Terror Insurance Bill Backed by Bush Is Passed

A bill to make the federal government the insurer of last resort for future terrorist attacks, touted by President Bush as critical to the nation’s economic security, cleared the Senate by a wide margin and was sent to the White House on Tuesday.

“Terrorism insurance will help get America’s hard hats back on the job, create new jobs for America’s workers, and spur billions in new investment in construction projects all across the country,” Bush said in a statement after the legislation was passed. “This bill comes at a critical time, as commercial construction is at a six-year low.”

The 86-11 vote came as the Senate headed toward adjournment of its lame-duck session, passing another one of Bush’s priorities in the war on terrorism, a bill creating a Department of Homeland Security.

“We have dealt with ... the physical security of our country since 9/11,” said Sen. Christopher J. Dodd (D-Conn.), one of the bill’s sponsors. “But no security is ever final unless you’ve also dealt with economic security.”

The bill had been stalled for months because of a dispute over Republican efforts to limit damages in terrorism-related lawsuits. But Bush broke the deadlock, persuading the GOP-controlled House last week to pass the bill, saying it was too important to the economy to delay any longer.

“We want to get this done because the president wants to get it done,” a Senate GOP leadership aide said Tuesday.

California’s two Democratic senators, Barbara Boxer and Dianne Feinstein, voted for the bill.

The legislation creates a three-year, $100-billion program, under which the government will cover 90% of terrorism-related losses after insurance companies pay an initial amount. Insurers will be responsible for the remaining 10%.

The industry will be required to repay the government -- through a surcharge on commercial policyholders -- for payments up to $10 billion in the first year, $12.5 billion in the second year and $15 billion in the third year.

The legislation is the second major package to aid an industry from the economic fallout of the Sept. 11 attacks. The other was a $15-billion package for the airline industry. Insurance industry officials say the insurance measure is not a bailout because government funds will go to policy-holders.

Sen. Ben Nelson (D-Neb.) called the bill a “backstop,” not a bailout, for catastrophic losses resulting from acts of terrorism.

“This issue is about the economy,” he said. “It’s not about insurance.... Fundamentally, it is a jobs bill.”

“It’s grease on the economic wheel,” said Kurt Pfotenhauer, senior vice president of government affairs for the Mortgage Bankers Assn. “Our members were telling us that [the lack or high cost of terrorism insurance] was a real factor in their day-to-day transactions, and this will be a big help.”

Consumer and taxpayer groups questioned whether the bill was needed.

“More than a year after Sept. 11, a private market for terror insurance is developing and this kind of broad taxpayer assistance is no longer necessary,” said Travis Plunkett, legislative director for the Consumer Federation of America. “Congress is roaring up to the scene of the accident with a lot of money while the patient has gotten up and limped away.”

The industry expects to be able to cover the estimated $40 billion to $50 billion in claims arising from last year’s attacks, and this legislation does not cover them. Industry officials have said that without government assistance, they cannot insure against the incalculable liability from future attacks.

A wide range of business interests, from builders and mortgage bankers to hotels and sports teams, lobbied for the legislation, contending that the unavailability or the high cost of terrorism insurance has stalled more than $15 billion in projects.

But supporters were unable to provide a list of such projects. “No one really wants to call attention to problems they’re having in obtaining terrorism insurance,” said a spokeswoman for the Real Estate Roundtable, a Washington-based policy group.

Still, businesses say they are paying more for insurance coverage, but getting less.

In Port Elizabeth, N.J., the privately run Maher Terminals Inc. is paying about $1 million for property insurance -- about double what it paid a year ago -- that provides only one-fourth the terrorism coverage the container terminal operator needs, said Sam Crane, Maher’s vice president of external affairs.

He said the company has proceeded with plans to build new terminals. “We’ve continued ahead because we assumed that at some point there would be action by Congress,” he said, “and that a market would be created that would make it affordable and available.”

Some Republicans were upset that the bill did not bar individuals injured in an attack from suing businesses for punitive damages. Bush has pledged to make reform of the legal system a priority when Republicans take control of both houses of Congress in January.

Democrats argued that the threat of punitive damages was necessary to force businesses to take reasonable steps to ensure security.

Dodd said he hopes the measure is never needed. “But it’s a critically important safety net in place if the threat arises,” he said.

“None of us can say with any certainty whether this structure we created will do the job,” Dodd added.

“We’ve never done this before. But we’re relying on expert people who have told us this will be enough for the market to begin to take over and price a product so people can afford it.”