that repealing the McCarran-Ferguson Act would make much difference. But we would be happy to look at a specific proposal and comment on it.

As I indicated, we do not normally look favorably upon special industry exemptions in the antitrust laws.

Senator SIMON. Well, you are being asked to do that right now, and if you could give me your reaction, I would appreciate it.

Mr. WILLARD. Could we have a specific bill because

Senator SIMON. I will give you a specific bill, and I would appreciate having your reaction to it.

Mr. WILLARD. We would be happy to provide that, Senator.

Senator SIMON. All right. Thank you. Thank you, Mr. Chairman. Senator McCONNELL. Senator Biden.

OPENING STATEMENT OF SENATOR JOSEPH R. BIDEN, JR. Senator BIDEN. Thank you, Mr. Chairman.

Welcome, Mr. Willard. I think this whole area is obviously important, and somewhat confusing, and I respect your attempt to deal with what is in fact a genuine crisis. Genuine in the sense that small business people-roller rink owners and wheelchair manufacturers, and people who run junkyards, et cetera, are in serious dilemma, in that their insurance rates are being raised so significantly, that their ability to continue to stay in business is either jeopardized, or eliminated. And so there is a problem. You have obviously-when I say "you" I use it in an editorial sense-you, the administration, have obviously concluded that the source, the overwhelming reason for the problem, as I understand it, is the tort system, and unprecedently large awards on information that is skeptical. I listened to the acting chairman talk about these outrageous awards and basically indict the jury system, which I found fascinating.

And there are others who suggest that-and I admit I am one of them that more than half the blame lies with the insurance industry's greed.

I find it somewhat interesting, that most studies I have read indicate that the insurance industry at the time-by the way, they had about a $7.6 billion profit from areas other than their writing insurance-that they were actively competing with abnormally low premiums for access to business, so they had access to capital to invest in other areas.

And now, having done that, they want it both ways from this Senator's perspective. They wanted to make that business judgment, to go out and do it that way, and it worked. They made a lot of money in noninsurance related industry areas, and now they want to come back and make the insurance side of their ledger, balance, if you will, a profit must be shown there, and rather than looking at the totality of what the insurance companies have made from purely investments in-the risks they take in providing insurance and investments they make in Zimbabwe, or housing, or anything else.

But the bottom line of it all is, to use that trite Washington expression, the American people are angry and they are confused.

And I am not suggesting you have done this alone. It is awfully easy to ancedotally make one's case. I should also note, parenthetically, that Senator Simon is right-there will be no bill this year. I can almost guarantee that.

And I seldom if ever have attempted to guarantee anything. There will be no bill this year.

But there will be, and must be, some action taken on this issue because the end result is that that main street merchant needs help, and needs help, in my view, somewhat badly.

So let me explore with you, if I may, a couple areas of concern that I have, and then on a second round of questioning, although I have to-there is a drug conference at 11:45. I may not be able to stay for a second round, but I no doubt will get to do this again next year.

One of the things that—and if we can deal with what I believe— and I am going to be presumptuous to suggest that I understand, as we all think we do, what the public concern is in this area.

I am always reluctant when my colleagues-none of whom have said this this morning-but when colleagues in the House and the Senate say, "This is what the American people want." I do not know what they want. I cannot speak for all the American people. But I have spoken to enough people in my State to understand what I think are at least some of the broad concerns.

And everybody knows them. But let's go through and see how your bill would cure, or impact upon their concern. The biggest concern is the amount of money they are paying for insurance.

Now do you have any evidence that limiting pain and suffering to a $100,000 recovery will lower insurance rates?

Mr. WILLARD. Senator, there is evidence. There is a study cited in our report, that a substantial amount

Senator BIDEN. Which study is that?

Mr. WILLARD. It was the Florida Medical Association study cited in our report, which shows that a substantial amount of money that is actually awarded in jury verdicts is in the form of pain and suffering awards in excess of $100,000.

So the first step of my answer would be to say, I do believe that kind of limitation would reduce the amount awarded. The second question--

Senator BIDEN. There is no question it would reduce the awarding but obviously, the law-

Mr. WILLARD. The second question obviously is, would those savings be passed on in the form of lower premiums, or would the insurance companies just grab the profits and keep them for themselves?

The answer is there is good evidence to suggest that they would be passed along because of the competitive nature of the industry. Senator BIDEN. Why is it?

Mr. WILLARD. As you indicated yourself, Senator, a few years ago we had excessive rate cutting by insurance companies because of competitive pressures. I think those competitive pressures are still there.

So if costs go down, that rates would also tend to come down as

Senator BIDEN. In all the cases that are tried, do you have any estimate of what the total number of awards over a million dollars are in personal injury cases?

Mr. WILLARD. It is hard to know the precise numbers. There is a recent study by the Rand Corporation's Institute of Civil Justice, that does show that the frequency of those awards has increased in recent years. What I think is more significant, however, is the amount of money attributable to such awards is accounting for a larger and larger percentage of the money that is awarded. In this Rand study, they found that in the 1980's, the first half of the decade, million-dollar awards were less than 4 percent of the total plaintiff verdicts.

Senator BIDEN. Is this in Federal court, or all courts?

Mr. WILLARD. These are in all State and Federal courts. Rand found that the million-dollar awards were less than 4 percent of the awards, but accounted for two-thirds of the money awarded.

So, I think that there is some evidence that while million-dollar awards are fairly unusual, they are so large that they have a skewing effect. Thus accounting for a very large amount of the money awarded.

Senator BIDEN. Would it surprise you to learn, that there have only been 1,642 awards over $1 million in the last 14 years, and for over two-thirds of those, the people who were awarded $1 million or more were permanently paralyzed, brain-damaged, or had amputations, or death?

Would that surprise you, that figure?

Mr. WILLARD. No, Senator.

Senator BIDEN. Does that seem unreasonable to you out of a population of 240 million people?

Mr. WILLARD. To the extent that some of the awards reflect amounts for pain and suffering, some of those are in fact excessive, because they are totally unpredictable.

One jury might award $50,000 for pain and suffering and another jury $5 million for the same kind of injury.

Senator BIDEN. Well, isn't that the same thing the jury system does in murder cases? Some juries aquit on the same evidence that other juries come back and convict?

I mean, are you suggesting we change the jury system? Is there something fatally flawed in the jury system?

Mr. WILLARD. No, Senator, I think the jury system is good for determining facts. The problem occurs when a jury is asked to determine pain and suffering, it is such a subjective inquiry. Other elements of damages, for example-

Senator BIDEN. Well, who should make that judgment?

Mr. WILLARD. We think the legislative bodies should: Congress or the State legislatures should impose some limits on what can be awarded in those cases.

Senator BIDEN. Do you think we are better able to determine, by an arbitrary number, whether or not someone who has suffered pain and suffering, should get that number, or less, or whether or not a jury who sat through 2, 3, 4 weeks of a trial, looking at the evidence, and at the plaintiff-you think that we are better equipped to do that than 12 women and men sitting in a box under sworn oath, as to whether or not they make the judgment?

I mean, how are we better equipped to do that?

Mr. WILLARD. I think you are, Senator, because in individual cases, juries can be swayed by some irrelavant fact of the particular case, or the emotions, or how the case is presented by the lawyers. This causes juries to lose sight of the ultimate consequences of the way the awards have to be paid.

Senator BIDEN. Isn't the reason why they are in the courtroom, the ultimate consequence is the right of the plaintiff and the defendant? That is the ultimate consequence, not the money. The ultimate consequence is whether or not under our English jurisprudential system, someone has a right to go into court and have their claim adjudicated.

I am concerned, as Senator Heflin, that we sort of got this thing-talking about skewed-we have a problem here, but what we are doing is, we are basically attacking the fundamental essence of the system.

Here you are saying that 535 women and men sitting in Washington, DC, are better able to determine what pain and suffering award should be given to someone in Oshkosh, than 12 women and men from Oshkosh who sit there for 4 weeks and watch what happens, and make judgments about what happens.

You are further suggesting to me that the ultimate concern should be, for us, not protecting the right of that person to go in and recover, but whether or not the insurance company has a premium requirement that will be so high, that it will impact upon whether or not someone can stay in business.

I mean, I kind of thought it was the other way-I mean, if you are concerned about that, why-let me ask you this: why shouldn't we-if that is the concern-why should we be here in fact underwriting insurance premiums? I mean, if the concern is whether or not people are going to be able to get insurance, they are going to be able to stay in business; whether or not insurance companies are going to be able to guarantee that they have insurance, why shouldn't we be sitting here? I am not suggesting it, but why did you dismiss, on the one hand, that we go in and directly, directly underwrite-as we do many other places, like we do for the nuclear industry and the insurance policy-taxpayers pay for Three Mile Island's insurance. You understand that. I understand that.

Why shouldn't we go in and do that instead of saying that Mitch McConnell who does not know a "bloody thing" about Mrs. Schmedlap who is totally paralyzed in Oshkosh, whether or not she is suffering, that he should be able to sit here and make a decision that she cannot collect more than $100,000? If we are going to be so concerned-if our concern is the system continuing to function, why go in and trade those judgments for the judgment that says we are going to make a decision? The business of America is business, we have go to keep it rolling, people have to be insured, so let's go in and subsidize it through Federal funding.

Mr. WILLARD. Senator, I think that the traditional separation of roles between the jury and the legislative branch dictates that the legislative branch create policymaking law and then it is applied to the facts of a particular case by the jury.

Mr. WILLARD. I think it would be legitimate, just as many legislatures create laws that create causes of action in court, and define them and limit them-

Senator BIDEN. Right.

Mr. WILLARD [continuing]. To be involved in this area. Obviously, whether that kind of law is good as opposed to whether it-Senator BIDEN. Oh, we've never done this before.

Mr. WILLARD [continuing]. Is legitimate is something that you

can

Senator BIDEN. I mean, look, we have never done this. If we go in and create a cause of action, to say that if in fact you go in and your employer, instead of-he says, "Now in order to determine whether to hire you, Miss, let me run my hand up your skirt." We have created a cause of action relating to that. Harassment; civil rights; civil liberties. We went in and created a specific cause of action where States have deemed to suggest they do not exist.

But we have not, in turn, gone in and taken the essence of the jury system, which is to determine, (a), guilt or innocence, culpability, or lack of culpability, and then make a just award.

A just award from their perspective, whether it is to make-in courts of equity-to make the person whole. A judgment of what constitutes making them whole. Look. I just think-Mr. WILLARD. Could I answer, Senator?

Senator BIDEN. Sure. Please.

Mr. WILLARD. I just want to suggest that this does happen sometimes. For example, in the areas of workers' compensation with regard to maritime jurisdiction and railroads benefits, State legislatures and the Federal Congress have passed laws interfering with the common law recoveries for people who suffer on-the-job injuries. So there is some precedent for legislation that would deal with these kinds of issues.

Senator BIDEN. Now, are you willing to do that? Then we can talk a different ball game. I am prepared to do that, if that is what you are willing to come back and suggest. I think that is reasonable.

But here you are coming in and taking the one thing that is totally subjective. We have had studies. We have had doctors. We have had psychologists. We have had attorneys. We have had professors who have come in, in my State, and at the Federal level, and say,

Now look, the reasonable award based upon the loss of an arm is "X" number of dollars. That is a reasonable award because it impacts upon the ability to do a job to this extent and the earning capacity, and so on and so forth.

But we have not come along and said, "By the way, we are going to put a measure on whether or not you have suffered pain and suffering to such an extent that you cannot recover for it." I mean, we are not in the business of, have not heretofore been in the business of determining how you put a value on that.

And what I want to get back to is this issue, who are we protecting? What is the interest we have? And it seems to me, the interest I have in this-I acknowledge my interest-is to keep the Main Street businessman in business. That is my interest.