[Congressional Record Volume 145, Number 54 (Tuesday, April 20, 1999)]
[Senate]
[Pages S3920-S3925]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself, Mr. Moynihan, Mr. Lieberman, and 
        Mr. McCain):
  S. 837. A bill to enable drivers to choose a more affordable form of 
auto insurance that also provides for more adequate and timely 
compensation for accident victims, and for other purposes; to the 
Committee on Commerce, Science, and Transportation.


                         auto choice reform act

  Mr. McConnell. Mr. President, I rise today to introduce a 
progressive, bipartisan bill to allow hard-working Americans to keep 
more of what they earn.
  Imagine for a moment a tax cut that could save families $193 billion 
over the next five years. Better yet, this tax cut would not add a 
single penny to the deficit. Sound impossible? Not really. It's called 
Auto Choice.
  The Auto Choice Reform Act offers the equivalent of a massive across-
the-board tax cut to every American motorist. Based on a study by the 
RAND Institute for Civil Justice, the Joint Economic Committee 
(``JEC'') in Congress issued a 1998 report estimating that Auto Choice 
could save consumers as much as $35 billion a year--at no cost to the 
government.
  In fact, the 5-year net savings described in the JEC report could 
reach $193 billion. Let me say that again, Mr. President: a potential 
savings of $193 billion--that is $50 million more than five-year tax 
cut savings projected in our budget resolution.
  So what does this mean for the average American?
  It would mean that the average American driver could keep more of 
what he or she earns to the tune of nearly $200 per year, per vehicle. 
And, Mr. President, low-income families would be the greatest 
beneficiaries of this bill. According to the JEC, the typical low-
income household spends more on auto insurance in two years than the 
entire value of their car. Auto choice would change that by allowing 
low-income drivers to save 36 percent on their overall automobile 
premium. For a low-income household, these savings are the equivalent 
of five weeks of groceries or nearly four months of electric bills.
  And, Mr. President, let me say again--Auto Choice would not add one 
penny to the deficit. It wouldn't cost the government a cent.
  I expect that there will be a good deal of discussion over the next 
few months about Auto Choice and the effort to repair the broken-down 
automobile insurance tort system. But, Mr. President, everything you 
will hear about Auto Choice can be summed up in two words: Choice and 
Savings.
  Consumers want, need, and deserve both.
  Very simply, the Auto Choice Reform Act offers consumers the choice 
of opting out of the current pain and suffering litigation lottery. The 
consumers who make this choice will achieve a substantial savings on 
automobile insurance premiums by reducing fraud, pain-and-suffering 
litigation and lawyer fees.
  Mr. President, before you can truly comprehend the benefits of this 
pro-consumer, pro-inner city, pro-tax cut bill, you must understand the 
terrible costs of the current tort liability system.
  The current trial-lawyer insurance system desperately needs an 
overhaul. And nobody knows this better than the American motorist--who 
is now paying on average nearly $800 per year per vehicle for 
automobile insurance. Between 1987 and 1994, average premiums rose 44 
percent--nearly one-and-a-half times the rate of inflation.
  Why are consumers forced to pay so much?
  Because the auto insurance tort system is fundamentally flawed. It is 
clogged and bloated by fraud, wasteful litigation, and abuse.
  Fundamental flaw #1: The first flaw of the current system is rampant 
fraud and abuse. In 1995, the F.B.I. announced a wave of indictments 
stemming from Operation Sudden Impact, the most wide-ranging 
investigation of criminal fraud schemes involving staged car accidents 
and massive fraud in the health care system. The F.B.I uncovered 
criminal enterprises staging bus and car accidents in order to bring 
lawsuits and collect money from innocent people, businesses and 
governments. In fact, F.B.I. Director Louis Freeh has estimated that 
every American household is burdened by an additional $200 in 
unnecessary insurance premiums to cover this enormous amount of fraud.
  In addition to the pervasive criminal fraud that exists, the 
incentives of our

[[Page S3921]]

litigation system encourage injured parties to make excessive medical 
claims to drive up their damage claims in lawsuits. The RAND institute 
for Civil Justice, in a study released in 1995, concluded that 35 to 42 
percent of claimed medical costs in car accident cases are excessive 
and unnecessary. Let me repeat that in simple English: well over one-
third of doctor, hospital, physical therapy and other medical costs 
claimed in car accident cases are for nonexistent injuries or for 
unnecessary treatment.
  The value of this wasteful health care? Four billion dollars 
annually. I don't need to remind anyone of the ongoing local and 
national debate over our health care system. While people have 
strongly-held differences over the causes and solutions to that 
problem, the RAND data make one thing certain--lawsuits, and the 
potential for hitting the jackpot, drive overuse and abuse of the 
health care system. Reducing those costs by $4 billion annually, 
without depriving one person of needed medial care, is clearly in our 
national interest.
  Why would an injured party inflate their medical claims, you might 
ask. It's simple arithmetic. For every $1 of economic loss, a party 
stands to recover up to $3 in pain and suffering awards. In short, the 
more you go to the chiropractor, the more you get from the jury. And, 
the more you get from the jury, the more money your attorney puts in 
his own pocket.
  Which leads us to Fundamental Flaw #2--that is, the excessive amounts 
of consumer dollars that are wasted on lawsuits and trial lawyers. 
Based on data from the Insurance Information Institute and the Joint 
Economic Committee, it is estimated that lawyers rake in nearly two 
times the amount of money that injured parties receive for actual 
economic losses. Surely we would all agree that a system is broken down 
when it pays lawyers more than it pays injured parties for actual 
economic losses.
  Fundamental Flaw #3: Seriously injured people are grossly 
undercompensated under the tort system. A 1991 RAND study reveals that 
people with economic losses $25,000 and $100,000 recover on average 
barely half of their economic losses--and no pain-and-suffering 
damages. People with losses in excess of $100,000 recover only 9 
percent of their economic losses--and no pain-and-suffering damages. 
So, the hard facts demonstrate that seriously-injured victims do not 
receive pain-and-suffering damages today--event though they are paying 
to play in a system that promises pain-and-suffering damages.
  Fundamental Flaw #4: Not only does the current system force you to 
typically hire a lawyer just to recover from a car accident, it also 
forces you to wait for that payment. One study indicates that the 
average time to recover is 16 months, and of course, it takes much 
longer in serious injury cases.
  Auto Choice gives consumers a way out of this system of high 
premiums, rampant fraud, and slow, inequitable compensation. Our bill 
would remove the perverse incentives of lawsuits, while ensuring that 
accident victims recover fully for their economic loss.
  So, what is auto choice? Let me first answer with what it is not. It 
does not abolish lawsuits, and it does not eliminate the concept of 
fault within the legal system. Undoubtedly, there will be more 
equitable compensation of injured parties, and thus less reason to go 
to court--but the right to sue will not be abolished.
  Auto Choice allows drivers to decide how they want to be insured. In 
establishing the choice mechanism, the bill unbundles economic and non-
economic losses and allows the driver to choose whether to be covered 
for non-economic losses (that is, pain and suffering losses).
  In other words, if a driver wants to have the chance to recover pain 
and suffering, he says in the current system. If he wants to opt-out of 
the pain and suffering regime and receive lower premiums with prompt, 
guaranteed compensation for economic losses, then he chooses the 
personal injury protection system.
  This choice, which sounds amazingly simple and imminently reasonable, 
is, believe it or not, currently unavailable anywhere in our country. 
Auto Choice will change that.
  Let me briefly explain the choices that our bill will offer every 
consumer. A consumer will be able to choose one of two insurance 
systems.
  The first choice in the Tort Maintenance System. Drivers who wish to 
stay in their current system would choose this system and be able to 
sue each other for pain and suffering. These drivers would essentially 
buy the same type of insurance that they currently carry--and would 
recover, or fail to recover, in the same way that they do today. The 
only change for these tort drivers would be that, in the event that 
they are hit by a personal protection driver, the tort driver would 
recover both economic and noneconomic damages from his own insurance 
policy. This supplemental first-party policy for tort drivers will be 
called tort maintenance coverage.
  The second choice is the Personal Injury Protection System. Consumers 
choosing this system would be guaranteed prompt recovery of their 
economic losses, up to the levels of their own insurance policy. 
Personal protection drivers would achieve substantially reduced 
premiums because the personal injury protection system would 
dramatically reduce: (1) fraud, (2) pain and suffering lawsuits, and 
(3) attorney fees. These drivers would give up the chance to sue for 
pain and suffering damages in exchange for lower premiums, guaranteed 
compensation of economic losses, and relief from pain and suffering 
lawsuits.
  Under both insurance systems--tort maintenance and personal 
protection--the injured party whose economic losses exceed his own 
coverage will have the chance to sue the other driver for excess 
economic losses. Moreover, tort drivers will retain the chance to sue 
each other for both economic and noneconomic loss. Critics who say the 
right to sue is abolished by this bill are plain wrong.
  The advantages of personal protection coverage are enormous.
  First, personal protection coverage assures that those who suffer 
injury, regardless of whether someone else is responsible, will be paid 
for their economic losses. The driver does not have to leave 
compensation up to the vagaries of how an accident occurs and how much 
coverage the other driver has. A driver whose car goes off a slippery 
road will be able to recover for his economic losses. Such a blameless 
driver could not recover under the tort system because no other person 
was at fault. No matter when and how a driver or a member of his family 
is injured, the driver will have peace of mind knowing that his 
insurance will help protect his family.

  Second, the choice as to how much insurance protection to purchase is 
in the hands of the driver, who is in the best position to know how 
much coverage he and his family need. He can choose as much or as 
little insurance as his circumstances require, from $20,000 to $1 
million of protection.
  Third, people who elect the personal protection option will, in the 
event they are injured, be paid promptly, as their losses accrue.
  Fourth, we will have more rational use of precious health care 
resources. Insuring on a first-party basis helps eliminate the 
incentives for excess medical claiming. When a person chooses to be 
compensated for actual economic loss, the tort system's incentives for 
padding one's claims disappear. If there's no pain-and-suffering 
lottery, then there's no reason to play the game.
  Fifth, Auto Choice offers real benefits for low-income drivers 
because the savings are both dramatic and progressive. Low-income 
drivers will see the biggest savings because they pay a higher 
proportion of their disposal income in insurance costs. A study of low 
income residents of Maricopa County, Arizona, revealed that households 
below 50 percent of the poverty line spent an amazing 31.6 percent of 
disposable income on car insurance.
  For many low-income families the choices are stark: car insurance and 
the ability to get to the job, or medicine, new clothing and extra food 
for the children. Too often these families feel forced to drive without 
any insurance. In fact, some areas in our country have uninsured 
motorist rates exceeding ninety percent. I would hope that this Senate 
would not sit back and allow our litigation system to promote this kind 
of lose-lose scenario for consumers.
  Moreover, Auto Choice offers benefits to all taxpayers, even those 
who don't

[[Page S3922]]

drive. For example, local governments will save taxpayer dollars 
through decreased insurance and litigation costs. This will allow 
governments to use our tax dollars to more directly benefit the 
community. Think of all the additional police and firefighters that 
could be hired with money now spent on lawsuits, Or, schools and 
playgrounds that could be better equipped. New York City spends more on 
liability claims than it spends on libraries, botanical gardens, the 
Bronx Zoo, the Metropolitan Museum of Art and the Department of Youth 
Services, combined. Imagine the improved quality of life in our urban 
areas if governments were free of spending on needless lawsuits.
  The bottom line? We think that consumers should be able to make one 
simple choice: ``Do you want to continue to pay nearly $800 per year 
per vehicle for auto insurance and have the chance to recover pain and 
suffering damages? Or would you rather save roughly $200 per year per 
vehicle, be promptly reimbursed for your economic losses, and forego 
pain and suffering damages?''
  It's really that simple. And, we're not even going to tell them which 
answer is the right one. Because that's not up to us. It's up to the 
consumer. We simply want to give them the choice.
  In closing, I'd like to quote The New York Times, which has summed up 
the benefits, and indeed, the simplicity of our bill: ``[Auto Choice] 
would give families the option of foregoing suits for nonmonetary 
losses in exchange for quick and complete reimbursement for every blow 
to their pocketbook. Everyone would win--except the lawyers.''
  Mr. President, this bill is bipartisan and bicameral. I am proud 
today to again have the support of Senators Moynihan  and Lieberman. We 
first introduced this bill in the 104th Congress, and I want to take a 
minute to say how much I appreciate their ongoing commitment to provide 
meaningful relief for consumers across the country, especially low-
income families. And, we have now added another heavy hitter to our 
list of original cosponsors, Senator John McCain, the chairman of the 
Senate Commerce Committee.
  I also want to thank House Majority Leader Dick Armey and Congressman 
Jim Moran. They joined our team in the last Congress, and I am pleased 
to say that they will again be leading the charge in the House.
  Auto Choice has broad support from across the spectrum. It should be 
obvious by the support and endorsements that Auto Choice is not 
conservative or liberal legislation. It is consumer legislation. To 
show this range of support, I ask unanimous consent that the Record 
include the statements in support of Auto Choice from the Republican 
Mayor of New York City, Rudolph Giuliani; the former Massachusetts 
Governor and Democratic presidential candidate, Michael Dukakis; and 
award-winning consumer advocate Andrew Tobias. I also ask unanimous 
consent that the Record include statements on behalf of Americans for 
Tax Reform, Citizens for a Sound Economy, and the U.S. Chamber of 
Commerce.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                             The City of New York,


                                          Office of the Mayor,

                                     New York, NY, April 13, 1999.
     Hon. Mitch McConnell,
     U.S. Senate, Senate Russell Office Building, Washington, DC.
       Dear Senator McConnell: I am writing to you in support of 
     Auto-Choice insurance reform, which will dramatically reduce 
     automobile insurance premiums for American motorists.
       Drivers across the country are struggling with the burden 
     of unjustly high automobile insurance premiums caused by 
     excessive pain and suffering damages awarded in personal 
     injury actions. Three out of every four dollars awarded in 
     these actions are spent on this subjective component of tort 
     recovery. Also contributing to high premiums are inflated and 
     fraudulent insurance claims. The Federal Bureau of 
     Investigation has estimated that more than $200 of an 
     American family's average annual premiums go to pay for 
     automobile insurance fraud. Because insurance companies have 
     to cover these payments, our premiums are significantly 
     higher than they ought to be.
       New York City has proposed State legislation to remedy some 
     of the ills afflicting our tort recovery system, such as 
     capping pain and suffering awards. However, your assistance 
     is needed nationwide to protect ordinary drivers who suffer 
     from the incentives that invite plaintiff attorneys to sue 
     without restraint, in the hope of obtaining a large, unearned 
     contingency fee from a large pain and suffering recovery. 
     Attorneys receive one third or more of a tort recovery, a sum 
     that often bears no relationship to the amount of time or 
     effort invested by the attorney, while drivers often pay 
     premiums that are not commensurate with the protection 
     actually afforded. That is grossly unfair.
       I support Auto-Choice because it would be a major step 
     forward in tort reform and would provide billions of dollars 
     in relief to taxpayers. Auto-Choice gives motorists the 
     option to choose between two insurance coverage plans. The 
     personal protection plan permits drivers to insure for 
     economic loss only. Under this option, injured drivers 
     recover from their own insurance carrier for economic loss 
     without regard to fault. No lawsuit would be required unless 
     an injured driver seeks recovery of economic loss exceeding 
     his or her own policy's coverage. Under the second plan, 
     traditional tort liability coverage, motorists insure for 
     economic and non-economic damages, and recover both from 
     their own insurance carrier. Under either plan, drivers may 
     sue uninsured or inebriated drivers for economic and non-
     economic damages. The result is a first party recovery 
     framework that separates pain and suffering damages from tort 
     recovery. With litigation incentives eliminated, motorists 
     will pay only for protection actually provided at a price 
     they can better afford. Injured drivers recover medical 
     bills, lost wages and other pecuniary loss without the 
     headache of protracted litigation. For those that think pain 
     and suffering recovery is an important part of insurance 
     coverage, that option is available to them in the bill--at 
     the price they are willing to pay, for the amount of coverage 
     they wish to have.
       Families throughout the country would benefit considerably 
     from savings on automobile insurance premiums generated by 
     this bill. According to the Congressional Joint Economic 
     Committee, within a five year period, Auto-Choice could give 
     motorists a total of over $190 billion in disposable income 
     that otherwise would go to insurance companies. The average 
     annual premium nationwide would be reduced by $184, and in 
     New York, drivers would see a $385 decrease in the average 
     annual insurance premium. That means more disposable income 
     available to spend and more incentive to save. Until now, the 
     insured have had to endure paying what is, for all intents 
     and purposes, an ``automobile insurance tax'' to subsidize 
     non-economic tort awards and inflated insurance claims. With 
     these new reforms, drivers will realize what is essentially a 
     huge tax cut, without any countervailing decrease in 
     government service delivery.
       Without the benefits of Auto-Choice, drivers will continue 
     to pay high premiums. As I have stated previously in 
     testimony submitted in 1997 to the Senate Committee on 
     Commerce, Science and Transportation concerning the 
     introduction of Auto-Choice legislation in the Senate: 
     ``Residents, as taxpayers, lose money that could otherwise be 
     spent on essential services. Residents, as individuals, lose 
     money otherwise available as disposable income. Residents, as 
     consumers, lose money because the cost of goods and services 
     increases as businesses have to pay higher insurance 
     premiums. Finally, and perhaps most disturbingly, residents 
     lose faith in our judicial system as a result of courts 
     clogged with tort litigation only to be out-done by hospital 
     emergency rooms clogged with ambulance-chasing lawyers.''
       In short, Auto-Choice would make an important difference in 
     the lives of New Yorkers and drivers throughout the country. 
     I look forward to opportunities to work with you in support 
     of this important reform.
           Sincerely,
                                              Rudolph W. Giuliani,
     Mayor.
                                  ____

                                          Northeastern University,


                              Department of Political Science,

                                        Boston, MA, April 7, 1999.
       I enthusiastically endorse the ``choice'' auto insurance 
     bill you are jointly sponsoring. Your action is an important 
     act of bipartisan leadership on an issue that significantly 
     affects all Americans.
       The issue you address has been a great concern of mine 
     throughout my political career ever since I sponsored the 
     first no-fault auto insurance bill in the nation.
       Given the horrendous high costs of auto insurance, coupled 
     with its long delays, high overhead, and rank unfairness when 
     it comes to payment, your ``choice'' reform takes the 
     sensible approach of allowing consumers to choose how to 
     insure themselves. In other words, your reform trusts the 
     American people to decide for themselves whether to spend 
     their money on ``pain and suffering'' coverage or food, 
     medicine, life insurance or any other expenditure they deem 
     more valuable for themselves and their families.
       The bill is particularly important to the people who live 
     in American cities where premiums are the highest. It is no 
     surprise that the cost studies done by the Joint Economic 
     Committee indicate that while your reform will make stunning 
     cost savings available to all American consumers, its largest 
     benefit will go to low income drivers living in urban areas.
       The bill will also help resolve the country's problems with 
     runaway health costs. By allowing consumers to remove 
     themselves from a system whose perverse incentives trigger 
     the cost of health care costs, your reform will lower the 
     cost of health care for all Americans while ensuring that 
     health care

[[Page S3923]]

     expenditures are more clearly targeted to health care needs.
       I look forward to assisting you to the fullest degree as 
     you exercise your vitally needed leadership on behalf of 
     America's consumers.
     Michael S. Dukakis.
                                  ____



                                                    Miami, FL,

                                                   March 25, 1999.
       To Whom It May Concern: As an independent journalist and 
     private citizen, I have been studying and working for 
     automobile insurance reform for twenty years. I have written 
     a book on the subject.
       It astounds and saddens me that the system in Michigan--a 
     state that knows something about automobiles--has not been 
     adopted anywhere else in America. Michigan's coverage 
     provides the seriously injured accident victim VASTLY better 
     insurance protection than anywhere else. Yet it costs less 
     than average. It has worked well for 25 years, more than 
     proving itself. It is not perfect, but most consumer 
     advocates agree it is by far the most humane, efficient, and 
     least fraud-ridden system in the country.
       And yet the coalition of labor unions and consumer groups 
     that helped pass the Michigan law has failed to duplicate 
     this success anywhere else. And over time, things in most 
     states have only gotten worse. More uninsured motorists, more 
     fraud, higher premiums, and even more shamefully inadequate 
     compensation to those most seriously injured.
       Given that reality, Senators Lieberman and Moynihan, and 
     Jim Moran in the House, have got it absolutely right in 
     supporting Auto Choice legislation. It is not perfect either. 
     But it allows the man or woman who earns $9 an hour, let 
     alone less, to opt out of a system that forces him or her, in 
     effect, to shoulder the cost of the $125-an-house insurance 
     company lawyer who will fight his claim . . . shoulder also, 
     the enormous cost of padded and fraudulent claims . . . and 
     then, if he wins, typically fork over 33% or 40% of the 
     settlement, plus expenses, to his own attorney.
       These attorneys are good people. But as virtually every 
     disinterested observer from Richard Nixon in 1934 to 
     Consumers Union in 1962 and periodically thereafter has said, 
     the current lawsuit system of auto insurance makes no sense. 
     It makes no sense that more auto-injury premium dollars in 
     many states go to lawyers than to doctors, hospitals, 
     chiropractors and rehabilitation specialists combined. Yet 
     that is the case. Give consumers the choice to opt out of 
     this system. The only difference from 1934 and 1962 and 1973 
     (when Michigan enacted its good system) is . . . it's gotten 
     worse.
           Sincerely,
     Andrew Tobias.
                                  ____



                                     Americans For Tax Reform,

                                   Washington, DC, March 29, 1999.
     Hon. Mitch McConnell,
     Russell Senate
     Washington, DC.
       Dear Senator McConnell: Americans for Tax Reform 
     wholeheartedly endorses the ``Auto Choice Reform Act'' 
     legislation to provide consumer choice in automobile 
     insurance.
       Automobile insurance rates have skyrocketed during the last 
     ten years. Between 1987 and 1994, premiums rose more than 40 
     percent--one-and-a-half time the rate of inflation. In 1995, 
     the average policy cost more than $750. Clearly, these costs 
     must be reduced, and we believe your legislation will achieve 
     this goal.
       Auto choice provides savings of about 45 percent on average 
     for personal injury premiums for drivers that choose the PIP 
     option. Especially, auto choice aids low-income drivers, who 
     would save about 36 percent on their overall premiums. Not 
     only does this plan give savings, but it will enable more 
     low-income workers to get better paying jobs.
       Most importantly, your bill gives consumers something they 
     really want--a chance to choose the kind of auto insurance 
     that fits their individual needs.
       Auto choice is an idea whose time has come. ATR supports 
     your efforts to make it a reality.
           Sincerely,
                                               Grover G. Norquist,
     President.
                                  ____



                                 Citizens for a Sound Economy,

                                   Washington, DC, April 13, 1999.
     Senator Mitch McConnell,
     Russell Senate Office Building,
     Washington, DC.
       Dear Senator McConnell: On behalf of Citizens for a Sound 
     Economy and its 250,000 members, I wish to convey our strong 
     support for the Auto Choice Reform Act of 1999.
       Most Americans rightly believe that they pay too much for 
     auto insurance. And year after year, state legislatures and 
     insurance departments respond with price controls and 
     underwriting restrictions, which only make matters worse. The 
     Auto Choice Reform Act of 1999 is based on the realization 
     that to reduce the cost of auto insurance, two elements of 
     the accident compensation system must be addressed: Losses 
     resulting from bodily injury, including damages for ``pain 
     and suffering''; and the tort-based system for redressing 
     those losses.
       Under the tort-based compensation system that operates in 
     most states, accident victims may not file bodily injury 
     claims with their own insurance company. Instead, they must 
     try to collect from the other driver's insurer--which they 
     can do only if they succeed in establishing that the other 
     driver was legally at fault for their injuries. Compensating 
     accident victims in this way is costly, inefficient, and time 
     consuming. Trial lawyers, who constitute one of the most 
     powerful special interests in America, are the primary 
     beneficiaries of the current system.
       Those eligible for compensation under the current tort-
     based system are subject to a perverse pattern of recovery. 
     People with minor injuries are often vastly overcompensated, 
     while in many cases the seriously injured cannot recover 
     nearly enough to cover their economic losses.
       ``Contingency'' fee arrangements, whereby insureds agree to 
     pay their attorneys a percentage of whatever sum they receive 
     as compensation for their losses, siphon away about a third 
     of an injured person's recovery award. Meanwhile, insurance 
     costs are driven up because of the tort system's promise to 
     compensate victims for their ``noneconomic damages.'' A 
     catchall term that generally refers to ``pain and 
     suffering,'' noneconomic damages are wildly subjective and 
     impossible to quantify. Usually the successful claimant 
     simply collects some multiple of his economic losses--
     typically three times--as compensation for pain and 
     suffering.
       This system creates a powerful incentive to inflate 
     economic damages, typically by claiming unverifiable soft-
     tissue injuries. In Michigan, where third-party liability for 
     pain and suffering has been virtually eliminated thanks to 
     the state's strong no-fault law, auto accident victims suffer 
     about seven soft-tissue injuries (sprains, strains, pains and 
     whiplash) for every 10 ``hard'' injuries (such as broken 
     bones). By contrast, in California, where auto accident 
     victims are compensated through the tort system, injured 
     motorists claim about 25 soft-tissue injuries for every 10 
     verifiable hard injuries. The ratio of soft-tissue injuries 
     to hard-tissue injuries is similar in other tort states and 
     states with weak no-fault laws. Obviously, these disparities 
     raise troubling questions about the legitimacy of many soft-
     tissue injury claims--troubling, because ultimately the cost 
     of inflated medical damages is passed on to all drivers in 
     the form of higher premiums.
       If the Auto Choice Reform Act becomes law, drivers will be 
     able to choose either pure no-fault coverage, or a package 
     that would allow them to collect pain and suffering damages 
     from their own insurer, or from the insurers of other drivers 
     with similar premium coverage. ``Pain and suffering'' would 
     thus become an insurable risk, limiting legal liability to 
     cases involving egregious behavior, or where both parties 
     have agreed to pay, in the form of higher premiums, for the 
     privilege of engaging the legal system. Meanwhile, truly 
     negligent drivers--those who cause accidents intentionally, 
     or while impaired by drugs or alcohol--would continue to be 
     liable for their behavior, in addition to being subject to 
     criminal sanctions.
       By curtailing litigation and attorney involvement in the 
     claim-settlement process, the Auto Choice Reform Act would 
     have a dramatic impact on auto insurance rates. The RAND 
     Institute for Civil Justice estimates that drivers choosing 
     the no-fault option would reduce their premiums by 21 percent 
     on average.
       The Auto Choice Reform Act would yield even greater 
     benefits to low-income motorists, who are increasingly 
     dependent upon personal auto transportation at a time when 
     welfare rolls are being cut and jobs are being transferred 
     from the central city to the suburbs. Happily, the 
     Congressional Joint Economic Committee has determined that 
     low-income drivers could cut their premiums by as much as 48 
     percent if the Auto Choice Reform Act becomes law.
       In sum, by allowing policyholders to opt out of the tort 
     system, the Auto Choice Insurance Reform Act would rely on 
     market forces--rather than price controls and hidden cross-
     subsidies--to drive down auto insurance premiums.
       Serious efforts to reform auto insurance at the state level 
     have been stymied repeatedly by the trial lawyers' lobby. 
     Inflated medical bills, attorney fees, court costs, and 
     exorbitant pain-and-suffering awards continue to impose 
     tremendous costs on the automobile insurance system--costs 
     that insurers must pass on to consumers in the form of 
     escalating premiums. Because they profit handsomely from the 
     inefficiencies wrought by this system, trial lawyers and 
     their political allies will doubtless make every effort to 
     defeat the Auto Choice Reform Act of 1999. Their desire to 
     maintain the status quo must not be permitted to prevail over 
     the interests of America's motorists.
           Sincerely yours,

                                   Robert R. Detlefsen, Ph.D.,

                                               Director, Insurance
     Reform Project.
                                  ____

                                              Chamber of Commerce,


                              of the United States of America,

                                   Washington, DC, April 15, 1999.
     Hon. Mitch McConnell,
     U.S. Senate,
     Washington, DC.
       Dear Senator McConnell: I am writing on behalf of the U.S. 
     Chamber of Commerce, the world's largest business federation, 
     representing more than three million businesses and 
     organizations of every size, sector, and region, to commend 
     you for your continued leadership and sponsorship of the Auto 
     Choice Reform Act.

[[Page S3924]]

       This legislation would provide motorists and businesses 
     with a very valuable option. They could cut their automobile 
     insurance premiums by over 20 percent by voluntarily opting 
     out of coverage for pain and suffering injuries in auto 
     accidents. Those choosing this option would continue to 
     receive full compensation for medical bills, lost wages and 
     other economic losses, and would receive payment quickly--
     within 30 days. Those who wish to retain coverage similar to 
     that presently available could do simply by paying higher 
     rates.
       As the largest business federation, the U.S. Chamber of 
     Commerce supports this legislation and a similar bill in the 
     House of Representatives because they provide a more 
     affordable and efficient insurance option for businesses and 
     motorists. Last year, the Joint Economic Committee (JEC) 
     estimated that enactment of Auto Choice legislation could 
     allow consumers to receive an annual auto insurance premium 
     reduction of over $27 billion. This amounts to an average 
     annual savings of $184 per car. Of particular importance to 
     businesses, the JEC also estimated that commercial vehicle 
     owners could see their auto insurance premiums decline by 
     over 27 percent for a total business savings of $8 billion 
     per year. This is equivalent to a huge tax cut for all 
     Americans.
       The U.S. Chamber pledges to continue to support this 
     important legislation. Through our grassroots network and 
     media outreach, we will inform the business community and 
     public about the key benefits of this proposal. We thank and 
     commend you for your leadership on the Auto Choice Reform Act 
     and look forward to working with you for its successful 
     passage.
           Sincerely,
                                                  B. Bruce Josten.

  Mr. MOYNIHAN. Mr. President, I am pleased to be an original cosponsor 
of the Auto Choice Reform Act of 1999, a bill submitted by my 
distinguished colleague, Senator McConnell. This legislation is 
designed to create a new option in auto insurance for consumers who 
would prefer a system that guarantees quick and complete compensation. 
This alternative system would change most insurance coverage to a 
first-party system from a third-party system and it would separate 
economic and noneconomic compensation by unbundling the premium. 
Therefore, drivers would be allowed to insure themselves for only 
economic loss or for both economic and noneconomic loss.
  I simply would remark that this issue has been with us for 30-odd 
years and I wish to provide some of the background and a particular 
perspective.
  The automobile probably has generated more externalities, as 
economists and authors Alan K. Campbell and Jesse Burkhead remarked, 
than any other device or incident in human history. And one of them is 
the issue of insurance, litigation, and compensation in the aftermath 
of what are called ``accidents'' but are nothing of the kind and are 
the source of so much misunderstanding.
  When a certain number of ``accidents'' occur (I think that in 1894, 
if memory serves, there were two automobiles in St. Louis, MO, and they 
managed to collide--at least, it has been thought thus ever since), 
they become statistically predictable collisions--foreseeable events--
in a complex transportation system such as the one we have built.
  This began to be a subject of epidemiology in the 1940's, and by the 
1950's, we had the hang of it. We knew what we were dealing with and 
how to approach it.
  The first thing that we did--I think it fair to say it was done in 
New York under the Harriman administration, of which I was a member--
was to introduce the concept of passenger safety into highway and 
vehicle design. Safety initiatives were undertaken, first at the State 
level. The, in 1966, Congress passed two bills, the National Traffic 
and Motor Vehicle Safety Act and the Highway Safety Act, to establish 
pervasive Federal regulation. At the time, the last thing in the world 
an automobile manufacturer would suggest was that its product was a car 
in which one could safely have an accident! Perhaps other motorists, 
driving other companies cars, had accidents. It took quite a bit of 
learning--social learning--but eventually it happened: safety features 
such as padded steering wheels and dashboards, seat belts, and airbags 
became integral design considerations. Now it is routine; we take such 
features for granted. It wasn't always thus. Social learning.
  And then the issue of insurance and litigation and so forth arose. In 
1967, if I could say, which would be 32 years ago, I wrote an article 
for The New York Time Magazine, which simply said, ``Next, a new auto 
insurance policy.'' By ``next,'' I meant a natural evolution, building 
on the epidemiological knowledge we had developed regarding the 
incidence of collisons and the trauma they caused to drivers, 
passengers, and pedestrians. And I had a good line here, I think: 
``Automobile accident litigation has become a twentieth-century 
equivalent of Dickens's Court of Chancery, eating up the pittance of 
widows of orphans, a vale from which few return with their respect for 
justice undiminished.''

  The are several fundamental problems with the current system of auto 
insurance, as I explained back then. First, determining fault, 
necessary in a tort system, is no easy task in most instances. 
Typically, there are few witnesses. And the witnesses certainly aren't 
``expert.'' The collisions are too fast, too disorienting. And 
adjudicating a case typical occurs long after the collision. Memories 
fade.
  More important, as I remarked at the time, is that ``no one involved 
(in the insurance system) has any incentive to moderation or 
reasonableness. The victim has every reason to exaggerate his losses. 
It is some other person's insurance company that must pay. The company 
has every reason to resist. It is somebody else's customer who is 
making the claim.'' This leads to excessive litigation, costly legal 
fees, and inefficient, inequitable compensation.
  A 1992 survey of the nation's most populous counties by the U.S. 
Department of Justice found that tort cases make up about one-half of 
all civil cases filed in state courts. Auto collision-related lawsuits 
account for 60 percent of these tort cases--more than all other types 
of tort lawsuits combined. Such lawsuits are time consuming: 31 percent 
of automobile tort cases take over one year to process. They are 
clogging our courts, displacing other types of civil litigation far 
more important to society.
  And for all the time, money, and effort these lawsuits consume, they 
do not compensate victims adequately. On average, victims with losses 
between $25,000 and $100,000 recover just over half (56 percent) of 
their losses, and those persons with losses over $100,000 receive just 
nine cents on the dollar in compensation.
  ``Auto Choice,'' as our legislation is known, will curtail excessive 
litigation by changing insurance coverage to a first-party system--at 
the driver's option. Individuals will insure themselves against 
economic damages regardless of fault. They can, if they wish, insure 
for non-economic losses, too. They simply pay a higher premium. In the 
event they sustain damages in a collision, under Auto Choice, they 
bypass litigation altogether, and they receive just and adequate 
compensation in a timely fashion.
  I earnestly hope that Congress will enact this important legislation 
this year. It will benefit all American motorists. Its savings are 
bigger than any tax cut Congress is likely to enact, and they won't 
affect our ability to balance the budget. But even more important, I 
think, is the fact that ``auto choice'' will take some of the strain 
off our overburdened judiciary. I don't know if we can calculate the 
value of such a benefit.
  Mr. LIEBERMAN. Mr. President, I rise in strong support of the bill we 
are introducing today: the Auto Choice Reform Act of 1999. If enacted, 
this bill would save American consumers tens of billions of dollars, 
while at the same time producing an auto insurance system that operates 
more efficiently and promises drivers better and quicker compensation.
  America's drivers are plagued today by an auto accident insurance and 
compensation system that is too expensive and that does not work. We 
currently pay an average of approximately $775 annually for our auto 
insurance per car. This is an extraordinarily large sum, and one that 
is particularly difficult for people of modest means--and almost 
impossible for poor people--to afford. A study of Maricopa County, AZ, 
drives this point home. That study found that families living below 50 
percent of the poverty line spend nearly one-third of their household 
income on premiums when they purchase auto insurance.
  Perhaps those costs would be worth it if they meant that people 
injured in

[[Page S3925]]

car accidents were fully compensated for their injuries. But under the 
current tort system, that often is not the case, particularly for 
people who are seriously injured. Because of the need to prove fault 
and the ability to receive compensation only through someone else's 
insurance policy, some injured drivers--like those in one car accidents 
or those who are found to have been at fault themselves--are left 
without any compensation at all. Others must endure years of litigation 
before receiving compensation for their injuries. In the end, many 
people who suffer minimal injuries in auto accidents end up 
overcompensated, while victims of serious injuries often fail to 
receive full restitution. Indeed, the extent to which seriously injured 
drivers are undercompensated in the current tort system is staggering: 
victims with economic losses--things like lost wages and medical 
bills--between $25,000 and $100,000 recover only 56 percent of their 
losses on average, while those with over $100,000 in economic losses 
get only about 9 percent back on average. Recite those numbers to 
anyone who tells you the current system works just fine the way it is.
  The current system most hurts the very people who can afford it the 
least--the nation's poor and drivers who live in the nation's inner 
cities. The $775 average premium I mentioned is already far too much 
for people of modest means to afford. But for many residents of the 
inner cities a $775 premium is just a dream. As a report issued by 
Congress' Joint Economic Committee last year starkly detailed, inner 
city residents pay what can only be called a ``tort tax''--insurance 
rates that are often double those of their suburban neighbors. For 
example, a married man with no accidents or traffic violations living 
in Philadelphia pays $1,800 for an insurance policy that would cost him 
less than half that if he moved just over the line, out of Philadelphia 
County. The average annual premium for a 38-year old woman with a clean 
driving record living in central Los Angeles approaches $3,500. The 
statistic that I think best drives home the disproportionate amount 
poor people spend on auto insurance is this one: the typical low-income 
household spends more on auto insurance over two years than the entire 
value of their car.

  The results of these high costs shouldn't surprise us. They lead many 
inner-city drivers to choose to drive uninsured, which is to say our 
auto insurance system makes outlaws of them and puts the rest of us in 
jeopardy, because people injured by an uninsured driver may have no 
place to go for compensation. Other inner-city residents simply decide 
not to own cars, something that in itself should trouble us. As the 
JEC's Report details, the lack of car ownership, combined with the 
dearth of jobs in the inner-cities, severely limits the ability of many 
city residents to find employment and lift themselves out of poverty.
  The Auto Choice bill would go a long way towards solving all of these 
problems. By simply giving consumers a choice to opt out of the tort 
system, Auto Choice would bring all drivers who want it lower premiums. 
Auto Choice would save drivers nationally an average of 23 percent, or 
$184, annually--a total of over $35 billion. Connecticut drivers would 
see an average savings of $217 annually. Low-income drivers would see 
even more dramatic savings--an average of 36 percent nationally or 33 
percent in Connecticut.
  Here's how our plan would work: All drivers would be required to 
purchase a certain minimum level of insurance, but they would get to 
choose the type of coverage they want. Those drivers who value 
immediate compensation for their injuries and lower premiums would be 
able to purchase what we call ``personal injury protection insurance.'' 
If the driver with that type of coverage is injured in an accident, he 
or she would get immediate compensation for economic losses up to the 
limits of his or her policy, without regard to who was at fault in the 
accident.
  If their economic losses exceeded those policy limits, the injured 
party could sue the other driver for the extra economic loss on a fault 
basis; The only thing the plaintiff could not do is sue the other 
driver for noneconomic losses, the so-called pain and suffering 
damages.
  Those drivers who did not want to give up the ability to collect pain 
and suffering damages could choose a different option, called tort 
maintenance coverage. Drivers with that type of policy would be able to 
cover themselves for whatever level of economic and noneconomic damages 
they want, and they would then be able to collect those damages, also 
from their own insurance company, after proving fault.
  As I mentioned earlier, the savings from this new Choice system would 
be dramatic--again, an average of $184 annually nationally, up to $35 
billion each and every year under our proposal.
  Our Auto Choice plan ensures that most injured people would be 
compensated immediately and that we all can purchase auto insurance at 
a reasonable rate. Mr. President, this bill would be a boon to the 
American driver and to the American economy. I look forward to working 
with my colleagues to see it enacted into law.
  Mr. McCain. Mr. President, I rise to join my colleagues in 
introducing legislation to provide consumers with a true choice when 
they purchase auto insurance. Not simply a choice between to insurance 
companies, but a choice between two different systems of insurance.
  The current tort based liability system is expensive and inefficient. 
It pays more money to lawyers than for victims legitimate medical bills 
and lost wages. A study conducted in my home state of Arizona found 
that a low-income family spends as much as 31 percent of their 
disposable income on car insurance. As a result, families put off basic 
necessities such as rent, medical care and sometimes groceries. The 
current system needs to be changed.
  The system proposed in our bill would allow consumers a more 
affordable alternative designed to provide adequate and timely 
compensation for accident victims and less need for layers. Under the 
new system when an accident occurs, the consumer's insurance company 
would compensate them for their economic losses, such as repair costs, 
medical bills and lost wages. In exchange, the consumer forgoes the 
right to sue for non-economic losses such as pain and suffering.
  Consumers choosing to remain in the current system can bring suit as 
they do now. These consumers would purchase additional coverage to 
cover their non-economic damages in the event they have an accident 
with someone in the new system.
  The purpose of this legislation is to allow consumers to choose the 
type of insurance that meets their needs. It also provides state 
legislatures a choice. This legislation allows states to ``opt out'' 
should they disagree with this proposal. States can ``opt out'' in two 
ways. First, the legislature can enact legislation declaring they will 
not participate in the new system. Secondly, the state insurance 
commissioner can find that the measure will not reduce bodily injury 
premiums by 30 percent. This opt out provision is reasonable and will 
give states a true choice.
  Again, I am pleased to join my colleagues in introducing this 
measure. I look forward to moving it through the legislative process.
                                 ______