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The Senator from Rhode Island is 100 percent right. I was largely a tort trial lawyer in the years of my practice and you couldn't settle a case until a week before the trial. It is a practical fact of life.

Without changing the Constitution, it would not seem possible to deny such a right to a trial by jury. But there are other methods of pretrial hearings before the court to narrow down the issues, and also to refer the case to a referee. My State is largely a rural area and I understand we don't have the problems you have in New York City, but nevertheless, such procedures have proven to be effective. The CHAIRMAN. The Senator from Michigan.

Senator HART. Thank you, Mr. Chairman, Mr. Secretary.

I certainly share the view expressed by the chairman and others that this report, overall, is excellent. It does not surprise me that it would be, since to your right sits Dr. Dick Barber who contributed enormously some years ago to the antitrust subcommittee study of automobile insurance.

Now back in 1967 that other committee on which I sit got into this field, and as a result I have made some suggestions as to how we could cure it. And with that recommendation of your administration, I hope along with it will come comment on three bills I have filed.

Maybe I won't be here next year, and if I am not, I hope nobody who survives will assume that my defeat was because I filed such far-reaching legislative proposals, and I hope that somebody will put them in.

I have a feeling that we may be kidding ourselves that there is any way effectively to cure the court clogging until we go to first party coverage, no-fault. I wonder whether the tort concept makes any sense any longer when you have 90 million privately owned automobiles, you throw in 16 million trucks on the road. You can talk about appointing referees, pre-trial, liability being admitted. When you are in the right, you have to prove it. Philadelphia tried, among others, a referee arbitration, and their court docket is in just as bad shape as anybody elses.

Even if you cured this aspect of it, which I tentatively suggest we can't, that doesn't do anything for the fellow that is denied insurance to begin with, or who is arbitrarily canceled after he gets it.

There is another area where I think we may be teasing ourselves into the notion that we can avoid an ultimate confrontation with the States, this notion that we can guide, persuade, outline, and so on. As my legislative proposals indicate tentatively, I think we have to be much more direct, much more preemptive.

Senator PASTORE. Would the Senator yield for a question?
Senator HART. Yes.

Senator PASTORE. What would it do to the premiums, no fault? Would it increase them?

Senator HART. We would like to think not. And the antitrust subcommittee, I am compelled to admit, can't give you a solid answer on it.

But certainly in the evaluation of these proposals we ought to as well as we can in advance of actual experience answer it, I agree. My own feeling is that overall costs would go down.

I am sympathetic with lawyers' incomes that would go down, too. And, Mr. Chairman, if I may, let me add to the record at this point the three legislative bills I introduced along with my remarks on the floor.

The CHAIRMAN. Without objection, so ordered.

(The three legislative bills follow:)

By Mr. HART:

[From the CONGRESSIONAL RECORD, Sept. 14, 1970]

S. 4339. A bill to regulate interstate commerce by requiring certain insurance as a condition precedent to using the public streets, roads, and highways, and for other purposes; and

S. 4340. A bill to promote the greater availability of motor vehicle insurance in interstate commerce under more efficient and beneficial marketing conditions; to the Committee on Commerce.

S. 4341. A bill to amend the Internal Revenue Code of 1954, and for other purposes; to the Committee on Finance.

(The remarks of Mr. HART when he introduced the bills appear below under the appropriate heading.)

S. 4339, S. 4340, AND S. 4341-INTRODUCTION OF AUTO INUSRANCE REFORM BILLS

Mr. HART. Mr. President, today, I plunge in where perhaps a wiser man would not tread. By introducing the first automobile liability insurance reform bill in Congress, I know I am volunteering as a lightning rod for the criticism that will come from those wedded to the status quo.

Nevertheless, it is clear that the status quo in the auto insurance fault field is not good enough.

Use whatever indicator you like-complaints to governmental agencies, complaints to newspapers, complaints to congressional offices-auto insurance is a major problem to millions of consumers both as policyholders and claimants.

Three years ago, the Senate Antitrust and Monopoly Subcommittee decided to determine both the validity and basis for these complaints. We launched an investigation that took us into the auto insurance fault system's innards.

Touched off by the complaints of cancellation, unavailability, high cost and claims practices, our study meandered through the technicalities of investment income, classifications, loss ratios, reserves, assigned risk plans and the fault-finding process itself.

At the end of it all, only one reasonable solution seemed possible: Reform. The present insurance system evolved from common law and was designed to protect the assets of the few who could afford the very early cars.

Plastered on a society where there are more cars than households-where even the man with few assets to protect may find owning two cars essential-the old system does not meet the needs. Today, as a study done for DOT pointed out, the problem of auto crashes is a public health problem. "Only diseases of advancing age are more significant causes of death than auto crashes." Further, "only heart disease causes the loss of more man-years of productivity in the country each year."

To my view, the social benefit we seek from insurance today is not protection from the other fellow's losses, but compensation for our own.

The present auto liability insurance-fault system is not giving us that.

Of each dollar, consumers pay into the system for liability protection, only 40 cents goes to compensate accident victims. Of this 40 cents, only 13 cents actually ends up compensating for out-of-pocket losses. Seven cents goes for duplicate recovery and 20 cents for "pain and suffering."

This is the system that about 20 million Americans looked to for compensation from July 1965 to July of this year. It is the system that was to compensate 300,000 families in that period for death of a member.

The total economic loss-including insurance company overhead and all future income loss discounted-during that period was more than $61 billion.

53-006-70

The DOT Economic Consequences of Auto Accident Inquiries study gives an idea of how much victims got back of their losses.

Of $5.1 billion of personal and family loss suffered by one-half million serious injury and fatality victims of auto accidents in 1967, the auto insurance fault system provided only $813 million. No-fault auto insurance coverages-medical payments and collision-provided another $248 million.

Thus, there was only 20 percent recovery from auto insurance.

Another study conducted for DOT by the insurance industry itself showed that claimants with a permanent total disability had an average total economic loss of $78,000, yet received an average insurance payment of $12,556-only 16 percent of economic loss.

That uncompensated loss took its toll on the victims. The DOT study-which covered 513,000 victims-showed that 27 percent of those victims-or 136,000— with losses over $5,000 accounted for 85 percent of the total loss.

The families of 37 percent of those 136,000 victims or 50,300—had to change their way of life. Thirty-two percent-43,500-had to take money from savings or sale of property. Twenty percent-27,200-missed payments. And-9 percentor 12,200 had to move to cheaper quarters.

Mr. President, if we are to make our insurance system one which truly protects auto accident victims and their dependents from economic catastrophe-if we are to avoid creating new social burdens-if we are to put fairness into the system-we must have the courage to change the system.

What we have now is not-has not been-and cannot be good enough, or close to it.

Several days ago, as you know, I introduced legislation to cut the cost of auto insurance for protection of property.

Today, I introduce three bills aimed not only at bringing down the premium covering injury to people but at increasing compensation to accident victims. Both objectives are possible through a more fair and efficient allocation of the insurance premium dollar.

There are other benefits in the package-perhaps more psychological than economic.

The most important, to my mind, is the guarantee that any licensed driver— be he young or old, married or divorced, a minister or an oil-rig operator-would get and keep insurance.

During our hearings, insurance companies told us that such personal factors as age, sex, occupation, court and accidents records are valid criteria for identifying individual "bad" drivers or "bad" prospective court witnesses.

A recent study for DOT claims that

"Although such factors could be used to distinguish groups of drivers with significantly different accident rates, they were not reliable in predicting whether or not particular individuals would be involved in accidents."

Statistical tests "applied to random sample of all drivers, could eliminate all but the best drivers but could not identify only the worst."

Unavailability is perhaps the most universal complaint of consumers about auto insurance. In fact, in a study done by the University of Michigan, 14 percent said they either had been cancelled, refused renewal, or knew someone who had. That consumers would complain is understandable.

The insurance market is unusual. Consumers across the Nation-by various types of State laws are virtually required to buy auto liability insurance. Yet, after guaranteeing the industry a market, we have allowed it to refuse to supply the product.

Under the Uniform Motor Vehicle Insurance Act, this no longer would be possible.

The only grounds for refusing or cancelling a policy would be loss of a driver's license or nonpayment of premium.

To me, those are the only valid reasons.

Unfortunately, in the past, insurance has been refused for reasons far more arbitrary and in some cases, almost ludicrous.

For example, several companies flagged various occupations as "undesirable.” Incredibly, these included law enforcement officers, doctors, lawyers, reporters, editors, and others normally considered the stabilizing elements of society. For many companies, thousands of applicants were either "too young or too old" and were refused.

Further, sections of cities have been blacked out as areas in which no residents could buy that company's auto policies.

In short, the overthink many companies engaged in as they sought out the "good risks" gave the impression that they really wanted to write insurance only for those who were likely never to file a claim.

The result was frustration of the system-with an estimated 20 percent uninsured cars on the road whose drivers offered little hope of compensation to their victims.

Perhaps the second most frequent complaint about insurance is the cost. Well it might be. From 1960 to July 1970, the cost of auto insurance went up 65 percent compared to 39 percent for auto repairs, 28 percent for tires and 15 percent for gasoline. See tables 6 and 7. That 65 percent insurance hike came as take-home pay for nonsupervisory and factory workers went up only 40 percent.

In dollars, that 65 percent insurance hike means consumers in our 20 most populous cities are paying premiums ranging from $193 in Memphis to $617 in New York City to cover the average car. In San Francisco, the rate is $430; in Chicago, $352; Detroit, $285, and Washington, D.C. $298.

Those are the base rates-which too many consumers have learned climb with surcharges for 3 years after minor accidents.

Further, those rates are climbing daily. For example, a major insurer recently raised its rates in Michigan by an average of 17.6 percent. That was the average increase. But, reportedly, a high risk driver in Detroit will find himself paying 39 percent more after the price hike.

One of the reasons for the high charges for auto insurance is the built-in expenses of handling each applicant on an individual basis. See chart 1 and table 1. Long ago, we learned that selling accident and health insurance on a group basis-with all members treated the same-cuts the selling price.

But, in about 36 States today the same type of sale of auto insurance as well as other forms of property and liability insurance is prohibited by regulations or law.

One of the bills I introduce today, the Property and Liability Group Insurance Act, would overturn this prohibition and allow group auto insurance.

The other insurance bill would amend the Internal Revenue Code by having group property and liability insurance treated the same as group accident and health insurance. This would encourage group auto insurance sales by allowing employees to get the same tax benefits from employers' contribution to auto plans as they do now with group accident and health plans.

This, I feel, is necessary since the savings of group auto are significant only when the vast majority of employees participate in the plan. Otherwise, the group might contain many drivers who would be surcharged on the open market-forcing the rate for the group too high.

One estimate is that simply converting to a group auto insurance plan-without any employer contributions-could save the average dirver 15 percent each year. Obviously, the savings would be much greater if the employer contributes-as many do with group accident and health.

The nonrefusal provisions and the encouragement of group plans, I suspect, are the aspects of this package which will most easily catch the attention of the public. This is because each person can identify with those situations.

However, the most significant change I propose today is the move away from the "fault" liability system of insurance.

Few consumers realize-until the accident happens-that the present insurance system will pay the bills caused by personal injury and death only if the driver of the car is totally free from blame for the accident. This is so in all but a handful of States which have adopted "comparative negligence" laws. Under these laws the errant driver may receive at least some compensation.

Those of us who are honest with ourselves know how many times in the shortest trips we avoid accidents more through dumb luck than driving skill. As one study pointed out, the driver must make 200 observations and 20 decisions each mile he drives. The potential is so great that it would be natural for even the most careful of drivers to make errors in judgment. In fact, the same study estimated that the average driver does make errors-one per each two miles driven.

The 1970 causation and culpability and deterrence study done for DOT explains that

"A substantial but largely unmeasurable number of violations and crashes occur which involve generally competent drivers who are suffering temporary lapses from their normal adequate levels."

Yet these errors are the "outs" for the insurance companies under the present system-making it possible that passengers in neither car will be compensated because both drivers may have contributed to the accident.

And deciding who is to be paid-if anyone becomes a "who shot John" finger-pointing contest which burdens our legal system, ties up our courts and keeps money out of the pockets of victims when they need it.

A study by the Federal Judicial Center points out that motor accident litigation requires 11.4 percent of judge time in Federal district courts and approximately 17 percent of judge time in State courts of general jurisdiction. Impact of motor vehicle accident litiagion on the courts varies widely among States. In Iowa County, Iowa, it is 3 percent. In Wayne County, Mich., it is 40 percent.

Chief Justice Burger has warned that we have clogged our courts so much that justice in this country is more myth than reality. He suggests caution in passing new laws which would bring more cases to court.

I share his concern over the clogged courts. But it seems more rational-and fair-to reserve the courts for matters which merit adjudication by freeing them from problems that could be handled better under another system. Furthermore, we could free our doctors for more profitable uses such as improving emergency accident treatment-rather than sitting in courthouses or otherwise being tied up in the fault-finding process.

The worst part of this clogging of the courts is the delay in payments for victims of accidents. A DOT study showed that victims with losses over $2,500 averaged a 19-month lag before they received any payment.

In Wayne County, the site of Detroit, a claimant must wait 4 years for trial. Unfortunately, rehabilitation expenses do not wait. So the seriously injured person has two choices: go without rehabilitation when it would help or risk bankruptcy to finance it. He faces similar problems with rent, food and clothing costs.

The Uniform Motor Vehicle Insurance Act seeks to overcome these hurdles and to guarantee a "sufficient, fair, and prompt" payment system. Under the bill, injuries are divided into short and long-term.

Out-of-pocket expenses of injuries generally would be compensated on a first party, no-fault basis-in the manner of hospitalization policies.

The driver's own auto insurance policy would cover the net economic loss due to such injury or death-which is not covered by other sources.

Making the auto policy the "book balancer," as it were, would eliminate the need for consumers to pay the several billion dollars years they are now spending for coverage which duplicates what they may have-say in hospitalization plans or sick leave.

The bill provides that the victim would be made economically whole for his entire medical, hospital and rehabilitation costs. Incidental expenses-such as transportation for treatment or in-the-home assistance-also would be covered. Lost income would be reimbursed-up to $1,000 a month for 30 months. An amount up to $30,000 would be paid for fatalities of wage earners. The death payment seeks to put ready cash in the hands of families who have lost their wage earner. Survivors of nonwage earners and those suffering economic loss in excess of $30,000 may still sue under the tort system.

The time limit on protection of income was set to assure that about 97 percent of all accident victims would be rehabilitated and back at work within its span. The other victims who are injured would have ample time for calm determination of ways of replacing the income lost due to permanent disability.

Those who are permanently disabled-or disfigured-and survivors of fatalities in other words, the catastrophic injuries-under this bill would still be free to recoup damages over and above economic loss reimbursed by the bill by suing under the tort system. They could sue for all economic loss not reimbursed under the bill as well as for "pain and suffering."

Under the bill, a person committing a felony, using the vehicle with the specific intent of causing injury or without the permission of the owner, would not be compensated for his injuries and would have to reimburse any insurer for damages paid due to an accident.

Drunk drivers, as well as those under the influence of drugs, would be compensated for their injuries but would have to reimburse an insurer for damages paid to others. Alcohol-related accidents caused an estimated 25,000 deaths and 800,000 crashes in the United States each year, according to the DOT 1968 alcohol and highway safety report. Auto manufacturers are working on devices that would make it impossible for a drunk driver to start a car-and the DOT plans on requiring these devices on cars by 1975. This, I think, is the most realistic way to treat the problem of the drunk driver—that is, to prevent him from being on the road.

Payments for economic loss under the "no fault" section of the bill would be made as the loss occurs-eliminating the lengthy waits for settlements.

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