Background
The terrorist attacks of September 11, 2001, caused tremendous loss of life, property, and income. The response of private insurers, charities, and the federal government to the losses of individuals and businesses was on a scale and of a scope never before seen.
Private insurance payments are expected to be the largest for any single-event loss in U.S. history and far in excess of the losses for any other terrorist-related event. Estimates of insured losses from 9/11 are as high as $32.5 billion (Hartwig, 2004a), over 50 percent more than the $20 billion in insured losses resulting from 1992’s Hurricane Andrew, the second-largest single-event insured loss in U.S. history (Tillinghast-Towers Perrin, 2001). Insured losses from the September 11 attacks were also more than 30 times larger than the next-largest insured loss from a terrorist attack, the $907 million from a bomb attack in London in April 1993 (Swiss Rein- surance Company, 2002, p. 3).
The extent of the charitable response to the September 11 attacks was just as unprecedented. According to a number of surveys, nearly two-thirds of American households made financial contributions to charities for victims of the September 11 attacks (The Center on Philanthropy at Indiana University, 2003),1 and charitable
donations exceeded $2.9 billion (Renz, Cuccaro, and Marino, 2003, p. 19).2 No
other event in U.S. history has generated anything close to this level of philanthropic giving (Seessel, 2002b, p. 1).
The federal government promised $20 billion to help the New York City area recover from the attacks (U.S. General Accounting Office [now the Government Ac- ____________
1 The survey was conducted from October 22 to November 28, 2001. The Center on Philanthropy also reported that a USA Today/CNN/Gallup poll conducted on December 14–16, 2001, found that 64 percent of respon- dents reported making contributions to charities for 9/11 victims.
2 This figure includes contributions raised by 40 of the largest September 11 relief funds. More than 350 relief funds were created after 9/11 to aid victims, their families, and other persons and communities affected by the disaster. Funds raised by these 40 organizations account for the vast majority of the total (Renz, Cuccaro, and Marino, 2003, p. 19).
2 Compensation for Losses from the 9/11 Terrorist Attacks
countability Office], 2003b, p. 15). It also distributed $5 billion to the airlines and offered loan guarantees. Significantly, Congress moved quickly to limit the use of the tort system for recouping losses caused by the attacks. Congress capped the liability of airlines, airports, and local governments to existing insurance coverage limits and required all lawsuits to be filed in federal court. In return, Congress established the September 11th Victim Compensation Fund of 2001 (VCF) to provide compensa- tion to the families and dependents of those killed and injured in the immediate af- termath of the attacks.
These measures were adopted quickly with little time for reflection, analysis, or coordination. President Bush pledged $20 billion to rebuild New York City in the days immediately following the attacks, and the VCF and tort restrictions were signed into law 11 days after the attacks. Charities raised hundreds of millions of dollars before the VCF was enacted into law, and because of the way the fund-raising campaigns were crafted, some major charities had less flexibility than usual in how they could spend the funds.
The tort restrictions, the VCF, and the tremendous government incentives to revitalize the New York economy applied solely to the events of 9/11. Charities re- ceived special dispensations from the Internal Revenue Service, which allowed them to distribute money to the families of those killed in the attacks, regardless of their need. In addition, there is no guarantee that insurance coverage will be as widespread in the event of a future attack.
The Policy Problem
Because the response to the losses from the 9/11 attacks was for the most part event- specific, it does not provide a plan for the future. Nor is there general agreement on what role the four basic mechanisms of the compensation system—insurance, the tort system, government, and charity—should play in providing assistance and com- pensation for injury and financial loss due to terrorist attacks.
Future large-scale terrorist attacks may occur in the United States. We as a soci- ety need to consider what approach should be taken to assist and compensate indi- viduals and businesses that suffer injury and financial loss in the event of a future at- tack and what public policies and programs are needed to further that approach.
Purpose of This Study
This report describes compensation and assistance provided to individuals who were killed or injured in the September 11 attacks. It also describes compensation to those who suffered emotional injuries, those who suffered injuries due to environmental
Introduction 3
exposures, residents who were displaced from their homes, businesses that were de- stroyed or weakened, and workers who lost income or their jobs in New York City due to the attack on the World Trade Center (WTC). 3 Previous studies have focused
on specific pieces of the compensation system, such as the performance of various charities, the September 11th Victim Compensation Fund, and the Federal Emer- gency Management Administration (FEMA). We provide an overview of the benefits provided by the entire compensation system, including private insurance, the federal government, charities, and the tort system. Our purpose is threefold: (1) to provide an historical record of the benefits that were provided as a result of the September 11 attacks, (2) to assess the performance of various parts of the compensation system, and (3) to identify the issues raised by 9/11 that should be addressed in developing policies for compensation and assistance for future terrorist attacks.
In this study, we focus our attention on New York City because it is the com- munity that clearly suffered the most from the attacks. We describe the benefits that were made available to various groups of victims and quantify the benefits where pos- sible. We were not able to develop comprehensive estimates of the losses suffered by the various groups of victims or to determine the percentage of losses that were cov- ered by the various benefits programs. However, we do use available information and interviews with knowledgeable stakeholders in New York City to provide qualitative descriptions of which groups of victims were better or more poorly served relative to their losses. Because well-developed programs are in place to provide assistance to state and local governments for cleanup and rebuilding after a disaster, we restrict our attention to the benefits that were made available to individuals and businesses.
Organization of This Report
In Chapter Two, we define key terms, lay out the framework for our analysis, and describe our research methods. Chapters Three through Seven present our findings on the postdisaster experiences of the major groups of victims. Chapters Three and Four focus on benefits to those who were injured (either physically or emotionally) or killed by the attacks. Chapter Three details and assesses benefit programs for ci- vilians and for emergency responders who were killed or seriously injured. Chapter Four examines programs available to those who suffered injuries from exposure to smoke and dust that were released during the collapse of the WTC and subsequent ____________
3 Although other individuals and businesses across the country suffered financial losses from the events of 9/11, this report focuses on financial losses in the New York City area after the attacks. In this report, we use the term attacks to refer collectively to the plane crashes at the World Trade Center and the Pentagon and in Shanksville, Pennsylvania. When examining benefits and financial losses in New York City, we use the term attack or attack on the World Trade Center (WTC).
4 Compensation for Losses from the 9/11 Terrorist Attacks
cleanup of the site, and to those in New York City who suffered emotional injuries from the attack.
Chapters Five and Six examine benefits that were provided to individuals for losses not associated with personal injuries. Chapter Five examines reimbursement for property damage and additional expenses incurred by residents of Lower Manhat- tan4 as a result of the disaster. Chapter Six turns to the broader economic effects of
the attack on the World Trade Center. It examines benefits to workers in New York City, and their families, who lost jobs or suffered a substantial decline in income.
Chapter Seven examines the programs available for compensating losses in- curred by New York City businesses due to the events of 9/11. Those losses include property damage and losses in revenue and profits. We examine the experiences of large and small firms separately because the effects of the attack on the WTC and the available benefits varied widely for the two groups.
Chapter Eight concludes the report by addressing the benefits identified in the previous five chapters and analyzing them from several points of view. It also summa- rizes the roles played by each of the four compensation mechanisms—private insur- ance, the tort system, government programs, and charitable giving. Finally, it raises fundamental issues that policymakers should address when they consider possible compensation approaches the country might take in the event of another major ter- rorist attack.
____________
4 We use the term Lower Manhattan to refer to the area south of Canal Street (see the map and discussion in Ap- pendix D).
5
CHAPTER TWO