[Congressional Record Volume 141, Number 70 (Monday, May 1, 1995)]
[Senate]
[Pages S5874-S5909]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
COMMONSENSE PRODUCT LIABIL- ITY AND LEGAL REFORM ACT
The Senate continued with the consideration of the bill.
Mr. KYL. I thank my colleague.
Mr. President, at this time, I ask unanimous consent to lay aside the
pending amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 611 to Amendment No. 603
(Purpose: To establish a limitation on noneconomic damages)
Mr. KYL. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The bill clerk read as follows:
The Senator from Arizona [Mr. Kyl] proposes an amendment
numbered 611 to amendment No. 603.
Mr. KYL. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert the following new section:
SEC. . LIMITATION ON NONECONOMIC DAMAGES.
(a) In General.--With respect to any health care liability
action, in addition to any award of economic or punitive
damages, a claimant may be awarded noneconomic damages,
including damages awarded to compensate the claimant for
injured feelings such as pain and suffering, emotional
distress, and loss of consortium.
(b) Limitation.--The amount of noneconomic damages that may
be awarded to a claimant under subsection (a) may not exceed
$500,000. Such limitation shall apply regardless of the
number of defendants in the action and the number of claims
or actions brought with respect to the injury involved.
(c) No Disclosure to Trier of Fact.--The trier of the fact
in an action described in subsection (a) may not be informed
of the limitation contained in this section.
(d) Awards in Excess of Limitation.--An award for
noneconomic damages in an action described in subsection (a),
in excess of the limitation contained in subsection (b)
shall--
(1) be reduced to $500,000 either prior to entry of
judgment or by amendment of the judgment after entry;
(2) be reduced to $500,000 prior to accounting for any
other reduction in damages required under applicable law; and
(3) in the case of separate awards of damages for past and
future noneconomic damages, be reduced to $500,000 with the
initial reductions being made in the award of damages for
future noneconomic losses.
(e) Present Value.--An award for future noneconomic damages
shall not be discounted to present value.
Mr. KYL. Mr. President, this is the noneconomic damages limitation
amendment that many of us have been talking about for some time. I
indicated earlier this morning that I would be introducing it. It works
in tandem with the limitation on lawyer's fees to ensure that the
victims of negligence are properly compensated and that neither the
public needs to end up continuing to pay this tort tax that we talked
about earlier nor that lawyers or others in the system become enriched
at the expense of the victims of negligence.
This particular amendment would place a limitation of $500,000 on
noneconomic damages that are awarded to compensate a claimant for pain,
suffering, emotional distress, and other related injuries.
Mr. President, every day in America, physicians take care of over 9
million patients. These are professionals who are dedicated to the
service of their fellow citizens. They do a tremendous job. They serve
in times of crisis and natural disasters often at great personal risk.
A good example is the heroic service of the doctors in the aftermath of
the bombing in Oklahoma City.
The medical profession is dedicated to doing everything possible to
ensure that the practice of medicine conforms at all times with both
Government rules and regulations and, of course, with the high
standards that are inherent in the profession itself.
But physicians are not God. They are human like all the rest of us,
and occasionally mistakes are made and sometimes patients suffer
injuries as a result. When this occurs, injured patients must be
awarded full and fair compensation for their injuries should they
choose to pursue a legal remedy. But in today's litigious climate,
roughly one-third of all physicians, 50 percent of all
[[Page S5875]] surgeons, and 75 percent of all obstetricians will be
sued in their careers.
Let me go through those figures again: 50 percent of all surgeons and
75 percent of all obstetricians will be sued in their careers.
Courts determine that roughly three-fourths of these cases have no
merit, and they are ultimately dismissed with no payment being made to
the claimant, but the psychological and financial costs of defending
these cases, oftentimes frivolous, but these unpredictable situations
are staggering. Defending against meritless lawsuits has in effect
become an occupational hazard of practicing medicine and, of course,
these costs are passed on to all the rest of us in the form of higher
medical costs, diminished quality, and access to health care.
Mr. President, as we in the Congress address legal reform, we should
not miss the opportunity to rationally address the overly litigious
nature of medical liability actions. The Kyl amendment would limit
noneconomic damages to $500,000. The amendment would apply only to
noneconomic damages, known sometimes as pain and suffering.
No other country compensates victims of health care injuries as
generously as $500,000 for noneconomic damages. For example, in Canada,
there is a cap on noneconomic damages of $180,000. In a 1994 report to
Congress, the Physician Payment Review Commission, which is the Federal
Commission established to review Medicare payments, said:
Much of the unpredictability and inconsistency that
characterizes today's malpractice awards is because of
noneconomic damages, which account for 50 percent of total
payments. Reducing the unpredictability and eliminating the
potential for unreasonably high awards would improve
decisionmaking during the course of a lawsuit and would
promote settlement.
In other words, Mr. President, in order to encourage settlement
rather than litigation, we should address this ``lottery mentality'' of
awarding arbitrary and unpredictable noneconomic damages.
According to a September 1993 report by the Office of Technology
Assessment, and I am quoting now:
Limits on noneconomic damages is the single most effective
reform in containing medical liability premiums.
Let me repeat that, because all of us are concerned now about what
kind of health care reform we will be adopting later this year, and in
the context of both legal reform and health care reform, this is a
startling statement. It is the OTA, 1993.
Limits on noneconomic damages is the single most effective
reform in containing medical liability premiums.
Without a reasonable limitation on these nonquantifiable losses,
medical liability insurance premiums and medical product liability
costs will continue to skyrocket. Physicians are forced to drop
insurance coverage or, in order to minimize the risk, to stop
performing high-risk procedures such as delivering babies.
According to a book published by the respected Institute of Medicine
called ``Medical Professional Liability and the Delivery of Obstetrical
Care,'' the most comprehensive, authoritative study of rural health
care access, the delivery of obstetrical care in all rural areas of
America is seriously threatened by professional liability concerns:
12.3 percent of the ob/gyn's nationally have given up obstetrics
totally due to liability pressures--12.3 percent; 22.8 percent of ob/
gyn's nationally have drastically decreased the amount and level of
obstetric care they provide. In some States, the problem is much worse
than nationally.
In rural Arizona, the most recent study shows that 21 percent of the
ob- gyn's have totally stopped providing obstetric care. The reason?
The cost of malpractice insurance and threats of suits in Arizona.
Mr. President, how is this system enhancing medical care in our
country? Somehow, this system is protecting people in need of medical
care? It is precluding physicians from serving the patients, and in the
rural areas in particular the kind of care that women delivering babies
are getting is less than it could be, less than it should be, because
you do not have that obstetrician there helping with the delivery.
There is an impact on the minority community. The National Council of
Negro Women believes that ``a cap on noneconomic damages is an
essential part of comprehensive legal reform legislation.'' This is in
a letter dated just February 14 of this year, from Eleanor Hinton
Hoytt, director of national programs of the National Council of Negro
Women.
The council realizes that low-income minority communities are facing
increasing shortages of physicians who can afford to pay liability
insurance premiums.
We know, Mr. President, of many examples of physicians who, on the
very first day of the year, January 1, either have to have a liability
insurance policy costing them anywhere from $30,000, $40,000, $50,000,
$60,000, and even upward of $70,000 before they can see their very
first patient, much more than most people in this country make in a
year.
The argument may be made that limiting noneconomic damages would
restrict the right of an injured patient to sue and collect for
economic damages and that, of course, is not true. My amendment does
not prevent filing suit and recovering all economic damages for past
and future medical expenses, loss of past and future earnings, loss of
consortium, loss of employment or any other business opportunity, nor
does my amendment limit suits that seek damages for malicious acts for
which punitive damages are warranted. A cap on noneconomic damages such
as the Kyl amendment does not discourage the filing of lawsuits. In
California, which has a cap just half the cap that I am proposing here,
a cap of $250,000 as opposed to $500,000, there were 16\1/2\ percent
more cases filed in 1993 than in 1992, the year before the limit in
California went into effect. So it did not preclude the filing of
actions.
Moreover, in California, the cost of liability premiums has been
reduced in part because of this cap. Prior to imposition of the
$250,000 cap in California, the State had the highest liability
premiums in the Nation. Premiums are now one-third to one-half the rate
in States like New York, Florida, and other States that have not
established a limit.
Mr. President, as part of the Contract With America, the House has
passed a more restrictive cap of $250,000 on noneconomic damages, the
same limit as in some other States, including California. Some in the
Senate said, in response to that, that the $250,000 cap may be fine in
most cases, but there are always those few exceptional egregious cases
that should have a greater limit. So we doubled it. We increased it 100
percent to $500,000. And bear in mind, this would be on top of all of
the economic damages awarded, in other words, all of the sums of money
required to make the victim whole, to pay for all of the economic
losses, losses of future employment opportunities, whatever it might
be, including all of the bills, of course. And, as I said, in the case
of punitive damage awards, those are not limited by this particular
amendment. So we are only talking about the noneconomic damages, those
unquantifiable damages. No one can put a dollar amount on how much pain
and suffering it is when someone is injured. What we are saying is
there should be a predictable sum that at least represents the absolute
top.
There is a lot of public support for some kind of cap here. For
example, a very recent poll conducted by the Health Care Liability
Alliance indicated that 17 percent of the public supports a cap on
common noneconomic damages.
So we think, Mr. President, this is an amendment which will
strengthen the bill. It will strengthen the Kassebaum-McConnell-
Lieberman amendment, which has to do with medical malpractice, and
therefore at the appropriate time, I guess sometime after 11 o'clock
tomorrow, we are going to call for a vote on this amendment, and I hope
it will pass.
I wish to conclude with two arguments that have been made in
opposition to this amendment. The first is that the people who are
injured by some kind of negligence need to keep the lion's share of the
money they win, and the point with respect to these caps is do they not
ordinarily keep what they win? And the answer to that, of course, is
that that is not true.
According to the Rand Corp., plaintiffs keep only 43 cents of every
dollar
[[Page S5876]] spent on medical liability. Over 50 cents goes to the
lawyers.
So, Mr. President, what we are trying to do here is to put two
amendments in tandem. There is already an amendment which I have
offered which would limit the attorney's fees in these kinds of cases.
By limiting the attorney's fees, we enable the claimant to keep more of
the award. So, at the same time that a cap would be placed on the
noneconomic damages, a cap of a half million dollars, the claimants
would be able to keep more of that half million dollars because of the
limits on attorney's fees.
So the net result is that the claimant will not be hurt, will not
have recovery reduced by this cap on noneconomic damages. The claimant
will do as well, if not better, by virtue of the fact that we would
also limit the attorney's fees. The loser will be the attorney who is
trying to get the great jackpot here, the big bonanza, of earning
something like $300,000 for 1 hour of work. That will be the loser, not
the claimant, with this particular cap.
The bottom line is that the claimants will do as well or better if we
combine this with the limitation on attorney's fees.
Second, there is a question that I have heard: Is it not true that a
$500,000 cap on noneconomic damages will keep deserving patients from
getting million-dollar settlements when they really need them? And the
answer is, of course, no.
One of the reasons for increasing the cap to $500,000 rather than
$250,000 is to ensure that in that very exceptional cases, in addition
to all of the economic damages awarded, there will be an opportunity to
get up to a half million dollars.
But the point is that patients with valid claims are today collecting
millions of dollars in States with caps, such as California, despite
the cap on noneconomic damages there of $250,000. In California, the
number of million-dollar verdicts and settlements has hovered around 30
per year throughout the 1990's, with the average indemnity in these
cases over $2 million. These million-dollar-plus cases included awards
for wrongful death, birth injuries diagnosed in related areas, failure
or delay in treatment, and substandard post-surgical care.
So, Mr. President, despite the fact there has been a limit on
noneconomic damages in California of only half the amount we are
suggesting here, there have still been settlements and awards that far
exceed $1 million. So we are not limiting those cases, and everyone
acknowledges they are the very small exceptions to the rule here. But
we are not limiting those particular recoveries.
In conclusion, Mr. President, there are two amendments that I have
offered to the underlying medical malpractice amendment offered by
Senators Kassebaum, Lieberman, and McConnell. The first is a limitation
on attorney's fees, essentially, at 25 percent, although there are some
nuances to it, of any recovery. And second is the limitation on
noneconomic damages. The two of these amendments, working in tandem,
ensure that people will be able to bring claims, that they will be able
to recover more of the award either in settlement or by jury verdict
themselves, that the attorney will receive less but attorneys will
still receive a perfectly adequate compensation, and there will be no
disincentive for them to actually bring the lawsuits because the
attorney's fees cap is actually high enough so that there is not a
disincentive.
The combination of that with the cap on noneconomic damages will
enable the plaintiffs to be fully compensated, but also reduce the cost
to society as a whole in the form of increased medical malpractice
premiums and, therefore, in the form of higher costs charged for
medical care generally because those costs have to be passed on by the
physicians and the hospitals that have to acquire the insurance.
We believe these are two important and necessary amendments to the
underlying legislation. I ask my colleagues to support these
amendments.
I yield back my time.
Mr. WELLSTONE addressed the Chair.
The PRESIDING OFFICER (Mr. Grams). The Senator from Minnesota.
Mr. WELLSTONE. I wonder whether I would have time to ask a few
questions that I would like to ask my colleague from Arizona.
I am not a lawyer, but as I understand it, the whole concept of
compensation is to make the individual whole, and there is the economic
and then the noneconomic. With this cap of $500,000, how many of the
plaintiffs, as we project to the future, how many plaintiffs would lose
how much by way of dollars in compensation to make them whole again?
What are the projections on what impact this is going to have on those
individuals that have been injured in a malpractice?
Mr. KYL. Mr. President, I say to my colleague that the information
that we have, according to a study that was recently done, is that less
than 2 percent of the cases would be affected by the $500,000 cap. But,
of course, because of the large amount of money involved, it would have
a very large impact on constraining costs.
Mr. WELLSTONE. Mr. President, my next question would be: If it is
less than 2 percent--and I gather that that, as you say, may focus on a
few cases where there are large dollars involved--then I would ask my
colleague from Arizona, do you have any projections on what impact this
will actually have on more doctors? How many more doctors would be
practicing medicine in underserved areas, be they rural or inner city,
as a result of this cap? Do you have any projections?
Mr. KYL. I would be happy to continue to respond to my colleague,
because they are very good questions. They go right to the heart of the
issue.
Obviously, by proposing the reform, we are hoping to have an impact
pact on the problem. Part of the problem, as I indicated, is the fact
that, particularly in rural areas but not limited to rural areas, and
in particular ob-gyn's have either stopped practicing or have cut back
their practice just to the gynecological services rather than
obstetrical services. If you go by the numbers I cited, you have an
indication at least of what these physicians were able to do before
this litigation system got to the point that it is today.
It is impossible, of course, to predict precisely, but I will go back
to the numbers that I stated just a moment ago, because the study was
very recent. I think it was either 1993 or 1994. Nationally, 12.3
percent of the ob-gyn's have given up obstetrics totally, due to
liability pressures. That is in a book, as I said, that was written by
the Institute of Medicine called Medical Professional Liability and the
Delivery of Obstetrical Care. Nationally, 22.8 percent of the ob-gyn's
have drastically decreased the amount of care they have provided
because of this.
So one could conclude that, if we were able to put a cap on these
damages, at least some of this problem would go away. But, obviously,
because you would still be able to recover up to $500,000 in
noneconomic damages, I am not contending that all of these physicians
would go back to practicing. Of course, this does not relate either to
the increases in costs of the medical malpractice premiums for those
physicians who do choose to stay in practice or for those who are
involved in other areas of specialty.
So, it is impossible to say with precision, but I think it is safe to
say that at least it would reduce medical costs and get some of these
rural areas better covered by physician services.
Mr. WELLSTONE. By the way, in the 2 percent of the cases that the
Senator mentioned, how much does that translate to in terms of dollars?
Mr. KYL. Let me see if I can get that for you. I do not have that in
my prepared remarks.
Mr. WELLSTONE. I guess what I am struggling with here, Mr. President,
as I try to figure out the logic of this, if my colleague had said,
``Look, there are lots of cases that this would affect all across the
country,'' then I would have said, ``Well, then I understand what you
are doing in terms of the negative impact on plaintiffs.'' Many times
we are talking about people who have been injured.
But my colleague's response was, it is a relatively small percentage,
in which case then the flip side of the coin is, I am wondering--and I
wrote it down--if it is 12.3 percent, the figure on ob-gyn's who talked
about the problems of excessive payments, I am not at all sure that
there would be--I mean, by definition, if there are very few cases,
then why would any of us
[[Page S5877]] have any reason to believe that, by putting this cap on,
this would have any significant impact on the number of ob-gyn, if you
follow me, practitioners in these underserved communities?
Mr. KYL. I think my colleague raises a good point. The mere fact that
half of the physicians will, half of the surgeons in the country will
be sued for medical malpractice has a great deal to do with the
malpractice premium problem as well.
So it is very difficult to tell how much of the problem is due to the
large number of cases that will be filed and have to be defended,
regardless of whether they have merit or not--three-fourths of them
actually being thrown out--and how many problems, on the other hand,
are due to very large awards. Because it is impossible to divide those
numbers out, it is impossible to say precisely how much good we will do
with this amendment.
But this amendment is just one narrow piece of a much larger
underlying amendment, as my colleague knows, that is being offered by
Senators Lieberman, Kassebaum, and McConnell, that hopefully will also
deal with the number of claims that are filed.
So we are trying to get at it in three different ways: We are trying
to limit the circumstances under which these cases are filed and trying
to get them into alternative dispute rather than going all the way
through trial, No. 1; second, we are trying to limit the nonessential
costs, and in this case, we are saying some of the attorney's costs are
just not necessary, we want to give more of that money to the
claimants; and third--and I think this goes directly to the point of
the Senator from Minnesota--there may not be very many cases where you
have these astronomical awards but those few cases do represent a lot
of money and they represent a lot of psychological horror to the
insurance companies and to the physicians. They are the ones everybody
knows about. That is the McDonald's coffee that burned the claimant and
all of the other cases that we are very familiar with.
Of course, that is not a medical malpractice case, but it is those
kinds of awards that get put into people's minds and it is that which
probably, in the case of the insurance companies, ends up causing them
to, in effect, dictate to their insured, the physician, that a case be
settled, even though I heard a lot of physicians saying, ``I wanted to
fight that case because I knew I was not negligent, I knew we didn't
cause this damage, or at least it was not negligence,'' but the
insurance company said it was cheaper to settle because of the
potential for one of these astronomical awards.
Because that is the sense of it, it is probably impossible to tell
precisely what effect it will have. But I think a combination of all
three of those approaches together will have a significant impact on
bringing the costs down.
Mr. WELLSTONE. Mr. President, there are two issues I will address,
and I would be very interested in the response of my colleague. One is,
and, again, I do not know what the exact amount of money is, my
colleague says a small number of cases but there is a significant
amount of money involved. If I do not know exactly how many plaintiffs
are going to be hurt or denied what I think should be fair
compensation, and I do not know exactly what impact this is really
going to have on the problem that my colleague identifies--ob-gyn's
practicing in some of our underserved communities--then I find it
difficult to support this, especially since I struggle with two
questions:
One--and I will present both to my colleague so he can respond at
once--I can remember, for example, when I was in North Carolina and we
had our first son, David, there was a guy I was very close to, a
graduate student, who had a son and went in for what was supposed to be
regular surgery. Because of malpractice, his son was paralyzed in a
wheelchair for the rest of his life. He was a student, he did not have
a lot of money, but would anything above and beyond $500,000 for
noneconomic damages be too much? That is my first question, and I am
not willing to give up on that principle, especially when I do not
really have any precise way of knowing what the benefits are of the
amendment. And second, I say to my colleague from Minnesota, in 1986,
the Minnesota Legislature enacted a $400,000 cap on intangible loss
which was defined to mean embarrassment, emotional distress, so on and
so forth, and we repealed it the following year because we felt it did
not work at all.
This may be good in Arizona, but why should this be applied to the
State of Minnesota? We have tried something different. We have some of
our own alternative dispute mechanisms, et cetera, et cetera. If it is
good for Arizona, fine, but why the Federal preemption on this?
Two questions, if you follow me: A, in all due respect--and, by the
way, there is a lot of respect--I still feel like my colleague has not
been able to spell out what exactly will be the pluses and the minuses
of this, the losses and the benefits, who would benefit, who would not;
and, B, therefore, I am a little reluctant to--more than a little
reluctant--to give up on two principles, which are, I do not know why,
in some cases, we say $501,000 is too much, and why preempt what
Minnesota is doing?
Mr. KYL. I will be happy to try to respond to my colleague. First of
all, by its very nature, these noneconomic damages are not
quantifiable, so no one can say a particular amount is or is not
warranted, which is to say of course, except we have put this decision
in the hands of the jury. They are no more capable of divining a figure
than the rest of us. We ask them to do it. We charge them with that
responsibility, and they discharge their responsibility and, in many
cases, do so very, very well. But these are very emotional cases, by
their very nature. Ordinarily, the jury is well within the bounds of
reason when it fixes the damage amount. We are only talking about those
very, very exceptional cases, the less than 2 percent which exceed the
half of a million dollars.
So no one can say in one case it should have been $501,000 and in
another case $499,000. But I think we should be guided by two or three
different principles.
First of all, we should understand that all of the economic damages
are unaffected by this, so that with regard to the young man who has
been confined to a wheelchair there would have to be a question about
the loss of his earning power throughout the rest of his life, and he
would receive damages for that entire sum of money. If he was building
houses or something of that sort, his economic damages would be
tremendous at that point, they would probably be in the millions and
millions of dollars. In other cases, because of the nature of the
economic loss, it would not be. If you are talking about a 65-year-old
person who is about at the end of the earning part of their career, the
economic damages would not be quite as large. We are already
compensating for the economic loss.
Second, since we cannot know precisely how much pain and suffering
should be compensated, I think we ought to fix it at a level that is
adequate to compensate an egregious case but not such as to permit all
of the rest of society to pay a very large price as we are paying.
What kind of a price do we put on the poor woman in rural Minnesota
or rural Arizona who loses a child because there is not an obstetrician
there to help deliver her baby because the high cost of medical
malpractice premiums prevented that person from practicing? I know
several communities in Arizona where every one of the OB's have left
town because they cannot make it with the high premiums that they have
to pay. I have cited these statistics here.
So when we talk about how many millions of dollars should one person
receive for being injured, I turn that around and say, how many
millions of dollars worth of damage are being caused by the fact that
physicians are not able to practice the way we all would like to have
them practice and the way they used to practice.
Finally, I note that our amendment does not provide for reduction in
present value, therefore, in the case of the young man, the example the
Senator cited, that $500,000, since he already received the economic
damages--he has been made whole in that sense--this $500,000 can
generate maybe several millions of dollars, many millions of dollars of
income during that person's lifetime. We are enabling the person to
collect the entire sum rather than having it to be reduced to present
value.
[[Page S5878]] As to the question why preemption, it is a very good
question, because ordinarily we would like to have the experimentation
at the State level, and that certainly has been a part of my philosophy
over the years. But we found in many areas from standards we have
established on health care delivery, from the FDA, in welfare, in so
many different areas we have found we want to have some kind of at
least minimal national standards.
In the case of people trying to do business and provide insurance so
that hospitals and physicians can provide care to people so that they
will receive the kind of health care that they need, in order for them
to do that, they are going to need to have some kind of standard by
which they can operate.
If there is a different standard in every State, it is going to be
very difficult--in fact, they have said it--it is very difficult for
these insurers to insure against the different standards in different
States. So some predictability and a maximum level of exposure, we
think, would go a long way toward enabling companies around the country
to reduce the overall cost of health care which, of course, would tie
into our efforts to try to establish some kind of health care reform
later in the session in Congress.
Mr. WELLSTONE. I see other colleagues on the floor. I wanted to speak
briefly about an amendment that I have offered.
Mr. KYL. May I say, before my colleague leaves the floor, I
appreciate his questions. They are all very good. I wish we had more of
an opportunity to engage in colloquy. I think we would get to the
bottom of some of these things.
Mr. WELLSTONE. I thank my colleague, too. I think ultimately where I
come down on this question is--while some of my objections I have tried
to be clear about--I guess I still do not find the argument about the
jury being swayed on a motion to appeal that persuasive--and you know
what I am going to say. These are the people who vote for us in
elections. I will tell you that my State has struggled with this
question, and we have passed some significant reform. You may want to
do this in Arizona. I think the Senator from Massachusetts ultimately
will have the State-opt-out amendment. It seems that States--the
Federal preemption bothers me to no end and not trusting juries, which
are citizens, to make these decisions when we trust them to elect us to
office, I think is a curious irony. I think that is one of the flaws in
the proposal.
I know the Senator presents this in very good faith. I agree with the
Senator--not on his amendment, but I agree and we share a very strong
common commitment and interest--and I look forward to working with you
on this--about how we can make sure that some of our underserved areas,
where we have men and women that can deliver dignified and affordable
health care. In rural Minnesota, the issue is not any longer whether
you can afford a doctor but whether you can find one. I do not think
the cause of that is what you think is the cause. But I think we can
work together. I thank my colleague.
I want to briefly speak about a ``Dear Colleague'' letter I have sent
out on an amendment I introduced on Friday. This amendment deals with
what is called the national practitioner data bank, which was created
in 1986.
Mr. President, this data bank provides information in two decisive
areas that are extremely important to provide this. One is the area of
what is called adverse actions. When an adverse action has been taken
against a doctor by a hospital or by a medical board, essentially
saying to that doctor, ``You cannot practice medicine at this hospital
any longer because of a pattern of negligence,'' or ``you cannot
practice medicine in the State any longer,'' then that information--
very important information--goes into this data bank.
Mr. President, the second kind of information that is critically
important that goes into that data bank is information that deals with
malpractice payments. When in fact a doctor has made a malpractice
payment, then going into this national practitioner data bank is very
important information on how many times this has happened and what
amount has been paid.
Mr. President, this is, I think, the bitter irony to it. This
information in the national practitioner data bank is available to
hospitals; it is available to doctors; it is available to managed care
plans; it is available to just about everybody but the consumers. It is
not available to the consumers.
Now, Mr. President, what we do in this amendment is a couple of
different things. First of all, we really strengthen the disclosure of
this information in a couple of different ways. What this amendment
calls upon is for the Secretary of Health and Human Services, over a 6-
month period--every 3 months he comes to Congress, and 3 months later
promulgates rules as to the best way to make sure that this information
gets to consumers. Understand, Mr. President, there are 80,000 deaths a
year for medical malpractice, from negligence, and 300,000 people
injured.
Now, I want to be clear for colleagues that tomorrow when I speak on
the floor when all of our colleagues are back, in summarizing this
amendment, I am going to make this point again. We are very clear that
what goes into this data bank is not when someone complains about the
doctor--that is not part of the data bank. It is only when there has
been an adverse action taken or a malpractice payment has been made.
That is all there is. I mean, for example, if you go to a dentist and
you do not like the dental work, you are pretty angry about it and you
feel like you were put in a lot of pain and you say, ``Look, I want to
get my money back,'' and he says, ``I do not want to deal with you,
here is your money back,'' that is not in this data bank. It is only
when an actual adverse action has been taken or there has been a
malpractice payment. That is very important. That is the only
information.
Moreover, Mr. President, in response to what I think were some fairly
legitimate questions from the providers, we have done a couple of other
things in this amendment which I think are important. First, we list
the norms, we were just talking about obstetricians, and we were
talking about that in terms of rural areas. We list the norm for each
subsection of the health care profession so that, for example, if you
were to see there had been a malpractice payment, one or two with an
obstetrician, you might think that is bad. But if you saw the norm for
obstetricians and it looked pretty good, you would not be nearly as
worried. We make sure the norms are listed for each part of the medical
profession that a consumer would have access to.
Second, since insurance companies sometimes say to a doctor, ``Look,
just settle,'' and the doctor really does not want to, does not feel he
or she did anything wrong but that is the best thing to do, we make
sure that is part of that data bank, that provider's perspective
analysis of what happened and why it is a part of the data bank. This
is available as part of the data base.
Fourth of all, Mr. President, we deal with what is a very serious
problem. Maybe tomorrow, because I see my colleague from Ohio and I
promise I am going to try and finish within 5 minutes--maybe tomorrow I
will give examples which are very heartrending. But all too often what
happens is--and we are not talking about, thank God, many doctors--but
all too often what happens is that you have a doctor who has had an
adverse action taken against him--and I know my colleague from Ohio is
interested in this question--and he actually leaves the State, changes
his name, and commits the butchery again. What we make sure of--and we
have examples of this in a number of different States, and this has
been a proposal that Health and Human Services has made for some time--
as a matter of fact, the Social Security number is entered into this
data bank, so it is much easier to track those individuals--so that,
Mr. President, if you had to have back surgery in Minnesota and you
wanted to check--and God forbid there had been somebody who came from
Ohio who literally had an adverse action taken against him, and he no
longer was able to practice in the State, changed his name in
Minnesota--you could track that person. You could have access to that
kind of information.
Mr. President, I really believe that this amendment is extremely
important. Here we are talking about malpractice reform--med-mal
amendments. I am saying that one of the
[[Page S5879]] ways we can prevent this malpractice or this negligence
from happening in the first place is to make sure consumers have this
information. I really find it a very weak argument, and weak arguments
were made as to why we cannot do it. Some say, ``Let us study it,'' or
``We need to improve the data.'' We have, as a matter of fact; we have
plugged some of the loopholes.
In any case, it is far better that we make sure the consumers have
access to this information. I am a little startled at some of the
opposition to this. If in fact this information is available--and you
could go to a court in any State and get it. But it is not readily
available to consumers. It is readily available for hospitals, for
doctors, medical boards, medical societies, and managed care plans. The
only people that do not have access to this information are the
consumers.
So it seems to me that this amendment strengthens what we are trying
to do here,
especially if what we are trying to do here does, I hope, in part,
prevent this kind of negligence from happening in the first place.
I do not think there is any reason why a Senator should vote against
what is a strong consumer protection amendment. Tomorrow morning, I
will, if there are any Senators who want to debate this, be pleased to
debate it. Or later on today, we will do so, as well.
I yield the floor.
Amendment No. 612 to Amendment No. 603
(Purpose: To clarify that the provisions of this title do not apply to
actions involving sexual abuse)
Mr. DeWINE. Mr. President, I ask unanimous consent that the pending
amendment be set aside so that I may offer an amendment.
Mr. WELLSTONE. Mr. President, reserving the right to object, is this
a medical malpractice amendment?
Mr. DeWINE. It is, indeed.
Mr. WELLSTONE. Mr. President, I no longer object.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DeWINE. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Ohio [Mr. DeWine] proposes an amendment
numbered 612 to amendment No. 603.
The amendment is as follows:
In section 12(5) of the amendment, add at the end
thereof the following new sentence: ``Such term does not
include an action where the alleged injury on which the
action is based resulted from an act of sexual abuse (as
defined under applicable State law) committed by a provider,
professional, plan or other defendant.''.
Mr. DeWINE. Mr. President, the underlying amendment that we are
considering, the McConnell medical malpractice amendment, would place a
cap on the punitive damages that may be awarded by a jury against a
doctor or against other medical providers.
My amendment would except out from this cap sexual assault and sexual
abuse.
The underlying amendment, Mr. President, does set this cap. By
setting the cap, it also sets a cap on all medical malpractice cases,
including cases where the doctor has committed a sexual assault, some
form of sexual abuse, against the patient.
Mr. President, I find no logical reason for this Congress, as we
debate the issue of medical malpractice, to impose our will on the
States and say to each State no longer can a person have unlimited
punitive damages against those who a jury has found or an individual
who a jury has found has sexually abused his patient.
I find no logic behind that, and I think it would be, quite frankly,
morally wrong for this Congress to impose such a limit.
Mr. President, the amendment I have just sent to the desk would add,
at the end of the relevant section, the following new sentence:
Such term does not include an action where the alleged
injury on which the action is based resulted from an act of
sexual abuse (as defined under applicable State law)
committed by a provider professional, plan, or other
defendant.
Mr. President, it is not my intention at this time to talk about the
underlying merits of the amendment. What I will try to do, instead, is
make absolutely certain by my amendment, that this legislation does not
have a truly disastrous, if unintended, consequence, one that may well
occur if we do not make the legislation absolutely crystal clear.
Mr. President, sexual abuse is a horrible problem in this country.
Two and a half percent of all medical malpractice cases involve sexual
abuse.
In the last reporting period, Mr. President, it was reported that
this totaled 173 cases of not only medical malpractice, but of sexual
abuse.
Clearly, Mr. President, there are a few doctors out there who are
engaging in very reprehensible conduct. These cases involve a brutal
violation of one of the most sacred relationships that exist; that is,
the relationship between a doctor and his or her patient.
When a person goes to a doctor, that person establishes that sacred
relationship. That person goes to a place where she or he can be healed
and certainly not hurt. The patient goes to a doctor in a spirit of
trust, someone who is bound by a sacred oath not to violate that trust.
Mr. President, tragically, at least 173 women have recently
discovered that they had misplaced that trust. They trusted someone who
posed as a healer but who it turns out was, in fact, a predator. When
they entered the doctor's office, they certainly did not expect that it
would turn into an outrageous, humiliating, criminal nightmare.
Let me talk about a few cases that have been in the news recently.
Let me talk about a woman in Virginia who went to a doctor because she
and her husband wanted to have children. They asked the doctor, because
they had that problem, to help them start this pregnancy. The doctor
led them to believe that the husband's semen would be implanted in the
wife by artificial means.
The woman became pregnant, all right. But tragically, it turned out
that the semen was not her husband's but was, rather, the doctor's. It
was later revealed that the doctor had literally made a practice of
impregnating his own patients.
Mr. President, what words can we summon to express the rage that we
all feel when we hear about this kind of outrageous conduct?
Mr. President, it has been said that one of the problems we have in
this country today in our society is that we accept too much, we
tolerate too much; we see so much on TV that is sad and brutal that we
just pass it off and say that that is just the way it is.
I think, Mr. President, we need to really recapture a spirit of
outrage, a sense of deep shame, a sense that we are not going to
tolerate this anymore, that we are really going to succeed in deterring
this kind of intolerable behavior. It is that sense of outrage that we
must have.
Would it be right, would it be just, for this Congress to impose a
cap and tell the State of Virginia to tell that jury in Virginia, ``You
cannot impose punitive damages above a certain amount in this
particular case''? I think the answer is, clearly, no.
We cannot tolerate what happened to a woman in Connecticut. She had
been going to a dentist for about 10 years. She was going to get a
molar filled. The dentist sedated her with nitrous oxide. She woke up,
Mr. President, three times in the next hour and 15 minutes.
The first time, she found the dentist kissing her and she felt pain
in her breasts. She attempted to resist and saw the doctor turn up the
concentration of nitrous oxide so that she would pass out again, which
she did. The second time she woke up, she found the dentist on top of
her, and the third time she woke up the dentist was still on top of
her.
She felt very scared and very sick. The dentist realized she was
awake. He helped her out of the chair. He grabbed her and kissed her.
The woman did not remember any dental work ever having been done in
that visit.
During her excessive exposure to the nitrous oxide, some obviously
went into her lungs. And stomach acid had actually gone into her lungs,
leaving her with a permanent asthma condition and permanent loss of 30
to 40 percent of her lung capacity.
Would it be right to tell the jury in Connecticut, ``No, in this
case, there will be a cap on the punitive damages
[[Page S5880]] that can be awarded''? I do not think so.
In another case, a Florida woman thought she was receiving
periodontal treatment. She awoke from the anesthesia the doctor had
given her and found the doctor touching her private parts. Would it be
right, in that particular case, Mr. President, to impose a cap? Again,
I think not.
Mr. President, according to a recent study, in one-third of the sex
abuse cases--in one-third--the doctor was permitted to go on practicing
medicine.
Patients today are being treated by those doctors, totally unaware of
the doctors' history of obscene conduct.
Sometimes, tragically, it takes time for justice to be done. An
investigation by ABC News revealed that a gynecologist in southern
California sexually abused as many as 200 women over a 30-year period.
It took almost 20 years after the first complaint for California
authorities to start proceedings against him. But in that case, the
very first complaint really told the whole story. The victim wrote that
while the doctor was examining her pelvic region he began sexually
abusing her and using foul language. My amendment would exclude this
kind of behavior from the changes contemplated in the bill we are
considering. This medical malpractice amendment should not have caps
which would affect sexual abuse.
The Senate may decide to cap damages in case of medical malpractice.
But there certainly is no logical reason to extend that protection to
individuals who sexually abuse their patients. It would, I believe, be
morally wrong. Indeed, I believe it would be outrageous for this
Congress to protect, by the use of a cap on punitive damages,
individuals who sexually molest or abuse their patients. Under my
amendment, all of the remedies currently available for victims of this
kind of sexual abuse will continue to remain available to them under
the applicable State law.
Punitive damages are historically used to punish and to deter. Let us
not limit the punishment of these sex offenders. Let us not limit the
deterrent effect on these sex offenders. Let us allow juries the full
latitude they need to punish and the full latitude they need to deter
these offenders. That is what this amendment would do.
The vast majority of doctors in this country do a fantastic job. We
rely on them for literally the most precious thing in our lives, which
is the health and welfare of our family members. Each one of us has
had, we hope, great experiences with these doctors. This amendment
should not in any way reflect on these doctors. All we are saying by
this amendment is let us not have the U.S. Congress interfere with a
jury, interfere with a State, interfere with the people's right to
punish and deter the small minority of doctors who violate the sacred
trust that the patient has given them.
The same amendment I am offering today was offered by Senator Kennedy
in the Labor and Human Resources Committee. The committee passed that
amendment and it is my hope the full Senate will, tomorrow, do the
same.
The American jury speaks with the voice of America's deepest
conscience. That is why I want to make sure the jury keeps the power,
the power to punish fully these horrible violations of trust by some
truly warped and dangerous individuals.
Mr. President, I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. HATCH. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Thomas). Without objection, it is so
ordered.
Bashing Business/helping lawyers
Mr. HATCH. Mr. President, during debate on the products liability
bill last week, some of our colleagues who defend the status quo made
comments on the punitive damages issue to which I would like to say a
few words.
I heard one comment to the effect that, ``if a multibillion-dollar
corporation makes a mistake in building a bus and the bus explodes, to
punish a multibillon-dollar corporation $250,000 or three times
economic damages is not going to cut it.''
First, let us understand that punitive damages were not conceived for
application in cases of mere mistake, mere negligence. They are
intended for application in cases of much, much more serious conduct.
The underlying bill, which speaks to conduct carried out with a
conscious, flagrant indifference to the safety of others is the kind of
standard usually employed before punitive damages are found
appropriate.
Second, given today's regime of compensatory damages, the cost of
litigation, and adverse publicity, punitive damages infrequently are
needed to punish and deter such misconduct. In the case of the
exploding bus, if it had resulted from the kind of conduct triggering a
right to punitive damages under the law today, all of these factors
would combine as a powerful incentive for the company to reform its
practices. But, the underlying bill hardly does away with punitive
damages, it simply places rational limits on their award.
Third, the current, largely uncontrolled nature of punitive damages
is anticonsumer. The threat of these awards must be built into the cost
of services and products today, even before we get to the impact on
prices when runaway awards are handed down. Punitive damage reform is
proconsumer.
I will have more to say about this subject when Senator Dole offers
his amendment on punitive damages to broaden the scope of the provision
now in the bill. I believe my colleagues might be interested in the
testimony of George L. Priest before the Judiciary Committee on April
4, 1995. Mr. Priest is professor of law and economics at Yale Law
School and has taught in the areas of tort law, products liability, and
damages for 21 years. He has served as director of the Yale Law School
Program in Civil Liability since 1982.
He appeared before the committee as a private citizen, and not as a
representative of any interest or lobbying group. His scholarship has
led him to the conclusion that the kind of reform on punitive damages
that Senators Gorton and Rockefeller are talking about, and which
Senators Dole and I and others would like to extend beyond products
liability, would be beneficial to consumers. He also concluded that
punitive damages do not serve a deterrent purpose. He testified:
I have never once seen a careful study in a specific case
showing that a punitive damages judgment of some particular
amount was necessary to deter some particular wrongful
behavior.
Professor Priest unhesitatingly stated that the view--
That ever-increasing civil liability verdicts, including
punitive damage verdicts, would serve to reduce the number of
accidents * * * has been totally discredited today, and I
know of no serious tort scholar publishing in a major legal
journal who could maintain it.
He added:
It is widely accepted--and it is a routine proposition of a
first year modern torts course--that compensatory damages * *
* serve as a complete deterrent in addition to their role in
compensating injured parties.
I ask unanimous consent that Professor Priest's testimony be printed
in the Record at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. HATCH. Thank you, Mr. President.
Now, Mr. President, let me address another point made on the floor
last week. It was asked, how can Congress know how to limit judges and
juries in making punitive damage awards, how can we lay down a rigid
law?
Mr. President, I find the criticism odd in the extreme. These same
Senators would not dream of imposing punishment, be it jailtime or
criminal fines or both, on some violent thug, without according that
criminal a full panoply of procedural protections, clarity in the law
as to what constitutes criminal conduct, and certainly, a defined set
of punishments. That is what we do before we seek to punish anyone in
our society for criminal misconduct.
But, because some of the opponents of change in our civil justice
system like to mischaracterize the issue before us as a matter
involving only businesses, they apparently could not care less if
defendants are punished in a civil case in an almost totally
uncontrolled fashion. It is OK I guess in their
[[Page S5881]] eyes to bash business. It is OK to unload on large,
medium, and small businesses. What the heck, some of our Nation's
lawyers make out just fine. Forget about the fact businesses, especaily
small businesses, provide the jobs in this country. Forget about the
fact they bring new products and services to the American people. Who
cares if runaway punitive damage awards stifle innovation, curtail
products and services, hurt employment, and deplete company assets for
use in compensating other victims of the company's wrongdoing? Let us
just bash American business and watch some of the Nation's lawyers
laugh all the way to the bank. I am not being critical of all lawyers
by a long shot and I understand the crucial role lawyers play in
vindicating individual rights. But, today, the biggest beneficiaries of
the stubborn defense of the status quo are some of our Nation's
lawyers--not consumers.
And the opponents of change can wave around lists of consumer
organizations that also oppose change. But the American people for whom
they claim to speak, favor change. They know the civil justice system
is broken.
Exhibit 1
Testimony of Prof. George L. Priest Before the Senate Committee on the
Judiciary
Mr. Chairman, I am grateful for the opportunity to testify
on the subject of punitive damages reforms being considered
by your Committee. I am the John M. Olin Professor of Law and
Economics at Yale Law School, and have taught in the areas of
tort law, products liability and damages for 21 years--the
last 15 years at Yale. I have served as the Director of the
Yale Law School Program in Civil Liability since 1982.
Over the course of my career, I have written broadly on the
fields of tort law and damages. A major area of my interest
has been jury verdicts in civil litigation. I have published
many empirical studies of jury verdicts, including verdicts
involving punitive damages. I was one of the original
organizers of the now-famous Rand Corporation studies of jury
verdicts that began in the early 1980s.
The concern of my scholarship universally has been how the
civil justice system can be reformed to benefit consumers in
our society and low-income consumers most of all. I have no
particular concern to define what is beneficial to
manufacturers or to other corporate entities, except as their
activities provide benefit to consumers. I wish to emphasize
that I am testifying today at your invitation, solely in my
capacity as a private citizen interested in the effects of
tort law and punitive damages on American consumers. The
views presented here are mine alone and do not represent
those of any interest or lobbying group.
As an academic, my job is to study and define the ideal
world and the system of laws that would most benefit American
citizens. The reform of punitive damages alone--even reforms
that would cap punitive damages or introduce a
proportionality cap--will help consumers, but will not
achieve the ideal. I believe consumers in this country would
be benefitted all the more if Congress (or our courts) were
to modify substantive standards of civil liability, reducing
the scope of liability and cutting off at the source a great
deal of what today is needless and counterproductive
litigation. Indeed, if such reforms were introduced, changes
in punitive damages might not be necessary because punitive
damages awards would nearly disappear. That world, however,
is the ideal, and we should not allow hope for the ideal to
discourage support for true reform. As I hope to convince
you, sharp yet reasonable Congressional limits on punitive
damages will constitute true reform to the benefit of all
American citizens.
the increasing commonality of punitive damages
Forty years ago, punitive damages verdicts were
exceptionally rare and were available against only the most
extreme and egregious of defendant actions. The world of
civil litigation is surely different today. But the number
and, especially, magnitude of punitive damages judgments have
increased dramatically. Indeed, the frequency of claims for
punitive damages has increased to approach the routine. These
claims affect the settlement process, both increasing the
litigation rate\1\ and, necessarily, increasing the ultimate
magnitude of settlements even in cases that are settled out
of court.
Footnotes at end of article.
I recently participated in an empirical study of punitive
damages verdicts that illustrates the point. The study
reviewed claims and verdicts for punitive damages in several
counties in Alabama--a state in which it has been alleged
that punitive damages verdicts have skyrocketed over the past
decade.
The study first addressed the extent to which tort actions
filed included claims for punitive damages. Many commentators
have dismissed concerns about punitive damages on the grounds
that there are very few ultimate punitive damages verdicts
reported. In the American system of civil justice, of course,
very few verdicts of any kind are reported, relative to the
number of claims filed, since only 2 to 5 percent of civil
cases filed ever proceed to a verdict.\2\ The better test of
the frequency and impact of punitive damages, thus, derives
from a study of claims.
Here are the results: Bullock, Lowndes, and Barbour
Counties in Alabama are relatively rural locales, with small
populations and without substantial industry. We studied all
tort actions filed in these counties for several fiscal years
to determine the numbers in which punitive damages were
claimed. To summarize the most recent statistics, we found
that, in the fiscal year 1992-93, of all tort cases filed in
Bullock County, 76.5 percent included a punitive damages
claim; 65.1 percent in Lowndes County; and 78.3 percent in
Barbour County.\3\
The exceptionally high proportion of punitive damages
claims and the universality of such high proportions over
each of the counties are striking and nearly incredible.
Again, the study was not limited to only claims involving
high dollar amounts or product liability claims or, even,
claims against corporate defendants; the study addressed
all tort claims. Anyone familiar in the slightest with our
civil justice system knows that most tort actions involve
relatively routine forms of accidents, including traffic
accidents. That 65 to 78 percent of all tort actions over
a fiscal year include punitive damages claims starkly
challenges the notion that punitive damages are an
infrequent and seldom invoked remedy in American civil
law.
Yet, incredible as these numbers may seem, in the
succeeding fiscal year, the proportion or number of tort
cases including a punitive damages claim actually increased
in each of the counties. During the 1993-94 fiscal year, an
extraordinary 95.6 percent of tort cases filed in Bullock
County included a punitive damages claim; 78.8 percent in
Lowndes County. In Barbour County, the proportion of tort
cases including a punitive damages claim decreased from 78.3
to 72.1 percent, but the absolute number of punitive damages
claims increased during 1993-94 by over 40 percent.
Much of the debate over punitive damages proceeds in the
form of battle by competing anecdote in which a defender of
our modern regime will present a case of exceptionally
egregious defendant behavior deserving of punitive damages,
and a supporter of reform will present an opposite example.
(Indeed, I present an anecdotal case--though a telling one--
below.) The Alabama numbers belie anecdotes. No one can
plausibly claim that 72.1 to 95.6 percent of all accident
cases over an entire year in any county of the U.S. involve
the form of exceptionally egregious defendant behavior that
might merit substantial punitive damages. In contrast, these
numbers show that the role of punitive damages has changed
dramatically in our civil justice system, from an occasional
remedy invoked against outrageous action to a commonplace of
tort law practice.
These numbers also belie the commonly-heard defense that
actual punitive damages verdicts are rare and that many of
those awarded by juries are later reduced on appeal so that
there is no substantial effect. Debate can be had on what is
meant by the term ``rare'' and what constitutes in terms of
magnitude of verdicts a ``substantial'' effect. The
impression is often suggested, however, that even for the
Nation in its entirety, punitive damages claims amount to
nothing more than a handful.
Our Alabama study demonstrates that this is a great
misimpression. Again, we did not select the largest cities in
Alabama or industrial or manufacturing centers; in fact, just
the opposite: The counties that we studied in Alabama are
rural, with modest populations, and a relatively non-
urbanized citizenry. For example, Bullock County has a total
population of only 11,042, 4,040 of whom are employed, and a
per capita income of $9,212; Lowndes, a total population of
12,658, 5,300 employed, and a per capita income of $10,628.
Barbour County is somewhat larger, with a total population of
25,417, 12,400 employed, and a per capita income of $12,100.
None of these counties, however, resembles in the slightest
metropolitan areas such as Miami, Los Angeles, or Dallas.
What did we find? In 1993-94, despite these small
populations, punitive damages claims constituted far more
themselves in these rural counties than the claimed
nationwide ``handful''. In Bullock County, 43 of 45 tort
actions included a punitive damages claim; in Lowndes County,
52 of 66; and in Barbour County, 93 of 129. Are punitive
damages in Alabama insignificant? The claims reported above,
of course, are quite recent and remain still in the
litigation pipeline. Looking to much earlier claims, however,
our study in Alabama showed that the magnitude of punitive
damages judgments affirmed by the
Alabama Supreme Court from 1987 through the first half of
1994 equalled $53.2 million,\4\ equal to roughly $13 per
Alabama citizen.
This study demonstrates that the number and magnitude of
affirmed punitive damages verdicts is only the very small tip
of an extraordinary iceberg. Again, it is universally
conceded that only 2 to 5 percent of cases filed ever proceed
to verdict. Thus, it is not surprising that the systematic
observation of any single type of verdict is relatively rare.
What the Alabama numbers show is that the availability of
unlimited punitive damages affects the 95 to 98 percent of
cases
[[Page S5882]] that settle out of court prior to trial. It is
obvious and indisputable that a punitive damages claim
increases the magnitude of the ultimate settlement and,
indeed, affects the entire settlement process, increasing the
likelihood of litigation. Thus, as shown in the Bullock,
Lowndes, and Barbour County figures, our modern rules with
respect to punitive damages impose these effects on 95.6 and
72.1 percent of even settled cases. Punitive damages reform--
especially if it extends to all state and federal litigation,
not simply products liability--is desperately needed.
do punitive damages serve a necessary deterrent purpose?
Virtually every supporter defends punitive damages on
grounds of deterrence, accompanied by an anecdote or
anecdotes involving persons who suffered serious losses in
contexts in which most observers would agree that the
respective defendant should have prevented the accident.
Generally, the anecdotes are allowed to speak for themselves:
I have never once seen a careful study in a specific case
showing that a punitive damages judgment of some particular
amount was necessary to deter some particular wrongful
behavior. Instead, the argument proceeds by implication. The
basic defense of punitive damages--and I believe that it
is the only serious defense--is the implication that
large, unlimited punitive damages verdicts are necessary
to control injurious activities in the society. Put
slightly differently, it is implied that, without the
availability of unlimited punitive damages awards,
potential defendants, especially corporate defendants,
would face no deterrent threat to prevent them from
causing injuries.
Forty years ago, in a tort law regime that provided little
in the way of consumer remedies, it might have been believed
that ever-increasing civil liability verdicts, including
punitive damages verdicts, would serve to reduce the number
of accidents.\5\ That view, however, has been totally
discredited today, and I know of no serious tort scholar
publishing in a major legal journal who could maintain it.
Instead, it is widely accepted--and it is a routine
proposition of a first-year modern torts course--that
compensatory damages--economic losses and pain and
suffering--serve a complete deterrent purpose in addition to
their role in compensating injured parties. Compensatory
damages impose costs on defendants who wrongfully fail to
prevent accidents, costs equal in amount to the injuries
suffered. Compensatory damages internalize injury costs to
defendants where some action has wrongfully injured an
innocent party.
Indeed, the strongest theory in the modern tort academy is
that full compensatory damages generate exactly the optimal
level of deterrence of accidents--not too little and not too
much.\6\ For purposes of deterrence or accident prevention,
given full compensatory damages, there is no need for
punitive damages of any dimension, not to mention unlimited
punitive damages. Of course, this is a theoretical
conclusion, and there remains dispute in the academy as to
whether as an empirical matter court or juries calculate
compensatory damages exactly perfectly in every case or in
every context. Thus, substantial academic attention has
been given to the refinement of liability so that the
deterrant effects of compensatory damages may be
sharpened.
Given the role of compensatory damages as a deterrent,
however, the analysis of punitive or other exemplary damages
becomes substantially different. The only justification on
grounds of deterrence for any exemplary award beyond the
compensatory is that compensatory damages are inadequate for
some reason, say, that juries award damages too low in some
dimension or that some set of injuries go undetected or are
perhaps too insignificat individually to justify
litigation.\7\ The only plausible defense of punitive damages
on deterrence grounds, thus, is to restore aggregate damages
to a level equal to that that is fully compensatory.
Opponents of punitive damages reform in current
Congressional debates avoid this issue, but this failure to
confront it suggests the ultimate weakness of their
opposition. Again, anecdotes involving individuals suffering
serious serious loss are not generally helpful to the
analysis. I am extremely sympathetic--as all of us are--to
individuals suffering serious injuries. We all wish that the
wrongfully injurious action might have been avoided. Given a
wrongful injury, we all want the victim to receive full
compensation for economic losses and pain and suffering.
The question for punitive damages tort reform, however, is:
Given full compensation to the victim, is there some
affirmative deterrent purpose served by awarding further
damages? Is there some reason to believe that the payment of
full compensatory damages
will fail to deter the defendant, such that some further
multiple of punitive damages is absolutely necessary? For
corporate defendants, the answer surely is no. Corporate
defendants who must maximize profits net of costs must
necessarily take the prospect of compensatory damages into
account in determining how to invest in accident
prevention. Again, this analysis presumes full
compensation. If there were some reason to believe that
juries were systematically undervaluing economic losses or
pain and suffering, punitive damages might be necessary to
make up the shortfall. (Of course, the opposite is true;
many, including myself, believe that juries overvalue
compensatory damages, especially pain and suffering,
justifying Congressional limits on pain and suffering
awards.) Barring such a shortfall, however, there is no
justification for punitive damages on deterrence grounds.
The analysis is, perhaps, somewhat different in the context
of individual noncorporate defendants who are less subject to
cost constraints and, perhaps, more inclined to behave
unconscionably. This is the reason that exemplary or punitive
damages are often awarded in cases involving intentional
harms such as assault.
As administered by juries, however, our current civil
liability regime approaches the issue exactly backwards. In
our current regime, large punitive damages verdicts are
seldom awarded against non-corporate defendants. And I know
of no one objecting to a punitive damages cap on the grounds
that it will impair the deterrence of private individuals.
Instead, large punitive damages verdicts are most typically
awarded against corporate defendants who, as profit
maximizers (a motivation often irrationally held against
them), will be carefully responsive to compensatory damages.
Corporate defendants need no punitive damages verdict to
encourage them to take all cost-effective precautions to
prevent injuries; compensatory damages alone achieve that
result. Thus, the increasingly commonplace plaintiff lawyer's
charge to a jury to ``send the defendant a signal'' ignore
entirely the
universally accepted academic view that, to a corporate
defendant, full compensatory damages are not only an
effective signal, but also the only and entire signal
needed.
do punitive damages help or hurt consumers?
If the effect of punitive damages were to benefit consumers
or if their effect were even neutral to the consumer
interest, we might be unconcerned that punitive damages are
unnecessary to deter corporate defendants from injurious
behavior. The central problem of punitive damages, however,
is that, except in the rare cases of jury undervaluation of
damages or underlitigation, punitive damages settlements and
verdicts affirmatively harm consumers, and low-income
consumers most of all.
Where punitive damages become a commonplace of civil
litigation as in Alabama, or even where they become a
significant risk of business operations, consumers are harmed
because expected punitive damages verdicts or settlements
must be built into the price of products and services. The
effect of the greater frequency and magnitude of punitive
damages recoveries of modern times has been to increase the
price level for all products and services provided in the
U.S. economy. To observe this phenomenon is not to say that
injured consumers should go uncompensated. If a consumer
suffers an injury that can be attributed to some wrongful
activity of a defendant, whether manufacturer or service
provider, that consumer should receive compensation for
economic losses and for reasonable non-economic losses, such
as pain and suffering.\8\ In contrast, punitive damages, by
definition, go beyond the compensatory. The problem with the
increasing commonality of
large punitive damages verdicts and settlements, such as
those we see in Alabama, is that the awards to some
consumers of greater than compensatory damages must be
built into the prices paid by all other consumers.
It is an obvious implication of this proposition that low-
income consumers are most seriously harmed by our current
damages regime. First, low-income consumers have less money
generally and, regardless of the product or service, are more
seriously affected in terms of the purchasing power of their
limited resources where the price level increases. Secondly,
and most importantly, low-income consumers are not the
typical beneficiaries of large punitive damages verdicts or
settlements, surely not on a systematic basis. Again,
research of my own currently in progress shows that low-
income consumers, if injured, are less likely to seek an
attorney; even with an attorney, are less likely to sue; less
likely to recover; and, again by definition, less likely to
recover large damage judgments since their lost income is
typically low and pain and suffering awards, which are highly
correlated with lost income, equally low.
Put more simply, where punitive damages verdicts and
settlements are frequent and large, low-income consumers are
forced to subsidize the high-incomes as expected punitive
damages awards are built into the prices of products and
services. Occasionally, a low-income individual will receive
a punitive damages windfall, but the far more systematic
effect is to harm the low-income as the prices of products
and services generally are increased as producers must adjust
for the expectation of future punitive damages payouts.
Although these Hearings are chiefly directed to punitive
damages reforms, it is important to recognize that the
current effect of the doctrine of joint and several liability
is similar. Joint and several liability has its most general
effect on organizations or entities which engage in a large
scope of activities, such as state and municipal governmental
entities, public utilities, and the like. It has become a
commonplace of modern civil litigation for plaintiffs'
attorneys to join as defendants any governmental entity or
utility remotely associated with an injury. Thus, state
governments and municipalities are joined as defendants on
claims
[[Page S5883]] that roads were misdesigned or poorly
maintained or that a guard rail or telephone pole could have
been placed in a better position. Forty years ago, attorneys
would not have thought to include entities whose causal
relationship to the harm was so low or, if they had attempted
to join such entities, the claim would have been dismissed.
Today, such litigation is routine and imposes substantial
litigation expenses upon our state and municipal governments
and liability expenses, only infrequently, but chiefly under
operation of the doctrine of joint and several liability
where the truly responsible defendants have gone bankrupt,
leaving our governments and utilities to suffer the remaining
judgment.
It is clear that, for very similar reasons, operation of
the doctrine of joint and several liability harms citizens in
general, but low-income citizens most of all. Damages
judgments must be paid from state and municipal financial
sources. It is well-established that state and, especially,
municipal finance is seriously regressive in effect, charging
more to middle- and low-income citizens, proportionate to
income, than to the relatively high-income. This effect, most
obviously, is not limited to the product manufacture context
and provides an important independent reason why the reforms
the Senate is considering should be expanded beyond
application to products manufacture to all civil litigation.
These propositions about the effect of punitive damages and
joint and several liability on the poor and low-income may
appear abstract, though I believe that they are generally
accepted within the academic community. To illustrate their
import with greater salience, however, I would like to
present one recent example of a punitive damages verdict in
Alabama, indeed, a case that inspired the research presented
above. The case will both show
the pressing need for punitive damages reform, again, not
limited to products liability, but expanded to all state
and federal litigation.
In the case Gallant v. Prudential, decided this past April
1994, Iran and Leslie Gallant sued Prudential Life Insurance
Company based on the actions of a Prudential agent. The
Gallant's had purchased a combination life insurance-annuity
policy with a $25,000 face value at a monthly premium of
roughly $39.00. At the time of sale, the agent had told them
that the value of the annuity was roughly twice what in fact
it was; the agent had added together the table indicating
``Projected Return'' with the table indicating the lower
``Guaranteed Return.'' A jury found this action fraudulent
and held the agent liable and Prudential separately liable
for failing to better supervise the agent.
Fortunately, the problem was discovered before either the
policyholder had died or had retired to receive the annuity.
Thus, to the time of trial, there was no true economic loss
beyond the failed expectation of the larger future return. I
have carefully read the transcript of the testimony, and the
Gallants testified that, between the time that they
discovered the misinformation and Prudential called them to
offer a remedy (Prudential offered to return their premiums
or to discuss adjusting the policy), they had suffered
roughly two weeks of sleepless nights and substantial anger
at having been misled. That was the extent of their ``mental
anguish''.
Twenty years ago, I taught cases of this nature in a course
entitled Restitution, in which the appropriate remedy was
restitution of all paid premiums or out-of-pocket costs. On
very rare occasions such as especially egregious actions by a
defendant, some courts considered awarding plaintiffs the
benefit of the bargain, say, by increasing their annuity
benefits.
Our modern world has changed: After a one and one-half day
trial, an Alabama jury awarded the Gallants damages equal to
$30,000 in economic loss; $400,000 in mental anguish; and $25
million in punitive damages. Again, the face value of the
insurance policy was only $25,000.
I do not wish to minimize the harm to the Gallants,
especially the indignity of the misrepresentation, nor to
condone the fraudulent actions of the agent, apparently
perpetrated on several other Alabama citizens who recovered
separately. Nevertheless, there is not a single person to
whom I have described this case--not an attorney, whether
plaintiff or defendant; not a liberal or a conservative; not
even a radical or idealistic Yale Law student (or faculty
member)--who has not been shocked by the outcome or who could
defend it as a rational or sensible verdict in the context of
the harm. Again, many defenders of punitive damages argue
that exceptionally large verdicts are usually overturned on
appeal. Alabama provides a review procedure for punitive
damages verdicts that the U.S. Supreme Court has approved.\9\
In the Gallant case, however, the judge conducting the review
affirmed the $25 million award in its entirey, though
directing part of the amount to be paid to the State.
What will be the effect of a punitive damages verdict of
this nature? The Gallants appear to be persons of modest
means (before the verdict). Does a verdict of this nature
help middle- or low-income consumers? Totally, the opposite.
The insurance policy in question--face value, $25,000--was
the cheapest form of life insurance/annuity available on the
market; again, its monthly premium was only $39.00.
Obviously, at such a premium, the insurance carrier could not
be expecting to make a substantial profit on the policy.
Indeed, an expert in the case estimated that over the entire
life of the policy, the premiums net of
payouts paid by the Gallants would increase Prudential's
assets by only $46.00.\10\ Prudential, like most other
life insurance companies, profit more substantially from
large dollar, rather than small dollar policies. The
expert estimated that the verdict reduced dividends to
every Alabama policyholder (Prudential is a mutual
carrier) by $323.
How do we analyze a case like this in terms of whether
punitive damages serve a necessary deterrent effect? In his
closing arguments, the (highly effective) attorney for the
Gallants asked the jury to determine a level of damages that
would send a ``message'' to the giant Prudential Life
Insurance Company that fraudulent behavior on the part of an
agent will not be tolerated.\11\ What kind of damages message
is necessary to achieve that effect? Obviously, if the
insurer stood to gain no more than $46 over the life of the
policy, any damages judgment greater than $46 sends the
insurer a message by making the policy unprofitable. (Of
course, I ignore entirely Prudential's defense costs plus the
reputational harm from the lawsuit.) The jury in the Gallant
case went substantially beyond that amount, however, in
awarding compensatory damages of $30,000 for economic loss
and $400,000 for the mental anguish of the two weeks' lost
sleep and anger. It certainly cannot be argued that the jury
has undervalued the Gallant's compensatory loss--indeed, the
$400,000 mental anguish award is extreme. Furthermore, there
is no reason to think that the agent's behavior in other
contexts would go undetected. (Prudential later settled other
cases brought by the agent's clients.) As a consequence,
there is no justification for a punitive damages award
whatsoever.
What will be the effect of punitive damages verdicts such
as that in the Gallant case? In the face of such a verdict,
what is the rational response of an insurer like Prudential
or
other insurers selling similar policies? Regrettably, but
necessarily in a competitive industry, the rational
response is to quit selling such low value policies
altogether. It makes very little sense to expose the
company and its policyholders to the risk of such a
damages verdict given the very small gain from the sale of
such a policy.
Is this the type of product that our civil liability system
should drive from the market? Obviously, not, and low-income
consumers in Alabama are directly harmed as a result. Here,
the dramatically differential effects of such verdicts on
high-income versus low-income consumers are made clear. In my
own view, it is far more important to our society to have our
insurance industry provide life insurance coverage to low-
income than to high-income citizens, since the relatively
affluent of our society have other means of providing
financial security for their families. The availability of
financial protection and security at relatively low cost will
be substantially diminished if such low premium policies, as
here, are no longer available.
More generally, where expected punitive damages verdicts
are added to the price of products and services, the first to
feel the effect will be low-income consumers. And where the
magnitude of punitive damages verdicts rise, imperiling the
continued provision of the product or service, the first to
be affected will be those products and services with the
lowest profit margins, most attractive to the low-income. The
Gallant case provides a dramatic example of the effect.
Following Gallant and other large punitive damages verdicts,
several insurers have quit offering coverage in Alabama
altogether.
Punitive damages reform would cure that ill to the benefit
of all Americans and especially low-income Americans. As the
Gallant case shows, however, to fully cure the problem,
punitive damages reform must extend beyond the products
liability context to all civil litigation. The Gallant case
involved insurance, not product manufacture, Punitive
damages verdicts such as the $25 million verdict in the
Gallant case encourage wasteful litigation. (Indeed,
litigation seeking punitive damages judgments against
financial service companies has become an industry in
Alabama.) By increasing the prices of all products and
services, punitive damages verdicts and settlements reduce
the purchasing power of all Americans, again, especially
the poor.
must congress implement punitive damages reform?
Many defenders of our current regime question why the
Congress should become involved in civil liability reform,
rather than leaving reform initiatives to the courts or to
the state legislatures. The question is particularly
appropriate with respect to punitive damages reform, given
that the Supreme Court has addressed the issue of the
excessiveness of punitive damages in several recent
cases.\12\
I have been involved in the tort reform effort for many
years and have testified in favor of tort reform before
various state legislatures (California, Louisiana, New
Jersey) and in various judicial proceedings evaluating state
tort reform statutes (Alabama, Florida, New Mexico). I have
organized several conferences addressing tort reform for
state legislators and judges, and have directed much of my
writing on tort reform to the judiciary.
[[Page S5884]] This varied experience has convinced me that
only Congress is in a position to implement effective civil
liability reform and, especially, punitive damages reform.
First, it is evident, after many opportunities, that the
Supreme Court has great difficulty proceeding beyond what
might be called a ``procedural'' approach to the punitive
damages problem. The Court's various options suggest clearly
that a majority of Justices are concerned about
the excessiveness of modern punitive damages verdicts. To
date, however, the only form of punitive damages control
that the Court has adopted has been procedural: approving
a set of procedures at the state level for judicial review
of punitive damages verdicts (Haslip, supra) or
disapproving a state judicial procedure as not providing
sufficient review (Oberg, supra).
In my view, a merely procedural approach to the punitive
damages problem will never be successful. Indeed, we have
stark evidence of its failure. In 1991 in the Haslip case,
the Supreme Court specifically approved the procedure for
reviewing punitive damages verdicts for excessiveness adopted
by the Alabama Supreme Court.\13\ Viewing the Alabama
procedure on its face, few can contest that the review
procedure appears reasonable. In practice, however, as the
Gallant case proves and as the statistics from the rural
Alabama counties strongly suggest, the punitive damages
problem in Alabama, under the procedures approved by the U.S.
Supreme Court, has grown to epidemic proportions.
Upon reflection, it is not surprising that the Supreme
Court has found it difficult to deal with excessive punitive
damages. The Supreme Court's job, in general, is to define
rights. Few would contest--I do not contest--that punitive
damages may be appropriate in some contexts. I would not
support a Constitutional right of immunity from punitive
damages (though that may well be an important improvement
over the current state of the law).
What is needed for punitive damages reform is a prudential
judgment of the appropriate cap or limit to punitive damages
that will allow some room for punishing egregious behavior,
but constrain the deleterious effects of unlimited punitive
damages judgments on consumers and on the low-income. A
proportional limit of three times
economic losses or $250,000 is a prudential judgment of that
nature. (Personally, I would support a lower figure absent
a definitive finding of malice.) But that prudential
judgment is a uniquely legislative, not judicial,
exercise.
With respect to reform by the states, the question is
somewhat different. Punitive damages verdicts implicate both
interstate and foreign commerce in a manner that only the
federal Congress can address. Some have argued that a state
without a significant manufacturing or interstate service
sector could actually benefit its citizens by adopting an
expansive civil liability regime at the expense of citizens
of other states. Only the federal Congress can address this
issue.
Secondly, there is one further effect of our modern damages
regime that should not go unnoticed in Congress: an effect on
the competitiveness of American manufacturers and producers.
Some have argued that large punitive damages verdicts in the
U.S. are neutral with respect to competitiveness since
foreign courts do not award such verdicts against U.S.
producers with respect to sales abroad and because foreign
producers are equally subject to such verdicts for sales in
the U.S. Thus, for U.S. sales, foreign producers, just like
U.S. producers, must add expected punitive damages and joint
and several liability verdicts into the prices of products
and services. (It is often lost on these observers that an
increase in prices on account of punitive damages--even if
operating neutrally--is not an affirmative argument on behalf
of consumers.)
This analysis, however, is only partially correct.
Increasingly, foreign courts are refusing to enforce
extraordinary judgments from U.S. courts against foreign
defendants. For example, very recently the German Federal
Court of Justice (Germany's highest court for civil and
commercial matters) refused to enforce a $400,000 punitive
damages verdict obtained in an American court by an American
plaintiff against a German defendant on the
grounds that the punitive damages verdict was inconsistent
with German public policy.\14\ In the same case, an
intermediate court had reduced the pain and suffering
damages component from $200,000 to $70,000 on the same
grounds.
Foreign judgments of this nature should be alarming both to
Congress and to U.S. courts. First, they are strong evidence
that the current course of American law does not command wide
assent--itself another reason for Congress to enact general
punitive damages reform. Secondly, however, such judgments
suggest an increasing competitiveness problem facing U.S.
producers here in the U.S. To the extent that U.S. verdicts
must be enforced abroad, foreign producers need not add the
costs of the U.S. civil justice system, including punitive
damages and excessive pain and suffering awards, into the
prices of products and services sold in the U.S. Thus,
foreign producers can underprice U.S. producers in sales to
American consumers here in the U.S.
Ironically, although U.S. producers and their employees are
harmed by this effect, U.S. consumers benefit because they
can obtain products and services at lower prices, without the
effects of our punitive damages verdicts built in. Put
slightly differently, the refusal of foreign courts to
enforce large punitive damages or pain and suffering awards
from U.S. courts represents a type of tort reform,
regrettably however, only available--prior to federal
punitive damages reform--to foreign, rather than to U.S.,
producers.
For these various reasons, I endorse punitive damages
reform. May I emphasize again the necessity of extending
reform to all civil litigation, state and federal, rather
than
limiting it to products liability or some other subset, in
order to spread the benefits of reform most broadly.
There are a wide range of punitive damages reforms that the
Senate might consider. Most important would be a
proportionality limit on available punitive damages. The
proposed limit of three times economic losses or $250,000 is
a reasonable first start, though strong arguments can be made
for lower limits or more rigorous standards requiring a
finding of actual malice before any exemplary damage award
can be made. It would also be helpful to provide for the
bifurcation of trial as between the compensatory and punitive
damages phase, in order that the often highly-inflammatory
evidence concerning defendant (most often, corporate) wealth
does not taint a jury's evaluation of the basic evidence with
respect to liability. It is also important to place limits on
or give credit to defendants facing multiple punitive damages
awards. The tragic modern experience in the asbestos
litigation demonstrates the problem. Here, because of
multiple punitive awards to sets of plaintiffs reaching court
first, many subsequent claimants have been unable to collect
basic compensatory damages of any amount.
These comments address only current proposals. Again, I
have studied the reform of modern tort law for many years and
would be happy to respond to any questions concerning the
full range of modern tort law reform.
footnotes
\1\See, e.g., Richard A. Posner, An Economic Approach to
Legal Procedure and Judicial Administration, 2 J. Legal Stud.
399 (1973); G.L. Priest, Selective Characteristics of
Litigation, 9 J. Legal Stud. 399 (1980).
\2\G.L. Priest, Private Litigants and the Court Congestion
Problem, 69 B.U.L. Rev. 527, Table 1 at 540 (1989).
\3\These data were collected under a research project
organized and directed by myself and Professor James R.
Barth, Auburn University for the case Gallant v. Prudential.
Publication is in process; the data are available from the
author.
\4\This figure excludes wrongful death awards which are
denominated ``punitive'' in Alabama. If such awards were
included, the amount equals $109 million, equal to $26 per
capita.
\5\For a discussion of the development of modern tort law,
G.L. Priest, The Invention of Enterprise Liability: A
Critical History of the Intellectual Foundations of Modern
Tort Law, 14 J. Legal Stud, 461 (1985).
\6\Richard A. Posner, Economic Analysis of Law (4th ed.,
1992).
\7\Of course, this is also a justification for the class
action.
\8\I have written widely on the subject of appropriate pain
and suffering awards, and would strongly endorse limits on
pain and suffering, though this issue is somewhat beyond the
focus on punitive damages here. See, e.g., G.L. Priest, The
Current Insurance Crisis and Modern Tort Law, 96 Yale L.J.
1521 (1987).
\9\Pacific Mutual Life Insurance Co. v. Haslip, 111 S.Ct.
1032 (1991).
\10\Testimony of Professor James R. Barth, Auburn University.
\11\Gallant v. Prudential, Barbour County, Alabama, Trial
Transcript at 647, April 6, 1994.
\12\See, e.g., Pacific Mutual Life Insurance Co. v. Haslip,
111 S.Ct. 1932 (1991); TXO Production Corp. v. Alliance
Resources Corp., 113 S.Ct. 2711 (1993), Honda Motor Co. v.
Oberg, 114 S.Ct. 2331 (1994).
\13\Pacific Mutual Life Insurance Co v. Haslip,. 111 S.Ct.
1032 (1991).
\14\Judgment of June 4, 1992, BGH Gr. Sen. Z., discussed in
G.L. Priest, Lawyers, Liability and Law Reform: Effects on
American Economic Growth and Trade Competitiveness, 71 U.
Denver L. Rev. 115 at 146-47 (1993).
McConnell Amendment to H.R. 956, Product Liability Fairness Act
Mr. HATCH. Mr. President, there is a subtle implication in this whole
debate on the McConnell amendment--an amendment which I strongly
support--that somehow health care providers are a bunch of greedy so
and so's, motivated solely by dreams of maximizing profit.
If they ask for relief from liability, it must be because they want
to escape responsibility, to make a quick buck, not because it would
make our health care delivery system better.
What is ironic is that this body has spent countless hours over the
past 2 years debating proposals on health care reform, all of which
were based on a system which places the utmost trust in the health care
professional, whether it be a doctor, a nurse, a chiropractor, or a lab
technician.
In fact, we spent countless hours here in this very Chamber, debating
how to improve our health care delivery system. We spent 54 days in the
Labor and Human Resources Committee--46 days in hearings and 8 days in
markup--and 40 days in the Finance Committee--36 days in hearings, and
4 days in markup. And that does not even count the countless hours of
work outside the committee and on the floor.
There was no disagreement over the need for medical liability reform.
Indeed, the Clinton proposal, the Labor
[[Page S5885]] Committee bill, the Finance Committee bill, the ensuing
Mitchell bill--all contained medical liability provisions, as I will
discuss later. The only question was over what those proposals should
be.
When we get sick, who do we see? A doctor, a nurse practitioner, or
another health care professional. Not an attorney.
When our children get sick, who do they see? A pediatrician, a
physician assistant, or another health care provider. Not an attorney.
Our entire medical system--which everyone knows is heralded as the
best in the world--is based on a total reliance on the abilities of the
health care professionals who treat us, professionals who have
scarified immeasurably to get the requisite training and credentialing.
These are professionals who spend long and hard hours in school and at
work to make our system the best in the world.
Will there be mistakes?
Of course there will. After all, we are only human. And while we must
drive for perfection, that by definition cannot be.
My heart goes out to each and every person who has suffered an
adverse medical event, whether it were caused by the delivery system or
not.
I wish we could have a perfect health care delivery system, where
everyone was healthy and no one ever was ill or suffering.
I wish this could be a perfect world in which children never suffered
adverse reactions from the very vaccines designed to protect them.
I wish this could be a perfect world in which a surgeon never removed
the wrong eye, or the wrong kidney. But it is not a perfect world, nor
can it ever be.
I was a trial attorney before I came to the Congress.
I saw heart-wrenching cases in which mistakes were made. I saw heart-
wrenching cases in which mistakes were not made, and doctors were
forced to expend valuable time and resources defending themselves
against frivolous lawsuits.
I have litigated these cases, both as an attorney for the plaintiff
and as an attorney for the defendant.
No one in this body knows better than I--perhaps with the exception
of our colleague from Tennessee, Senator Frist--what the defects are in
this system.
Mr. President, there are over 260 million people in these United
States. I wish we could design a system which would protect each and
every one of them from harm, but that is not possible. Our job is to
design the best system we can.
Several of our colleagues came to the floor last week and gave very
heart-felt statements, citing specific cases in which patients had not
had the outcome we all would have liked.
I pray that these cases could have turned out for the better. I
fervently wish that such problems never occur again.
But in a country as large and as diverse as this one, problems are
inevitable. The task before us is to make sure the system
minimizes those problems.
I ask my colleagues: ``Do we have the best system possible?''
I do not believe any one in this Chamber would argue that is so.
Thus, the question before is how to design a system which protects
both the patient and the provider. I do not believe that a protracted
war between trial attorneys and health care professionals is the way to
accomplish that goal.
My experience indicates that the best way for us to pass solid
legislation which really solves a problem is for both sides to come
together and negotiate a solution. Unfortunately, that has not been the
case to date. And I think our debate, and indeed our country, has
suffered because of this.
Nevertheless, the intransigence of one or more parties is no reason
that we should cast aside consideration of one of the most important
issues that has faced this body since I came to the Senate.
Indeed, I first introduced a medical liability bill in this body in
1978. Many of the approaches embodied in my legislation are also
contained in the McConnell-Kassebaum amendment before us today.
the need for health care liability reform
What are the problems which give rise to the need for the McConnell
amendment? Let me list them for my colleagues:
First, medical liability costs are out of control. A significant
portion of our gross domestic product is devoted to tort costs, of
which medical torts are a large part. This number is growing.
As our distinguished House colleague, Representative Dave McIntosh,
noted in an April 1994 ``Hudson Briefing Paper,'' the United States has
the most expensive tort system in the world, with direct tort liability
costs of 2.3 percent of the gross domestic product. Our colleague went
on to note that whereas U.S. economic output grew 100 percent between
1933 and 1991, tort costs grew almost 400 percent. In other words, over
the past 58 years, tort costs have grown almost four times faster than
the U.S. economy.
In that briefing paper, which I commend to my colleagues, Mr.
McIntosh found that 7 percent of America's tort costs--$9.1 billion--
are associated with medical malpractice claims. As Senator McConnell,
the author of this amendment, said last Thursday, according to the AMA
physician masterfile and other AMA liability data, the average rate of
claims has increased every year since 1987. In fact, as Senator
McConnell noted, the AMA data show that in 1992, 33,424 medical
professional liability claims were filed. The next year, 1993, 38,430
claims were filed, a 28-percent jump from one year to the next.
Second, liability insurance costs are having a direct impact on
health care spending. Professional liability insurance rates are rising
in response to our runaway tort system. The estimated annual cost of
liability insurance for physicians and health care facilities, for
example, was calculated at more than $9 billion in 1992, and it
continues to grow.
We have all heard the statistics cited in our debate on the amendment
by our distinguished colleague from Wyoming, Senator Thomas.
The costs of ob-gyn malpractice claims in particular are having a
very serious impact on both professional liability costs and the
patient's bill. Statistics from the American College of Obstetricians
and Gynecologists show that one out of eight ob-gyn's has dropped
obstetrical practice due to liability concerns. A 1990 OTA report
indicated that more than half a million rural residents are without any
ob services at all, a number which has undoubtedly grown since the
report was issued.
Third, health care liability costs raise the costs of health care.
The explosion in medical liability claims diverts resources which could
be used for patient care, and it raises the per patient cost of health
care.
As Federation of American Health Systems President Tom Scully noted
at a March 28 Labor Committee hearing, the total yearly cost of medical
liability insurance is $9.2 billion. He went on to relate that that,
added to Lewin-VHI estimates of defensive medicine, as I will discuss
in a minute, plus the liability costs borne by manufacturers of drugs
and devices--$10.8 billion a year--could total up to $45 billion a
year. And that does not even include settlements. Clearly, even if
these estimates are off a bit, we are talking about a substantial sum
involved in the cases.
Fourth, defensive medicine contributes to increased health care
spending. Health care professionals, fearing lawsuits, perform more
services and order more tests than they would otherwise would.
I know about that. As a former medical malpractice lawyer, one of the
bits of advice I would give to doctors was you cannot afford to not
list every possibility in your health history. You cannot afford to not
try everything you possibly can to make sure that that simple cold is
not a respiratory disease, blood disorder or any number of other
things. You have to make sure of your history because no longer can you
get by just meeting the standard of practice in the community. You
better be way above and beyond that. And in the process, the cost of
health care has gone up exponentially because doctors must now protect
themselves, against medical liability cases, and I cannot blame them.
The only way to stop it is to get some reason into the system.
[[Page S5886]] This issue has been one of the more hotly contested in
the medical liability debate.
In fact, a few years ago, Ways and means Chairman Bill Archer and I
asked the Office of Technology Assessment to conduct a study on
defensive medicine. The results embodied in a July 1994 report were not
as conclusive as we would have liked. As OTA admitted, ``Accurate
measurement of the extent of this phenomenon (defensive medicine) is
virtually impossible.''
However, Lewin-VHI, one of the leading analysts in the whole field,
has estimated that the combined cost of hospitals' and physicians'
defensive practices was $25 billion in 1991, and that study was based
on what was considered to be a very conservative definition of
``defensive.''
In fact, the Hudson Institute Competitiveness Center study I cited
earlier found that liability premiums and defensive medical practices
contributed $450 per patient admitted to a large urban hospital in
Indiana, an average of 5.3 percent of the patient's hospital bill. Of
that amount, $327 went for defensive medicine practices, and $123 went
for insurance and administrative costs.
But, Mr. President, I do not believe you need the results of a study
to realize that there is defensive medicine and that it costs a lot of
money.
I have a very simple gauge. Ask your doctor or other health care
professional the next time you have an office visit. They will confirm:
defensive medicine is real.
In fact, you do not have to even wait for your next visit. Ask our
colleague from Tennessee, Senator Frist. In a very compelling statement
before this body last week, he said:
As a physician, I have seen first-hand on a daily basis the
threat of litigation and what it has done to American
medicine.
I have watched my medical colleagues order diagnostic tests
that were costly and unnecessary to the diagnosis or to the
care of the patient, and they are ordered for one purpose: To
create a trail--in many cases a paper trail--to protect them
in the event a lawsuit were ever to be filed.
It is called defensive medicine and it happens every day in
every hospital in America. It alters the way medicine is
practiced, and it is wasteful.
He could not have said it better. In fact, some scholars and leaders
say that if the American Medical Association admits to $25 to $30
billion a year in defensive medicine, can you imagine how really high
it must be? We have to get a handle on this.
Fifth, a significant portion of these tort awards never make it to
the plaintiff. Despite all these tremendous litigation costs, the
beneficiaries seem to be lawyers, not patients.
Lawyers should be compensated and they should be fairly and
reasonably compensated. But studies have shown anywhere from 28 to 43
percent of every dollar spent on liability litigation ever reaches
patients. That is a strong indication that our liability system has
been turned squarely on its head.
There are lawyers in some States who set up separate corporations to
provide for documentary evidence or exhibits or designs and pictures
and other matters. Sometimes total costs taken out of these suits can
go as high as 60 percent of the money before any of it ever reaches the
patient. Now, I think that is outrageous in some of these States. But I
am aware of some of these things that go on. These lawyers are just
making a killing off some of these cases. I will never deny or begrudge
any lawyer the right to make a fair compensation for what happens to be
a very difficult and skillful trial or even a case. But there are
limits to everything, and that is why this bill is providing some
additional limits that would help all of us to save and conserve on
medical costs.
Sixth, the liability crisis has limited the public's access to, and
confidence in, health care. An Insurance Information Institute report
in May of last year cited that a 1992 survey of obstetricians and
gynecologists showed that 80 percent has been sued. Is it likely that
80 percent of obstetricians and gynecologists are committing
malpractice? I do not think so.
The results of this are obvious. A survey conducted by the American
College of Obstetricians and Gynecologists showed that one out of eight
physicians specializing in pregnancy-related services stopped
delivering babies because of liability concerns, and, I might add, the
cost of malpractice insurance.
A New York Times article from July of 1993 said that as many as 17
percent of obstetricians and 70 percent of family practitioners who
once delivered babies in New York no longer do so.
I ask my colleagues, is the goal of access to care helped by a system
that drives providers out of certain areas or types of practice?
I ask my colleagues, does a system which creates these disincentives
to patient care instill public confidence in providers?
In each case, I think the answer is a resounding ``no.'' Senators
McConnell and Kassebaum have provided us with a solution.
The vulnerability of both health care payers and health care
providers to claims arising from the liability morass is not an
abstract proposition.
According to Lewin-VHI, comprehensive medical liability reform would
save $4.5 billion in year one, and an estimated $35.8 billion over 5
years, by curbing both the costs of premiums and of defensive medical
practices.
The McConnell amendment, modeled after the Health Care Liability
Reform and Quality Assurance Act of 1995 (S. 454), which I strongly
support, would instill a much needed measure of stability into our
legal lottery and benefit both patient and provider. How?
Statute of limitations: First, the proposal includes a 2-year statute
of limitations for health care liability actions. A claim must be filed
within 2 years of the date on which the claimant discovered or, in the
exercise of reasonable care, should have discovered the injury and its
cause. This is similar to a provision contained in S. 672,
my Civil Justice Fairness Act.
It is also similar to the law in Utah, which provides for a 2-year
statute of limitations, with a 4-year maximum.
Punitive damages reform: Second, the McConnell amendment sets
standards for punitive damages awards. In order for a claimant to
receive such damages, he or she must prove by clear and convincing
evidence that:
The defendant intended to injure the claimant for a reason unrelated
to health care;
The defendant understood the claimant was substantially certain to
suffer unnecessary injury and yet still deliberately failed to avoid
such injury; or
The defendant acted with a conscious, flagrant disregard of a
substantial and unjustifiable risk of unnecessary injury, which the
defendant failed to avoid in a manner which constitutes a gross
deviation from the normal standard of conduct.
Further, the amendment precludes punitive damages awards only if
compensatory damages are more than nominal.
One of the strong points of the amendment is that it sets up
standards for punitive damages. Any defendant may request separate
proceedings on either punitive damages liability or the amount of the
award. There is a proportionality requirement, so that no award will
exceed three times the amount awarded for economic damages or $250,000,
whichever is greater.
Finally, there is an important safeguard contained in the McConnell
amendment, so that it is made clear the language does not imply a right
to seek punitive damages if none currently exists under Federal or
State law.
Again, this language is very similar to the language in my bill S.
672.
Periodic payments: Under the McConnell amendment, periodic payment of
future damages can be made at the request of either party if the award
exceeds $100,000. This is an important provision which ensures that the
injured party will receive more of the award, and the attorney less. It
also makes it easier for insurers to judge their appropriate reserves.
This provision was also contained in my Civil Justice Fairness Act. I
would note that in Utah law, periodic payments for awards of over
$100,000 are mandatory.
Limits on attorney fees: The amendment before us limits attorney fees
to 33\1/3\ percent of the first $150,000, based on after tax-recovery,
and 25 percent of any amount in excess of $150,000. Although my bill
this year addresses attorney fees from a different perspective, I would
note that last year the
[[Page S5887]] Labor and Human Resources Committee adopted an amendment
I offered to cap attorney's fees at 25 percent across the board.
I have to say, I am concerned about any limitation on attorney's
fees, but there have been some colossal rip-offs in this area and this
appears to be a reasonable approach in the McConnell-Kassebaum
amendment.
Finally, I want to mention two other important provisions in the
McConnell-Kassebaum amendment.
Alternative dispute resolution [ADR] mechanisms: I have long felt
that our fault-based liability system may not be the most equitable or
the most efficient. It is expensive, time consuming, and unpredictable.
The McConnell-Kassebaum bill encourages States to establish or
maintain alternative dispute resolution systems. It also requires the
Attorney General, in consultation with the Administrative Conference of
the United States, to develop guidelines for State ADR procedures,
including:
Arbitration; mediation; early neutral evaluation; early offer and
recovery mechanisms; certificate of merit; and no-fault.
Further, the provision authorizes the Attorney General to provide
States with technical assistance in establishing and maintaining such
ADR systems. The AG is required to monitor and evaluate the
effectiveness of these systems.
I believe that these provisions will be very helpful in encouraging
alternatives to our current system. However, I am concerned that the
language does not go far enough in encouraging the development of such
systems.
For example, at least two States, Colorado and Utah, are developing
no-fault liability systems. No-fault may hold great promise in
rectifying many of the problems with a fault-based system, such as its
unpredictability and cost, but we are far from designing a system which
will work perfectly.
Later in this debate, I plan to offer an amendment authorizing the
Attorney General to assist States to help develop the ADR programs
which are authorized in the McConnell amendment.
On measures to improve quality; when I began this statement, I talked
about efforts to improve our health care delivery system, and, in
particular, the quality of care that patients receive.
There are myriad safeguards in our system to ensure that we strive
for quality care.
Physicians are credentialed by the hospitals at which they practice
to ensure that the medical staff both has the appropriate training,
experience, insurance coverage, and is utilizing their skills
appropriately. Peer review protects against problems with patient care
as do the many activities of local and State medical societies.
All U.S. medical schools are accredited by one of three organizations
sponsored and supported by the American Medical Association. In
addition, all medical school graduates must pass the U.S. Medical
Licensing Examination and almost all voluntarily choose to become board
certified.
The Joint Commission on the Accreditation of Healthcare Organizations
[JCAHO] accredits most of the hospitals in the United States. Hospital
insurors monitor the care at the facilities they cover as well.
Finally, I would also note that according to statistics provided to
me by the Federation of State Medical Boards, State medical board
authorities disciplined 3,685 physicians in 1994, representing an 11.8-
percent increase over the previous year. Almost 86 percent of those
actions involved loss of license or some restriction of license.
By the way, I want to recognize that the States are also moving to
improve health care quality.
In my own State of Utah, the legislature in January of this year
enacted the second phase of Governor Leavitt's HealthPrint health
reform program.
The act established a 2-year demonstration program to promote and
monitor quality health care. Specifically, the law requires that the
project include a collaborative public-private effort to promote
clinical quality and cost effectiveness through community-wide
continuous quality improvement methods. It also requires a process for
evaluating the effectiveness of health care continuous quality
improvement in the State of Utah.
Some have alleged that this system is not tight enough to guard
against problem practitioners.
That may be the case. For example, there is an impediment to
physicians self-regulating themselves which is posed by our antitrust
laws; that obstacle is something Chairman Archer and I attempted to
address in our antitrust legislation last year. It is an issue I intend
to pursue again this year.
But, obviously, out antitrust laws are not the entire answer.
The McConnell-Kassebaum amendment provides additional resources for
State health care quality assurance and access activities. One-half of
all punitive damage awards will be used for licensing, investigating,
disciplining, and certifying health care professionals in a State or
for reducing the malpractice-related costs for health care volunteers
in medically underserved areas.
This is a common sense provision, and one which I believe should be
adopted.
biomaterials liability
A very important provision contained in Senator McConnell's original
medical liability bill, S. 454, is not contained in this amendment as
it is contained in the underlying Gorton substitute product liability
bill. I am referring to the biomaterials liability legislation
sponsored by my colleagues from Arizona, Senator McCain and from
Connecticut, Senator Lieberman.
I am very supportive of this legislation. There is a real need for
the Congress to take action to relieve raw materials suppliers from
liability in finished medical products.
Last month, I received a letter from Dr. Don B. Olsen, director of
the University of Utah Artificial Heart Laboratory. He cited a
situation which points out precisely why the McCain-Lieberman language
is needed.
In his letter to me, Dr. Olsen said:
Perhaps you were informed about the recent patient at LDS
Hospital who is on one of our devices awaiting cardiac
transplantation. The patient is doing very well, after having
been bed-ridden for about 11 days awaiting a heart
transplant. ``As his health continued to deteriorate, he
received an intraaortic balloon pump (manufactured from one
of the polymers now pulled off the market) and this device
was inadequate to support his failing heart. Dr. Long, Dr.
Doty and myself then elected to replace his heart with the
CardioWest pneumatic artificial heart developed at the
University of Utah.
CardioWest is a not-for-profit corporation that has 42 of their
pneumatically powered artificial hearts implanted in patients as a
bridge to cardiac transplantation.
The problem is that large polymer manufacturers, who make the raw
materials needed to produce the artificial heart, have stopped
marketing the polymers due to liability concerns.
A large device manufacturer, facing similar liability concerns, has
set up its own polymer plant to produce the materials needed for its
own devices. They are working with the university in an attempt to
reach an agreement to provide the polymers for the artificial heart.
However, they are understandably reluctant to provide the materials
without some liability protection. There again the liability problem
has reared its head.
Here we have a renowned university designing literally lifesaving
products which cannot be used because of liability concerns. This is a
travesty.
The McCain-Lieberman language is needed to obviate such problems.
Enactment of it cannot come to quickly.
health care reform redux?
In closing, Mr. President, I want to outline for my colleagues the
road we have traveled in the past 2 years.
When the President and Mrs. Clinton transmitted their Health Security
Act to Congress, they acknowledged that we do have a health care
liability problem in this country.
The Clinton bill, while it did not contain caps on damages,
contains provisions on collateral source reform, periodic payment of
future damages, limits on attorneys' fees, and alternative dispute
resolution mechanisms.
In the Labor Committee, we adopted provisions on collateral source
reform, periodic payment of future damages, limits on attorneys' fees,
and grants for alternative dispute resolution mechanisms, including no-
fault.
Subsequently, in the Finance Committee, we adopted a measure which
[[Page S5888]] contained a $250,000 cap on noneconomic damages indexed
to inflation, joint and several liability reform, use of punitive
damage awards for quality improvement, limits on attorneys' fees,
mandatory ADR, and grants for no-fault demonstration programs.
Obviously, none of these measures included all of the provisions of
the Mcconnell proposal; at the same time, it is obvious that much of
the ground we have covered in the past 2 weeks we have covered before,
in that many of these provisions been advocated, indeed endorsed, by
significant parties in our past health care reform debate.
conclusion
Mr. President, what we are talking about here is improving our health
care delivery system, by ending the legal lottery which threaten both
patients and providers.
Some in this body have expressed opposition to the very fundamental
changes espoused by my colleague from Kentucky and Kansas.
What I find ironic is that when the shoe is on the other foot, that
is, the Government is the deep pocket not a practitioner, this body can
move quickly to enact tort reforms far more radical than those we are
discussing today.
I am referring to the 1992 amendments to the Federal Tort Claims
Act--FTCA--amendments I supported, indeed helped pass--which relieved
Community health centers from burdensome malpractice premiums.
In placing community health centers under the FTCA, Congress endorsed
prohibiting punitive damages, allowing liability to be determined by a
judge, not a jury, and capping contingency fees at 25 percent of a
litigated claim or 20 percent of a settlement.
And, while we are on the subject of community health centers--a
program I support fervently and which I hope can be expanded to help
address the uninsured problem--I might mention another irony.
Many have stood in this Chamber and cited the statistic that
malpractice claims only amount to 1 percent of our total health care
bill.
With a national health care bill approaching almost $1 trillion, 1
percent amounts to almost $10 billion.
Think how we could expand access to health care by using those
billions of dollars for a program so much more productive than
litigation.
With current funding of $757 million, community, migrant and homeless
centers provide care to almost 9 million people in 2,200 communities.
They estimate that, incrementally, each additional $10 million they are
provided would extend services to 100,000 people in 30-40 new
communities.
Reforming our medical liability system and using those savings in
community health centers would truly be health care reform in the first
order of magnitude.
In closing, I wish to commend Senator McConnell, Senator Kassebaum,
and Senator Lieberman for their efforts on this important topic.
I intend to continue working with them closely on this issue, as it
is extremely important to health care in America.
Amendment No. 613 to Amendment No. 603
(Purpose: To permit the Attorney General to award grants for
establishing or maintaining alternative dispute resolution mechanisms)
Mr. HATCH. Mr. President, I ask unanimous consent that the pending
amendment be temporarily set aside, and I send an amendment to the desk
and ask for its immediate consideration.
The PRESIDING OFFICER. Without objection, the pending amendment is
set aside.
The clerk will report.
The legislative clerk read as follows:
The Senator from Utah [Mr. Hatch] proposes an amendment
numbered 613 to amendment No. 603.
Mr. HATCH. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
In section 20(d)(1), strike ``with technical
assistance'' and insert ``with grants or other technical
assistance''.
Mr. HATCH. Mr. President, one thing is clear from our debate over the
past week.
While there are both proponents and opponents of the medical
liability amendment before us, we all agree that the system is not
perfect.
Specifically, many commentators have criticized our current liability
system as compensating very few of those entitled to recovery and
punishing the wrong providers.
And most of the money spent on liability goes to lawyers.
By a RAND estimate, 57 cents of every liability dollar goes to
lawyers, leaving only 43 cents for injured patients.
Injured patients can wait years for a final judgment and eventual
payment of the small percentage of their awards left to them by the
lawyers and the system.
And doctors can have their reputations destroyed or lose their
livelihood by a single lawsuit or even mere insurance costs. The
results of tort litigation, particularly in jury cases, is so
unpredictable that it has been called the liability lottery.
There must be a better way of compensating injured patients and
punishing bad doctors without wasting so much time, money, and effort
while getting such unpredictable and inconsistent results. There must
be a more rational and efficient liability system.
As with so many things, innovative ideas are coming from the States.
And, I believe, many more interesting new ideas can be developed in the
States if we will allow them to experiment.
One idea, which some in Utah, and in other States like Colorado, have
been investigating is the development of innovative no-fault medical
liability systems. A no-fault system could compensate more injured
patients more quickly than the litigation system.
It could be more effective at punishing those providers who do act
culpably. It may be that a no-fault system could be not only more
equitable, but more inexpensive.
Researchers at Harvard University, who have been working in this for
years and who are working with those in Utah and Colorado suggest that
these systems hold substantial promise on all these fronts.
But we need more experience with different alternative dispute
resolution systems, such as no-fault, before we can be sure.
There are many other approaches being tried in various parts of the
country that might help make the system more rational. In the last few
years we have heard about innovative dispute resolution systems that
encourage quick and fair settlements like early intervention and early
offer models.
Practice guidelines and enterprise liability are also options that
should be watched and studied to see if they will yield helpful results
elsewhere.
Enhancing the evidentiary status of clinical practice guidelines
could help the tort system move to judgment more quickly and
efficiently, with more uniform results. And practice guidelines could
also be an interesting method of developing more uniform standards of
medical practice.
There are many forms of each of these approaches, and I think we can
learn much from experimenting with various approaches in the States. I
believe we should encourage the States and entities in the States to
experiment so that we can see what approaches are most likely to lead
to a more fair and efficient liability system.
The amendment I am offering to the McConnell-Kassebaum provision on
medical liability is very simple.
In section 20, State-Based Alternative Dispute Resolution Mechanisms,
the current language in subsection (d) authorizes the Attorney General
to provide States with technical assistance in establishing or
maintaining alternative dispute resolution mechanisms.
My amendment would expand that slightly, so that the Attorney General
may provide grants or technical assistance to States in establishing or
maintaining alternative dispute resolution systems.
The only change is the addition of the words ``grants or'', and I
note that this would be entirely permissive.
While minor, it is an important change, because it will allow States,
or their designees, to work on ADR alternatives, without time-consuming
work which is potentially duplicative at the Federal level.
[[Page S5889]] I hope this amendment can be adopted.
Mr. WELLSTONE addressed the Chair.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, I know my colleague from Illinois is
shortly going to introduce an amendment that I will support, which
gives States the right to opt out. I am in profound disagreement with
this Federal preemption. I think I will respond to my colleague from
Utah just with a somewhat different perspective for the record, if you
will, Mr. President.
Mr. President, I remember last year during the health care debate
when we had talked about the cost of medical malpractice premiums that
both the Congressional Budget Office--I did not say Democrat or
Republican--and the Office of Technology Assessment, which gets high
remarks for its very rigorous work--indicated that the medical
malpractice premiums account for less than 1 percent of the overall
health care costs. A trillion-dollar industry, less than 1 percent.
As I remember, there were some other reports that said even if you
were to take into account defensive medicine, altogether it was 2
percent of the total cost. By the same token, Mr. President, when the
Congressional Budget Office, for example, and the General Accounting
Office scored a single payer bill, where there was one single payer at
each State level, as I remember, the estimates were that we could save
up to $100 billion a year. But that challenged the power of the
insurance industry. My understanding, Mr. President, is that medical
malpractice insurance is the single most important profitable line of
property casualty insurance and generated $1.4 billion in profit in
1992.
So we do not talk about insurance reform, record profits being made;
we do not talk about how to really contain costs. The Congressional
Budget Office also said, Mr. President, that the best single way of
containing health care costs would be to put some limit on what
insurance companies can charge. We do not do that at all. We go the
path of least political resistance. Those folks have entirely too much
economic and political power. We dare not confront them.
But, Mr. President, instead, we are going to go after those people
who have been hurt, those people who have been injured, that have lost
loved ones and take away some of their protection and take away some of
their rights to seek redress of grievance.
Mr. President, I am going to go back to an example--I am sorry my
colleague is not on the floor right now. I have a practice of not
debating colleagues directly if they are not here. I do not think there
is a standard of fairness to that. So I will be more general.
Let me raise the question about these caps on punitive damages. For
example, I think my colleague wants caps across the board, as I
understand it. Let me put a face on this question. Think of Lee Ann
Gryc from my State of Minnesota who was 4 years old when the pajamas
she was wearing ignited, leaving her with second- and third-degree
burns over 20 percent of her body. An official with the company that
made the pajamas had written a memo 14 years earlier stating that
because the material they used was so flammable, the company was
``sitting on a powder keg.'' When Lee Ann sued for damages, the jury
awarded $8,500 in economic damages and $1 million in punitive damages.
By the way, children--earlier we were talking about this in debate, and
one of my colleagues was making projections for economic damages for
children--children do not get much by way of economic damages.
Let me ask you, Mr. President, as I cannot ask my colleague, was the
jury wrong? Should the company have gotten away with a cap of $250,000
in punitive damages, as this bill would require? Unless you are
comfortable answering the question yes, unless you are willing to say
that Lee Ann Gryc was entitled to no more than $250,000 in punitive
damages, when the company knew that the pajamas were flammable, then
you should not be supporting this bill.
This legislation is going to have a very negative effect on
consumers. I think it is unconscionable.
Now, Mr. President, I do not get a chance to ask the question, but I
get a chance to present another perspective on the floor of the Senate
right now in response to my colleague. The question I would raise is--I
do not think my colleagues have an answer to this question--No. 1, if
we have this cap on punitive damages, what is the projection on how
many citizens are going to be denied, how much by way of compensation,
over the years to come? And No. 2, what implications does this have
toward weakening the deterrent effect?
Like it or not, Mr. President, the company that made those pajamas
had a memo written 14 years earlier stating that it was sitting on a
powder keg. But for this company the bottom line was the only line.
Unfortunately, there are some companies like that--thank God, not too
many. For those companies that produced these pajamas that are
flammable that burn children, or products that injure or kill people,
one of the ways we know they will not do it again is when they are
slapped with such a stringent punitive damages suit that they know they
cannot do it again. What is the effect of taking away that deterrent?
What is the projection on how many innocent people are going to be
injured, maimed, or killed by defective products in the foreseeable
future? Give me near-term figures. Give me middle-term figures. Give me
long-term figures.
Mr. President, what we have before us is an agenda that is an
extreme. First of all, there is this agenda to, on the one hand, weaken
some of the agencies which have as their mandate to protect the health
and safety of consumers in this country. Then, on top of that, we try
and take away from citizens their right to receive fair compensation.
I might add, when it comes to the cap on punitive damages, I think we
essentially severely undercut the deterrent effect of this. That is why
they are there. I mean, you have the economic and noneconomic damages
to make the victim whole. In addition, you have punitive damages to say
to a company: By God, you need to understand this is so egregious in
what has been done that you really are slapped with a major damage
which will prevent you from ever, ever doing this again and will
prevent other companies from doing this again.
That is what we are attempting to overturn. That is what is so
dangerous, no pun intended, for consumers in this country.
Mr. President, again, No. 1, for Lee Ann Gryc from the State of
Minnesota, 4 years old when the pajamas she was wearing were ignited,
leaving her with second- and third-degree burns over 20 percent of her
body. Is $250,000 too much? Is any Senator willing to say it was too
much? I do not think so.
Then my colleagues say, we cannot leave it up to a jury to decide.
They are too swayed by emotion. The juries are the citizens that elect
Senators.
Then, in addition, when my State of Minnesota decides that a cap on
noneconomic damages did not work, we may not have any choice in the
matter because we have legislation that preempts States. Whatever
happened to decentralization? Whatever happened to the idea of States
making some of these decisions?
Finally, Mr. President, again, on the medical malpractice part, I can
simply say that I am not aware of any independent study done by CBO or
Office of Technology Assessment since last year that went through the
whole question of a $1 trillion industry, that went through medical
costs, went through an analysis of health care costs.
What CBO and OTA said is 1 percent--medical malpractice premiums
account for less than 1 percent of overall health care costs. Medical
malpractice premiums account for less than 1 percent; adding defensive
medicine, maybe 2 percent. Those are my figures as I remember.
When, in the name of controlling health care costs, are we going to
pass a piece of legislation which is profoundly anticonsumer, which
tips the scales of justice away from people who were seeking redress of
grievance in behalf of negligent companies or negligent doctors? It is
just outrageous. We take away from people some of the basic legal
rights they have, some of the basic consumer protection they count on.
On the other hand, I would say to my colleagues, if we want to
control health
[[Page S5890]] care costs, great, I will give my colleagues an
opportunity. Sometime I hope to bring an amendment on the floor that
talks about putting a limit on insurance company premiums. Then we will
see whether or not we are interested in controlling health care costs.
According to the Congressional Budget Office, that is the way to
control health care costs.
And I will say to my colleagues, if my colleagues are interested in
having more health care in rural or urban communities, I am extremely
interested in how we encourage more family doctors, nurse
practitioners, and how we deliver health care in a humane, affordable
way in underserved communities. But do not use these medical
malpractice amendments as a reason to do that. We do not have to take
away from citizens in this country protection when it comes to their
health and safety. We do not have to take away from them their rights
in the court system in order to make sure that we provide dignified,
affordable health care. That is not a choice.
Mr. President, I hope on both the underlying product liability, and
much less, some of these medical malpractice amendments--ones with
caps--that colleagues will vote no. I yield the floor.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. SIMON. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SIMON. Mr. President, I ask unanimous consent that amendment No.
613 be laid aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 614 to Amendment No. 603
(Purpose: To clarify the preemption of State laws)
Mr. SIMON. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Illinois [Mr. Simon], for himself and Mr.
Wellstone, proposes an amendment numbered 614 to amendment
No. 603.
Mr. SIMON. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place insert the following:
SECTION . STATE OPTION.
(a) A provision of this subtitle shall not apply to
disputes between citizens of the same State if such State
enacts a statute--
(1) citing the authority of this section; and
(2) declaring the election of such State that such
provision shall not apply to such disputes.
(b) If a dispute arises between citizens of two States that
have elected not to apply a particular provision, ordinary
choice of law principles shall apply.
(c) For purposes of this section, a corporation shall be
deemed a citizen of its State of incorporation and of its
principal place of business.
Mr. SIMON. Mr. President, this is word-for-word the amendment that
the Presiding Officer offered in our Labor and Human Resources
Committee, a very thoughtful amendment, which says we will permit the
Federal Government to establish these standards, and if there is a
litigation between a citizen of one State and a physician or hospital
from another State, or whatever the circumstances may be, then these
Federal standards apply. But if a State wishes to differ from this, a
State can do that. That is all this amendment does. It was carried, as
the Presiding Officer will recall, in a bipartisan vote in the Labor
and Human Resources Committee. I hope it can pass in a bipartisan vote
here.
I have some concerns about the basic product liability bill, but
there can be a very cogent argument made for it, because if a
manufacturer in Illinois or Michigan, or in some other State,
manufactures a product, that goes interstate. So having some national
standards makes some sense.
But in the case of medical malpractice, in all but a few cases we are
talking about litigation within a State. And the argument made by
Senator Abraham in the committee seems to me to be a very logical
argument, and that is, let us establish the Federal standards, but if a
State wishes to vary from those standards, a State can do that. That is
all the amendment does. It is not complicated. I will, at an
appropriate time tomorrow, ask for a rollcall vote on the amendment.
I see my colleague from Washington is off the floor right now.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. GORTON. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GORTON. Mr. President, I would like to speak for a few moments on
the underlying bill on product liability--the debate on which began a
week ago today--on some aspects of the amendments which are before us
at the present time on medical malpractice, and respond to two
questions raised by the Senator from Minnesota during one of his sets
of remarks on product liability earlier during the course of the day.
But I can begin in no better fashion than to share with you, Mr.
President, and with my colleagues, a remarkably eloquent essay which
appeared in last Friday's Washington Post. Its author, Bernadine Healy,
was Director of the National Institutes of Health during most of the
Bush administration and is a senior policy advisor at the Cleveland
Clinic Foundation.
Mr. President, rather than simply to put that essay into the Record,
in order that our Members, in making their judgments on the important
votes they are going to cast tomorrow and the rest of the week, I
intend to read that essay, because I was so moved by it, with simply
the caveat in the beginning. The essay, entitled ``Tort Tax on Women's
Health,'' is primarily about the impact of this bill and these
amendments on women. And I trust, Mr. President, that you will
remember, as I read it, that it speaks from Dr. Healy's female
perspective. I am quoting and I will be until I bring this to an end:
As the move to fix the broken tort system gains steam in
the Senate, we're hearing a tired refrain: Legal reform will
hurt women. This political gimmick to paint women as victims
is precisely the opposite of the truth: Perpetuation of the
litigation lottery, not its reform, hurts most women in the
long run.
In dire need of reform is the current system's imposition
of massive and arbitrary fines under the guise of ``punitive
damages.'' In product liability cases, punitive damages are
intended to punish a company that manufactures a dangerous
product. In medical malpractice cases, these fines are
cloaked as non-economic damages, such as those for ``pain and
suffering.''
Juries are asked to impose these damages on a purely
subjective, emotional basis. They are in excess of the
amounts needed to pay for the harm actually done. One juror
told the Legal Times her reasons for awarding $10 million
against a Washington, D.C. doctor and hospital: ``[Q]uite
honestly, I think it had something to do with sounding like a
round figure.''
It is this open-ended freedom to punish that creates a
legal lottery, one in which many trial lawyers scoff at
smaller claims in favor of the winning ticket of a million-
dollar contingency fee.
How could reforming this system hurt women? Protectors of
the current system claim that, because society places women
at a lower economic value, economic compensation for an
injury will never be enough. They point to lower wages for
women than men in comparable jobs, as well as to the
pathetically low wages identified for women who care for the
children and home in a family.
Women always must stand firm for equal wages for equal
work. We also must fight for economic respect for our work
within the family unit. (This might even include calculating
compensatory damages based on the total income of the family
unit, not just the market value of domestic services). But
our struggle for economic equality should not be used as a
smokescreen to justify a liability system that threatens
women's health.
Women live longer and suffer from chronic diseases (such as
osteoporosis) to a greater extent than men. More than men, we
will rely on new drugs and therapies to combat these
debilitating diseases. Unfortunately, unpredictable and
excessive product liability costs are forcing drug and
medical device companies to withdraw needed products, or even
to decline to develop them.
Some products used exclusively by women--namely, those for
pregnancy and contraception--are particularly susceptible to
withdrawal by companies fearing lawsuits. For example, the
price of Bendectin, a drug approved by the FDA for morning
sickness, skyrocketed 250 percent after lawsuits
[[Page S5891]] alleged birth defects. Although no causal link
to birth defects was ever found, the manufacturer withdrew
the
drug from the market. There are no other drugs for morning
sickness.
Improvement to contraceptive products also have been
stalled by the product liability system. While there was a
need to compensate women for problems associated with the
Dalkon Shield intrauterine device (which physicians--not
lawsuits--first called to the attention of the FDA), the
lengthy, hyperadversarial and profit-oriented stream of
lawsuits seriously wounded the development and acceptance of
an improved version. The same may become true for Norplant.
Liability intimidation over minor problems in the first
generation of this useful contraceptive may foreclosure the
development of an updated version.
Another threat to women's health comes from the current
medical malpractice system. The American College of
Obstetricians and Gynecologists found that malpractice
premiums increased 237 percent between 1982 and 1991. Added
on are the indirect costs of defensive medicine (like too
many Cesarean sections) and fewer doctors choosing to go into
obstetrics.
No one pays a higher price for this system than the poor.
The Institute of Medicine reports that physicians' fear of
lawsuits has left many rural communities without obstetrical
care. The National Council of Negro Women reports the same
for urban low-income areas.
Who gains from this tort tax on women's health? Only 40
percent of malpractice insurance premiums goes to injured
patients, while the remaining 60 percent goes to lawyers'
fees and administrative costs.
Instead of health care by lottery, women need good science
and the aggressive pursuit of medical advances by the NIH,
academia and the private sector. We don't need women's
advocates who protect a liability system that limits our
health care choices by turning businesses away from women's
health.
Nor do we need the same people who rightly argue for women
to pilot F-16s then to characterize us as too delicate to
weight our health risks. It is time to recognize that women,
armed with solid research and medical information, can make
their own intelligent choices about their health, from
choosing a contraceptive to getting breast implants.
During the House debate, a congresswoman characterized
liability reform as a male conspiracy, comparing the
``second-class status'' of non-economic damages under a
reformed system to what she viewed as a ``second-class
status'' for women. But just as women's health has finally
been upgraded to first class, we cannot abide a liability
system that holds women back in the dark ages of medicine.
Mr. President, two principal points in Dr. Healy's essay, I think,
deserve special emphasis.
The first has almost been ignored entirely since the opening salvos
in this debate. That is, the tremendous cost of the present system, a
tremendous cost which does not go to victims under any set of
circumstances.
Dr. Healy speaks of medical malpractice as producing 40 percent of
all the insurance premiums that go into medical malpractice insurance
to victims and 60 percent to lawyers and to administrative costs, the
rest to the costs of the system itself.
Mr. President, that figure is not limited to medical malpractice. It
is endemic across the board in product liability litigation. I am
astounded that we have not been met with an outrageous attack on this
system by the very Members of this body who, instead, are arguing for
its preservation without change.
They who speak of victimization, they who speak of appropriate
compensation seem overwhelmingly content with a system where 60 percent
of the money that goes into it ends up in the pockets of people who are
not victims but who are lawyers or expert witnesses or insurance
investigators or the like.
In almost any other aspect of our lives, we would be outraged by a
60-percent administrative cost. If anything, Mr. President, that 60 to
40 percent split underestimates the cost of the system. That is only
what is reflected in medical malpractice premiums. It does not reflect
at all the unnecessary defensive medicine that is practiced in order to
try to prevent such claims from coming up in the first place.
If there were no other reason for change, to make more effective
compensating the actual victims of negligence, either in product
liability or medical malpractice, we should be demanding reform instead
of fighting that reform.
At the same time, Mr. President, if this split in favor of
overwhelming administrative costs is shocking, it seems to me
especially shocking is the other principal point made by Dr. Healy and
by others, the tremendously adverse impact of the present system on
research, on the development of new products, whether National
Institutes of Health related, machine tools--a wide range of products
and the marketing of those products.
First, of course, is that the price of every such product includes an
insurance premium, a product liability insurance premium. More
significant than that--more significant than that --are the choices
made by companies faced with this lottery system.
My distinguished friend and colleague from New Mexico last Friday
read a statement by retired U.S. Supreme Court Justice Lewis Powell,
which I can only paraphrase here, saying that the most irrational form
of business regulation is the product liability system.
We have in this Government a large number of regulatory bodies, many
of which are devoted to the safety and effectiveness of the kinds of
articles, the kinds of products that we use in our lives every day.
Those agencies, of course, are not infallible. By comparison, a jury
system dealing with a specific instance only, in every case is a pure
lottery. The argument that somehow or another this system, which on
identical facts can come up with a verdict for a defendant after a huge
investment in the costs, or a multimillion-dollar punitive damage claim
for actions deemed by the jury to have been deliberate or close to
deliberate, is exactly that; it is a lottery.
What is the rational response of a small business or, for that
matter, a very large business in the field of producing new and
improved items, especially related to our health? Well, the response
is, in many cases, the flame is not worth the candle. Why should we as
a company subject ourselves to tens of millions of dollars in
attorney's fees, even in cases in which we are successful, and the
possibility, however remote, of multi-million dollar judgments and
terrible publicity in punitive damages in connection with a product
which sells for a relatively low profit margin?
Companies will, under those circumstances, not so much weigh the
question of the safety of a particular device or medicine or product,
they will weigh their potentials for successful business against the
potential of all of these large attorney's fees and potential punitive
damage awards.
And what happens? What happens is many companies simply get out of
the business; 90 percent of all of the companies manufacturing football
helmets, for example, have abandoned the business during the course of
the last 20 years. Major national laboratories and developers have
abandoned the search for drugs that will have a positive impact on the
AIDS epidemic because their calculation was that the legal costs of
introducing such drugs, even with the approval of the Food and Drug
Administration, vastly exceeded any profit that they can make on them.
Other companies have gotten out of the business, as Dr. Healy says in
one particular case here, ``. . . have gotten out of the business of
producing traditional immunizations and the like because of the
potential cost of either verdicts or even the cost of successfully
defending lawsuits.''
We have discussed on this floor the dramatic impact of product
liability litigation against companies manufacturing piston driven
aircraft, a 95-percent reduction in the production of that kind of
aircraft in the United States over a 20-year period all because of
product liability litigation. Not successful lawsuits, Mr. President;
in the overwhelming majority of these cases, the lawsuits were
unsuccessful. But the costs of a successful defense are often more than
the costs of a judgment. So that industry was practically destroyed
until a modest change was made by this Congress last year and we have,
in that one industry, the beginning of a recovery.
Mr. CRAIG assumed the chair.
Mr. GORTON. The goal of product liability legislation is the recovery
and development of those industries which make our lives better, which
provide new and more effective treatment for medical conditions to
which all of us are subject, more and better products for our
enjoyment, for our transportation, for every other aspect of our lives.
And when we can do that without
[[Page S5892]] denying a single claimant the right to go into court and
the right to recover all of the actual damages that a jury awards to
that plaintiff--all of the actual damages--and when we can do that at
so low a cost to anyone except those who benefit from the litigation
itself, it would not seem to me that this debate should have lasted as
long as it did or that its result should still be so highly
unpredictable.
So, I congratulate Dr. Healy on her particular insight into this
question, and say that insight can be expanded across the entire scope
of the legislation with which we are dealing here and urgently speaks
for its passage.
I did want to remark briefly on two questions which were propounded
by the Senator from Minnesota to the supporters of this legislation an
hour or so ago. The Senator from Minnesota asks, and I hope I
paraphrase him accurately, ``What projections are there for how many
people will be denied how much money as a result of the cap on punitive
damages included in this legislation?'' The second question was, ``What
is the extent of adverse effects of the bill on the deterrent effect of
uncapped punitive damages?''
In a sense, each of those questions is the same. Ironically, the
answer to the first question, how many people will be denied how much
money by some kind of limitations on punitive damages, has probably
been answered most eloquently by the opponents to the bill. Opponents
to the bill have been at great pains to say that there is no litigation
explosion with respect to product liability litigation. That is an
interesting argument, since the contrary argument has never been made
on the floor of this Senate during the course of the last week. And
that only a relative handful of punitive damages judgments had been
entered in the last 10 to 12 to 20 years in product liability
litigation.
Of course, not all of those awards would be affected by this cap. A
number of them are less than the cap is in the bill in its present
form. So the answer is, ``Not very many people directly through the
litigation system will be denied very much money by the passage of this
bill in this form.''
But what is not asked in the question is, no one, not a single
individual, will be denied $1 of the actual damages that they suffer
and have proved to a judge and jury by this litigation because punitive
damages, by its very definition, is an award above and beyond the
damages suffered by a claimant in a particular case.
The importance of this legislation in connection with punitive
damages is not so much in connection with actual awards as it is with
the effect of the threat of potential awards against sound business
judgment about the marketing, particularly of new and improved
articles, items, and products; and the fear of losing such a lottery on
the settlement of lawsuits for more money than can justly be found due
to a given claimant in order to prevent that lottery from going against
a particular defendant.
While we can probably come up with an accurate and relatively low
count of the number of major punitive damage judgments in product
liability cases, it is impossible to come up with the number of product
liability cases in which punitive damages have been alleged for $1
million, for $10 million, for $100 million. It costs very little for
the word processor to add another zero to the prayer in a complaint for
damages. And in every case, that complaint must be taken seriously by a
potential defendant. There is no way to predict the outcome and
therefore many settlements are made for claims which are not justified,
in significant amounts of money, and it is that uncertainty which has
so constricted the desire of many businesses to make valid business
judgments, not only from the point of view of the businesses themselves
but to the great gain of the people who would otherwise have used those
new products.
Again, we can simply go back to the one area in which we know what
the impact has been and will be, piston driven aircraft,
95 percent destroyed by the system, significantly restored already
last year since the modest reform in the system has been made.
That, too, answers the second question propounded by the Senator from
Minnesota. What is the extent of the adverse effects of the bill on the
deterrent effect of uncapped punitive damages? Again to paraphrase
Justice Powell, this is the most irrational system of business
regulation that can be imagined. It lacks any general principle
whatsoever. It lacks any certainty whatsoever. It is utterly arbitrary.
Mr. President, I am sure that the Senator from Minnesota would not
for 1 minute countenance our changing the Criminal Code to one in which
no matter what the crime the jury could impose whatever sentence it
thought appropriate--capital punishment for an assault, life
imprisonment for running a stop sign. Yet, that is by analogy exactly
what we do with a punitive damages system, unlimited in every case
except by the judgment of the jury itself.
Moreover, the criminal justice system at least requires proof beyond
a reasonable doubt, something not required as far as I know by any
State having punitive damages. The deterrent effect: Well, Mr.
President, the State I represent in this body does not now and never
has allowed punitive damages in the bulk of civil litigation, nor have
four or five other States. And there is no evidence that there is any
greater carelessness or willfulness on the part of business enterprises
in that State in dealing with consumers in our State because of the
entire absence of punitive damages.
So my answer to the question, ``What is the extent of the adverse
effects of the bill on the deterrent effect of uncapped punitive
damages?'' is: None. Not a conditional answer whatsoever; the answer is
none. We have far better and far more just ways of dealing with rogue
business enterprises than to deal with any such businesses in this
fashion and in a fashion which deter the State's legitimate businesses
and those who would wish to use such, to benefit from what those
businesses will produce in the way of products and treatments and the
like.
So, Mr. President, I think we are perhaps winding up our day on this
subject. I repeat once again, for the benefit of all of my colleagues,
that today we must have all of the amendments introduced to the
McConnell amendment, the amendment seeking to limit malpractice to a
product liability bill. There will be a brief time of debate,
approximately 1\1/2\ hours and a half tomorrow in the morning and then
a series of votes on all of those amendments, after which we will go on
to other amendments dealing with the general bill itself.
Seeing no Member who wishes to offer an amendment or a comment on the
floor at the present time, Mr. President, I suggest the absence of a
quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. KYL. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KYL. Mr. President, I have been trying to watch the proceedings
on the floor all day. I was here twice before talking about amendments
that are pending before the body on the issue of malpractice reform. I
have been disappointed, frankly, that there has not been more debate
joined on two very, very critical questions, except for a brief
colloquy which the Senator from Minnesota and I had earlier today, I
have heard virtually no refutation of the points that I have set forth
regarding the two amendments. I wanted to spend 5 minutes this evening
summarizing my views prior to the time that we will have votes on these
two issues tomorrow.
Mr. President, you know that we have before us the product liability
legislation by which we are going to try to reform this Nation's
product liability laws. Pending is also an
amendment--the McConnell-Lieberman-Kassebaum amendment--
which will add the medical malpractice area to that reform. There are a
couple of specific amendments pending to that which we hope will help
to further reform our tort law relating to medical malpractice;
specifically, an amendment that would limit attorney's fees and,
secondly, one that would put a cap on noneconomic damages.
[[Page S5893]] The point of these two amendments is to try to return
more of the recoveries of these cases to the victims, to the plaintiffs
or claimants in the cases. In the past, the claimants received--in
fact, today the claimants receive on the order of 40 to 50 percent of
the recoveries, and the attorneys receive most of the rest.
In fact, several studies demonstrate that at least half of the
recovery in these kinds of cases go to the attorneys. Let me cite two
or three of those studies, Mr. President. There is a Rand study which
demonstrates that about 50 percent of the money goes to lawyers, and
less than 50 percent goes to the claimants. Some of it goes to
administration. There are other studies that show somewhere in the
neighborhood of between 40 and 50 percent. The bottom line is that the
claimants are not getting the recovery; the attorneys are.
As a result, what we have sought to do is to limit the recovery of
the attorneys in the noneconomic damage area to 25 percent of the first
$250,000. That is over $60,000. In addition to that, the attorney,
under the McConnell amendment, would be getting either 33\1/3\ percent
of the first $150,000, or 25 percent of everything thereafter, on all
economic damages.
So let us take a very large recovery for the sake of argument. Let us
take a million-dollar recovery. The attorneys could easily get between
a quarter of a million or more in their contingent fee from that. Then,
of course, if punitive damages are further sought, an attorney, under
my amendment, could go to the court and ask for a reasonable fee.
Twenty-five percent would be presumed to be reasonable, and the court
would have to determine it based on reasonableness and the ethics
standards to apply to attorney fees. We are not limiting attorneys from
recovering their fees. We are saying in a great big recovery, where it
is a multimillion-dollar recovery, the bulk is not going to go to the
attorneys. About 75 percent would go to the claimants.
The adjunct to that is a limitation on the noneconomic damages
themselves. By giving the claimants more of the money that they get and
giving less of it to the attorneys, we can afford to put a cap on the
noneconomic damages. That is what the second amendment I have
introduced would do. The House-passed cap is $250,000. But a lot of our
colleagues in the Senate said $250,000 was just too stringent in that
exceptional case. They are rare, but in those exceptional cases where
you would want to give an award of more than a quarter of a million
dollars, you can provide an award of up to $500,000 under my amendment.
It could not be discounted at the present value. So that is a lump sum
of money. Invested over a period of time, it could make millions of
dollars. That is on top of the economic damages, which would be
collected to totally recompense the plaintiff for all out-of-pocket
expenses as well as lost earning power and any other economic damages.
So you do not limit the totality of the award so much as you provide
that the claimant gets the award by putting a limit of $500,000 on the
noneconomic damages. By having a limit on the attorney's fees, the
claimants get essentially the same thing. But the attorney's fees are
reduced to a more reasonable level. So these two amendments fit hand-
in-glove. We are going to be voting on them tomorrow.
I urge my colleagues to support the limit on attorney's fees and the
limit on noneconomic damages. Some of my colleagues says the limit on
attorney's fees is not strong enough. It does not really whack the
lawyers. That is not my objective. My objective is to make sure there
is a fairness and a balance here and that some reason is restored to
the system. With respect to the noneconomic damages limit, there is a
question about really whether that will do any good. I just want to
cite to my colleagues the Office of Technology Assessment report of
1993 which said:
Limits on noneconomic damages is the single most effective
reform in containing medical liability premiums.
We all suffer by virtue of medical expenses going out of sight, of
physicians having to close down their practices or decline to serve
certain kinds of patients because of the escalating costs of medical
malpractice premiums. This is one of the cost-drivers in this whole
health care reform debate. We have to get that under control. When a
group like the OTA notes the fact that this is one of the most
significant reforms we can pass, it seems to me important to do so.
So again, I urge my colleagues, when we vote on these two amendments
tomorrow to, of course, support the McConnell-Kassebaum-Lieberman
amendment and to support my amendment on attorney's fees and on
limiting noneconomic damages. I think if we do all three of those
things, we will have strengthened the bill and will be better able to
go to conference and come out with a really strong bill that, as a
result, we can tell the American people we have done something in this
area of medical malpractice and tort liability reform.
Thank you, Mr. President.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. KENNEDY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. Mr. President, for 2 days during the consideration of
the product liability bill the Senate has been debating fundamental
change to the system under which victims of medical negligence are
compensated for their injuries. I regret that the subject of
malpractice reform is before the Senate as a rider to product liability
legislation. We should not begin to tinker with the malpractice
liability system except as a part of a more comprehensive effort to
reform the Nation's health care system.
As we have pointed out at other times in the debate, tomorrow we will
have an opportunity to give consideration to a proposal that deals with
malpractice insurance that represents the best judgment of the Human
Resources Committee of a year ago and which will reflect a bipartisan
effort to come to grips with that particular issue. We are not in that
situation at the present time.
That particular proposal was also accompanied by a variety of
proposals to try to avoid medical malpractice, to try to enhance the
quality of health care so that we were not going to have the incidence
of malpractice. But we do not have included in this legislation the
provisions to try to enhance quality health care, nor do we have this
measure as a part of a comprehensive health care proposal.
The health care crisis in this country continues to be extremely
serious. Last year, the number of Americans without health insurance
increased by more than 1 million people, 800,000 of whom were children.
Costs are spiraling out of control. Our health care system needs urgent
repair, and malpractice reform is at most one small part of such
reform.
Proponents of malpractice reform speak of a crisis, but they are
ignoring the real health care crisis. By the year 2000, only half of
working Americans and their families will be protected by health
insurance through an employer. As recently as 1987, two-thirds had this
protection. Forty million Americans have no coverage today and, by the
year 2000, 50 million will have no coverage. If current efforts to cut
Medicaid and Medicare are successful, the number could be much higher.
Eighty-five percent of those who have no insurance are members of
working families. They face a health care crisis every day. But even
those who currently have coverage cannot be complacent because, if they
lose their job or change jobs or become seriously ill, their health
insurance is in jeopardy.
This is the point, Mr. President. Here we are taking one small phase
of the whole health care issue that effectively is going to protect
negligent doctors and substandard hospitals as being the principal
measure to be considered as health care reform when we have these other
kinds of issues and challenges which we are facing as a country, and we
are not addressing them. We are not addressing them. We are not
addressing the serious, continued decline of the coverage of working
families. Eighty-five percent of those not covered are from working
families.
Where are their interests covered in this legislation? They are not.
And
[[Page S5894]] what we have seen is the fastest growing group of
individuals who are not being covered end up being children in our
society. Working families and children, their interests are not being
attended to with this particular measure that is before us because it
is just dealing with the issues affecting negligent doctors and
substandard treatment.
Senior citizens have no coverage for prescription drugs. This is
another problem. Coverage for long-term care is grossly inadequate--
another health care problem. Last year, the average senior citizen had
to spend one-quarter of his or her income on health care, and that does
not count those who are in nursing homes and hospitals.
Health care costs are out of control. We have the problem with
access, the coverage of people, and we have the issue of health care
costs. Those are essential elements. We have the other additional issue
of quality health care that has to be attended to and other measures in
the health care debate. But we have the access issue and the cost
issue. And the costs are out of control. The Nation spent $1 trillion
on health care last year and that number will double in 10 years.
Health care costs are devastating to the Federal budget and to the
family budget.
And this is the health care crisis we should be talking about and
these are the people who need the protection.
Getting the handle on health care costs in Medicare and Medicaid
ought to be a part of health care reform. Many of us are strongly
committed to that particular challenge. That will make a difference in
terms of the quality of health care for senior citizens. And for the
rest of Americans, it can make a difference in terms of the escalation
of health care costs and it can make an important difference for the
families in this country.
But are those the issues that we are debating here on health care
this evening? Absolutely not. We are dealing with a very narrow issue
of profit for the medical insurance industry, $1.4 billion in 1991
profits. And who pays for that? It is the American consumer. And that
is what is happening on the floor of the Senate.
Instead, the proposals before the Senate offer protection to
substandard doctors and substandard hospitals. Limits on malpractice
liability will be a windfall for them--and also for an insurance
industry already reaping record profits. The crude limits in this
amendment are an insult to hundreds of thousands of patients injured or
killed every year as a consequence of medical negligence.
Medical malpractice is the third leading cause of preventable death
in the United States. According to researchers at the Harvard School of
Public Health, 80,000 Americans die in hospitals each year from the
negligence of physicians or other health providers, and an additional
1.3 million are injured. As many as a quarter of all patient deaths
could have been prevented but for negligent medical care.
It is ironic that one of the first pieces of health legislation
considered by the Senate this year would actually hurt patients by
protecting negligent doctors and their insurance companies. In fact,
the current malpractice compensation system already offers too much
protection to doctors and insurance companies.
Fewer than 2 percent of malpractice victims ever file suit. The rate
of medical malpractice claims has declined steadily since 1985.
Patients won fewer than one-third of the malpractice verdicts in a 1994
study. The size of malpractice awards has dropped significantly in the
last year alone, according to the New York Times.
The legal system pays only 1 malpractice claim for every 15 torts
inflicted in hospitals, according to Business Week. According to
Business Week, the legal system pays 1 malpractice claim for every 15
torts inflicted in hospitals.
That is what is happening. It is not just the studies at the Harvard
School of Public Health. This is Business Week that is demonstrating
the inadequacy of the system--the fact that there are hundreds of
thousands of Americans who are not compensated, that the total number
of claims are going down, that the premiums are going down, and that
the insurance industry's profits are soaring up through the roof. That
is what we are dealing with here on this particular issue.
And Business Week points out, rather than a surplus, the article
concludes, there is a ``litigation deficit because so many injured
people wind up undercompensated.''
That is the true problem that we are facing. Are our fellow citizens,
who are subject to malpractice, unable to have any kind of
compensation, unable to get any kind of help and assistance? That is
what we are talking about.
Those are the issues that we addressed in a bipartisan way in the
Labor and Human Resources Committee last year to try to work through
alternative dispute resolutions and other kinds of measures in order to
make sure that people are going to receive at least some benefit.
Part of the reason for this litigation deficit is that the legal
system is inaccessible to so many citizens. That problem will be
exacerbated by the proposals now before the Senate. The deficit is also
attributable to the malpractice reforms already adopted in many States
under pressure from the powerful medical insurance lobbies.
I do not know how many of our fellow colleagues turned on the
television over the period of this weekend. I was back in Washington on
Friday evening. Just after suppertime, I watch television to see the
news for a couple of hours. I tried to watch it again on Saturday for a
couple of hours. Eight times I saw--eight times--including twice on
Sunday morning between 6 and 7 a.m. I do not know who the buyers of
time are for those insurance companies and I do not know how much value
they are getting for that particular purchase time, but you could not
turn on the television programs all week long and not see those
insurance industry spokesmen trying to replicate the television ads of
last year that distorted the health care debate, talking about
California, what is happening out in California.
Well, it is interesting. They were talking about how California had
worked so well. Well, we find out, of course, that California has had a
number of the kinds of changes in their tort legislation that is
included in the McConnell amendment.
Here is a news release entitled ``AMA Propaganda False on Tort Law
Restrictions, Report Shows.'' It says:
A 1975 California law that limits the legal rights of
victims of medical malpractice--the model for Federal tort
law proposals before the U.S. Congress--has failed to deliver
what its backers have promised, according to a study released
today by a California nonprofit insurance watchdog
organization.
What they pointed out is health care costs rose in California 343
percent between 1975 and 1993. The president-elect of the new AMA says
that the No. 1 issue in the United States is access to health care--we
can say that is true, along with increased costs--and then says the
access to health care costs is malpractice reform, and urges us to go
ahead with the McConnell amendment. And here we have an example of what
happens with the McConnell amendment in one particular State, the State
of California.
It shows that rather than having any impact in terms of slowing
escalation of costs down, it has not. As a matter of fact, it has not
done that in the other States.
I hear my friend from Indiana, Senator Coats, talk about the changes
they have had in Indiana. The health care costs, in terms of health
care in Indiana, have not gone down. They have not gone down in the
other six States that have implemented many of the suggestions that are
included in the McConnell amendment.
Health care costs in California rose 343 percent between
1975 and 1993, faster than the inflation rate in California.
Since 1985, the California Medical Consumer Price Index has
grown nearly twice as fast as the inflation rate . . .
Compensation paid to medical malpractice victims, as
estimated by insurers, is a tiny fraction--about one-fifth of
1 percent.
One-fifth of 1 percent. That is what we are talking about. I mean,
for anyone to look over, as I did the other day, the findings of this
legislation, where they have the findings of the problem of access to
health care, findings there is a problem of costs and therefore we have
to enact this legislation, and you put that against what the real facts
are and that is, if you just look at one State that has capped some
damages
[[Page S5895]] and has other changes in their malpractice law, they
talk about the estimate by insurers on compensation of medical
malpractice, one-fifth of 1 percent in 1993 of all health care costs in
California, and the fraction has been dropping.
Medical malpractice liability insurance premiums paid by
physicians and hospitals are a negligible components--about
half of one percent in 1993--of California's total health
care expenditures, and the percentage has been falling.
The idea that it is less than half of 1 percent and to think that is
going to be able to leverage a health care system just reaches, I
think, the impossible to imagine.
``Insurance companies have not reduced malpractice liability premiums
commensurate with the drop in malpractice claims payments''--one might
expect, if the insurance companies are giving less in terms of payments
out in terms of injured individuals, one might think that the cost of
that insurance might go down; that is not what is happening, not in
California--``in recent years in both California and the nation.
Insurance companies have reaped excessive profits from MICRA--in 1993,
insurers paid out only 38 cents of every premium dollar.''
The rest of it goes in terms of administration, advertising and
profits. That is what we are talking about this evening, because the
McConnell amendment tracks very closely what has happened in California
and in the five other States that have enacted measures which are
similar to the McConnell amendment.
Despite the claims of the backers, such reforms have not lowered
health care costs. The cost of medical care grew faster in California.
And in Indiana, malpractice reforms have not caused health care costs
to decrease. Compared to neighboring States, consumers derive no
benefit from malpractice reform. In fact, they are harmed. If they fall
victim to medical negligence, they are likely to be undercompensated
for their injuries.
Malpractice reforms in States have been greeted enthusiastically by
insurance executives. The General Accounting Office surveyed six States
that enacted limits on recoveries in malpractice cases similar to what
is before the Senate in terms of the McConnell amendment. And this is
what the General Accounting Office--this is not the trial lawyers, this
is the General Accounting Office. When I mentioned the other fact, it
was not trial lawyers, it was Business Week talking about the fact of
the few tort cases that are actually brought in our health care system.
This is what the General Accounting Office has said about the six
States that have enacted limits in terms of awards in malpractice
cases:
Insurance companies in those States were enjoying profits
that averaged 122 percent above the national average.
Nationwide, insurers reaped $1.4 billion in malpractice-
related profits in 1991, but in those six States, the return
was so great that the National Insurance Consumer
Organization labeled it ``insurance profiteering.''
Insurance profiteering. Here we have the States themselves taking
action, and I have a letter from some of the medical profession in the
State of Michigan. This is true in many other States. Other States are
taking action to try and deal with this problem that has changed
dramatically since 1985 when we saw the rather dramatic increase in the
number of malpractice cases, particularly with regards to ob-gyn's. We
have seen those numbers go down dramatically in the period of the last
2 years. I included those in the Record at the end of last week.
Here we have the States themselves dealing with this issue. In the
hearings that we had in our Health and Human Resources Committee, we
did not have State attorneys general that were in there testifying
saying, ``Look, we need a Federal preemption law.'' We did not hear
from them on that issue, not from a Republican or Democrat. We did not
have letters from Governors saying, ``Help us out, bail us out, get a
preemptive law. We haven't got one.''
Maybe someone has a letter to that effect. We never saw it. It was
never referred to, never commented on, never quoted. We do not have the
Governors asking us for this action. We do not have the States
attorneys general asking for this action. We do not have the State
legislators saying, ``Please, bail us out, we can't handle this
problem.'' We do not have that. We do not have that at all.
What we have is the medical insurance industry looking over what has
happened in the States where they have been effective on wanting to
preempt the States and to do it not in a single piece of legislation,
not even taking the bill that was reported out of the committee, not
even giving reference to that with the modest adjustments that were
made to try and strengthen the quality provisions of this with the
Jeffords amendment; to recognize that in the areas of punitive damages,
when they have been utilized in the past, it has been against primarily
women who have been the beneficiaries as a result of sexual
exploitation at the hands of corrupt doctors.
We did not even have the chance to consider what was actually
reported out of the committee. The medical malpractice industry
insisted on the whole thing. They wanted the whole bill before it went
to the committee and not what was acted on, either Republican
amendments that were accepted or even Democrat amendments that were
accepted, with support from different sides of the aisle. No, no, they
wanted the whole thing.
This is in an area that is different from product liability. This is
in an area that involves the most personal relationship between the
doctor and the patient. What could be more local, what could be more
within a State's jurisdiction more completely?
We can understand products produced in Massachusetts and shipped to
California, those in Michigan are sent to Florida, we understand that
there is a case to be made in terms of product liability. But we are
talking about a doctor in a community dealing with a patient in that
community and do we need a Federal solution for that?
The McConnell amendment says yes. The McConnell amendment has a one-
size-fits-all. How many times have we heard that on the floor of the
Senate? What we do not want is all knowledge in Washington. The
solution to the problems in Boston are going to be different than in
Pocatello, ID. How often do we hear that?
Here my friends say, ``Except when it affects the medical insurance
industry on medical malpractice.'' Sure, the States have been acting.
Sure, the States have been dealing with their particular problems that
they are facing that are as diverse in some of the rural States or the
mountain States as they are in some of the industrial States. Sure,
they have been trying to deal with those particular issues. But here we
say on the floor of the U.S. Senate, we are going to preempt those
States, we are preempting, we know better on the issue of malpractice
affecting a doctor and their patient in that particular community.
Mr. President, I find that it is an extraordinary extension of
political philosophy that indicates a demand for this kind of
standardization is so compelling. I think when you reach a situation
where we are dealing with a total reform of a health care system that
includes, for example, the 10 million Federal employees that are being
covered by health insurance, expanding the Federal employees insurance
to pick up people in all parts of the country that you say, ``OK, in
those circumstances, we ought to permit the States to develop
alternative dispute resolutions and permit the States to experiment
with no-fault liability, pools with enterprise challenges and to permit
experimentation, all of which we did last year.'' But, oh, no, we have
a preemption of those States which may, according to the medical
insurance industry, may be more sympathetic to the consumers than they
are to substandard doctors, and that is where we are.
So we end up with a situation as we have heard now from the Michigan
State Medical Society:
Dear Senator Kennedy: On behalf of our more than 12,000
physician members, the Michigan State Medical Society wishes
to appraise you of our concern that the Michigan law of joint
and several liability applicable to medical malpractice not
be affected by Federal legislation. We have fought hard to
retain joint and several liability in medical malpractice
cases in Michigan, for the reason that its abolition would
cause substantial increase in physicians' premiums and
resultant health care costs. . .
Malpractice carriers in Michigan advise us the premiums
would increase by 64 percent if the coverage was increased to
$1 million,
[[Page S5896]] which would be even more unaffordable but
essential for the physicians' personal protection. . .
The dynamics of malpractice litigation . . . virtually
require we retain the common law doctrine of joint and
several liability in malpractice cases. . .
It is critical that Federal legislation not preempt State
joint and several liability laws.
Twelve thousand doctors in Michigan say they do not need the
preemption that is in the McConnell amendment. The list goes on.
I daresay, as more and more of them begin to understand what is
really going on here, and the fact that we have rushed to judgment on
this issue--2 days after we take the action in the committee, we have
the amendment right here on the floor. Generally, you have a reporting
out of 10 days, you have a report that points out the reasons and the
justifications for those provisions.
You have the opinions of those that might differ that are published
and circulated by the various groups that are interested in this, and
had a chance to review that. Oh, no, not on this measure. We have to
put it right on the product liability without a report, without even
printing--I do not know whether today it is available, but last week it
was not--even the printed changes in the legislation, based upon the
amendments that we had included.
You are going to find out, my friends and colleagues, how many other
doctors are going to get a chance to finally have a chance to sit down
and look this over and say, woe, how did we get into this? The
president of the Michigan State Medical Society, Jack Barry, sent a
carbon copy of a letter he sent out. I wish he sent it to colleagues on
our committee. He sent it to his colleagues in the medical community.
I ask unanimous consent that the letter be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
Michigan State Medical Society,
East Lansing, MI, April 20, 1995.
Senator Edward M. Kennedy,
Ranking Member, Senate Labor and Human Resource Committee,
Washington, DC.
Dear Senator Kennedy: On behalf of our more than 12,000
physician members, the Michigan State Medical Society wishes
to apprise you of our concern that the Michigan law of joint
and several liability applicable to medical malpractice cases
not be affected by federal legislation. We have fought hard
to retain joint and several liability in medical malpractice
cases in Michigan, for the reason that its abolition would
cause substantial increases in physicians' premiums and
resultant health care costs.
As you undoubtedly know, medical malpractice litigation in
Michigan has been out of control. Premium costs for
malpractice coverage in Michigan virtually exceed all other
states. Malpractice insurance in Michigan is typically
$200,000 per occurrence, with an annual aggregate of
$600,000. The annual premium cost to obstetricians and
surgeons in southeastern Michigan often exceeds $80,000. Even
with this substantial cost, the coverage is still
insufficient to provide comfort to physicians. Malpractice
carriers in Michigan advise us that premiums would increase
by 64 percent if the coverage was increased to $1 million,
which would be even more unaffordable but essential for the
physicians' personal protection if joint and several
liability was abolished.
As a result of this unique problem in Michigan, the
Michigan legislature adopted malpractice reform legislation
which took effect on April 1, 1994. This legislation has not
yet had any effect upon premiums for the reason that it
essentially applies prospectively and is being
constitutionally challenged in the state appellate courts. We
are helpful that this legislation will cause malpractice
costs to fall into line with other states when this
legislation becomes fully applicable to malpractice cases.
Until then, we will continue to have the unique and costly
problem in Michigan.
The dynamics of malpractice litigation in our state
virtually require that we retain the common law doctrine of
joint and several liability in malpractice cases. The
potential for joint liability causes hospitals and other
corporate defendants to more readily settle cases where the
greater liability might potentially be imposed upon
individual physicians. This provides at least some protection
to the physician in engaging in the higher risk practices and
also has a beneficial effect upon the legal system and the
public generally in that cases are more likely to settle.
Michigan law has, therefore, retained joint and several
liability.
We urge you to protect the current status of joint and
several liability in Michigan. It is critical that federal
legislation not preempt state joint and several liability
laws. Any federal legislation enacting malpractice reform
should have a provision clearly making the federal
legislation inapplicable to the extent that state statutes
retain joint and several liability in medical malpractice
cases.
The Michigan State Medical Society fully supports the
federal legislation in malpractice reform, including a
$250,000 limitation on noneconomic damages. We urge you to
support this federal legislation, but request that you
protect the interests of physicians and their patients in
Michigan by assuring that any federal legislation will not
preempt joint and several liability in medical malpractice
cases in this state.
Thank you for your help. If you have any questions, please
feel free to contact Kevin A. Kelly, Managing Director,
Michigan State Medical Society at (517) 336-5742.
Sincerely,
Jack L. Barry, MD,
President.
Mr. KENNEDY. If enacted, the proposals before the Senate today may
well fatten the profit margin of malpractice insurers nationwide. But
malpractice reform will not address the fundamental problems facing our
health care system. It has not in California, or Indiana, or elsewhere.
In any event, the cost of medical malpractice premiums amounts to only
six-tenths of 1 percent of the Nation's health care costs.
Nor will legal reforms make a dent in the prevalence of malpractice
itself. Instead, we need more effective means to discipline the few bad
apples in the medical profession who cause upwards of 45 percent of all
of the unnecessary injuries. Today, a negligent auto mechanic or a
negligent funeral director is more likely to be disciplined by a State
licensing board than a physician.
That is really saying something, Mr. President. Are we here
attempting to discipline? No, we are not even beginning to go down that
road. We are not even in the legislation that is being provided giving
the full information. That is a matter of public record, included in
the data bank to consumers. It can be collected. I understand my friend
from Minnesota, Senator Wellstone, has addressed this issue. There is
already the assemblage of that kind of information, but it is not done
in a comprehensive way as I think it should be. Hospitals can find out
certain information with regard to disciplinary conduct with regard to
professions. HMO's can find that out but the consumers cannot.
There was no real effort or attempt--there was a good faith
expression that we ought to get after this issue and we will revisit it
later. But we are still moving ahead with the legislation.
First, Mr. President, here are the four major flaws of the McConnell
amendment:
First, it sets an impossibly high standard for awarding punitive
damages and then imposes a cap on such damages, even in cases involving
sexual abuse of a patient and other outrageous conduct. Sixty-eight
percent of all punitive damage awards in malpractice cases are awarded
to women, so the impact of this provision is discriminatory.
Now we know that those punitive cases are only a small number of
cases. We did not include, for example, in the markup, other kinds of
cases, for example, when doctors go in and practice a medical procedure
when they are on illegal drugs. We did not include that in the
legislation, in the amendment. Or when hospitals knowingly and
willfully destroy records with regard to the treatment of patients. We
did not even include that in it. We did not even include the punitive
damages situations where doctors lost their licenses in a State and
fraudulently practice in another State. I would think that any Member
of this body who was concerned about what is happening to any member of
their family wrote would think that in those circumstances, and in some
others, punitive damages would be justified. We did not. We included
one reference in our Senate markup to permit punitive damages if the
standard was to be met in terms of the intent standards, which is
extremely high, and in the Dodd amendment, which gave the jury the
power to establish whether punitive damages should be awarded and the
judge, with guidelines, to set the amount. But that has been
effectively set aside.
Second, the amount severely limits the longstanding legal doctrine of
joint and several liability, leaving the patients vulnerable to
inadequate compensation. For at least 100 years, it has to be
recognized as unacceptable to force an innocent patient to bear the
cost of other people's negligence if one or more of the wrongdoers are
available to provide compensation. That is a sensible rule to protect
patients, and
[[Page S5897]] we should not undermine it for the benefit of guilty
malpractice defendants.
I point out, Mr. President, that we are talking about an individual
who has been wrongfully treated. I think we can understand the
circumstances of what might appear to be unfair and unjust, payments by
those who are brought into the compensation awards through joint and
several. There are many here that are enormously sympathetic to anyone
that would be so included.
The fact of the matter is, Mr. President, we are talking about
circumstances where there has been malpractice and where, if they do
not collect it, they are not given any kind of adequate remedy for the
malpractice. It is interesting. Effectively, this legislation is
immunizing the medical insurance companies, and as we do that, make no
mistake about who pays for all of the other care for those individuals.
It ends up being the taxpayers--to the tune of about $60 billion a
year.
So here we go in and set up a program that has windfall profits when
this has been adopted in the six States, and we are going to do it
nationwide and you are going to see--even according to Business Week
and the business insurance publication--the benefits that are going to
the insurance industry. Who is left holding the bag? On the one hand,
it is the victims, and on the other hand it is the taxpayers. They are
going to be the ones that are going to be left paying for the care of
this individual rather than the wrongdoer. That is wrong and unfair.
Third, the amendment denies consumers access to the information about
the fitness of their doctors, even when those doctors have repeatedly
committed malpractice or have been repeatedly disciplined. The
Wellstone amendment addresses this flaw and I hope that will be
accepted.
Finally, the McConnell amendment unjustifiably preempts a wide array
of the State malpractice laws.
The preemption language in the proposal before us is not balanced. It
strikes down State laws that are of benefit to consumers. I think it is
not appropriate. If preemption of State tort laws were appropriate, and
I think it is not, it should at least be accomplished in a fair and
even-handed manner. The one-way preemption in the amendment ensures the
absence of the national standard that the proponents say they want.
For these reasons, I urge defeat of the McConnell amendment. But
rejection of that proposal does not mean we should not take some
action. There are a series of steps Congress should take to assist the
States and improve the efficiency of the malpractice system in a way
that will benefit both doctors and patients.
Last year, the Labor and Human Resources Committee favorably reported
a health care reform bill which contained sensible malpractice reforms.
We required alternative dispute resolution to provide for streamlined
consideration of malpractice claims. We capped attorneys' fees to make
sure that patients get fair compensation for their injuries, and that
they get early resolutions for these claims, and to permit the States
themselves to develop alternative dispute resolutions.
Let them develop those measures--they had to meet certain minimum
standards--but permit the States to develop their own. That was one
part of it.
We capped attorney's fees to make sure the parties get fair
compensation for their injuries. We provided seed money to let the
States experiment with innovative models such as enterprise liability,
no-fault funds, and medical malpractice guidelines.
Medical malpractice guidelines--there is a case we could say if a
person would establish the medical malpractice guidelines and doctors
follow those, that ought to be a basic presumption against the
malpractice and would permit what would be the basis of the evidence to
be able to rebut that. I think there is a great deal that commends that
concept. When we talked about it last year as part of the health care
reform, it got labeled as ``cookbook medicine,'' that we will have
medicine by the numbers.
So, there are legitimate public policy issues with regard to this
issue that we ought to address seriously. That is not unimportant in
terms of this whole debate. We ought to give serious consideration to
that kind of an action, not just dismiss it completely as we have in
this legislation. It is just not correct. It is a concept that can make
an important difference in terms of quality health care and should not
be dismissed out of hand, as it has been effectively in this
legislation.
Some of last year's reforms have been included in the McConnell
amendment, but in other ways that I have described, the amendment goes
too far. I will offer a substitute amendment tomorrow that contains the
reasonable reforms proposed by the Labor Committee last year.
I will also offer an amendment to strike the preemption provisions in
the McConnell amendment. If the Federal Government is to involve itself
in this area of the law, it should do this cautiously and with respect
to State prerogatives.
For example, we received a strong request from the Michigan Medical
Society urging that we not preempt that State's law, and joint and
several liability. Federal malpractice reforms should only apply in
those situations where no State statute is applicable. That was the
concept which had bipartisan support. The legislation that was reported
out of our committee was unanimous--unanimous--Republicans and
Democrats alike on that issue. It will be that provision which I will
offer with regard to preemption.
In urging ill-considered malpractice reforms, a hypocritical Congress
is violating the Hippocratic oath, first, to do no harm. Some of the
proposals before the Senate will cause great harm to large numbers of
our fellow citizens if we reduce the ability of the legal system to
deter negligent medical care. If we deny adequate compensation to
severely injured patients, we violate basic principles of federalism.
The Senate will have committed legislative malpractice.
Mr. President, I see the Senator from Maine, who has been extremely
patient. As I understand, under the previous agreement--and I want to
comply with the parliamentary situation that exists at the current time
in order that my amendments be eligible--as I understand it, is it the
desire of the Chair that we call them up and have them set aside? Is
that the procedure which has been agreed on or is that the satisfactory
procedure?
The PRESIDING OFFICER (Mr. Frist). The Senators have been following
that procedure by unanimous consent.
Amendment No. 607 to Amendment No. 603
Mr. KENNEDY. Mr. President, I will follow that same procedure. I ask
unanimous consent that the pending amendment be set aside, and I will
call up amendment No. 607 and ask it be considered.
The PRESIDING OFFICER. Without objection, it is so ordered. The clerk
will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Massachusetts [Mr. Kennedy] proposes an
amendment numbered 607 to amendment No. 603.
Mr. KENNEDY. Mr. President, I ask unanimous consent further reading
be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
In lieu of the matter proposed to be inserted, insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Medical Liability Reform Act
of 1995''.
TITLE I--LIABILITY REFORM
SEC. 101. FEDERAL TORT REFORM.
(a) Applicability.--
(1) In general.--Except as provided in section 102, this
title shall apply with respect to any medical malpractice
liability action brought in any State or Federal court,
except that this title shall not apply to a claim or action
for damages arising from a vaccine-related injury or death to
the extent that title XXI of the Public Health Service Act
applies to the claim or action.
(2) Effect on sovereign immunity and choice of law or
venue.--Nothing in this title shall be construed to--
(A) waive or affect any defense of sovereign immunity
asserted by any State under any provision of law;
(B) waive or affect any defense of sovereign immunity
asserted by the United States;
(C) affect the applicability of any provision of the
Foreign Sovereign Immunities Act of 1976;
(D) preempt State choice-of-law rules with respect to
claims brought by a foreign nation or a citizen of a foreign
nation; or
(E) affect the right of any court to transfer venue or to
apply the law of a foreign nation
[[Page S5898]] or to dismiss a claim of a foreign nation or
of a citizen of a foreign nation on the ground of
inconvenient forum.
(3) Federal court jurisdiction not established on federal
question grounds.--Nothing in this title shall be construed
to establish any jurisdiction in the district courts of the
United States over medical malpractice liability actions on
the basis of section 1331 or 1337 of title 28, United States
Code.
(b) Definitions.--In this Act, the following definitions
apply:
(1) Alternative dispute resolution system; ADR.--The term
``alternative dispute resolution system'' or ``ADR'' means a
system that provides for the resolution of medical
malpractice claims in a manner other than through medical
malpractice liability actions.
(2) Claimant.--The term ``claimant'' means any person who
alleges a medical malpractice claim, and any person on whose
behalf such a claim is alleged, including the decedent in the
case of an action brought through or on behalf of an estate.
(3) Health care professional.--The term ``health care
professional'' means any individual who provides health care
services in a State and who is required by the laws or
regulations of the State to be licensed or certified by the
State to provide such services in the State.
(4) Health care provider.--The term ``health care
provider'' means any organization or institution that is
engaged in the delivery of health care services in a State
and that is required by the laws or regulations of the State
to be licensed or certified by the State to engage in the
delivery of such services in the State.
(5) Injury.--The term ``injury'' means any illness,
disease, or other harm that is the subject of a medical
malpractice liability action or a medical malpractice claim.
(6) Medical malpractice liability action.--The term
``medical malpractice liability action'' means a cause of
action brought in a State or Federal court against a health
care provider or health care professional by which the
plaintiff alleges a medical malpractice claim.
(7) Medical malpractice claim.--The term ``medical
malpractice claim'' means a claim brought against a health
care provider or health care professional in which a claimant
alleges that injury was caused by the provision of (or the
failure to provide) health care services, except that such
term does not include--
(A) any claim based on an allegation of an intentional
tort;
(B) any claim based on an allegation that a product is
defective that is brought against any individual or entity
that is not a health care professional or health care
provider; or
(C) any claim brought pursuant to any remedies or
enforcements provision of law.
SEC. 102. STATE-BASED ALTERNATIVE DISPUTE RESOLUTION
MECHANISMS.
(a) Application to Malpractice Claims Under Plans.--Prior
to or immediately following the commencement of any medical
malpractice action, the parties shall participate in the
alternative dispute resolution system administered by the
State under subsection (b). Such participation shall be in
lieu of any other provision of Federal or State law or any
contractual agreement made by or on behalf of the parties
prior to the commencement of the medical malpractice action.
(b) Adoption of Mechanism by State.--Each State shall--
(1) maintain or adopt at least one of the alternative
dispute resolution methods satisfying the requirements
specified under subsection (c) and (d) for the resolution of
medical malpractice claims arising from the provision of (or
failure to provide) health care services to individuals
enrolled in a health plan; and
(2) clearly disclose to enrollees (and potential enrollees)
the availability and procedures for consumer grievances,
including a description of the alternative dispute resolution
method or methods adopted under this subsection.
(c) Specification of Permissible Alternative Dispute
Resolution Methods.--
(1) In general.--The Board shall, by regulation, develop
alternative dispute resolution methods for the use by States
in resolving medical malpractice claims under subsection (a).
Such methods shall include at least the following:
(A) Arbitration.--The use of arbitration, a nonjury
adversarial dispute resolution process which may, subject to
subsection (d), result in a final decision as to facts, law,
liability or damages.
(B) Claimant-requested binding arbitration.--For claims
involving a sum of money that falls below a threshold amount
set by the Board, the use of arbitration not subject to
subsection (d). Such binding arbitration shall be at the sole
discretion of the claimant.
(C) Mediation.--The use of mediation, a settlement process
coordinated by a neutral third party without the ultimate
rendering of a formal opinion as to factual or legal
findings.
(D) Early neutral evaluation.--The use of early neutral
evaluation, in which the parties make a presentation to a
neutral attorney or other neutral evaluator for an assessment
of the merits, to encourage settlement. If the parties do not
settle as a result of assessment and proceed to trial, the
neutral evaluator's opinion shall be kept confidential.
(E) Certificate of merit.--The requirement that a medical
malpractice plaintiff submit to the court before trial a
written report by a qualified specialist that includes the
specialist's determination that, after a review of the
available medical record and other relevant material, there
is a reasonable and meritorious cause for the filing of the
action against the defendant.
(2) Standards for establishing methods.--In developing
alternative dispute resolution methods under paragraph (1),
the Board shall assure that the methods promote the
resolution of medical malpractice claims in a manner that--
(A) is affordable for the parties involved;
(B) provides for timely resolution of claims;
(C) provides for the consistent and fair resolution of
claims; and
(D) provides for reasonably convenient access to dispute
resolution for individuals enrolled in plans.
(3) Waiver authority.--Upon application of a State, the
Board may grant the State the authority to fulfill the
requirement of subsection (b) by adopting a mechanism other
than a mechanism established by the Board pursuant to this
subsection, except that such mechanism must meet the
standards set forth in paragraph (2).
(d) Further Redress.--Except with respect to the claimant-
requested binding arbitration method set forth in subsection
(c)(1)(B), and notwithstanding any other provision of a law
or contractual agreement, a plan enrollee dissatisfied with
the determination reached as a result of an alternative
dispute resolution method applied under this section may,
after the final resolution of the enrollee's claim under the
method, bring a cause of action to seek damages or other
redress with respect to the claim to the extent otherwise
permitted under State law. The results of any alternative
dispute resolution procedure are inadmissible at any
subsequent trial, as are all statements, offers, and other
communications made during such procedures, unless otherwise
admissible under State law.
SEC. 103. LIMITATION ON AMOUNT OF ATTORNEY'S CONTINGENCY
FEES.
(a) In General.--An attorney who represents, on a
contingency fee basis, a plaintiff in a medical malpractice
liability action may not charge, demand, receive, or collect
for services rendered in connection with such action
(including the resolution of the claim that is the subject of
the action under any alternative dispute resolution system)
in excess of--
(1) 33\1/3\ percent of the first $150,000 of the total
amount recovered by judgment or settlement in such action;
plus
(2) 25 percent of any amount recovered above the amount
described in paragraph (1);
unless otherwise determined under State law. Such amount
shall be computed after deductions are made for all the
expenses associated with the claim other than those
attributable to the normal operating expenses of the
attorney.
(b) Calculation of Periodic Payments.--In the event that a
judgment or settlement includes periodic or future payments
of damages, the amount recovered for purposes of computing
the limitation on the contingency fee under subsection (a)
may, in the discretion of the court, be based on the cost of
the annuity or trust established to make the payments. In any
case in which an annuity or trust is not established to make
such payments, such amount shall be based on the present
value of the payments.
(c) Contingency Fee Defined.--As used in this section, the
term ``contingency fee'' means any fee for professional legal
services which is, in whole or in part, contingent upon the
recovery of any amount of damages, whether through judgment
or settlement.
SEC. 104. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL
SOURCES.
(a) Reduction of Award.--The total amount of damages
recovered by a plaintiff in a medical malpractice liability
action shall be reduced by an amount that equals--
(1) the amount of any payment which the plaintiff has
received or to which the plaintiff is presently entitled on
account of the same injury for which the damages are awarded,
including payment under--
(A) Federal or State disability or sickness programs;
(B) Federal, State, or private health insurance programs;
(C) private disability insurance programs;
(D) employer wage continuation programs; and
(E) any other program, if the payment is intended to
compensate the plaintiff for the same injury for which
damages are awarded; less
(2) the amount of any premiums or any other payments that
the plaintiff has paid to be eligible to receive the payment
described in paragraph (1) and any portion of the award
subject to a subrogation lien or claim.
(b) Subrogation.--The court may reduce a subrogation lien
or claim described in subsection (a)(2) by an amount
representing reasonable costs incurred in securing the award
subject to the lien or claim.
(c) Inapplicability of Section.--This section shall not
apply to any case in which the court determines that the
reduction of damages pursuant to subsection (a) would
compound the effect of any State law limitation on damages so
as to render the plaintiff less than fully compensated for
his or her injuries.
[[Page S5899]] SEC. 105. PERIODIC PAYMENT OF AWARDS.
(a) In General.--A party to a medical malpractice liability
action may petition the court to instruct the trier of fact
to award any future damages on an appropriate periodic basis.
If the court, in its discretion, so instructs the trier of
fact, and damages are awarded on a periodic basis, the court
may require the defendant to purchase an annuity or other
security instrument (typically based on future damages
discounted to present value) adequate to assure payments of
future damages.
(b) Failure or Inability To Pay.--With respect to an award
of damages described in subsection (a), if a defendant fails
to make payments in a timely fashion, or if the defendant
becomes or is at risk of becoming insolvent, upon such a
showing the claimant may petition the court for an order
requiring that remaining balance be discounted to present
value and paid to the claimant in a lump-sum.
(c) Modification of Payment Schedule.--The court shall
retain authority to modify the payment schedule based on
changed circumstances.
(d) Future Damages Defined.--As used in this section, the
term ``future damages'' means any economic or noneconomic
loss other than that incurred or accrued as of the time of
judgment.
SEC. 106. CONSTRUCTION.
Nothing in this title shall be construed to preempt any
State law that sets a maximum limit on total damages.
PART 2--OTHER PROVISIONS RELATING TO MEDICAL MALPRACTICE LIABILITY
SEC. 201. STATE MALPRACTICE REFORM DEMONSTRATION PROJECTS.
(a) Establishment.--The Secretary shall award grants to
States for the establishment of malpractice reform
demonstration projects in accordance with this section. Each
such project shall be designed to assess the fairness and
effectiveness of one or more of the following models:
(1) No-fault liability.
(2) Enterprise liability.
(3) Practice guidelines.
(b) Definitions.--For purposes of this section:
(1) Medical adverse event.--The term ``medical adverse
event'' means an injury that is the result of medical
management as opposed to a disease process that creates
disability lasting at least one month after discharge, or
that prolongs a hospitalization for more than one month, and
for which compensation is available under a no-fault medical
liability system established under this section.
(2) No-fault medical liability system.--The terms ``no-
fault medical liability system'' and ``system'' mean a system
established by a State receiving a grant under this section
which replaces the common law tort liability system for
medical injuries with respect to certain qualified health
care organizations and qualified insurers and which meets the
requirements of this section.
(3) Provider.--The term ``provider'' means physician,
physician assistant, or other individual furnishing health
care services in affiliation with a qualified health care
organization.
(4) Qualified health care organization.--The term
``qualified health care organization'' means a hospital, a
hospital system, a managed care network, or other entity
determined appropriate by the Secretary which elects in a
State receiving a grant under this section to participate in
a no-fault medical liability system and which meets the
requirements of this section.
(5) Qualified insurer.--The term ``qualified insurer''
means a health care malpractice insurer, including a self-
insured qualified health care organization, which elects in a
State receiving a grant under this section to participate in
a no-fault medical liability system and which meets the
requirements of this section.
(6) Enterprise liability.--The term ``enterprise
liability'' means a system in which State law imposes
malpractice liability on the health plan in which a physician
participates in place of personal liability on the physician
in order to achieve improved quality of care, reductions in
defensive medical practices, and better risk management.
(7) Practice guidelines.--The term ``practice guidelines''
means guidelines established by the Agency for Health Care
Policy and Research pursuant to the Public Health Service Act
or this Act.
(c) Applications by States.--
(1) In general.--Each State desiring to establish a
malpractice reform demonstration project shall submit an
application to the Secretary at such time and in such manner
as the Secretary shall require.
(2) Contents of application.--An application under
paragraph (1) shall include--
(A) an identification of the State agency or agencies that
will administer the demonstration project and be the grant
recipient of funds for the State;
(B) a description of the manner in which funds granted to a
State will be expended and a description of fiscal control,
accounting, and audit procedures to ensure the proper
dispersal of and accounting for funds received under this
section; and
(C) such other information as the Secretary determines
appropriate.
(3) Consideration of applications.--In reviewing all
applications received from States desiring to establish
malpractice demonstration projects under paragraph (1), the
Secretary shall consider--
(A) data regarding medical malpractice and malpractice
litigation patterns in each State;
(B) the contributions that any demonstration project will
make toward reducing malpractice and costs associated with
health care injuries;
(C) diversity among the populations serviced by the
systems;
(D) geographic distribution; and
(E) such other criteria as the Secretary determines
appropriate.
(d) Evaluation and Reports.--
(1) By the states.--Each State receiving a grant under this
section shall conduct on-going evaluations of the
effectiveness of any demonstration project established in
such State and shall submit an annual report to the Secretary
concerning the results of such evaluations at such times and
in such manner as the Secretary shall require.
(2) By the secretary.--The Secretary shall submit an annual
report to Congress concerning the fairness and effectiveness
of the demonstration projects conducted under this section.
Such report shall analyze the reports received by the
Secretary under paragraph (1).
(e) Funding.--
(1) In general.--There are authorized to be appropriated
such sums as may be necessary to carry out the purposes of
this section.
(2) Limitations on expenditures.--
(A) Administrative expenses.--Not more than 10 percent of
the amount of each grant awarded to a State under this
section may be used for administrative expenses.
(B) Waiver of cost limitations.--The limitation under
subparagraph (A) may be waived as determined appropriate by
the Secretary.
(f) Eligibility for No-Fault Demonstration.--A State is
eligible to receive a no-fault liability demonstration grant
if the application of the State under subsection (c)
includes--
(1) an identification of each qualified health care
organization selected by the State to participate in the
system, including--
(A) the location of each organization;
(B) the number of patients generally served by each
organization;
(C) the types of patients generally served by each
organization;
(D) an analysis of any characteristics of each organization
which makes such organization appropriate for participation
in the system;
(E) whether the organization is self-insured for
malpractice liability; and
(F) such other information as the Secretary determines
appropriate;
(2) an identification of each qualified insurer selected by
the State to participate in the system, including--
(A) a schedule of the malpractice insurance premiums
generally charged by each insurer under the common law tort
liability system; and
(B) such other information as the Secretary determines
appropriate;
(3) a description of the procedure under which qualified
health care organizations and insurers elect to participate
in the system;
(4) a description of the system established by the State to
assure compliance with the requirements of this section by
each qualified health care organization and insurer; and
(5) a description of procedures for the preparation and
submission to the State of an annual report by each qualified
health care organization and qualified insurer participating
in a system that shall include--
(A) a description of activities conducted under the system
during the year; and
(B) the extent to which the system exceeded or failed to
meet relevant performance standards including compensation
for and deterrence of medical adverse events.
(g) Eligibility for Enterprise Liability Demonstration.--A
State is eligible to receive an enterprise liability
demonstration grant if the State--
(1) has entered into an agreement with a health plan (other
than a fee-for-service plan) operating in the State under
which the plan assumes legal liability with respect to any
medical malpractice claim arising from the provision of (or
failure to provide) services under the plan by any physician
participating in the plan; and
(2) has provided that, under the law of the State, a
physician participating in a plan that has entered into an
agreement with the State under paragraph (1) may not be
liable in damages or otherwise for such a claim and the plan
may not require such physician to indemnify the plan for any
such liability.
(h) Eligibility for Practice Guidelines Demonstration.--A
State is eligible to receive a practice guidelines
demonstration grant if the law of the State provides that in
the resolution of any medical malpractice action, compliance
or non-compliance with an appropriate practice guideline
shall be admissible at trial as a rebuttable presumption
regarding medical negligence.
Amendment No. 615 to Amendment No. 603
Mr. KENNEDY. Mr. President, I ask that the pending amendment be
temporarily set aside, and I send an amendment to the desk and ask that
it be considered.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page S5900]] The PRESIDING OFFICER. The clerk will report the
amendment.
The assistant legislative clerk read as follows:
The Senator from Massachusetts [Mr. Kennedy] proposes an
amendment numbered 615 to amendment No. 603.
Mr. KENNEDY. Mr. President, I ask unanimous consent further reading
be dispensed.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 8, line 20, insert after ``subsection'' the
following: ``(b) and''.
Strike the material from page 9, line 4 through page 10,
line 17, and insert in lieu thereof the following: ``The
provisions of this subtitle shall not be construed to preempt
any state statute but shall govern any question with respect
to which there is no state statute.''
Mr. KENNEDY. Mr. President, I will include the two statements, one on
the substitute which I referred to briefly now and in great detail last
week, which I will expand on in my extended remarks, and the other
deals with the preemption amendment.
As I understand from the leadership, we will consider those in a
timely fashion in our procedure outlined by our leader tomorrow. I
thank my colleagues. I yield the floor.
Mr. COHEN. Mr. President, I wish to address a few comments on the
underlying bill, the Product Liability Fairness Act, which attempts to
address some of the abuses that have occurred in the civil justice
system. Unfortunately, the cure being offered is worse than the disease
itself.
I am struck by the irony that many, particularly on this side of the
aisle, have been calling for the deregulation of our economy, for
returning power to the States, for empowering the people, and for
trusting the judgment of our citizens. They invoke the 10th amendment
as if remembering the Alamo--remember the 10th amendment.
Yet, at the very same time we are calling for this deregulation, this
demassification--if I can use Toffler's phrase --of the power structure
in Washington by returning power back to the States and local
communities, we are now calling for the passage of another Federal
piece of legislation.
At a time when we are searching for ways to streamline the civil
justice system and to make litigation less cumbersome and costly, this
bill is going to complicate the law and make litigation even more
expensive.
At a time when we are trying to improve the lives of hard-working
middle-class Americans, this bill is going to make it more difficult
for these citizens to obtain compensation when they are injured, at
work or at home, from defective products.
I am well aware that there have been cases involving abuse of our
civil justice system. We have seen cases of outrageous jury awards and
frivolous lawsuits, and they have undermined public confidence and
interest in our legal institutions. Unfortunately, the bill before the
Senate is not narrowly tailored to root out these abuses. Rather, it is
an unprecedented and unwarranted Federal takeover of a core State
responsibility.
Our system of federalism is based on the principle that the national
government should address problems that confront the Nation as a whole,
and State governments, which are closer to the people in both distance
and temperament, should be responsible for local concerns.
Writing of ``Our Federalism'' almost 25 years ago, Justice Hugo Black
stated that:
The concept . . . represents . . . a system in which there
is sensitivity to the legitimate interest of both State and
National Governments, and in which the National Government,
anxious though it may be to vindicate and protect federal
rights and federal interests, always endeavors to do so in
ways that will not unduly interfere with the legitimate
activities of the States.
No less of a proponent of a strong national government than Alexander
Hamilton fully understood the genius of a system that divided powers
between the national and State governments. He wrote in Federalist No.
17 that ``Commerce, finance, negotiation and war,'' should be the
prerogatives of the national government, while ``the administration of
private justice . . . [is] proper to be provided for by local
legislation.''
There are few areas of law that are more appropriate in State
legislation than the law of torts. In essence, tort laws deal with the
duties and responsibilities that members of a community have toward one
another. Tort law is, as Alexander Hamilton put it, ``private
justice.'' It is an inherently local issue. That is the reason, for the
past two centuries, from the beginning of our Republic, that we have
delegated this responsibility of tort law to the State legislatures and
courts.
The same is true of the product liability law, which emerged as a key
element of tort law in the 1960's. Through time-tested methods of
common law adjudication and legislative adjustments, the courts and
legislatures in each State have worked together to develop laws that
strike the appropriate balance between the needs of plaintiffs and
defendants and those of consumers and business.
Over the past decade, many States have begun to reform their tort
systems by experimenting with alternative dispute resolution, limiting
punitive damages, and changing liability standards. The States continue
to experiment with product liability reforms to achieve a balance
between the demands of the modern economy and the need to ensure the
products that enter that marketplace are safe. This is the way the
Federal system is supposed to work. As Justice Louis Brandeis noted,
``It is one of the happy incidents of the Federal system that a single
courageous State may, if its citizens choose, serve as a laboratory;
and try novel, social, and economic experiments without risk to the
rest of the country.''
The bill before Congress would bring the experimentation that is
taking place in our States to a grinding halt by wiping most of the
State product liability laws off the books and replacing them with one-
size-fits-all Federal law developed right here in Washington. This is
the same Washington that has been so demonized as late for passing too
many Federal laws.
Now, suddenly, it is in the interests of manufacturers to have a one-
size-fits-all piece of legislation. It appears as if Congress, which
has had virtually no experience in legislating in this area over the
past two centuries, believes it has found the single answer to the ills
of the civil justice system. It has decided to impose that system on
the entire Nation.
Ironically, it is occurring at a time when the Federal Government is
already said to be too large. The public already resents its intrusion
into affairs that properly belong before the States.
Congress ought to be focusing on health care reform, the budget
deficit, and entitlement reform, not to mention terrorism and nuclear
proliferation. These are appropriate concerns of Congress. The time
Congress spends wading in the minutiae of product liability law, a
subject the States are fully capable of regulating, will be time that
should be spent on more pressing national concerns.
The supporters of this legislation maintain that a national product
liability law is necessary to provide uniformity and to increase
predictability. I believe this bill will have precisely the opposite
effect. Litigants are no longer going to be able to rely upon well-
established State law. Instead, they will be faced with the uncertainty
of a Federal statute loaded with undefined, untried, and untested legal
principles.
This bill is going to make the law more complicated. Since certain
aspects of the State laws are going to be preempted and others are not,
litigation is going to proceed under an amalgam of State and Federal
law.
I will give you an example, Mr. President. S. 565 creates a new
standard of liability for product sellers but does not change the law
pertaining to the manufacturers of those products. So in a case brought
both against a manufacturer and a seller of an allegedly defective
product, the court is going to be required to apply the Federal law to
one defendant and the State law to another. This unnecessary complexity
will lead to greater litigation expenses, not less.
Mr. President, one of the great legal scholars of this century, Prof.
Herbert Wechsler of Columbia University, once wrote that ``national
action has * * * always been regarded as exceptional in our polity, an
intrusion to
[[Page S5901]] be justified by some necessity, the special rather than
the ordinary case.''
This presumption against Federal involvement in local affairs has not
been overcome by the evidence that has been presented to this body. The
so-called litigation crisis that is often cited by the sponsors of this
legislation simply does not exist.
The most comprehensive study to date of product liability suits
indicates that they comprise 0.36 percent of all civil filings--hardly
a litigation explosion. If you take away the asbestos cases, which I
think are unique in our history, the number of Federal product
liability cases declined by over 35 percent during the late 1980's.
Proponents of the bill also claim that there is an explosion of
punitive damages and rely heavily upon horror stories of irresponsible
jury awards as a justification for Federal preemption. Putting aside
the fact that for every punitive damage horror story, there is a more
compelling story of manufacturer misconduct, we should not legislate on
the basis of anecdote. Listen to the Wall Street Journal, an open
advocate of reform, which reports that the debate is largely ``driven
by anecdote'' and ``truth [has been the] first casualty of tort-
reform.''
I think the case for punitive damages has been overstated. The
objective facts demonstrate there have been few punitive damage awards
in product liability cases in the recent past. One widely cited study
indicates that only 355 punitive damage awards were entered by juries
during the years 1965 to 1990. And 25 percent of these verdicts were
reversed or remanded on appeal.
So there is no evidence that runaway punitive damage verdicts have
wreaked havoc, certainly not in my State of Maine. Punitive damages
were imposed in only three product liability cases during a 25-year
period--just three cases. The juries in Maine have acted responsibly.
They have applied State law in a commonsense fashion and reserved the
sanction of punitive damages for extreme cases in which there has been
either malicious or wanton disregard for public safety on the part of
some companies. Maine does not need a Federal solution for a problem
that does not exist in our State. Yet, this is precisely what this law
would do--force Maine to abandon its law.
Our product liability laws have been subject to sweeping criticism,
but it cannot be denied that the system has been a very important
protection for American consumers. From the Ford Pinto to the Dalkon
shield, product liability laws and suits have caused dangerous products
to be taken off the market, products that have caused horrific injuries
and multiple deaths. Without product liability, including the threat of
punitive damages, American consumers would be at far greater risk than
they are today.
Let me recall a program I saw that involved a lobbyist for tobacco
companies. He indicated that he would stop at nothing whatsoever. It
did not matter what study was concocted; it did not matter whether it
was truthful or untruthful. He used every conceivable trick in the book
in order to defeat any legislation that would protect the American
people from the effects of tobacco. This man is now suffering from
cancer. I believe he had cancer of the throat and it spread to his hip.
This may account for his change of heart in terms of revealing the
kinds of tactics that have been applied by the company. I do not know
if the allegations he made on this program are true. But if they are--
if companies have deliberately lied, deliberately falsified documents,
and concocted studies in order to defeat consumer protection
legislation--is that not a case in which we want to see punitive
damages that are not limited by the amounts set forth in this bill?
Let me give another example. Suppose a manufacturer of children's
toys learns that a product has a dangerous defect that is likely to
cause, let us say, 10 deaths over the lifetime of the product. Under
current law, the company would probably recall the product. It would
fix that defect, regardless of the cost, because it could not possibly
risk the punitive damage award or suits that might follow.
But under this bill, that company would know that, since children
have little or no wages, the maximum punitive damage award would be
$250,000 per fatal injury. If the toy makes $20 million to $30 million
in profit, the company might well decide that it makes economic sense
not to recall a dangerous product.
I suspect this may have been the line of thinking by Ford Motor Co.
when it put the Pinto on the market. And without punitive damages, many
other dangerous products may be unleashed on the unsuspecting American
consumer.
This does not mean the system is free of abuses. In a recent case
from Alabama, a jury awarded $4 million in punitive damages because BMW
failed to disclose that a car sold as new had in fact been damaged, and
then repainted on the way from the factory to the showroom. Even though
BMW may have acted wrongly in this case, in my judgment this punitive
award was well out of proportion to the seriousness of the misconduct
on the part of the company.
So we have examples of excessive jury awards that are outrageous from
time to time. They undermine public support for the civil justice
system. A narrowly tailored bill designed to curb runaway jury verdicts
may be deserving of support. This bill, however, is not targeted at
this problem. It uses a sledgehammer where a scalpel may be more
appropriate.
Regardless of the outcome of this debate, I think the legal
profession has to undertake a concerted effort to address a major
premise that underlies this legislation--that the law and the legal
profession no longer serve a valid public interest.
Lawyers are no longer held in as high regard as some once were.
Books, plays, and movies were written about Clarence Darrow for his
dedication to providing justice for the common man. Lawyers like
Thurgood Marshall and Ruth Bader Ginsburg are revered for striking down
legal barriers based on race and gender.
However, the esteem which the legal profession once held has fallen
quite substantially in recent years. Attorneys are often portrayed as
being more interested in making profits than promoting the interest of
justice.
I believe that it is a minority of the profession that casts
aspersion on the broad majority of lawyers who are dedicated to the
best tradition of the profession and volunteer much of their time to
public service. It is up to a majority of the profession to discipline
those who file frivolous lawsuits, who sue parties only because they
have a deep pocket, or who run up the cost of litigation solely to
induce a settlement.
One of the great virtues of our civil justice system is that everyone
has a right to have his or her grievance heard before a court of law.
When that principle is abused, the very foundations of the system are
called into question. So I think the legal profession has to take swift
and meaningful action in order to rebuild the public's confidence in
our civil justice system.
The legislation now pending before the Senate is not the right answer
to these problems. It is a one-size-fits-all Federal solution that will
end State experimentation in tort reform. It will impose uniformity on
regions of the country with different needs and values. The entire
bill, in my judgment, is an affront to the principle of federalism.
State governments have demonstrated the capability of both developing
and reforming product liability law. There is no need for the Federal
Government to infringe on yet another area of State sovereignty.
Mr. President, over the weekend, I, like the Senator from
Massachusetts, saw many advertisements on television, some dealing with
medical malpractice, others with the impact of product liability
litigation on small businesses. Of course, small companies as well as
large companies have the ability to purchase insurance to cover
themselves for liability suits. Manufacturers have the ability to
purchase insurance to cover their exposure to liability. But when
companies put into the stream of commerce a product that is inherently
dangerous or has a defect and that defect causes an injury to the
citizens of this country, the manufacturer should bear that
responsibility, not the consumer.
This bill seeks to put a limitation on the ability of consumers to
recover for the damages that have been inflicted
[[Page S5902]] upon them and, yes, for punitive damages to discourage
companies that either act willfully or in wanton disregard for public
safety. These cases demand that punitive damages be imposed in order to
discourage and deter manufacturers and the distributors of dangerous
products from continuing to inflict harm upon the public.
Commercials that I saw over the weekend said we are addressing this
problem of medical malpractice in California. The State legislature
passed a medical malpractice reform law and guess what? Those lawsuits
have now declined. We have also passed a medical malpractice reform law
in the State of Maine. We have prelitigation screening panels. We set
statewide standards for doctors and hospitals. States can--in fact,
have--adopted changes in their tort law to deal with their particular
problems. But in a State like Maine, which, over a 25-year period, has
actually awarded punitive damages in three product liability cases, do
we need a Federal law to tell us what to do?
It is an insult to the people of this country to say that the 12 men
and women sitting in the jury cannot be trusted to weigh the evidence
and decide to impose or not impose damages. This legislation sets a
uniform national standard for damage awards. It says: You juries cannot
go above this, your judgment cannot be trusted. We are saying that no
matter how egregious the offense, no matter how defective the product,
no matter how wanton the disregard for public safety, we do not trust
you, ladies and gentlemen of the jury, to do what is right, to exercise
common sense. And we here in the Halls of Congress we are going to tell
you exactly how far you can go.
To me, Mr. President, it is an insult to all the people of this
country to say that we no longer have faith in their judgment, that
only Congress can determine exactly how high they can go in terms of
compensating citizens of their community who have been injured by
defective products. I think this contravenes everything that is being
said on this side of the aisle about limiting the scope of government,
reducing the power of Washington, returning power to the people,
deregulating the economy, and revering the 10th amendment.
I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SPECTER. Mr. President, I have sought recognition to comment
about punitive damages in our legal system as they apply to tort
reform. I have spoken before on this bill and have noted that I have
had experience representing both plaintiffs and defendants in personal
injury cases and had one very involved product liability case which I
described in a floor statement a week ago today. I have noted my
concern that there is room for reform of product liability tort law.
But my concern is that it be done very, very carefully because the body
of law in the United States, common law development is slow, laborious,
careful. Common law builds up by accretion or encrustation over a long
period of time and is very different from the kind of processes which
we have in legislation where there are frequently only one or two
Senators present at hearings and where markups are done without the
kind of background or careful evidentiary study which marks development
of the law, case law and common law.
There is a very erudite analysis of punitive damages in the Iowa Law
Review, volume 78, appearing at page 1, published in 1992, by Prof.
Michael Rustad and there are a number of aspects of that article about
which I would like to comment.
Even though this is a lengthy law review article, it is worth
printing in full in the Congressional Record because of the importance
of tort liability generally and product liability specifically and
punitive damages as it impacts on the legislative consideration which
we have before the Senate.
My comments will be relatively brief compared to the scope of the
article.
I start by referring to four empirical studies of punitive damages in
product liability cited in Professor Rustad's law review article.
The first is by the Rand Institute for Civil Justice, which studied
24,000 jury verdicts in Cook County, IL, and San Francisco, CA, between
1960 and 1984. The Rand study stated that the ``punitive damages
picture in personal injury cases has changed very little in 25 years.''
As noted in this law review article, the Rand study states: ``Product
liability cases have been of special concern to many critics, but our
analyses indicate that punitive damages were awarded in only four
product liability cases in San Francisco and two in Cook County from
1960 through 1984.'' It further notes that, ``The rarity of punitive
damage awards in products liability cases suggests that there is little
need for tort reform.''
The second empirical study noted in this law review article is by the
American Bar Foundation, which examined 25,627 jury verdicts handed
down from 1981 to 1985, drawn from State jury verdict reporters in 47
counties in 11 States. This study found that in 5 percent of the
verdicts there was an inclusion of punitive damages and that products
liability accounted for 3.8 percent of the 25,627 verdicts. Of the 967
products liability verdicts, the study found 34 cases in which punitive
damages were awarded. The researchers concluded that the awards were
generally quite proportionate to the actual damages, and they concluded
that ``the median punitive damage award is not at a level that is
likely to `boggle the mind.'''
The third empirical study noted in the Iowa Law Review article is the
GAO study on the frequency and size of punitive damage awards in
product liability cases in five States between 1983 and 1985. There was
a review of court records for 305 product liability cases resolved
through trial in Arizona, Massachusetts, Missouri, North Dakota, and
South Carolina. The GAO supplemented official court records with
posttrial interviews with attorneys. The General Accounting Office
found that punitive damage awards were neither routine nor excessively
large and that posttrial appeals and settlements substantially reduced
the amount of punitive damage awards.
The fourth empirical study noted in the Iowa Law Review was conducted
by Judge Richard Posner, a distinguished court of appeals judge in the
Federal system, and Prof. William Landes of the University of Chicago,
who examined all products liability cases ``reported in the 10 most
recent volumes of each of the West Publishing Company's regional
reporters'' and all ``product liability cases in the federal courts of
appeals from the beginning of 1982 to November 1984.'' This study found
```punitive damages were awarded in the trial court in 10 of 172
cases.' The award was affirmed in whole in only one of the ten cases.
Appellate judges reversed and remanded six of the cases for further
proceedings.''
Mr. President, in an era when we are looking toward less Federal
regulation, I think it is very important that we take a close look at
what private actions import. This is an area which has attracted my
attention since law school days, when, as a member of the board of
editors of the Yale Law Review, I wrote an article on private
prosecution, which is a somewhat different line, on the need when there
was unwarranted inaction by the public prosecutor. In the Senate, I
have authored legislation to establish a private right of action for
people who are damaged by unfair foreign competition, where goods come
in the United States either as a result of subsidy or dumping because
of the insufficient resolution of proceedings in the International
Trade Commission.
At this point, I am going to refer to a number of cases, some of
which are cited in the Iowa Law Review article and some of which are
found in other places.
One case of considerable interest was Richardson-Merrell's
concealment of side effects of MER/29, an anticholesterol drug. In a
case litigated, Toole versus Richardson-Merrell, Inc., in the
California court of appeals, the evidence was that there had been
fictitious reports filed by the company, that none of the abnormal
[[Page S5903]] blood changes encountered in experiments was disclosed
and that there was a falsified chart prepared under protest by one of
company's employees which was included in the application. One
advertising brochure stated that MER/29 was ``virtually nontoxic and
remarkably free from side effects, even on prolonged clinical use.''
The evidence further showed evidence of high-level management with
knowledge of the concealment of MER/29's known defects. There were
1,500 civil suits filed after there were guilty pleas by the company's
executives. Three scientists pleaded nolo contendere to criminal fraud
charges and were fined a total of $80,000 in the context of the
criminal conduct which seriously injured an estimated 5,000 consumers.
Of the 1,500 civil cases which were filed in the wake of those
criminal pleas, juries awarded punitive damages in three of those
cases.
Another case of some concern noted in the Iowa Law Review article is
one involving the Dalkon shield put out by A. H. Robins, in a case
captioned Plaintiff versus A. H. Robins Co. The Supreme Court of
Colorado found evidence upholding a punitive damage award with the
following statement:
Robins' marketing program which occurred over a long period
of time was directed to a vast array of unwary consumers and
was accompanied by false claims of safety and a conscious
disregard of a life-threatening hazard known by it to be
associated with its product. Robins accumulated gross
revenues which exceeded $11 million from the shield alone and
its net worth nearly doubled during the marketing period of
this device.
Another case worthy of special note, although there are many cited in
this law review article, is a case captioned Duddleston versus Syntex
Labs, Inc., which involved the company's failure to test a soy-derived
baby formula which resulted in thousands of infants suffering brain
damage. The company had removed salt from its product without
considering the effect on child development, and that was a causative
factor in brain damage and learning disabilities.
Another case worthy of special note is captioned Batteast versus
Wyeth Laboratories in which there was an assessment of substantial
punitive damages for failure to warn physicians of certain propensities
dangerous to children in the chemical composition of a drug, and the
basis for the punitive damages was the company's failure to market the
suppository in compliance with Federal Drug Administration adverse-
reaction guidelines.
Among many of the other cases cited, my final reference is to the
Minnesota Supreme Court decision in a case captioned Gryc versus
Dayton-Hudson Corp. as follows:
In April 1968, a letter from an official of [the defendant]
explained that satisfactory runs were made with flame-
retardant flannelette using various chemicals, but that [the
defendant] was not going to use these products until Federal
law so required because of the cost factor. . . [T]he
decision not to use flame-retardant cotton flannelette was
merely an economic one for the benefit of [the defendant]--
This gave rise to the imposition of punitive damages.
In reviewing a number of cases, and these are only illustrative, Mr.
President, of what exists in the field of tort liability, the famous
case involving the Pinto automobile which had the gas tank in the rear
and was justified in a letter from Ford Company to the Administrator of
the National Highway Traffic Safety Administration which sought to
justify the dangerous condition, because it was more cost-effective to
suffer 180 burn deaths with 180 serious burn injuries and 2,100 burned
vehicles at a total cost of $49.5 million, contrasted with the cost of
repairing 1.5 million light trucks, 11 million cars at a unit cost of
$11 per car, which would cost $137 million. This has already been
placed in the Record, Mr. President, so I will not further burden the
Record by asking that it be printed.
Another matter of some notoriety involved the American Motors Corp.
and its product, the Jeep, when there was an internal American Motors
Corp. memo dated January 7, 1982, acknowledging a defect with the
shackle system of the Jeep, which was known for many years to the
company, and the following sentence from the memo is of some
significance:
Not to retrofit will subject Jeep Corporation to possible
punitive damages on a component which has previously been the
subject of several causes of action.
I ask unanimous consent that this intracompany correspondence be
printed in the Record for its probative value in showing that the
possibility of punitive damages is something to be considered in
retrofitting a vehicle to make it safer.
There being no objection, the material was ordered to be printed in
the Record, as follows:
intracompany correspondence
From: Mr. J.E. MacAfee,
To: R.M. Huffstutler
Subject: C.J. Shackles,
Location--Ext: AMTEK/33223
Date: January 7, 1962
Copy to: C.S. Sklaren, W.C. Jones, C.E. Merritt.
Confirming our telephone conversation of this P.M., we
understand that vehicle 1609 will soon be tested. This test
will be the fourth in the series of 1461, 1477, and 1484, a
test we presume will meet with the complete satisfaction of
you and your engineering staff.
Upon successful completion of testing on the new shackle
design, we would appreciate the ECR being with obsolescence
and the new design being incorporated at the earliest
possible time. Assuming the shackle is released for CJ-5, CJ-
7, Scrambler, and various export models, I will press for
retrofit of all CJ-7 and Scrambler vehicles produced in the
1982 model year. This action I believe is warranted since the
FMYSS 101-75 movable barrier 20 mon test which indicated a
problem was completed July 22, 1981, three weeks prior to the
1982 production. Not to retrofit will subject Jeep
Corporation to possible punitive damages on a component which
has previously been the subject of several causes of action.
Our legal staff has, to date, not seen the merits of testing
the current design before a jury; it is my belief that the
new design will have to be tried and thus Jeep Product
Engineering should have a sufficient data file to convince
not only engineers but lay persons as well.
Any action by Engineering to our purchasing group to
forestall their dilatory tactics in this matter would be
appreciated. An early warning to them that the design will be
changed may preclude Jeep Corporation from having to pay for
stock ahead of our production requirements.
R.M. Huffstutler.
Mr. SPECTER. Mr. President, an internal memo from the Cutter Co.,
which was involved in manufacturing blood factors for hemophiliacs, is
of considerable interest. To the extent that an internal Cutter
memorandum dated December 29, 1982, recommended several steps to warn
about AIDS transmission through its factor concentrate product, this
memo reads as follows, from one Ed Cutter to Jack Ryan and others:
It appears to me to be advisable to include an AIDS warning
in our literature for certain factors.
And there is a second document by a Dr. Bove, January 1983:
This case increases the probability that AIDS may be spread
by blood. Further, the CDC--
That is the Centers for Disease Control.
continues to investigate the current cases aggressively and
may even have a few more. While I believe our report reacts
appropriately to the data at hand, I also believe that the
most we can do in this situation is to buy time.
Until these documents were disclosed, the Cutter Co. argued that the
obligation to warn did not arise until the spring of 1984. This same
case has a cost/benefit analysis by the American Red Cross which
concluded that it would cost more to make a correction than to treat
the AIDS patients, with the testing costs being in the range of $13 to
$67 million, whereas an evaluation of each AIDS case at $500,000 would
require the prevention of some 30 to 134 AIDS claims to be cost-
effective. This suggests to me, Mr. President, a wholly inappropriate
evaluation of cost analysis dealing with a deadly subject like AIDS.
I ask unanimous consent that these internal corporate documents be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
cutter
To: Jack Ryan, Carolyn Patrick, Wayne Johnson, Ralph
Roussall, George Akin
From: Ed Cuttar
Date: December 25, 1982
Copes To: Arnold Laong
Subject: AIDS.
It appears to me to be advisable to include an AIDS warning
in our literature for Factor IX and Factor VIII. I realize
that very little is known about AIDS and the relationship the
products we manufacture have in causing
[[Page S5904]] the syndrome. However, litigation is
inevitable and we must demonstrate diligence in passing along
whatever we do know to the physicians who prescribe the
product. In my opinion, three steps are called for, once we
agree on the wording of our message.
1. Include it in the package insert.
2. Educate the sales force.
3. Since MDs won't be reading the package insert in most
cases, send a letter to hematology specialists informing them
of the warning we are putting in the insert.
Ed Cuttar.
____
To: AIDS Working Group, Dr. Dood, Ms. Baum
From: Dr. Cumming
Date: 3/20/84
Subject: Meeting request and report on: Progress on AIDS
marker testing marketing research.
summary
Our review of AIDs marker testing issues to date brought
into question the value or continuing to proceed along lines
or developing a non scientific opinion research survey.
Specifically:
Objectively it is difficult to make a case for adoption of
AIDS marker testing,
Plasma industry projected adoption or such a test is a
rather obvious marketing initiative which will serve to
increase pressure on us, and
ARCBS decision-making criteria are complicated by
considerations of ethics and public welfare as distinct from
competitive response.
This last issue can be summarized nicely by reference to
``false positives''. Essentially all anti core test results
are likely to be false positives. Specifically, it is
estimated that over 6,000,000 annual units are donated by
4,000,000 persons. With 5% normal population incidence of
anti core positive results this means 200,000 people may be
labelled as likely to get AIDS. Contrast this with a possible
50 cases per year of AIDS avoided (0.00025 of all positives).
Assuming these 200,000 people have additional testing done,
costs to society may be from $20,000,000 to $100,000,000
(based on $100 to $500 per false positive). And this does not
ascribe any value to mental anguish, time off work, etc.
These figures and issues make the direct cost of testing
minimal in comparison.
It is from this perspective that we question the value of
continuing to develop a non projectable sampling effort and
request a meeting to clarify as precisely as possible where
we
are heading and why.
background
Attached for your information, review, and comment are:
(1) A background document summarizing various marker tests
for AIDS, and estimating effectiveness and costs, and
Three draft questionnaires designed to elicit the opinions
of various interest groups on marker tests for AIDS.
The background document explores some of the costs and
benefits of implementing screening marker testing for AIDS
amongst blood donors. On the descriptive matrix,
characteristics such as effectiveness, ease of use,
availability, etc. are estimated, as well as other potential
advantages and public relations effects.
The latter is an area of grave importance which must be
further explored. As you are aware, the possibility exists of
creating panic in the (normal) donor population from positive
test results, and incurring unnecessary costs to the health
care sector as these donors pursue further medical
evaluation, as well as reducing the size of the donor pool.
These effects must be carefully weighed against the possible
benefit of reassuring the blood recipient population and the
hypothetical benefit of reducing the incidence of
transfusion-associated AIDS (trx-AIDS).
The cost matrix addresses the potential costs associated
with implementation of the various marker tests. Review of
this matrix indicates that costs for testing in all ARC Blood
Service regions would range from $15 million to $67 million.
If we assume that each average AIDS case has a value of $1M,
then to justify use of one of the tests would require an
expected reduction in trx-AIDS from ARC blood of 15 to 67
cases. Since trx-AIDS patients have averaged 50 years of age,
average earnings per worker are approximately $20,000 per
annum, and treatment for AIDS victims has averaged about
$80,000 * * * about $500,000. This lower benefit would
indicate a need to prevent 90 to 134 trx-AIDS cases from ARC
blood to justify use of a marker test exclusively on economic
considerations. In addition, these averted cases would have
to be over and above the number of cases prevented by
currently implemented screening measures.
As an example, to economically justify anti-HBc testing in
all Blood Service regions, we would need to demonstrate an
anticipated rate of trx-AIDS (not prevented by screening
measures) of 1.75 cases per week, assuming an 88%
effectiveness rate of the test. This rate is considerably
above previous and
current rates.
proposal
To summarize the background document, implementation or any
AIDS marker test will be extremely expensive. Given the fact
that tax-AIDS is still a hypothesis, that there has been no
effective measurement or the success of the screening
procedures which have already been implemented, and that cost
justification or testing would rest on a considerably higher
incidence or tax-AIDS than is currently being observed, the
following recommendations are proposed for further
exploration.
(1) Implement the confidential self-exclusion procedure,
currently used by New York Blood Center (NYBC), in all ARC
Blood Service regions.
(2) Implement one of the marker tests in Los Angeles and
any other regions where there is reason to suspect a high
concentration of AIDS carriers.
(3) Continue to evaluate the non-economic considerations
inherent in implementing one of the marker tests systemwide.
It is in keeping with the last recommendation that the
three questionnaires are attached. The non-economic
considerations are primarily the opinions and beliefs of the
various publics which are served by ARC Blood Services. The
questionnaires which are attached are targeted at physicians
who prescribe blood, the general public including blood
donors and recipients, and third party payers such as
Medicare/Medicaid agencies and insurers. We intend to modify
or add to these questionnaires to also target hospital
administrators and other signatores of annual hospital/blood
region contracts.
Relative to these questionnaires, we would appreciate
information or comments on the following:
Decision making criteria given results of the survey, i.e.
what influence will the results of the survey have on a
decision whether or not to implement marker testing?
Method of sampling and sample sizes
Content and phrasing of questions
Target audiences
purpose of meeting
Answers to this first question are essential for further
development of the survey. Admittedly if public opinion could
determine that ARC implement testing, a very large sample
would be required, whereas if the questionnaires are designed
merely to ``test the waters'', a small screening sample would
suffice. At this point, we really can't see too much value in
a small, non-scientifically projectable sample. For such a
sample to be useful for other than field testing of an
instrument, we would have to observe a high degree of
unanimity or opinion. Given the subject matter this is
unlikely. For a large and statistically valid and reliable
sampling effort to be most useful, we need to be very
specific as to how we intend to use results from each likely
outcome of the sampling. I suggest that a meeting of the
group plus Dr. Doda and Ms. Baum is in order to gain this
specificity or select another course of action.
Report to the Board Committee on Transfusion Transmitted Diseases
The major report of your Committee on Transfusion
Transmitted Diseases has been issued as our recommendations
to the Association. These few additional paragraphs are more
my current views and concerns than a formal committee report.
Nonetheless, because of my recent experiences I am anxious to
share some thoughts with you.
The report that we have submitted to our members is, in my
view, appropriate considering the data at hand. Since we met,
however, an additional child with AIDS has been admitted to a
Texas hospital. At birth the child had received seven
transfusions, one of which came from a donor who now seems to
have AIDS. This case increases the probability that AIDS may
be spread by blood. Furthermore, the CDC continues to
investigate the current cases aggressively and may even have
a few more. While I believe our report reacts appropriately
to the data at hand, also believe that the most we can do in
this situation is buy time. There is little doubt in my mind
that additional transfusion related cases and additional
cases in patients with hemophilia will surface. Should this
happen, we will be obliged to review our current stance and
probably to move in the same direction as the commercial
fractionators. By that I mean it will be essential for us to
take some active steps to screen out donor populations who
are at high risk of AIDS. For practical purposes this means
gay males.
The matter of arranging an appropriate screening program is
delicate and difficult. We have had excellent cooperation
from individuals in the gay community and our deliberations
have been made easier by their knowledge and ability to help
us. I have no doubt that they will continue to support us
and, should we need to be more aggressive in this area, will
help us do it in a way that is socially responsible.
Blood banks that wish to sell plasma for further
fractionation already face the need to do something. Perhaps
our Committee should prepare guidelines with suggested
wording for them to use. We are reluctant to do this since we
do not want anything that we do now to be interpreted by
society (or by legal authorities) as agreeing with the
concept--as yet unproven--that AIDS can be spread by blood.
All in all this is a knotty problem and one that we will
not solve easily.
I want to make a few comments about the process by which
our joint document developed. We spent a great deal of time
and energy and did the best we could in attempting to reach a
consensus. The difficulty was to get AABB,ARC, CCBC and all
the other groups to adopt a position which was acceptable to
each other. It was impossible to have a small meeting;
everybody wanted to attend. When we got the group together we
were able to hammer out a statement that pleased the
attendees. Unfortunately, the
[[Page S5905]] statement had to go through several iterations
with our own Board and the Boards of the other involved
organizations. In
all probability these modifications resulted in a better
statement, but the process of getting these changes
incorporated and run back and forth through the three
organizations was difficult. We have had a good start at
working together on this and we hope to keep it up. The
mechanism was a little less smooth when it came to
releasing the statements and the public relations that
went with it.
I hope that we are equipped psychologically to continue to
act together. I have been in contact with ARC (Dr. Katz) and
CCBC (Dr. Menitove) and believe that the three of us can,
together, work out whatever new problems may arise. We plan
frequent conference calls to keep each other informed.
I want to comment about the Committee. They worked well
together and I was particularly pleased with the input of
advisory members. Having individuals who are not associated
with the blood banks nor a traditional part of the blood
banking community proved most useful to us. Their comments
and suggestions were excellent. In a like manner, we were
helped by participants from the National Gay Task Force. As
we continue to react to the various challenges before us, I
am sure that their help will be essential. Finally, let me
acknowledge the help from the Central Office and, in
particular from Lorry Rose.
No immediate end to the publicity is in sight and we will
get continued calls for us to act more aggressively. We need
to do whatever is medically correct. In addition, we may have
to do a little more, since we are accused of burying our
heads in the sand. We are not being helped by the spate of
publicity about this illness, but will continue to react
responsibly to whatever scientific and medical information we
have.
Joseph R. Bove,
Chairman, Committee on Transfusion Transmitted Diseases,
American Association of Blood Banks.
Mr. SPECTER. Mr. President, another very important product involved
the Bjork-Shively heart valve where internal company documents show the
company was notified by the inventor in 1982 of the manufacturing
defect, with the handwritten notations on the memo by the inventor to
try to ``settle him down,'' a defect which was not fixed for years
resulting in damages to thousands of people who used these heart
valves.
Again, I ask unanimous consent that this corporate document be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
15242 Shiley 64,
March 24, 1982.
Attn: Paul Morris.
Last night a 60 year old man, with a double valve (mitral
and aortic valve) replacement performed--August 24, 1981 with
a * * * degree, 25 mm in aorta and 31 mm in mitral, had
rupture of the smaller strut and pulmonary edema.
During the night, I re-operated the broken mitral valve and
the * * * strut was localized in the pulmonary vein. The
patient has now woken, but has neurological seguele.
It is evident by now that the manufacture of the prosthetic
valve is not acceptable. The small strut must be made in one
piece and much more effort and priority must be put on this
than has been done so far.
Your programmed conferences, in Atlanta and California in
the end of August, are extremely ill timed--before an
acceptable production can be achieved.
Dear friends, I am serious.
Viking O. Bjork.
P.S. By airmail I am sending you the piece.
handwritten notes by recipient
* * * also suggested we go to Sweden to talk to Bjork.
I'd like to avoid if possible as it won't help solve
problem.
Paul * * *
Kjell called to discuss * * *. Wants us to call Bjork and
attempt to settle him down and convince him we are oing
everything possible to get the monostrut faster--I suggest we
use the ``double side'' EB Wolf method to get him valves
fast! They have to be stronger than the welded strut on
70 deg. cc.
Bruce.
P.S. I have all employee meetings at 10 a.m. and 11 a.m.--
Please call Bjork and try to settle him down and convince him
that we are doing everything possible.
BS.
Mr. SPECTER. Mr. President, some of the cases disclosed procedures
which would result in additional safety which were left uncorrected for
very considerable periods of time, and I refer now to an intracompany
memorandum of the Ford Motor Co., dated September 19, 1967, which
reports:
When properly worn, the three-point diagonal shoulder belt
system has been demonstrated to offer much greater protection
to the vehicle occupant than does a single-lap belt alone
since it prevents injuries from jack-knifing.
And in the same document:
A properly worn three-point system clearly protects the
occupant better than a lap-belt-only system.
But it was not corrected until 1987 as reflected in intracompany
correspondence of Ford. This is dated May 2, 1986:
I believe we should consider optional rear seat shoulder
belts for reasons described in the attached memo to you from
Al Slechter as a defense against future product liability
claims.
These are a series of internal memos, Mr. President, which have come
to public light in the course of litigation and show that litigation of
product liability cases with the potential for punitive damages is a
significant factor leading to product safety, which I think has to be
evaluated as we consider this legislation. Further evaluation of the
cost benefit occurred by General Motors in a memo dated June 29, 1973,
where as a result of their cost analysis, they made a substantial
change, showing that where there was concern about fatalities and
damages, safety features were added.
I ask unanimous consent that this document be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Value Analysis of Auto Fuel Fed Fire Related Fatalities
Accident statistical studies indicate a range of 650-1,000
fatalities per year in accidents with fuel fed fires where
the bodies were burnt. There has been no real determination
of the percent of these people which were killed by the
violence of the accidents rather than by fire. The condition
of the bodies almost precludes making this determination.
Based on this statistic and making several assumptions, it
is possible to do a value analysis of automotive fire related
fatalities as they relate to General Motors.
The following assumptions can be made:
1. In G.M. automobiles there are a maximum of 500
fatalities per year in accidents with fuel fed fires where
the bodies burnt.
2. Each fatality has a value of $200,000.
3. There are approximately 41,000,000 G.M. automobiles
currently operating on U.S. highways.
Analyzing these figures indicates that fatalities related
to accidents with fuel fed fires are costing General Motors
$2.40 per automobile in current operation.
500 fatalities times $200,000 per fatality divided by
41,600,000 automobiles equals $2.40 per automobile.
This cost will be with us until a way of preventing all
cash related fuel fed fires is developed.
If we assume that all crash related fuel fed fires can be
prevented commencing with a specific model year another type
analysis can be made.
Along with the assumptions numbered above the following
assumptions are necessary:
1. G.M. builds approximately 5,000,000 automobiles per
year.
2. Approximately 11% of the automobiles on the road are of
the current model year at the end of that model year.
This analysis indicates that for G.M. it would be worth
approximately $2.20 per new model auto to prevent a fuel fed
fire in all accidents.
500 fatalities times 11 percent new model autos equals 55
fatalities in new model autos.
55 fatalities times $200,000 per fatality divided by
5,000,000 new model autos equals $2.20 per new model auto.
This analysis must be tempered with two thoughts. First, it
is really impossible to put a value on human life. This
analysis tried to do so in an objective manner but a human
fatality is really beyond value, subjectively. Secondly, it
is impossible to design an automobile where fuel fed fires
can be prevented in all accidents unless the automobile has a
non-flammable fuel.
E.C. Ivey,
Advance Design
Mr. SPECTER. Mr. President, another similar modification occurred by
the Pitman-Hutsik Co., relating to boom tip contacts used on cherry
pickers with an analysis that a large number of accidents occurred with
these boom tip contacts, and as a result of the jury awards in product
liability cases, the design was changed.
I ask unanimous consent that the last item be printed in the Record.
Typical Accidents
1. Boom tip contact: Metallic portion of upper boom
contacted a line, and the operator touched these metal parts
as well as another line.
2. Boom contact or crane contact: A non-insulated boom or
lower boom of an insulated device contacted a line, resulting
in injury to personnel on the ground.
3. Phase/phase contact: Operator in the bucket personally
touched two phases or a phase and ground, resulting in an
injury, but the machine carried no current.
4. Tipovers: Machine turned over because of: (1) improper
outrigger placement; (2) outrigger malfunction or breakage;
(3) outriggers were not used; (4) driving accident; (5)
overload; (6) et al.
[[Page S5906]] 5. Controls contacted foreign object:
Controls malfunctioned or contacted foreign object, forcing
machine to continue to move against the object.
6. Leveling cable failures: Bucket leveling system broke
for some reason, causing operation to fail.
7. Boom collapse: Component in boom system broke due to
overload, poor maintenance, etc., allowing the boom to
collapse.
8. Boom collision: Boom collided with personnel during
operation of the machine. Boom collision is sometimes the
result of a boom collapse, also.
Discussion of pertinent data
Electrical accidents account for 29 percent of the total
number of accidents, but account for 77 percent
($21,500,000.00) of the active claims.
The largest single type of electrical accident is ``Boom
Tip Contact.'' It accounts for 40 percent of the number of
electrical accidents and 67 percent of the total dollar value
of the active claims. ($18,500,000.00) Those electrical
accidents involving metal boom machines usually do not lead
to lawsuits and represent only 9 percent ($2,500,000.00) of
the dollar value of our active claims. The same is true for
``Phase-Phase'' contacts, which account for only 1.5 percent
($500,000.00) of the active claims.
Contractors have fewer numbers of accidents than utilities,
but contractors have a higher accident rate per machine.
(This statement may be somewhat inaccurate, because it is
felt that utilities, in some cases, tend to hide some of
their accidents.)
Contractors account for 76 percent ($21,200,000.00) of the
active claims against the A.B. Chance Company, while
utilities account for only 15 percent of the active claims
($4,300,000.00). Of the $21,200,000.00 claims from the
contractors, $18,000,000.00 resulted from electrical
accidents, $15,000,000.00 of which was attributed to ``Boom
Tip Contact.''
There being no objection, the material was ordered to be printed in
the Record, as follows:
cost to implement technical recommendations
(A) Estimated cost to design a machine with the following
features:
1. Insulated boom tip.
2. Insulated lifting attachments.
3. Boom interlock system.
4. Tip-over warning system.
5. Improved leveling system.
6. Improved hydraulic control system.
7. Improved placards.
Estimated time: 2 years:
Design Prototype Test, Document; $200,000.00.
Tooling: $10,000 to $25,000.00.
(B) Estimated Cost Increase of Machine: $2,000.00.
(C) Dollar value of active lawsuits as result of ``Boom Tip
Contact'': $18,500,000.00.
(D) Assuming average awards paid out equal to 2.5 percent
of total claims dollar value (.025 18,500,000): $462,500.00.
conclusion
If $225,000.00 could be spent to alleviate the liability
exposure due to ``boom tip contact'', it would appear that
this expense could be justified.
Mr. SPECTER. Mr. President, finally, in a confidential legal opinion
on a matter involving the Clark Equipment Co., Hancock Division, is the
following statement.
* * * the lack of a back-up alarm presents a substantial
product liability exposure to Clark that far exceeds any
requirements of State safety laws or OSHA. In every case in
which we have had an injury involving a person struck by a
machine, the absence of a back-up alarm has been very
crucial.
* * * The customer is not in the same position as the
manufacturer and Clark must take all steps necessary to
protect itself--
Showing the safety and precaution taken as a result of the liability
imposed in product liability cases.
I ask unanimous consent that the full text of that document be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Buchanan, MI,
August 29, 1974.
Confidential Legal Opinion
To: Phil Hoel, Hancock Division.
I have received your memo concerning making back-up alarms
standard on all scrapers. I disagree with you that the
decision concerning making back-up alarms standard should be
made by the Sales Department.
Although there are many states that do not require a back-
up alarm at this time, and, in fact, OSHA would make it
optional since you can also provide a flagman to signal when
to back up, the lack of a back-up alarm presents a
substantial product liability exposure to Clark that far
exceeds any requirements of state safely laws or OSHA. In
every case in which we have had an injury involving a person
struck by a machine, the absence of a back-up alarm has been
very crucial. I must conclude that it is a very substantial
fact in the mind of any juror that if the machine had had a
back-up alarm, the injury might have been prevented. This
thought must be in the minds of the jurors no matter how
great the evidence is that the back-up alarms are not
required by state safety laws or are not effective because
the engine noise is too loud.
I think this must be an overall management decision and
should not be left to the Sales Department since that
department only gives basically a reflection of what the
customer wants. The customer is not in the same position as
the manufacturer and Clark must take all steps necessary to
protect itself, whether the customer wants it or not.
Accordingly, I again strongly suggest that you consider
making back-up alarms standard on all scrapers. I was
informed yesterday by Walt Black that Benton Harbor has
decided to make such alarms standard on all loaders, and I
applaud them for that decision. I would hope you could reach
the same conclusion.
Steve Anderson,
Assistant Counsel.
Mr. SPECTER. Mr. President, in the Iowa Law Review article that I
have referred to, there is a lengthy listing of protective measures
which were taken after litigation disclosed a substantial problem. They
have a special probative value in showing that when product liability
litigation occurs, there is a very practical impact on safety for the
consumers.
For example, when the CJ-7 Jeep was found to have inadequate roll-
over protection on the off-road vehicle, punitive damages caused a
safety measure to be taken to redesign the product and add a new
warning.
When the Toyota Corona was found to have a fuel integrity problem due
to the placement of tanks with injuries and deaths, there was a
redesign.
When power lines were found to have uninsulated components causing
electrocutions, there was a multi-million-dollar safety program.
When there was a television manufacturer with tubes made of wax and
paper which posed a fire risk, despite the company's knowledge of
numerous house fires, it did not warn or redesign until the litigation
in effect compelled a redesign.
There is a long list which appears at pages 81 and 82 of the Iowa Law
Review article, which I shall not take the time to read now, but are
worthy of special note, because once there is an aggravating factor
determined in the litigation of product liability cases, there are
safety measures which are taken.
Mr. President, I have taken this time to put into the Record some
concrete cases, where the presence of liability and the presence of
punitive damages has had a profound effect on influencing the conduct
of the producers. I think these are matters which have to be taken into
account that I have included in the Record so my colleagues will have
access to this information when the Congressional Record is printed
tomorrow. That will be in ample time for consideration of this kind of
material in their legislative judgments.
Mr. President, I see that my colleague, Senator DeWine, has come to
the floor, so I will yield the floor to him and also the duties
involved in wrap-up, which I have agreed to undertake thinking I would
be the last speaker.
I yield to my colleague, Senator DeWine, at this time.
Mr. DeWINE. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DeWINE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DeWINE. Mr. President, I rise today to discuss in general terms
the underlying product liability this Senate has now been debating for
several days, and to also discuss the medical malpractice amendment
that is pending before the Senate.
I intend to discuss tonight some of the concerns that I have with
these bills, but also I hope to talk a little bit about some of the
hopes that I have in regard to the things that I hope a well-crafted
bill can, in fact, achieve, and some improvements that we can make in
our current legal system.
Mr. President, I do not pretend to be an expert in this area. I have
spent a considerable period of time in the last 2 to 3 months reading,
talking, and more importantly, listening--listening to business men and
women, listening to others who have concerns about our
[[Page S5907]] current system, and some who have concerns about this
particular bill.
Some people, Mr. President, have been, I think, surprised, some
amazed, that this Senator from Ohio did not automatically jump on this
bill, saying we will approve everything in it just because it was
labeled a ``reform'' piece of legislation.
We do need reform. I think the question before the Senate today,
tonight, tomorrow, next week, will be what really constitutes reform?
What will truly help the small companies, small manufacturers in Ohio
and other States who are threatened by the current system?
But what reform, also, will we utilize that will not take away the
victim's rights, nor will it stop the deterrent effect that I find to
be an essential part of our system today?
I believe that we have to approach this debate cautiously and
carefully. Let me first start tonight by listing a few reasons why I
believe we do have to approach this very serious, very important debate
from a point of view of caution. Let us make no mistake about it, even
the relatively narrowly drafted bill that was introduced, that we began
this debate with, even if it was passed and nothing more--no amendment,
none of the amendments that we have heard about to expand the bill--if
the bill was passed in its original form, it would still constitute the
most radical, the most dramatic change in our civil justice system in
the history of this country.
For over 200 years the tort law in this country, the civil justice
system, has developed not primarily at the Federal level. Rather, it
has been a home-grown product. It has been developed in State after
State--in Ohio since 1880--both by statute, by action taken by the
State legislature, but also in court case after court case after court
case. We have developed a fairly fine-tuned tort system to handle
disputes between individuals, to handle tortious conduct.
Clearly the system does not work perfectly. By and large it does
work. The proposal before us is, for the first time, to federalize that
tort system. The only example I can think of where this Congress really
became involved in the tort law, civil justice law, was when Congress
passed--and I think it was a correct decision--a bill to give help to
the general aviation industry in this country. Congress acted only
after it was clear that general aviation had been driven overseas. The
results of that bill have been positive. We have seen jobs come back to
this country. That industry now, instead of contracting in this
country, is expanding. But with that exception, Congress has never
gotten into this area.
I believe there are some very sensible reasons for this past
reluctance on the part of the U.S. Congress. A simple way to express
Congress' concern is to invoke the concept of Pandora's box. Once you
open up this area of law to congressional interference, congressional
control, where does that stop? Where does the debate stop?
If anyone doubts this is a legitimate concern, I ask them to look at
some of the amendments that have already been offered or will be
offered in the next few days. Should there be a Federal cap for
lawyers' fees? What should be the contractual relationship between
employers and employees? What sort of evidence should be admissible at
trial? That is just the beginning.
Having said this, that it is a dramatic change and we should proceed
with caution, that does not necessarily mean we should not proceed at
all. But what it does mean is that we should go into this debate with
our eyes wide open, and we should understand what we are tackling, and
we should understand how significant a change in our law this will be.
Let me next turn to another reason I think we, particularly in the
year 1995, need to approach this debate with caution. There is some
irony that this historic Congress, a Congress which is devoted to
thinking and talking about State prerogatives and States rights and the
value of returning power to the people, the value of returning power to
the States, that this Congress should today be debating a bill that
does just the opposite, that really says the U.S. Congress in certain
areas--product liability, medical malpractice--will impose its will,
will impose a national, uniform standard on all the States in the
Union.
Merely because it is strange, again, Mr. President, does not mean we
should not necessarily do it. But, again, I think it points up how
cautious we have to be as we begin this task. It is somewhat ironic
that the very qualities we value, particularly those of us on this side
of the aisle--self-help, market forces, local as opposed to national
authority being better--are basically present in our current system.
But they would in fact be changed and be compromised by this
legislation.
Let me cite what to me is an interesting example. We have been
considering in committee a regulatory reform bill. One of the
complaints I have heard from business men and women, particularly small
businesses, as I travel across Ohio, is how overregulated they are. I
totally agree. If there is one thing this Congress needs to do it is to
get the Federal Government off the backs of small business men and
women. The bill we have reported out of our committee makes an attempt
at doing that and I think it will improve the law. I think the bill as
we report it could actually be improved. I am going to work to do that
when it reaches the floor.
But there is, again, some irony here. The bill that this Congress has
proposed to help business men and women get the Federal Government to
back off and to stop overregulating puts more power in the hands of
business men and women to sue the Federal Government, to sue the
regulators. It is almost a self-help, self-enforcing provision. And the
basic principle behind this bill, I believe, is that if you really want
to get control of the Federal regulators, about the only way you can do
it--you cannot do it by changing the law and changing the regulations--
the most effective and efficient way to do that is to open up the court
system and to rely on business men and women to go into court and sue
the bureaucrats, sue the regulators. Again, back to some of the basic
principles I talked a moment ago, self-help being one of them.
This bill, in a sense, does move in the other direction. So, again,
another reason to be cautious.
This bill in its various forms, depending on which amendment we look
at, caps punitive damages. I believe we need to have a very, very fine
balancing test as we approach this particular issue. Punitive damages
have been with us for a long time. Punitive damages--let us be very
plain about it--are intended to punish. There have been some Members
who have talked on the floor almost in surprise that punitive damages
are used to punish. That is what they are intended to do. That is what
the definition of punitive damage is.
But the real benefit to society in regard to punitive damages is not
the punishment inflicted on the wrongdoer. The real value to society is
that punitive damages in some cases, and in some very important cases,
serve as a deterrent for some small minority of people in this country
who put a product into circulation and then who, in spite of evidence
to the contrary, evidence that should indicate to them they should
either make a change in that product or withdraw the product or notify
consumers, still go ahead and do none of the above. Punitive damages,
the threat of punitive damages in some cases can serve as a deterrent.
When a jury awards punitive damages in a product liability case, that
jury may in fact be saving lives. The historic purpose of punitive
damages is to punish and also to deter. Here is what the Supreme Court
said. I quote:
The purposes of punitive damages are to punish the
defendant and protect the public by deterring the defendant
and others from doing such wrong in the future.
Let me read it again:
. . . protect the public by deterring the defendant and
others from doing such wrong in the future.
The purpose of punitive damages is to deter conduct that hurts
people, but the product liability legislation we are considering does
seek to limit the jury's use of that vitally important deterrent. Now,
the real question, though, Mr. President, for this Senator at least, is
what kind of cap, what dollar amount will achieve the legitimate,
desired results that the proponents of this bill want to achieve
without really hurting or eliminating this deterrent effect? That I
think is one of the key
[[Page S5908]] and most important questions that this Senate faces.
Let us talk a minute about how punitive damages work in real life. A
tampon manufacturer received studies and medical reports that linked
high absorbency tampon fibers to toxic shock syndrome. Other tampon
manufacturers responded to the warning by either altering or
withdrawing their product. But the manufacturer in question that I am
talking about did not do that. This manufacturer tried to profit from
the disadvantage of its competitors and, frankly, tried to profit from
the good works of its competitors and the fact that they did the right
thing. This manufacturer advertised how effective this product was at a
time when its competitors were reducing the absorbency of their
products because of this health warning.
The court in this particular case came to the following conclusion:
Our review of the record reveals abundant evidence that
[they] deliberately disregarded studies and medical reports
linking high-absorbency tampon fibers with increased risk of
toxic shock at a time when other tampon manufacturers were
responding to this information by modifying or withdrawing
their high absorbency products . . . that [they] deliberately
sought to profit from this situation by advertising . . .
[And this] occurred in the face of [their] awareness that
[their] product was far more absorbent than necessary for its
intended effectiveness.
The jury in the case awarded $10 million in punitive damages. The
manufacturer then withdrew the product. Tragically, Mr. President, that
is what it sometimes takes--a small minority of cases--to deter people.
It takes punishment. It takes punitive damages. So I think we need to
proceed very carefully in this area.
The Senator from Maine has offered I think a very appropriate
amendment. The Snowe amendment is an attempt to preserve the punitive
and deterrent function of punitive damages while at the same time
placing a cap, a cap that will, in fact, bring some predictability to
business decisions that are made by manufacturers, by other business
men and women, a cap that will achieve a goal of not only bringing
predictability but allowing the manufacturer to expand and allowing
them to move into other markets and to do things that will benefit the
public that they would not be able to do but for the cap.
Mr. President, I support the Snowe amendment. If for some reason this
Senate would vote down the Snowe amendment and proceed to adopt the
product liability legislation in its current form, then I believe the
punitive and deterrent effect of these damage awards could be seriously
weakened. By basing punitive damage awards only on economic damages,
the product liability legislation does an injustice, the current bill
does an injustice in those cases where the plaintiffs suffer only minor
monetary losses but--but--severe and other permanent harm of a
nonmonetary kind. The Snowe amendment would rectify that. That is why I
intend to vote for it.
That being said, I should mention that I do have a concern about the
equity of the Snowe formula as regards small companies versus large
companies; that while in fact this cap may be appropriate for the huge
companies, it may not be appropriate in regard to small companies, and
we may need to provide them more assurance and more protection. I am
concerned that under this particular formula small companies are
punished somewhat disproportionately. A small company may well be
destroyed outright by a damage award that would serve merely as an
appropriate deterrent to a much larger company. This is a concern that
we might want to address during the amendment process.
In fact, one way of looking at it was expressed to me by a small
businessman from Ohio several weeks ago. This is what he told me: A
punitive award that might just be a serious deterrent to a big company
might really be a death penalty for a smaller company.
Let me list some other concerns that I do have about this bill.
Earlier today on this floor, I offered an amendment concerning the
civil penalties for sex abuse by doctors. I am sure that even those who
strongly favor the passage of this bill will join me in making it clear
that we do not want to cap damages in cases in which a doctor sexually
abuses a patient. I think it would be wrong for this Senate, for this
Congress to impose a national cap and to tell each State in the Union
to tell the juries of each State in the Union that there is a limit on
the punitive damages you can award against a doctor once you have
already found that doctor has sexually abused a patient.
Let me talk about another area of concern. I intend to offer another
amendment to preserve the right of juries to consider the financial
status of defendants in product liability cases.
As currently written, the product liability bill would forbid juries
from considering the assets of the corporation while considering what
the proper punitive damages should be. This provision would drastically
weaken the punitive and deterrent effect of damage awards, and that is
why I will be working to amend that part of the bill.
I can find no logical reason, Mr. President, why this Congress
should, in this particular case, override the settled law in virtually
every State in the Union that does, in fact, allow a jury to take that
into consideration.
If the jury, in the punitive, as is their job, is trying to make a
punishment and is trying to deter, then it seems to me it would be
wrong to deny the jury the knowledge of exactly what assets that
company does in fact have, because, Mr. President, if that knowledge is
denied to the jury, the jury could err either way. They may assume,
incorrectly, that a company has a lot of assets and it may turn out the
company does not have a lot of assets. And so when they impose that
award to get the company's attention, to deter future conduct, it may
not be an appropriate amount. It may be too much. It may impose an
unbelievable burden on that company; or, on the other hand, it may not
be enough.
Mr. President, let me make it very clear. The current system is not
all good. It is not perfect. If it were, I do not think we would be
here today. If it were, I would not have heard from so many people that
I have heard from in Ohio about this particular problem.
What we are really doing, Mr. President, and what we should be doing,
I think, ultimately, is a balancing test. That is what I think we have
to do. We have to balance the benefits and costs of the current system
versus the benefits and costs of this bill; or, maybe a better way of
saying it, the benefits and costs of the bill that we finally do, in
fact, pass.
Mr. President, I am concerned that the current system in some cases
deters innovation. And I think one of the strongest--no, I think the
strongest--argument for changing the current system, and the strongest
argument for imposing some caps in regard to punitive damages is that
the current system does deter innovation.
We all know and are aware, Mr. President, of products that have been
kept off the market because of our current law. We have all heard how
no company will make an antinausea drug for pregnant women. I talked
yesterday to a lawyer from a major company who said no one is going to
do it; simply not going to do it. ``We have the technology; we could
put it on the market. But we are not going to take the risk. We are not
going to accept the risk that we have to accept because of lawsuits.''
So if we can give some relief in this area, then products such as the
antinausea drug for pregnant women may be able to come onto the market.
Another example, in 1992, a company stopped testing a vaccine for
preventing the transmission of the AIDS virus from an infected mother
to her unborn child. Think of that. I have no idea, Mr. President,
whether or not that product would have made it onto the market. I have
no idea whether that product would have worked. But heavens, the last
thing in the world we want to do is to stop innovation in the research
in regard to AIDS. What a tragedy it would be if we had the ability to
move forward and to develop this particular vaccine that would keep
that unborn child from being infected. That is another, I believe,
argument for some change.
Also, liability concerns have hindered the development of
microbicides used to prevent the spread of AIDS.
Mr. President, during this debate, we have all heard and will
continue to hear provisions about lawyer's fees. There are going to be
several other amendments also offered. I may support some; some I may
not. I am not
[[Page S5909]] too concerned about the lawyers. Lawyers can generally
take care of themselves.
But, Mr. President, I think what we have to look at when we look at
some of these limitations on fees is what impact it will have on the
market, what impact it will have on poor people's ability to get into
the ball game. And in this case, getting into the ball game means
getting into court.
If some of these well-intentioned, well-sounding amendments do in
fact hinder poorer people from having access to the courthouse door,
then I think the right thing to do would be to oppose them. We need to
preserve access to the courtroom for people who have been harmed. We
should do this to their benefit, not for the benefit of the lawyers.
Last week, Mr. President, I voted for an amendment that would force
lawyers to disclose their fees. I think that is a good idea. I voted
for another amendment that would make sanctions mandatory in cases when
lawyers bring lawsuits that are legally determined to be frivolous by a
trial judge. I think that is a good idea, too.
But I do part company with the proponents of this legislation when
they do things that would limit the legal rights of indigent
plaintiffs. I believe that that is precisely what some of these
amendments would have the effect of doing.
Mr. President, over the last 4 months, I have had more than 55
meetings with concerned Ohioans and others about the faults and merits
of this legislation. I intend, Mr. President, to be working over the
next couple of days and probably weeks to improve the system--to
improve the system, but also to make sure we do not abandon some of the
extremely positive effects of the legal system we have built up over
the last 200 years.
Mr. President, that concludes my statement this evening on this
issue.
Mr. President, at this point, on behalf of the leader, I ask
unanimous consent that the pending amendment be set aside.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 616 to Amendment No. 603
(Purpose: To provide for uniform standards for the awarding of punitive
damages)
Mr. DeWINE. Mr. President, I send an amendment to the desk on behalf
of Senator Dodd.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Ohio [Mr. DeWine], for Mr. Dodd, proposes
an amendment numbered 616 to amendment No. 603.
Mr. DeWINE. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
Strike section 15 of the amendment and insert the
following new section:
SEC. 15. UNIFORM STANDARDS FOR AWARD OF PUNITIVE DAMAGES.
(a) General Rule.--Notwithstanding any other provision of
law, punitive damages may, to the extent permitted by
applicable State law, be awarded against a defendant in an
action that is subject to this Act if the claimant
establishes by clear and convincing evidence that the harm
that is the subject of the action was the result of conduct
that was carried out by the defendant with a conscious,
flagrant indifference to the safety of others.
(b) Bifurcation and Judicial Determination.--
(1) In general.--Notwithstanding any other provision of
law, in an action that is subject to this Act in which
punitive damages are sought, the trier of fact shall
determine, concurrent with all other issues presented,
whether such damages shall be allowed. If such damages are
allowed, a separate proceeding shall be conducted by the
court to determine the amount of such damages to be awarded.
(2) Admissible evidence.--
(A) Inadmissibility of evidence relative only to a claim of
punitive damages in a bifurcated proceeding.--Notwithstanding
any other provision of law, in any proceeding to determine
whether the claimant in an action that is subject to this Act
may be awarded compensatory damages and punitive damages,
evidence of the defendant's financial condition and other
evidence bearing on the amount of punitive damages shall not
be admissible unless the evidence is admissible for a purpose
other than for determining the amount of punitive damages.
(B) Proceeding with respect to punitive damages.--Evidence
that is admissible in a separate proceeding conducted under
paragraph (1) shall include evidence that bears on the
factors listed in paragraph (3).
(3) Factors.--Notwithstanding any other provision of law,
in determining the amount of punitive damages awarded in an
action that is subject to this Act, the court shall consider
the following factors:
(A) The likelihood that serious harm would arise from the
misconduct of the defendant in question.
(B) The degree of the awareness of the defendant in
question of that likelihood.
(C) The profitability of the misconduct to the defendant in
question.
(D) The duration of the misconduct and any concealment of
the conduct by the defendant in question.
(E) The attitude and conduct of the defendant in question
upon the discovery of the misconduct and whether the
misconduct has terminated.
(F) The financial condition of the defendant in question.
(G) The total effect of other punishment imposed or likely
to be imposed upon the defendant in question as a result of
the misconduct, including any awards of punitive or exemplary
damages to persons similarly situated to the claimant and the
severity of criminal penalties to which the defendant in
question has been or is likely to be subjected.
(H) Any other factor that the court determines to be
appropriate.
(4) Reasons for setting award amount.--
(A) In general.--Notwithstanding any other provision of
law, with respect to an award of punitive damages in an
action that is subject to this Act, in findings of fact and
conclusions of law issued by the court, the court shall
clearly state the reasons of the court for setting the amount
of the award. The statements referred to in the preceding
sentence shall demonstrate the consideration of the factors
listed in subparagraphs (A) through (G) of paragraph (3). If
the court considers a factor under subparagraph (H) of
paragraph (3), the court shall state the effect of the
consideration of the factor on setting the amount of the
award.
(B) Review of determination of award amount.--The
determination of the amount of the award shall only be
reviewed by a court as a factual finding and shall not be set
aside by a court unless the court determines that the amount
of the award is clearly erroneous.
Mr. DeWINE. Mr. President, I have only offered this amendment for
Senator Dodd so that it would qualify under the consent agreement, in
that Senator Dodd, at this point, is unable to be on the floor.
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