Terrorism Debate Heats Up as Democrats Block Republican Effort

June 17, 2002

The battle over terrorism insurance heated up one notch June 13 as Senate Democrats blocked a Republican effort to limit lawsuit claims as part of a terrorism-insurance bill, putting forth a battle with the White House and the Republican-controlled House over legislation that has been in limbo for months.

The Senate voted 50 to 46 along party lines to reject an amendment, proposed by Sen. Mitch McConnell (R-Ky.), to prohibit punitive damages in civil cases involving businesses or buildings attacked by terrorists, except in the case where the businesses were found criminally negligent.

Republicans wanted the provision in a bill that would help pay the insurance costs of future terrorist attacks.

The bill, written by Sens. Christopher J. Dodd (D-Conn.), Charles E. Schumer (D-N.Y.), Harry M. Reid (D-Nev.) and Paul S. Sarbanes (D-Md.), would make it necessary for insurance companies first to pay a portion of claims resulting from a terrorist attack. The amount of that initial payment has not yet been determined, but it will vary depending on each insurer’s market share.

The government would then be responsible for 80 percent of the remaining claims totaling less than $10 billion and 90 percent of claims totaling more than $10 billion. Insurers would pick up the rest.

The House passed a bill in 2001 that would make it necessary for insurers to cover the first $1 billion in losses arising from a terrorist attack. The government would pay 90 percent of additional claims. The insurers and policyholders eventually would have to repay the money.

The House bill also has limitations on lawsuits.

While the White House is behind a federal backup for insurance claims, the administration wants to protect businesses from lawsuits by victims of a terrorist attack.

The Democratic-sponsored legislation prohibits federal money from being used to pay punitive damages, however it does not protect businesses from claims.

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