- The Washington Times - Friday, September 21, 2001

The Bush administration is prepared to pay damages from lawsuits arising from last week's terrorist attacks that are not covered by the airline industry's own insurance, according to a White House official.

Under the administration's proposed Terrorist Attack Liability Act, the federal government would compensate victims for damages stemming from the destruction caused by all four hijacked planes.

"It is all aimed at ensuring that victims and their families are compensated but that the financial consequences do not cripple the industry," said White House spokeswoman Claire Buchan.

The White House also wants to consolidate all claims into the federal courts in the southern district of New York and ban the punitive awards that have raised the costs of many lawsuits.

Lawmakers yesterday wrestled with the precise scope of liability protection arising from the attacks, House Minority Leader Richard A. Gephardt, Missouri Democrat, told reporters.

"We're trying to do the right thing," Mr. Gephardt said.

Congress could vote on a financial and liability package as early as today.

On Tuesday, Leo Mullin, chairman and chief executive officer of Atlanta-based Delta Air Lines, asked for legislation that would go further than the administration proposal. He told the House Transportation and Infrastructure Committee that legislation should bar suits against the airlines for damages and deaths on the ground.

"It is absolutely critical that this issue be addressed in your legislation," Mr. Mullin said.

The liability issue has emerged as a major hurdle to revitalizing the airline industry as it attempts to recover from last week's attacks.

Industry executives told the committee on Tuesday that even with the administration's proposed injection of $5 billion in government money, Wall Street will refuse to grant vital long-term financing without protection from a slew of potential lawsuits for injuries and property destruction.

"The capital markets correctly fear an avalanche of lawsuits, which could bankrupt our companies," said Tom Horton, chief financial officer of American Airlines. "And until that cloud is lifted, I don't think we're going to have any access to the capital markets."

Mr. Mullin said that, without liability protection, the airlines face judgments beyond what their current insurance covers.

Already strapped for cash, some airlines would face bankruptcy, he said.

The airlines have also found that, since early this week, insurers have balked at renewing policies that guarantee against war risks, while simultaneously raising rates for other types of coverage. Liability problems "may well prevent airlines from purchasing insurance until such time as the litigation is concluded," Mr. Mullin said.

Mr. Mullin said airlines face premium increases of up to $1 billion. That would effectively double airline-insurance costs, which amounted to roughly $1 billion last year, according to an estimate by the Aviation Insurance Association.

Regional carriers and corporate aviation are also feeling the pinch from insurers.

"The underwriters are showing tremendous anxiety for all aviation-risk insurance, not only for the airlines," said Darryl Hyde, manager of the Atlanta office of CS&A Aviation Insurance, a broker that writes policies backed by large underwriters, such as Lloyd's of London.

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