Senator SIMON. I thank you.

Mr. Riley, you said that we are going to be back again with another crisis, assuming that things are leveling off at this point. I think that is absolutely correct and I think we ought to somehow devise a system for moving in directions that I think most people would agree we ought to be moving in, and it is not going to be as far as you might like or I might like, but we can make some solid progress.

You heard me ask the question before on the agreed bill process. Let me ask all four of you: Do you think it makes sense to have a small committee representing the insurance industry, trial lawyers, business, consumers, a small group that meets and says can we come up with agreements? And if those representatives can come up with agreements on modification, I think they can be achieved. But the reality is the four of you have been asked to testify on a bill that is not going anywhere. Now, my colleagues may not say that publicly, but that is the reality and they will tell you that privately. What do you think about having some kind of an agreed bill process here?

Mr. RILEY. Well, if you mean by an agreed bill process, Senator, a negotiating process, I have always been one to believe in communication and through communication you usually get what is best for all parties concerned. The word "fairness" has been used here a number of times today, and I think that is the underlying theme that needs to be thought of by all of the interests in this issue.

I personally think that negotiation and communication is good, and nothing is etched in stone as far as the Independent Insurance Agents of America is concerned. We are always open to rethinking any process to determine if there is a better way. But the thing that we see, sir, is very discouraging to me as an individual insurance agent that is not normally involved in this political process, but just tries and does earn a living back home, is to come to Washington and hear people say nothing is going to pass.

This is a situation that I can tell you from personal experience, dealing with the average American citizen, the average consumer, the insurance buyer, it is a major problem. The American public, if it was put to a vote, would demand that Congress do something. That comes back to what you just asked: How do we do something that is fair? You know, all this rhetoric has to be cut through, but something has to be done, because if it is not that boat and ship will sink again and with it go the insurance buying public, your constituents, my customers.

Senator SIMON. I thank you, Mr. Riley.

Mr. Smith.

Mr. SMITH. Senator, I think you are right on the money in terms of the parties to this game, if you will, getting together. You know, there has been enough name calling by everybody. There is plenty of fault to go around, quite frankly. I think the lawyers share in the fault, I think the consumer who wants to sue, you know, willynilly, at the drop of a hat, I think the insurance companies who throw caution to the wind because insurance rates are lowered to generate funds because they can invest them in high-interest dollars we have a litigious society, if you will. That is a terrible situ

I think you are right about what needs to be done. I think the problem is we have been doing this or trying to do it for 5, 6, 10 years, and now the house is on fire and businesspeople around this country-when I sat at the White House Conference, you could walk through the halls of the meetings rooms of the hotels and you could hear little conversations. They were all talking about the same thing, and they all have horror stories, and I will just close with one.

I was sitting next to a lady who had been in the chemical business or the firm had been since the late 1800's, said to me, she said, "You know, I got involved in this issue this year, I am not a politician, I don't know anything about how Washington works. My company lost $100,000 last year, and the reason for that was our product liability insurance costs."

You know, you can say that about the banker, the doctor, the lawyer, the insurance chiefs. I think that, yes, your solution makes an awful lot of sense, but we need to do it now.

Senator SIMON. Mr. Angoff?

Mr. ANGOFF. Senator, I strongly support proceeding in that direction. I think that there is already agreement among a number of the parties in some surprising areas. For example, I know that our organization and Senator McConnell, and I think many of the insurance industries, will support-not Senator McConnell-many of the insurance industry groups would support not Senator McConnell's first bill that would limit recovery to severely injured people, but the second bill which is an ADR, alternative dispute resolution type of system. I think there is a lot of support for that.

Second, surprisingly for at least the substantial modification of the antitrust exemption, I think there is a substantial amount of support for even within the insurance industry. There is a new leader of the American Insurance Association who just took over a few months ago and he was quoted when he first took over as saying that we should look at McCarran-Ferguson-that is a very difficult position to defense. After that, he changed his remarks. Maybe Les knows something more about what happened then, but I know that there is quite a bit of support for McCarran-Ferguson modification again within the insurance industry as well as among consumer groups.

Then, finally, the question of data-and I think frankly that is the most difficult area for the industry to defend, because I found

others have found in testifying in various States that even legisiators who are generally friends of the insurance industry—and I think Senator McConnell said this at an earlier hearing-do want to have the data and they do not have the data. Sure, they do have data which is submitted now in the annual report form, but they do not have data in English and they do not have the data that they need to decide what, if any, tort reform makes sense. I think on those three areas there could be some substantial agreement, and we would be very pleased to work toward it.

Senator SIMON. Yes?

Mr. CHEEK. Senator, I would support that, too. I think part of the problem, if you look back into history, has been that all of the players you need to have at the table do not show up. When one of the key players happens to be the trial lawyers who, as Mr. Habush

said, simply do not participate in negotiations of this sort, it is kind of like having only two legs of a three-legged stool.

I think if the groundrule that he insisted upon, legislation that would not place limits on the recovery of injured persons, could be agreed upon initially, then perhaps they could come to the table, if I read him correctly.

On that score, I would like to say that I support the argument of those who have opposed caps. I think caps are bad from an insurer's standpoint in that they do not help the predictability of the smaller cases, because they tend to perpetuate the overcompensation of those cases. At the other end of the spectrum, they preserve the tort system's principal defect, which is the undercompensation of serious cases.

On the data issue, I think part of the insurance business' problem with the data reporting requirement is that historically all of the data that is collected has been done so only if it was useful for ratemaking purposes.

We are now talking about public policy issues that require a different cut at perhaps some of that same data. There are discussions, in which I am a participant, underway at the ISO to see if we cannot collectively come up with some of the kinds of data that you have indicated that you would like to have, to see if we cannot make a cut between economic versus noneconomic loss, and to, as Jay suggests, find out exactly how many people actually are subject to joint and several liability in particular cases.

I think we would welcome the opportunity to participate in the process, to let people know what minimal changes in the law we would need to be able to predict the risk. Then you, as public policymakers, would have to decide whether the costs involved in that predictable system were acceptable.

Senator SIMON. I thank you. And I thank all four of you for that answer. Nothing is going to happen realistically between now and November 4 on the political calendar. But it seems to me that if some of us were to get together and invite representatives of the various groups, just small groups to meet informally, and get Senator McConnell on that side and Paul Simon on this side, we can make progress. Some trial lawyers resist any change, though most acknowledge that there ought to be some change. Some insurance companies acknowledge they do not want any change.

I think there is a middle ground that has to be cultivated and that some of us are going to try and do that.

I thank all of you for your testimony.

Mr. ANGOFF. Thank you, Senator.

Mr. SMITH. Thank you, Senator.

Mr. RILEY. Thank you, sir.

Senator SIMON. The next panel, Mr. Gene Kimmelman, Linda Lipsen, Joseph Goffman, Ernie DuBester, and Prof. Marshall Shapo.

Prof. Marshall Shapo, of Northwestern University Law School,

PANEL CONSISTING OF MARSHALL S. SHAPO, NORTHWESTERN UNIVERSITY LAW SCHOOL; GENE KIMMELMAN, LEGISLATIVE DIRECTOR, CONSUMER FEDERATION OF AMERICA; LINDA LIPSEN, LEGISLATIVE COUNSEL, CONSUMER'S UNION; JOSEPH GOFFMAN, STAFF ATTORNEY, PUBLIC CITIZEN'S CONGRESS WATCH; AND ERNIE DuBESTER, ASSISTANT TO THE DIRECTOR, LEGISLATIVE DEPARTMENT, AMERICAN FEDERATION

LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS

Mr. SHAPO. Yes.

OF

Senator SIMON. So if you duck out before we are through here, we understand.

Mr. SHAPO. Yes, sir. I am grateful. I am Marshall S. Shapo. I am a professor at Northwestern University School of Law. My testimony represents my own views based on 20 years of teaching and the writing of several books, including three about product liability.

I must say I have come to believe from my appearances at various committees on this subject that perhaps there should be a Gramm-Rudman-Hollings bill to limit the number and scope of Federal statutes.

You have heard a lot about crises in insurance and data, and I suppose that an insurance layman may be forgiven for being puzzled when he sees headlines like "Reinsurers Predict Good Times Here to Stay," and "Insurers' Health Termed Excellent."

But the problem of getting accurate data is not limited to insurance. It extends to the question of how and why injuries occur, and it is for that reason that the very first recommendation of the Report of the ABA's Special Committee on the Tort Liability System, which I served as reporter, was for the creation of a permanent organization for the comprehensive collection of data on injuries.

A related point is that the general thrust of the proposals that I have seen appears to cut against requiring distributors of unreasonably dangerous products to compensate for the costs of harm caused by those goods, and if that happens the law has not served its deterrence role.

One of the biggest problems that I think would concern the Judiciary Committee is that a bill of this sort would pile an extra layer of decisionmaking and doctrinal complexity on the existing legal structure. I cannot imagine right now how the courts will deal with those problems.

I have said at other hearings that there may be a role for a few modest and highly specific Federal provisions aimed at some easily identifiable and especially irritating problems. But the difficulty has been, as you know, Senator, that there has been an expensively financed 6-year effort to build momentum for a much more comprehensive statute. I call it the baroque version of the law. And the enactment of that sort of statute will multiply-I think Senator Heflin is quite right about that-not simply add to our flock of legal problems. Litigation will probably increase and Congress undoubtedly will face demands for drastic amendment each session. I should also say that I can think of nothing more calculated to undermine federalism than for Congress to tell the States that they

have done such a bad job of making private law that the National Government ought to take it away from them.

I want to say a word about the phrase and the concept of tort reform. Surely there are ways to make the process of resolving tort cases more efficient. Indeed, it was a group of suggestions directed to process reform that comprised the principal recommendations, of which there are more than. a dozen, of the ABA Special Committee's study.

But beyond that, I think that the kinds of substantive law reforms that these products bills would bring would create some terrible conceptual problems for courts that must deal with the rest of tort law day in and day out. In an era in which technology threatens to outrun our ability to deal with it, and regulation does not always keep up with technology, this kind of legislation would confuse and handcuff the courts. And the courts are an absolutely vital and relatively independent social watchdog agency.

Now, you have my prepared testimony, Mr. Chairman, so I would just like to close on a personal note. I returned last month from a fascinating trip to East Asia as the leader of a people-to-people delegation. We spoke with various officials in the Chinese Ministry of Justice and the state-run insurance company and we even witnessed a civil trial. It seemed to me, at least through translation, that while citizens of the People's Republic of China have a very ethical approach to questions that we think of as being issues of law, that that approach is highly collectivist.

The trial we witnessed was very much the exception in the Chinese system of justice, and it was striking to me as a student and often a critic of our own system of civil law how fortunate we are to have the legal process we do have. For all its faults, it preserves a substantial amount of freedom for the employment of counsel and the assertion of a cluster of rights that respond to the demands of our present technology.

Now, I certainly share the concerns that many members of Congress have articulated in favor of improving the legal process, but I am at least as concerned about the limitations that this bill places or may place on both our substantive rights and our ability to assert them.

I thank you very much, Mr. Chairman.