Conflict Resolution|systems design

Designing Victim Compensation Facilities

At the recent ABA Business Law Section Meeting in Washington, the Dispute Resolution Committee offered an interesting program titled “Who Gets What?”  The panel discussed how one designs compensation schemes that address the needs of victims of mass disasters.  Some of these events might be natural (i.e., storms) and others man-made (i.e. bombings, mass killings, environmental disasters), but the design of victim compensation procedures seems to be similar regardless of the nature of the incident giving rise to it.

The speakers were Kenneth Feinberg and Deborah Greenspan.

The speakers, who have vast experience both in designing and implementing these projects, define four types of victim compensation schemes:

1.  The legal umbrella — class actions in which a settlement fund is established and funded, and a process is created to distribute the funds to the class.  Example: Agent Orange.

2.  The non-judicial but nevertheless public fund created by act of the legislature.  A no-fault statutory program which takes the place of the legal tort system and compensates injured victims either with or without a “cap” on total compensation paid, but requiring waiver of judicial action.  Example: September 11 Victims Compensation Fund

2a.  The non-judicial fund that is privately established, and also offering compensation without the finding of legal liability.  A voluntary claims program that is implemented by an administrator independent of the entity establishing the fund, but requiring that recipients waive judicial action.  Example:  BP oil spill fund.

3.  Private gifts that are amalgamated into a pools of charitable funds without any legal ramification of either the party liable or the party receiving compensation.  Example: Virginia Tech, Newtown CT.

4.  Compensation schemes that are designed to accelerate, but not replace or enhance, existing compensation processes.  Claims facilities that are designed to get the right money to the right people faster than might otherwise take place.  Example: programs established by private insurance companies in the wake of Katrina and Sandy.

The panel pointed out that numbers 1, 3 and 4 were not controversial.  And in category 2, only two instances have arisen: September 11 and the BP oil spill.  These two gestures were prompted by patriotism, by sentiment, by political pressure or by private reputational interests, but don’t raise a serious challenge to conventional tort systems.  Why victims of the Pentagon in 9/11 were compensated while victims of the Oklahoma City bombing were not, or why the Gulf Oil Spill victims were compensated but the Exxon Valdiz victims were not, is a proper subject for political science, suggested the panel, but not for law.

In designing any of these types of compensation schemes, the questions raised are six:

  • Who is eligible for compensation and who is not?
  • How is the extent of compensible injury to be determined?
  • What proofs of compensible injury will be required?
  • What process will be adopted so that each claimant is treated in a uniform, fair and equitable manner, with an opportunity to present proofs and to impeach evidence?
  • What pool of money is to be distributed? (In the original 9/11 Fund, Feinberg had no limit at all.  He could give away as much money as he thought appropriate.  In the second stage of that fund, Greenspan has a limited and capped amount that may not be exceeded in distributions to injured first-responders and others whose injuries were latent.)
  • What waiver or release will be sought from those who accept compensation through the fund?

Both Greenspan and Feinberg regretted recent Supreme Court decisions that raise obstacles to class action certification.  They both agreed that, at this point, procedures in bankruptcy may be the best forum to aggregate claimants, determine due process protocols, and justly distribute capped pools of funds to large numbers of similarly situated injured claimants.

The audio of this program, and the robust materials prepared it (including model compensation programs for Virginia Tech, Aurora CO, and others) are available at the Business Law Section Website (materials at item 100, audio at item 101).


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