clear how an accident happened. Very often there are witnesses, there is physical evidence. In a great many cases, the serious question is not liability, but damages. No "partial" abolition of the tort liability system would solve any of these problems; courts and juries would still face the same questions in a large lawsuit as in a small one. The whole thinking behind the "difficult decision" notion is fuzzy and unsound.

In this connection, it is interesting to look at Title II of Senate Bill 354 and consider the situations in which tort liability is preserved. First, there would be tort liability in cases involving serious injury or death. As we have already observed, the issues are no easier to decide in the serious case than in the instance of relatively minor injury. As a matter of fact, the issues in a death case may present great difficulty to the judge, the jury and the lawyers trying the case. Next, tort liability would be preserved in product liability and negligent repair cases. Although it is not quite clear why such actions should be exempt from the "partial abolition" of tort liability, we hope it is not because of any delusion that such cases are simple and straightforward. On the contrary, a product liability or negligent repair case can present the most difficult and intricate problems of evidence and the closest questions of fact to a jury. Yet somehow, juries are considered capable of deciding such cases. As to the preser vation of liability in cases of intentional injury, we agree that Congress should not pass a law which would declare open season on the public. However, it does not require much imagination to hypothesize a set of facts under which the question of intentional injury would be a very difficult matter to decide. If we have overstated the obvious, I apologize to this committee; but it seemed necessary to point out the fallacies inherent in the notion that tort liability should be partially or totally abolished because juries have to decide hard questions.

It has also been suggested that tort liability must be restricted or abolished in order to finance no-fault insurance. This theory assumes that only by denying some accident victims the right to seek damages in court can we achieve the reduction in insurance premiums and tort claims which are supposed to flow from the enactment of federal no-fault. This theory is wrong because it is based on an assumption which has been proved false in states which already have no-fault insurance. Consider the experience in Massachusetts, which has a $500.00 threshold on tort claims; in Florida, which has a $1,000.00 threshold; and in Delaware, which has no threshold at all. According to the statement of the American Trial Lawyers Association before the Senate Judiciary Committee on February 5, 1974, Massachusetts has reported a reduction of over 70 percent in tort claims under no-fault; Florida has had a similar reduction of 71 percent; and in Delaware, with no threshold, there has been a reduction of 70 percent. Very obviously, something is wrong with the threshold theory! What is wrong with the theory is that is ignores a fact of human nature which several insurance companies have known for years. An accident victim with minor injuries who receives immediate and continuing payment for his out-of-pocket expenses is not generally inclined to pursue a tort claim in the hope of recovering a small sum of damages for pain and suffering. This is hardly news to anyone who has been involved in the accident reparations system. In fact, this is the only reason why any no-fault system is acceptable to the public. If Americans were really so fond of litigation that they wanted to go to court every time they had an auto accident, however slight, then they would rise up en masse against any law which promised to reduce lawsuits. They have not, of course.

They have not risen up because they are promised that if they are really, seriously injured, their courts will be open to them. What we are suggesting, and it is borne out by experience, is that each individual is the best judge of whether or not his injuries are so serious that a tort claim should be pursued. Pay him his expenses, and let him choose for himself whether or not to go further. We do not need to speculate whether this system will reduce tort claims we know that it will. What it will avoid are the evils that attend any attempt to set a statutory standard for something as subjective as severity of injury.

It is obvious, for example, that a no-fault statute establishing a dollar threshold will invite malingering. The injured victim who has $400.00 worth of medical bills in a state with a $500.00 threshold will not find it difficult to delay recovery until another hundred dollars worth of bills accrue if he really wants to have a lawsuit. Likewise, how can it make sense to tell the honest

victim with $450.00 in medical expenses that his injuries are not so serious as to warrant a lawsuit when he knows that others with less serious injuries than his own are building up their medical bills in order to bring a lawsuit? The potential for abuse is clear. We mention the dollar threshold limitation not because Senate Bill 354 contains such a threshold-it does not. We mention it as an example of what is wrong with any kind of threshold, and also because we do not yet know whether or not a plan with a dollar threshold would be a plan which "meets or exceeds" the standards set in Senate Bill 354.

The language of Senate Bill 354 avoids thep itfalls of the dollar threshold but raises new nad equally difficult questions with the "quantum of injury” type of threshold. Senate Bill 354 would permit actions for disfigurement or injuries which are "serious and permanent." No one would seriously question that loss of an arm is a serious and permanent injury. Loss of a hand would also be serious and permanent. So would loss of a thumb, especially on the hand an individual tended to favor. But what about loss of a finger; or part of a finger; or one finger on each hand. Permanent injury-of course; but serious injury-perhaps not. No one would know until an appellate court decided. As there are fifty states, we might well expect fifty different standards of "serious and permanent" to develop, defeating the uniformity so prized by federal nofault advocates. There is another disturbing feature of the "quantum of injury" threshold, quite apart from the obvious difficulty of determining what "serious and permanent" means as applied to a particular set of facts. Since meeting the threshold would be a prerequisite to the right to maintain an action, trial judges would regularly be required to make determination as to the right of individuals to bring an action. Presumably, a losing defendant could raise again on appeal (or raise for the first time, since it goes to jurisdiction) the question of seriousness and permanency of injury. Appellate courts would then have to weigh the evidence and, in essence, retry the case. This would add a very real element of uncertainty to litigation, and would force our appellate courts to perform the same task they must now perform in obscenity cases-sitting as triers of fact to measure the evidence in a case against an unclear national standard. The folly of this is clear-it is equally clear that this is what would happen if Senate Bill 354 is enacted.

It is contended that unless a federal system of tort immunity is imposed upon the states persons injured in automobile accidents cannot and will not receive prompt and fair reimbursement for their losses. It is suggested that the adversary is inefficient, wasteful, slow and unfair. But under the adversary system the injured person, if he is unable to affect a fair settlement of his claims, does have access to our courts and can have available to him those rights guaranteed him by the constitution, including right to counsel. It occurs to me that only a few, and they are few percentage wise, (according to statistics available from insurance companies doing business in Missouri, litigation results in only .6% auto accidents and of those filed only 10% are actually tried) personal injury cases that are tried in our courts are these because the insurer of the party at fault has not been willing to fairly compensate the accident victim. If an insurance company might, on occasion, attempt to treat a claimant unfairly with the knowledge that the claimant has access to the courts and to the services of a lawyer, what safeguards are provided to guarantee that they will deal fairly if a claimant is their own insured and no longer able to obtain counsel or expert help without prepayment of fees? I believe that most companies, most adjusters and most claims supervisors do attempt to settle claims against their insureds fairly, honestly and promptly because they realize that if settlement is delayed, additional costs and expenses may be incurred by the carrier. But in the settlement of these claims, as in any activity, the human element is necessarily present. Not all adjusters and claims supervisors have the capability of dealing evenhandedly in these matters, nor will they if the legislation now being considered by this committee were to be enacted. Query? Would all carriers deal equitably with their assureds if they know that the assured cannot economically afford counsel?

In Icosing, we would like to touch upon an aspect of Senate Bill 354 I find disturbing in connection with the "partial abolition of tort liability" provided for in the hill. Title II of Senate Bill 354 purports to encourage the development of state no-fault plans which meet or exceed the standards of Senate Bill 354. A plan is said to exceed these standards if, among other things, it is more restrictive of tort liability than is Senate Bill 354. We note that Senate Bill 52-820-75-11

354 preserves the right of victims to recover for serious and permanent injury, death, or injury which is intentionally inflicted. Presumably, then, an acceptable state plan which would exceed the standards of Senate Bill 354 might abolish all tort liability in auto injury cases, including cases of intentional injury. We find it hard to believe that Congress desires such a result. However, that is what Senate Bill 354 seems to encourage by its very demeaning and diffident view of the tort liability system.

Finally, I submit that any bill that awards attorney's fees to a claimant filing a fraudulent or excessive claim (see Section 107(a)) could not have been drafted with the care and expertise that one would expect of legislation of such momentous import to the entire populace of the United States. Since such a glaring error appears in Section 107(a) of Senate Bill 354, one can only be suspect of the remainder of the bill.

We thank this committee for this opportunity to supplement our earlier statement concerning The Missouri Bar's position on Senate Bill 354.

Senator Moss. This completes our list of witnesses for this morning. Our next day of hearings on this bill will be on the 22d of this month. We are adjourned.

[Whereupon, the committee adjourned, to reconvene on Tuesday, Apr. 22, 1975.]

NATIONAL STANDARDS NO-FAULT MOTOR VEHICLE

INSURANCE ACT

TUESDAY, APRIL 22, 1975

U. S. SENATE, COMMITTEE ON COMMERCE, Washington, D.C.

The committee met at 9:35 a.m., in room 5110, Dirksen Senate Office Building, Washington, D.C., Hon. Frank E. Moss presiding. Senator Moss. The committee will come to order. We are continuing today our hearings on S. 354, the National Standards NoFault Motor Vehicle Insurance Act. We had a fine hearing last week, and we look forward to a good hearing today.

We have a number of very important witnesses to hear. Each of the witnesses has, in accordance with our rules, prepared a written statement, which we will have before us. For that reason, in order to conserve time, I suggest and urge that witnesses, where possible, summarize and highlight their statements. I will make a blanket order that the full written statement will be in the record. What they care to emphasize, of course, will be in there twice. The witnesses may talk about points that they wish to particularly bring to the attention of the committee. However, if a witness feels that he should read his statement in full, he will be accorded that privilege, but I would recommend that the witnesses summarize so far as possible.

Our first witness is going to be Mr. James Fellers, president of the American Bar Association, accompanied by Mr. James D. Ghiardi, chairman of the Committee on Automobile Insurance Legislation for the American Bar Association, and a member of the faculty of the Marquette University Law School.

We are pleased to welcome both of you gentlemen before the committee, and look forward to hearing your testimony.

You may proceed, sir.

STATEMENT OF JAMES D. FELLERS, PRESIDENT, AMERICAN BAR ASSOCIATION; ACCOMPANIED BY JAMES D. GHIARDI, CHAIRMAN, SPECIAL COMMITTEE ON AUTOMOBILE INSURANCE

LEGISLATION

Mr. FELLERS. Thank you, sir. As the chairman announced, my name is James D. Fellers. I am a practicing lawyer in Oklahoma City and presently serve as president of the American Bar Association.

(157)

And with me today is Prof. James D. Ghiardi of the Marquette University Law School in Milwaukee, and he currently chairs our association's special committee on automobile insurance legislation. We have filed with the committee a statement setting forth our views in some detail, and in the interest of time, I will endeavor to summarize that statement, and then, of course, will be glad to respond to questions that the committee may wish to address to me or to my "expert witness."

At the outset, we wish to commend the committee on its decision to hold hearings on S. 354, and to express our appreciation for the opportunity to present the views of the American Bar Association. As you may know, we now have more than 190,000 members and have become the world's largest voluntary professional organization. Since our last appearance before the committee in hearings in April of 1973, the association, through the committee chaired by Mr. Ghiardi, has attempted to monitor and evaluate developments at both the State and Federal level. We remain committed to reform in the automobile insurance reparation system, but prefer that such reform be accomplished by State action, rather than by Federal preemption, as contemplated by S. 354.

The most recent manifestation of our association's commitment to State responsibility in this area is reflected in a resolution adopted by our House of delegates in February of this year, urging the States which have not yet adopted appropriate automobile accident reparations reform legislation immediately to undertake to do so as expeditiously as possible, and that such State plans encompass at a minimum the substantive provisions for State legislation which have been previously approved by our House of delegates.

A copy of the resolution is attached to the prepared statement which has been submitted to the committee.

In urging State, rather than Federal, action, as we have done since adopting our first policy statement on the no-fault question in January of 1969, the association appears to be in accord with the majority of interested groups and organizations which have studied the automobile accident reparations issue and in accord with the overwhelming majority of State bar associations which have adopted policies in the area.

Continued commitment to our position appears to be fully justified when we note that 24 of the States have already adopted some type of automobile insurance reform legislation, and the remaining 26 States have had legislation pending in the current legislative session.

Obviously, the States are capable of confronting this problem, and are doing so in a responsible and effective manner.

A predictable and highly desirable result of the State-by-State approach is evidenced by the diversity of plans which now exist, and the wealth of experience and data which is beginning to become available. Those States which have not yet adopted plans or which find defects in the operation of plans will benefit from the experience and data of those States where it is working well.

And reports available to us indicate that, generally speaking, the plans are working. Small claims are being taken out of the court