Demand by conservatives to add tort reform provisions could kill the bill

Washington

The likelihood that some of the more innovative and controversial provisions of the House version of legislation extending the Terrorism Risk Insurance Act would make it into law were reduced last Thursday when the House Judiciary Committee was given jurisdiction over the bill.

That will delay House action on the bill and reduce the window for some of these provisions to be added into the Senate version of the bill supported by the White House, the Treasury Department and conservatives in the House.

It could also kill the bill if tort provisions demanded in the past by House conservatives were added.

In a bulletin to members sent out after the House Parliamentarian granted referral to the Judiciary Committee, David Winston, senior vice president, federal affairs, for the National Association of Mutual Insurance Companies, said the referral will delay consideration of the bill, H.R. 4314, by the full House.

The panel could also add a tort reform measure relating to punitive damages arising from a terrorist attack to the bill, Winston said in his bulletin.

“The legislative time constraints and the referral of the House bill to the Judiciary Committee may strengthen the prospects for the more streamlined Senate bill supported by the White House,” Winston concluded.

Earlier, an industry lobbyist said “Capitol Hill staff has made it clear that tort reform provisions could sink the bill. Tort reform is the proxy for those who want TRIA to expire.

“As much as everyone in the industry supports tort reform, it is more important that we get this bill completed. Tort reform will never be accepted by the Senate,” the lobbyist said.

The effort by the White House, Treasury Department and House conservatives is designed to send the bill to the Judiciary Committee to add tort reform provisions and is totally unacceptable to Democrats.

Democrats would have strong leverage because of the strong consensus needed to act on legislation when Congress wants to move quickly. Congress wants to wrap its current session by Dec. 17, and the Senate does not plan to return until Dec. 12.

Before last Thursday, it had been expected that the House would vote early this week on a TRIA extension bill reported out of the House Financial Services Committee just before Thanksgiving by a 64-3 vote.

Time is running out on TRIA, with the current law–providing a terrorism reinsurance backstop–expiring Dec. 31. Vast differences between House and Senate extension bills must be worked out, and objections cited by President Bush overcome, before an extension can be implemented. The only certainty is if TRIA is extended, it is likely to at least have much higher triggers and retentions.

The House bill will need to be approved by a wide margin if Committee Chairman Mike Oxley, R-Ohio, is to have a strong hand in what is expected to be tense negotiations over reconciling his measure with a more bare-bones version of TRIA extension passed by the Senate by unanimous consent on Nov. 17.

Indeed, talking points distributed by Treasury officials at a Nov. 30 “retreat” for the House Republican leadership argued that the “current House TRIA extension bill contains fundamental flaws.”

For example, the paper says the House bill, by removing company deductibles and creating separate silo deductibles for different lines of coverage, “adds significant lines and exposure” and “presents gaming opportunities for multiline providers,” citing AIG and The Hartford.

“Essentially,” the White House paper said, “the House proposal expands the program by creating several ‘mini-TRIAs’–a Workers’ Compensation TRIA, a Property TRIA, a Casualty TRIA, a new Group Life TRIA, and a new NBCR [nuclear, biological, chemical, radiological] TRIA.”

The bill also adds “significant complexity” to the program, the paper says.

Christopher B. Kende, with Cozen, O’Connor in New York–an insurance lawyer for 25 years and an advisor to numerous clients on terrorism coverage and political risk insurance–said after examining the two bills last week that “the Senate bill is designed to put off what is going to be done over the long term. It is not a solution. It is just an extension with higher limits with some idea that within two years they will know what to do.”

The House bill, he added, “seems to be a much more comprehensive effort to create a new scheme. It is much more of an effort to deal with the situation now and not delay a solution for two years.”

Insurance industry officials declined repeatedly last week to comment for the record on what one lobbyist privately called the “White House assault” on the House bill.

“It appears that earlier assurances by Treasury that they would not interfere with the House process have been abrogated,” the lobbyist said. “Chairman Oxley has iron-clad assurances that his legislation will be considered on the House floor next week, and there is every evidence that the floor vote will be consistent with the committee vote–strong and bipartisan.”