[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1860 Introduced in Senate (IS)]







104th CONGRESS
  2d Session
                                S. 1860

To provide for legal reform and consumer compensation relating to motor 
             vehicle tort systems, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 11, 1996

Mr. McConnell (for himself, Mr. Dole, Mr. Moynihan, and Mr. Lieberman) 
introduced the following bill; which was read twice and referred to the 
           Committee on Commerce, Science, and Transportation

_______________________________________________________________________

                                 A BILL


 
To provide for legal reform and consumer compensation relating to motor 
             vehicle tort systems, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Auto Choice Reform Act of 1996''.

SEC. 2. FINDINGS.

    The Congress finds that--
            (1) the costs of operating a motor vehicle are excessive 
        due to the legal and administrative costs associated with the 
        processing of claims under the tort system;
            (2) the costly fault and liability insurance system often 
        fails to provide compensation commensurate with loss, takes too 
        long to pay benefits and wastes too many dollars on legal fees;
            (3) the distorted incentives of the tort system for motor 
        vehicles produce--
                    (A) significant fraud in the claiming process, 
                thereby dangerously exacerbating the national distrust 
                felt by many Americans toward the legal process in 
                general and the rule of law itself;
                    (B) significant wasteful, fraudulent, and costly 
                overuse and abuse of scarce health care resources and 
                services, thereby increasing the problems of 
                affordability and accessibility in the health care 
                system;
                    (C) significant and unbearable cost burdens on low-
                income Americans, which impose on them the Hobson's 
                choice of driving on an unlawful, uninsured basis or 
                compelling them to forego essential needs;
                    (D) significant reductions in access to, and 
                purchases of, motor vehicles, thereby damaging the 
                economic well-being of many low-income Americans, while 
                also unnecessarily harming a critical component of the 
                American economy;
                    (E) significant deterioration of the economic well-
                being of most major American cities through the 
                imposition of a massive, differentially greater ``tort 
                tax'' on urban residents, thereby contributing to the 
                abandonment of cities by many American taxpayers able 
                to achieve substantial after-tax savings on automobile 
                insurance premiums by the sole act of moving to 
                adjacent suburban communities; and
                    (F) significant inability to achieve market-based 
                discounts in insurance rates for owners of safer cars, 
                thereby powerfully contributing to the lesser safety of 
                American drivers and passengers;
            (4) a system that allows consumers the opportunity to self-
        insure and separates economic and non-economic damages for the 
        purpose of purchasing insurance would provide enormous cost 
        savings to drivers;
            (5) consumer choice in selection of motor vehicle insurance 
        would be greatly enhanced if each consumer could decide upon 
        the form of insurance that best suits the individual needs of 
        the consumer;
            (6) insurance to indemnify individuals for personal injury 
        arising from motor vehicle collisions is frequently unavailable 
        at reasonable cost because of the potential for third-party 
        claims;
            (7) a system enabling individuals to select the form of 
        motor vehicle insurance coverage that best suits individual 
        needs would enhance individual freedom and reduce the costs of 
        motor vehicle insurance for consumers; and
            (8) a system which targets and emphasizes the scourge of 
        those who drive under the influence of drugs or alcohol will 
        further deter such dangerous and unlawful conduct.

SEC. 3. PURPOSE.

    The purpose of this Act is to authorize consumers of motor vehicle 
insurance to choose between their present tort remedies under State law 
and a system which combines first-party insurance and the right to sue 
negligent drivers for all further uncompensated economic losses.

SEC. 4. DEFINITIONS.

    For the purposes of this Act, the term--
            (1) ``accident'' means unforeseen or unplanned event 
        causing loss or injury;
            (2) ``economic loss'' means any objectively verifiable 
        pecuniary loss resulting from the harm suffered, including past 
        and future medical expenses, loss of past and future earnings, 
        burial costs, costs of repair, or replacement costs of 
        replacement services in the home, including child care, 
        transportation, food preparation, and household care, costs of 
        making reasonable accommodations to a personal residence, loss 
        of employment, and loss of business or employment 
        opportunities, to the extent recovery for such losses is 
        allowed under applicable State law;
            (3) ``financial responsibility law'' means a statute 
        (including one requiring compulsory coverage) penalizing 
        motorists for failing to carry defined limits of tort liability 
        insurance covering motor vehicle accidents;
            (4) ``insurer'' includes a person who is self-insured 
        within the meaning of applicable State law;
            (5) ``intentional misconduct'' means conduct whereby harm 
        is intentionally caused or attempted to be caused by one who 
        acts or fails to act for the purpose of causing harm or with 
        knowledge that harm is substantially certain to follow when 
        such conduct caused or substantially contributed to the harm 
        claimed for, except a person does not intentionally cause or 
        attempt to cause harm--
                    (A) merely because his or her act or failure to act 
                is done with the realization that it creates a grave 
                risk of causing harm; or
                    (B) if the act or omission causing bodily harm is 
                for the purpose of averting bodily harm to oneself or 
                another person;
            (6) ``motor vehicle'' means a vehicle of any kind required 
        to be registered under the provisions of the applicable State 
        law relating to motor vehicles;
            (7) ``net economic loss''--
                    (A) means economic loss, including when payable 
                based on fault, a reasonable attorney's fee calculated 
                on the basis of the value of the attorney's efforts as 
                reflected in payment to the attorney's client; and
                    (B) excludes amounts paid or payable under--
                            (i) Federal, State, or private disability 
                        or sickness programs;
                            (ii) Federal, State, or private health 
                        insurance programs;
                            (iii) employer wage continuation programs;
                            (iv) workers' compensation or similar 
                        occupational compensation acts; and
                            (v) any other source of payment intended to 
                        compensate such individual for injuries 
                        resulting from a motor vehicle accident, 
                        including amounts paid under personal 
                        protection insurance or tort maintenance 
                        coverage;
            (8) ``no-fault motor vehicle law'' means a statute under 
        which those injured in motor vehicle accidents are paid without 
        regard to fault for their pecuniary losses as a result of 
        personal injury, in return for which claims based on fault 
        including for nonpecuniary losses, are to a defined extent 
        limited;
            (9) ``noneconomic loss'' means subjective, nonmonetary 
        losses including pain, suffering, inconvenience, mental 
        suffering, emotion distress, loss of society and companionship, 
        loss of consortium, hedonic damages, injury to reputation, and 
        humiliation;
            (10) ``person'' means any individual, corporation, company, 
        association, firm, partnership, society, joint stock company, 
        or any other entity (including any governmental entity);
            (11) ``personal protection'' means an insurance contract 
        payable without regard to fault for net economic loss due to 
        personal injury resulting from a motor vehicle accident, along 
        with waiver of tort claims pursuant to this Act;
            (12) ``replacement service loss'' means expenses reasonably 
        incurred in obtaining ordinary and necessary services from 
        others, not members of the injured person's household, in lieu 
        of the services the injured person would have performed for the 
        benefit of the household;
            (13) ``resident relative or dependent'' means a person 
        related to the owner of a motor vehicle by blood, marriage, 
        adoption, or otherwise (including a dependent receiving 
        financial services or support from such owner), and residing in 
        the same household at the time of accidental personal injury, 
        and a person resides in the same household if he or she usually 
        makes his or her home in the same family unit, even though 
        temporarily living elsewhere;
            (14) ``serious bodily injury'' means bodily injury which 
        results in death, dismemberment, significant and permanent loss 
        of an important bodily function, or significant and permanent 
        scarring or disfigurement;
            (15) ``State'' means any State of the United States, the 
        District of Columbia, the Commonwealth of Puerto Rico, Guam, 
        the Virgin Islands, American Samoa, the Northern Mariana 
        Islands, the Trust Territories of the Pacific Islands, and any 
        other territory or possession of the United States;
            (16) ``tort liability'' means the legal obligation for 
        payment of damages caused by one adjudged to have committed a 
        tort;
            (17) ``tort liability insurance'' means insurance by the 
        terms of which an insurer agrees to pay, on behalf of an 
        insured, damages the latter is obligated to pay a third person 
        because of his or her liability to that third person;
            (18) ``tort maintenance coverage'' means coverage under 
        which a tort liability insured, when involved in an accident 
        with a personal protection insured, retains his or her right to 
        claim for personal injury under State law without modification 
        by any provision of this Act, except that responsibility for 
        payment for any such claim is assumed by his or her own insurer 
        to the extent of such coverage under section 5(b)(1); and
            (19) ``uninsured motorist'' means the owner of a motor 
        vehicle, including his or her resident relatives, uninsured for 
        either personal protection or tort liability insurance at the 
        limits prescribed by the applicable State's financial 
        responsibility law or higher under section 5(a)(2)(A).

SEC. 5. MOTOR VEHICLE PERSONAL PROTECTION INSURANCE.

    (a) Insurance Policy Provisions.--(1) An insurance policy that 
includes provisions that entitle the insured to receive, without regard 
to fault or lack of fault, the insured's net economic losses caused by 
an injury along with an express, specific waiver of tort rights as 
provided in the insurance policy shall be valid notwithstanding any 
contrary provisions of State law.
    (2) In order for a personal protection insurance policy to be 
covered by this Act, a motor vehicle insurance policy issued by an 
insurer shall, at a minimum--
            (A) provide personal protection coverage of the greater 
        of--
                    (i) up to the minimum limits of liability insurance 
                for personal injury under the State's financial 
                responsibility law; or
                    (ii) in a State covered by a no-fault motor vehicle 
                insurance law, up to the minimum level of insurance 
                required for no-fault benefits; and
            (B) contain provisions under the State's financial 
        responsibility law, including those related to liability for 
        property damage, except to the extent State law would bar 
        contractual provisions giving effect to personal protection 
        authorizations set forth in this Act, or to the extent that 
        State law would be contrary to other provisions of this Act.
    (3) A personal protection insurer is authorized to contract to pay 
personal protection benefits periodically as losses accrue. Unless the 
treatment or expenses related thereto are in reasonable dispute, an 
insurer who does not pay a claim for net economic loss covered by a 
personal protection insurance under this Act within 30 days after 
payment is due, shall pay the loss compounded at a rate of 50 percent 
per annum, as liquidated damages and in lieu of any penalty or 
exemplary damages.
    (b) Operation of the Right To Choose.--(1) Under this Act, in lieu 
of buying traditional tort liability insurance for personal injury to 
protect third parties, motorists have the right to choose personal 
protection which will be available to themselves and their family 
members in the event of a motor vehicle accident, including the amount 
of financial protection they deem appropriate and affordable for 
themselves and such others. As an alternative, motorists have the right 
to elect traditional tort liability coverage for personal injury at the 
minimum limits (or higher) under the State's financial responsibility 
law.
    (2)(A) A motorist who chooses traditional tort liability has 
automatically included in such coverage tort maintenance coverage at 
least at the equivalent of the minimum levels of insurance under the 
higher of--
            (i) the State's financial responsibility law for personal 
        injury; or
            (ii) the State's no-fault motor vehicle law, if applicable.
    (B) A motorist described under subparagraph (A) who is involved in 
an accident with another motorist remains subject to tort law for 
personal injury except that, based on fault, such motorist--
            (i) may be claimed against by those covered by personal 
        protection insurance or tort maintenance coverage only for net 
        economic loss; and
            (ii) may not claim against those covered by personal 
        protection insurance or tort maintenance coverage except for 
        net economic loss.
    (C)(i) With respect to a claim under subparagraph (B)(ii), a 
deduction is made against the recovery equal to the limits of tort 
maintenance coverage applicable to the economic loss of the claimant.
    (ii) One-half of any amount paid under tort maintenance coverage 
referred to under clause (i) shall be deemed payable for economic loss.
    (3) A motorist who chooses personal protection coverage and who is 
involved in an accident with another such motorist is compensated under 
his or her own policy for net economic loss only without regard to 
fault. But if the motorist sustains net economic loss in excess of his 
or her policy's benefit levels, that person retains the right to claim 
and sue for net economic loss based on fault.
    (4) If a motorist who has chosen personal protection coverage is 
involved in an accident with an uninsured motorist, the personal 
protection insured is compensated for net economic loss without regard 
to fault according to the terms of his or her personal protection 
policy, and has the right to claim against the uninsured motorist for 
net economic loss based on fault. The uninsured motorist forfeits the 
right to claim for noneconomic loss against the motorist who has chosen 
the personal protection policy.
    (5)(A) A motorist who chooses either personal protection insurance 
or tort liability insurance also binds by such choice his or her 
resident relatives, provided that--
            (i) an adult resident relative shall not be bound without 
        his or her consent, which, in the absence of express consent, 
        shall be implied when the relative is present in a motor 
        vehicle operated by the motorist; and
            (ii) insurers are authorized to specify reasonable terms 
        and conditions governing the commencement, duration, and 
        application of the chosen coverage depending on the number of 
        motor vehicles and owners thereof in a household.
    (B) In order to minimize conflict between the two options under 
subparagraph (A), insurers are authorized to maintain underwriting 
rules that encourage uniformity within a household.
    (6) A personal protection insured retains the right to claim, and 
remains subject to a claim, for driving under the influence of alcohol 
or illegal drugs, both as defined by State law, or for intentional 
misconduct.
    (7) A personal protection insured claims personal protection 
benefits in the following priority:
            (A) The personal protection of an employer if the person 
        injured is an employee of the employer and the accident occurs 
        while the employee is acting within the scope of the employee's 
        employment.
            (B) The personal protection under which the injured person 
        is or was an insured.
            (C) The personal protection covering a motor vehicle 
        involved in the accident, if the person injured was an occupant 
        or was struck by such motor vehicle at the time of the 
        accident.
    (8) A personal protection insurer is authorized to write personal 
protection coverage--
            (A) without any deductible or subject to a reasonable 
        deductible not to exceed $1,000; and
            (B) with an exclusion of coverage for persons driving under 
        the influence of alcohol or illegal drugs.
    (9) A personal protection insurer is subrogated, to the extent of 
its obligations, to all of the rights of its personal protection 
insured with respect to an accident caused in whole or in part, as 
determined by applicable State law, by the negligence of an uninsured 
motorist or driving under the influence of alcohol or illegal drugs, or 
caused in whole or in part by intentional misconduct or any person who 
is not affected by the limitations on tort rights and liabilities under 
this Act.
    (10) Any person lawfully uninsured under the terms of State law for 
either personal protection or tort liability insurance retains his or 
her tort rights in a form unaffected by this Act.
    (c) Renewal or Cancellation.--An insurer shall not cancel, fail to 
renew, or increase the premium of its insured solely on account of the 
insured or any other injured person making a claim for personal 
protection benefits or, where there is no basis for ascribing fault to 
the insured or one for whom the insured is vicariously liable, for tort 
maintenance coverage.
    (d) Immunity.--No insurer or any agent or employee of such insurer, 
no insurance producer representing a motor vehicle insurer or any 
automobile residual market plan, and no attorney licensed to practice 
law within this State shall be liable in an action for damages on 
account of an election of the tort liability option, an election of the 
personal protection option, or a failure to make a required election, 
unless such person has willfully misrepresented the available choices 
or has fraudulently induced the election of one system over the other.
    (e) Rule of Construction.--Nothing in this Act shall be construed--
            (1) to waive or affect any defense of sovereign immunity 
        asserted by any State under any law or by the United States;
            (2) to preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation;
            (3) to affect the right of any court to transfer venue, to 
        apply the law of a foreign nation, or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
ground of inconvenient forum;
            (4) subject to paragraph (1), to create or vest 
        jurisdiction in the district courts of the United States over 
        any motor vehicle accident liability or damages action subject 
        to this Act which is not otherwise properly in the United 
        States District Court;
            (5) to prevent insurers and insureds from contracting to 
        limit recovery for lost wages and income under personal 
        protection coverage such that only 60 percent or more of lost 
        wages or income is covered, or to offset death benefits under 
        personal protection coverage by amounts paid for lost wages and 
        replacement service losses;
            (6) to prevent an insurer from contracting with personal 
        protection insureds, as permitted by State law, to have 
        submitted to arbitration any dispute with respect to payment of 
        personal protection benefits;
            (7) to relieve a motorist of the obligations imposed by 
        State law to purchase tort liability insurance for personal 
        injury to protect third parties who are not affected by the 
        immunities of subsection (b); and
            (8) to preclude a State from enacting, for all motor 
        vehicle accident cases including cases covered by this Act, a 
        minimum dollar value for defined classes of cases involving 
        death or serious bodily injury.

SEC. 6. APPLICABILITY TO STATES; CHOICE OF LAW; JURISDICTION; AND 
              CONSTRUCTION.

    (a) Election of Nonapplicability by States.--This Act shall not 
apply in a State if such State enacts a statute that--
            (1) cites the authority of this subsection; and
            (2) declares the election of such State that this Act shall 
        not apply.
    (b) Nonapplicability to State by State Finding.--(1) This Act shall 
not apply in a State, if--
            (A) the State official charged with jurisdiction over 
        insurance rates for motor vehicles makes a finding that the 
        statewide average motor vehicle premiums in effect immediately 
        before the effective date of this Act for personal injury will 
        not be reduced by an average of at least 30 percent for persons 
        choosing personal protection coverage in lieu of traditional 
        tort liability pursuant to this Act (without including any cost 
        for uninsured or underinsured or medical payments coverages);
            (B) the finding described under subparagraph (A) is 
        supported by evidence adduced in public hearing and reviewable 
        under the State's administrative procedure law; and
            (C) the finding described under subparagraph (A) and any 
        review of such finding described under subparagraph (B) occurs 
        no later than 60 days after the date of the enactment of this 
        Act.
    (2) Premiums for personal injury referred to under paragraph (1)(A) 
include premiums for--
            (A) personal injury liability, uninsured and underinsured 
        motorists' liability, and medical payments coverage; and
            (B) if applicable--
                    (i) no fault benefits under no fault motor vehicle 
                law; or
                    (ii) similar benefits under a law not limiting 
                claims based on fault for nonpecuniary losses.
    (c) Choice of Law.--In disputes between citizens of States that 
elect nonapplicability under subsection (a) and citizens of States that 
do not so elect, ordinary choice of law principles shall apply.
    (d) Jurisdiction.--This section shall not confer jurisdiction on 
the district courts of the United States under section 1331 or 1337 or 
title 28, United States Code.
    (e) Construction.--Nothing in this Act shall alter or diminish the 
authority or obligation of the Federal courts to construe the terms of 
this Act.

SEC. 7. EFFECTIVE DATE.

    This Act shall take effect 60 days after the date of the enactment 
of this Act.
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