Boston Marathon Bomb Victims May Turn to BAA Insurance, Central Fund for Compensation

Victims of the Boston Marathon bombings will eventually win some kind of compensation, but it is far too early to know how much money there will be, whether private donors or insurers will provide most of it, and how long it might take to distribute.

Late on Tuesday, state and city officials said they had established One Fund Boston, designed as a central source of compensation for victims. John Hancock, a Boston-based insurer owned by Manulife Financial Corp., has contributed $1 million in seed money. Boston law firm Goodwin Procter will run it.

What happens next will depend in part on whether individual victims choose to hire lawyers to press their own claims. Judging from previous catastrophes, experts say victims have an easier path if they settle with a central relief fund, rather than pursue lawsuits against governments, race sponsors or perpetrators.

A fund is “the easiest, the fairest and the quickest way to go,” said Marc Bern, a lawyer who represented thousands of workers at the World Trade Center site in litigation over illnesses related to the 9/11 attacks.

“The most important thing for the victims of these kinds of tragedies is a quick solution,” he said, even if that means surrendering the right to sue others for even more compensation later.

Monday’s attack killed three and wounded more than 170. Many of the survivors suffered amputations that will require prolonged medical treatment and rehabilitation.

The parameters of the One Fund Boston are still unclear and may not be known for days or weeks. A spokesman for Goodwin Procter could not immediately comment on when victims or their families could start filing claims, and whether the fund would handle claims on a case-by-case basis or in groups.

Such questions will have to be answered before anyone can get paid, according to Kenneth Feinberg, the Washington attorney who administered funds set up after 9/11 and the 2007 Virginia Tech shootings.

“If you take the money, do you give up your right to litigate against the city of Boston or the marathon association? Who’s eligible?” said Feinberg, considered the world’s foremost expert on disaster compensation.

The 9/11 fund – a rare example of the federal government, rather than the private sector, taking the lead on disaster compensation – provided money for people with injuries provided they surrendered their rights to sue.

MONEY GETS STUCK

In December’s Newtown school shooting in Connecticut, no central authority was appointed. That appears to have slowed the distribution of funds raised for victims and their families.

“These kinds of tragedies really generate an entirely different kind of charitable giving than is normal. It’s emotional, it’s chaotic and people are driven to want to help in some way,” William Rubenstein, commissioner of the Connecticut Department of Consumer Protection, said.

Disputes can arise even when there is a central authority. Victims from the 1995 Oklahoma City bombing, according to the NBC television network, are still fighting over claims with the Oklahoma City Community Foundation, which oversees a relief fund. (The fund has defended its distribution practices).

There are also fraud risks to consider. Massachusetts Attorney General Martha Coakley warned on Wednesday that within four hours of the bombing, more than 125 websites had been registered purportedly to collect money for victims.

Regardless of who is giving out the money, calculating how much each victim should receive promises to be a painstaking process. It will depend in part on whether the fund administrator decides to lump people together into categories.

The 9/11 fund considers each case individually, calculating economic loss (medical costs, lost earnings etc) plus non-economic loss (pain and suffering) and then subtracting any other money earmarked for the victim. Payments have ranged from $10,000 to $1.5 million.

Some funds group victims by category and pay accordingly. The fund set up for victims of the 2012 Aurora theater shootings paid $220,000 to families of the dead and those who suffered brain damage or paralysis. Survivors who stayed in hospital longer than 20 days received $160,000. There were other lower brackets as well, depending on the length of hospitalization.

After some past disasters, such as Aurora, hospitals waived or limited bills for those who did not have private insurance. Boston-area hospitals are still addressing that question. Massachusetts General Hospital said on Wednesday that it would expect patients’ insurers to be billed first, though it would take all bills on a case-by-case basis.

INSURANCE MAY APPLY

In theory, victims also have the right to pursue litigation against the Boston Athletic Association (BAA), which has organized the 26.2-mile race since 1897, or the perpetrators, assuming authorities eventually arrest and convict them.

But it is far from clear whether either of those parties will have sufficient funds to pay off any claims, or how long it would take to reach a settlement.

Bob Murphy, global sports and events practice leader for insurance brokerage Marsh, said he had fielded well over 100 calls since Monday from clients and underwriters asking about potential claims related to the bombings.

“We’re talking about somebody injured or a fatality as a result of a terrorist event. Could liability come out of this? Absolutely,” he said. “Are most of these events covered for that? Yes.”

The BAA’s ability to pay any settlements likely will depend on its insurance coverage. It may have a specific policy to cover terrorism-related incidents or a special clause in its regular liability policy to cover such acts.

The BAA declined to comment on what type of policy it had.

“The organizers of larger events tend to be more risk-aware and do contemplate acts of terror as a possibility under the terms of the coverage as a matter of course,” said Ian Barnes, a member of the terrorism and political risk team at Cooper Gay, a British insurance broker.

Assuming the BAA has terror coverage, it probably will not kick in unless there is an official designation by U.S. Attorney General Eric Holder and Treasury Secretary Jack Lew that the bombing was an act of terrorism.

President Barack Obama on Tuesday called the bombings an “act of terror.” Under the federal government’s Terrorism Risk Insurance Program, the attorney general and treasury secretary must officially certify an event as an act of terrorism before that government program can be activated.

Even if activated, though, it would not start paying until claims have reached $100 million.