- The Washington Times - Friday, October 18, 2002

The House and Senate agreed on compromise legislation yesterday that would make the federal government pay most of the damages for major acts of terrorism, but the amount would be decided under state laws.

State laws also would be used to decide whether to impose punitive damages in lawsuits resulting from terrorism.

The compromise does not include the ban on punitive damages sought by the Bush administration, which was the main issue holding up an agreement.

White House spokeswoman Claire Buchan said that the compromise overcomes President Bush's objections to previous terrorism insurance proposals and that he would sign the bill.

"We're very pleased that the elements of a deal appear to be falling together," Miss Buchan said. "The president believes it's very important for creating new jobs, for getting construction workers back to work and for encouraging investment for construction projects."

Insurance companies would be required to pay the first $10 billion in damages in the first year of the three-year bill, $12.5 billion the second year and $15 billion the last year. The federal government would pay the rest.

The legislation would appoint one federal court to rule on all lawsuits involving terrorism. However, the court would be required to decide the cases based on the laws of the states where the terrorist acts occurred.

Mr. Bush has made terrorism insurance a priority this year. He said that about 300,000 construction jobs have been lost because projects cannot get the insurance required by banks before they make the loans.

A senior Bush administration official said that the president supported the compromise proposal because it would consolidate terrorism cases under one federal court.

"What that does is make sure the litigation does not get out of control," the administration official said. "This will ensure the litigation process is fair and orderly. This will be a significant improvement for the economy and the legal system."

Nevertheless, he said, the president had reservations about provisions that allow laws of the states where the terrorism occurred to determine damages.

Six states ban punitive damages and 15 cap the amount of punitive damages allowed. Other states have a patchwork of laws for deciding an amount.

Policyholders victimized by terrorists would have their deductibles reduced when damages exceed the $10 billion mark the first year and the higher amounts in the next two years. The policyholders would be required to pay 7 percent of their deductible the first year, 10 percent the second year and 15 percent the third year. The federal government would pay the rest of the deductible.

"It's very good for jobs, it's very good for the economy," said Sen. Christopher J. Dodd, Connecticut Democrat, who helped craft the compromise.

The proposed federal "backstop" on terrorism would lower insurance rates enough to make policies affordable for developers and builders, he said.

"Business cannot function if you cannot get insurance," Mr. Dodd said. "This is having a very negative effect on our economy. This is a needed bill."

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