America acts: swift legislative responses to the September 11 attacks; Congress moved to stabilize the airline industry, to establish a victim compensation fund and to strengthen airport and aircraft security.

AuthorCampbell, Richard P.

THE devastation wrought by the September 11, 2001, attacks on the World Trade Center in New York City and the Pentagon, as well as the air crash in Pennsylvania, remains difficult to comprehend. Nearly three thousand people were killed and hundreds injured; thousands of families were torn apart. The property damage is so complete that the nuclear war term "ground zero" is used to describe the site of the attack in New York City.

The resulting economic dislocation from the attack posed a credible threat to bring the entire commercial airline industry down in an apocalyptic crash emulating the four aircraft that disintegrated. Confronted with the potential failure of the industry and operating in a wartime mode, the U.S. Congress enacted and the President signed on September 22 the Air Transportation Safety and System Stabilization Act (ATSSSA) (1) designed to shore up the industry financially for the short term, to assure that the U.S. cross-continental economy had a viable air transportation system, and to establish the September 11th Victims Compensation Fund of 2001 (VCF) to provide compensation to those who were injured or lost family members in the attacks.

In order to help protect against similar events occurring again, Congress also speedily enacted the Aviation Transportation Security Act (Security Act) (2) on November 19. It provides for federal oversight of airport security screening, improved in-flight security measures and the development of enhanced measures to increase aircraft security.

Regulations implementing the VCF were published on December 21, 2001, as an interim final rule. (3) They became final on January 21, 2002, but the Department of Justice remained open to further comments. In view of the strong feelings the VCF had engendered and the criticism of some of its provisions--such as an offset for collateral source compensation, presumed economic loss tables, and a presumed award for non-economic losses sustained of $250,000 per victim, plus an additional $50,000 for the spouse and each dependent of the deceased victim--it was expected that there would be further refinements to the regulations or even a legal challenge as to whether the regulations properly interpret the VCF statute.

The final rule was issued on March 13, (4) according to which these changes were made to the interim rule:

* Clarified how certain "collateral resources," including pensions, will be treated;

* Expressed the intention to assist claimants in understanding how certain types of collateral offsets will be treated to help claimants to decide whether to use the VCF;

* Adjusted the "presumed" economic loss methodology, which should increase potential awards for most claimants;

* Increased the "presumed" non-economic award in certain cases;

* Clarified the intention that most families of victims who died should receive a minimum of $250,000; and

* Provided certain exceptions to the requirement that injured victims must have received medical treatment within 24 hours of injury.


The ATSSSA provides substantial financial assistance to U.S. air carriers (5) and establishes a mechanism by which all individuals who were injured and the personal representatives of those killed in the attacks may seek compensation for their personal injury or wrongful death claims without establishing fault.

  1. Title I -- Airline Stabilization

    To stabilize the financial condition of U.S. airlines, the U.S. President is authorized to issue up to $10 billion in federal loan guarantees and $5 billion in direct compensation. The latter sum applies to direct losses resulting from the federal ground stop order of September 11 and any subsequent ground stop orders and to incremental losses sustained by air carriers as a direct result of the September 11 attacks, continuing through December 31, 2001.

    Title I also creates the Air Transportation Stabilization Board, which serves as the decision maker on applications for the federal loan guarantees. The board is composed of Cabinet officers, the chairman of the Board of Governors of the Federal Reserve System and the Comptroller General of the United States.

    To receive a portion of the $5 billion direct compensation, an air carrier must demonstrate its losses by sworn financial statements and supporting data. A carrier will receive the lesser amount of its direct and incremental losses or a calculation based on the available seats or cargo revenue ton-miles just prior to the September 11 attacks.

    1. Limitation on Employee Compensation

      To receive the benefits of the credit instruments, a carrier must enter into an agreement with the President that places restrictions on the total compensation of certain of the carrier's employees. "Total compensation" is defined as "salary, bonuses, awards of stock, and other financial benefits provided by an air carrier to an officer or employee of the air carrier." The carrier must agree that during a two-year period beginning September 11 no officer or employee whose total compensation exceeded $300,000 in calendar year 2000 will (1) receive total compensation that exceeds that employee's compensation for calendar year 2000 during any 12 consecutive months of the two- year term and (2) will receive severance pay or other termination benefits that exceed twice that employee's maximum compensation for the calendar year 2000.

      The salaries of employees whose compensation is determined through an existing collective bargaining agreement entered into prior to September 11, 2001, are excluded from this provision.

    2. Continuance of Certain Air Service

      Under the ATSSSA, the U.S. Secretary of Transportation will work to ensure that all communities continue to receive adequate air transportation service. The act provides $120 million to ensure that essential service to small communities continues without interruption. It also authorizes the secretary to require carriers that receive direct financial assistance to continue scheduled air service to any point served by that carrier prior to September 11.

  2. Title II -- Aviation Insurance

    Title II of the ATSSA allows the Secretary of Transportation to reimburse air carriers for insurance premium rate increases and amends provisions of the United States Code relating to the secretary's ability to provide insurance and reinsurance for aircraft operations. (6)

    The reimbursement applies to premiums for insurance coverage that ends before October 1, 2002, and the amount will reflect the increase in premiums between coverage ending before October 1, 2002, and coverage for a "comparable operation" between September 4, 2001, and September 10, 2001. The reimbursement authority expired on March 21, 2002.

    1. Future Attacks Liability Cap

      The ATSSSA limits the liability of U.S. air carriers to third parties for any action that arises from an act of terrorism occurring between September 22, 2001, and March 21, 2002. (7) If the Secretary of Transportation certifies that an air carrier is the victim of an act of terrorism, the carrier will not be responsible for the losses of third parties in excess of $100 million, the federal government assuming liability above that cap. The ATSSSA also prohibits the awarding of punitive damages against an air carrier, or the federal government when it assumes above the cap, in an action arising from a certified terrorist act.

    2. Reinsurance and Premiums

      The ATSSSA eliminates the provision of 49 U.S.C. [section] 44304(b) that restricted the premium rates at which the Secretary of Transportation could provide and purchase reinsurance. The secretary retains the power to reinsure any part of the insurance provided by an insurance carrier and to reinsure with, transfer to, or transfer back to the carrier any insurance or reinsurance provided by the secretary.

      Anticipating increased carrier expenses, the ATSSSA also allows the secretary to make allowances to the insurance carrier for expenses incurred in providing services and facilities the secretary considers good business practices.

  3. Title III -- Tax Provisions

    The ATSSSA extended the deadline for eligible air carriers whose excise tax deposits were due after September 10 but before November 15, 2001. Compensation received under the ATSSSA may not be excluded from gross income under the Internal Revenue Code. Payments under ATSSSA already have been received by major air carriers.

  4. Title IV -- Victim Compensation

    Title IV establishes the September 11th Victim Compensation Fund of 2001, whose purpose, according to Section 403 of the act, is "to provide compensation to any individual (or relatives of a deceased individual) who was physically injured or killed as a result of the terrorist-related aircraft crashes of September 11, 2001." The scope of the word "relatives" is not defined. The right to participate in the fund is limited to physical injury and wrongful death claims.

    1. Procedure

      The U.S. Attorney General will administer the victim compensation program through an appointed "special master," and in late November, Attorney General John Ashcroft appointed Kenneth R. Feinberg as special master. He was described in a Department of Justice press release as a Washington, D.C., lawyer specializing in mediation, arbitration and negotiation.

      Claimants who elect to utilize the victim compensation scheme must file their claims no later than December 21; 2003, two years after the effective date of the regulations. They must submit claim forms to be developed by the special master that will require (1) information detailing the physical harm or confirming the death, (2) disclosure of claimed economic and non-economic losses and (3) information about all collateral source compensation.

      Section 402(5) of the ATSSSA defines "economic loss" as:

      any pecuniary loss resulting from harm (including the loss of earnings or other benefits related to employment, medical expense loss, replacement services loss, loss due to death, burial costs, and loss of...

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