It's time for a dose of common sense

The congressional debate over the future of the federal terrorism insurance backstop soon will be in full swing. Suggestions are flying as to how the program might be improved--which generally means expanded.

For example, lawmakers are looking at how the risks presented by chemical, nuclear, biological and radiological weapons should be addressed. And there's a renewed effort to include group life insurance in the program, an effort that's sure to be resisted by a White House that remains adamant that the backstop not only remain limited but that it eventually disappear.

I'll leave it to others to debate whether group life insurance should join the property/casualty lines of coverage that come under the backstop's umbrella. But if the program is to be expanded, there is one common-sense change that's more than justified.

This change involves removing something rather than adding something. That something is the totally artificial distinction contained in the program between acts committed by foreign terrorists and their domestic counterparts.

While the distinction's artificial, it's quite important. The current backstop, like the original one created by the Terrorism Risk Insurance Act of 2002, would respond only to catastrophic terrorist attacks by foreign interests. Attacks by U.S groups on U.S. soil remain unaddressed by the program.

This is a serious omission. Although the Sept. 11, 2001, attacks on New York's World Trade Center, the Pentagon and two airlines were indeed committed by foreign interests, the deadliest terrorist attack on U.S. soil before that--the April 19, 1995, destruction of the federal building in Oklahoma City--was committed by one Timothy McVeigh, a native-born U.S. citizen without foreign ties.

Perhaps more importantly, deciding what stems from foreign and what stems from domestic sources could be extremely difficult, particularly in the aftermath of a major attack. As New York Mayor Michael Bloomberg pointed out during a hearing earlier this month on the backstop's future, British citizens--not foreign nationals--carried out the 2005 London subway attacks.

This should be a distinction without a difference, but it could prove to be a very big difference indeed if this distinction is not erased.

Imagine what would happen if a large-scale attack occurred on U.S. soil. Even before the smoke has dissipated, authorities discover that while some of the attackers did come from elsewhere, others are U.S.-born and bred.

Under current law, it's up to the secretary of the treasury, in "concurrence with the secretary of state, and the attorney general" to certify whether an attack qualifies as "an act of terrorism" that would trigger coverage under the backstop. The law provides no guidance as to what happens when the source of the terrorist act cannot be assigned, although it does say that certification or noncertification of an act is final, and therefore not subject to judicial review.

Despite that caveat, you can bet that if there's an attack big enough to trigger the backstop--an event causing at least $100 million in damage--but the federal finger is off the trigger because the attack doesn't seem to meet the foreign-origin-only provision, there will be quite an uproar. Although individual insurers would not be able to sue the government for cover, there's nothing to stop policyholders from suing the insurers. The result would be a litigator's dream but a policyholder's nightmare as claims would go unpaid--perhaps forever--while the judicial system sorted things out.

The practical impact of the kind of catastrophic terrorist attack that the backstop's designed to deal with would have nothing to do with whether outside or homegrown terrorists committed it. And triggering the backstop shouldn't, either.