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Now the way to do that, it seems to me is, there are much better ways to do it than going in and making an arbitrary judgment about pain and suffering, which I will bet you, if I end up losing this fight next year, that in fact it will not positively affect insurance premiums. Because in fact I do not know how it does.

If you look at the numbers for the other studies-for example, you talked about in your-you know-you cite the Rand Corp. study, but there is no mention of the task force report of some important facts that the study points out, namely, that punitive damages are highly concentrated in intentional torts and business contract torts.

That punitive damages are infrequently awarded. That punitive damages are so rare in other types of cases that they are unreliable as an indicator of a trend in litigation, and that punitive damages are very likely to be reduced appellate courts. You cite a figure of product liability cases up 758 percent. Well, that is in the Federal court system. Can you tell me what percentage of product liability cases are in the Federal courts as opposed to the State courts?

Out of the total Federal product liability cases, what percentage of them are in State court? I mean, in Federal court?

Mr. WILLARD. I do not know, Senator.

Senator BIDEN. And yet, there is a State study showing that product liability in State courts, since 1978, is up 10 percent, which about parallels what the population increase has been.

And unless I am mistaken, unless someone can give me evidence to the contrary, it would be that the overwhelming percentage of product liability cases are at the State level, and a very small percentage at the Federal level.

You know, Disraeli once said there are three kinds of lies: lies, damn lies and statistics, and I think you very-I mean, you know, you are making your argument and you have a right to make it, obviously, and you make it well.

But I do not think we have all the facts here. Civil cases stemming from business disputes, in fact, over the last 4 years, have declined 10 percent.

This notion that we are the most litigious society in the world. I was out, I made a speech, I say to my friend, the acting Chairman. I made a speech out at-I do not know how I got there-but the University of Iowa, and to the law school.

Senator McCONNELL. There is nothing going on in Iowa-

Senator BIDEN. Nothing going on in Iowa now except the farm crisis that has been brought on by this administration's policies. But at any rate-

Senator McCONNELL. You did not say that while you were out there, did you?

Senator BIDEN. I did not mention it. I was talking to the law school, and I stood up, and I made, 5 months ago, the case that I have been reading, which is that—I used the phrase, “We're the most litigious society in the world." I thought that to be true. I was believing the press.

Then I was sent four different studies, which point out to meand I would like to know if there are any studies to the contrary because this is a question-pointing out that it just ain't so. That England, Australia, New Zealand, Canada, all are equally as litigious or more litigious than we. So this notion that we are somehow this overwhelmingly litigious society just is not true.

I started off being for you all, and then I found out about the insurance companies, as to why they had lowered their premiums and how much profit they made overall. I wonder if the American public knows. If I am not mistaken-and I ask staff to correct methat the insurance industry during the same time frame that is cited in your study, they in fact had a profit of over $756 billion. Is that correct? Excuse me, $7.6 billion. I am used to dealing with Federal numbers; $7.6 billion. That was profit.

And I believe the losses relating to the insurance portion of the business was $25 billion. Let me get this straight. All right; $33 billion in total income, $25 billion in losses, for a net profit as an industry of somewhere around $8 billion.

Now, the way I get this, I believe the public out there thinks what I thought from reading U.S. News & World Report and Fortune and, you know, well, the Wall Street Journal, that in fact these companies were all going under, that no one was making any profit, that they were losing money net, you know, in a big way; that we were the most litigious society in the world.

I believe by the way-you know, I remember reading that case about the guy who sued Sears, the lawnmower, you know, if you pull the lawnmower, you got a heart attack. I thought this is ridiculous, what is happening here. Then I went and found out about the facts. The facts are the guy was 32 years old, he had no history of a heart condition. It took him 15 times to pull the darn thing, which was advertised not to do that. It brought on a heart attack, he died. I had it read to me as an overweight, obese, older guy, going out, trying to cut the lawn when he should not; pulling this lawnmower twice and gets a heart attack and sues Sears. And poor old Sears, because of their deep pockets, is in real trouble.

Anyway, I am concerned that we do not have the facts. I am concerned that we had better darn well do something because small business people in this country are in trouble, but that the target of our affection at this moment, which is to change the tort liability system, limitate its suffering will, even if we do it, have no impact upon their ability to stay in business, will not help them a bit, and will fundamentally impact upon an aspect of our English jurisprudential system that will be very dangerous.

I yield the floor and will come back for questions.

Senator McCONNELL. All right. Senator Grassley gave up and left. I might suggest we spent an hour and a half on the first witness. Senator Biden, the insurance industry will be represented tomorrow. You might raise those questions about its profitability with them.

I want to thank Mr. Willard for coming. Senator Metzenbaum has an opening statement he did not make earlier.

Our next witness is Charles Brown, the attorney general of West Virginia, and I would like to ask him to come forward while Senator Metzenbaum makes his opening statement, and then we will go straight to Attorney General Brown.

Senator Metzenbaum.


I find this hearing to be particularly interesting, and I think, before we get done, it may be a little bit helpful, but I agree with others, there will be no legislation this year.

I think we can all agree there is a crisis in this industry. What I do not think we can agree is exactly what that cause is. There are plenty of places to put the blame. We can put it on the lawyer, plaintiff's lawyers; we can blame the jury system; we can blame irresponsible insurance company underwriting and poor investment decisions; we can blame litigious consumers. And when we get all done, we will find that there are no simple answers, and the fact is that you need facts in order to responsibly legislate.

The whole issue with respect to this matter of whether the Federal Government should do it or the State government is a rather interesting one. We are all aware of the fact that after the Supreme Court had acted, the insurance industry came to Congress and asked them to pass the McClure and Ferguson Act, and they did that, and sent responsibility back to the States. In that instance, they did not want Congress to be involved.

And then, in 1979, the Federal Trade Commission was moving on this very critical issue in order to obtain the necessary information about the insurance industry. And the insurance industry mounted an extremely effective lobby to get an amendment passed on the floor of the Senate, which I fought vigorously, to keep the Federal Trade Commission not from doing anything more than just studying and finding out the facts for it. And I regret to admit that the insurance industry was almost 100-percent successful because the net result was that we provided by compromise that the FTC cannot do anything on its own without a request from Congress, either the Commerce Committee in the House or the Senate committee. And three times the House committee has requested some investigation be made and some facts be made available. Regrettably, in no instance has the Senate Commerce Committee acted on the subject.

But we do find this reversal of position of the insurance industry not unique around here, sometimes asking Congress to act, sometimes saying Congress ought to keep their nose out of our business.

But the fact is that the insurance industry today says it is bleeding and they do not give us any credible evidence. They give us newspaper and TV ads and, interestingly enough, Senator Hollings indicated that much of the information that the task force had that Mr. Willard speaks about, based their conclusions upon newspaper ads. It is hard for me to believe that to be the fact, but that is the statement which he made and is to be found in the congressional report on it as the bill came out of committee.

Generally speaking, the insurance industry refuses to provide data on premiums collected and actual claims paid by class of coverage. It is an incredible reality in this country that probably the largest single industry having a concentration of wealth and the ability to have such an impact upon our total economy is so unwilling to provide us with the facts and data, and we in the Congress have been irresponsible in coming down hard enough on them in order to see to it that we can find out what this industry is all about. But what the devil.

We all buy insurance policies day in and day out, and we beg our insurance advisor or insurance agent to get us the policy, and then when we get it, there is not one of us, no matter how much training we have had in the legal profession, who can totally understand what we bought after we bought it because it is written in such convoluted language.

So we find the insurance industry selling a product that nobody can understand, and then giving us figures that nobody can understand either.

They have incredible gall to come here and demand relief and refuse to provide us with the facts. But the available facts that we do have before us undercut much of the industry's claims.

In the medical malpractice area, for example, in 1984, the estimated loss in expense payments increased by the smallest margin since 1977. Yet the premiums rose by the greatest margin since 1976.

Day care providers are a common casualty of the liability crisis. We hear constantly about day care centers being forced to close down.

There was an organization known as the National Association of Education for Young Children. It made a study in 1986, a very recent study; a survey of more than 200 child care providers revealed 9 out of 10 programs had never had a claim against them since the beginning of their operation, and that the total claims paid off by the insurers for all programs since they began operating amounted to only 6 percent of the premiums paid by the programs in the 1984-85 year alone. We need facts, not rhetoric.

Before legislating in the dark, we should see data for each classification of business insured, listing premiums collected, claims paid, administrative and legal costs, reserves, and investment income. As a matter of fact, I side with those who say: what are we in this field at all for? Why is this not a State's rights issue? But if we are going to legislate in this area, then we ought to legislate with some brains and some knowledge rather than with just the propaganda that we have received so far from the insurance industry.

This bill is nothing more than an industry wish list. It is grossly unfair to the victims, and it is indifferent to the need for more stringent controls on the insurance industry.

It says to the injured party that he or she can never get more than $250,000 for pain and suffering. Is that enough for someone suffering excruciating pain, sleepless nights, loss of limbs, inability to bear children? Is it enough for that little child about which I spoke previously that will never have a peaceful day the rest of his life? And what about the parents and their responsibility and their ability to defray the expenses of caring for that child?

Under this bill, a victim with a lesser life expectancy than that child, a victim with a 40-year life expectancy can anticipate receiving the magnificent sum of $17 a day, less than a dollar an hour. It is an affront to equity; it is an affront to dignity; it is an affront to fairness. And Congress has no right to put a price on human misery.

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Bill sponsors themselves acknowledge that the current, not the future, the current tort system underpays people with the most se rious losses. Now, I am prepared to sit here and admit there is a real problem. But do not take it out on the victims, do not use our antipathy, not mine, but some, antipathy to plaintiff's lawyers to foster a one-sided result. We know there will be no bill this year. Several members of the Senate have already indicated they will oppose it on the floor, and I will join them.

Over the last 18 months, there has been an effort to develop a compromise. It has failed. If we are going to be called upon in Congress to legislate in this area, it is necessary that we develop that kind of compromise. And I would say that I am prepared to help. I am prepared to work in that area. We ought to consider expanded risk retention, and, yes, we ought to consider, and I will join with Senator Simon as previously indicated, that I will introduce legislation to repeal the antitrust exemption for the insurance industry.

There ought to be alternative dispute procedures, but we cannot do anything. I say to the insurance industry do not come before us next year again and ask us to act without being willing to provide us with all the facts.

I remember that TV program some years ago where I think the punchline on it was “just the facts,” just the facts. That is all they wanted. We want just the facts before we are called upon to deny individuals rights to which juries have indicated heretofore that they are entitled.

Thank you, Mr. Chairman.

Senator McCONNELL. I would like to note the presence of Senator Specter and Senator Grassley. And Senator Grassley has an opening statement which I would like to place in the record at the appropriate time.

We have now spent 1 hour and 75 minutes, and finally got to the second witness- 1 hour and 45 minutes, all right-Attorney General Brown of West Virginia.

Mr. Brown.


Mr. Brown. Thank you very much, Mr. Chairman.

Senator McCONNELL. If you would summarize your statement, we would appreciate it.

Mr. Brown. I would be happy to do that.

I am a last second replacement for Attorney General Bellotti of Massachusetts, who was to appear here. I am very honored to be before the Judiciary Committee today.

As attorney general of West Virginia, I want to state my adamant opposition to federalizing our tort system. We have an effort here that is more than trying to resolve conflicts in State laws. The State laws are roughly similar in the tort area. The advances that are made in one State generally are followed in the ensuing years in other States.

What is really going on here is a victory that has not been able to be won in the State legislatures. The effort is to advantage the manufacturers over the victims in the courtroom of a perceived im

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