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Box 2138 Santa Monica, CA 90407-2138 Phone: (310) 393-0411 x6786; Fax: (310) 451-6979 E-mail: [email protected] Web: www.rand.org/icj/ iii ICJ Board of Overseers Raymond I. Skilling, Aon Corporation (Chair) Sheila L. Birnbaum, Skadden Arps Slate Meagher & Flom (Vice Chair) Steven Bennett, United States Automobile Association James L. Brown, Center for Consumer Affairs, University of Wisconsin–Milwaukee Kim M. Brunner, State Farm Insurance Alan Charles, RAND Corporation Robert A. Clifford, Clifford Law Offices John J. Degnan, The Chubb Corporation Markus Diethelm, Swiss Reinsurance Company Kenneth R. Feinberg, The Feinberg Group, LLP Paul G. Flynn, Los Angeles Superior Court Kenneth C. Frazier, Merck & Co., Inc. William B. Gould IV, Stanford Law School Jay A. Greer II Terry J. Hatter, Jr., United States District Court Deborah R. Hensler, Stanford Law School Patrick E. Higginbotham, United States Court of Appeals Roberta R. Katz, Stanford University Jeffrey B. Kindler, Pfizer, Inc. Steven J. Kumble, Lincolnshire Management, Inc. Ann Lomeli, MassMutual Financial Group James Macdonald, ACE, USA Joseph D. Mandel, University of California, Los Angeles Christopher C. Mansfield, Liberty Mutual Insurance Company v vi Compensation for Losses from the 9/11 Terrorist Attacks Charles W. Matthews, Jr., Exxon Mobil Corporation M. Margaret McKeown, U.S. Court of Appeals, Ninth Circuit Robert S. Peck, Center for Constitutional Litigation Robert W. Pike, Allstate Insurance P. Mickey Pohl, Jones Day Thomas E. Rankin, California Labor Federation, AFL-CIO Robert T. Reville, RAND Institute for Civil Justice Charles R. Schader, American International Group Daniel I. Schlessinger, Lord, Bissell & Brook Hemant Shah, Risk Management Solutions, Inc. Larry S. Stewart, Stewart Tilghman Fox & Bianchi Wayne D. Wilson, Farmers Insurance Group Neal S. Wolin, Hartford Financial Services Group, Inc. Preface The terrorist attacks of September 11, 2001, caused tremendous losses of life, prop- erty, and income, and the response to those losses by public and private organizations was unprecedented. This monograph examines the benefits received by those who were killed or seriously injured in the 9/11 attacks and the benefits provided to indi- viduals and businesses in New York City due to the attack on the World Trade Cen- ter. The authors provide insight into the perceived shortcomings of the current com- pensation system in responding to losses caused by an event on the scale of 9/11. They examine the performance of the four basic mechanisms of the compensation system—insurance, the tort system, government programs, and charity. This assessment should be useful in helping policymakers and stakeholders to understand how the losses created by 9/11 differ from losses stemming from natural disasters and other catastrophic events. A better understanding of how the compensa- tion system responded in the aftermath of 9/11 should also help policymakers and stakeholders to develop objectives for compensation in the event of a future terrorist attack and to identify issues to be addressed in planning for the possibility of such an event. This research was funded by the RAND Institute for Civil Justice. For more in- formation about this study, contact Lloyd Dixon RAND Institute for Civil Justice 1776 Main Street. P.O. Box 2138 Santa Monica, CA 90407-2138 Phone: (310) 393-0411 x7480; Fax: (310) 451-6979 E-mail: [email protected] vii Contents Preface .......................................................................................vii Figures ....................................................................................... xiii Tables .........................................................................................xv Summary.................................................................................... xvii Acknowledgments ......................................................................... xxxv Acronyms ................................................................................. xxxvii CHAPTER ONE Introduction ...................................................................................1 Background ....................................................................................1 The Policy Problem............................................................................2 Purpose of This Study .........................................................................2 Organization of This Report...................................................................3 CHAPTER TWO The Compensation System, Terminology, and Research Methods..........................5 The Compensation System ....................................................................5 Goals for a Compensation System .............................................................6 Equity........................................................................................6 Economic Efficiency.........................................................................6 Types of Loss...................................................................................7 Death and Personal Injury...................................................................7 Property Damage ............................................................................8 Income Loss .................................................................................8 Economic Revitalization.....................................................................8