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and assigned risk pools.
3. A minimum of 60 days notice should be required for an insurer to non-renew a policy or to increase its unit premium by more than 25 percent. Mid-term cancellations should be prohibited and premiums should be based on experience ratings.
4. Promote tax deductible self-insurance through risk pooling and other group arrangements, including the expansion of The Risk Retention Act of 1981.
5. Legislate a self-insurance systam that would allow small businesses to pay premiums into a fund with pre-tax dollars which could be used for no other purpose than the payment of claims, with the fund being regulated in the same manner as any other insurance company.
6. Require the insurance industry to make complete financial disclosures by lines of insurance, so that Congress, state legislatures, and state insurance commissioners may call on it at any time.
Realizing that the most effective long-term solution to the liability insurance problem is a knowledgeable citizenry, we urge an ongoing education program to develop an awareness that:
1. The litigious nature of the American public will profoundly affect our way of life as the cost of public and private facilities becomes unaffordable.
2. There is no such thing as a risklass society, so each of us must assume some responsibility for his/her own safety and the normal hazards of everyday living. (R.A. 180, Liability Insurance; 1419 votes of 1715 ballots cast]
Senator McCONNELL. Two quick questions.
If I were to offer my bill S. 2046 as a substitute for S. 2760, assuming the majority leader were to bring that up, would your organization be for or against that?
Mr. MOTLEY. We support your bill, Senator. I think the floor situation at the time might have some consideration on how strongly we would support it. But we certainly do believe that the problem is a much broader one than the one addressed by S. 2760, and believe, like ATRA, that it should be addressed at the Federal level.
Senator McCONNELL. Because, in fact, S. 2760 is probably not going to do anything for the majority of your members, right?
Mr. MOTLEY. That is very true.
Senator McCONNELL. Do you believe that repeal of the McCarran-Ferguson exemption would increase liability insurance availability?
Mr. MOTLEY. I do not know if I could answer that question, Senator. We certainly believe that this particular industry should be treated like all other industries in the United States.
Senator McCONNELL. So it is a fairness issue with your membership?
Mr. MOTLEY. It is very much a fairness issue.
We also do believe that it gives them somewhat of an upper hand in dealing with the individual States. One of the complaints that we have received from our membership is indeed the type of situation which happened in West Virginia where individual States have taken strong stands—or in Florida, then the insurance industry has reacted almost in a case of saying, you know, we are going to take our ball and go home, and we are not going to write insurance in your State any longer. You cannot deal with this situation piecemeal 50 States at one time.
Senator McCONNELL. Senator Broyhill.
I am interested, in learning how many people your organizations represent, how many individual businesses. I know that your organization, Mr. Coyne, is composed of a number of different groups, performing excellent work in this area.
Would you have an estimate as to how many individual businesses would be represented in your organization? It would be thousands, would it not?
Mr. COYNE. Well, in fact, it would be millions, Senator.
The American Tort Reform Association and its affiliate organizations represent 30 million American employers and employees across this country. Our members, for example, include the American Red Cross, the American Business Conference, the Business Roundtable, the NFIB, the American Recreation Coalition, the Boy Scouts of America, the National School Board Association, the American Medical Association, the American Consulting Engineers Council, and the National Institute of Architects. What we really see here is a problem that is not a specific problem affecting just one small sector of America, it is affecting every single American.
Senator BROYHILL. This is a broad-based problem and a broadbased group of people are coming forward to ask for some relief.
Mr. COYNE. That is exactly right, Senator.
Senator BROYHILL. I know, your organization has a large membership. I believe you are a member of this group of several hundred thousand. Are these individual businesses coming forward and saying they want to see some reform?
Mr. MOTLEY. Yes, Senator; I looked at the figures yesterday. NFIB has 517,009 member firms roughly employing 10 individuals
Senator BROYHILL. And, of course, NAM is a large organization composed of the larger firms. Am I correct in assuming that you have the overwhelming support of all of your members for this position?
Mr. CURCIO. Yes. And as you know, that covers quite an extensive field of manufacturing firms of all sizes, in fact about 13,500 different firms in every State of the country.
Senator BROYHILL. I want to briefly say, Mr. Chairman, I welcome this group before the committee. I have been fighting for enactment of uniform product liability legislation for many years. And it is my hope that we can move forward with this legislation. I do not know if we can do it in this session, but we will certainly try.
I want to commend Chairman Kasten and the other members of the other committee who have led the fight for this legislation. It can be improved. But it is needed legislation. We need to get behind it, subject it to the legislative process, and let the Senate work its will, and the House work its will. I think if we can accomplish that, we will come out with something that is in the public interest.
I became interested in this subject matter a number of years ago, when I served as a member of the House Energy and Commerce Committee in the House of Representatives. Beginning in the 96th Congress hearings were held with respect to this problem and I introduced legislation in conjunction with then Congressman Preyer of North Carolina. Richardson Preyer, my colleague from North Carolina, and I introduced a bill in the 96th Congress that was, I believe, the first comprehensive product liability reform legislation introduced in the Congress. Unfortunately, we did not get action at that time, and we have seen the problem grow worse. We have seen the varying rulings and court decisions handed down by the individual States, greatly increase the cost of doing business. I am also concerned by another issue. That is, import penetration into our markets, and the effect the increased costs have on our ability to compete against foreign competitors who do not always bear those same costs.
It seems to me that everyone loses under the present system, consumers, plaintiffs, defendants, employees, and employers. I think it is time that we do something.
Generally, I agree with the Senator from Alabama, when he says that problems like this can best be left to the States. Unfortunately, despite their best efforts, the States have been unable to resolve all of the problems of product liability tort reform.
Products are manufactured in one State, but they are sold, distributed, and used in another State. Data does show products manufactured in a given State, are generally consumed outside of that State. Therefore, it seems to me that what we need to do is take a
look at this from a national perspective. The decision in a State other than my home State of North Carolina drives up the cost of doing business in North Carolina. We should be concerned about making sure that the laws are encouraging manufacturers to improve product safety, and encouraging them to take steps to improve their products. That is one of the aspects of this legislation, as you well know.
I realize that the plaintiff bar is still opposed to this legislation just as they were back in the 96th Congress. I wish they would step forward and help us to write some legislation here.
Liability legal costs often exceed the amounts that are recovered by the injured and plaintiffs. And it should be obvious to everyone that it is time for reform of the tort litigation system. I know there will be several amendments adopted. I, of course, will be studying these with a great deal of interest. I just hope we do not see a delay like we were discussing a few moments ago. I do not think manufacturers or distributors of products have the time for another 10 years of hearings.
I think that this bill is a good basis for a fair and balanced solution to this urgent national problem, and I would urge its prompt enactment.
I thank you very much.
Mr. MOTLEY. Mr. Chairman, I have-just listening to Senator Broyhill's comments—a terrible sense of deja vu because I was involved very much in those original set of hearings and the original effort to try to do something on products liability. And it appears to me that where you are in what you are trying to propose and push right now in the area of general liability insurance is exactly where we were 10 years ago on products liability. And I hope we do not have to wait 10 years and find out we have not moved very far on this issue also.
Senator McCONNELL. Just in my year and a half here, it has occurred to me that this seems to be everybody's favorite hearing topic, every committee of Congress darn near except the Foreign Relations Committees, and they may be next, has had a hearing on the subject. But it does not seem to be anybody's favorite topic for doing something. And I think Senator Broyhill has put his finger right on it. Thank you very much, all of you.
We are moving toward the close here. Both parties have their weekly policy luncheons at 12:30. We do not want to have anybody wait any longer who has been here patiently all morning. I do want the second panel to come forward, Edward Zuccaro, National Conference of State legislatures; Philip Hermann, chairman of the Board of Jury Verdict Reporting, Inc.; and Robert Roper of the National Center for State Courts.
Gentlemen, if you see Senator Broyhill and myself depart, it is not because we are not interested in what you have to say. I am going to ask Larry Herman, who is chief counsel of the Subcommittee on Courts, which I chair, to finish the hearing. And so we are going to hear from you and we are going to have some questions for you, and do appreciate your waiting. But Larry may be finishing it up.
We will lead off with Mr. Zuccaro.
STATEMENTS OF PANEL CONSISTING OF: HON. EDWARD R. ZUC
CARO, A REPRESENTATIVE IN THE VERMONT HOUSE OF REPRESENTATIVES, ON BEHALF OF THE NATIONAL CONFERENCE OF STATE LEGISLATURES; PHILLIP J. HERMANN, CHAIRMAN OF THE BOARD, JURY VERDICT RESEARCH, INC.; AND ROBERT ROPER, NATIONAL CENTER FOR STATE COURTS
Mr. ZUCCARO. Mr. Chairman, Senator Broyhill, my name is Edward Zuccaro, and I am a member of the Vermont House of Representatives where I sit as the ranking Republican member on the Committee on Ways and Means. But I also serve as Vice Chair of the Law and Justice Committee of the National Conference of State Legislatures.
NCSL, through its State and Federal Assembly, of which the 50 State legislatures are represented, adopts policy resolutions on important issues involving State and Federal relations. I appear before you today to express NCSL's concern about what Federal preemption of a large area of State civil law would mean for the vitality of our federal system and the effect it would have on the functioning of our State court systems. It is for these reasons that NCSL has taken a position in opposition to Federal preemption of product liability law.
We certainly recognize that a problem exists in the area of availability and affordability of liability insurance. And in particular a very real problem exists in the field of product liability. But the States, in recognition of the existence of these problems, have acted. Virtually every State has passed some form of tort reform. A number have specifically dealt with product liability reform. For example, Kansas has made the introduction of evidence of post-accident improvements inadmissible. Iowa, this last year, adopted an absolute state-of-the-art defense in product liability cases.
The States have also dealt with the issue of insurance regulation and have adopted legislation to streamline and reform the regulation of the insurance industry in various States. This is not, however, only an issue that deals with tort reform and insurance. It is also an issue that deals in general with economic cyclical factors, interest rates and foreign currency exchange rates even, especially in the area of reinsurance with foreign companies, such as Lloyd's.
NCSL's position is that each level of government has a role to play in dealing with the product liability question. I heard you let the States deal with tort reform and product liability issues. They have already acted and they have the capacity to act and enact further legislation based upon the accumulative experience with what has taken place at this point.
NCSL in studying this issue has heard testimony that preemption of products liability law would create problems for the States and would not necessarily achieve the stated goal of uniformity, and that it might not ultimately resolve in the reduction of insurance costs. For example, section 308 of S. 2760 propose to eliminate joint liability in products cases. Changing this rule in product liability cases would create confusion in multiparty litigation, which might involve both product liability claims and other tort claims.