A previously unimaginable risk potential: September 11 and the insurance industry

The attacks [of September 11th] have revealed a previously unimaginable

risk potential. (1)

I. INTRODUCTION

The events of September 11, 2001, were a shattering experience for Americans, indeed for all people wherever they may reside who believe in the forward progress of civilization and the fundamental goodness of humankind. For Americans, sheltered from previous attack upon their shores and basking in the glow of seemingly endless economic opportunity, the events of September 11 were particularly unnerving. The national psyche was shaken to its very foundation as Americans witnessed an attack upon their military headquarters, the destruction of the twin architectural symbols of U.S. economic hegemony and the resulting catastrophic loss of life. Shocked, fearful and angry, Americans emerged from the events of the waning months of 2001 into the harsh light of a new world few had contemplated at the dawning of the millennium.

September 11 also constituted a watershed event for the insurance industry. Prior to September 11, the most costly insurance event in world and national history was Hurricane Andrew, which resulted in losses totaling $19.6 billion in August 1992. (2) This loss stands to be dwarfed by the financial impact of the events of September 11, estimates of which have varied from $30 billion to $90 billion. (3) If the $90 billion estimate proves to be accurate, such a loss would exceed all of the combined insurance losses in the United States for the period 1993 through 2000. (4) Even assuming the accuracy of the more modest estimate of $60 billion, such a loss would exceed the entire property and casualty industry’s combined net income for 1999 through 2001. (5) These estimates include $1 billion in costs associated with demolition and debris removal at the former site of the World Trade Center in New York (6) as well as an estimated cost of rebuilding in excess of $8 billion. (7) These estimates are 120 to 180 times the $500 million cost of the previous bombing of the World Trade Center in 1993. (8)

These enormous, and widely varying, loss estimates reflect the unprecedented scale of destruction associated with the attacks. In New York, the attack on the World Trade Center killed 2843 people, destroyed six buildings containing 13.3 million square feet of commercial space and damaged eleven buildings containing another 16.5 million square feet of commercial space. (9) In addition, hundreds of businesses were displaced, including 435 businesses that leased space in One and Two World Trade Center. (10) By comparison, the commercial office space damaged or destroyed in the attack on New York exceeded all such space available in San Francisco. (11) In Washington, the attack on the Pentagon killed 189 people, injured 110 others and damaged or destroyed 2 million square feet of office space. (12) The attack on the Pentagon also generated 57,000 tons of debris, resulting in removal and rebuilding estimates in excess of $700 million. (13)

There are numerous types of insurance impacted by the September 11 attacks. For example, commercial property insurance policies cover direct losses to insured property, such as damage to buildings and their contents. (14) These policies may contain an endorsement insuring indirect losses, “such as the interruption of a business’s income stream following the loss of its premises.” (15) Equally impacted may be inland marine insurance policies that provide coverage for special types of personal property, such as computers and construction equipment. (16) Commercial property and inland marine policies may apply on an “all-risk” basis, providing coverage for any cause of loss not specifically excluded, or on a “named-peril” basis, only providing coverage for causes of loss listed in the policy. (17) Business income insurance provides coverage for income losses suffered as a result of destruction or damage to the insured’s place of business. (18) In a similar vein, business income civil authority coverage protects businesses that suffer income losses as a result of the denial of access to their premises by civil authorities. (19) Income losses suffered by businesses as a result of their dependence on a business whose premises have been destroyed or damaged may be covered by contingent business income coverage. (20) Other impacted policies include those relating to general liability insurance, life insurance, workers’ compensation, health and disability insurance, homeowners’ and renters’ insurance and automobile insurance. (21) The focus of this article will be on commercial property insurance coverage.

This article examines three issues arising from the September 11 attacks. (22) The article initially reviews the factual background surrounding the events of September 11 with special emphases upon the financial impact of the attacks upon the national economy in general and the insurance industry in particular. The article then examines the issue of whether the attacks constituted acts of war, thereby triggering exclusionary language within otherwise applicable insurance policies. The next section of the article specifically examines the issue of whether the attacks on the World Trade Center constitute a single occurrence or multiple occurrences for purposes of calculating the liability of insurers. Finally, the article focuses upon the Terrorism Risk Insurance Act of 2002, which constitutes the most recent initiative to ensure the financial viability of the insurance industry in the event of future attacks. The article concludes that the applicable principles of law may be characterized as murky at best. In addition, the article advocates a limited role for the federal government in light of the continuing threat that terrorist attacks pose to the insurance industry’s financial health.

II. THE ATTACKS OF SEPTEMBER 11 AND THE INSURANCE INDUSTRY: THE FACTUAL BACKGROUND

A. A Brief History of the World Trade Center

Designed by architects Minuro Yamasaki and Emery Roth and placed on sixteen acres of land owned by the Port Authority of New York and New Jersey, the World Trade Center took seven years to complete. (23) The complex consisted of seven separate buildings. (24) The highlight of the complex was the twin towers constituting One and Two World Trade Center. (25) The North Tower was 1368 feet tall, and the South Tower was 1362 feet tall. (26) Upon their completion, the towers served as the world’s tallest buildings until the completion of the Sears Tower in Chicago, Illinois in late 1973. (27) The remaining buildings in the complex consisted of a forty-seven-story office building (Seven World Trade Center), two nine-story office buildings (Four and Five World Trade Center), an eight-story U.S. Customhouse (Six World Trade Center) and a twenty-two-story hotel (Three World Trade Center). (28)

In addition, seventy stores and restaurants were located in the complex, many of which were located in a subterranean shopping center. (29) The complex had 435 tenants representing 26 countries that employed 40,000 office workers. (30) In addition, approximately 70,000 business and leisure visitors passed through the complex on a daily basis. (31) Another 150,000 daily commuters were served by the seven different trains representing the three major New York City subway systems and the commuter railroad operated by the Port Authority Trans-Hudson Corporation that converged in a station beneath One and Two World Trade Center. (32) Opened for its first tenancy in December 1970, the World Trade Center was the largest commercial real estate development project in the United States at the time of its completion and, at the time of its destruction, remained the largest office complex in the country. (33)

Ownership of the buildings and real property underlying One through Six World Trade Center, the underground retail center and the real property beneath Seven World Trade Center remained with the Port Authority of New York and New Jersey (Port Authority). (34) On July 16, 2001, the Port Authority entered into a ninety-nine year lease for Buildings One, Two, Four and Five in the complex with four separate Delaware limited liability companies identified as One, Two, Four and Five World Trade Center, L.L.C. (Lessees). (35) The Lessees were indirectly owned in their entirety by World Trade Center Properties, L.L.C., a Delaware limited liability company. (36) The managing member of World Trade Center Properties, L.L.C. is Silverstein WTC Properties, L.L.C., a Delaware limited liability company controlled by real estate developer Larry Silverstein. (37) The Port Authority simultaneously entered into a ninety-nine year lease with Westfield WTC, L.L.C., a Delaware limited liability company, for retail areas within and beneath the complex. (38)

The ninety-nine year leases were valued at $3.2 billion. (39) This amount included an initial payment of $616 million and annual rent of $107.25 million subject to escalation at the five-year anniversary of the lease. (40) The Lessees obtained financing of the acquisitions from two primary sources. GMAC Commercial Mortgage Corporation, a California corporation with its principal place of business in New York, provided a loan secured by a mortgage on the leases. (41) This loan was subsequently assigned to Wells Fargo Bank Minnesota, N.A., a national bank with its principal place of business in Minnesota, “in connection with the issuance of commercial mortgage-backed securities to institutional investors.” (42) In addition, UBS Warburg Real Estate Investments, Inc., a Delaware corporation with its principal place of business in New York, provided a mortgage loan to Westfield WTC, L.L.C. secured by a mortgage on the aforementioned retail lease. (43) Factoring in the repayment terms of these loans, the Lessees’ annual financial obligations exceeded $143 million, which included the annual payment for the World Trade Center leases and approximately $36 million in debt service. (44)

Less than two months after these leases were negotiated, the World Trade Center became one of the targets for the deadliest terrorist attacks on American soil. At 7:58 a.m. Eastern Daylight Time, United Airlines Flight 175, a Boeing 767, departed Logan International Airport in Boston, Massachusetts with sixty-five passengers and crewmembers bound for Los Angeles, California. (45) One minute later, American Airlines Flight 11, a Boeing 767 with ninety-two passengers and crewmembers, also departed Logan International Airport bound for Los Angeles. (46) Two minutes later, at Newark International Airport in New Jersey, United Airlines Flight 93, a Boeing 757 with forty-four passengers and crewmembers, departed for San Francisco, California. (47) Nine minutes after this departure, American Airlines Flight 77, a Boeing 757 with sixty-four passengers and crewmembers, departed Washington Dulles International Airport bound for Los Angeles, California. (48) At 8:45 a.m. American Airlines Flight 11 crashed into One World Trade Center. (49) The impact of this crash caused One World Trade Center to collapse at 10:29 a.m. (50) At 9:06 a.m., United Airlines Flight 175 struck Two World Trade Center, causing it to collapse fifty-four minutes later. (51) Three, Four, Five and Six World Trade Center were also destroyed in the attacks as was Seven World Trade Center, which collapsed later that day at 5:25 p.m. (52) Twelve other nearby buildings were seriously damaged as a result of these collapses. (53) In addition, at 9:40 a.m., American Airlines Flight 77 struck the Pentagon in northern Virginia, and, fifty-seven minutes later, United Airlines Flight 93 crashed in Shanksville, Pennsylvania, eighty miles southeast of Pittsburgh. (54) The number of dead as a result of the events of September 11, 2001 totaled 3076 as of the time of the preparation of this article. (55)

Individuals believed to be members of the al Qaeda organization hijacked all four flights. (56) Al Qaeda is a decentralized organization headed by a consultative council led by Saudi dissident Osama bin Laden and consisting of various committees handling business enterprises, military training and religious policy and small cells of individuals responsible for carrying out reconnaissance and operations. (57) The number oral Qaeda members is impossible to know with any degree of certainty. However, it is believed that approximately 5000 of the 20,000 people who trained in camps maintained by al Qaeda in Afghanistan actually completed all stages of training and swore allegiance to the organization and bin Laden. (58) These members operate throughout the world and are known to maintain cells in thirty-six countries, including states located in the Balkans, the Middle East, South and Central Asia and Africa as well as the United States and Western Europe. (59) The transnational and borderless nature of al Qaeda has permitted it to become a model for non-state global terrorism. (60) Al Qaeda has been blamed for numerous terrorist attacks throughout the world in the past nine years, including the previous attack upon the World Trade Center in 1993, an assassination attempt on Egyptian President Hosni Mubarak in Ethiopia in 1995, the attack upon a U.S. military housing complex in Dhahran, Saudi Arabia in 1996, the bombings of the U.S. embassies in Kenya and Tanzania in 1998 and the bomb attack upon the U.S.S. Cole in Yemen in 2000. These attacks have resulted in thousands of injuries and 277 deaths. (61)

The goals of al Qaeda are as amorphous as its membership. Nevertheless, these goals may be summarized in five basic principles. Initially, al Qaeda seeks to establish a pan-Islamic religious movement for the promotion of its political aims. (62) This pan-Islamic movement seeks to unify Muslims through the provision of social and educational services. (63) Second, al Qaeda seeks to expel Westerners and non-Muslims from traditional Muslim areas, including Saudi Arabia and the states bordering the Persian Gulf. (64) The third principle is the expulsion of Muslim leaders deemed to have deviated from fundamental tenets of Islam, such as the Fahd dynasty in Saudi Arabia and the regime of Pervez Musharraf in Pakistan. (65) A fourth principle of the organization is revenge for the perceived historical mistreatment of Muslims throughout the world. (66) Finally, and most ambitiously, al Qaeda desires the establishment of a religious state throughout the Islamic world by restoration of the caliphate. (67)

Regardless of the identity of the attackers, the toll of their actions upon human life and health continued well after September 11. The collapse of the buildings formerly comprising the World Trade Center complex propelled a wide variety of pollutants into the atmosphere and onto adjoining properties. (68) These pollutants, which experts characterized as at “unprecedented levels,” exceeded even those generated by the destruction of oil wells by retreating Iraqi armed forces in Kuwait at the end of the Gulf War. (69)

For example, in a study conducted in October 2001, the U.S. Environmental Protection Agency discovered elevated levels of numerous pollutants, including dioxin, polychlorinated biphenyls, lead and chromium in the atmosphere, soil and water surrounding the World Trade Center location. (70) Benzene at the site was measured by the U.S. Environmental Protection Agency at fifty-eight times higher than levels established by the U.S. Occupational Safety and Health Administration. (71) In a more comprehensive study conducted by the University of California-Davis and the Lawrence Livermore National Laboratory from October through December 2001, scientists discovered a wide range of “coarse” and “ultrafine” particulate matter in the atmosphere emanating from the World Trade Center location. (72) Although much of the particulate matter should have settled to the ground as a result of precipitation, the continuous fire at the core of the ruins acted as “a screamingly hot chemical reactor” that continued to spew particulate matter until its extinguishment. (73) As a result, elevated levels of toxic and potentially toxic substances, including copper, iron, nickel, silicon, sulfur, titanium, vanadium and zinc, were found in the atmosphere at numerous locations surrounding the site. (74) Scientists found lower than expected concentrations of lead, mercury and asbestos in these areas. (75) Nevertheless, of the 1300 people who had given notice of their intent to initiate litigation against New York City for injuries suffered as a result of the attacks at the time of preparation of this article, the vast majority were firefighters, police officers and other rescue personnel alleging that municipal authorities failed to adequately advise and protect them from the health risks associated with the cleanup and recovery operation. (76) These claims seek a total of $7.18 billion in damages from New York City. (77)

B. Insurance Coverage for the World Trade Center and the Swiss Re Litigation

The events of September 11 brought the issue of insurance coverage with respect to the World Trade Center complex into sharp focus. Prior to their acquisition of the leases, the Lessees retained Willis Limited (Willis) to obtain insurance coverage on their behalf for the World Trade Center complex. (78) There is considerable controversy with respect to the circumstances surrounding the Lessees’ efforts to obtain insurance. The initial controversy concerns the amount of coverage. According to SR International Business Insurance Company (Swiss Re), one of the participating insurers in the World Trade Center, Willis estimated the replacement value of One, Two, Four and Five World Trade Center and the retail complex at $3.9 billion and the accompanying loss of rental income for a three year period at an additional $1.1 billion. (79) However, according to Swiss Re, the Lessees initially instructed Willis to obtain coverage totaling $2.32 billion, which amount was subsequently increased to approximately $3.5 billion at the request of the Lessees’ lenders. (80) Regardless of the exact amount, Swiss Re claimed that “[t]he amount of coverage ultimately purchased was far below the projected $5.05 billion necessary both to replace the buildings and cover [the Lessees’] rental income losses in the event of a catastrophic loss.” (81) The inadequacy of coverage becomes even more apparent if the cost of restoration of damaged and destroyed infrastructure is included. For example, U.S. government officials have placed the cost of repairing or replacing damaged or destroyed infrastructure, such as transportation facilities within the complex, at $39 billion. (82) In any event, such amounts are crucial due to the Lessees’ obligation to rebuild the complex if so instructed by the Port Authority. (83)

Another controversy arose over the wording of the insurance binder that was issued with respect to the Lessees’ interests in the World Trade Center. According to Swiss Re, on June 25, 2001, Willis sent an underwriting submission and placing slip to Swiss Re containing proposed terms and conditions to underwrite a portion of the first party coverage of the Lessees’ interests in the complex. (84) Among the proposed terms was a definition of the term “occurrence” providing that “losses attributable to any cause or series of causes would be subject to a single occurrence limit.” (85) Swiss Re accepted this provision but allegedly made several material changes to the placing slip. (86) According to Swiss Re, the most significant change was its objection to being bound by the terms of coverage of other insurers as provided on the placing slip. (87) Rather, Swiss Re allegedly “conditioned its undertaking to insure on having an absolute right of approval of the terms of coverage.” (88) Subject to these modifications, Swiss Re agreed to provide coverage on July 9, 2001. (89) Upon receiving confirmation of these amendments from Willis, Swiss Re executed a revised placing slip on July 26, 2001. (90) Based upon the terms of the executed placing slip, Swiss Re agreed to underwrite twenty-two percent of the Lessees’ $3.5 billion of coverage for the World Trade Center in excess of a primary layer of insurance in the amount of $10 million underwritten by another group of insurers led by Travelers Insurance Company (Travelers Policy). (91) However, the exact wording of the entire insurance policy between the Lessees and Swiss Re was never finalized, and no policy was ever issued. (92)

By contrast, the Lessees claimed that numerous provisions contained within Willis’ initial proposal to Swiss Re were subsequently modified in communications between the parties. Among the provisions amended by these communications was the definition of the term “occurrence.” With respect to this term, the Lessees alleged that the definition contained within Willis’ proposal was subsequently deleted in an electronic mail communication between a Willis broker and a Swiss Re executive on July 23, 2001. (93) As a result, the Lessees contended that the definition of the term “occurrence” was to be determined pursuant to applicable New York law. (94) In addition, on September 24, 2001, the Lessees claimed that the terms of the Travelers Policy governed the terms of coverage underwritten by Swiss Re. (95) The terms of the Travelers Policy did not include a definition of the term “occurrence,” once again leaving its determination to applicable New York law. (96)

While acknowledging its liability pursuant to the terms of the executed placing slip, Swiss Re objected to any determination of its liability based upon the terms of the Travelers Policy. (97) Swiss Re specifically noted that the Travelers Policy did not include many of the terms set forth in Willis’ proposal and the executed placing slip. (98) Of primary importance in this regard was the exclusion of a definition for the term “occurrence” in the Travelers Policy. (99) The absence of a definition of this term has proven to be crucial as the Lessees have subsequently claimed that the events at the World Trade Center on September 11, 2001 constituted two separate occurrences. (100) Utilizing this approach, the Lessees effectively doubled the insurance proceeds payable as a result of the attacks to $7 billion. (101) Labeling this approach as “audacious,” Swiss Re alleged that it was a transparent attempt to increase the inadequate coverage upon the complex. (102) Swiss Re also alleged that this approach was intended to fund reconstruction in order to avoid the terms of the leases granting priority to insurance proceeds to the Port Authority and lending institutions in the event the Lessees failed to reconstruct the complex. (103) Swiss Re also objected to utilization of the Travelers Policy on the bases that it added named insureds that were not included on the executed placing slip and was contrary to “the parties’ express agreement that Swiss Re had an unequivocal right to approve the terms of coverage.” (104)

As a result of these controversies, Swiss Re initiated a declaratory judgment action against the Lessees and all other parties maintaining an interest in the insurance proceeds on October 22, 2001 in the U.S. District Court for the Southern District of New York. (105) Swiss Re sought three specific declarations with respect to its obligations arising from its relationship with the Lessees and subsequent destruction of the World Trade Center. Initially, Swiss Re sought a declaration that the insurance proposal submitted by Willis on behalf of the Lessees, as supplemented by any subsequently executed documents, provided the exclusive terms of Swiss Re’s coverage. (106) Second, Swiss Re sought a declaration that the destruction of the World Trade Center was the result of a single occurrence. (l07) Finally, Swiss Re sought a judicial order declaring the rights of the respective defendants to any proceeds due and payable as a result of insurance coverage extended by Swiss Re. (108) Swiss Re’s lawsuit and the status of its requests remained pending as of March 2003.

C. The Financial Impact of September 11

In a broader context, the September 11 attacks had a widely varying financial impact upon insurance companies depending upon the type of coverage at issue. For example, commercial property losses as a result of the attack upon the World Trade Center varied from a low of $8.5 billion to a high of $25 billion. (109) Business interruption claims have been valued as low as $5 billion to as high as $21 billion, (110). Aviation insurance policies were also impacted with anticipated losses of $6 billion for loss of life and $434 million in hull coverage resulting from the destruction of the four hijacked aircraft. (111) In addition, it has been forecast that automobile insurance policies for vehicles damaged or destroyed in the attacks would be impacted by an anticipated $90 million in claims. (112) Life insurance losses as a result of the attacks were estimated at between $900 million and $6 billion. (113) Finally, workers’ compensation losses were estimated between $2.4 billion and $5 billion. (114)

The enormity of these losses becomes more apparent when particularized by individual company. Among U.S. insurance companies, the greatest losses occurred in the reinsurance industry. Berkshire Hathaway and St. Paul Companies suffered $2.2 billion in losses each while CNA Financial Corporation suffered losses totaling $304 million. (115) Commercial property, casualty and liability companies also posted large losses. For example, American International Group of New York suffered a pretax loss of $820 million as a result of the attacks while Citigroup, Inc. incurred a $502 million loss. (116) Other commercial property, casualty and liability companies incurring significant losses included Hartford Financial Services Group, Inc. ($440 million), Chubb Corporation ($240 million) and Allstate Corporation ($32 million). (117) U.S. life insurance companies were impacted by the September 11 attacks to a lesser degree. Nevertheless, major life insurance companies incurred significant losses, as exemplified by the $210 million, $100 million and $25 million losses suffered by MetLife, Inc., New York Life Insurance Company and Cigna Corporation respectively. (118)

Internationally based insurance companies also suffered large individual losses. As in the United States, reinsurance companies suffered the largest losses. For example, Lloyd’s of London incurred gross claims totaling $5.36 billion and suffered a net loss of $2.8 billion as a result of the attacks on the World Trade Center. (119) Munich Re and Swiss Re, the world’s two largest reinsurance companies, suffered net losses of $1.95 billion and $1.25 billion respectively. (120) Other major insurers suffering large losses included German based Allianz AG ($1.3 billion) and Swiss based Zurich Financial Services ($900 million). (121) From a global standpoint, fifty-five insurance and reinsurance organizations had reported losses as a result of the attacks by the first week of October 2001. (122) Seventeen of these companies reported losses exceeding five percent of their consolidated capital for 2000, and six of these companies reported a financial impact exceeding ten percent of such capital. (123) Furthermore, in a decision announced in October 2001, the U.S. Financial Accounting Standards Board ruled that the attacks were not extraordinary from an accounting standpoint. (124) As a result, companies, including insurers, which suffered losses as a result of the attacks, could not list such losses separately on their financial statements. (125)

The losses associated with the events of September 11 and the likelihood of similar losses in the future struck the insurance industry just as it was beginning to show gradual improvement in its financial performance. After a lackluster 1999 characterized by sharply higher underwriting losses, the industry began to show improvement in 2000 primarily as a result of strong growth in premiums and investment income. (126) The year 2001 was deemed to be “pivotal for property/casualty insurers … with significantly improved growth prospects and a slight improvement in underwriting performance.” (127) The attacks, when combined with a $19 billion decrease in industry surplus through the first six months of the year, led analysts to conclude that the industry was “extremely vulnerable to the impacts of catastrophic losses and the weak investment environment.” (128) However, financial analysts, trade associations and consumer groups expressed confidence that the industry remained solvent and could cover all losses associated with the attacks. (129) This optimism was echoed by government officials who noted that the U.S. insurance industry maintained assets in excess of $3 trillion. (130) Nevertheless, industry analysts anticipated that twelve to seventeen insurance and reinsurance companies would be placed on watch lists by rating agencies in the months following the attacks. (131)

Insurance companies reacted to these losses and potential losses associated with future attacks in a number of different manners. Some companies, such as CNA Financial Corporation and Dutch financial services group ING Group, acted to stem losses through large layoffs. (132) Other insurers immediately moved to raise premiums. Initial estimates of premium increases for commercial property insurance policies of ten to thirty-five percent were quickly dwarfed by what one member of the U.S. Congress characterized as exponential increases rendering insurance coverage unaffordable for many U.S. businesses. (133) Instead, in what has been described as “a feeding frenzy,” premiums on commercial property insurance and reinsurance policies increased by one hundred to four hundred percent. (134) Particularly hard hit by premium increases were the airline, shipping and energy industries as well as commercial real estate owners, especially those who own or manage “iconic structures” perceived to be potential future terrorist targets. (135) In the months following the attacks, shippers and owners of large commercial properties saw premium increases ranging from fifty to one hundred percent. (136) With respect to aviation, Goshawk Insurance Holdings, which insures aircraft throughout the world, reported that rates in its particular field had increased ten-fold since the attacks. (137)

Actual or proposed premium increases in such massive amounts resulted in an avalanche of criticism that insurers were taking unfair advantage of circumstances surrounding the attacks to increase profits. (138) These accusations were bolstered by reports that the Association of Lloyd’s Members, a trade group for members of the Lloyd’s of London insurance market, had characterized the September 11 attacks as “a historic opportunity” to earn “very large profits” in “one of the strongest markets in living memory.” (139) In any event, such increases would be an unwelcome shock for U.S. businesses that had enjoyed a sharp drop in premiums during the 1990s as a result of aggressive competition within the insurance industry. (140)

In addition to premium increases, several insurers, especially those in the property and casualty industries, began to reevaluate the basis upon which they extended coverage. One month after the attacks, Munich Re stated that the attacks demonstrated the need for a ‘”fundamental reassessment’ of the financial risks from terrorism faced by the insurance business.” (141) Executives at U.S.-based Kemper Insurance Companies and Germany’s GeneralCologne Re were even blunter in their conclusion that terrorism is an uninsurable risk that should be excluded from future policies upon initial underwriting or renewal. (142) According to insurers, the primary problem is their inability to predict and, thus, quantify the risks associated with terrorism, including the likelihood and location of future attacks and financial losses accruing as a result thereof. (143) As a result, insurance and reinsurance companies claimed that they were unable to price appropriate coverage with any degree of certainty. (144)

As reinsurance companies began to eliminate coverage for terrorism in new commercial insurance policies as well as those subject to renewal, primary insurers also undertook efforts to exclude terrorism from the scope of their coverage. (145) Consequently, commencing in November 2001, insurance companies began filing petitions with state insurance commissions seeking to exclude terrorism from commercial, home, automobile and life insurance policies effective January 1, 2002. (146) Many of these requests were based upon a proposal advanced by the National Association of Insurance Commissioners excluding coverage in commercial insurance policies for losses incurred as a result of terrorist activities in excess of $25 million. (147) Thirty-six states and territories had accepted this proposal by February 2002. (148) However, insurers were unable to obtain consent from commissioners in two of the largest insurance markets in the U.S., namely New York and California. (149) In any event, the market for terrorism insurance, especially for large and high profile buildings, has markedly shrunk. (150) As noted by one insurance executive, “[t]here is a clear and growing gap in commercial insurance coverage that the private marketplace cannot cover.” (151)

The events of September 11 have also had a broader impact upon the U.S. economy. Although it is impossible to calculate the long-term economic impact of the attacks with any degree of certainty, a few statistics bear mention as mileposts by which such impact may be judged. At the epicenter in New York, the Office of the Comptroller estimated that the attacks would have $90 billion and $105 billion impacts in fiscal years 2002 and 2003. (152) A study completed in December 2001 by the Milken Institute calculated that New York City would lose over 149,000 jobs in 2002 as a result of the attacks with future losses in excess of 90,000 in 2003 and 48,000 in 2004. (153) However, New York City is not alone in suffering job losses attributable to the attacks. Cities dependent upon the travel and tourism industries have been particularly hard hit. For example, the San Francisco Bay Area lost an estimated 49,700 jobs in 2002 with future losses accruing at 29,880 in 2003 and 12,040 in 2004. (154) On a percentage basis, Las Vegas lost more jobs than any other major American city with estimated losses at 4.98% in 2002 and 2.42% in 2003. (155) Nationwide, the Milken Institute concluded that 1.64 million jobs would be lost in 2002 as a direct consequence of the attacks. (156)

In addition, the U.S. gross domestic product contracted for the first time in eight years in the third quarter of 2001. (157) According to the U.S. Department of Commerce, gross domestic product contracted by 0.4% during this period. (158) Economic forecasters have attributed this contraction in part to the sharp impact of the attacks on consumer spending, airline and vacation travel, factory production and business investment. (159) Although this was considerably less than the one to two percent decline forecast by many economists, it still represented approximately $40 billion in lost output or $400 on average for every American household. (160) Future declines and associated costs, both foreseeable and unforeseeable, remain indeterminate. (161) What is certain is that the attacks pushed an already fragile U.S. economy over the brink into recession. (162) Indeed, as one commentator noted, the impact associated with the attacks, “measured in dollars and disruption, have rippled outward from the rubble to affect all of America.” (163)

D. The Federal Response

In response to the problems discussed previously and the perceived growing crisis, the insurance industry sought financial assistance from the U.S. Congress. Insurance industry executives and trade associations proposed the creation of an insurance company that would pool premiums collected from the private sector to be paid in the event of damage to commercial property as the result of a future terrorist attack. (164) Pursuant to the industry’s plan, insurance companies would charge additional premiums, five percent of which would be retained by companies voluntarily opting to participate in the program. (165) Participating insurance companies would retain five percent of the risk for damage to commercial property resulting from a future terrorist attack. (166) The remaining ninety-five percent of premiums would be utilized to create a common reinsurance pool of $5 to $10 billion, known as “Freedom Re” or the Homeland Security Mutual Reinsurance Company, to fund claims beyond the initial five percent contributed by participating insurers. (167) The U.S. government would pay claims in excess of the pool’s resources. (168) Premiums would be established based upon perceived risk, with purchasers in major population centers paying higher premiums to obtain terrorism coverage than those located in rural areas. (169) Terrorism would be included as standard coverage in homeowner and small business insurance policies. (170) By contrast, larger commercial purchasers would have the ability to opt out of such coverage. (171) According to industry representatives, a reinsurance pool would limit “[t]he potential maximum loss for individual companies and the industry … in a way that allows [them] to service the coverage needs of … policyholders while remaining financially strong.” (172)

In contrast to the plan advocated by the insurance industry, the Bush administration presented its assistance plan in October 2001. The plan provided significant federal assistance to insurers in the event of a terrorist attack for a period of three years. Specifically, in 2002, the federal government would be responsible for eighty percent of the first $20 billion in claims resulting from a terrorist attack and ninety percent of claims in excess of $20 billion. (173) In 2003, insurance companies would be responsible for the first $10 billion in claims. (174) Claims in excess of $10 billion but less than $20 billion would be divided equally between the insurance industry and the federal government. (175) The federal government would be responsible for ninety percent of claims in excess of $20 billion. (176) Finally, in 2004, the last year of the program, private insurers would pay the first $20 billion in claims. (177) Claims between $20 billion and $40 billion would be divided equally between private insurers and the federal government with the government responsible for ninety percent of claims in excess of $40 billion. (178) Under the Bush administration’s proposal, the insurance industry’s maximum liability would be $12 billion in 2002, $23 billion in 2003 and $36 billion in 2004. (179) The federal government’s liability for terrorism claims was capped at $100 billion. (180) The Secretary of the Treasury could request consultations with the U.S. Congress in the event of an attack causing in excess of $100 billion in damage. (181)

The Bush administration plan received a mixed reaction. Although the administration plan received support from the insurance industry and state insurance regulators, the proposal was subject to bipartisan criticism in the U.S. Congress. (182) The proposal was criticized as fiscally unsound and amounting to a federal guarantee of the industry’s future profits. (183) These profits would continue to accrue to the industry without a countervailing continuation of risk. (184) Other critics noted that federal taxpayers could overpay if the plan was adopted while insurance companies charged policyholders inflated premiums for terrorism coverage. (185) Skeptics also criticized the proposal as leaving open the possibility of the creation of a permanent governmental program. (186)

Despite a vigorous defense by the administration, (187) the U.S. Congress failed to adopt the Bush proposal or any alternative prior to the end of 2001 and the concurrent expiration of approximately seventy percent of commercial reinsurance policies for U.S. properties. (188) Although Karl Rove, President Bush’s chief political advisor, sardonically noted that “[t]he world was supposed to collapse on December 31 and we’re still around,” the failure of the administration and Congress to act was roundly criticized. (189) State insurance regulators announced that they would permit insurance companies that were still obligated to provide terrorism coverage to deny claims from any attack that caused in excess of $25 million in insured losses. (190) Executives from a wide range of industries warned of the consequences of the U.S. government’s failure to adopt a plan to assist insurance and reinsurance companies in the event of a future terrorist attack. Standard & Poor’s noted that “insurers offering terrorism provisions would unduly expose their capital bases and invite ratings downgrades … unless policies were written with some form of government protection, such as a federally backed reinsurance pool.” (191) Lending institutions warned that they would be required to review their practices in major U.S. cities and with respect to large properties or those deemed to be high risk. (192) The reaction of lending institutions rippled throughout the commercial real estate industry, which expressed concern with respect to the ability of developers to obtain financing and maintain liquidity. (193) The pressure on real estate investors was increased in March 2002 when Moody’s Investor Service announced that it would evaluate commercial mortgage-backed securities on the basis of whether the underlying property was insured against terrorist attacks. (194) Bonds secured by buildings without terrorism insurance could be subject to downgrading, thereby resulting in increased borrowing costs and difficulty in obtaining capital for new ventures. (195) Private industry also warned of “severe economic dislocation in the coming months if insurance-related issues tied to terrorism are not addressed by the federal government immediately.” (196)

Numerous federal officials echoed these concerns. In October 2001, then Secretary of the Treasury Paul H. O’Neill noted that “[l]eaving this problem unresolved threatens [U.S.] economic stability.” (197) In his first statement on the topic before the House Financial Services Committee in February 2002, Federal Reserve Chairman Alan Greenspan stated that “[i]t may be necessary … for the Congress to stipulate that in the event of a terrorist attack … the federal government, with some deductible, would cover the cost.” (198) In the most comprehensive governmental study of the attacks’ impact upon the market for commercial insurance to date, the General Accounting Office concluded that the potential negative consequences of the growing cost and unavailability of terrorism insurance are cause for serious concern. (199) Specifically, the General Accounting Office found that insurers were shifting the risk of losses associated with terrorism to property owners through the withdrawal of reinsurers from the terrorism insurance market. (200) Primary insurers were also abandoning the market as a result of their inability to obtain coverage from reinsurers. (201) The report revealed that increasing amounts of uninsured risk posed potentially grave consequences for private industry. (202) These consequences would have the most significant impact upon the relationship between commercial property owners, developers and lending institutions. (203) The lack of available and affordable terrorism coverage would serve to shift unacceptable amounts of risk to owners and financing institutions as well as discourage new commercial development and lending activities. (204) The current state of the terrorism insurance market could also cause conflict with respect to the maintenance of required insurance coverage on existing mortgaged properties. (205) In presenting the report to the House Financial Services subcommittee, Richard J. Hillman, the General Accounting Office’s director of financial markets and community investments, emphasized that the extent of the problem posed by terrorism to the economy in general and the insurance industry in particular remains unknown. (206) However, he also warned of the “potentially significant” impact of the problem upon the recovering economy and the “real and potentially large” consequences of continuing congressional inaction in addressing the issue. (207)

In response to these concerns and after prolonged debate, the U.S. Congress passed and, abandoning his previously announced plan, President Bush signed the “Terrorism Risk Insurance Act” on November 26, 2002. (208) Federal assistance to private insurers is triggered by the occurrence of an act of terrorism that meets a four-part definition. In order to constitute terrorism, the act must be “a violent act or an act that is dangerous to human life, property or infrastructure.” (209) Second, the act must result in damage within the United States or outside of the United States in the case of air carriers, vessels and U.S. missions. (210) Third, the act in question must be committed by an individual or individuals acting on behalf of foreign interests in “an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States Government by coercion.” (211) Finally, in order to qualify as an act of terrorism triggering the Act’s provisions, the act in question must be certified as such by the Secretary of the Treasury in concurrence with the Secretary of State and the Attorney General. (212) All certification decisions of the Secretary of the Treasury are final and not subject to judicial review. (213) Acts committed in the course of a war as declared by the U.S. Congress and aggregate losses resulting from an act in an amount less than $5 million are specifically excluded from the definition of terrorism. (214)

All commercial insurers writing policies in the United States are required to participate in the program established by the Act and write policies covering terrorism as defined above. (215) The effect of these requirements is to nullify exclusions for occurrences meeting the Act’s definition of terrorism in place on the effective date of the Act, specifically, November 26, 2002. (216) In order to be eligible for reimbursement in the event of a certified terrorism loss, insurers must provide a “clear and conspicuous disclosure” to their policyholders of premiums being charged for such coverage and the extent to which any losses are reimbursed by the federal government. (217) Existing policyholders were required to receive this notice no later than ninety days from the effective date, specifically February 24, 2003. (218) Notice with respect to policies purchased within ninety days of effective date of the Act must be provided at the time of the policy’s purchase or renewal. (219) Policies purchased more than ninety days after adoption of the Act must provide the notice as a separate line item in the policy. (220) Exclusions for acts of terrorism may be reinstated in the event the insured provides a written authorization for such reinstatement or fails to pay the premium for such coverage within thirty days after receipt of the required notice from the insurer. (221)

The reimbursement provisions of the Act in the event of a certified act of terrorism depend upon when the act occurred. For losses occurring during the transition period of November 26 through December 31, 2002, insurers are liable for the initial amount of covered losses up to one percent of the insurer’s direct earned premiums for the preceding calendar year. (222) For losses occurring during 2003, this deductible increases to seven percent of the previous calendar year’s direct earned premiums. (223) In 2004, the deductible increases to ten percent, and, in the final year of the program in 2005, the deductible increases to fifteen percent of the previous year’s direct earned premiums. (224)

The Terrorism Risk Insurance Act provides for federal cost sharing for commercial property and casualty insurers in the event of a certified terrorist attack. The federal government is responsible for ninety percent of losses beyond the above-referenced insurer deductibles until aggregate losses for any program year (or the transition period and 2003 combined) reach $100 billion. (225) Insurers are responsible for the remaining ten percent of such aggregate losses beyond their deductibles. (226) Compensation from the federal government must be reduced by any compensation provided by the federal government to any person under any other federal program. (227) Federal assistance to insurers is capped at $100 billion. (228) The U.S. Congress is responsible for determining procedures for and the source of any payments to be made to insurers in excess of $100 billion. (229) In any event, pro rata allocation of federal compensation to individual insurers is within the sole discretion of the Secretary of Treasury, which determination is final and not subject to judicial review. (230)

Federal assistance received by commercial insurers as a result of acts of terrorism is not without cost to the industry, private insurers and, ultimately, policyholders. There are two separate methods by which the federal government may recoup payments to insurers occurring as the result of a certified act of terrorism. Mandatory recoupment of payments is based upon the difference between the sum paid for losses resulting from a certified act of terrorism by insurers, specifically the earned premium deductibles and ten percent participation payment, and specified dollar amounts. These dollar amounts are referred to as “insurance marketplace aggregate retention amounts.” (231) If the sum of earned premium deductibles and insurer participation payments do not equal the aggregate retention amount for a given year of the program, insurers are required to remit the difference to the federal government. (232) The aggregate retention amount for the transition period and 2003 is $10 billion. (233) This amount increases to $12.5 billion in 2004 and $15 billion in 2005. (234) There is no mandatory recoupment in the event the sum of the insurer deductibles and participation payments equals or exceeds the aggregate retention amount for a specified year. (235) The Secretary of the Treasury may also assess discretionary recoupment to the extent that federal assistance exceeds any mandatory recoupment amount. (236) The amount of such discretionary recoupment is based upon the cost to taxpayers if no additional recoupment is assessed, economic conditions in the marketplace, the affordability of insurance to small and medium-sized businesses and other factors the Secretary deems relevant. (237)

Recoupment is to be achieved through policy surcharges on property and casualty insurance policies in force and effect after the date of establishment of the recoupment amount. This surcharge is to be established by the Secretary based upon a percentage of the premiums charged to such policyholders. (238) However, such surcharges may not exceed three percent of the premium charged to policyholders on an annual basis. (239) In determining the method and manner of imposing surcharges, the Secretary of the Treasury is required to take into consideration “the economic impact of any such assessments and surcharges on commercial centers of urban areas … the risk factors related to rural areas and smaller commercial centers … and the various exposures to terrorism risk for different lines of insurance.” (240) Insurers are legally obligated to collect such surcharges and remit them to the Secretary. (241) Failure to collect or remit surcharges is punishable by a civil fine in an amount equal to the greater of $1 million or the amount of surcharges due and owing. (242)

Finally, the Act contains additional provisions concerning its relationship to state insurance regulations and limitations upon private litigation arising from future terrorist attacks. With respect to the relationship between the Act and state insurance regulations, Section 105 provides for the preemption of any state law requiring or regulating terrorism coverage that is inconsistent with the Act. (243) In addition, all state causes of action of any kind seeking compensation for property damage, personal injury or death are preempted. (244) In the event of a determination by the Secretary of the Treasury of the occurrence of a terrorist attack, injured parties are granted a federal cause of action, which shall serve as the exclusive remedy for claims seeking compensation for property damage, personal injury and death. (245) The Judicial Panel on Multidistrict Litigation is responsible for the designation of one or more U.S. district courts as having exclusive jurisdiction over all actions brought with respect to a specific act of terrorism. (246) These courts are required to apply the substantive law of the state in which the act of terrorism occurred to all such claims. (247)

III. THE ATTACKS OF SEPTEMBER 11: ACTS OF WAR OR ACTS OF TERRORISM?

The initial issue that must be addressed with respect to the events of September 11 is whether the attacks upon the World Trade Center constitute acts of war or acts of terrorism for insurance purposes. The nature of these attacks has been subject to many different, and often inconsistent, characterizations. In the days following September 11, President George W. Bush repeatedly characterized the attacks as acts of war. For example, in Proclamation 7462 issued on September 13, 2001, President Bush described the attacks as “despicable acts of war.” (248) President Bush reiterated this characterization as late as November 2001 when he stated that the attacks “created a state of armed conflict.” (249)

However, President Bush has also characterized the attacks as acts of terrorism. For example, on September 25, 2001, President Bush issued Executive Order 13,224 in which he described the attacks as constituting “grave acts of terrorism.” (250) President Bush reiterated this description on November 13, 2001 in the same executive order in which he also stated that the attacks were acts of war. (251) In this regard, President Bush defined terrorism as “a violent act or an act dangerous to human life, property, or infrastructure … intended to intimidate or coerce a civilian population … influence the policy of a government by intimidation or coercion or … affect the conduct of a government by mass destruction, assassination, kidnapping, or hostage-taking.” (252)

The U.S. Congress and several individual members also have issued contradictory characterizations of the attacks. For example, U.S. Senator and former candidate for Vice President Joseph I. Lieberman described the attacks as “acts of war” and “heinous war crimes” perpetrated “against defenseless civilians by terrorists posing as noncombatants using concealed weapons.” (253) This opinion was shared by Senators John McCain and John Kerry who called the attacks “a declaration of war [that] demands a forceful response.” (254) The U.S. House of Representatives affirmed these characterizations on three separate occasions. On September 13, 2001, the House of Representatives issued Joint Resolution 62 which stated that “any attack of international terrorism by a foreign country or entity on the United States or its territories, possessions, or installations should be considered an act of war.” (255) This description of the attacks was repeated in Joint Resolution 63 in which the House of Representatives determined that “a state of war exists between the United States of America and any entity determined by the President to have planned, carried out, or otherwise supported the attacks against the United States on September 11, 2001.” (256) Legislation introduced in the House of Representatives repeated this determination that the attacks were “acts of war perpetrated by enemy belligerents to destroy the sovereign independence of the United States of America contrary to the law of nations.” (257)

However, there were several instances in which the U.S. Congress described the attacks as acts of terrorism. In the hours following the attacks, the U.S. Congress adopted Joint Resolution 22 in which it denounced the attacks as acts of terrorism “targeting symbols of American strength and success [in an attempt to] intimidate our Nation and weaken its resolve.” (258) This characterization was repeated in numerous congressional actions in the days following September 11. For example, Joint Resolution 23 authorized the President to use “all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons.” (259) Joint Resolution 61 declaring September 12,2001 a national day of unity and mourning repeated the characterization of the attacks set forth in Joint Resolution 22. (260) Later joint resolutions declaring the existence of a state of war between the United States and the entities responsible for the attacks and those states that aided or harbored them and authorizing the use of military force also described the attacks as acts of terrorism. (261) Two of these joint resolutions, specifically, Resolutions 62 and 63, also determined that the attacks constituted acts of war. It must be further noted that many of these resolutions also described the attacks in terms other than acts of war or terrorism. (262)

Regardless of the source, the characterization of the attacks as either acts of war or acts of terrorism is crucial to the existence of insurance coverage and potential application of exclusions. Insurance companies are free to exclude as many risks from coverage as deemed necessary and proper subject only to statutory prohibitions, public policy considerations and market factors. (263) Purported exclusions of specific risks may be disregarded if they are not expressed in specific language clearly and unambiguously eliminating coverage of the purported risk. (264) Usage of less certain phraseology upon which dictionaries and common understanding may differ as a substitute for precise language is likely to result in the existence of coverage rather than an effective exclusion. (265)

The practice of determining the existence of coverage in the event the insurer fails to utilize appropriately precise language in attempting to exclude a known risk is otherwise known as the rule of contra proferentum and is equally applicable to many different types of insurance including life, liability and property policies. (266) This doctrine creates a presumption in favor of coverage that may not be overcome by narrowly drafted language within an exclusionary provision. (267) An insurer seeking to refute the application of this doctrine bears the burden of demonstrating that the proximate cause of the loss was a peril whose consequences were unambiguously excluded from coverage. (268)

“Acts of war” have long been an excluded peril from various forms of insurance coverage. War exclusions generally consist of those included in standard policy forms developed by industry associations and nonstandard forms drafted by individual insurers based upon the language contained within the standard forms. (269) The most comprehensive war exclusion is that contained within the commercial property insurance policy developed by Insurance Services Office, Inc. (ISO). The ISO exclusion consists of three separate exclusions for war. Initially, damages proximately resulting from “war, including undeclared or civil war” are specifically excluded from coverage. (270) The second proximate cause of loss excluded from coverage is “[w]arlike action by a military force, including action in hindering or defending against an actual or expected attack, by any government, sovereign or other authority using military personnel or other agents.” (271) The final provision excludes losses resulting from “[i]nsurrection, rebellion, revolution, usurped power, or action taken by governmental authority in hindering or defending against any of these.” (272) Another example of such a provision excludes coverage for “bodily injury or property damage due to war, whether or not declared or any act or condition incident to war…. [including] civil war, insurrection, rebellion, or revolution.” (273) A final example excludes coverage for “hostile or warlike action in time of peace or war … by any government or sovereign power (de jure or de facto) or by any authority maintaining or using military, naval or air forces.” (274)

However worded, war exclusions have received renewed attention in light of the events of September 11. Shortly after the attacks, ranking members of the Committee on Financial Services of the U.S. House of Representatives expressed their concern that affected insurance and reinsurance companies would deny coverage to thousands of victims on the basis of applicable war exclusion provisions. (275) The Committee deemed any invocation of such exclusions to be “completely unacceptable” and without legal justification. (276) The Committee concluded that “such legal maneuvering would not only be unsupportable and unpatriotic-it would tear at the faith of the American people in the insurance industry.” (277) These sentiments were shared by the National Association of Insurance Commissioners, which announced that war exclusions would not excuse coverage by any of the policies impacted by the events of September 11. (278) As a result, numerous companies and trade associations rushed to assure the U.S. Congress, state insurance regulators and customers of their intent to honor their obligations. Included in this group were Chubb, Cigna, MetLife, Northwestern Mutual Life Insurance Company and the Saint Paul Companies as well as trade associations such as the American Council of Life Insurers, the American Insurance Association, the National Association of Independent Insurers and the National Association of Mutual Insurance Companies. (279)

However, despite these representations, several insurers were rumored to be contemplating defenses based upon war exclusion clauses contained within impacted policies. For example, Britain’s Cox Insurance, which holds a portion of the insurance for the World Trade Center, stated that it would explore invoking war exclusions where applicable in order to avoid a “major impact” on profits. (280) Arab Insurance Group, the largest insurance company in the Arab world, announced that act of war issues added “another legal dimension to the insurance aspect of this catastrophe” with respect to its potential liability on policies impacted by the death of passengers on the hijacked flights. (281) Other insurers have yet to formulate their individual responses to the attacks and ensuing liabilities.

Initially, the distinction between acts of war and acts of terrorism appears straightforward. Federal and New York statutes distinguish between these acts in what appears to be an unambiguous fashion. Title 18 of the U.S. Code defines an act of war as “any act occurring in the course of declared war

By contrast, numerous federal statutes define terrorism and acts of terrorism. For example, Title 18 of the U.S. Code, as amended by the USA PATRIOT Act of 2001, distinguishes between international and domestic terrorism. (285) In order to constitute an act of international terrorism, an activity must satisfy a tripartite test. Initially, the activity must “involve violent acts or acts dangerous to human life that are a violation of the criminal laws of the United States or of any State, or that would be a criminal violation if committed within the jurisdiction of the United States or of any State.” (286) Second, the activity must be intended “to intimidate or coerce a civilian population

Despite these statutes, the judicial opinions attempting to apply such sweeping pronouncements to actual controversies remain inconsistent at best and irreconcilable as a general rule. Although war is generally accepted to mean a state of armed conflict between two nations, a legal determination of the existence of such a state of conflict is not as simple as it initially would appear. (293) Rather, judicial opinions have found war to be “a word of many meanings.” (294) Even accepting the above-noted definition, the existence of war still may not be determined to arise from a given state of facts on a consistent basis. (295) This is especially true given the wide range of conflicts that may exist between states. A recognition that war only exists if it is commenced and conducted in the traditional sense of deployment of organized military forces after a declaration of hostilities by respective sovereigns ignores the far more numerous types of conflicts that arise between states. If the definition is limited to war in the classic sense, the question remains how to characterize border incursions, police actions, armed clashes involving irregulars and cross-border raids. (296)

The same problems are inherent with respect to defining terrorism in practice rather than hypothetically in broad statutory prohibitions. Perhaps even more so than war, terrorism eludes ready definition and remains a relative concept subject to political manipulation and individual pathos. Although its essence, the “terror” it inspires among its unfortunate victims, is universal, terrorism’s particularities remain malleable to a maddening diverse range of human perceptions. It has remained so since its inception in the excesses of the French Revolution through anarchism in the nineteenth century, national liberation movements in the twentieth century and, most recently, violent religious fundamentalism. (297) As a result, no single definition of terrorism has been universally accepted, stymieing even the most capable of diplomats. Perhaps, as noted by one commentator, terrorism can no longer adequately describe that which truly merits outrage due to “a legacy of careless usage [that has left] us at a loss for words.” (298) Universal application to widely varying circumstances and the susceptibility of definitions based upon the identity of those peoples and states primarily impacted may very well have left the term bereft of any remaining moral power. (299)

Despite this lack of clarity, some conclusions with respect to the application of war exclusions to the events of September 11 may be drawn from an analysis of the voluminous case law. An initial starting point is the definition of war itself. Regardless of the court or its particular definition, the opinions share a common theme, specifically, that war is the interruption of all pacific relations between nations and a general contest of arms by authority of their respective sovereigns. (300) This theme has recurred throughout federal (301) and state court opinions that have addressed the issue. (302) War, as defined in these cases, may be either a declared or solemn war or an undeclared or imperfect war. (303) Declared or solemn war is war in its strictest constitutional sense requiring a formal declaration by the U.S. Congress. (304) However, war may also exist without a formal declaration. (305) Undeclared or imperfect war recognizes the existence of actual armed conflict without the benefit of formal recognition of such hostilities. (306) Courts recognizing the existence of undeclared or imperfect war have done so on the basis that it is a recognition of reality and grants the word its plain, ordinary and generally accepted meaning. (307)

Based upon these definitions, any insurance company seeking to invoke a war exclusion clause with respect to the attacks of September 11 will be required to overcome at least three substantial obstacles. The first and most formidable obstacle is inherent in the very definition of war itself. U.S. cases addressing the meaning of war for insurance purposes have defined it in accordance with the ancient international law definition, specifically, a contest of arms waged by states or state-like entities. (308) This contest of arms must occur at the behest of sovereign or quasi-sovereign entities exercising governmental authority within their respective states. (309) At a minimum, the entity purportedly conducting war on behalf of a state must constitute a de facto government. (310)

The cases identifying sovereign or quasi-sovereign entities constituting de jure or de facto government for purposes of conducting war have concentrated on three characteristics. The initial characteristic of any such entity is whether it exercises authority over persons within a determinate territory. (311) Governments and those entities deeming themselves to be de facto governments manifest “attributes of sovereignty,” one of which is to “stake out and maintain adverse claims to territory.” (312) Of particular relevance in this regard is the ability of the purported sovereign to enact laws and punish violators within such territory. (313) An entity does not obtain sovereign status to the extent that there remains a separate, identifiable and functional government responsible for the administration of law within the defined territory. (314) Thus, the uncontested occupation of territory by an entity at the sufferance of a de jure government does not constitute control of territory sufficient to confer sovereign status. (315) This includes the maintenance of guerrilla camps and training facilities and the utilization of territory for the staging of operations occurring with the express or implicit consent of the de jure government. (316)

The second characteristic is whether the entity has proclaimed itself to be a sovereign government in the territory it occupies or controls. (317) An “attribute of sovereignty” manifested by governments is a declaration of independence or proclamation of sovereignty. (318) The absence of such declarations and proclamations is evidence that an entity does not consider itself to be sovereign within the territory in which it conducts its operations. (319) Further evidence in this regard is the issuance of statements of goals short of declarations of sovereignty. (320) Statements condemning the acts of recognized governments or listing such governments as enemies are also insufficient to confer sovereign status upon such entities. (321)

The third attribute of a sovereign or quasi-sovereign entity is whether it has been recognized as such by members of the international community. (322) International recognition implies more than the disbursement or receipt of financial, military or moral support. (323) In addition, affiliation with entities possessing some attributes of sovereignty, most notably the Palestine Liberation Organization, is insufficient to elevate an otherwise stateless entity to the status of sovereign. (324) As a result of the absence of these characteristics, U.S. courts have routinely denied guerrilla groups sovereign status. Rather, courts have characterized such organizations as “relatively miniscule, militarily impotent, essentially isolated group[s] of dedicated revolutionists pursuing long-range objectives.” (325)

Any attempt to establish al Qaeda as a sovereign or quasi-sovereign entity for purposes of characterizing the events of September 11 as acts of war would encounter difficult, if not insurmountable, obstacles. Initially, it is clear that al Qaeda did not claim territory within Afghanistan independent of control by the ruling Taliban. In fact, other than its guerrilla training camps and some fortified bases at various locations, it appears that al Qaeda did not maintain a continuous permanent presence at any specific locale within Afghanistan. Rather, members of the organization appear to have moved freely about the country as dictated by their operations. It is additionally clear that, although it may have enforced a code of conduct applicable within its camps and bases, al Qaeda did not formally enact or enforce laws against civilian populations within any territories it occupied or utilized for its operations. Furthermore, the Taliban remained a separate, identifiable and functional government responsible for the administration of law within the defined boundaries of Afghanistan. It thus appears that al Qaeda occupied territory within Afghanistan at the sufferance of the de jure government of the Taliban. Finally, at no time did al Qaeda leadership ever proclaim itself to be a sovereign government, take up arms against the Taliban in order to establish sovereignty or receive international recognition from any member of the international community.

Further difficulties would be encountered through al Qaeda’s failure to adhere to the rules governing states in the conduct of war. The Hague Convention of 1907 and the Geneva Conventions of 1949 provide considerable guidance with respect to the conduct of war and the status of those who participate in hostilities. (326) For example, combatants are proscribed from specifically targeting civilian populations for extermination. (327) A1 Qaeda’s sworn purpose of deliberately targeting and killing U.S. citizens places it outside of customary norms and serves to disqualify its members from status as soldiers pursuant to the Hague and Geneva Conventions. Furthermore, in order to qualify as soldiers, combatants must be commanded by a person responsible for the behavior of his subordinates, carry arms openly and wear uniforms with fixed and distinctive insignia that may be identified from a distance. (328) Al Qaeda clearly fails to meet these requirements as its members have never worn uniforms bearing the requisite insignia and are known to have carried concealed weapons on several occasions, most notably during the prison uprising in Mazar-e Sharif. (329)

Even more to the point, applicable case law has focused upon the status of the actual perpetrators in determining whether their actions constituted acts of war. The U.S. Court of Appeals for the Second Circuit in Pan American World Airways, Inc. v. Aetna Casualty & Surety Co. noted that the Popular Front for the Liberation of Palestine (PFLP) hijackers did not wear uniforms or insignia or openly carry arms. (330) When combined with the previously noted factors relating to sovereignty, the court rejected the contention of the insurers that the hijacking and subsequent destruction of a Boeing 747 aircraft were an act of war. The court concluded that the hijacking “had criminal rather than military overtones” and was perpetrated by “agents of a radical political group, rather than a sovereign government.” (331) There is no distinction between these actors and the individuals who perpetrated the attacks on the World Trade Center and the Pentagon. As in Pan American World Airways, Inc., the hijackers were clad in civilian dress and carried concealed box cutters that ultimately served as weapons. (332) There is simply no persuasive argument that may be advanced that the perpetrators of the September 11 attacks qualify as soldiers pursuant to the Hague Convention, thus elevating their activities to acts of war against the United States.

Nevertheless, the question of whether al Qaeda itself qualifies as a quasi-sovereign entity for purposes of characterizing its activities on September 11 as acts of war would be as close a question as ever presented to a U.S. court. This is especially true given the judicial recognition that, for insurance purposes, “[w]ar can exist between quasi-sovereign entities.” (333) In order to meet this requirement, a guerrilla group must have “some incidents of sovereignty before its activities can properly be styled ‘war.'” (334) Al Qaeda possessed numerous sovereign attributes unlike other groups to whom U.S. courts declined to extend the status of “quasi-sovereign” such as the PFLP and the various combatants in the Lebanese civil war of the 1970s and 1980s. In contrast to its predecessors, al Qaeda exercised considerable control over its purportedly sovereign hosts. A1 Qaeda showered the Taliban with millions of dollars necessary for the operation of the government, including payment of salaries of influential officials and agencies such as the Bureau for the Protection of Virtue and the Prevention of Vice. (335) In return, al Qaeda received freedom to operate within Afghanistan without oversight and interference by the Taliban. (336) Al Qaeda operated its own school system and stores, owned or leased real and personal property for its offices and operations and housed, fed and trained thousands of recruits drawn to Afghanistan from throughout the world. (337) AI Qaeda members also were largely exempted from government control and were free to menace civilian populations with impunity. (338)

As a result, some scholars have concluded that the Taliban ultimately lost control over its own movement and the Afghan state and became a mere mouthpiece for al Qaeda. (339) Al Qaeda’s operations in Afghanistan may be “the first time [the world has] seen a terrorist organization hijack an entire state.” (340) In this regard, Afghanistan represents a reversal of the traditional roles of states and terrorist organizations by perhaps becoming the first terrorist-supported state. These conclusions, to the extent that they are accurate, may be sufficient to grant al Qaeda quasi-sovereign status for purposes of characterizing its actions as acts of war. If nothing else, the relationship between the Taliban and al Qaeda in Afghanistan exposes the inadequacy of traditional notions of sovereignty to the emerging international order of the twenty-first century. The blurring distinction between sovereign governments and quasi-independent terrorist organizations can only cast further doubt upon insurance coverage for future incidents absent universally accepted standards of differentiation.

The second formidable obstacle confronting any insurance company seeking to invoke a war exclusion clause with respect to the events of September 11 is that of declared and undeclared war. The issue that must be resolved in this regard is whether a formal declaration by the U.S. Congress is necessary in order for a state of war to exist. Although courts have uniformly held that the President and Congress may exercise war-making powers independent of one another and in the absence of a formal declaration, the issue remains whether an undeclared war may trigger an act of war exclusion. (341) This distinction becomes particularly relevant to the extent that the exclusion in question does not distinguish between declared and undeclared war.

The cases addressing the necessity of such a declaration are in hopeless conflict. The cases that require a declaration or other acknowledgement of a state of war prior to enforcing an act of war exclusion have noted that war “is not a mere contest of physical force, on however large a scale.” (342) Rather, war has a constitutional or legal meaning, thereby requiring that an authorized political department of the government determine its existence. (343) This line of cases recognizes that the existence or nonexistence of a state of war is not a matter for judicial determination but rather is a political question. (344) In addition, courts adopting this approach have noted that there is a difference between an act of war and the existence of a state of war. (345) In this regard, there is an acknowledgement that “[h]ostile attacks and armed invasions … accompanied by the destruction of life and property … however great and flagrant provocation to war are often atoned for and adjusted without [war] ensuing.” (346)

As such, courts cannot take judicial notice of the existence of a war until there has been formal acknowledgement by a political department of government clothed with war-making authority. (347) This conclusion brings certainty to insurance contracts by establishing well-defined preconditions to the application of war exclusions and requiring the inclusion of appropriate language if types of hostilities other than formally declared war are to be excluded from coverage. (348) This approach also spares courts of having to make “fine distinctions as to when [hostilities] became [a war], nor how many casualties or how much expenditure of blood and treasure made it so.” (349) Courts taking this approach to the issue have thus held the attack on Pearl Harbor and the conflicts in Korea and Vietnam not to be war within the meaning of applicable insurance policies. (350)

Conversely, the cases that have not required a declaration or other acknowledgement of a state of war prior to applying exclusions have noted that “[w]ar is an existing fact, and not a legislative decree.” (351) This approach has been deemed a recognition of reality associated with the expenditure of capital, destruction of property and loss of life associated with undeclared hostilities. (352) This recognition of reality comports with the ordinary sense of the word “war” and its common usage and understanding by the general public. (353) In further support of this conclusion, at least one court has cited numerous instances of hostilities throughout history, which have been referred to as wars without formal declarations thereof. (354) Included on this list are the naval war between the United States and France from 1798 to 1800, the First and Second Barbary Wars (1801-05 and 1815), the U.S. Civil War, the Spanish-American War, the Boxer Rebellion of 1900 and the U.S.-Mexico border hostilities of 1914-17. (355) This interpretation is further supported by the absence of language demonstrating that the parties to the insurance contract intended to give war a technical or legal definition. (356) Thus, any limitation of such exclusion to the rare instance of actual declared war impermissibly narrows its operation while concurrently expanding the liability of the insurer in a manner not anticipated by the parties. (357) Courts taking this approach have held the attack on Pearl Harbor and the conflicts in Korea and Vietnam to be wars within the meaning of applicable insurance policies despite the absence of a formal declaration of hostilities. (358)

The better approach with respect to exclusions that fail to distinguish between declared and undeclared wars is that which requires a formal declaration or other acknowledgement. This approach has several benefits. Initially, it recognizes that the existence or nonexistence of a state of war is ultimately a political question from which the judicial branch should abstain. This approach shields courts from making determinations with respect to U.S. foreign affairs that may run contrary to determinations by the political branches. Courts also are spared from having to determine when hostilities commenced and when they terminated for insurance purposes. A standard establishing declared war as the only type of hostilities within an exclusion clause eliminates this uncertainty and provides clear guidance to courts. Finally, exclusions to coverage are subject to strict construction and must be “clear and exact” to be given full force and effect. (359) As any ambiguities are to be resolved in favor of the insured, those risks that are not clearly excluded are included within coverage. (360) As war has been held to import various meanings, it is incumbent upon insurers to adopt clear definitions encompassing undeclared as well as declared wars. Any insurer failing to do so acts at its own peril. Thus, any exclusion for war contained in a commercial insurance policy impacted by the attacks of September 11 that fails to distinguish between declared and undeclared war should be construed in favor of the insured and coverage.

One additional issue with respect to the necessity of a formal declaration of war merits attention. This issue relates to whether a state of war exists for insurance purposes when an entity has declared war without a corresponding recognition of hostilities by its purported adversary. This issue is relevant with respect to the attacks of September 11 as it is widely believed that the attacks were a continuation of the “war” declared on the United States by al Qaeda in 1998. (361) The attacks may be viewed as an attempt to force the United States to recognize and respond to this purported state of hostilities, thereby permitting al Qaeda to rally potential allies in its declared jihad against the United States and other western interests. (362)

Regardless of how the attacks are characterized, this issue may be resolved in brief fashion. Although a state of war may exist for insurance purposes despite the absence of direct U.S. participation, it is doubtful that a U.S. court would find the existence of such a state based upon the declaration of an entity lacking international recognition and important attributes of sovereignty. Indeed, in the only case to have addressed this issue, the U.S. Court of Appeals for the Second Circuit noted that the mere fact that a guerrilla group has declared war on the United States and believes it to be prosecuting such a war in the course of its operations does not mean that there is a war between the United States and such entity. (363) Self-serving propaganda issued by a radical political group substantially lacking the hallmarks of a sovereign government do not constitute a war even under the broadest of exclusionary provisions. (364)

The final obstacle confronting any insurance company seeking to invoke a war exclusion clause with respect to the attacks of September 11 are limitations upon the definitions of other types of hostilities short of actual war. An insurer failing to establish that the attacks constitute an actual war may choose to characterize them instead as “warlike actions” or some lesser degree of hostilities within standard exclusionary clauses. However, such characterizations of the attacks are unpersuasive for several reasons. The most likely characterization would be that of “warlike actions.” “Warlike actions” are defined as acts of war that may or may not lead to a state of war. (365) However, hostilities constituting acts of war must occur between sovereign entities in the absence of a declared war. (366) Furthermore, “warlike actions” have been specifically held not to encompass the infliction of intentional harm by non-sovereign political groups upon civilian populations far removed from the locale or subject of any actual warfare. (367) Rather, “warlike actions” imply that the perpetrator intended to coerce or conquer the sovereign against whom the action was directed. (368) Attacks by political groups, such as the attacks by members of al Qaeda on September 11, are not for the purpose of conquest but rather constitute “the striking of spectacular blows for propaganda effects.” (369) As such, they may not be properly characterized as “warlike actions” for purposes of excluding insurance coverage.

Al Qaeda’s attacks also do not meet the requirements of any of the other exclusions contained within standard insurance policies. The attacks do not constitute a “civil war” due to the absence of “specific intent to overthrow [an] established government.” (370) This intent is evidenced by hostile occupation of territory, declarations of independence, proclamations of new governments, the organization of military forces and the waging of war against an existing sovereign, all of which were absent from the attacks of September 11. (371) The absence of this specific intent also prevents the attacks from constituting an insurrection, which has been defined as “a violent uprising by a group or movement acting for the specific purpose of overthrowing [a] constituted government and seizing its powers.” (372)

By contrast to the international context of these disturbances, a “civil commotion” or a “riot” is a purely domestic occurrence. A “civil commotion” has been defined as “an uprising among a mass of people which occasions a serious and prolonged disturbance and infraction of civil order not attaining the status of a war or an armed insurrection.” (373) This type of disturbance imports “occasional local or temporary outbreaks of unlawful violence … such as occur among fellow citizens or within the limits of one community. (374) The locale in which this disturbance occurs may be a city, a county or other specific area. (375) The meaning of “civil commotion” has been held to be “scarcely descriptive of [a] hijacking.” (376)

Finally, the term “riot” has been defined as “any gathering of three or more persons with a common purpose to do an unlawful act and with an apparent intention to use force or violence against anyone who may oppose this purpose.” (377) The common purpose the participants seek to accomplish through force or violence is an enterprise of a private nature. (378) Such could hardly have been the purpose of the members of al Qaeda who perpetrated the attacks upon the World Trade Center and the Pentagon. Rather, the purpose appeared to be to strike a spectacular propaganda blow against a symbol of U.S. economic and military dominance. Furthermore, as with a civil commotion, a hijacking does not fit within the definition of a riot. As noted by the U.S. Court of Appeals for the Second Circuit in Pan American World Airways, Inc., “the notion of a flying riot in geographic installments cannot be squeezed into … [this] formula.” (379) A “complex traveling conspiracy” as represented by a hijacking also lacks the requisite local nature to constitute a riot for insurance purposes. (380)

Rather than acts of war, the attacks of September 11 most closely resemble acts punishable as terrorism as defined in applicable federal criminal statutes. Applying the most recent incarnation of the federal crime of terrorism as set forth in the USA PATRIOT Act, it is undisputed that the hijackers engaged in “violent acts or acts dangerous to human life” in violation of U.S. law. (381) In addition to the violation of U.S. and New York laws proscribing terrorist activities, the actions of the hijackers violated numerous other federal (382) and state (383) laws with respect to malicious destruction of aircraft, conspiracy and mass murder.

Second, the actions of the hijackers were clearly intended to intimidate the U.S. population, influence policies of the U.S. government by intimidation or coercion and affect the conduct of government by mass destruction. In striking at symbols of American economic and military hegemony, the attackers inflicted severe psychological trauma upon a shell-shocked population. As noted by one commentator, destroying architecture is a particularly effective method of inflicting trauma as it represents “culture in its most physical form.” (384) Destruction of buildings, especially those with deep symbolic meaning such as the World Trade Center and the Pentagon, serves to “rob a culture of its memory, of its legitimacy, of its right to exist.” (385) Clearly, this was the intent of the hijackers. As noted by Osama bin Laden, the attacks resulted in the destruction of “America’s greatest buildings,” thereby resulting in a country “full of fear, from its north to its south, from its west to its east.” (386)

It is also clear that the attacks were designed to interfere with the operation of government as well as the private sector. Indeed, if this was not the intent of the attacks, it was the ultimate result. Commercial air traffic was suspended nationwide for the first time in history, the New York Stock Exchange was shuttered for the longest period of time since the Great Depression and more than fifty U.S. embassies, a quarter of the nation’s foreign outposts, were closed in the aftermath of the attacks. (387) All aspects of commercial activity within the United States were impacted to some degree. In addition to the commercial toll, there was the human toll. Almost three thousand lives were obliterated in a single moment, and tens of thousands of other persons were rendered temporarily homeless, unemployed, psychologically scarred or all three. (388) Although al Qaeda has never formally admitted its complicity or explained any motivation it may have had for perpetrating the attacks, it cannot be seriously doubted that the attacks were intended to achieve the goals of encouraging U.S. withdrawal from the Middle East and avenging perceived U.S. mistreatment of Muslims, especially in the occupied territories and Iraq.

Finally, the activities meet either the definition of international or domestic terrorism. Specifically, the attacks constituted acts of international terrorism to the extent the participants and the planning, financing and ultimate authorization of the attacks originated outside of the United States. The attacks may also be characterized as acts of domestic terrorism to the extent that the attacks and the population to be intimidated were within the United States. The similarity between the definition of terrorism set forth within applicable federal law and the events of September 11 thus creates another obstacle for any insurance company seeking to employ a war exclusion clause. Strictly construing the application of exclusionary language against the insurer and applying the presumption in favor of coverage, it appears highly unlikely that any insurer will be able to carry the burden of demonstrating that the proximate cause of the losses suffered on September 11 was anything other than an act of terrorism, a peril whose consequences were not excluded from applicable policies.

IV. THE ATTACK ON THE WORLD TRADE CENTER: ONE INSURABLE LOSS OR TWO INSURABLE LOSSES?

Assuming the existence of coverage for the World Trade Center, the second issue that must be resolved is whether the attacks constituted one or two occurrences. As previously noted, this issue is currently the subject of ongoing litigation between Swiss Re and the Lessees. As such, there has been no judicial determination with respect to this issue. Nevertheless, some conclusions may be drawn at this preliminary stage. Initially, there appears to be minimal controversy in the event that the language allegedly contained in the Willis’ proposal governs the definition of occurrence. It is clear in this regard that the destruction of the World Trade Center was directly or indirectly attributable to one series of similar causes, specifically, the hijacking of commercial aircraft and their subsequent intentional collision with buildings in the complex. Although the aircraft were owned and operated by different airlines and were hijacked by different groups of individuals, both flights originated from the same airport, were bound for the same destination and were commandeered by members of the same organization. Furthermore, the end result of both hijackings was the same, specifically, the collapse of One and Two World Trade Center within twenty-nine minutes of one another. The causes are thus similar in kind to warrant treatment as a single occurrence for insurance purposes. According to the language contained within the Willis’ proposal, all losses resulting from these similar causes are to be added together and the total amount thereof is to be treated as one occurrence. (389) This amalgamation of losses is to occur regardless of any chronological or geographic separation. (390) However, a more interesting and difficult issue arises if the Lessees are correct in their contention that the term “occurrence” is to be defined pursuant to New York law. This section of the article examines New York law in this regard and evaluates the Lessees’ assertion that there were two separate losses arising from the events of September 11.

Any analysis of the number of insured occurrences arising from an injury-producing event must begin with a review of general principles utilized to interpret occurrence provisions within commercial insurance policies. Initially, terminology utilized in insurance policies relating to the number of losses, such as “occurrence” and “accident,” is to be given its common sense meaning. (391) This common sense meaning may be determined by examining the intent of the parties as demonstrated by their words and purposes. (392) In a commercial insurance policy, the intent of the parties may be determined by ascertaining the “reasonable expectation and purpose of the ordinary business man when making an ordinary business contract.” (393) This ordinary businessperson is presumed to be familiar with insurance agreements and the industry for which he or she seeks coverage. (394) Any ambiguities resulting from this inquiry are to be construed against the insurer “in the context of the policy as a whole, the purposes sought to be accomplished, and the relevant surrounding circumstances.” (395) This results in judicial construction of ambiguous language in favor of coverage as long as the construction is reasonable. (396) Thus, the burden of proof resides with the insurer “to establish that the construction it seeks is the only reasonable interpretation of the policy language.” (397)

New York state courts and federal courts applying New York law have extensively discussed the meaning of the term “occurrence.” Courts considering the subject have uniformly held that the plain meaning of the term “occurrence” is “something that takes place, especially something that happens unexpectedly and without design.” (398) An “occurrence” for insurance purposes has been defined as “an accident, event or continuous happening or repeated exposure to conditions, which unintentionally causes … injury to or destruction of property, including the loss of use thereof, during the policy period.” (399) The focus of inquiry in determining the number of occurrences is the cause or causes of the damage and not the number of injuries or claims. (400) Thus, it is possible to have a single claim result from an occurrence or, “if the occurrence is of the sort where one event causes injury to several persons or to property owned by several persons, to have several claims per occurrence.” (401)

Multiple claims or injuries may arise from a single occurrence if the cause of the claims or injuries was “so numerous, uniform, routinized and regularized, at such steady and frequent intervals, that they merged into one continuous and repeated event.” (402) This determination has come to be known as the “one unfortunate event” test. This test was first delineated by the New York Court of Appeals in Arthur A. Johnson Corp. v. Indemnity Insurance Co. in which the court defined the term “accident” as an “event of an unfortunate character which takes place without one’s foresight or expectation.” (403) This definition was subsequently extended to the word “occurrence” in Hartford Accident & Indemnity Co. v. Wesolowski. (404) The “one unfortunate event” is “one of the several happenings … which precedes and contributes to the resulting injury.” (405) The insured or perpetrator is held liable for this one event and not some distant point in the causal chain of events. (406) This approach has been deemed to be “most practical” and most closely comporting with the understanding of the average person with respect to the meaning of the terms “accident” and “occurrence” in an insurance policy. (407) The “one unfortunate event” test continues to be applicable to the determination of whether multiple claims and injuries arise from a single occurrence or accident in New York. (408) Application of this standard has resulted in a diverse range of holdings with respect to multiple and single occurrences. (409)

The cases finding a single occurrence as a result of application of the “one unfortunate event” test have focused on four factors. Initially, the injuries or losses must share a common origin. (410) This common origin must constitute a single continuous event resulting in multiple injuries or losses. (411) The cause of injury or loss for insurance purposes is “the efficient or dominant cause of the loss [and] not the event that merely set the stage for that later event.” (412) This dominant cause has been described as “a continuous or repeated exposure to conditions” or “‘part of a routinized, repetitive process.” (413)

Injuries or losses resulting from a common cause or from exposure to substantially similar conditions may be deemed to have arisen from a single event. (414) Thus, in Hartford Accident & Indemnity Co. v. Wesolowski, the New York Court of Appeals held that an automobile accident in which the insured’s vehicle struck an oncoming vehicle, ricocheted off and struck another vehicle 130 feet away constituted but “a single, inseparable ‘three-car accident.'” (415) However, applying the same test in Travelers Casualty & Surety Co. v. Certain Underwriters at Lloyd’s of London, the same court found that the presence of pollutants at 175 locations lacking a spatial or temporal connection were multiple occurrences for purposes of resolving apportionment disputes between the primary insurers and their reinsurers. (416) A similar conclusion was reached by the New York Supreme Court in Newark Insurance Co. v. Continental Casualty Co. in which the court held that the grounding of a fuel oil tanker on a previously uncharted rock ledge while attempting to dock in Antofagasta, Chile was a separate occurrence from a grounding of the same tanker on the same ledge as it attempted to leave port. (417) Federal courts applying this principle have also found multiple occurrences in repeated exposure of workers to asbestos fibers on vessels owned and operated by the insured and the collapse of two separate sections of the roof of a copper concentrator mill as a result of heavy snowfall. (418)

The application of this first factor to the attack upon the World Trade Center leads to a very close result. Arguably, the collision of the aircraft with the twin towers was a single continuous event resulting from the culmination of a common criminal enterprise. In addition, the collisions of the aircraft with the towers were undoubtedly substantially similar events resulting in a common outcome. However, the more persuasive argument is that the ultimate loss suffered by the Lessees did not share a common origin. A separate aircraft operated by separate airlines and commandeered by separate groups of hijackers at different times and locations struck each tower. The separation of these multiple instrumentalities of destruction is particularly important when compared to the result reached in Hartford Accident & Indemnity Co. v. Wesolowski. In this case, the New York Court of Appeals found that two automobile collisions, consisting of an initial collision, a ricochet and subsequent immediate second collision, shared a common origin and were one occurrence for insurance purposes. (419) According to the court, these collisions shared a common origin, specifically, the negligent driving of the insured. (420) However, the collisions and resultant losses also were caused by the single instrumentality of the insured’s vehicle as it separately struck the two automobiles. The existence of a single loss-producing instrumentality is in sharp contrast to the other cases applying the common origin factor. These cases found separate occurrences as a result of multiple loss-producing instrumentalities. (421) Furthermore, as will be noted later, the attacks did not share as close of spatial and temporal connections as the accident at issue in the Hartford case. It thus appears that the balance of the argument with respect to the application of the first factor weighs in favor of a finding of multiple occurrences.

Closely related to the common origin factor is the requirement of causation. This factor requires the existence of an unbroken causal chain of events resulting in the injuries or losses at issue. (422) The chain between the causative event and ultimate loss must be without intervention of other agents or operative factors. (423) A single occurrence may be found to exist where there has been no break in the causal chain. (424) Thus, in Hartford Accident & Indemnity Co. v. Wesolowski, the New York Court of Appeals concluded that two separate automobile collisions with the insured’s vehicle within seconds and 130 feet of one another were but a single occurrence for insurance purposes. (425) The dominant cause of the second collision, specifically, the first collision which propelled the insured’s automobile into the path of the second automobile, could not be overcome as a result of the extremely short period of time and space between the incidents. (426) By contrast, in Newmont Mines, Ltd. v. Hanover Insurance Co., the U.S. Court of Appeals for the Second Circuit refused to find that two separate collapses of different sections of the roof of a copper concentrator mill as a result of heavy snow were a single occurrence. (427) The court noted the intervention of numerous factors that served to break the causal chain. These intervening factors included the design of the mill as two independent structures lacking a direct physical connection, the chronological separation of the collapses and the absence of evidence that the first structural failure resulted in the subsequent collapse. (428) Thus, the second collapse was an independent event and was not a mere continuation of the earlier structural failure. (429),

The application of this factor to the attack on the World Trade Center favors a determination that the attacks were separate occurrences for insurance purposes. Despite the numerous common elements with respect to the attacks, these common elements primarily occurred prior to the attacks themselves. As such, they were a mere prelude to the events that led directly to the destruction of the complex and not the dominant or efficient causes of loss. Rather, the dominant cause of loss of both towers was a weakening of their infrastructure as a result of prolonged fires fed by jet aircraft fuel and set off by the impact of the aircraft upon the buildings. Although this cause of loss is common to both towers, the fires were sparked at different times by different perpetrators utilizing different aircraft. Furthermore, although the towers were designed as part of a larger office complex, they had a separate and independent existence from one another, as did the copper concentrator mill in Newmont Mines, Ltd. Another similarity to the collapses at issue in Newmont Mines, Ltd. is the fact that the structural failures resulting in the collapse of the towers occurred at different times. Finally, there is no evidence to date suggesting that the collapse of one of the World Trade Center towers would have necessarily resulted in the collapse of its counterpart. Thus, it may be persuasively argued that the collapse of One World Trade Center was not a continuation of the earlier collapse of Two World Trade Center.

The application of these cases to the World Trade Center attacks demonstrates the importance of a geographic and temporal relation between the injuries or losses. These relations are the third and fourth factors for determining the number of occurrences for insurance purposes. With respect to the geographic relation between the losses, in order for a court to determine the existence of a single occurrence, the injuries or losses at issue must be spatially linked to one another. (430) This spatial link does not exist if the losses sought to be combined as one occurrence are “widely separated” from one another. (431) Although the term “widely separated” has not been specifically defined, it is apparent from the cases that independent and unconnected structures are sufficiently separated such that damages occurring to the structures constitute multiple occurrences. (432) It is also apparent from the cases that adjoining premises may be deemed separate if they maintain some type of physical barrier between them. (433) Despite the absence of specificity, it has been noted that to find geographically separated losses to be a single occurrence would result in the absurdity that buildings several miles apart but damaged as a result of the same catastrophic event would be but one insurable event. (434) Such a result is directly contrary to the purposes of the parties in entering into the insurance contract as well as the plain and ordinary meaning of the contract. (435)

Particularly instructive with respect to the issue of geographical separation are the cases of Arthur A. Johnson Corp. v. Indemnity Insurance Co. (436) and Newmont Mines, Ltd. v. Hanover Insurance Co. (437) The Arthur A. Johnson Corp. case posed the issue of whether the flooding of the subbasements of adjoining buildings as a result of the failure of separate temporary retaining walls due to the accumulation of water from a torrential rainstorm constituted one or two occurrences. Although adjoining one another, the buildings at issue were physically separated such that flooding occurring in the subbasement of one building would not necessarily intrude upon the subbasement of the other building. (438) The underground vault walls were removed from the front of each building as the result of a construction project. (439) Separate cinder block walls replaced these walls for each of the structures. (440) Unfortunately, the temporary walls gave way within fifty minutes of one another, thereby resulting in flooding of the structures. (441)

In deciding this case of first impression in New York, the Court of Appeals held that the walls’ collapse and subsequent flooding were separate occurrences for insurance purposes. (442) Applying the “one unfortunate event” test, the court found that there was “no suggestion that the collapse of the first wall caused the failure of the second.” (443) In further support of this conclusion, the court noted that if the walls were separated by several city blocks on different construction sites but subject to the same torrential rainfall, there clearly would be two occurrences. (444) Therefore, the court concluded “the collapses of separate walls, of separate buildings at separate times, were in fact separate disastrous events and, thus, two different accidents within the meaning of the [applicable] policy.” (445) The court deemed this result to conform to “the reasonable expectation and purpose of the ordinary business man when making an ordinary business decision.” (446)

The holding of the U.S. Court of Appeals for the Second Circuit in Newmont Mines, Ltd. v. Hanover Insurance Co. is of even greater relevance to the issue of geographic proximity in the case of the World Trade Center. In this case, the court was called upon to resolve the issue of whether the collapse of two separate sections of the roof of a copper concentrator mill on different days as a result of heavy snowfall constituted one or two occurrences pursuant to the applicable insurance policy. The building in question was designed and constructed as two adjacent structures. (447) In March 1979, a large section of the concentrator roof collapsed due to the weight of ice and snow. (448) Several days later, the roof of the second section of the concentrator collapsed for the same reason. (449) In affirming the jury’s verdict finding two separate occurrences, the court applied the “one unfortunate event” test and found that the second collapse was not the consequence of the first collapse as each section was structurally distinct and independently capable of supporting accumulations of snow and ice. (450) This conclusion was further supported by the physical separation of the columns, trusses, purlins and roofs themselves, (451) Thus, the court concluded that the subsequent collapse was not a continuation of the earlier collapse. (452) As in Arthur A. Johnson Corp., the court deemed this result to conform to “the business purposes sought to be achieved by the parties and the plain meaning of the words chosen by them to effect those purposes.” (453) Furthermore, the court concluded that to hold otherwise would lead to an “absurd result.” (454) Specifically, such a conclusion would mean that “the collapse of the roof of one building caused on one day by a snowstorm would be considered the same occurrence as an entirely unrelated collapse days later of the roof of another building located several miles away simply because the same snowstorm was the cause of both collapses.” (455)

Applying the holdings of these cases to the World Trade Center leads to the conclusion that the attacks and resultant collapses were two separate occurrences. Initially, it must be noted that One and Two World Trade Center were separate buildings. In fact, the twin towers were more geographically distinct from one another than the buildings at issue in either Arthur A. Johnson Corp. or Newmont Mines, Ltd. in that they did not physically adjoin one another and were not part of the same building. If the adjoining buildings in Arthur A. Johnson Corp. and the distinct portions of the roof of the copper concentrator mill in Newmont Mines, Ltd. were separate buildings for insurance purposes, it is difficult to conclude that two office towers in excess of one hundred stories each and separated by a large public open space are one and the same building. The degree of physical separation was such that the initial attack on One World Trade Center did not constitute an attack on Two World Trade Center. There is no indication that the attack on Two World Trade Center was a continuation of the earlier attack on One World Trade Center. In addition, there is no evidence that the collapse of One World Trade Center was a continuation of the preceding collapse of Two World Trade Center.

A contrary conclusion would lead to legal hairsplitting as to what constitutes sufficient physical separation for purposes of ascertaining multiple losses. Clearly, had the towers stood in separate locations in Manhattan, the attacks and collapses would not bear the necessary geographic relation to constitute a single occurrence. A court proceeding down this interpretive path would be hard-pressed to distinguish the holdings in Arthur A. Johnson Corp. and Newmont Mines, Ltd. finding multiple occurrences as a result of losses suffered to buildings with a closer physical relationship than that of the World Trade Center towers. Furthermore, it appears unlikely that an insurer confronted with making such a distinction would be able to do so in such a convincing fashion as to establish that such a construction is the only reasonable interpretation of the policy language. (456) Finally, this conclusion would be inconsistent with the previously noted presumptions in favor of coverage and of interpreting ambiguities for the benefit of the insured. (457)

In addition to a geographic relation, the losses at issue must have a temporal link. (458) There is no basis for aggregating losses that are “widely separated in time.” (459) There is a paucity of New York case law defining what constitutes a “wide separation in time” with any degree of specificity. For example, in Stonewall Insurance Co. v. Asbestos Claims Management Corp., the U.S. Court of Appeals for the Second Circuit rejected any attempt to characterize tens of thousands of asbestos exposure and contamination claims as a single occurrence, in part, based upon the fifty-one year period in which the asbestos-laden products were manufactured and caused injury. (460) By contrast, in Hartford Accident & Indemnity Co. v. Wesolowski, the New York Court of Appeals held that two collisions involving the insured’s automobile occurring within an instant of one another were temporally linked such as to be properly characterized as a single occurrence. (461) The instantaneous nature of these collisions prevented the intervention of outside agents and other operative factors sufficient to break the chronological continuum between the two impacts. (462) As a result, the court concluded “in common understanding and parlance there was … but a single, inseparable ‘three-car accident.”‘ (463)

Once again, perhaps most instructive and relevant on the requirement of a temporal relationship is the New York Court of Appeals’ opinion in Arthur A. Johnson Corp. v. Indemnity Insurance Co. (464) In this case, the cinder block wall at 300 Fourth Avenue in New York City gave way at 5:10 p.m., resulting in the flooding of the building’s subbasement. (465) Fifty minutes later, the cinder block wall protecting the adjoining building at 304 Fourth Avenue was breached as a result of the same torrential rainfall, resulting in similar flood damage to the building’s subbasement. (466) As previously noted, the court found the flooding incidents to be separate occurrences based upon the geographic separation of the buildings, their individual structural integrity and the lack of a common causal element. However, the court also based its conclusion upon the chronological separation between the breaches of the two walls. (467) This temporal separation of fifty minutes was deemed sufficient to support the conclusion that the breaches were “in fact separate disastrous events and, thus, two different accidents within the meaning of the policy.” (468)

The timing of the collapse of the cinder block walls in Arthur A. Johnson Corp. bears some resemblance to the events surrounding the collapse of the World Trade Center towers. As in Arthur A. Johnson Corp., there was a distinct temporal separation with respect to each tower between the attacks and their collapse. One World Trade Center was struck at 8:45 a.m., and Two World Trade Center was struck twenty-one minutes later. (469) Furthermore, the subsequent collapses were separated by twenty-nine minutes. (470) Although these separations were not as great as in Arthur A. Johnson Corp., neither were they instantaneous events warranting treatment as a single occurrence as in Hartford Accident & Indemnity Co. v. Wesolowski. The World Trade Center case thus falls within a gray area between these opinions. Although it is entirely within the power of a court considering the issue to determine that anything less than a fifty-minute interval is inadequate temporal separation for purposes of finding multiple occurrences, such a distinction appears to be arbitrary at best. This is especially so given the previously noted presumptions in favor of coverage and the interpretation of ambiguities in favor of the insured. (471) This result also appears unlikely given the difficulty any insurer would encounter meeting its burden of demonstrating that such a reading is the only reasonable interpretation of the policy language. (472)

There is one final legal principle that contributes to the conclusion that the attacks on the World Trade Center were separate occurrences. This principle provides for something short of a judicial presumption, perhaps best characterized as a predisposition, favoring the finding of a single occurrence in instances resulting in mass injuries. For example, in Uniroyal, Inc. v. Home Insurance Co., the U.S. District Court for the Eastern District of New York stated that “[f]inding a single occurrence is especially apt in cases … ultimately imposing damage on large numbers of people.” (473) Thus, numerous shipments on a mass basis of Agent Orange by Uniroyal to the U.S. military “in which it was anticipated that any defects in the system would affect a large number of persons in the chain of distribution were a unitary, continuous and repeated exposure to the same conditions.” (474) The same conclusion was reached by the U.S. Bankruptcy Court for the Southern District of New York in the case of In re Prudential Lines, Inc. (475) In holding that exposure to asbestos on the debtor’s vessels over a period of several years was a single occurrence, the court noted that “where a single event, process or condition results in injuries, it will be deemed a single occurrence even though the injuries may be widespread in both time and place and may affect a multitude of individuals.” (476) As later elaborated upon by the U.S. Court of Appeals for Second Circuit, one of the primary motivations for reaching such a conclusion in the mass tort context is that it “maximizes coverage where the insured is confronted with numerous claims that, considered separately, would not exceed the deductible amount.” (477)

The judicial predisposition for finding a single occurrence as a result of a mass tort is inoperative in the case of the World Trade Center for two reasons. Initially, although the attacks clearly constituted a mass tort, they were different in nature than the torts at issue in either Uniroyal, Inc. or In re Prudential Lines, Inc. The torts in each of these cases involved long-standing and widespread exposure to toxic substances. Although such a case may be made in later years if long term exposure to toxins released as a result of the collapse of the twin towers proves to be of serious health consequence, such cannot be presently concluded with respect to the collapses themselves. Furthermore, the court in Uniroyal, Inc. concluded that a finding of a single occurrence is preferred where the mass tort involves “continuous and repeated exposure to conditions … [as] part of a routinized, repetitive process.” (478) The attacks on the World Trade Center can hardly be characterized in a similar fashion. In addition, the bankruptcy court’s stated preference for such an approach in the case of In re Prudential Lines, Inc. was subsequently overturned by the U.S. Court of Appeals for the Second Circuit in favor of a finding of multiple occurrences. (479)

Finally, the policy reason underlying the application of this preference is absent in the destruction of the World Trade Center. Unlike Stonewall Insurance Co. v. Asbestos Claims Management Corp., a determination that the attacks constituted one occurrence would not maximize insurance coverage for the Lessees. Instead, quite to the contrary, insurance coverage will only be maximized in the event of a judicial determination that the attacks constituted multiple occurrences. If the maximization of coverage has a legitimate role in policy interpretation, then a court confronted with this issue must be predisposed to finding multiple occurrences in the World Trade Center attacks. Given the pro-insured tilt of the rules of policy interpretation, the application of the four-factor test and the uncertainty surrounding the circumstances in which the insurance binder was issued for the complex, such a determination would be a defensible and reasonable conclusion.

V. FEDERAL INTERVENTION IN THE PRIVATE INSURANCE MARKET: ENSURING INDUSTRY SURVIVAL OR PROFITS?

In light of the uncertainty surrounding resolution of the aforementioned issues, the enormous financial losses sustained as a result of the events of September 11 and the likelihood of future terrorist attacks, discussion of federal intervention in the private insurance market is warranted. As previously noted, in light of the attacks, state regulators began to permit insurance providers to slowly retreat from the provision of terrorism coverage. (480) Executives from a wide range of industries, including banking, commercial real estate development and financial ratings services, warned of the impact of federal inaction, including increased difficulty in locating capital and costs associated therewith, loss of development opportunities and ratings downgrades. (481) These consequences could have a serious impact on other business sectors and serve to hamper any budding recovery from the current recession. These concerns were echoed by numerous government officials, including the Secretary of the Treasury and the Federal Reserve Chairman, and reported in greater detail by the U.S. General Accounting Office. (482) Although perhaps somewhat colored by industry perspective, the legitimacy of these concerns will be assumed for purposes of the subsequent discussion, thereby warranting federal intrusion in the private insurance market for terrorism.

There is precedent for federal intervention in the U.S. private insurance market. For example, pursuant to the Atomic Energy Damages Act of 1957, operators of nuclear reactors are required to obtain insurance in the private market to the maximum amount available and capitalize a secondary insurance fund. (483) There is implicit government financial backing for accidents in which the damages exceed the combined limits of private insurance and the secondary fund. (484) In addition, for the past thirty-one years, the federal government has provided political risk insurance to facilitate private investment by U.S. businesses in developing countries through the Overseas Private Investment Corporation. (485) The federal government also provided federal reinsurance for damages caused to property located in urban areas as a result of riots and civil disorder. Established by the Housing and Urban Development Act of 1968, the National Insurance Development Program encouraged state regulators and private insurers to make property and casualty insurance available for such properties. (486) Until its discontinuance in 1984, private insurers writing policies upon such properties could elect to purchase federal reinsurance and thereby transfer the vast majority of the risk associated with urban disturbances to the federal government. (487) Finally, through authority granted by the National Flood Insurance Act, the federal government funds the National Flood Insurance Program. (488) This program offers federally backed flood insurance to property owners residing in communities that join the program. (489) This program has proven to be the most controversial of federally backed insurance plans due to its failure to generate sufficient income from premiums to accumulate adequate reserves to meet the cost of future flood-related losses. (490) This failure has resulted in occasional additional appropriations by the U.S. Congress as well as periodic borrowing from the U.S. Treasury. (491)

Nevertheless, if federal intervention in the private insurance market with respect to terrorism is warranted, the issue remains what form the intervention should take. There are numerous international examples from which to choose. For example, the United Kingdom’s Pool Reinsurance (Pool Re) program insures owners of industrial, commercial and residential property located on the British mainland against losses caused by terrorist attacks. (492) Established in 1993, Pool Re permits policyholders to purchase additional coverage from their primary property insurer to protect against terrorism. (493) Insurers are responsible for the first 100,000 [pound sterling] with losses in excess of this amount paid from premiums accumulated within a pool consisting of insurance companies and Lloyd’s of London syndicates. (494) Claims exceeding the pool’s resources are funded through an additional ten percent call on premiums collected by participating insurers, investment income and, ultimately, the British government. (495) It has not been necessary for the British government to provide assistance to the pool to date. (496)

Another international example of government intervention in the terrorist insurance market is Israel’s Property Tax and Compensation Fund. (497) Administered by the Israeli Income and Property Tax Commission, this law levies a national property tax on Israeli businesses. (498) The proceeds of this tax fund claims for property damage directly resulting from terrorist attacks. (499) Claims for property damage are based upon the market value of the property immediately prior to the attack. (500) Property owners may purchase additional gap coverage insurance for differences between the market value of their property and its replacement cost from private insurers or the government. (501) The Commission is not responsible for payment of indirect losses, such as those associated with business interruption. (502) Rather, it is the responsibility of property owners to procure private insurance for such losses. (503)

However, these forms were rejected by the U.S. Congress in favor of the Terrorism Risk Insurance Act. (504) The Act has much to commend itself to the insurance industry and, ultimately, to policyholders. The initial strength of the Act is its recognition of the need to define terrorism for insurance purposes. There is universal agreement among state insurance commissioners, trade associations and consumer advocates of the need for a uniform definition in any federal insurance program. (505) A uniform definition is not only essential to determining those acts that trigger coverage (or exclusions as the case may be) but also to the industry’s future ability to measure risk and price premiums accordingly. Any definition of terrorism should be free from ambiguity and establish standards that the industry may use to support theoretical and empirical risk analysis, the results of which would be utilized to set appropriate premiums. Furthermore, by including all terrorist attacks regardless of their location within the scope of the definition, the Act eliminates the ability of insurers to self-select those risks it chooses to retain and those it is willing to pass on to the government. Known as “cherrypicking,” this practice occurs when insurance companies choose to retain coverage for low risk structures while only purchasing federal reinsurance coverage for buildings and other structures deemed to be of high risk. (506) By including high risk and low risk insureds and their structures within its provisions, the Act serves to distribute the risk associated with future acts of terrorism while simultaneously shielding the federal government from assuming a disproportionate degree of exposure associated with high profile structures. (507)

There are, however, three potential problems with the definition selected for inclusion in the Terrorism Risk Insurance Act. Initially, the Act’s definition differs from that contained in other federal statutes, specifically those statutes defining the crime of terrorism. The Act is much broader than its criminal counterpart in that an act of terrorism may occur as a result of activities harmful to property and entities. (508) By contrast, the federal crime of terrorism includes only acts dangerous to human life. (509) However, the Act is narrower than the federal crime of terrorism as it requires that the activity in question be undertaken by persons or entities designated as terrorists by the U.S. Department of State or the Secretary of the Treasury. (510) This additional requirement is completely absent from the definition of the federal crime of terrorism, which conceivably applies to all persons and entities regardless of their designation.

The Act and its criminal counterpart are also inconsistent with respect to the intent required of those perpetrating acts of terrorism. Federal criminal law requires the purpose of the alleged terrorist activities to be the intimidation, coercion or exercise of influence upon any civilian population or government. (511) Thus, a person committing such an act in the United States with the intent of intimidating, coercing or influencing a foreign government or population has conceivably committed the federal crime of terrorism. In contrast, the Terrorism Risk Insurance Act requires that the intent of the activity in question be to coerce, affect or influence the civilian population of the United States or the U.S. government. (512) This is a much narrower definition than provided by federal criminal law to the extent that the required intent is limited to the United States. The Act’s reach is also narrower than federal criminal law based upon the exclusion of acts resulting in less than $5 million in damage from the definition of terrorism, which limit is not part of federal criminal statutes. (513) Given the differences in these definitions, it is conceivable that a future attack may violate federal criminal laws but not constitute an act of terrorism for insurance purposes. This possibility is exacerbated by the different governmental departments authorized to make such determinations, specifically, the U.S. Departments of Justice, State and the Treasury, and the different standards of proof necessary to support such determinations.

The second feature of the Terrorism Risk Insurance Act meriting discussion is its financial provisions. Analysis of these features leads to mixed conclusions. The insurance marketplace aggregate retention amounts representing the maximum amount that all insurers participating in the program will be liable to pay out for certified terrorism losses in a given year may be too low. Given the wide variety of potential instruments of destruction that may be utilized in future terrorist attacks, the industry may be entitled to federal assistance for attacks that do not resemble the extraordinary events of September 11. Furthermore, there has been no indication of the source of these aggregate retention amounts. Most certainly, it is not related to the industry’s ability to weather losses of this magnitude as the industry has done so on a routine basis with other types of insurable (and equally unpredictable) events. (514) As such, it is reasonable to conclude that federal assistance may flow to insurers for “non-extraordinary” terrorist attacks (if such an event truly exists).

The generous assistance provisions also may discourage insurers from implementing necessary reforms of their risk assessment, pricing and coverage policies with respect to terrorism. This lack of incentive to the industry to undertake reform, including risk mitigation, will impact policyholders who may not receive needed encouragement to minimize their risk of incurring losses as a result of future terrorist attacks. Although Section 103 places a $100 billion cap upon the aggregate amount of financial assistance that may be provided to the industry, the Act also permits Congress to address additional losses.” (515) This authority presumably includes the ability to appropriate additional sums. There would undoubtedly be considerable pressure placed on Congress to appropriate such funds in the event of industry losses in excess of $100 billion. This pressure and the absence of guidelines for Congress to take into account in appropriating additional funds may render the effect of any cap on financial assistance nugatory.

There are benefits accruing from the financial provisions of the Act as drafted. Initially, the terms will permit the insurers to accumulate reserves that will be necessary to underwrite the risk of terrorism after the expiration of the Act. Second, the financial provisions should serve to maintain the solvency of individual insurers that may be severely impacted by future terrorist attacks. Furthermore, the Act’s repayment plan imposes substantial requirements that must be met by insurers as well as substantial penalties for noncompliance. (516) However, the effect of this repayment obligation is somewhat muted by the wide latitude provided to the Secretary of the Treasury with respect to recoupment. The Act grants authority to the Secretary to waive mandatory recoupment under specific circumstances. (517) Nevertheless, the repayment provisions do serve to deflect some of the criticism with respect to the financial provisions of the Act. These provisions also prevent the program from deteriorating into an open-ended loan program to the industry.

The Act is also subject to criticism for fostering geographic discrimination. Specifically, Section 103 of the Act grants the Secretary of the Treasury discretion in calculating and imposing loss risk-spreading premiums based upon geographic distinctions. These distinctions include decreased risk factors and the magnitude of loss associated with rural areas and smaller commercial centers. (518) As insurers are permitted to pass a portion of these assessments on to policyholders in the form of a premium surcharge, consumers in certain areas of the nation, particularly those operating in major urban and commercial areas, could be assessed higher premiums. To the extent that such considerations reflect the fundamental principle of pricing premiums to meet risk, Section 103 makes perfect economic sense. However, the war against terrorism is not a regional conflict but rather a national enterprise, the weight of which should be borne equally by all sections of the country. To the extent that combating terrorism is deemed a national problem, any disproportionate shift of financial responsibility to specific regions of the country pursuant to Section 103 constitutes an unfortunate example of geographic discrimination.

There are two additional criticisms of the Terrorism Risk Insurance Act that merit discussion. Initially, the Act runs roughshod over the traditional role of the states with respect to the regulation of insurance. Specifically, the Act expressly preempts any state law requiring or regulating terrorism coverage that is inconsistent with the Act. (519) The effect of such a provision is that any commercial insurer complying with its requirements is considered to be in compliance with any state law requiring or regulating coverage for acts of terrorism. Presumably this also includes any state rate law that restricts an insurer from increasing its premiums in an amount necessary to recoup assessments.

The federalization of this portion of the insurance market is understandable given that terrorism is a national issue worthy of national solutions. However, in its eagerness to address the issue, Congress should not overstep its bounds and lose sight of the expertise of the states in numerous areas of insurance regulation. State regulations with respect to insurer licensing, solvency surveillance, rate oversight, form requirements and market research should not go by the wayside in any attempt to administer a federal terrorism insurance program. (520) Most importantly, insurance providers should not be allowed to utilize any federal program as a means of avoiding state consumer protection measures. (521) In this regard, states should remain free to assist policyholders during the claim settlement process. (522) Furthermore, jurisdiction over claim settlement practices should remain with the states. (523) As a general rule, the vibrant role of the states in insurance regulation should be retained to the greatest degree possible and, where so retained, subject to the least amount of federal interference.

A final criticism of the Terrorism Risk Insurance Act lies in its attempt to restrain civil litigation and attorneys with respect to causes of action arising from terrorist attacks through the guise of “Litigation Management.” Of particular note is the federalization of all claims arising from acts of terrorism as determined by the Secretary of the Treasury. (524) The creation of an exclusive federal cause of action with respect to acts of terrorism is a further intrusion upon the role of the states with respect to insurance regulation. There is no evidence of flooding of state courts with cases relating to terrorism, the inability or incompetence of such courts to resolve these cases or abuse of such venues by claimants or their attorneys. The ability of the Secretary of the Treasury to unilaterally determine the existence of an act of terrorism without judicial review is also of considerable concern. (525) This provision imprudently places the discretion to increase federal jurisdiction while concurrently limiting state jurisdiction within the exclusive authority of a member of the executive branch. This provision raises the specter of industry lobbying of the executive branch for a determination of exclusive federal jurisdiction and potential manipulation of applicable standards.

Despite these shortcomings, the Terrorism Risk Insurance Act does contain two important and appropriate provisions that should characterize any federal assistance program. Initially, the assistance program terminates after three years. (526) A set date for termination is consistent with the views expressed by government commentators, state insurance commissioners and consumer advocates. (527) The limits upon the duration of the assistance program give the insurance industry time to determine how and if to cover future terrorist attacks and how to price such policies. (528) In fact, it maybe the case that the assistance program contemplated by the Terrorism Risk Insurance Act does not continue for a sufficient period of time for the industry to make these determinations. (529) The Act provides for this contingency by requiring the Secretary of the Treasury to submit a report to the U.S. Congress no later than June 30, 2005 assessing the Act’s effectiveness, the ability of the industry to offer insurance for terrorism after the termination of the assistance program and the availability and affordability of such insurance for policyholders. (530) Despite this limitation, the Act fails to establish standards for any future congressional determination to extend the Act’s benefits. This lack of standards constitutes a design flaw that raises the possibility of self-perpetuation without careful monitoring. (531) In any event, the result that must be avoided is the creation of a permanent entitlement program that unjustly enriches insurance companies through the collection of enhanced premiums without an accompanying degree of risk and provides no incentive to the industry to take appropriate action to price future terrorism coverage. Only time will tell if the assistance program contemplated by the Act will actually be of limited duration or prove to take on a life of its own.

The second important and appropriate provision contained in the Act is the implicit recognition of the ultimate need for a market solution to the issue of terrorism insurance. Ultimately, any federal assistance program should supplement, but not replace, private insurance. (532) As noted by the General Accounting Office, private insurance providers should retain market incentives in any government assistance program. (533) Retention of these market incentives recognizes the industry’s “long and proud record of finding ways to overcome new obstacles while advancing its business goals and serving the interests of the insurance-buying public.” (534) For example, the industry has discovered methods by which “to assess and insure extremely large and difficult risks that were initially considered uninsurable … [and] weathered enormous financial losses” associated with claims relating to asbestos, environmental contamination and medical malpractice. (535) By requiring the industry to retain some degree of risk and repay a portion of any federal assistance, private firms will have the proper incentive to maximize efficiency with respect to setting premiums, establishing underwriting policies and handling and adjusting claims. (536) Although the Act may allocate a disproportionate share of risk to the federal government and, ultimately, U.S. taxpayers, its recognition of the primacy of the private market in addressing the issues raised by the events of September 11 is a step in the proper direction.

VI. CONCLUSION

The events of September 11 were a wake-up call for Americans. Long shielded from violence on their own shores, many Americans undoubtedly viewed acts of international terrorism as something that occurred somewhere else to other people. Be it Irish Republican Army bombs in London, Tamil Tiger shootings in Sri Lanka or the seemingly unending stream of attack and counterattack by opposing forces in Israel, terrorism was not perceived to be a threat to the American homeland. Nevertheless, the calling cards of terrorists were there for anyone to read. The attack on the World Trade Center in 1993 and destruction of the Murrah Building in Oklahoma City in 1995 demonstrated the vulnerability of Americans and their edifices, be they located on the coasts or in the nation’s heartland, to the evil designs of a small but determined group of fanatics. Furthermore, the tide of anti-American violence in the name of Islamic fundamentalism was on the rise in the five years before the final catastrophe at the World Trade Center. The bombing of the U.S. military housing complex in Dhahran, Saudi Arabia in 1996 was followed two years later by the destruction of the U.S. embassies in Kenya and Tanzania and two years after that the attack on the U.S.S. Cole in Yemen. Thousands were injured in these attacks, and 277 people were killed.

But many Americans, perhaps the majority, paid little or no heed to these signals. This disinterest was seemingly reflected in responses of the U.S. government consisting of little more than standard condemnations, a tightening of existing sanctions and perfunctory cruise missile strikes. But on September 11 what could not happen here did. The country was left with many questions in the aftermath of the events of that day–what happened, who was responsible and why did this occur. At the time of the preparation of this article, Americans have some answers to these questions but not nearly all the information they need. What Americans have learned is that they are no different or less vulnerable than other global citizens from the scourge of terrorism.

September 11 was also a watershed event for the insurance industry. Prior to the attacks, coverage for acts of terrorism was extended on a routine basis on most commercial property and casualty policies. The industry’s most serious concerns appeared to be related to natural catastrophes, the ten most costly of which in the past thirty years cost the industry $77.1 billion on a global basis and $57.3 billion in the United States. (537) By comparison, the three most expensive man-made disasters in the United States, the Los Angeles riots of 1992, the 1993 World Trade Center bombing and the 1995 Oklahoma City bombing, resulted in insurance losses totaling $1.4 billion, an amount insufficient to make the top ten most costly catastrophes in the U.S. or the world. (538)

By comparison, the losses suffered by the industry on September 11 are forty-three to sixty-four times the combined amount of these three man-made disasters and will most likely exceed the combined losses attributable to the ten most costly natural disasters in the United States in the past thirty years. (539) In fact, it is conceivable that industry losses will exceed the combined losses for the ten most costly natural catastrophes in world history in the past thirty years. (540) The industry’s new focus has now become man-made risks. This focus was sharpened later in the fall with the onslaught of the still-unsolved anthrax attacks upon various federal facilities and private businesses in New York, New Jersey, Washington and Florida. One might conclude from these events that the insurance industry has met its greatest risk, and it is not Mother Nature but rather humankind itself.

One of the many lessons of September 11 for the insurance industry was adaptation to a newly perceived risk. It is not that the risk of terrorism was previously unknown. Rather, it was that the magnitude of the destruction and instantaneous financial impact were previously unimaginable. Even assuming the accuracy of the more modest estimate of $60 billion, the commercial property and casualty industry still lost more than its combined net income for 1999 through 2001. (541) This estimated loss was 120 times the $500 million cost of the previous bombing of the World Trade Center in 1993. (542)

In assessing the enormity of the risk posed by modern terrorists, the insurance industry would be well served to note that ultimate responsibility for adapting to this risk lies with the industry itself. The industry must once again update its definitions of acts of war and acts of terrorism in order to further differentiate between the two for purposes of determining coverage. Of particular importance in this regard is the creation of a definition that takes into account a quasi-sovereign terrorist organization that hijacks an entire state and government for its own purposes, such as al Qaeda’s activities in Afghanistan and its virtual control of the Taliban. The insurance industry can not rely upon the courts to make these distinctions. As previously noted, the cases defining acts of war for insurance purposes are in hopeless conflict. (543) In addition, many of these cases date back to World War Two and the Korean conflict when the definition of what constituted a sovereign government was much clearer. (544) Even the most recent of these cases relating to the Vietnam conflict are thirty years old. (545) The same statement holds true with respect to judicial definition and discussion of acts of terrorism. The seminal case in this area, the U.S. Court of Appeals for the Second Circuit’s opinion in Pan American World Airways, Inc. v. Aetna Casualty & Surety Co., dates from this same era. (546) As such, the judicial branch is a slow and unreliable agent of reform. The industry must thus act on its own initiative. Failure to address the blurring line between sovereign governments and organizations possessing attributes of sovereignty comes at the industry’s own peril.

The same need for clarification exists with respect to the definition of the term “occurrence” in commercial property and casualty insurance policies. The vague language and factual circumstances that have permitted the World Trade Center Lessees to advance a plausible argument in favor of two occurrences rather than a single occurrence must not be permitted to recur. Once again, the industry can not wait for the courts to act. At least with respect to New York, there is persuasive case law buttressing the Lessees’ case that the attacks constituted two separate occurrences. (547) Although one of the most persuasive cases in this regard, the New York Court of Appeals’ holding in Arthur A. Johnson Corp. v Indemnity Insurance Co., is more than forty years old, it remains on point and of serious consequence in the ultimate outcome of the SR Litigation. (548) It should be one of the goals of the insurance industry to eliminate this uncertainty through well-crafted language clearly setting forth the definition of “occurrence” applicable to all future attacks.

The events of September 11 were also a wake up call for the federal government. There is a strong case for limited federal intervention in the commercial property and casualty insurance industries. (549) The U.S. government has now realized that which has been long known to other governments, most notably the British and Israeli governments, specifically, that the health of a significant portion of the economy relies upon the ability of private industry to procure and maintain affordable insurance. Any inability to obtain and retain such insurance in the wake of September 11 will not only seriously hinder the ability of the economy to rebound from its current doldrums but will also hamstring future growth. The anecdotal nature of this inability is of no consequence. Despite considerable delay, the federal government has acted through the Terrorism Risk Insurance Act, the effectiveness of which remains to be determined.

Nonetheless, the federal government must resist two temptations in future attempts to address issues arising from September 11. Initially, it must avoid trying to do too much in a hasty manner. The natural inclination of government under such circumstances is to overreact in an impulsive fashion. This has already occurred with respect to the overreaching nature and intrusiveness of the USA PATRIOT Act. Traces of this same inclination are evident in aspects of the Terrorism Risk Insurance Act. Such overreaction must not be permitted to occur at the undue expense of taxpayers with respect to any future plan to assist the insurance industry.

Congress must also resist the temptation to politicize future issues arising from the attacks of September ll. These issues are not Republican or Democratic issues but rather concern the continuing well being of the country. Industry trade associations must resist the temptation to overreach, and consumer protection advocates must quell their tendency to demonize the industry at every turn. Future cooperative efforts in the national interest cannot be permitted to degenerate into political bloodbaths. (550) Ultimately, with an even-handed approach by the federal government, cooperation between competing trade and consumer interests and adaptation to the changed circumstances by the industry itself, insurance companies can emerge from the nightmare of the September 11 attacks risk savvy and financially stronger. All parties will be severely tested, but the stakes could not be higher and ultimate success is absolutely essential.

(1) Alexander G. Higgins, Reinsurers Double Loss Estimates, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A63288-2001Sep20 (Sept. 20, 2001) (quoting an unidentified Munich Reinsurance spokesperson).

(2) See Disaster Statistics, DISASTER INS. INFO. (Disaster Ins. Info. Office, New York, N.Y.), 2001, at 4 [hereinafter Disaster Statistics]. Other noteworthy world insurance losses include the Northridge, California earthquake in January 1994 ($16.2 billion), Typhoon Mireille, Japan in September 1991 ($7.1 billion), Winter Storm Daria, Europe in January 1990 ($6 billion), Winter Storm Lothar, Europe in December 1999 ($5.9 billion), Hurricane Hugo, United States in September 1989 ($5.8 billion), European flooding in October 1987 ($4.5 billion), Winter Storm Vivian, Europe in February 1990 ($4.2 billion), Typhoon Bart, Japan in September 1999 ($4.1 billion) and Hurricane Georges, United States and the Caribbean in September 1998 ($3.7 billion). See id. at 4-5. In addition to Hurricanes Andrew, Hugo and Georges and the Northridge earthquake, the ten most costly insurance losses in U.S. history include Hurricane Opal in October 1995 ($2.3 billion), Hurricane Floyd in September 1999 ($2 billion), Winter storms in March 1993 ($2 billion), Oakland, California fire in October 1991 ($2.1 billion), Hurricane Iniki in September 1992 ($1.9 billion) and Hurricane Fran in September 1996 ($1.7 billion). See id. at 5-6. By contrast, prior to September 11, the three most expensive man-made disasters in the United States were the Los Angeles riots of 1992 ($775 million), the 1993 bombing of the World Trade Center ($510 million) and the Oklahoma City bombing in 1995 ($125 million). See Press Release, National Association of Independent Insurers, Insured Losses from Terrorist Attack Likely to Rank as One of Largest in U.S. History (Sept. 12, 2001) (on file with author). All monetary denominations are in U.S. dollars unless otherwise noted.

(3) Estimates of losses fluctuated wildly following the attacks. In the week following the attacks, estimated losses totaled $30 billion. See John Christoffersen, Insurance Losses to Exceed $30 Billion, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wpdyn/A58415-2001Sep19 (Sept. 19, 2001) (quoting Keith Buckley, managing director of Fitch, Inc.)

(4) Combined insured losses for catastrophes occurring in the United States between 1993 and 2000 totaled $70.4 billion. See Disaster Statistics, supra note 2, at 6.

(5) See The Need for Federal Reinsurance for Terrorism Before the Senate Banking Comm., 107th Cong. 1 (2001) (statement of Robert E. Vagley, President, Am. Ins. Ass’n) [hereinafter Vagley Senate Statement].

(6) See David R. Baker, Bechtel in Talks to Help N.Y. Efforts, S.F. CHRON., Nov. 9, 2001, at B1. There are presently four companies involved in demolition and debris removal at the World Trade Center site. Each company will receive up to $250 million for its services. See id.

(7) See Deepti Hajela, WTC Attacks Will Cost Nearly $40 Billion, ASSOCIATED PRESS, available at http ://www.washingtonpost.com/wp-dyn/articles/A44885-2001Sep29(Sept. 29, 2001)

(8) See Gene Rappe, The Role of Insurance in the Battle Against Terrorism, 12 DEPAUL BUS. L.J. 351,368 (2000). The World Trade Center bombing in February 1993 killed six people, injured 1000 others, created a crater 200 feet deep and damaged the complex five levels down and two levels up from the location of the blast. See Jeffrey S. Green & Ira Tripathi, Coping with Chaos: The World Trade Center Bombing and Recovery Effort, 27 URB. LAW. 41, 41 (1995).

(9) See Robert Burgess, Insurers Dispute Trade Center Claim, WASH. POST, Oct. 9, 2001, at E4

(10) See Michael S. Hiller, Act of War Exclusions Do Not Apply in Tragedy, N.Y.L.J., Sept. 19, 2001, at 1

(11) See Michael Grunwald, Terror’s Damage: Calculating the Devastation, WASH. POST, Oct. 28, 2001, at A12

(12) See Pentagon Picks Up Pieces of Lives, Limestone, S.F. CHRON., Jan. 2, 2002, at A7.

(13) See id.

(14) See Jack P. Gibson, et al., Attack on America: The Insurance Coverage Issues–General Coverage Provisions, IRMI INSIGHTS, (Int’l Risk Mgmt. Inst., Inc., Wash., D.C.), Sept. 2001, at 1.

(15) Id.

(16) See id.

(17) See id.

(18) See id. at 1-2.

(19) See id. at 2.

(20) See id. at 2-3.

(21) See id. at 3-7

(22) Although this article only examines three issues arising from the attacks upon the United States, there are undoubtedly innumerable other issues. Some of these issues include the timely provision of notice of losses to applicable insurers, proof of loss issues, the liability of the airlines for security lapses that may have facilitated the hijackings, the applicability of workers’ compensation insurance coverage for those injured in the attacks and the liability of property managers at the World Trade Center for failing to adopt appropriate emergency procedures and promptly evacuate tenants upon the initiation of the attacks. See Press Release, National Association of Independent Insurers, Terrorist Attacks Hit Insurers on Human and Economic Level

(23) See Daniel Levy, Twin Towers were Architectural Icons, S.F. CHRON., Sept. 12, 2001, at B6.

(24) See id.

(25) See id.

(26) See id.

(27) See id.

(28) See Green & Tripathi, supra note 8, at 43.

(29) See Levy, supra note 23, at B6.

(30) See id.

(31) See Green & Tripathi, supra note 8, at 43.

(32) See id.

(33) See Levy, supra note 23, at B6

(34) See Compl. [paragraph] 25, SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., No. 01-CV-0233 (S.D.N.Y. 2001) [hereinafter SR Complaint]. The Port Authority was created in 1921 as the result of a compact between the States of New York and New Jersey to which the U.S. Congress granted its consent. See Green & Tripathi, supra note 8, at 42. The primary mission of the Port Authority is “to develop and operate public transportation, terminal, and other facilities of commerce in and around an area which comprises about a twenty-five mile radius of the Statue of Liberty, termed a ‘Port Authority.'” Id. The Port District encompasses approximately 1500 square miles located in the States of New York and New Jersey. In addition to the World Trade Center complex, the Port District includes New York City and Yonkers in New York, Newark, Jersey City, Bayonne, Hoboken and Elizabeth in New Jersey and other parcels of real property located in seventeen counties in the two states. See id. at 42 n.4. The Port Authority operates as a public corporation with its principal place of business in New Jersey. See id. at 43

(35) See SR Complaint, supra note 34, [paragraph] 26.

(36) See id.

(37) See id.

(38) See id.

(39) See Burgess, supra note 9, at E4.

(40) See id.

(41) See SR Complaint, supra note 34, [paragraph] 27.

(42) Id.

(43) See id.

(44) See Karen Matthews, Was There One WTC Attack or Two?, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A57666-2002Jan3 (Jan. 3, 2002).

(45) See Michael Grunwald, Terrorists Hijack Four Airliners, Destroy World Trade Center, Hit Pentagon

(46) See Grunwald, supra note 45, at A1

(47) See Grunwald, supra note 45, at A1

(48) See Grunwald, supra note 45, at A1

(49) See The Paths of Destruction, supra note 45, at 36.

(50) See id.

(51) See id.

(52) See id.

(53) See Woodbury, supra note 9, at A7. In addition to the destruction of the World Trade Center complex and St. Nicholas Greek Orthodox Church, buildings suffering damage included the Millennium Hilton, One Liberty Plaza, East River Savings Bank, the New York Telephone Building, the Bankers Trust Building, One through Four World Financial Centers, a federal building and buildings located at 90 West Street and 30 West Broadway. See id.

(54) See Grunwald, supra note 45, at A1

(55) See Official Count of Victims of September 11, supra note 9. At the time of the preparation of this article, there were an estimated 2843 dead in New York, including 2686 persons in the World Trade Center complex, 92 persons aboard American Airlines Flight 11 and 65 persons aboard United Airlines Flight 175. See id. There were 189 confirmed deaths in the attack on the Pentagon, including 125 in the office complex and 64 aboard American Airlines Flight 77. See id. Finally, there were 44 confirmed deaths as a result of the crash of United Airlines Flight 93 in Pennsylvania. See id.

(56) See Daniel Eggen, FBI Says Malaysia was Site of September 11 Planning WASH. POST, Feb. 1, 2001, at A15

(57) See Karen DeYoung & Michael Dobbs, Bin Laden: Architect of New Global Terrorism, WASH. POST, Sept. 16, 2001, at A8

(58) See Eggen & Dobbs, supra note 57, at A1. Called a bayat in Arabic, members of al Qaeda were required to sign an agreement in which they swore “to agree about the jihad [against the United States and Israel], listen to the emir [Bin Laden] … and do whatever work [al Qaeda] ask [ed] them to do.” Walter Pincus, Al Qaeda to Survive Bin Laden, Panel Told, WASH. POST, Dec. 19, 2001, at A18.

(59) See DeYoung & Dobbs, supra note 57, at A8. In addition, to the United States and Western Europe, al Qaeda cells are known to operate in Algeria, Indonesia, Iraq, Lebanon, Pakistan, the Gaza Strip and the West Bank in the Palestinian territories, the Philippines, Russia (Chechnya), Syria, Uzbekistan and the former Yugoslavia (Kosovo). See Osama bin Laden and His Group, available at http://www.washingtonpost.com/wp-srv/ nation/graphics/ attack (Sept. 13, 2001).

(60) See DeYoung & Dobbs, supra note 57, at A8.

(61) See id.

(62) See Osama bin Laden and His Group, supra note 59.

(63) See Walter Pincus, Zawahiri Urged al Qaeda to Let Fighters Escape for Jihad’s Sake WASH. POST,Jan. 1, 2002, at A13.

(64) See AHMED RASHID, TALIBAN 134 (2000), (??) the manifesto of “The International Islamic Front for Jibad Against Jews and Christians” which objects to continued U.S. occupation of “the lands of Islam in the holiest of places, the Arabian peninsular [sic], plundering its riches, dictating to its rulers, humiliating its people, terrorizing its neighbors, and turning its bases … into a spearhead through which to fight the neighboring Muslim peoples”)

(65) See RASHID, supra note 64, at 134, 138

(66) See Richburg, supra note 64, at Al (noting the killing of Muslim populations “in Tajikistan, Burma, the Philippines, Uganda, Somalia, Eritrea, Chechnya [and] Bosnia… [which] have become slaughterhouses for Muslims.”) Id.

(67) See Pincus, supra note 63, at A13.

(68) See Andrew Bridges, Study: Pollutant Levels High in New York City, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A62284-2002Feb12 (Feb. 12, 2002)

(69) See Bridges, supra note 68

(70) See Christine Haughney, In New York, Taking a Breath of Fear, WASH. POST, Jan. 8, 2002, at A1.

(71) See id.

(72) See Bridges, supra note 68

(73) Perlman, supra note 68, at A1 (quoting Thomas Cahill, the chairman of the Detection and Evaluation of Long-Range Transport of Aerosols team at the University of California-Davis).

(74) See id.

(75) See id. Increased levels of lead were expected from the thousands of computers located in the buildings and destroyed in the attack. See id. Increased levels of mercury and asbestos were expected to be discovered from electrical wiring and insulation. See id.

(76) See 1,300 Say They May Sue New York City, S.F. CHRON., Feb. 8, 2002, at A18

(77) See 1, 300 Say They May Sue New York City, supra note 76, at A18

(78) See SR Complaint, supra note 34, [paragraph] 28.

(79) See id. The precise amounts of Willis’ alleged estimates were $3,944,653,200 and $1,105,935,000, respectively. See id.

(80) See id.

(81) Id.

(82) See Hajela, supra note 7. This estimate includes $8.2 billion for rebuilding, $4.1 billion for repairing and improving subway service to the area and $3.6 billion in overtime and other costs for police, firefighters and other city workers. See id.

(83) See Burgess, supra note 9, at E4.

(84) See SR Complaint, supra note 34, [paragraph] 30.

(85) Id. [paragraph] 31. According to Swiss Re, the definition of occurrence contained within Willis’ proposal specifically provided that:

“Occurrence” shall mean all losses or damages that are attributable directly or indirectly to one cause or to one series of similar causes. All such losses will be added together and the total amount of such losses will be treated as one occurrence Id. irrespective of the period of time or area over which such losses occur.

(86) See id. [paragraph] 32.

(87) See id.

(88) Id. Swiss Re’s objections were set forth on the placing slip through the handwritten notation “to be agreed by SRI.” Id.

(89) See id.

(90) See id. [paragraph] 33.

(91) See id. [paragraph] 29. The Travelers Policy issued on September 14, 2001. See id. [paragraph] 37.

(92) See id. [paragraph] 34.

(93) See Herman, supra note 40.

(94) See id.

(95) See SR Complaint, supra note 34, [paragraphs] 37-38.

(96) See id. [paragraph] 39.

(97) See id. [paragraphs] 41-42.

(98) See id. [paragraph] 39.

(99) See id.

(100) See id. [paragraph] 46

(101) See Burgess, supra note 9

(102) SR Complaint, supra note 34, [paragraph] 46.

(103) See id. [paragraph] 48.

(104) Id. [paragraph] 42. Swiss Re alleged that, pursuant to its agreement with Willis, the named insured was World Trade Center Properties, L.L.C. and its affiliates. See id. The Port Authority, GMAC Commercial Mortgage Corporation and Westfield, Inc. were additional named insureds. See id. However, the Travelers Policy included Silverstein Properties, Inc. and Silverstein WTC Management Company as named insureds and listed One, Two, Four and Five World Trade Center, L.L.C.s, Westfield WTC, L.L.C., Westfield Corporation and Westfield America, Inc. as additional named insureds. See id. [paragraph] 40.

(105) See SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., L.L.C., No. 01-CV-0233 (S.D.N.Y. filed Oct. 22, 2001)

(106) See SR Complaint, supra note 34, [paragraphs] 49-52.

(107) See id. [paragraph] 53-55.

(108) See id. [paragraphs] 56-58.

(109) See The Impact of the September 11, 2001 Terrorist Attacks on America’s Insurance System Before the House Comm. on Fin. Servs., 107th Cong. 6-7 (2001) (statement of Kathleen Sebelius, Comm. of Ins., Kan.) ($8.5 billion) [hereinafter Sebelius House Statement]

(110) See Sebelius House Statement, supra note 109, at 7-8 ($8.8 billion)

(111) See Sebelius House Statement, supra note 109, at 10-11. Commissioner Sebelius’ estimate of the financial impact of the loss of life as a result of the destruction of the four hijacked aircraft was based upon insurance policies American and United Airlines had in place at the time of the attacks containing limits of $1.5 billion per occurrence. See id. at 10. However, other estimates of the financial impact of such losses reach as high as $20 billion. See TILLINGHAST REPORT, supra note 3, at 1. Commissioner Sebelius’ estimate of the financial impact upon American and United Airlines’ hull coverage for the destruction of the aircraft involved in the hijackings was based upon the replacement costs of Boeing 757-300 and 767-300ER aircraft at $89.5 million and $127.5 million respectively. See Sebelius House Statement, supra note 109, at 11.

(112) See Sebelius House Statement, supra note 110, at 9.

(113) See id. at 9 ($900 million)

(114) See Sebelius House Statement, supra note 109, at 8 ($2.4 billion)

(115) See Berkshire Estimates $2.2B Loss, ASSOCIATED PRESS, available at www.washingtonpost .com/ac2/wp-dyn/A64097-2001Sep20 (Sept. 20, 2001)

(116) See Attacks Costly to Citigroup, WASH. POST, Sept. 18, 2001, at E2

(117) See Dave Carpenter, Allstate Earnings Tumble 65 Percent, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A14744-2001 Oct 18 (Oct. 18, 2001)

(118) See Cigna Sees Losses from Attack at $25M, ASSOCIATED PRESS, available at http://www. washingtonpost.com/ac2/wp-dyn/A52338-2001 Oct 1 (Oct. 1,2001)

(119) See Lloyd’s Raises WTC Loss Estimates, ASSOCIATED PRESS, available at http://www. washingtonpost.com/wp-dyn/articles/A21972-2001Nov27 (Nov. 27,2001)

(120) SeeAttack Claims Put at $3.2 Billion, WASH. POST, Sept. 21,2001, at E2

(121) See Allianz Sees $928M in Attacks Claims, ASSOCIATED PRESS, available at http://www. washingtonpost.com/ac2/wp-dyn/A4952-2001Sep21 (Sept. 21, 2001)

(122) See TILLINGHAST REPORT, supra note 3, at 4.

(123) See id.

(124) See Adam Geller, In Accounting Attacks Aren’t “Extraordinary,” S.F. CHRON., Oct. 6, 2001, at B2.

(125) See id. This ruling has resulted in considerable controversy in the accounting and insurance industries. Dan Noll, director of accounting standards for the American Institute of Certified Public Accountants, noted that “[t]hese events certainly were extraordinary…. [i]t’s one of these things where … the devil is in the details.” Id. Todd Thomson, chief financial officer for Citigroup, Inc., responded by stating that “[i]f claims payments caused by these events do not qualify as extraordinary, we fail to understand what other events possibly would.” Id.

(126) See ROBERT P. HARTWIG, INS. INFO. INST., 2000-YEAR END RESULTS 1 (2000). Despite earned premiums of $296.8 billion in 2000, the insurance industry incurred losses and expenses and paid dividends totaling $329.4 billion, resulting in an underwriting loss of $32.6 billion. See id. at 4. This loss was offset by $58.3 billion in investment income and realized capital gains, resulting in pre-tax income of $25.7 billion and net after-tax income of $20.2 billion. See id. The industry surplus at the end of 2000 totaled $319.4 billion. See id. By contrast, in 1999, earned premiums of $282.9 billion were offset by incurred losses, expenses and dividends totaling $306.3 billion, resulting in an underwriting loss of $23.4 billion. See ROBERT P. HARTWIG, INS. INFO. INST., 1999-YEAR END RESULTS 3 (1999). This loss was offset by investment income and realized capital gains of $52.3 billion, resulting in pre-tax income of $27.6 billion. See id. The industry’s net after-tax income was $22.2 billion, and the industry’s surplus was $336.3 billion. See id.

(127) ROBERT P. HARTWIG, INS. INFO. INST., 2000-YEAR END RESULTS, supra note 126, at 2.

(128) ROBERT P. HARTWIG, INS. INFO. INST., 2001-FIRST HALF RESULTS 1 (Sept. 18, 2001). Through the first half of 2001, the insurance industry had a net underwriting loss of $19.6 billion based upon earned premiums of $153.9 billion and incurred losses, expenses and policyholder dividends of $173.5 billion. See id. at 2. This underwriting loss was offset by investment income and realized capital gains of $23.9 billion, resulting in pre-tax income of $3.6 billion. See id. Net after-tax income totaled $2.5 billion, and the industry surplus was $298.2 billion. See id.

(129) See Theresa Agovino, Insurance Stocks Drop, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A44863-2001Sep17 (Sept. 17, 2001) (quoting Nutmeg Securities analyst Ira Zuckerman that the September 11 attacks were “a major hit to the industry but not a body blow.”)

(130) See Federal Assistance in Assuring that Insurance for Terrorist Acts Remains Available to American Consumers Before the Senate Comm. on Banking, House and Urban Affairs, 107th Cong. 3 (2001) (statement of Kathleen Sebelius, Comm’r of Ins., Kan.) [hereinafter Sebelius Senate Statement]

(131) See Christoffersen, supra note 3. Stephen Lowe, a principal with the financial services firm of Tillinghast-Towers Perrin noted that, although the industry’s losses were “affordable in relationship to capital, [insurance] companies are not in the habit of losing ten to twenty percent of their capital in one day or on a risk that they didn’t understand and that is difficult to price going forward.” Spinner, supra note 129, at A10. Ronald Ferguson, chairman of General Reinsurance Corporation, has opined that the insurance and reinsurance industries “really can’t stand another one, two or three of these [attacks]…. [t]here will be insolvencies…. [and] failed promises.” Jackie Spinner, Insurers See Terror Coverage Delays Unless U.S. Helps, WASH. POST, Jan. 18, 2002, at E3.

(132) See ING to Cut 1600 U.S. Jobs. ASSOCIATED PRESS, available at http://www.washington post.com/wp-dyn/articles/A1889-2001Dec6.html (December 6, 2001)

(133) See Marcy Gordon, House Nears Vote on Insurance Bill, ASSOCIATED PRESS, available at http://www.washingtonpost.com/wp-dyn/articles/A32297-2001Nov29.html (Nov. 29, 2001) (citing the statement of U.S. Representative John LaFalce (N.Y.), the senior Democrat on the House Financial Services Committee)

(134) Gordon, Insurers Accused of Rate Inflation, supra note 133 (quoting J. Robert Hunter)

(135) See Ruff, supra note 115

(136) See Gerald D. Adams, Sky-High Premiums, S.F. CHRON., Feb. 27, 2002, at B1

(137) See Cost of Plane Insurance Jumps, ASSOCIATED PRESS, available at http://www.washington post.com/ac2/wp-dyn/A43185-2001Sep28 (Sept. 28, 2001) (citing Chris Fagan, the director of finance for Goshawk Insurance Holdings).

(138) See Gordon, Insurers Accused of Rate Inflation, supra note 133.

(139) Bruce Stanley, Lloyd’s Group Sees Terror Profit, ASSOCIATED PRESS, available at http:// www.washingtonpost.com/ac2/wp-dyn/A5907-2001Oct29 (Oct. 29, 2001).

(140) See Crenshaw, supra note 136, at E16.

(141) David McHugh, Reinsurer: Attacks Will Mean New Coverage Ceiling, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A16033-2001Oct18 (Oct. 18, 2001) (quoting an unnamed official at Munich Re).

(142) See David McHugh, Insurers: Government Must Help on Attacks, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A34398-2001Oct22 (Oct. 22, 2001) (quoting Arno Junke of GeneralCologne Re that it had reached the conclusion that “terrorism, in itself, cannot be underwritten.”)

(143) See Jackie Spinner, Insurance Industry Can Pay Claims, WASH. POST, Sept. 26, 2001, at E1.

(144) See Spinner, supra note 118, at E1. Matthew C. Mosher, vice president of A.M. Best Company, an insurance ratings firm, aptly noted that “[t]he terrorism issue isn’t an issue of capital…. [i]t’s an issue of not being able to price it.” Id.

(145) See Jackie Spinner, Small Insurers Feel September 11 Fallout, WASH. POST, Jan. 17, 2002, at E8. David B. Mathis defended these efforts by stating that “[i]f the cumulative impact of a loss exposes your entire capital or surplus of your company and you have no reinsurance for it, you have no choice.” Id. Maurice R. Greenberg, chief executive officer of American Insurance Group, echoed these concerns, noting that “[y]ou have finite capital in the insurance industry, and you can’t cover infinite risk with finite assets.” Jackie Spinner, Insurance Executive Warns of Upheaval Without U.S. Help, WASH. POST, Jan. 9, 2002, at E3.

(146) See Jackie Spinner, Insurers Ask to End Terrorism Coverage, WASH. POST, Nov. 16, 2001, at E1

(147) See Jackie Spinner, States Move to Exclude Terrorism Coverage, WASH. POST, Dec. 22, 2001, at E1. The recommendation of the National Association of Insurance Commissioners was only with respect to commercial insurance policies. The Association flatly rejected terrorism exclusions in homeowners and automobile policies and recommended that state insurance regulators deny requests for such exclusions. See Jackie Spinner, An Appeal on Terror Insurance, WASH. POST, Jan. 30, 2002, at E3.

(148) See Michael Gormley, New York Nixes Insurance Plan, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A13940-2002Jan8 (Jan. 8, 2002).

(149) See id.

(150) See Jackie Spinner, In Search of Insurance. WASH. POST, Jan. 16, 2002, at E1.

(151) Spinner, supra note 131, at E3.

(152) See NEW YORK CITY OFFICE OF THE COMPTROLLER, THE IMPACT OF THE SEPTEMBER 11 WTC ATTACK ON NEW YORK CITY’S ECONOMY AND CITY REVENUES (2001). New York City Comptroller Alan Hevesi based this estimate upon an immediate capital loss of $45 billion (consisting of $34 billion in destroyed property and $11 billion in lost human capital) with continuing losses of $45 to $60 billion in fiscal years 2002 and 2003. See id.

(153) See Carolyn Said, September 11 Will Cost Nation 1.64 Million Jobs, Sudy Says, S.F. CHRON., Jan. 11, 2002, at B1. The Milken Institute forecast that New York City would lose 149,270 jobs in 2002, 91,320 jobs in 2003 and 48,880 jobs in 2004. See id.

(154) See id.

(155) See id. For example, approximately one-third of the 265,000 unionized hotel and restaurant workers in the United States were laid off in the weeks following the attacks. See Grunwald, supra note 11, at A12.

(156) See Said, supra note 153, at B1. However, in a report issued in March 2002, the U.S. Bureau of Labor Statistics estimated job losses of thirty days or more directly attributable to the events of September 11 affected 125,000 workers. See Kirstin Downey Grimsley, Terrorism-Related Layoffs ‘Substantial,’ WASH. POST, Mar. 5, 2002, at E2.

(157) See John M. Berry, Economy Contracts by 0.4 Percent, ASSOCIATED PRESS, available at http://www.washingtonpost.com/ac2/wp-dyn/A16825-2001Oct31 (Oct. 31, 2001).

(158) See id.

(159) See id.

(160) See id.

(161) There are numerous other economic indicators that may be impacted in the future as a result of the September 11 attacks. For example, economic productivity and efficiency as well as business investment may suffer as a result of the diversion of capital to enhanced security measures and increased insurance premiums. See Pearlstein, supra note 3, at E1. In addition, the impact of vast increases in spending by the federal, state and local governments and resultant return to deficit spending presently remains unknown.

(162) The Federal Open Market Committee, the lead policymaking group for the Federal Reserve Board, concluded in November 2001 that “[t]he economy appeared to have been growing very little, if at all, prior to the terrorist attacks, and the dislocations arising from the latter seemed to have induced a downturn in overall economic activity.” John M. Berry, Fed Blames September 11 for Onset of Recession, WASH. POST, available at http://www.washingtonpost. com/wp-dyn/articles/A62817-2001Nov8.html (Nov. 8,2001). David Jones, chief economist at Aubrey G. Langston & Company in New York, noted that the attacks “literally stopped the economy in its tracks” and would serve to “kick [the U.S.] over into a recession.” Martin Crutsinger, Analysts Say Recession Nearly Certain, S.F. CHRON., Sept. 19, 2001, at D9

(163) Grunwald, supra note 11, at A12.

(164) See Jackie Spinner & Steven Pearlstein, U.S. Prepares Alternate Insurance Plan, WASH. POST, Oct. 13, 2001, at A7.

(165) See Steven Pearlstein, Congress to Face Question of Who Will Share in Risk, WASH. POST, Oct. 11, 2001, at E1.

(166) See id.

(167) See Pearlstein, supra note 165, at E1

(168) See Pearlstein, supra note 165, at E1.

(169) See id.

(170) See id.

(171) See id.

(172) Jackie Spinner, Insurers Say White House Plan Doesn’t Spread Risk WASH. POST, Oct. 23, 2001, at A6 (quoting David B. Mathis).

(173) See Marcy Gordon, Administration Lays Out Insurance Plan, available at http://www. washingtonpost.com/ac2/wp-dyn/A63290-2001Oct15 (Oct. 15, 2001)

(174) See Gordon, supra note 173

(175) See Gordon, supra note 173

(176) See Gordon, supra note 173

(177) See Gordon, supra note 173

(178) See Gordon, supra note 173

(179) See Gordon, supra note 173.

(180) See id.

(181) See id.

(182) See Jackie Spinner, States Support U.S. Terrorism Insurance Plan, WASH. POST, Oct. 18, 2001, at A9. Industry, support for the Bush administration plan was not unanimous. For example, David B. Mathis, chairman and chief executive officer of the Kemper Insurance Companies, characterized the plan as failing to provide sufficient security for the industry, by forcing it to retain excessive risk with respect to future terrorist attacks. See id.

(183) See Marcy Gordon, Insurance Proposal Draws Some GOP Criticism, available at http://www.washingtonpost.com/ac2/wp-dyn/A46400-2001Oct24 (Oct. 24, 2001) (noting criticism by Senator Jim Bunning (Republican, Kentucky) that the Bush administration proposal guaranteed the industry’s profits at the expense of federal taxpayers)

(184) See Next Bailout: Insurers?, S.F. CHRON., Oct. 28, 2001, at C6 (noting that the effect of the Bush administration proposal would be to “allow insurance companies to rake in the premiums from customers worried about terrorism while the federal government is left with the bulk of the tab when losses occur”).

(185) See Gordon, supra note 183 (noting the comments of Senator Paul Sarbanes (Democrat, Maryland)).

(186) See Next Bailout: Insurers?, supra note 184, at C6.

(187) See Spinner & Kessler, supra note 183, at A20 (noting the defense of the Bush administration plan by the Secretary of the Treasury Paul H. O’Neill in which the Secretary stated that “[n]ot one damn dime … would go to an insurance company because of what [the Bush administration] has proposed…. [t]he idea that this is a bailout for an insurance company is preposterous, and it only exists in the mind of the stupid…. [i]t’s just outrageous”).

(188) See Jackie Spinner, Congress Unable to Pass Terror Insurance Bill, WASH. POST, Dec. 21, 2001, at E1.

(189) Jackie Spinner, Bush Aides Seek Evidence of Insurance Woes, WASH. POST, Jan. 8, 2002, at A8.

(190) See Marcy Gordon, Failure to Enact Aid Bill Criticized, available at http://www.washington post.com/ac2wp-dyn/A13605-2001Dec21 (Dec. 21, 2001).

(191) STANDARD & POOR’S, MAINTENANCE OF INSURANCE RATINGS DEPENDS ON MITIGATING TERRORISM RISKS 1 (2001).

(192) See Spinner, Terror-Insurance Market in Limbo, supra note 146, at E1.

(193) See Insurance Industry Wants Taxpayer Aid to Escape Future Losses, Liability, KNIGHT-RIDDER/TRIBUNE, available at http://www.insure.com/business/article.html (Oct. 30, 2001). In this regard, Steven A. Wechsler, president and chief executive officer of the National Association of Real Estate Investment Trusts, stated that lending institutions that extend loans to commercial real estate developers “assume adequate insurance coverage for risk. … [i]f the system doesn’t provide it, it has the potential to create significant disruption.” Spinner, supra note 133, at E4.

(194) See Jackie Spinner, Moody’s to Weigh Terror Risk, WASH. POST, March 2, 2002, at E1.

(195) See id.

(196) Spinner, supra note 133, at E4 (quoting Orin Linden, national director of property/casualty actuarial services for Ernst & Young). Ramani Ayer, chairman and chief executive officer of the Hartford Financial Services Group, echoed this concern when he stated that “[i]f the government doesn’t do something here … major cities [will] not [be] covered, and if these cities don’t have insurance, what happens to America as we “know it?” Spinner, Insurers Seek Help with Terror Coverage, supra note 167, at E1. The macroeconomic impact of the failure of the U.S. government to adequately address the issue of insurance coverage for terrorism was perhaps best summarized in undated correspondence forwarded to President George W. Bush by sixty-seven trade associations. In this correspondence, the associations stated that:

Our market-driven economy is predicated on risk. Insurers provide

much-needed

security. Without insurance, financiers cannot lend, and companies

are reluctant to

invest. Without insurance, new construction would cease. All types

of cargo would be

stuck in place. Some businesses may choose to cease operations after

determining that

the risks of continuing to operate in the current environment

without the ability to

share potential losses is too great. In addition, the potential

benefits of the

Administration’s economic stimulus package could be greatly muted.

Letter from Airports Council International-North America to George W. Bush, President of the United States of America 1 (on file with the author).

(197) Jackie Spinner, Insurance Uncertainty a Threat. O’Neill Says, WASH. POST, Oct. 25, 2001, at A6.

(198) Jackie Spinner, Greenspan Backs Federal Backup for Terrorism Insurance, WASH. POST, Feb. 28, 2002, at E4. However, Chairman Greenspan also acknowledged that there is considerable dispute over the necessity of federal intervention given the unknown nature of the continuing terrorist threat. See id.

(199) See U.S. GEN. ACCOUNTING OFFICE, TERRORISM INSURANCE: RISING UNINSURED EXPOSURE TO ATTACKS HEIGHTENS POTENTIAL ECONOMIC VULNERABILITIES, REP. GAO-02-472T 15 (2002).

(200) See id. at 3-4.

(201) See id. at 4-7.

(202) See id. at 7.

(203) See id. at 10-14.

(204) See id.

(205) See id. at 12.

(206) See Spinner, supra note 198, at E4.

(207) Id.

(208) Terrorism Risk Insurance Act of 2002, Pub. L. 107-297, 116 Stat. 2322 (2002)

(209) Terrorism Risk Insurance Act, [section] 102(1)(A)(ii)(I-III).

(211) See id. [section] 102(1)(A)(iii)(I-II).

(211) Id. [section] 102(1)(A)(iv).

(212) See id. [section] 102(1)(A).

(213) See id. [section] 102(1)(C).

(214) See id. [section] 102(1)(B)(i-ii).

(215) See id. [section] 103(a)(3).

(216) See id. [section] 105(a).

(217) See id. [section] 103(b)(2).

(218) See id. [section] 103(b)(2)(A).

(219) See id. [section] 103(b)(2)(B).

(220) See id. [section] 103(b)(2)(C).

(221) See id. [section] 105(c)(1-2).

(222) See id. [section] 101(7)(A).

(223) See id. [section] 101(7)(B).

(224) See id. [section] 101(7)(C-D).

(225) See id. [section] 103(e)(1)(A).

(226) See id.

(227) See id. [section] 103(e)(1)(B).

(228) See id. [section] 103(e)(2)(A)(i-ii).

(229) See id. [section] 103(e)(3).

(230) See id. [section] 103(e)(4-5).

(231) See id. [section] 103(e)(6).

(232) See id. [section] 103(e)(7)(A)(i-ii).

(233) See id. [section] 103(e)(6)(A)(i-ii).

(234) See id. [section] 103(e)(6)(B-C).

(235) See id. [section] 103(e)(7)(B).

(236) See id. [section] 103(e)(7)(D).

(237) See id. [section] 103(e)(7)(D)(i-iv).

(238) See id. [section] 103(e)(8)(A)(i-iii).

(239) See id. [section] 103(e)(8)(C).

(240) Id. [section] 103(e)(8)(D)(i)(I-III).

(241) See id. [section] 103(e)(8)(B).

(242) See id. [section] 104(e)(1)(A) & (2).

(243) See id. [section] 105(b).

(244) See id. [section] 107(2).

(245) See id. [section] 107(a)(1). Section 107 exempts any limitation upon the liability of “any government, an organization, or person who knowingly participates in, conspires to commit, aids, and abets, or commits any act of terrorism.” Id. [section] 107(b). Frozen assets of terrorist organizations are also available for satisfaction of any judgment that may enter against the terrorist organization subject to presidential waiver for reasons of national security. See id. [section] 201(a).

(246) See id. [section] 107(a)(4).

(247) See id. [section] 107(a)(3).

(248) Proclamation No. 7462, 66 Fed. Reg. 47,947 (Sept. 13, 2001).

(249) Exec. Order, Detention, Treatment & Trial of Certain Non-Citizens in the War Against Terrorism, 66 Fed. Reg. 57,833 (Nov. 13, 2001).

(250) Exec. Order No. 13,224, 66 Fed. Reg. 49,079 (Sept. 25, 2001).

(251) See Exec. Order, Detention, Treatment & Trial of Certain Non-Citizens in the War Against Terrorism, supra note 249, at 57,833.

(252) Exec. Order No. 13,224, supra note 250, at 49,079.

(253) Joseph I. Lieberman, No Excuse for Second-Class Justice, WASH. POST, Jan. 2, 2002, at A13.

(254) Hiller, supra note 10, at 1.

(255) H.R.J. Res. 62, 107th Cong. (2001) (enacted).

(256) H.R.J. Res. 63, 107th Cong. (2001) (enacted).

(257) September 11 Marque and Reprisal Act of 2001, H.R. 3076, 107th Cong. [section] 2(2) (2001).

(258) S.J. Res. 22, 107th Cong. (2001) (enacted).

(259) S.J. Res. 23, 107th Cong. (2001) (enacted).

(260) See H.J. Res. 61, 107th Cong. (2001) (enacted). House Joint Resolution 61 described the events of September 11 as “by far the deadliest terrorist attacks ever launched against the United States, and, by targeting symbols of American strength and success, clearly were intended to intimidate our Nation and weaken its resolve.” Id.

(261) See H.R.J. Res. 64, 107th Cong. (2001) (enacted)

(262) See H.R. Res. 3076, supra note 257, [Section] 3(a) (characterizing the attacks as “air piratical aggressions and depredations”)

(263) See e.g., State Farm Mut. Auto. Ins. Co. v. Belshe, 112 S.W.2d 954, 956 (Ark. 1938)

(264) See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098, 1118 (S.D.N.Y. 1973), aff’d, 505 F.2d 989 (2d Cir. 1974).

(265) See id.

(266) See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1002 (2d Cir. 1974)

(267) See Pan Am. World Airways, Inc., 505 F.2d at 1003-04

(268) See Am. States Ins. Co. v. Bailey, 133 F.3d 363, 369 (5th Cir. 1998)

(269) See Gibson, supra note 14, at 1.

(270) INS. SERVS. OFFICE, INC., ISO COMMERCIAL PROPERTY WAR EXCLUSION [section] f (1) (1999), reprinted in Gibson, supra note 14, at 5.

(271) Id. [section] f (2).

(272) Id. [section] f (3).

(273) Arnoff & Jacobs, supra note 21, at 3.

(274) Jenna Greene, After the Unthinkable

(275) See Letter from Michael G. Oxley, Chairman, Committee on Financial Services, U.S. House of Representatives, to Kathleen Sebelius, President, National Association of Insurance Commissioners 1 (Sept. 17, 2001) (on file with author).

(276) Id.

(277) Id.

(278) See Arnoff & Jacobs, supra note 21, at 3 (quoting an unnamed spokesperson for the National Association of Insurance Commissioners).

(279) See Vagley Senate Statement, supra note 5, at 1

(280) Arthur M. Louis, Most Big Insurance Firms to Pay Claims, S.F. CHRON., Sept. 18, 2001, at C1 (quoting Richard Brewster, director of finance for Cox Insurance).

(281) Id.

(282) 18 U.S.C. [section] 233 1(4)(A-C)(2000).

(283) N.Y. INS. LAW [section] 3203(c)(3)(E) (McKinney 2000).

(284) N.Y. INS. LAW [section] 4510(b)(2)(A) (McKinney 2000).

(285) See 18 U.S.C. [subsections] 2331, 2332b (2000), amended by USA PATRIOT Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001). The official title of the USA PATRIOT Act is the “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.” Drafted and adopted by the U.S. Congress largely without the benefit of submission to the committee process within seven weeks of the events of September 11, the USA PATRIOT Act was signed by President George W. Bush on October 26, 2001. See Bush Signs Anti-Terror Package, S.F. CHRON., Oct. 27, 2001, at A6

(286) 18 U.S.C. [section] 2331(1)(A)(2000).

(287) Id. [section] 2331 (1)(B)(i-iii) (2000). The term “mass destruction” was inserted into this section by the USA PATRIOT Act. See USA PATRIOT Act [section] 802(a)(1).

(288) See 18 U.S.C. [Section] 2331 (1)(C) (2000). The activities that must occur without the territorial jurisdiction of the United States are the means by which the activity is accomplished, the persons who comprise the population to be intimidated or coerced or the locale from which the perpetrators operate or in which they seek asylum. See id.

(289) See 18 U.S.C. [section] 2331(4) (2000). Domestic terrorism, as added by the USA PATRIOT Act, is defined as activities that:

(A) involve acts dangerous to human life that are a violation of the

criminal laws of the United States or of any State

(B) appear to be intended

(I) to intimidate or coerce a civilian population

(II) to influence the policy of a government by intimidation or

coercion

(III) to affect the conduct of a government by mass destruction,

assassination, or kidnapping

(C) occur primarily within the territorial jurisdiction of the

United States.

USA PATRIOT Act [section] 802(a)(5).

(290) See 18 U.S.C. [section] 3077(I)(A-B) (2000), amended by USA PATRIOT Act, [section] 802(b)(1).

(291) 18 U.S.C. [section] 2332b(g)(5)(A) & (B)(i-iii)(2000), amended by USA PATRIOT Act, [section] 808. The activities constituting the federal crime of terrorism, if performed with the requisite degree of coercive intent may be broadly characterized as destruction, violence or piracy performed at any aircraft facility or international airport or directed against any aircraft, flight crew or passenger

(292) See generally 8 U.S.C. [section] 1182(a)(3)(B) (2000), amended by USA PATRIOT Act, [section] 411(a)(l) (requiring the exclusion of terrorists and representatives of terrorist organizations from entry into the United States by the Immigration and Nationalization Service)

(293) See Thomas v. Metro. Life Ins. Co., 131 A.2d 600, 601 (Pa. 1957) (determining that insured killed in action during the Korean conflict died as a result of an act of war for purposes of an exclusionary provision contained within a life insurance policy).

(294) New York Life Ins. Co. v. Bennion, 158 F.2d 260, 266 (10th Cir. 1946) (Huxman, J., dissenting) (determining that death of the insured during the attack of Japanese military forces on Pearl Harbor, Hawaii was a result of an act of war within the meaning of a double indemnity provision of a life insurance policy).

(295) See id.

(296) See Navios Corp. v. The Ulysses II, 161 F. Supp. 932, 940 (D. Md. 1958), aff’d, 260 F.2d 959 (4th Cir. 1958) (determining the Suez crisis of 1956 to constitute a war in the internationally accepted sense of the term between Egypt, the United Kingdom and France).

(297) See Geoffrey Nunberg, “Terrorism”: The History of a Very Frightening Word, S.F. CHRON., Oct. 28, 2001, at C5. Maximilien F.M.I. de Robespierre, the leader of the jacobin movement in Revolutionary France, defined terrorism as “an emanation of virtue … justice, prompt, severe and inflexible.” Id. By contrast, Edmund Burke, the implacable English enemy of the French Revolution, described terrorists as “those hell-hounds … [who] are let loose on the people.” Id. In a recent attempt to devise a modern definition of terrorism, military historian Caleb Carr has concluded that violence directed at civilian populations are in fact acts of terrorism. See CALEB CARR, THE LESSONS OF TERROR (2002). Among those acts of war subject to reclassification according to Carr are William T. Sherman’s march through Georgia, James Doolittle’s raid on Tokyo and the U.S. bombing campaign in Cambodia during the Vietnam War. See id. at 139-43, 180, 194. However, such wholesale reclassification serves to deprive terrorism of any meaning by failing to distinguish between “conventional, if barbaric, acts of war committed by a state army under regular command, as part of a formally declared campaign to defeat another state, and violence against civilians by nonstate actors with the aim not of military victory but of causing panic or inflicting revenge.” Michael Ignatieff, Barbarians at the Gate, N.Y. TIMES BOOK REV. 8 (Feb. 17, 2002).

(298) Nunberg, supra note 297, at C5.

(299) See Michael Kinsley, Defining Terrorism, WASH. POST, Oct. 5, 2001, at A37.

(300) See Rosenau v. Idaho Mut. Benefit Ass’n, 145 P.2d 227, 230 (Idaho 1944).

(301) See In re Prize Cases, 67 U.S. (2 Black) 635, 666 (1862) (war is a state in which nations prosecute their rights by force)

(302) See Stankus v. New York Life Ins. Soc’y, 44 N.E.2d 687, 689 (Mass. 1942) (war is a conflict between armed forces of two nations under the authority of their respective sovereigns)

(303) See Thomas, 131 A.2d at 601

(304) See Christensen, 284 P.2d at 289.

(305) See Zaccardo v. John Hancock Mut. Life Ins. Co., 124 A.2d 926, 926 (Conn. Super. Ct. 1956)

(306) See W. Reserve Life Ins. Co., 261 S.W.2d at 557.

(307) See New York Life Ins. Co. v. Durham, 166 F.2d 874, 876 (10th Cir. 1948)

(308) See New York Life Ins. Co., 158 F.2d at 265

(309) See Pan Am World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1012 (2d Cir. 1974)

(310) See Pan Am World Airways, Inc., 505 F.2d at 1012

(311) See West v. Palmetto State Life Ins. Co., 25 S.E.2d 475, 477 (S.C. 1943).

(312) Holiday Inns, Inc., 571 F. Supp. at 1500.

(313) See Pan Am World Airways, Inc., 505 F.2d at 1010 (finding that the Popular Front for the Liberation of Palestine (PFLP) lacked the authority to adopt laws and punish their violation within the territories of the sovereign states in which it operated).

(314) See Holiday Inns, Inc., 571 F. Supp. at 1501 (declining to grant the Phalangist, Mourabitoun and Palestinian militias sovereign status due to the continued existence and functioning of the civilian government during the Lebanese civil war)

(315) See Pan Am World Airways, Inc., 368 F. Supp. at 1129-30.

(316) See id.

(317) See Pan Am World Airways, Inc., 505 F.2d at 1013 (holding that the PFLP was not a sovereign government or a state when its members hijacked and subsequently destroyed a commercial aircraft as it had never claimed it be a state, a government or to be acting on behalf of a recognized state or government).

(318) See Holiday, Inns, Inc., 571 F. Supp. at 1500.

(319) See id.

(320) See Pan Am World Airways, Inc. 505 F.2d at 997 (finding statements of the PFLP that its hijacking operations were conducted for the limited purposes of bolstering the morale of the Palestinian people and calling attention to the plight of Palestinian refugees indicative that the group did not consider itself to be a sovereign entity).

(321) See id. (finding statements of the PFLP condemning Israel, “reactionary Arab regimes,” the United States, “universal capitalism” and “world monopolies” to be insufficient to constitute a proclamation of statehood).

(322) See id. at 1015 (denying the PFLP sovereign status due to the absence of recognition by any Arab government)

(323) See Pan Am World Airways, Inc., 505 F.2d at 1015 (denying sovereign status to the PFLP despite its receipt of financial and military support from the Peoples’ Republic of China and North Korea)

(324) See Pan Am World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098, 1115-16 (S.D.N.Y. 1973), aff’d, 505 F.2d 989 (2d Cir. 1974).

(325) Id. at 1115-16.

(326) See generally Geneva Convention IV Relative to the Protection of Civilian Persons in Time of War, Aug. 12, 1949, 6 U.S.T. 3516, 75 U.N.T.S. 287

(327) See Geneva Convention IV, supra note 326, art. 3(l)(a)

(328) See Geneva Convention III, supra note 326, arts. 4(A)(2)(a-d)

(329) See John Mintz, Most Experts Say al Qaeda Members Aren’t POWs but Taliban Fighters May Be, WASH. POST,Jan. 27, 2002, at A22.

(330) See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 505 F.2d 989, 1015 (2d Cir. 1974).

(331) Id. at 1015.

(332) See Grunwald, supra note 45, at Al.

(333) Pan Am. World Airways, Inc., 505 F.2d at 1013

(334) Pan Am World Airways, Inc., 505 F.2d at 1013

(335) See Molly Moore & Peter Baker, Inside al Qaeda’s Secret World, WASH. POST, Dec. 23, 2001, at Al.

(336) See id.

(337) See Moore & Baker, supra note 335, at Al.

(338) See Baker, supra note 336, at Al.

(339) See Moore & Baker, supra note 335, at Al (citing the opinions of Said Amin Mujahed and Abdulbaki Hasari, professors of history at Kabul University).

(340) Id. (quoting an unnamed Western diplomat). This characterization of al Qaeda’s control over Afghanistan was echoed by President George W. Bush who noted that the administration “was concerned about [Osama bin Laden] when he had taken over a country…. [and] the fact that he was basically running Afghanistan and calling the shots for the Taliban.” Marc Sandalow, Bush Says bin Laden No Threat, S.F. CHRON., Mar. 14, 2002, at Al.

(341) See Mitchell v. Laird, 488 F.2d 611,613 (D.C. Cir. 1973) (holding that there are some types of war which the President may wage without congressional approval)

(342) Harding v. Pennsylvania Mut. Life Ins. Co., 90 A.2d 589, 597 (Pa. Super. Ct. 1952), aff’d, 95 A.2d 221 (Pa. 1953).

(343) See Beley v. Pennsylvania Mut. Life Ins. Co., 95 A.2d 202, 205 (Pa. 1953)

(344) See New York Life Ins. Co. v. Durham, 166 F.2d 874, 875 (10th Cir. 1948)

(345) See Pang v. Sun Life Assurance Co., 37 Haw. 208, 216 (1945)

(346) Thomas, 131 A.2d at 603.

(347) See New York Life Ins. Co. v. Bennion, 158 F.2d 260,266 (10th Cir. 1946)

(348) See Thomas, 131 A.2d at 611-12 (Musmanno,J., dissenting).

(349) Langlas v. Iowa Life Ins. Co., 63 N.W.2d 885,891 (Iowa 1954).

(350) For cases concluding that the Japanese attack on Pearl Harbor in December 1941 did not constitute war within the meaning of exclusionary language contained within applicable insurance policies, see, for example, Savage v. Sun Life Assurance Co., 57 F. Supp. 620, 621 (W.D. La. 1944)

(351) Langlas, 63 N.W.2d at 888

(352) See New York Life Ins. Co. v. Durham, 166 F.2d 874, 876 (10th Cir. 1948)

(353) See Navios Corp. v. The Ulysses II, 161 F. Supp. 932,939 (D. Md. 1958), aff’d, 260 F.2d 959 (4th Cir. 1958)

(354) See Thomas v. Metro. Life Ins. Co., 131 A.2d 600, 602-07 (Pa. 1957).

(355) See id. at 602-07.

(356) See Bennion, 158 F.2d at 265

(357) See Thomas 131 A.2d at 607,609.

(358) For cases concluding that the Japanese attack on Pearl Harbor in December 1941 did constitute war within the meaning of exclusionary’ language contained within applicable insurance policies, see, for example, Bennion, 158 F.2d at 264. For cases concluding that the Korean conflict did constitute a war for insurance purposes, see, for example, Weissman v. Metro. Life Ins. Co., 112 F. Supp. 420, 425 (S.D. Cal. 1953)

(359) Sherwin-Williams Co. v. Ins. Co., 863 F. Supp. 542,552 (N.D. Ohio 1994).

(360) See id.

(361) See Carl T. Hall, Terrorists Hoping U.S. Lashes Out Blindly, S.F. CHRON., Sept. 20, 2001, at A9.

(362) See id.

(363) See Pan Am. World Airways, Inc. v. Aetna Cas. & Stir. Co., 505 F.2d 989, 1019 n. 15 (2d Cir. 1974).

(364) See id. at 1015.

(365) See Link v. Gen. Ins. Co., 56 F. Supp. 275,277 (W.D. Wash. 1944), aff’d, 173 F.2d 955 (9th Cir. 1949)

(366) See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098, 1130 (S.D.N.Y. 1973), aff’d, 505 F.2d 989 (2d Cir. 1974).

(367) See id.

(368) See id.

(369) Id.

(370) Holiday Inns, Inc. v. Aetna Ins. Co., 571 F. Supp. 1460, 1467 (S.D.N.Y. 1983).

(371.) See id. at 1494, 1496.

(372) Id. at 1487

(373) Sherwin-Williams Co. v. Ins. Co., 863 F. Supp. 542,554 (N.D. Ohio 1994).

(374) Holiday Inns, Inc., 571 F. Supp. at 1467

(375) See Pan Am. World Airways, Inc. v. Aetna Cas. & Sur. Co., 368 F. Supp. 1098, 1137 (S. D. N. Y. 1973), affd, 505 F.2d 989 (2d Cir. 1974).

(376) Id. at 1132.

(377) Pan Am. World Airways, Inc., 505 F.2d at 1020

a gathering of three or more persons with a common purpose to do

an unlawful act,

with overt acts to accomplish that purpose, with an apparent

intention and ability to

use force if necessary against any person who may oppose them in

the execution of

their common purpose, and with force or violence displayed in such

manner as to

deter from opposing them at least one person of reasonable

firmness or courage who

might otherwise oppose them.

Pan Am. World Airways, Inc., 368 F. Supp. at 1133.

(378) See Pan Am. World Airways, Inc., 368 F. Supp. at 1135.

(379) Pan Am. World Airways, Inc., 505 F.2d at 1020.

(380) Id.

(381) 18 U.S.C. [section] 2331(1)(A)(2000).

(382) See 18 U.S.C. [subsection] 32, 371, 1111, 1117 (2000) (defining the crimes of air piracy, malicious destruction of aircraft, conspiracy and mass murder).

(383) See N.Y. PENAL LAW [subsection] 100, 105, 115, 120, 125 (McKinney 1998) (defining the crimes of solicitation, conspiracy, facilitation, assault and homicide).

(384) Benjamin Forgey, Buildings that Stood Tall as Symbols of Strength, WASH. POST, Sept. 13, 2001, at C1.

(385) Id.

(386) Michael Dobbs, Bin Laden Hails Attacks on U.S., WASH. POST, Oct. 8, 2001, at A12.

(387) See David Von Drehle, Nation Reels as Toll Mounts

(388) See Alice Dembner, September 11’s Mental Toll Measured in New York, S.F. CHRON., Mar. 28, 2002, at A9

(389) See SR Complaint, supra note 34, [paragraph] 31.

(390) See id.

(391) In re Prudential Lines, Inc., 158 F.3d 65, 80 (2d Cir. 1998) (determining the common sense meaning of the term “accident” to be “an event of an unfortunate character that takes place without one’s foresight or expectation.”)

(392) See Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1374 (E.D.N.Y. 1988).

(393) Arthur A. Johnson Corp., 164 N.E.2d at 706

(394) See Uniroyal, Inc., 707 F. Supp. at 1378.

(395) Id. at 1377

(396) See In re Prudential Lines Inc., 148 B.R. at 739, 747.

(397) Id. at 739.

(398) Newmont Mines, Ltd. v. Hanover Ins. Co., 784 F.2d 127, 135 (2d Cir. 1986)

(399) Newark Ins. Co. v. Cont’l Cas. Co., 363 N.Y.S.2d 327,328-29 (N.Y. Sup. Ct. 1975).

(400) See In re Prudential Lines, Inc., 202 B.R. at 22

(401) Champion Int’l Corp. v. Liberty Mut. Ins. Co., 546 F.2d 502, 507 (2d Cir. 1976).

(402) Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1385 (E.D.N.Y. 1988).

(403) 164 N.E.2d 704, 707 (N.Y. 1959).

(404) 305 N.E.2d 907,910 (N.Y. 1973).

(405) Uniroyal, Inc., 707 F. Supp. at 1382

(406) See In re Prudential Lines, Inc., 158 F.3d 65, 80 (2d Cir. 1998)

(407) Arthur A. Johnson Corp., 164 N.E.2d at 708.

(408) See In re Prudential Lines, Inc., 158 F.3d at 79

(409) For cases finding multiple occurrences as a result of application of the “one unfortunate occurrence” test, see, for example, In re Prudential Lines, Inc., 158 F.3d at 83 (exposure’to asbestos fibers on vessels owned and operated by insured)

(410.) See Newmont Mines, Ltd. v. Hanover Ins. Co., 784 F.2d 127, 136 (2d Cir. 1986)

(411) See In re Prudential Lines, Inc. 158 F.3d at 81

(412) Kosich v. Metro. Prop. & Cas. Ins. Co., 626 N.Y.S.2d 618, 618 (N.Y. Sup. Ct. 1995)

(413) Uniroyal, Inc., 707 F. Supp. at 1383.

(414) See Newark Ins. Co. v. Cont’l Cas. Co., 363 N.Y.S.2d 327,329 (N.Y. Sup. Ct. 1975).

(415) Hartford Accident & Indem. Co., 305 N.E.2d at 910.

(416) See Travelers Cas. & Sur. Co. v. Certain Underwriters at Lloyd’s of London, 760 N.E.2d 319, 326-27 (N.Y. 2001).

(417) See Newark Ins. Co., 363 N.Y.S.2d at 329-30.

(418) See In re Prudential Lines, Inc., 158 F.3d 65, 81 (2d Cir. 1998)

(419)See Hartford Accident & Indem. Co., 305 N.E.2d at 910.

(420) See id. at 909-11.

(421) See In re Prudential Lines, Inc., 158 F.3d at 81 (repeated exposure of workers to asbestos fibers on numerous ships owned and operated by insured over a period of fifteen years)

(422) See Uniroyal, Inc. v. Home Ins. Co., 707 F. Supp. 1368, 1380 (E.D.N.Y. 1988) (concluding that “the number of occurrences for purposes of applying coverage limitations is determined by reference to the cause or causes of the damage”)

(423) See In re Prudential Lines, Inc., 158 F.3d at 80

(424) See Champion Int’l Corp., 701 F. Supp. at 413.

(425) See Hartford Accident & Indem. Co., 305 N.E.2d at 910-11.

(426) See id.

(427.) See Newmont Mines, Ltd. v. Hanover Ins. Co., 784 F.2d 127, 137 (2d Cir. 1986).

(428.) See id. at 137.

(429.) See id.

(430) See Travelers Cas. & Sur. Co., 760 N.E.2d 319, 326-27 (N.Y. 2001).

(431) Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1214 (2d Cir. 1995)

(432) See Newmont Mines, Ltd., 784 F.2d at 137.

(433) See Arthur A.Johnson Corp. v. Indem. Ins. Co., 164 N.E.2d 704, 705, 708 (N.Y. 1959).

(434) See Newmont Mines, Ltd., 784 F.2d at 136-37.

(435) See id.

(436) 164 N.E.2d 704 (N.Y. 1959).

(437) 784 F.2d 127 (2d Cir. 1986).

(438) See Arthur A. Johnson Corp., 164 N.E.2d at 705.

(439) See id.

(440) See id.

(441) See id.

(412) See id. at 708.

(443) Id.

(444) See id.

(445) Id.

(446) Id. at 706.

(447) See Newmont Mines, Ltd. v. Hanover Ins. Co., 784 F.2d 127, 129 (2d Cir. 1986).

(448) See id. at 130.

(449) See id.

(450) See id. at 137.

(451) See id.

(452) See id.

(453) Id. at 135.

(454) Id. at 137.

(455) Id.

(456) See supra note 397 and accompanying text.

(457) See supra notes 395-96 and accompanying text.

(458) See In re Prudential Lines, Inc., 158 F.2d 65, 81 (2d Cir. 1998)

(459) Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1214 (2d Cir. 1995).

(460) See id.

(461) See Hartford Accident & Indem. Co. v. Wesolowski, 305 N.E.2d 907, 910 (N.Y. 1973).

(462) See id.

(463) Id

(464) 164 N.E.2d 704 (N.Y. 1959).

(465) See id. at 705.

(466) See id.

(467) See id. at 708.

(468) Id.

(469) See supra notes 49-51 and accompanying text.

(470) See id.

(471) See supra notes 395-96 and accompanying text.

(472) See supra note 397 and accompanying text.

(473) Uniroyal, Inc. v. Home Ins., Co., 707 F. Supp. 1368, 1384 (E.D.N.Y. 1988).

(474) Id. at 1384.

(475) 148 B.R. 730 (Bankr. S.D.N.Y. 1992), modified, 170 B.R. 222 (S.D.N.Y. 1994).

(476) Id. at 746.

(477) Stonewall Ins. Co. v. Asbestos Claims Mgmt. Corp., 73 F.3d 1178, 1213 (2d Cir. 1995).

(478) Uniroyal. Inc., 707 F. Supp. at 1383.

(479) See In re Prudential Lines, Inc., 158 F.3d 65, 83 (2d Cir. 1998). The Court of Appeals’ conclusions were based on the “one unfortunate event” test unique to New York law and the absence of policy language categorizing multiple exposures as a single occurence. See id. at 82-83.

(480) See supra note 190 and accompanying text.

(481) See supra notes 191-96 and accompanying text.

(482) See supra notes 197-207 and accompanying text.

(483) See Atomic Energy Damages Act of 1957, Pub. L. No. 85-256, 71 Stat. 576 (codified as amended in scattered sections of 42 U.S.C.).

(484) See id.

(485) See 22 U.S.C. [section] 2191-2200a (2000).

(486) See Housing and Urban Development Act of 1968, Pub. L. No. 90-448, 82 Stat. 476 (codified as amended in scattered sections of 5, 12, 15, 18, 31, 38, 40, 42 & 49 U.S.C.).

(487) See id.

(488) See National Flood Insurance Act of 1968, Pub. L. No. 90-448, 82 Stat. 572 (codified as amended in scattered sections of 42 U.S.C.).

(489) See id.

(490) See U.S. (GEN. ACCOUNTING OFFICE, ALTERNATIVE, PROGRAMS FOR PROTECTING INSURANCE CONSUMERS, REP. GAO-02-119T 6 (2001) [hereinafter GAO REPORT].

(491) See id.

(492) See id. at 8. For an in-depth discussion of the British Pool Re program, see William B. Bice, Comment, British Government Reinsurance and Acts of Terrorism: The Problems of Pool Re, 15 U. PA.J. INT’L BUS. L. 441 (1994).

(493) See GAO REPORT, supra note 490, at 8.

(494) See id.

(495) See id.

(496) See id.

(497) See id.

(498) See id.

(499) See id.

(500) See id.

(501) See id.

(502) See id.

(503)See id. Israel also provides coverage to its citizens and visitors for medical care, lost wages and personal injuries suffered as a result of terrorist attacks pursuant to the Law for the Compensation of Victims of Enemy Action administered by the National Insurance Institute. See id. at 8-9.

(504) Terrorism Risk Insurance Act of 2002, Pub. L. 107-297, 116 Stat. 2322 (2002).

(505) See GAO REPORT, supra note 490, at 15

(506) See Insuring Terrorism Risks After September 11 Before Senate Comm. on Banking, Hous. & Urban Affairs 107th Cong. 4 (2001) (statement of J. Robert Hunter, President of the Consumer Fed’n of Am.) [hereinafter Hunter Senate Statement].

(507) See id. at 9.

(508) See Terrorism Risk Insurance Act, [section] 102(1)(A)(iii)(I-III).

(509) See 18 U.S.C. [section] 2331(1)(A) (2000).

(510) See Terrorism Risk Insurance Act, [section] 102(1)(A).

(511) ,See 18 U.S.C. [section] 233 l(l)(B)(i-iii) (2000).

(512) See Terrorism Risk Insurance Act, [section] 102(1)(A)(iv).

(513) See id. [section] 102(I)(B)(ii).

(514) See supra note 2 and accompanying text.

(515) See id. [section] 103(e)(3).

(516) See id. [subsection] 106-07.

(517) See id. [section] 103(e)(7)(B).

(518) See id. [section] 103(e)(8)(D)(I)(i-iii).

(519) See id. [section] 105(b).

(520) See Koken Senate Statement, supra note 130, at 15

(521) See Koken Senate Statement, supra note 130, at 15

(522) See Koken Senate Statement, supra note 130, at 15

(523) See Koken Senate Statement, supra note 130, at 15

(524) See Terrorism Risk Insurance Act, [section] 107(2).

(525) See id. [section] 102(1)(C).

(526) See id. [section] 108 (a).

(527) See GAO REPORT, supra note 490, at 16

(528) See Koken Senate Statement, supra note 130, at 8

(529) See STANDARD & POOR’S, MAINTENANCE OF INSURANCE RATINGS DEPENDS ON MITIGATING TERRORISM RISKS, supra note 191, at 2 (contending that any “envisaged withdrawal by [the] federal government after 2004 raises questions about the future strength of commercial-lines carries.”).

(530) See Terrorism Risk Insurance Act, [section] 108(d)(1-2).

(531) See GAO REPORT, supra note 490, at 17.

(532) See Hunter Senate Statement, supra note 506, at 13.

(533) See GAO REPORT, supra note 490, at 16.

(534) Koken Senate Statement, supra note 130, at 5