Special Section

What Have We Learned About Compensating Victims of Terrorism?

By Kenneth R. Feinberg

Kenneth Feinberg, special master of the September 11th Victim Compensation Fund of 2001, is a member of the board of overseers of the RAND Institute for Civil Justice.

Following the Sept. 11 terrorist attacks, the U.S. Congress immediately enacted a no-fault administrative compensation scheme — the September 11th Victim Compensation Fund of 2001 — designed to provide tax-free awards to the almost 3,000 families who lost a family member on 9/11 and to those victims who were physically injured on that fateful day. By all accounts, the fund has been an unprecedented success.

Over 97 percent of those eligible voluntarily applied to the fund rather than choosing to litigate against the airlines, the World Trade Center, the Port Authority of New York and New Jersey, the Massachusetts Port Authority, and others. The average tax-free award to surviving family members was more than $2 million, with physical injury awards ranging from $500 to $8.6 million for a survivor who had suffered third-degree burns over 85 percent of his body. By the time the fund terminated on June 15, 2004, it had awarded more than $7 billion to 5,553 eligible families and victims.

Despite its success, the fund has raised two central issues that need to be examined in full and submitted to open public debate: Who should be compensated? And by how much?

Regarding the first issue, why is the fund limited in scope to the narrowly defined category of victims of the 9/11 tragedy? What about the victims of the Oklahoma City bombing in 1995 or the victims of the U.S. embassy bombings in Kenya and Tanzania in 1998? Why aren’t those people eligible for such public compensation? Indeed, what about the families of those who died in the first World Trade Center terrorist attack in 1993? How does one justify excluding them from the fund?

These questions go to the heart of a political and philosophical debate over the role of public compensation in a free society. One approach to dealing with this issue is to try to make fine-line distinctions among potential claimants by prioritizing victims. For example, one could distinguish between victims who suffer from foreign as opposed to domestic terrorism, or between those who maintain an effective right to litigate and those who don’t. But such distinctions are ultimately unconvincing and certainly sound hollow to potential claimants seeking public compensation. You will never convince a family who lost a loved one in Oklahoma City or in the 1993 World Trade Center attack that it makes sense to restrict public compensation to 9/11 victims. Prioritizing victims is risky business.

AP/WIDE WORLD PHOTOS/   JOHN-MARSHALL MANTEL   During a news conference challenging the caps placed on the amount of money granted by the federal September 11th Victim Compensation Fund of 2001, Vincent Ragusa stands next to a photograph of his son, firefighter Michael Ragusa, who perished in the World Trade Center attacks.

Instead, the only effective and convincing way to limit the scope of public compensation is to evaluate the problem from the perspective of the community rather than the victims. Such an approach would delineate the scope of a public compensation scheme and determine who is eligible after the fact, looking at the psychic scars the nation as a whole suffered and the nation’s immediate response following a terrorist attack.

Under this approach, the 9/11 victims are eligible for tax-free compensation because Congress deemed the magnitude and scope of 9/11 to be unique, greater than any previous related act of terrorism. In this sense, what makes 9/11 different is the community response following it. In terms of psychic scars, it affects the population in a similar way as the assassination of President John F. Kennedy, the attack on Pearl Harbor, and the American Civil War.

This emphasis on community response rather than victim characteristics seems the only convincing way to justify the limited scope and restrictive eligibility criteria of the federal 9/11 fund. Of course, such an approach undercuts any attempt to fashion eligibility criteria in advance, since a congressional response will depend on the effects of such an attack on our national community and since the barometer used to gauge public sentiment is by definition unknowable until and unless the terrorist event occurs.

Beyond the issue of who should be compensated in a public compensation scheme like the 9/11 fund is the issue of how much individuals should be compensated. The current law mandates that eligible claimants receive different awards based on the economic wherewithal and future economic losses suffered by the victims. Thus, in the overwhelming majority of cases, the stockbroker’s family receives more public compensation than the waiter’s family, the banker’s family more than the fireman’s family, the next of kin of the bond trader who died at the World Trade Center more than the family of the corporal who died at the Pentagon.

Such an approach is tort based, grounded in the recognition that the loss of future earnings should be a relevant consideration in promoting just compensation. Juries do exactly this every day in every courtroom in our nation. But they do it quietly, according to local community standards and mores, and outside the public eye. Asking one individual to do so, such as a special master acting pursuant to a very visible public law, is another matter altogether. And when that individual is also mandated to offset other collateral sources of income, such as life insurance and pension income, this is most decidedly not merely a tort-based concept and further complicates matters.

A strong argument can be made that — if and when there is a next time and if and when compensation for terrorist victims is once again considered by Congress — all eligible claimants, however defined, should be given the same tax-free awards. Such a flat-payment approach would not only be easier to administer but would also minimize divisiveness among eligible claimants, who would no longer be able to argue that the loss of a loved one, such as a fireman, is being undervalued in favor of the loss of a stockbroker or banker.

But such an approach still begs important questions. How much compensation would each eligible claimant receive, and who would establish such an amount? Would increased awards be allowed in certain limited cases for “exceptional circumstances”? Would access to the tort system remain unencumbered? These are important questions that must be addressed even if a flat payment is determined to be more just and efficient.

The federal September 11th Victim Compensation Fund of 2001 constitutes a unique experiment in American history, providing very generous compensation to a relatively narrow group of eligible claimants and then funding such awards through tax-free public money. The program should fuel a healthy public debate over the strengths and weaknesses of this approach when it comes to compensating those who suffer from some of life’s greatest tragedies.