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2002-01-19

Congress of the United States
House of Representatives
Vito Fossella
13th District, New York

January 19, 2002

Kenneth Feinberg
Special Master to the
September 11, 2001
Victims Compensation Fund

Re: Interim Regulations Promulgated December 21, 2001

I am writing today to offer comments and feedback on the interim regulations governing
the September 11 Victims Compensation Fund. While I recognize the complexity of this
unprecedented undertaking, I believe the Interim Regulations are at odds with the Air
Transportation Safety and System Stabilization Act ("Act") and, in certain respects, are contrary
to the intent of Congress when it established the September 11 Victims Compensation Fund.

As you know, Congress devised the Fund to provide fair economic and non-economic
compensation for those persons who suffered direct physical injury or families who lost a loved
one in the disaster. Congress placed no caps or limitations on individual awards or the amount of
money that would be dedicated to the Fund in order to achieve these goals and offer an
alternative to litigation for affected families.

The Interim Regulations, particularly the presumptive economic and non-economic
awards, may provide little or, is some cases, no benefits to a large number of decedents' families.
Indeed, the possibility exists that the small awards would force some families to sell their homes,
pull children out of schools and drastically alter their already devastated lives.

The following is a list of the primary areas in which the Interim Regulations violate the
statute or are unconstitutional or have been left so unclear as to cause most potential claimants to
hesitate to file a claim with the Fund:

Collateral Source Deductions:

Under the statute, certain collateral sources are used as offsets to potential awards.
However, the interim regulations offer an ambiguous definition of collateral sources and, in some
cases, define items as collateral sources above and beyond what was defined by Congress. The
interim regulations only list things that may constitute a collateral source (e.g., pension), but they
do not provide any guidance on which type of pension constitutes a collateral source. Under the
law, a collateral source must directly replace, match or indemnify a particular loss that is
compensable under the wrongful death statue before it may be considered an offset. See, e.g.,
Oden v. Chemung Co. Indus. Dve. Agency, 637 N.Y.S.2d 670 (1995). Only under that definition
of collateral source is the double recovery avoided (over compensation) without incurring under
compensation. Without such a definition, the regulations lead to unfair results, as follows:



Employee contributed pensions and social security are both largely deferred
income for a wage earner deducted from the pay check, lowering his/her yearly
income, but repaid in retirement. Neither should be considered collateral source
income. The reduction from the wage earner's income, by pension contributions,
reduces the earnings at the starting point for the Regulations' matrix, resulting in a
lower presumptive award. It is unclear if the regulations will adequately address
the loss of pension benefits as a loss of income or reduce an award by declaring it
a collateral source.

The New York State legal authorities recommended that workers' compensation
not be considered a collateral source because of the unpredicitability associated
with future life events, such as re-marriage or children reaching majority, that can
cause future workers' compensation to be terminated. The total amount of future
compensation is difficult, if not impossible, to ascertain because it is subject to
termination, reductions and reimbursement, and it should not be considered a
collateral source payment. Workers' Compensation is typically a monthly annuity
that is generally terminated once any third party compensates the injured party for
his/her loss. There is also usually a lien on any amounts recovered requiring the
recipient to repay all or a portion of the workers' compensation received prior.
Here, however, 104.63 of the Regulations does not allow such a lien in
specifying that awards from the Fund do not constitute a tort award or recovery
from a third party. This does not, however, solve the problem that future workers'
compensation will be terminated and thus should not be a collateral source.

The Interim Regulations must be amended to define collateral source as a payment
which is a direct replacement or indemnification of an economic loss that is compensated under
the Fund. That definition would solve the problem of how to deal with payments made to
nonclaimants.

As the Regulations currently stand, City and State rescue workers are in danger of
receiving either no recovery or perhaps only the non-economic loss award. This fails to account
for the true definition and treatment of their pension as deferred income and not a collateral
source. It also fails to recognize part-time jobs and second careers that most of these rescue
workers had or would have had, upon retirement at ages prior to the expiration of their work life
expectancy. This must be addressed.

Income Loss and Income Growth Rates

Regulations improperly look backward on a 3 year average of income rather than
forward. Rather than focus on the yearly income at the time of death, the starting
point is reduced and the punishing reduction is repeated forward each and every
year through retirement. In most cases, this results in a large understatement of
the decedent's true earnings. This unfairly devaluates the loss.

It is unclear how fringe benefits paid by the employer, such as health care and
pension contributions will be considered. Normally economists consider these
benefits to be additional income at a rate of approximately 20-25% of the
employee's W-2 income. Many families will be without health insurance as a
result of the wage earner's death and will be forced to obtain coverage. In so far
as pensions are concerned, the Regulation currently not that some premiums paid
by employers will be considered, but offers little guidance beyond that..

Income growth rates of government and military employees are inappropriate to
determine growth rates of workers in the private sector. The regulations do not
account for the much higher income growth rates that the decedents would have
enjoyed based on promotions, inflation and historical growth in the private sector.
This information is publicly available and past income growth rates and industry
parallels are also available on a case by case basis. Alternatively, if a uniform
growth rate is more desirable, even if skewed, a higher rate is more appropriate
that the 4.2 to 6.6% growth range the regulations currently envision, accounting
for only an unrealistic .7 to 3% growth after inflation due to merit, performance or
promotions.

The Regulations deduct taxes from the gross income based on today's tax rates.
Tax rates change on a regular basis and courts and economists are reluctant to
predict what tax rate would apply 10 or 20 years from now. No one can dispute
that tax on gross income is also reduced by deductions, exemptions, deferred
income, losses and other non-taxable income. It is not clear if this is being taken
into account when reducing the award for taxes. Furthermore, if New York law is
the applicable law for economic loss, it appears the regulations violate New York
law because New York law prohibits deduction or consideration of income taxes.
Coleman v. NYCTA, 37NY2d 137, 371 NYS2d 663 (1975); NY Pattern Jury
Instructions 2:280.

The Regulations disregard earnings in the top two percentile of income and thus
constitute a cap on damages. New York law on economic loss is clear in
prohibiting caps and this is in direct violation of the New York Constitution. New
York Const. Art. 1 516 prohibits any limitation on the amount of wrongful death
recovery. Section 408 of the Act defines economic loss according to applicable
state law. yet the Regulations violate that law and violate the New York
Constitution.

Non-Economic Loss

While it is difficult to place a value on non-economic loss or compare one family's loss of
a loved one to another's, or the suffering of a decedent before death, the $250,000 plus $50,000
per spouse and child grossly undervalues this category of injuries based on verdicts and
settlements throughout the United States. Once again, the Regulations in placing a cap on this
loss violate New York law. Furthermore, non-economic loss is separate and distinct from
economic loss and should not be reduced by collateral source income, taxes or reduced to present
value.

In an effort to meet the goals established by Congress, I believe the Special Master should
review the current cap on non-economic damages with an eye towards raising the limit. A higher
amount is not only fair and supported by law, but would encourage, if not ensure, the vast
majority of families to opt for the Fund rather than pursue litigation. The non-economic loss
award in the Fund is a creature of the federal law, unassociated with any state law for its
substance. Accordingly, I would encourage the Special Master to reevaluate and clarify the
claimants eligible to receive compensation under the fund. See Dixon v. Serotina, Inc., 331F.2d
668 (6th Cir. 1964): Petition of United States, 418 F.2d 264 (1stCir.1969); Spiller v. Lowe, 466
F.2d 903 (8th Cir.1972); Green v. Ross, 338 F. Supp. 365 (S.D. Fla. 1972); Stacey v. Interstate
and Ocean Transp. Co. of Phil., 590 F. Supp. 1043 (E.D.N.Y. 1984); Thompson v. Offshore Co,
440 F. Supp. 752 (S.D. Tex.1977); Boswell v. Bludworth Bond Shipyard, 854 F. supp. 461 (S.D.
Tex. 1994)

I want to thank you in advance for your attention to this important matter. I look forward
to hearing from you soon.

Sincerely,

Comment By:
Vito J. Fossella
Member of Congress
Washington, DC

2002-01-19