Senator Danforth, there have been a number of criticisms, as you know, of the expedited settlement provision of S. 2760 from both supporters and opponents of product liability reform. You outlined the section for us, but I am wondering if—and I think you have already answered this-whether you might be open to some modifications of that section.

Senator DANFORTH. Absolutely, and I have attempted to make this clear all along the way, if anybody has a better idea, let us hear it. I would say, though, that over the last 2 years or so the Commerce Committee has been addressing this, we have run through a variety of versions and we have discussed this matter at great length with law professors, with people we think have great expertise. We have not, frankly, seen anything better than some kind of cap.

I think as far as the defendants are concerned, what they want to do is to try to get some predictability on their exposure, and that is the No. 1 interest they have. What we have attempted to do is to say, all right, if you want predictability on your exposure, you have to ante up fast.

Senator MCCONNELL. You are familiar, I think, with my view that the most appropriate approach to this problem is comprehensive tort reform at the Federal level. That is viewed by some as the most violative of notions of federalism. Nevertheless, it is my own view that this is the only way to bring some true predictability to this system across the board and do something for the mayors, the physicians, the Boys Scouts, the day care centers and others, all of whom would not be touched by any kind of product liability bill.

I am wondering what your view would be about some kind of comprehensive tort reform amendment should your bill be called up by the leader, an amendment in the nature of a substitute, what would your position be on that?

Senator DANFORTH. Well, I would have to look at the amendment. Senator Kasten, who I see is here now, has really been the father and the grandfather and great-uncle and godfather and everything else of the whole issue of product liability reform. A couple of years ago, I guess, when we marked up S. 100, that really was a fairly comprehensive idea of at least product liability reform, and it attempted to modify the whole tort system.

I voted for it. I think though that we just could not get the votes for it, and so what we have attempted to do in our committee is to take a much more limited view of things and not try to get into the business of saying, well, liability should be based only on fault, for example. We leave that to the States.

I also think that once we get into the business of substantive tort reform, we have set up just a new starting point for the various fifty jurisdictions to begin developing their own common law on a new base, so I am not sure that we are that much farther along. With respect to broadening the concept of settlement incentives to apply beyond product manufacturers to other areas as well, I think that that would be something that would be very interesting to pursue. We are much more restricted, of course, in the Commerce Committee, but I think that would be something that would be worth considering.

Senator McCONNELL. Thank you.

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Senator DANFORTH. Could I just say one thing, Senator McConnell. You said that certain Senators said that this idea is going nowhere. Of course, we have heard that with respect to a lot of things that we attempt to do in Congress. You know, sometimes around here you wonder what is going anywhere. I guess we can pass a sense of the Senate resolution condemning terrorism and maybe that is about the best we can do around here.

But I would hope that sometimes at least in the Congress of the United States, instead of making speeches about what concerns the American people, we could act effectively and this is one area where I think we could.

Senator McCONNELL. I could not agree more. That is not my view. I was

Senator DANFORTH. I know. You tossed the ball my way and I wanted to take a swing at it.

Senator McCONNELL. I am glad you did not pass up that opportunity. Thank you.

Senator DANFORTH. Thank you.

[The prepared statement of Senator McConnell follows:]

PREPARED STATEMENT OF SENATOR MITCH MCCONNELL

Today, the Committee on the Judiciary continues with its second day of hearings on S. 2760, the Product Liability Reform Act.

Yesterday, one of the issues before us was whether the insurance component of the liability crisis was beginning to abate. This morning, we will have an insurance panel which I hope might clarify this matter. However, I have a clipping in my hand from the Lexington Herald Leader which suggests that the answer to this question is a definite no. The lead paragraph reads: "The Harlan County cities of Cumberland, Benham and Lynch were without a licensed emergency ambulance service yesterday after its liability insurance policy was canceled."

The Kentucky General Assembly has created an insurance and liability task force to investigate the causes of the availability and affordability crisis in my State. I believe that we will find their findings and conclusions useful in our own deliberations over this issue.

What is becoming less and less useful, in my opinion, is the bickering, finger pointing and accusations that have plagued this debate. The time has come for action. The causes of the liability crisis are many. The only innocent bystanders have been the American people who, ultimately, pick up the tab.

Tort reform is not a sinister conspiracy to make the world safe for reckless and irresponsible manufacturers. It is not an endeavor to absolve or bail out the insurance industry. And it is certainly not an open invitation to exact vengence and venom upon this Nation's trial lawyers. It is an endeavor to bring the scales of justice back into balance and to resurrect our decaying civil justice system.

I would submit that the responsibility for carrying out this task falls upon the legislative branch. It is our responsibility to determine public policy. That is what we are elected to do. So let us get on with the business at hand.

We have four panels of witnesses before us this morning, as well as several Members of the Senate who have requested an opportunity to testify. It is my hope that the testimony we hear this morning will constructively assist us in formulating an effective and meaningful piece of legislation.

AMERICAN BUSINESS CONFERENCE STATEMENT ON LIABILITY REFORM

The members of the American Business Conference believe that the increased costs and limited availability of all forms of liability insurance have become barriers to economic growth and competitiveness. A recent poll of the ABC membership revealed that 64.7 percent feel that the liability crisis has restricted growth in their industries by making people less willing to take risks, innovate, or expand into new product lines. In an indirect but very real way, our nation's liability problems are

The liability problem extends beyond product liability, and federal reform of other forms of liability is warranted in addition to product liability reform. The ABC poll found that 47 percent of the ABC CEO's had difficulty finding product liabilty insurance; 60 percent had difficulty finding directors and officers' insurance; 51 percent had difficulty finding general liability insurance. Over 86 percent found that general liability insurance could only be found at vastly increased rates.

The ABC believes that America needs broad-based federal standards for all major forms of liability. While the bill reported by the Commerce Committee includes some important reforms, we believe it does not go far enough. We favor the broader approach espoused by Senator Mitch McConnell. We feel the four most important elements of liability reform are:

1. The elimination of joint and several liability for both economic and noneconomic damages;

2. Limitations on punitive damages;

3. Reasonable statutes of repose and limitations;

4. Alternative mechanisms for dispute resolution.

Senator BROYHILL. One final question from this Senator. What can you tell us with respect to the depth and breadth of support for this legislation within the business community?

Senator DANFORTH. Well, Mr. Chairman, it really is amazing, in my opinion, how do you gauge support for something. It is in part letters and phone calls, it is in part people who just buttonhole you in airports, and it is in part the kind of turnout you get back home when you are addressing things.

I can think of a couple of meetings within the last few months that I had back in Missouri, and unfortunately they were both breakfast meetings. You know, it is very hard for me to get myself in gear for a fiery presentation in a windowless room of people at 7:30 in the morning on the question of product liability.

They were in both cases overflowing audiences of the group that sponsored the meeting. In both cases they were audiences that far exceeded anything that they had previously had.

I do not think that those people were there to hear, you know, some early morning chatter from a politician. I think that they were there because they were totally concerned about a problem that they perceive as being very serious. I am sure that in your hearings already you have heard horror stories about people who cannot buy insurance or whose insurance costs have tripled in a year even though no claims have been filed.

There is total unpredictability in this area right now and you cannot buy insurance for a reasonable price if the insurance carrier does not know what is happening, if the field is just so open to wild change that there is no predictability at all. And the whole concept of a cap is to provide a mechanism for obtaining certainty in exchange for an early payment.

You know, when I practiced law, some of the cases-it was in the late 1960's that I last practiced law in private practice and I think some of the cases I was working on in the late 1960's are still going on, because the name of the game for lawyers, defense lawyers in particular, is to just keep that ball in play, you know, just keep it going forever and ever.

Some of the most successful lawyers are the ones who are most fertile in writing interrogetories. You can just keep this thing going forever, and it is great for lawyers. I mean they get to send out their bills and everybody wants to go to law school, and it is wonderful for the lawyers, but I do not think it is so wonderful for

everybody else. And my hope is that the enthusiasm that has been shown by manufacturers, and I think increasingly by consumers alike, will continue to spread and that the pressure will continue to build until Congress does what is responsible.

Senator BROYHILL. One final question, and this needs to be asked because your committee would have partial jurisdiction over this. The question has been raised in the hearing thus far-that the insurance industry is to blame for this problem and that there is need for more regulation of it. Did you look into these allegations and did you come to any conclusion with respect to the need for more regulation of the insurance industry?

Senator DANFORTH. We had very extensive hearings in addition to about 6 days of markup in the Commerce Committee on the whole problem of insurance. We had a number of expert witnesses in something as controversial and complex as this. Of course, there is a variety of opinion on it.

I think that the evidence overwhelmingly is that the insurance industry is a competitive industry. That is not to say that it has not made mistakes. It has made mistakes. It has gotten itself into a hole in the past by its underwriting practices. But I am convinced that the No. 1 problem is not some temporary blip in underwriting practices and that it is not lack of competition in insurance.

I think the problem is that nobody knows what to charge, that there is just total unpredictability with respect to exposure. So my hope is that Congress would not repeal the McCarran-Ferguson Act. My hope is that Congress would not decide that we want to get into this business of regulating insurance, but that, instead, we would try to provide some mechanism to provide incentives for settlement in the court system.

Senator BROYHILL. Thank you very much for your testimony. We appreciate your coming and we appreciate your hard work on this issue.

Senator DANFORTH. Thank you, Mr. Chairman.

Senator BROYHILL. The committee is glad to welcome at this time the Senator from Wisconsin who has been a leader in the effort to achieve some reform in the area of product liability, and who has introduced legislation along these lines in several Congresses. We are delighted to welcome Senator Kasten.

STATEMENT OF HON. ROBERT W. KASTEN JR., A U.S. SENATOR FROM THE STATE OF WISCONSIN

Senator KASTEN. Mr. Chairman, first of all, thank you very much for that introduction, but, more importantly, for having these hearings. I greatly appreciate the opportunity to testify today in support of S. 2760, the Product Liability Reform Act. I am in complete agreement with the President, Majority Leader Dole, and colleagues on both sides of the aisle-Republicans and Democratswho believe that action on the product liability legislation is absolutely essential in this Congress.

Just 3 weeks ago, the delegates to the White House Conference on Small Business ranked the liability crisis as the No. 1 problem for small business today. The delegates, in an unprecedented

action, passed a specific resolution calling on Congress to pass the legislation under consideration here today.

Only 2 weeks ago, the National Governors' Association overturned a longstanding policy against Federal preemption of product liability laws and voted to support a Federal resolution to the product liability crisis.

Mr. Chairman, our product liability system has been in need of reform for many, many years, and no one knows this better than you. You introduced the first Comprehensive Product Liability Reform Act in the House of Representatives a full three Congresses ago, and we have been working together on this issue, but I truly believe that we are fortunate now that your expertise will be available to the U.S. Senate as we debate this bill on the floor, whether it is the 20th of September or whenever it is going to be coming up, because I think that you will be playing a key role. There is no one who has been working harder on this legislation than you have.

When our legislation was introduced, you and I at roughly the same time in the House and the Senate, the American people I think were at least partly unaware of how severe the product liability crisis had become. Today, however, because of the overall liability crisis, the lives of everyone in our society have been adversely affected by our tort system. All over the country, the liability crisis is changing the way we live.

Will County, IL, closed its forest preserves while it searches for a new liability insurance policy. Blue Lake, CA, decided to shut its skating rink, parks, and tennis courts. Eau Claire County, WI, has canceled their Memorial Day parade and the annual Fourth of July fireworks. Thousands of cities and towns are being forced to go bare, to go without insurance because they cannot afford liability insurance.

Small businesses across the country are shutting down because they cannot get liability insurance coverage. Day-care centers are facing astronomical increases in their insurance rates. Manufacturers of everything, from football helmets to child-safety seats, are halting production because of high liability insurance costs.

And every American pays, every single person pays-doctors and their patients, ski-slope operators and their patrons, municipal governments and their taxpayers, and consumers of almost every product that you can find on the shelves of any major department store today. Everyone pays, but, most importantly, society pays a price as well.

A few years ago there were four U.S. companies manufacturing a measles vaccine. Today, because of the high cost of liability insurance, there is just one left.

A Milwaukee company has designed a new safety braking device for lawnmowers, but they cannot afford to put it on the market. If they do, their liability insurance-it is a small company-would go from $18,000 a year to $200,000 a year because they would go out and market this new safety device. They have obviously decided that they cannot afford to do it.

I know that Senator McConnell of this committee has been searching for ways to address the broader liability crisis and I applaud his leadership in this direction. Whether or not a Federal solution to the broader tort crisis could be fashioned, which is consist