Published on Saturday, December 8, 2001 in Boulder Daily Camera
House Wants to Bail Out Insurance Companies
by Christopher Brauchli
If all the while I think on thee dear friend All losses are restor'd and sorrows end.
Here is the question of the week: If you were able to help one of the following groups that is suffering as a result of the events of Sept. 11, which group would it be: (a) individuals who lost their jobs; (b) owners of small businesses who have been forced out of business due to their proximity to ground zero; (c) insurance companies that are paying out claims. If you selected (a) or (b) don't give up your day job to run for Congress. If you selected (c) you would make an excellent congressperson and should consider running for office in 2002 when the next congressional elections take place.
In an effort to respond to needs that have arisen as a result of the Sept. 11 attack, and the hardship that has been directly inflicted on thousands of people and indirectly on many millions more, the House of Representatives has come up with a proposal that is astonishing if only because it is so totally unexpected. It follows closely on the economic stimulus plan that the House passed proposing refunds of taxes of more than $1 billion to the largest corporations in America in an effort to help out the economy. That was brilliant in its own right. This is equally so. It is a plan to help out insurance companies. It is needed because, to quote Michael G. Oxley, an Ohio Republican member of Congress: "The glue that holds our economy together is insurance."
The goal of the legislation is to protect insurance companies from having to bear unbearable losses in the event of future terrorist attacks. It does that by (a) providing lots of cash for insurance companies from people who are insured and by taxpayers and (b) by limiting the rights of individuals to sue the insurance companies.
The measure that was passed by the House of Representatives on Nov. 29 would provide as much as $100 billion in government loans to the insurance industry to cover losses from future large-scale terrorist attacks. The bill would create a federal loan program to cover 90 percent of any insurance industry losses in excess of $1 billion. The first $20 billion would be repaid by the insurance companies through a special assessment. The secretary of the treasury would then decide whether to impose a special assessment on insurance policy holders or have the balance paid by taxpayers. Although no guidelines have yet been promulgated, my guess is the program would work something like this.
If there were a large-scale terrorist attack that met the threshold amount required to activate the plan, policy holders in affected companies would get a letter from the insurance company saying as a result of the attack, the policy holder now had the opportunity to share in the loss by paying a special assessment. Not clear is what the consequence to a recalcitrant policy holder would be.
If the treasury secretary were a Republican, he or she might conclude that it was unfair to burden policyholders with such payments and could propose as an alternative that all taxpayers share in the insurance company's loss by using taxpayer dollars to bail out the insurance companies.
Readers may conclude from this that if Congress plans for the taxpayer to bail out insurance companies in bad times, it must surely contemplate having the taxpayer share in the insurance companies' profits during good times. Taxpayers would then become de facto shareholders. Anyone thinking that is demonstrating a complete lack of knowledge as to how the free-enterprise system works. If the legislation is adopted, taxpayers will only share in the bad fortunes of the insurance companies.
Gifts of cash to insurance companies are not the only bonanzas for insurance companies in this piece of legislation. It also ensures that the kinds of lawsuits some believe may be filed as a result of the Sept. 11 disaster will not be filed in the event of a future terrorist attack. It helps insurance companies by taking away rights from individuals. While the nation is still mourning the loss of life and injury inflicted on victims of the attack, members of the House put aside maudlin thoughts of the past and look instead to the future security of the insurance industry.
The House Bill would eliminate the possibility of collecting punitive damages from building owners or business owners even if it turned out that they had behaved in a completely irresponsible fashion or even contributed to the consequences of a terrorist act because of their negligence. The bill would limit a defendant's liability for a victim's pain and suffering. The bill would require that all suits be heard in federal court. The bill would limit lawyers' fees to a maximum of 20 percent of any award or settlement and a lawyer collecting more than that could be sent to prison for up to one year. The bill imposes restrictions on the ability of victims of future attacks to collect damages in court against insurers and other businesses.
Applauding the House action, Mr. Bush said the legislation was important for "ensuring that victims of terrorism don't also become subjects of unfair lawsuits." The victims of whom he was not thinking are those are who injured or killed in a terrorist attack. The victims of whom he was thinking are the insurance companies that insure companies that might be successfully sued following a terrorist attack. And those companies, as Mr. Oxley explained, are the glue that holds the economy together. The people who are deprived of the right to sue aren't glue they're just people.
Copyright 2001 The Daily Camera