to congress.--Not later than 90 days after
receipt of each report submitted under paragraph (3), the
Comptroller General of the United States shall submit to
Congress a report of the evaluation required by
subparagraph (A).

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 of that term 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 type of
insurance covered by this Act;
(B) during the period beginning on the date of enactment of
this Act and ending at midnight 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
authority of the Secretary under section 6(d) is in effect),
books and records of any participating insurance company that
are relevant to the Program shall be provided, or caused to
be provided, to the Secretary or the designee of the
Secretary, upon request by the Secretary or such designee,
notwithstanding any provision of the laws of any State
prohibiting or limiting such access.

SEC. 8. SENSE OF THE CONGRESS REGARDING CAPACITY BUILDING.

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

SEC. 9. AUTHORIZATION OF APPROPRIATIONS; PAYMENT AUTHORITY.

(a) Administrative Expenses.--There are authorized to be
appropriated to the Secretary, out of funds in the Treasury
not otherwise appropriated, such sums as may be necessary for
administrative expenses of the Program, to remain available
until expended.
(b) 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.

SEC. 10. PROCEDURES FOR CIVIL ACTIONS.

(a) Federal Cause of Action.--
(1) In general.--There shall exist a Federal cause of
action for claims arising out of or resulting from an act of
terrorism, which shall be the exclusive cause of action and
remedy for such claims, except as provided in subsection (f).
(2) Preemption of state actions.--All State causes of
action of any kind for claims arising out of or resulting
from an act of terrorism that are otherwise available under
State law, are hereby preempted, except as provided in
subsection (f).
(b) Governing Law.--The substantive law for decision in an
action described in subsection (a)(1) shall be derived from
the law, including applicable choice of law principles, of
the State in which the act of terrorism giving rise to the
action occurred, except to the extent that--
(1) the law, including choice of law principles, of another
State is determined to be applicable to the action by the
district court hearing the action; or
(2) otherwise applicable State law (including that
determined under paragraph (1), 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 date of 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 claims 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 claims 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 claims 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
claims arising out of or resulting from an act of terrorism
shall be subject to prior approval by the Secretary after
consultation by the Secretary with the Attorney General.
(e) Limitation on Damages.--
(1) In general.--Punitive or exemplary damages shall not be
available for any losses in any action described in
subsection (a)(1), including any settlement described in
subsection (d), except where--
(A) punitive or exemplary damages are permitted by
applicable State law; and
(B) the harm to the plaintiff was caused by a criminal act
or course of conduct for which the defendant was convicted
under Federal or State criminal law, including a conviction
based on a guilty plea or plea of nolo contendere.
(2) Protection of taxpayer funds.--Any amounts awarded in,
or granted in settlement of, an action described in
subsection (a)(1) that are attributable to punitive or
exemplary damages allowable under paragraph (1) of this
subsection shall not count as insured losses for purposes of
this Act.
(f) Claims Against Terrorists.--Nothing in this section
shall in any way be construed to 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) Effective Period.--This section shall apply only to
actions described in subsection (a)(1) arising out of or
resulting from acts of terrorism that occur during the
effective period of the Program, including any applicable
extension period.

The PRESIDING OFFICER. The Republican leader.
Mr. LOTT. Reserving the right to object, I will be brief and I will
not object. I think we should go ahead and get an agreement to proceed
on this bill because there has been a lot of effort over a long period
of time to try to work out some substance, some process for considering
it, the numbers of amendments that would be offered. Having been
through all of that, I think it is time we just go forward. We could
not get an agreement to limit amendments anyway. I believe there are
going to be a lot of amendments that relate to the subject matter that
will be offered and we will have a good debate.
I do want to make two observations. There was a bipartisan bill.
There was a bill, I had the impression, that had been worked out with
Senator Sarbanes, I thought Senator Dodd, and

[[Page S5440]]

Senator Gramm at the committee level, although it was not reported out,
that would have had some limits on liability, but all of a sudden it
disappeared from the committee itself, went to some other venue, and it
came up with the substance as it is now. I do not think that is the way
business should be done around here, and every time it is done that
way, which was the case, in my opinion, on the energy bill and on an
agriculture bill, you get into a great big fracas and have a lot of
trouble.
But I think the issue is important. I am sure there are very strong
feelings for it and some against it.
But I emphasize the point that Senator McConnell made a moment ago.
We need this legislation passed because of the confidence it will
provide to this sector of the economy. But it will not be signed into
law without some limits on liabilities. We cannot and we will not--and
the President will not--allow the plaintiff's lawyers of this country
to get this kind of access to the Treasury of the United States of
America. I think everybody needs to understand that.
We should do this. We are going forward. But in the end we are not
going to have a bill without limits on liabilities.
With that, I withdraw my reservation.
Mr. DASCHLE. Mr. President, in the days and weeks following September
11, this Senate passed an unprecedented series of measures to help heal
our wounded nation, protect America from future terrorist attacks, and
bring to justice those who attacked us.
Those days were among the most difficult any of us has ever
experienced in our public lives. They were also some of our proudest
days as Senators--because we were united. Because we rose to a
challenge that few of us could have imagined until then.
Today--nearly 9 months after the terrorist attacks we have not yet
addressed the growing inability of many businesses to purchase
adequate, affordable terrorism insurance.
Democrats have made repeated good-faith offers to reach a bipartisan
solution to this difficult problem. This Senate could have passed a
terrorism insurance bill months ago--and it could already be law. The
only reason it is not is because a small group of Senators in the other
party are determined to use terrorism re-insurance as cover to push
through radical changes in our legal system that they know do not have
sufficient support to pass on their own merits. They are holding
terrorism insurance, and America's economic security, hostage to try to
force through an agenda that has nothing to do with September 11th, or
with the threat of future terrorist attacks.
Enough is enough. Last Friday, Senator Dodd introduced a good,
balanced terrorism insurance bill, S-2600. I am now calling up that
bill to see where the votes fall. We need to stop playing politics with
this critical issue.
I want to thank Senator Dodd for the extraordinary patience and
leadership he has demonstrated on this issue over so many months. I
also want to thank a number of our other colleagues--especially Senator
Sarbanes, Senator Schumer and Senator Reid--for their help in producing
this bill, as well as their many efforts to reach a bipartisan
agreement on this matter.
President Bush has asked the Senate repeatedly to pass terrorism
insurance. So has the commercial real estate industry, the hotel
industry, and many other industries employing tens of millions of
Americans. Despite their requests, a small group of Republican Senators
has refused to let any terrorism insurance bill pass unless it includes
their extraneous plan to dramatically overhaul major parts of America's
civil justice system.
At a time when we are hearing new warnings almost every day about the
possibility, even the ``inevitability'' of more terrorist attacks--when
our economy is struggling to shake off a recession, such political
gamesmanship is inexcusable.
Before September 11th, terrorist attacks on America seemed
unimaginable. Now, as a result of September 11th, such acts are
becoming un-insurable.
Consider a few facts:
A recent survey by The Bond Market Association shows that lenders
have placed on hold or canceled more than $7 billion in commercial
mortgage loans because of ``the difficulty and expense'' of finding
terrorism insurance coverage.
According to a recent study by Moody's, ``virtually all terrorism
insurance policies have some major gap, including carve-outs for
certain types of terrorism and 30 day cancellation clauses.'' These
policy gaps pose significant risks to investors.
The lack of terrorism insurance for commercial real estate is also
hurting ``commercial mortgage backed securities'' bonds that are backed
entirely by mortgages on commercial buildings. Investors in this $270
billion market include pension funds, insurance companies and other
institutions.
Moody's and Fitch recently placed 22 commercial mortgage backed
securities transactions--backed by more than $9 billion in commercial
real estate loans, on a ``watch list'' for possible downgrade. In every
one of the 22 transactions on that list, terrorism insurance for the
collateral was either inadequate--or due to expire by this Fall.
In addition, major hotel companies employing thousands of Americans
have lost--or will soon lose--terrorism coverage. Businesses, museums,
hospitals, gaming and sports facility owners, and builders all over the
country are in similar straits.
While a few insurers have come together to offer very narrow
coverage, their policies they provide generally exclude coverage for
nuclear, biological and chemical attacks--the very threats the
government warns us are most likely to be used by terrorists.
The growing gap in terrorism coverage threatens the stability of
America's economy.
The plain fact is: private insurers, alone, cannot close this gap.
The potential loss is simply too great for any one company or industry
to absorb. The federal government must be a partner.
We've done it before. During World War II, the Government authorized
a program, administered by private insurers, which insured property
against ``enemy attack.'' We need a similar effort today. That is what
this bill is about.
The Congress is working closely with the President to improve the
physical security of our nation. We should be no less vigilant in
defending America's economic security from the catastrophic losses
associated with terrorism. We must pass a terrorism bill. We cannot
afford to let this critical measure be held hostage any longer by a
handful of Senators who want to use it to pass extraneous measures. The
risks to America's economic security is too great.
The President has made that clear. The market is making it clear. We
need to close the terrorism insurance gap now. No more delays. We urge
our colleagues to join us.
The PRESIDING OFFICER. Is there objection?
Without objection, it is so ordered.
Mr. REID. Mr. President, if I could just say a few words before my
friend from Connecticut who worked so hard on this legislation makes a
few remarks, the minority should understand that Senator Daschle has no
intention of peremptorily moving to invoke cloture. I think there
should be a reasonable time for people to offer amendments. I also say
that we also have to work constructively on this legislation.
The fact is that we have as a result of what is facing this country
lots of bills, not the least of which is the Defense authorization
bill. We have to complete that before the July 4th recess. We are going
to do that.
There is a lot of work to do. The majority leader has stated publicly
that this legislation is important. Senator Dodd has spent untold time
trying to work out an agreement. If everybody believes it as important
as they say it is, then we should be able to get a bill.
I respectfully say to my friend, the Republican leader, that they
have a right to offer all kinds of amendments and any amendment they
want to dealing with liability, lawyers, and other things. But I hope
if they lose, they do not cause us to not have a bill.
This bill is important to the real estate industry, the developers,
and the people in the construction business. We have hotels,
businesses, shopping centers, and they have all come to all of us. They
believe this is important.

[[Page S5441]]

We are going to have a debate. One of the principal participants in
that debate will be the Presiding Officer, who was an insurance
commissioner of the third or fourth largest State in United States. He
certainly has had a view that a lot of us haven't had as to what
insurance is all about. We look forward to the debate with the Senator
from Florida, and the debate generally. I hope it is as constructive as
the debate was on the estate tax. It was a good debate over the last 2
days. When we have debates like that, it makes this body look good. I
think people look not at the result as much as how we are treating each
other. Senators, we should be happy. I am happy with the result we had
with the estate tax. But the debate was good. People had a chance to
voice their opinions. I hope we do just as well on this important
legislation on terrorism insurance.
The PRESIDING OFFICER. The Senator from Connecticut.
Mr. DODD. Mr. President, I thank the distinguished majority whip,
Senator Reid, for propounding the unanimous consent request. I thank
the distinguished Republican leader for agreeing to allow this to go
forward, and my colleague from Texas, and colleague from Kentucky, who
have had a longstanding interest in the subject matter, as many Members
have, including the Presiding Officer. And other Members have come to
me over time with various ideas and proposals to be included as part of
the terrorism insurance package.
Let me say my good friend from Mississippi, the Republican leader,
raised the issue about where we were. He is right. There was a time not
so long ago--about 8 or 9 months ago--when we sat down and innocently
thought that three or four Members sitting together could write
something and then come to the floor, and people would say, You have
done a lot of work, go ahead. As oftentimes happens, it is not unique.
We thought we had put something together. We came to the floor and
discovered that there were 97 other Members who had some ideas--not all
97 but a good many had other thoughts about which they felt strongly.
I don't regret the effort that my colleague from Texas and I made
with Senator Sarbanes of Maryland. Senator Schumer was involved I think
to some degree in all of that, and others as well. We made a good faith
effort. We thought it would work. It didn't.
December 20, I think, was the date when there was a unanimous consent
request to bring the matter up. There was an objection expressed at
that time. From then on, we have tried all sorts of ideas and
variations that would get us to a unanimous consent where we would have
a limited number of amendments to be brought up to try to focus on this
bill. None of that worked.
We are now in a situation where we had a rule XIV on the bill on June
7, and this evening we avoided a cloture motion, for which I am
grateful. That would have delayed consideration of this bill.
I am not going to debate the merits or demerits of the bill tonight.
I see my colleague from Maryland, the chairman of the committee, is
here. He may want to be heard on this as well.
But this is an important bill. It isn't because I think it is. It is
important because you hear from almost every major metropolitan area in
the country now that is feeling the real pinch of a slowdown as a
result of the inability and an unwillingness, for obvious reasons, of
banks to lend money to major real estate and construction projects
without those projects having insurance on terrorism.
In the absence of getting that, which the industry is unwilling to
write because they cannot figure out how to cost all of this--that is
understandable as well from the business standpoint--a lot of these
projects are not moving. Jobs are being lost, and the economy is
feeling the effects of it.
That is a shorthand version of what is going on. It hasn't reached
such proportion yet that it would stop any kind of economic growth. But
it certainly, by every estimation, is having a negative impact on our
economic recovery.
Now we have put together the proposal. I know there will be
amendments offered. My hope is they will be relevant amendments so they
don't use this vehicle to bring up all sorts of extraneous matters.
We will try to limit the debate to some degree on the bill we are
proposing and the one which I suspect will finally be adopted. Even if
some amendments are accepted, it will be substantially different from
what the other body proposed.
Even if we complete our work here, there is a monumental amount of
work to be done to reach agreement with the other body. If we hope to
get that completed at some point between now and over the August
break--I hope earlier--we are going to have to finish this bill fairly
quickly.
I urge Members who have an interest to come over and be heard. If you
can limit your time so we can have a good debate--I hope no one intends
to filibuster on this bill. That would certainly be unwise, in my view.
We will try to produce a product that will get us to conference and
further refinement, and resolve the issues so we can send it to the
President of the United States for his signature; and, sort of cut this
Gordian knot that sits out there as a real choke point, if you will, in
the economic flow of our country. That is what this is at this point.
I thank again my colleagues for not objecting to the unanimous
consent request that we go to this bill. That is a good sign. I know
there is still a lot of difference. But I take that as an omen that we
at least can bring up this matter and try to resolve these differences.
I look forward to the debate tomorrow. I believe we will be here at 10
o'clock tomorrow to start debate on bill, and make opening statements,
if they need to be made, and then engage in, hopefully, a healthy but
brief debate and discussion on this important matter.
I see my colleague from Maryland here who may want to express some
thoughts.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I will be very brief. I join my very
able colleague from Connecticut in underscoring the importance of this
legislation and the problem with which it seeks to deal. It is one that
we have been wrestling with for a number of months.
I particularly commend the able Senator from Connecticut for his
leadership on this issue. He has been indefatigable in focusing our
attention on this matter and repeatedly insisting that we have to come
to terms with this issue.
I am pleased that we are now going to be able to actually move
tomorrow to the legislation and begin this important debate. I will
defer my comments on the substance of this legislation until tomorrow,
until that debate begins.

But Senator Dodd has played a major role, an instrumental role,
throughout and, obviously, has played a large part in bringing us to
the point at which we are now, which offers us now the opportunity to
finally address this issue.
I understand, under the consent agreement, it is a wide open
consideration that lies ahead of us. I would urge my colleagues of the
necessity to show some restraint as we try to do that because we are
under, obviously, some very significant time pressures.
But I look forward to that debate and the opportunity to try to
address this issue on its substance. We have heard, of course, a great
deal from across the country about this matter.
I simply want to echo the able Senator from Connecticut in saying
that I hope we can consider this matter in a very positive and
constructive way. I know Members have different ideas on how we ought
to go about it. We hope to be able to consider those in a reasonable
and proper way and reach some conclusion, hopefully, in the near
future.
I thank the Chair and I yield the floor.
The PRESIDING OFFICER. The Senator from Kansas.

____________________