operation of businesses and state and local governments. Nevertheless, because of the growing liability crisis, insurance coverage is being cancelled, is available only on a claims-made basis, is renewed only at substantially higher rates, or is subject to lower limits of liability. This insurance problem is placing a massive burden on both the private and public sectors, which must either operate without insurance or pay increasingly higher premiums.

Proposals to increase insurance regulation will not remove the underlying cause of the insurance crisis

the high costs and

uncertainties of the tort liability system. As you know, in February of this year, a Tort Policy Working Group appointed by the Attorney General of the United States and consisting of representatives of ten federal agencies and the White House issued a report on "The Causes, Extent and Policy Implications of the Current Crisis in Insurance Availability and Affordability" (the Attorney General's Tort Policy Report). The report concluded that the problem rests primarily with the tort liability system rather than with the insurance regulatory system.

Recommendations

The Business Roundtable recognizes that individuals injured through the intentional or negligent wrongdoing of others are entitled to be compensated for their injuries. The Roundtable respects those plaintiffs' rights, but, at the same time, also respects the rights of manufacturers and consumers who bear the burden of unrealistic litigation costs. For that reason, the Business Roundtable for the past five years has recommended comprehensive state and federal changes to redress current imbalances in the tort liability system. The Senate Commerce Committee should be commended for addressing an issue of such critical importance and for voting out a product liability reform bill. We hope the Judiciary Committee and the

Senate will similarly recognize the need for reform and take action on S.2760.

But the Business Roundtable advocates four amendments to S.2760.

First, eliminate joint and several liability.

While S.2760 abolishes joint and several liability for non-economic damages, it does nothing for economic damages. The bill should end joint and several liability for both economic and non-economic damages.

Second, incorporate a fault-based standard.

Fundamental to the American system of justice is the concept that if one is not at fault, one should not be held liable. Yet current liability laws ignore that concept. Any federal legislation should ensure that a defendant will be found liable only when the defendant is at fault for injury. S.2760 currently contains no such provision.

Third, delete current language requiring reporting by insurance companies.

It's my understanding that comprehensive data are already available through the National Association of Insurance Commissioners and that this organization has offered to refine its current reporting

procedures to meet the needs of the Commerce Committee as reflected in S. 2760.

Fourth, raise the standard for awarding punitive damages to a test

The "conscious, flagrant indifference" standard proposed in S.2760 may, in fact, cause an increase in the number of punitive damages claims. We strongly urge that punitive damages be awarded only in cases of malicious conduct.

CONCLUSION

Something must be done to redress current imbalances in the system, particularly relating to product liability. The Product Liability Reform Act, amended as described above, would counter escalating problems posed by inconsistent state laws; protect the rights of plaintiffs, manufacturers and consumers; ameliorate insurance affordability and availability problems; and enhance the

competitiveness of U.S. businesses.

On behalf of the Business Roundtable, I thank you for this

opportunity to comment on this critical issue and strongly urge your Committee to support this legislation.

1Time; "Sorry, Your Policy Is Cancelled"; March 24, 1986; pp. 16-26.

2Wall Street Journal; "Tort Reform"; April 7, 1986; p. 12, also,

The Institute for Civil Justice, "Changes in the Tort System:
Helping Inform the Policy Debate, June 1986.

SUMMARY OF RESEARCH RESULTS ON PRODUCT LIABILITY
STATEMENT PREPARED BY DEBORAH R. HENSLER

INSTITUTE FOR CIVIL JUSTICE

Mr. Chairman and Members of the Judiciary Committee.

My name is

Deborah Hensler; I am the research director of The Institute for Civil Justice (ICJ) at The Rand Corporation. Rand is a private non-profit corporation that conducts public policy research. The Institute was established at Rand in 1979 to conduct policy analytic research on the civil justice system. Its research is supported primarily by corporate and foundation grants.

The purpose of my testimony is to summarize the results of our research that are most relevant to a consideration of the current

product liability system. My testimony will touch on four topics, each

of which has been the subject of empirical research at the ICJ.

TRENDS IN PRODUCT LIABILITY LITIGATION

There has been considerable dissension over the past several months about how much, if at all, the U.S. tort liability system is changing. Much of this dissension stems from the misinterpretation of civil justice system statistical indicators. Judicial and legal policymakers have long operated as if they were dealing with a single homogeneous tort liability system. Indicators of aggregate change in the system

for example, civil filing rates

changes in all its components.

are assumed to reflect equivalent But there is increasing evidence that

this picture of the tort liability system is no longer accurate, if indeed it ever was. Each category of tort cases automobile

accidents, product defect suits, professional malpractice, and so forth

appears to have its own social and economic dynamics. This is not surprising once we consider the differences among these different case categories in substantive and procedural laws, party characteristics,

litigation practices, and financial and social stakes. In describing trends in product liability, then, it is important to distinguish those statistical indicators that apply specifically to this kind of lawsuit from those that apply to tort suits more generally.

With regard to product liability litigation, we can ask the

following questions:

1.

2.

3.

Is the amount of litigation increasing, decreasing, or
remaining roughly the same?

Has there been any change in the proportion of suits that are
decided in the plaintiff's favor?

Have the amounts juries award to plaintiffs increased,

decreased, or remained roughly the same?

4.

5.

6.

What has been the role of punitive damage awards?

Is there any evidence that juries apply different standards in
deciding product liability suits than they apply in other sorts
of tort litigation?

Have the amounts insurers can expect to pay out increased,
decreased, or remained roughly the same?

Unfortunately, our ability to answer these key questions for

liability specifically is severely constrained due to the unavailability of basic data on the civil justice system.

Amount of Product Liability Litigation

From data reported by the federal district trial courts, we know that the number of product liability lawsuits filed in the federal system has increased five-fold from 1975-1985 (from about 2400 suits to about 12,500 suits); because other types of tort filings in the federal system have not increased at a similar rate, product liability cases now account for about 30 percent of all federal tort filings, compared to 9 percent in 1975. But we don't know whether this trend was matched in state trial court systems, where an estimated 95 percent of all tort cases are filed, because most state court systems do not tabulate cases by type.