Terrorism Statutes and Indicators
STATUTES
Terrorism Risk Insurance Act of 2002
(P.L. 107-297 formerly H.R. 3210)
Because of the financial impact of the terrorist attacks of 9/11, many sought to provide a means to stabilize or even encourage investments throughout the country, particularly in large urban cities such as New York. The risk of loss from terrorism posed a huge disincentive for capital investment, particularly developers and businesses in areas deemed targets of terrorism. Indeed, the threat of terrorism posed such an uncertain risk that insurance companies were hard pressed to insure developers and businesses. If insurance coverage was not provided, why would a prudent investor or corporation risk capital that could be damaged or destroyed in a terrorist attack?
From the perspective of the insurance industry, it is very difficult to accurately price coverage for acts of terrorism. The unknown frequency of such acts, coupled with the potential for severe losses, makes coverage very risky to insurers or very costly to be insured. As evidence of this dilemma, the insurance industry took a huge financial hit from 9/11, reportedly losing more than $30 billion dollars before starting to exclude claims from these terrorist acts.1
As means to limit the exposure to terrorism related losses, and to encourage investment, the Terrorism Insurance Act of 2002 was signed into law. This legislation was designed to ensure the continued financial capacity of insurers to provide coverage for risks from terrorism. The congressional findings related to the act provide specific rationale for this act. It provides that:2
(1) the ability of businesses and individuals to obtain property and casualty insurance at reasonable and predictable prices, in order to spread the risk of both routine and catastrophic loss, is critical to economic growth, urban development, and the construction and maintenance of public and private housing, as well as to the promotion of United States exports and foreign trade in an increasingly interconnected world;
(2) property and casualty insurance firms are important financial institutions, the products of which allow mutualization of risk and the efficient use of financial resources and enhance the ability of the economy to maintain stability, while responding to a variety of economic, political, environmental, and other risks with a minimum of disruption;
(3) the ability of the insurance industry to cover the unprecedented financial risks presented by potential acts of terrorism in the United States can be a major factor in the recovery from terrorist attacks, while maintaining the stability of the economy;
(4) widespread financial market uncertainties have arisen following the terrorist attacks of September 11, 2001, including the absence of information from which financial institutions can make statistically valid estimates of the probability and cost of future terrorist events, and therefore the size, funding, and allocation of the risk of loss caused by such acts of terrorism;
(5) a decision by property and casualty insurers to deal with such uncertainties, either by terminating property and casualty coverage for losses arising from terrorist events, or by radically escalating premium coverage to compensate for risks of loss that are not readily predictable, could seriously hamper ongoing and planned construction, property acquisition, and other business projects, generate a dramatic increase in rents, and otherwise suppress economic activity; and
(6) the United States Government should provide temporary financial compensation to insured parties, contributing to the stabilization of the United States economy in a time of national crisis, while the financial services industry develops the systems, mechanisms, products, and programs necessary to create a viable financial services market for private terrorism risk insurance.
As with the concept of terrorism discussed above, the act provided for a specific definition of terrorism:
Any act that is certified by the Secretary, in concurrence with the Secretary of State, and the Attorney General of the United States:3
(i) to be an act of terrorism;
(ii) to be a violent act or an act that is dangerous to:
(I) human life;
(II) property; or
(III) infrastructure;
(iii) to have resulted in damage within the United States, or outside of the United States in the case of:
(I) an air carrier or vessel described in paragraph (5)(B); or
(II) the premises of a United States mission; and
(iv) to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of 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.
There are important limitations of this act. The most relevant exclusions include; that the terrorist act must have been committed by an individual( s) acting on behalf of a foreign person or interest, or if the terrorist act was committed as part of a war declared by Congress, or if the terrorist act does not result in property and insurance losses in excess of $5 million dollars. In this latter sense, the definition of an insured loss is: “any loss resulting from an act of terrorism (including an act of war, in the case of workers’ compensation) that is covered by primary or excess property and casualty insurance issued by an insurer of such loss.”4
These losses insure property and casualty coverage, which includes all commercial lines of insurance plus excess, workers’ compensation, and surety policies. Losses that are not insured include crop, private mortgage, financial guarantee, health or life, flood, or reinsurance.5 In addition, other provisions cap the amount of insured payments made in any year, provide for mandatory participation and insurance premium surcharges, dispute resolution procedures and certain risk factors associated with urban environments. Finally, the government retains the ability to subrogate any losses paid under this act, and to attach or lien assets of terrorist organizations associated with a particular terrorist act.6
Arguably the key aspect of the act is to provide for the nullification of any insurance contract exclusion that would preclude coverage for terrorist acts. Since this exclusion is rather common in the insurance industry, this act serves to make any such provision null and void. In return for this sweeping contractual change, insurers are required to offer terrorism coverage, with the government, through this act, acting as a “re-insurer.”7 Under the act, the insured would be free to reject the coverage or simply free to be uninsured against terrorist acts. If coverage is engaged, the federal government would be responsible for 90 percent of the losses for the insurer above the retention amount, while the insurer would pay the remaining 10 percent of the loss.8 In this way, the government absorbs the bulk of the insured losses resulting from foreign inspired terrorism (subject to the above mentioned limitations).
From the perspective of the insured, the incentive to purchase terrorism insurance relates to the duty of care to third parties described throughout this book. Particularly from the World Trade Center Litigation case mentioned previously, it can be extrapolated that liability exposure will exist from terrorism. Consequently, this act provides for such coverage, and at the same time, provides financial protections to insurance companies to insure the risk, with the federal government acting as a secondary (re-insurer) in the event of a terrorist act. Based on a survey conducted by Marsh Inc., the act appeared to be working, as nearly half of large and midsize companies had terrorism insurance at the end of 2004, up from 27 percent the previous year.9
This act was amended in December 2005 pursuant to P.L. 109-144. The key aspect of this amendment is to extend terrorism insurance coverage through the year 2007. In addition, the amended act provides for exclusions for commercial automobile insurance, burglary and theft insurance, surety insurance, professional liability insurance, and farm owners multi-peril insurance.10 More important, however, the amended act provides for a “program trigger” that prohibits payment of federal compensation monies unless the aggregate industry insured losses resulting from acts of terrorism exceed $50 million for program year 4 (2006), and $100 million for program year 5 (2007). This trigger provision substantially raises the liability exposure to insurance companies. The perceived need for this provision may partly stem from the concern that the U.S. government’s financial exposure is too great, particularly when one considers the budget deficits facing the country.11 Finally, the amended act also changes the “insurance marketplace aggregate retention amount” which was also increased for program years 4 and 5.12
Significantly, this act provides no protection against domestic terrorism. As evidenced by the Oklahoma City bombing, this may be a significant limitation of this legislation. There are a number of issues tied to this assertion. First, I see no reason why terrorism is or will remain a matter of foreign action. There are a host of reasons why terrorist acts may stem from purely American roots. While the nuances of this assertion is beyond the scope of this book, suffice it to say that criminal gangs, and extremist groups on both sides of the political spectrum are likely to commit terrorist acts. Indeed, in Chapter 14, I predict that terrorist violence from these groups is likely in the near future. Second, the distinction between a foreign versus domestic terrorist act may be factually difficult to assess. In this sense, the definition of an “terrorist act” focuses on acts “on behalf of any foreign person or foreign interest.” This may not be easy to discern. For example, if an American citizen commits an act of terrorism because of his fundamental belief that Islam should rule the world, is this act committed on behalf of any foreign person or foreign interest? Further, if an American citizen is a member of radical gang, whose tenets include the destruction of the United States government, is this act committed on behalf of any foreign person or foreign interest?
Consequently, this limitation may prove to be very costly in financial terms—and difficult to assess in operational or legal terms. For these reasons, it is my opinion that this act will fall short—far short—in its goal to limit the liability exposure of terrorism. Indeed, the amended legislation’s “program trigger” is an indication that the government is even backing away from its stated desire to protect against foreign inspired terrorism. In sum, while this legislation is useful, it does little to provide liability protection against terrorism. Much, if not most, future terrorist acts are likely to be assessed in terms of the case law presented earlier. Especially for high profile (trophy) buildings this will not provide adequate liability protection. In my mind, additional protections and incentives are necessary.
Support Anti-terrorism by Fostering
Effective Technologies (Commonly Known
As the “Safety Act,” P.L. 107-296)
This legislation is designed to facilitate and promote the development and deployment of anti-terrorism technologies. The purpose of these technologies is to detect, deter, mitigate, or assist in the recovery from a catastrophic act of terrorism.13 Underlying this purpose is the desire to create certain liability limitations. In essence, the legislation is designed to foster the development and deployment of anti-terrorism technologies by providing a specific liability limit, which is, in turn, secured through insurance coverage.
The liability limitations achieved through this act is as follows:14
1. Exclusive jurisdiction in federal court for suits against sellers of “qualified anti-terrorism technologies”
2. A limitation on the liability of qualified sellers to an amount of liability insurance coverage specified for each individual technology
3. A prohibition on joint and several liability for non-economic damages, so that sellers can only be liable for that percentage of non-economic damages proportionate to their responsibility of the resulting harm
4. A complete bar on punitive damages and prejudgment interest 5. A reduction of plaintiffs’ recovery by amounts that plaintiffs received from “collateral sources,” such as insurance or government benefits
6. A rebuttal presumption that the seller is entitled to the “government contractor defense”
In addition to these liability limitations provided directly to the seller of “qualified anti-terrorism technologies,” the legislation also protects contractors, subcontractors, suppliers, vendors, and customers of the seller from liability caused by an act of terrorism. The scope of this protection even goes to the contractors, subcontractors, suppliers, vendors, and customers of the customer. Even third-party claims are limited to the amount of insurance coverage enumerated in the act.15 Consequently, the protective coverage of this act is broad.
The SAFETY Act applies to a broad range of technologies, including “any qualifying product, equipment, service (including support services), device, or technology that the Secretary of Homeland Security, as an exercise of discretion and judgment, determines to merit designation under the statutory criteria.”16 The criteria to qualify as a seller of “qualified antiterrorism technologies” are also very broad, and include the following:17
1. Prior U.S. government use or demonstrated substantial utility and effectiveness
2. Availability of the technology for immediate deployment in public and private settings
3. Existence of extraordinary large or extraordinarily unquantifiable potential for third-party liability risk exposure to the seller or other provider of such anti-terrorism technology
4. Substantial likelihood that such anti-terrorism technology will not be deployed unless protections under the system of risk management provided under the act are extended 5. Magnitude of risk exposure to the public if such anti-terrorism technology is not deployed
6. Evaluation of all scientific studies that can be feasibly conducted in order to assess the capability of the technology to substantially reduce risks of harm
7. Anti-terrorism technology that would be effective in facilitating the defense against acts of terrorism, including technologies that prevent, defeat or respond to such acts
8. Any other factor that may be considered relevant to determination of the Secretary (of Homeland Security) or of the homeland security of the United States
All of these criteria are not required to be fulfilled. Instead, the legislation provides a good deal of discretion to the decision maker (typically the Undersecretary of Homeland Security). If approved, the seller is given the designation of a seller of “qualified anti-terrorism technology,” thereby incorporating the liability protections outlined above.
The incentives to obtain this designation are obvious. Once the “qualified anti-terrorism technology” designation is obtained, the seller and all parties related to the use and distribution of the goods or service is protected by the act. This broad liability protection is incurred for harm caused by an “act of terrorism.” This term is defined very broadly, to include any act that is18
1. Unlawful;
2. Causes harm to a person, property, or entity, in the United States; or in the case of a domestic United States air carrier or a United States flag vessel, in or outside of the United States; and
3. Uses or attempts to use instrumentalities, weapons or other methods designed or intended to cause mass destruction, injury or other loss to citizens or institutions of the United States.
As this definition implies, the scope of coverage under the act includes any unlawful act resulting in harm to U.S. citizens and interests, regardless of where the act occurred. It is hard to envision language that would encompass a broader category of potential exposures. The only real limitation to the scope of coverage is that the “unlawful” act must be deemed as a terrorist act. While the legislation does not define the term “terrorism,” the rules—and the name of the legislation—imply that the liability protections are triggered by an act of terrorism.
In my mind, as compared to provisions of the Terrorism Insurance Act, this legislation provides much more protection against liability stemming from an act of terrorism. Nonetheless, both legislative initiatives help to limit the liability exposures related to terrorism. As illustrated by the cases in the last chapter, lawmakers know that “traditional” jurisprudence will create substantial potential exposure to businesses and property owners. While the “jury is still out” on how effective legislation will be in limiting liability exposure, it is unlikely that any legislation will be enough to deal with the problems created by terrroristic threats. Of course, the most effective liability device is to prevent the act from occurring. In this light, the section below addresses specific anti-terrorism indicators and preventive methods.
DISCUSSION QUESTIONS
What are the strengths and weaknesses of these acts? Specify each act in your answer. What other legislation or court based law is needed, if any? In answering this question, please state the reasons behind your assertion. If no additional legislation is enacted, what implications are likely to result in a tort based assessment of liability exposure? Explain your answer in detail.
TERRORISM INDICATORS
This aspect of this book will address specific security methods and indicators related to terrorism. In reviewing these factors, please keep in mind that this section requires a holistic approach to security. In this way, the security methods discussed in previous chapters must be considered as part of this section. For example, the investigative and interrogation practices mentioned previously are applicable here. In addition, and more importantly, the threat and risk assessment factors are critical in this discussion. These factors and practices are particularly important when one considers the threat and potential impact of terrorism.
The threat of terrorism involves many variables. The nature and degree of risk posed by a potential attack depends on a number of factors, including the goals of the attackers and their means of inciting terror. There are numerous terrorist organizations with agendas ranging from various political ideologies to animal rights, environmental, and reproductive issues. With so many diverse groups and causes in play, the number and variety of potential targets present an enormous challenge.
It is beyond the scope of this book to address likely goals and targets of specific terrorist groups. It is important to understand, however, that the risk posed to any company or environment is related to the nature of the particular threat posed by particular terrorist groups. In addition, while local police play a major role in gathering information about likely terrorist attacks, it is important that the general public (including, of course, employees of companies and organizations) maintain great vigilance.19 Evidence of the value of vigilance can be illustrated in Israel, where ordinary citizens foil more than 80 percent of attempted terrorist attacks.20
Suggested Anti-terrorism Measures
Security related to terrorism must encompass varied measures, with the key focus being on vulnerabilities.21 As described throughout this book, security measures, of course, are not just effective for terrorism prevention. They are also useful—and suggested—for crime prevention. In this sense, consider this quote from James Poland, who asserts that “the concept of deterring acts of terrorism is based on the old police formula of preventing crime: desire + opportunity = crime.”22 This being said, the following security measures can be performed at little or no cost to the company—and the surrounding environment:23
• Maintain situational awareness of world events and ongoing threats.
• Encourage personnel to be alert and to immediately report any suspicious activity or possible threat.
• Know the location of the closest police station, hospitals, schools, etc.
• Encourage personnel to avoid routines, vary times and routes, pre-plan for crisis situations, and keep a low profile—especially during periods of high threat.
• Encourage personnel to take notice and report suspicious packages, devices, unattended briefcases, or other unusual materials immediately. Instruct them not to handle or attempt to remove any such object.
• Encourage personnel to keep their family members and supervisors apprised of their whereabouts.
• Maintain a list of employee cell phones, identifying information, addresses, emergency contacts, etc.
• Encourage personnel to know emergency exists and stairwells, and practice these exit drills.
• Ensure all levels of personnel are notified via briefs, e-mail and voice communications, and signage of any changes in threat conditions and protective measures.
• Post emergency telephone numbers for police, fire, and rescue.
Encourage personnel to memorize important phone numbers.
• Take any threatening or malicious telephone call, facsimile, or bomb threat seriously. If such a threat is received, obtain and record as much information as possible to assist in the identification of the source. Record the time of the threat, the exact words, any distinguishing features of the caller, and any background noise or other information related to the threat. Develop bomb threat information forms to assist in codifying this information.
• Rearrange exterior vehicle barriers, traffic cones, and road blocks to alter traffic patterns near facilities.
• Institute or increase vehicle, foot, and roving security patrols varying in size, timing, and routes.
• Implement random security shift changes, and vary patrol procedures.
• Increase the number and visibility of security personnel, whenever possible.
• Arrange for law enforcement vehicles to be parked randomly near entrances and exits.
• If practical, prohibit vehicles from parking within 30 feet of any building or facility.
• Conduct routine sweeps of common or adjacent areas, being attentive to trash, newspaper dispensers, mail boxes, planters, etc. If possible, consider removing any item that can be used to conceal bombs. In any case, keep environment clean and orderly.
• Review contingency plans and if not already in place, develop and implement procedures for receiving and acting on
• threat information procedures;
• alert notification procedures;
• terrorist incident response procedures;
• evacuation procedures;
• bomb threat procedures;
• hostage and barricade procedures;
• chemical, biological, radiological and nuclear procedures; and
• media relations and notification procedures.
• When the aforementioned plans and procedures have been implemented, conduct internal training exercises and invite emergency responders (fire, rescue, medical, and police agencies) to participate in joint exercises.
• Coordinate and establish partnerships with local authorities to develop intelligence and information sharing relationships.
• Place personnel on standby for contingency planning.
• Limit the number of access points and strictly enforce access control procedures.
• Implement stringent identification procedures to include conducting “hands-on” checks of security badges for all personnel, if badges are required.
• Remind personnel to properly display badges, if applicable, and enforce visibility.
• Require two forms of photo identification for all visitors.
• Escort all visitors entering and departing.
• X-ray all packages, if possible, prior to entry, and inspect all handbags and briefcases.
• Validate vendor lists of all routine vendor deliveries and repair services.
• Approach all illegally parked vehicles in and around facilities, question drivers and direct them to move immediately, if owner cannot be identified, have vehicle towed.
• Review security camera footage daily (or often) to detect for possible indicators of operational surveillance.
• Consider installing telephone ID, record phone calls, if necessary.
• Increase perimeter lighting.
• Deploy visible security cameras and motion sensors.
• Remove vegetation in and around perimeters, and maintain regular landscaping services.
• Institute a robust vehicle inspection program, to include checking undercarriage of vehicles, under the hood, and in the trunk. Provide vehicle inspection training to security personnel.
• Deploy explosive detection devices and explosive detection canine teams.
• Initiate mail and package screening procedure system.
• Install special locking devices on manhole covers in and around facilities.
• Implement a counter-surveillance detection program, including these factors:
• Unusual or prolonged interest in security measures or personnel
• Inspection or observation of entry points, and access controls or perimeter barriers, such as fences and walls
• Unusual behavior by individuals who stare or quickly look away from security personnel
• Observation of security reaction drills or procedures
• Increase in the number of telephone or e-mail threats
• Increase in the frequency and nature of suspected surveillance incidents
• Evidence of foot surveillance of two or three individuals who appear to be working together
• Evidence of mobile surveillance using cars, trucks, motorcycles, scooters, boats, or small aircraft
• Prolonged static surveillance using operatives disguised as panhandlers, shoe shiners, news agents, street sweepers, and food or flower vendors who were not previously seen in the area
• Abandoned devices that could contain explosives, such as vehicles, suitcases, bags, and the like
• Discreet use of cameras, video recorders, or note taking at key facilities including “trophy” buildings and symbolic targets
• Use of multiple sets of clothing and identification or the use of sketching materials
Suicide Bomb Attack Indicators
Terrorism necessarily requires an understanding of the threat posed by suicide bombers. This threat can be manifested in explosive-laden vehicles or explosives hidden on the bodies of individuals. The indicators mentioned above can be characterized as pre-incident factors. One or more of these factors may have occurred prior to a direct attack by a suicide bomber.
Data on suicide bombers in Israel suggest such individuals are usually young men, with 64 percent younger than 23, and 34 percent between the ages of 23 and 28. Fully 84 percent are single at the time of their deadly act.24 These individual characteristics should be considered in light of the indicators listed below.
Certain indicators may represent the presence of an immediate threat. Each of these indicators, however, may not be determinative of an imminent threat. Indeed, as with any other security-based profile, the individual who exhibits one or more of these indicators may be completely innocent.25 Nonetheless, these indicators have been shown to be valuable insights into potential suicide bombers, including the following:26
1. Wearing inappropriate attire, such as out of season clothing and loose or bulky clothing that are inconsistent with current weather conditions
2. Protruding budges or exposed wires under clothing 3. Chemical smell or odor emanating from individual
4. Intently focused eyes; individual appears to be unusually vigilant
5. Sweating, mumbling, or praying
6. Unusually calm and detached behaviors
7. Pale face suggesting a recently shaved beard
8. Carrying heavy luggage, bag, or backpack
9. Holding hands tight to body
10. Attempting to gain position near crowds or VIP targets 11. Wearing public safety uniform (police, fire, medical, military) or a disguise to elude detection, such as pregnancy or religious attire
12. Driving vehicle modified to handle heavier loads, increase fuel capacity, vehicle speeds, or storage areas
13. Discovery of batteries, wiring, timers or other power supply or switching components in the passenger compartment of a vehicle
14. Presence of stolen or unauthorized vehicles, or vehicle left unattended for extended periods of time. These vehicles may be parked near buildings, in garage parking, or near a potential target
These and other situational factors must be considered in any anti-terrorist plan. They also should be filtered through the considered judgment and interpretation of security personnel. Of course, to the extent practical, people should be made aware of these factors. Indeed, it is well advised to train employees, particularly security personnel, to be cognizant of these factors. Going beyond awareness, relevant policies and procedures in how to react to these indicators are crucial to an effective anti-terrorism response. Obviously, this is easier said than done. However, short of direct intelligence or mind-reading abilities, these are the best security practices available to date. Above all, it is important to maintain vigilance—and look for ways to prevent terrorist acts and its associated liabilities. I fear that this will be a difficult task, indeed.
NOTES
1. Schroeder, Michael (2005). Insurers Fight to Save Terrorism Safety Net. The Wall Street Journal, August 25.
2. See H. R. 3210.
3. Ibid.
4. Ibid.
5. Ibid.
6. Ibid.
7. Player, Thomas A., and Anthony C. Roehl (2004). Terrorism Risk Insurance—The U.S. Way. Intersec, Vol. 14, January.
8. Player op cit. at 14; and H.R. 3210-7 & 8.
9. Schroeder op cit. at 3A. See also Freeman, Joe (2004). The Impact of Terrorism. Security Technology and Design. September.
10. See P. L. 109-144 formerly S. 467.
11. Schroeder op cit. at 3A.
12. Leikin, Howard (2005). Interim Guidance Concerning the Terrorism Risk Insurance Extension Act of 2005. Department of the Treasury, December 29.
13. Regulations Implementing the Support Anti-terrorism by Fostering Effective Technologies Act of 2002 in 6 CFR Part 25 at 59685.
14. Ibid at 59690.
15. Ibid at 59700–701.
16. Ibid at 59692.
17. Ibid at Part 25 Section 25.3(b).
18. Ibid at Part 25 Section 25.9.
19. Chapman, Robert et al. (2004). Local Law Enforcement Responds to Terrorism: Lessons in Prevention and Preparedness. Office of Community Oriented Programs, U.S. Department of Justice.
20. Tucker op cit. at 4–5.
21. Pillar, Paul R. (2001). Is the Terrorist Threat Misunderstood? Security Management, May.
22. Poland, James M. (2005). Understanding Terrorism: Groups, Strategies, and Responses. Upper Saddle River, NJ: Pearson/Prentice Hall at 235.
23. The suggestions contained in this section were derived from various sources, and were compiled and collated by the author.
24. These statistics from the seminar attended by the author in Chicago on March 8, 2006, entitled Coping with Suicide Terrorism in a Civilian Environment: Aspects of Forensic and Post-blast Investigations, jointly hosted by the Chicago Police Department and the Israeli Consulate. Data provided by Chief Superintendent Avner Barsofsky of the Israeli National Police.
25. For example of issues related to behavioral profiling, see Behaving Like a Terrorist, Security Management, March 2006.
26. The suggestions contained in this section were derived from various sources, and were compiled and collated by the author.