7-7 Compensation

On July 7, 2005, terrorist bombs ripped through the London transportation system killing 52 people. During the recent anniversary of the attack, there were discussions, aired in the United States, as to whether the victim’s families should receive monetary compensation from the government as a result of their loss. The debate stems from the Victims’ Compensation Fund that was established in the United States after the 9-11 attacks which killed over 3000 in the World Trade Center, Pentagon, and in Pennsylvania. After the fund was created there were a number of voices from the Oklahoma City bombings that were saying that if the 9-11 victims were being compensated, then they too should receive compensation for their loss in 1996, five years earlier.

The clamoring for compensation for the London and Oklahoma City attacks misunderstands the reason for the Victims’ Compensation Fund and why the United States Government paid money to many of those who lost loved ones on September 11, 2001. The basis for the Victims’ Compensation Fund does not exist for the other two attacks, and the respective governments should not provide the families compensation.

September 11 was largely a result of airlines being negligent in the safety features placed in their airplanes. The airlines had a major hand in the security screening that passengers underwent prior to boarding the airplanes and were solely responsible for the specifications of the airplanes themselves. As a result of United’s and American’s negligent actions, the planes were susceptible to being taken over by hijackers.

For instance, the security screeners were forced to be sure people moved quickly through the security line, so the airplanes were not delayed as a result of security procedures. This allowed for people to go through a security line with a number of dangerous items, including straight razors. At the time, it is unlikely that even if security guards were more diligent in the screening process, they would not have confiscated box cutters since no one would have seen them as a threat to the safety of the passengers or airplane. What was a greater looming threat that the airlines knew about and were responsible for not correcting was the lack of security for the cockpit. Flimsy doors with inadequate locks separated the cockpit from the passenger compartment. Pilots had complained a number of times long before September 11 that dunks were known to have breached the door and gotten access to the cockpit placing the airplane in danger since the pilots were required to address a drunk in the cockpit opposed to flying the airplane. Despite the complaints, the airlines chose to be cheap and not put in reinforced doors and secure locks to protect the pilots from drunks to terrorists. This negligent act of failing to secure the cockpit resulted in the terrorists being able to get into the cockpit and taking charge of the airplane.

After the attacks, it was apparent that the airlines were negligent in their actions and faced lawsuits from all of the people who were onboard the four airplanes and those who were killed in the four crashes. This exposed two major airlines to endless lawsuits which likely would result in forcing both of them to go under.

Due to deregulation, the legacy airlines have been disappearing. Many of those that used to exist have been subsumed into other companies resulting in only a handful of companies continuing to operate. A loss of two of those legacy carriers would reduce the competition in the airline sector allowing for the remaining airlines to have a monopoly on the market and anti-competitive advantages over any new airline which may try to fill the void left by the collapse of United and American.

The United States Congress understood the economic calamity that would result in these two airlines folding, so it created a corporate welfare program in the form of a bailout. The United States Government established a policy whereby it would make payments to the victims families based upon an archaic formula devised by a bureaucratic committee, and in exchange for receiving the payment, the victims’ families waived their right to sue the airlines. The waiver provision was the most important part for the Government because it helped protect the legacy carriers.

The possibility of major economic ruin for a large sector of the economy or even the overall United States economy was not present in the Oklahoma City attack and similarly not in the London attacks. No one was suing Ryder truck claiming that it was negligent in renting the truck to Timothy McVeigh. Even if they did, Ryder going out of business as a result would not have major implications on the rental truck industry or the overall US economy. Nor is it likely that the London transit system is going to be put out of business if it gets sued by the 52 victims families.

In the end, the underlying need for a government funded compensation program is not present in the other two incidences to justify a compensation fund being created. Further, what consideration would there be in victims taking the money? Would they waive their right to sue the transit system in London or the Ryder Truck Company in Oklahoma City? Such a waiver is not really necessary in either case, and there is no other incentive to provide such compensation. Moreover, governments do not want to establish a policy whereby they become the de facto insurance policy for terrorist attacks, when in reality, the private sector needs to take steps to protect the people they serve and the private companies need to take out their own insurance policies for such attacks on their businesses.