balance that does not in fact exist. Basically it would cut at the core of the uniquely valuable American institution, the jury, in our civil law system.

Let me just outline briefly what happened in West Virginia this year. It may be instructive of the problems that citizens in our State are having and that other States are having with the insurance industry.

After our legislature passed a mild tort reform law in 1986, a law that was partly what the insurance industry wanted and partly something they opposed, the major malpractice companies instituted a mass pullout from the State, a simultaneous pullout of malpractice insurance. We came in fact within 48 hours of having clinics closing, having the only ambulance service in one county closing down, the only renal dialysis unit in southern West Virginia closing down, clinics shut down if the malpractice companies had succeeded in their effort to pull out.

I filed a civil antitrust case in State court against these five companies and got an injunction in our State supreme court stopping the cancellation of 7,600 policies so the insurance stayed in effect. The legislature came back to town. The situation was so bad that our Governor proposed even a State-run insurance company basically booting out the insurance companies permanently in malpractice and have a State-run system. Our Republican Governor, I might add, proposed that. The legislature instead took a more proinsurance position and simply passed the proposals that the insurance companies wanted essentially.

We undertook then-my office undertook a study through an economist, a Washington economist, to the profits of the insurance industry in malpractice, because they were claiming they were losing money. We found the profit picture to be astoundingly helpful to the insurance industry. The two major insurance companies were making 58 and 73 percent respectively in rate of return over the last 6 years. Two of the smaller companies indeed made 200 percent rate of return, but that may be a smaller data base. But the two largest companies made an incredible rate of return, 58 and 73 percent.

Interestingly, when I intervened in one of those rate increase requests a couple of weeks ago, we had the hearing. The insurance company was asked what in their rate proposal took into account the tort reform passed by the West Virginia Legislature. And their answer was they had not taken tort reform into account at all. That is, there was no quid pro quo at all for the businesses, for the consumers, in this case the doctors and nurses and dentists, who had expected tort reform to lower their insurance rates. Instead, the cavalier answer of this insurance company representative was, "We didn't take into account tort reform at all when we asked for this 130 percent rate increase in 1986."

So we have had a real difficult experience in West Virginia with the malpractice insurance industry. Perhaps a unique one in one sense that there was a mass pullout attempt.

Now, my fundamental question here to the committee is why must this so-called crisis be solved by the victim bearing the brunt, indeed the victim bearing the entire burden of the problem? The $100,000 cap or, in Senator Danforth's proposal, the $250,000 cap,

which so much limit the case of the administration bill would basically rule out punitive damages. It would not be that deterrent that we look for to have more safety in the workplace and safety in the environment.

Victims are no longer made whole for noneconomic losses. If the victim would have something valuable to stow on a piece of property, he could be made whole on that, but he or she could not be made whole for the noneconomic losses.

We certainly have, and I certainly would concede there are some real unusual, perhaps even outrageous anecdotes of people getting very high verdicts in particular cases. But they are anecdotes. They are not the aggregate data. And the aggregate data do not demonstrate the need for massive changes in the way insurance companies are able to act in our society.

Now, there is a solution. And I know all the members of the committee are lawyers, and there is a solution in the common law to outrageous jury verdicts or runaway jury verdicts. And that is the concept of remitting it, where the judge says your verdict is too high, we will remit it down to reasonable level. And that happens in cases where the jury verdict is too high. That is the way the common law solves the problem when an individual jury gives an award that is too high. That is really the problem. The anecdotes are too high jury verdicts from time to time. There is no systemic or aggregate data problems that I have been able to see.

We have to not only look at the impact on the victim; we have to look at the impact on safety. If we decrease the incentive to bring product safety, safe products to our consumers, we will lower the quality of those products in terms of safety. Safety in the workplace and safety of the product to the consumers.

I do not think that is a good tradeoff, and I do not think there would be any positive impact in the way of lower insurance rates. At least our experience is the opposite.

My question of the committee-my final question is why does not tort reform lower insurance rates? The one State that did in fact command lower insurance rates when they passed tort reform, the State of Florida subsequently faced a lawsuit from the insurance industry because they had lowered insurance rates as a quid pro quo for tort reform.

If tort reform is not going to lower insurance rates, why have tort reform at all? There is no gain except to the insurance industry. Our analysis of this situation is they do not really need any help from the Government at this time and have not for several years.

Let us get the data first. Senator Rockefeller of my home State has proposed in the Commerce Committee bill that there be aggregate data reporting. That would be important. In fact, Senator Simon, I believe, has a bill to that effect, and I really commend that.

The committee could also, in the insurance area, repeal the McCarran-Ferguson act. While attorneys general, the 50 of us, disagree on a lot of things, we are unanimous in agreeing that the McCarran-Ferguson act ought to be repealed. Republicans, Democrats from all regions, from all philosophies agree that we should repeal McCarran-Ferguson and make the insurance industry com

pete in the same terms that most industries in America had to behave.

The committee may have-if it does not, I would be happy to submit it-a report that six attorneys general have written. This is not the association, but six of us: Bellotti of Massachusetts; Van de Kamp of California; Mattox of Texas; Thornberg of North Carolina, and LaFollette of Wisconsin, and myself, on the issue of the insurance problem and our belief that it is more of an insurance crisis than a tort crisis.

We do have to act, we do have to bring down the cost of litigation in the courtroom. There are many changes that we need to bring. But let us not have the victim pay the price. Let us look at the other participants, the insurance industry itself, the lawyers, not only the plaintiffs' lawyers, but the defense lawyers, the medical, the health providers. When we look at jury verdicts going up so much, as is alleged-and I do not think they are that much more than the cost of inflation. But keep in mind the costs of health care have gone up much, much faster than the cost, have been inflation. If the cost of health care goes up dramatically, as it has in America for the past two decades, logically the jury verdicts that pay for those high health care costs are going to go up. Let us do something about high health care costs as part of this solution.

So, if we are going to have a solution, I think everybody has got to give, not just the victim.

Thank you, Mr. Chairman.

Senator MCCONNELL. Thank you, Mr. Attorney General.

I have three questions, two of them I am going to submit to you to be answered in writing, if you will, for the record. I am doing that in the interest of time. But I do want to ask you one of them. You mentioned the analysis of the causes of the current crisis of unavailability and unaffordability of liability insurance, and this Attorneys General study to which you are a signatory.

Mr. BROWN. Yes, sir.

Senator MCCONNELL. My question relates to that paper. It places the exclusive, the exclusive blame for the liability crisis upon the insurance industry.

So my question of you is: is there no evidence in your opinion, no evidence that inequities or uncertainties in our underlying tort liability system have played any role in even contributing to this crisis?

Mr. BROWN. I think, Senator McConnell, there are problems in our tort system. I certainly agree with that. The cost of legal fees, the time of getting to court, the difficulty of lower income plaintiffs, particularly in smaller awards, those who are not injured that much may not even be able to get an attorney at all.

There are certainly problems, but the problems are more in the one-on-one type, not only the anecdotes but the individual harm to the consumer. I think the aggregate data indicates that the insurance industry should not be charging the rates they are.

But I would say, as one individual attorney general, that we should look at every aspect of the problem. I commend you for doing that, not just looking at the victim, but looking at the insurance industry, looking at the bar, the plaintiffs' fees and defense fees and the medical costs.

Senator McCONNELL. So some kind of tort reform might be appropriate regardless of the insurance liability crisis?

Mr. BROWN. I think if we did it across-the-board, I think it should occur at the State level, but I think we should have no sacred cows in the system, and should look at the system as a whole. But I think our legislatures and our State courts are able to do that.

Senator McCONNELL. Senator Heflin.

Senator HEFLIN. You mentioned States-attorney general from the State, and the issue of federalism which concerns me.

Are you familiar with the bill that came out of the Commerce Committee? I assume it is S. 2760.

Mr. BROWN. Yes, sir, Senator.

Senator HEFLIN. It seems to take a somewhat different approach than most Federal legislation that attempts to create a Federal cure. Most create Federal standards, and then place the responsibility in the Federal courts. There are some exceptions where they have been concurrent, such as the FELA cases, Jones act cases, that have in effect given the State courts concurrent jurisdiction with the Federal court.

This bill in effect does not give the Federal courts any jurisdiction whatsoever, but creates standards that are imposed on the State court system. And this, as far as I can ascertain, is something different.

In the cases that have been created relative to several recovery, several causes of action and the basis in the courts, you have had the Federal courts to construe then, the expense involved, or else the concurrent aspect, as I mentioned in those two exceptions.

Now, here you have an imposition and an intrusion into the State court system in that you are imposing on the State judicial system standards to follow, preempting and taking away right from the legislative branch of the States and saying that in determination of matters between citizens of this State as to civil cause of action, the State must follow these federally imposed standards.

This raises, to me, a question of constitutionality. I do not believe that our Founding Fathers ever attempted to say that in the three branches of government within a State, we were going to impose standards upon them relative to certain matters, and then not take into jurisdiction anything which will allow a judicial system to do it.

My thoughts are hazy on this. But it seems to me a substantial constitutional issue from the concept of the way the States were organized and where our Constitution is written and the way that the Federal and State relationship exists. I just wonder if you have any comments relative to that aspect which is seemingly something entirely different than I have ever seen in any so-called Federal cure legislation.

Mr. BROWN. Well, I have not been a jurist like you have been, Senator Heflin, but I think it would certainly be one that should be researched thoroughly before it is posed. I would assume the administration has researched it and has come to a conclusion that it is. I have not seen any research from the States or from the attorneys general either way on that, but I do think it is a subject that

Senator HEFLIN. I can tell there has been no real research done on this. The language of the bill says the district courts of the United States shall not have jurisdiction over any civil action pursuant to this act, based on section 1331 and 1337 of title XXVIII, other than they would have jurisdiction on diversity cases, but not on the Federal question itself.

So it appears to me that we-I have not seen any research on it. I have looked at this a little bit and also at the Constitution. And I think it is an area that could stand some study.

It may well be that it violates a constitutional provision guaranteeing a Republican form of government to the States. I would like you and your attorneys general who are interested in this question of federalism and the rights of the States relative to this, to look at this peculiar aspect, and I think it is a peculiar aspect. It needs some research that is different from any so-called Federal cure legislation that has ever been proposed before that I know about.

Mr. BROWN. Well, thank you, and I agree with you, Senator.
Senator MCCONNELL. Senator Broyhill.

Senator BROYHILL. No questions at this time.

Senator MCCONNELL. All right. Thank you very much, Mr. Attorney General.

Our next group of witnesses is a panel consisting of James Coyne of the American Tort Reform Association; John Čurcio of the National Association of Manufacturers; and John Motley of the National Federation of Independent Businesses.

I apologize for the length of the hearing this morning. Apparently that was because there is a good deal of interest in the subject. If you could briefly each of you summarize your statements, we will put your full statements in the record.

We will start with Jim Coyne.

STATEMENTS OF PANEL CONSISTING OF: JAMES K. COYNE, PRESIDENT, AMERICAN TORT REFORM ASSOCIATION; JOHN B. CURCIO, NATIONAL ASSOCIATION OF MANUFACTURERS; AND JOHN J. MOTLEY III, DIRECTOR OF FEDERAL LEGISLATIVE AFFAIRS, NATIONAL FEDERATION OF INDEPENDENT BUSINESS Mr. COYNE. Thank you very much, Mr. Chairman.

I would like to submit my entire statement for the record, and I would also like to present you something.

Frankly, I am very frustrated to hear today that there is no chance of this bill, or a bill like it, being enacted this year. Of course, that frustrates, all of us who are involved in the tort reform effort, especially the 400 associations that make up the American Tort Reform Association, representing 30 million Americans and the nearly 2,000 small businessmen at the White House Conference last week. As you know, that group overwhelmingly supported tort reform and specifically, I might add, this bill. In addition, this inaction frustrates, I am sure, the people across the country who look to the Senate for relief. And so perhaps in the spirit of that frustration, I would like to submit to you for the record, if I may, the first demerit badge. This badge was developed by the Boy Scouts of America. They are a member of the American Tort Reform Association. They developed the badge for us. I would like to present it