99–010

Calendar No. 269

107TH CONGRESS REPORT

1st Session " ! SENATE 107–116

WORLD TRADE CENTER ATTACK CLAIMS ACT

DECEMBER 7, 2001.—Ordered to be printed

Mr. JEFFORDS, from the Committee on Environment and Public

Works, submitted the following

REPORT

[to accompany S. 1624]

[Including cost estimate of the Congressional Budget Office]

The Committee on Environment and Public Works, to which was

referred a bill (S.1624), to establish the Office of World Trade Center Attack Claims to pay claims for injury to businesses and property suffered as a result of the attack on the World Trade Center

in New York City that occurred on September 11, 2001, and for

other purposes, having considered the same, reports favorably

thereon with an amendment and recommends that the bill, as

amended, do pass.

BACKGROUND

On September 11, 2001, terrorists attacked the Pentagon and the

World Trade Center. These horrible events marked the first time

since the 1941 attack on Pearl Harbor that the United States has

suffered a foreign attack on domestic soil. The magnitude and enormity of these attacks are unprecedented in our Nation’s history.

Thousands of innocent people lost their lives. Tens of thousands

more lost their homes, their businesses, their jobs, their livelihoods

as a result of this attack.

In New York, the attack left in its wake a mountain of debris,

damaged buildings and inaccessible businesses and residences.

New York City will lose an estimated $105 billion as a result of the

attacks over the next two years. The attack damaged or destroyed

nearly 25 million square feet of office space, roughly equivalent to

20 percent of all the office space in downtown New York. The at-
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tack physically displaced some 850 businesses and over 125,000

workers, and an additional 9,000 businesses and over 145,000 people have only restricted access to their property.

Before the work of rebuilding lower Manhattan can begin, crews

must remove over a million tons of debris from the site, a process

that will likely take more than a year. Physical reconstruction of

destroyed buildings is most likely years away. Many businesses

and individuals do not have adequate insurance or resources to

sustain themselves in the near term or to rebuild their businesses

and lives in the long term.

S. 1624, the ‘‘World Trade Center Attack Claims Act,’’ responds

to the overwhelming needs of the businesses and the people of

lower Manhattan, those directly and seriously impacted by the recent attacks. The bill would provide compensation for residential

and business losses suffered by injured persons as a result of the

events of September 11th. The bill would create an Office of World

Trade Center Attack Claims (Office) within the Federal Emergency

Management Agency (FEMA). The Office would process and pay

claims at the discretion of the Director of the Federal Emergency

Management Agency (Director) acting in accordance with the legislation and regulations promulgated by FEMA.

SECTION-BY-SECTION ANALYSIS

Section 1. Short Title

The World Trade Center Attack Claims Act.

Section 2. Findings and Purposes

SUMMARY

Section 2 sets out the Congressional findings and purposes of the

legislation.

DISCUSSION

The purpose of the legislation is to compensate certain individuals and businesses located within a specific geographic region

within lower Manhattan suffering injury as a direct result of the

attack. It is not the intent of this committee to create an entitlement to disaster relief funds made available under this Act. Nor is

it the intent of this committee to compensate claimants for losses

that bear no relation to the September 11th attack. The intent of

the legislation is to allow the Director to determine and to make

discretionary awards on a case-by-case basis for qualifying business

and residential loss caused by the September 11th attacks until the

Office exhausts funds authorized and appropriated under this Act.

For businesses and residences located in a specific geographic region in Lower Manhattan prior to September 11, 2001, this Act

provides aid to assist attack victims to continue, replace, start, establish, or locate their business or residence in New York City.

Section 3. Definitions

Section 3 defines the following terms for purposes of the legislation.
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Affected area.—The term ‘‘affected area’’ means the area in lower

Manhattan, New York City, that is comprised of the area located

on or south of Canal Street, on or south of East Broadway (east of

its intersection with Canal Street), or on or south of Grand Street

(east of its intersection with East Broadway).

Attack.—The term ‘‘attack’’ means the attack on the World Trade

Center in New York City that occurred on September 11, 2001.

Claim.—The term ‘‘claim’’ means a claim by an injured person

under this Act for payment for injury suffered by the injured person as a result of the attack.

Claimant.—The term ‘‘claimant’’ means an injured person that

submits a claim under section 5(b) of the bill.

Director.—The term ‘‘Director’’ means— (A) the Director of the Federal Emergency Management Agency; or

(B) if an Independent Claims Manager is appointed under section 4(d)(4) of the bill, the Independent Claims Manager.

Injured person.—

(A) In General.—The term ‘‘injured person’’ means an individual, corporation, partnership, company, association, cooperative, joint venture, limited liability company, estate, trust, or

nonprofit organization that

(i) suffered injury as a result of the attack; and

(ii) resides or maintains a place of business in the affected

area.

(B) Exclusions.—The term ‘‘injured person’’ does not include

(i) a lender that holds a mortgage on or security interest

in real or personal property affected by the attack; or

(ii) a person that holds a lien on real or personal property

affected by the attack.

Office.—The term ‘‘Office’’ means the Office of World Trade Attack Claims established in section 4 of the legislation.

Section 4. Office of World Trade Center Attack Claims

SUMMARY

Section 4 establishes within FEMA an Office of World Trade

Center Attack Claims. This section also authorizes the Director to

appoint an Independent Claims Manager to head the Office and to

assume the duties of the Director under this Act.

DISCUSSION

The purpose of the Office is to receive, to process, and to pay

claims in accordance with the provisions set out in section 5 of the

bill. The Office will not diminish FEMA’s authority or funding

under the Stafford Act. Funding for the Office will come from funds

authorized through this legislation, and not from the Disaster Relief Fund or other FEMA sources. But the committee does not intend to prohibit FEMA from utilizing Stafford Act resources in the

administration of the program on a cost reimbursable basis provided that the use of those resources does not substantially affect

FEMA’s ability to carry out its Stafford Act mission. Examples of

Stafford Act resources that FEMA might use in administering the

Office include FEMA’s National Processing Service Centers, its in-
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formation technology capabilities, and its cadre of experienced, customer-service oriented disaster assistance employees. The Director

may also hire temporary personnel to staff the Office, and other

Federal agencies may detail, on a reimbursable basis, personnel to

assist in carrying out the duties of the Office.

The committee does not view the Office established under S.

1624 as duplicative of other Federal programs currently available

to victims of the September 11th attack. Recent news accounts concerning various relief agencies and their slow and sometimes ineffectual administration of disaster assistance shows that many directly affected victims are not receiving the necessary funds to restart their lives and their businesses. The intent of S. 1624 is to

provide direct and timely assistance to victims who qualify under

this Act.

Section 5. Compensation for Victims of the Attack

SUMMARY

Section 5 establishes the framework for the processing and payment of claims by the Office of World Trade Center Attack Claims

and places the burden of substantiating loss on the claimant. Section 5 also establishes a claimant appeals process.

DISCUSSION

Processing Claims

In processing claims and making payment decisions, the Director

will have complete discretion to determine disposition of each claim

in accordance with the provisions of this legislation and with regulations promulgated by FEMA for the purpose of processing claims

under this Act. The Director will publish final interim regulations

in the federal register not later than 45 days after enactment of

this legislation. Not later than two years after the publication of

the final interim regulations, an injured person may file a claim for

injury suffered as a result of the September 11th terrorist attacks.

Qualifying claims fall into two categories of compensable loss residential loss and business loss. Residential losses include uninsured

or underinsured property loss, damage to or destruction of physical

infrastructure, insurance deductibles, temporary living or relocation expense, debris removal and other cleanup costs, or any other

type of related injury that Director determines appropriate.

Business loss may include uninsured or underinsured property

loss, damage to or destruction of tangible assets or inventory, business interruption loss, overhead costs, employee wages for work not

performed, insurance deductibles, temporary relocation expenses,

debris removal and cleanup costs, and any other type of injury that

the Director determines appropriate. Business loss claims are subject to an additional limitation. An injured person may receive compensation for business loss only if the injured person’s business facility has suffered disruption of power, disruption in telecommunications capacity, damage to or destruction of physical infrastructure, or disruption in physical access by employees or customers to

the business facility.

Any qualifying claim is subject to a payment ceiling and other

offsets. Payment on a claim submitted by an injured person may
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not exceed the amount necessary to compensate for injuries suffered during the 18-month period following the September 11th attack. Also, payment on an injured person’s claim may not exceed $500,000, except in those instances where the Director determines

a greater amount is appropriate.

To prevent recovery by a claimant in excess of the equivalent of

actual compensatory damages, the committee anticipates that insured claimants will seek redress from their insurance companies

first. The committee expects that the Office will require insured

claimants to file claims with their insurance companies first and to

disclose the extent of their insurance coverage to the Office. However, it is not the committee’s intent that insured claimants wait

for insurance companies to fully process their claims before filing

a claim or receiving payment under this Act.

In calculating the amount of any compensable claim, the committee expects the Office will consider expected insurance proceeds

an injured party may receive. Awards are also offset by other benefits received through FEMA’s individual and public assistance benefits program and other government programs as a result of the

September 11th attacks. But the office should not offset awards by

the amount of any government loan received by the claimant.

It is important to note that the intent of the committee is not to

eliminate or to supplant the duty owed by individual insurance

companies to their policyholders. To the maximum extent possible,

the committee expects that insured claimants will seek redress

under existing insurance policies first. The intent of the legislation

is to provide a secondary source of remuneration for actual compensatory damages suffered as a direct result of the attack.

Burden of Proof

Under this section, the claimant has the burden of substantiating

loss. If documentary evidence substantiating the injury is not available, the Director may pay a claim based on an affidavit or other

documentation provided by the claimant.

Payment of Claims

Once an injured person has submitted a claim for loss to the Office, the Director, to the maximum extent practicable, will process

the claim within 180 days. If the Director determines the injured

party has suffered compensable loss under this section, the Director will pay the claim subject to the limitations set out in this section. The Director may give processing priority to certain claims

based on the claimants’ assessed needs and any other criteria the

Director deems appropriate. In determining the validity of a claim,

the Director will determine whether the claimant is an injured person, whether the injuries suffered resulted directly from the attack,

the amount, if any, to be paid under this section, and the person

or persons entitled to receive payment.

Again, in considering the amount of a claim, the Director will reduce the award by the amount of any payments on insurance policies made as a result of the September 11th attack. The Director

will also reduce the award by the amount of any benefits received

in response to the September 11th attack under the public assistance program or any other FEMA program. But the Director will
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not reduce the award by the amount of any government loan received by the injured person.

The United States may recover any portion of a payment improperly paid to the claimant because of fraud or misrepresentation on

the part of the claimant, a material mistake on the part of the

United States, insurance benefits not properly accounted for, or

failure of the claimant to cooperate with an audit.

The Director may make one or more advance or partial payments

before the final settlement of the claim.

Appeals

If the claimant does not agree with the Director’s disposition of

a claim, the claimant may appeal the decision in accordance with

the appellate process regulations jointly promulgated by FEMA and

the Small Business Administration. The claimant must file the notice of appeal no later than 60 days after the date the Director notifies the claimant that the claim will or will not be paid. The Administrator of the Small Business Administration will consider the

business loss appeals, and in the case of residential loss, the Director will consider the appeal. In either case, appellate decisions

must be rendered not later than 90 days after receipt of the notice

of appeal.

Debt Collection Requirements

Section 5 also includes a provision stating that the Debt Collection Act shall not preclude the payment of any claim. Injured persons cannot assign claims paid under this Act, and this bill exempts paid claims from creditors. However, the Director may require repayment of Small Business Administration disaster loans

from the proceeds of claims paid under this Act.

Section 6. Acceptance of Services of Other Agencies and Volunteers;

Gifts

Section 6 allows the Director to accept and to use the facilities

or employees of any State or local government or agency with the

consent of the government. The Director may also accept voluntary

and uncompensated services by individuals or organizations and

gifts of supplies, equipment, and facilities as needed.

Section 7. Relationship to Federal Entitlement Programs

SUMMARY

Section 7 states that nothing in the bill prevents an injured person from seeking benefits under any Federal entitlement program.

Further, calculation of eligibility for any Federal benefit or entitlement program should not include any compensation received under

this Act.

DISCUSSION

Section 7 is necessary to prevent injured persons receiving compensation under this Act from being excluded from receiving benefits under Federal entitlement programs. Asset calculations for programs such as the food stamp program under the Food Stamp Act

of 1977 (7 U.S.C. 2011 et seq.) and any program established under
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the Social Security Act (42 U.S.C. 301 et seq.) should not include

monetary compensation for compensable loss under this Act.

This section insures that injured persons can receive compensation from the Office without fear of losing essential Federal entitlements.

Section 8. Reports and Audits

SUMMARY

Section 8 mandates that the Director submit to Congress a report

describing the claims submitted under this Act during the year preceding the report. Section 8 also directs the Comptroller General to

conduct an annual audit of the payment of all claims submitted

under this Act and to report the results to Congress.

DISCUSSION

Not later than one year after the promulgation date of final interim regulations and annually thereafter, the Director must submit to Congress a report describing the claims submitted under

this Act during the preceding year. The report should include information on each claim including the amount claimed and a brief description of the nature and status of each claim including any payment on the claim.

The Comptroller General must complete the first annual audit

not later than 120 days after the Director submits the first claims

report to Congress, and annually thereafter. The purpose of the

audit is to ascertain adherence to the requirements and standards

of this Act, particularly with regard to the qualifications of the applicants.

The committee expects that FEMA’s Office of Inspector General

will maintain a full-time presence in the Office of World Trade

Center Attack Claims to deter fraud and to promote efficiency, consistent with its obligations under the Inspector General Act of

1978, as amended.

Section 9. Authorization of Appropriations

SUMMARY

Section 9 authorizes $2 billion for the purposes of carrying out

this Act.

DISCUSSION

The section authorizes $100 million for administrative expenses

and $1.9 billion for the payment of claims. The committee anticipates that these funds will be part of the President’s proposed $20

billion relief package for New York. These will remain available

until expended. The Director will not spend disaster relief funds to

carry out this Act.

Section 10. Termination of Authority

The authority of this Act terminates 42 months after the date of

enactment of this Act.
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LEGISLATIVE HISTORY

Senator Hillary Rodham Clinton introduced S. 1624, ‘‘The World

Trade Center Attack Claims Act,’’ on November 1, 2001. The committee held a legislative hearing to take testimony on the proposed

legislation on November 1, 2001. The committee reported the bill,

with an amendment in the nature of a substitute, on November 8,

2001 by voice vote.

HEARINGS

On November 1, 2001, the committee held a legislative hearing

on S. 1624, a bill to establish the Office of World Trade Center Attack Claims to pay claims for injury to businesses and property suffered as a result of the attack on the World Trade Center in New

York City that occurred on September 11, 2001, and for other purposes, receiving testimony from Michael Brown, Deputy Director,

Federal Emergency Management Agency; Joe Moravec, Commissioner, Public Building Service, General Services Administration;

Dr. David Sampson, Assistant Secretary for Economic Development, Economic Development Administration, U.S. Department of

Commerce; Richard Meserve, Chairman, Nuclear Regulatory Commission; Herbert Mitchell, Associate Administrator for Disaster Assistance, Small Business Administration; and Marianne L.

Horinko, Assistant Administrator. Office of Solid Waste and Emergency Response, Environmental Protection Agency.

ROLLCALL VOTES

The Committee on Environment and Public Works met to consider S. 1624 on November 8, 2001. By voice vote, the committee

agreed to amendment offered by Sentor Clinton in the nature of a

substitute. In addition, the committee adopted a second degree

amendment offered by Senator Clinton by voice vote. The committee then agreed to report S. 1624, as amended, by voice vote

with Senator Bond recorded as voting ‘‘no.’’

REGULATORY IMPACT STATEMENT

In compliance with section 11(b) of rule XXVI of the Standing

Rules of the Senate, the committee makes evaluation of the regulatory impact of the reported bill.

The bill does not create any additional regulatory burdens, nor

will it cause any adverse impact on the personal privacy of individuals.

MANDATES ASSESSMENT

In compliance with the Unfunded Mandates Reform Act of 1995

(Public Law 104-4), the committee finds that S. 1624 would impose

no unfunded mandates on local, State, or tribal governments.

COST OF LEGISLATION

Section 403 of the Congressional Budget and Impoundment Control Act requires that a statement of the cost of the reported bill,
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prepared by the Congressional Budget Office, be included in the report. That statement follows:

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, December 5, 2001.

Hon. JAMES JEFFORDS, Chairman,

Committee on Environment and Public Works,

U.S. Senate, Washington, DC.

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 1624, the World Trade Center Attack Claims Act. If you wish further details on this estimate,

we will be pleased to provide them.

The CBO staff contact is Julie Middleton, who can be reached at

226–2860.

Sincerely,

DAN L. CRIPPEN.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

S. 1624, World Trade Center Attack Claims Act, As ordered reported by the Senate Committee on Environment and Public

Works on November 8, 2001.

SUMMARY

S. 1624 would authorize the Federal Emergency Management

Agency (FEMA) to establish the Office of World Trade Center Attack Claims to process and pay claims for injury to businesses and

property suffered as a result of the September 11, 2001, terrorist

attack in New York. The bill would authorize the appropriation of

$2 billion for this purpose. Under this bill, FEMA would be authorized to issue claims for residential and business losses, though each

individual claim could not exceed $500,000 except under certain

circumstances. (The funding authorized by this legislation would

not be used for compensation to injured individuals or families of

individuals killed in the terrorist attack. That compensation will be

provided under Public Law 107-42, the Air Transportation Safety

and System Stabilization Act.)

Under S. 1624, residential losses would include an uninsured or

under-insured property loss, damage to or destruction of physical

infrastructure, an insurance deductible, temporary living or relocation expenses, and clean-up costs. In addition, business losses

would include all of those listed as residential losses as well as

damage to or destruction of assets or inventory, a business interruption loss, overhead costs, and employee wages for work not performed. Any amounts awarded would be net of insurance claims

that the person or business receives. Such claims would also be net

of any public assistance provided by federal, state, or local agencies. Under the bill, the authority to approve claims would end 42

months after enactment.

Assuming appropriation of the authorized amount, CBO estimates that implementing S. 1624 would cost $2 billion over the

2002-2006 period. S. 1624 would also have an insignificant effect
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on receipts by establishing a new civil penalty; therefore, pay-asyou-go procedures would apply.

S. 1624 would exempt the compensation awarded under the bill

from the attempts of creditors to collect outstanding debts. That is,

the bill would prohibit public and private creditors from making

claims against awards made to individuals or businesses who qualify for compensation under the bill. This prohibition would be both

an intergovernmental and private-sector mandate as defined in the

Unfunded Mandates Reform Act (UMRA). CBO estimates, however,

that any costs to comply with that mandate would be negligible.

ESTIMATED COST TO THE FEDERAL GOVERNMENT

The estimated budgetary impact of S. 1624 is shown in the following table. The costs of this legislation fall within budget function 450 (community and regional development).

By Fiscal Year, in Millions of Dollars

2002 2003 2004 2005 2006

CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Authorization Level .................................................................................................. 1,925 25 25 25 0

Estimated Outlays ................................................................................................... 385 500 510 410 195

BASIS OF ESTIMATE

For this estimate, CBO assumes S. 1624 will be enacted early in

fiscal year 2002. The bill would authorize the appropriation of $2

billion to pay business and property-loss claims related to the September 11, 2001, terrorist attack in New York. According to a report issued by the New York City Office of the Comptroller, the city

estimates the level of uninsured property loss and damage as a result of the terrorist attack will be about $17 billion. Under that information, CBO assumes that there would be strong demand for

the grants offered under this program and that all of the funds authorized to be appropriated would be spent. Under the process established in the bill, CBO assumes that it would take five years to

resolve all of the claims submitted to FEMA. Consequently. we estimate that implementing S. 1624 would cost $2 billion over the

2002-2006 period, assuming appropriation of the authorized

amounts.

S. 1624 would establish a ci viI penalty for lawyers who overcharge victims for their services. Collections of civil fines are recorded in the budget as governmental receipts (revenues). CBO expects that any additional receipts would be less than $500,000 because the number of cases involved is likely to be small.

PAY-AS-YOU-GO CONSIDERATIONS

The Balanced Budget and Emergency Deficit Control Act sets up

pay-as-you-go procedmes for legislation affecting direct spending or

receipts. CBO estimates that enacting S. 1624 would increase revenues by less than $500,000.
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INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

S. 1624 would exempt the compensation awarded under the bill

from the attempts of creditors to collect outstanding debts. That is,

the bill would prohibit public and private creditors from making

claims against awards made to individuals or businesses who qualify for compensation under the bill. This prohibition would be both

an intergovernmental and private-sector mandate as defined in

UMRA. Because the compensation would be new income generated

under the bill, creditors would not lose access to funds that they

could have made claims against in the absence of the bill. Consequently, CBO estimates that the costs to comply with the mandate would be negligible, if any, and would fall well below the annual thresholds established by UMRA ($56 million for intergovernmental mandates and $113 million for private-sector mandates in

2001, adjusted annually for inflation).

Estimate Prepared by: Federal Costs: Julie Middleton (226-2860);

Impact on State, Local, and Tribal Governments: Leo Lex (225-

3220); Impact on the Private Sector: Lauren Marks and Patrice

Gordon (226-2966).

Estimate Approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis.

CHANGES IN EXISTING LAW

Section 12 of rule XXVI of the Standing Rules of the Senate, provides that reports to the Senate should show changes in existing

law made by the bill as reported. Passage of this bill will make no

changes to existing law.

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