In response to the terrorist attacks of September 11, 2001, the President signed into law the AIR TRANSPORTATION SAFETY AND SYSTEM STABILIZATION ACT (the “Act”) on September 22nd.  The Act includes provisions to provide airline stabilization, reimbursement of insurance costs increases to air carriers, spending to increase airline safety and security, and victim compensation.

Title II of the Act amends § 44302 of title 49 of the United States Code by granting the Secretary of Transportation the power to reimburse an air carrier for the increase in the cost of insurance in limited circumstances related to terrorist activity.  For coverage ending before October 1, 2002, an air carrier may be reimbursed for increased insurance premium as measured against insurance costs prior to September 11, 2001.   Reimbursement is subject to the following limitations:
1)      Aircraft may be insured or reinsured for no more than their reasonable value;
2)      Presidential approval is required for each premium payment;
3)      The Secretary may be required to consult with governmental departments and agencies before acting; and
4)      The Secretary may impose such additional requirements as he deems appropriate in the interest of air commerce.  

Reimbursement will be paid from a revolving fund, and the Secretary’s authority to reimburse air carriers under the Act expires 180 days after enactment.   

For terrorist acts committed upon an air carrier during the 180-day period following enactment, the Secretary has discretion to certify, based on the facts and circumstances of each case, that the air carrier was the victim of a terrorist act.  If so certified by the Secretary, the air carrier will not be responsible for losses suffered by third parties exceeding $100,000,000, in the aggregate, for terrorist-related acts, and the Government will be responsible for the excess amount.  Punitive damages will not be recoverable against the air carrier for these certified terrorist acts.

 or the 180-day period following the enactment of the Act, the Secretary may extend the above provisions to vendors, agents, and subcontractors of air carriers provided they are not responsible for the terrorist acts.  Such protection would take the form of “excess” insurance coverage beyond the vendor’s liability coverage.