I am wondering how far we have gone into getting into the practical. The practical, that is the important thing here; the practical understanding of this animal we are dealing with. And it revolves itself around the question of delay.

If every State would set up some kind of a system whereby if liability is already acknowledged and it is a question of the amount of damages, if somehow there could be an informal hearing set up by one or two judges, whatever the case might be, to bring the two parties together, to knock heads together, and get the poor fellow who has been injured some money.

Has anybody thought of it? It strikes me this is part of the thing that needs to be done. I don't know as you can appoint enough judges and build enough courthouses to give everybody a trial in 4 or 5 months, because you have criminal cases, all other cases, equity cases. It isn't a lone negligence case.

But it strikes me in this particular area, the delay is caused because of the crowding of the calendars. In many, many cases wherein the liability is admitted. It strikes me that there ought to be some kind of a judicial process-I am not saying a compulsory solution, but at least if a judge could get the two parties to come in and talk about where they stand on the amount of damages, there could be some reason struck.

We do that every day in our courts. The only trouble is the insurance company likes to wait. Naturally they have the money in the bank, they are getting an investment on their investment, they are getting dividends on their investment and they are not ready to pay unless the time comes when they are made to pay, so they wait until you get to court.

They know you won't get there for 4 or 5 years. So finally when you get to court, you impanel a jury, the judge will say, "Will the two parties come into my office," and say, "how far apart are you?" and many, many times the cases are settled. Why should a plaintiff wait 5 years to have that process invoked.

I don't know why a bar association hasn't come up with a solution to this problem. I think this depends on the bar associations and the courts to reach some kind of a decision to expedite these cases.

Fundamentally, I will tell you very frankly, if we could resolve that question half our job would be done.

Do you agree, Mr. Volpe?

Secretary VOLPE. I do agree that it is a very serious problem, Senator.

The CHAIRMAN. Wait a minute. Only one-fourth of the job would be done if you take his half. Because 55 percent don't receive any benefits at all, whether they are in court or out of court or any place.

Senator PASTORE. Because it takes so long that sometimes they forget it. They figure by the time I get around to getting a nickel, I am going to be dead."

Now the next question is on the question of premiums. Some States, have a low premium and some States have a high premium, and that of course, is all predicated upon statistics. We all know that.

How you are going to bring about uniformity there I don't know. You may strive for it, but I don't think you will ever achieve it. But I think there ought to be intervention on the part of the Federal Government as an initiative to get the job done.

I think the more Governors talk about this, the more the Federal Government is interested in this, I think the quicker we are going to get solution. But I don't think you have to be a Ph. D. to understand this problem. And I don't think you have to be a Ph. D. to solve this problem.

This is a very practical problem that all of us have lived with. And I think the time has come when somebody should stand up and give us a realistic practical solution in view of the clogging of our court calendars.

And that is all I have to say. You don't need 15 volumes, you don't need 20 volumes; we have all lived with this problem. And the question today is that your premium costs are high, because in many, many cases the rate of accidents are high; and in many, many cases, of course, you can't get recovery only because the defendants know and the insurance companies know, you see, that they can stall you for 4 or 5 years.

You say to me, but under $500 we have been successful. You know why. Because the insurance company would rather pay than hire the lawyer. That is why you have gotten settlements there.

Where the settlement is high, they have to get a lawyer, the longer that lawyer procrastinates and files petition after petition and delay after delay, the bigger his fee.

The CHAIRMAN. Well, that is the fault of our whole tort system. Senator PASTORE. That is right. You rectify your tort system and you know what you can do with all of those volumes?

The CHAIRMAN. No; there are too many of them for that. [Laughter.]

Than you have the added problem involved that where there is negligence and contributory negligence, neither side recovers. If they go to court, neither one of them gets anything.

A small amount of contributory negligence can hold it up forever. But I am thinking that these judges have got to start to think about appointing referees for these things.

Senator PASTORE. That is right.

The CHAIRMAN. Instead of going through the long, tedious court procedures, or commissioners to handle these cases.

In New Hampshire they can appoint referees.

Secretary VOLPE. The new chief justice of the Massachusetts Supreme Court, G. Joseph Tauro, I was honored to place him on the bench and make him chief of the superior court, has led the way and done a great deal toward solving some of the problems which Senator Pastore has pointed out.

It is a long, tedious job. Justice Tauro, working through the National Conference of Metropolitan Judges, led the way in developing a good deal of support for reform in this area. But we have an awful long way to go, so far as reform of the judiciary is concerned, in order to bring about the situation that the Senator talks about.

Senator COTTON. This matter also would seem to give rise to issues concerning rights guaranteed under the Constitution. For example, there is the right of trial by jury under the seventh amendment. Conceivably, you may narrow the procedure down by pretrial tactics and arrive at a point where such an issue is joined.

The Senator from Rhode Island is 100 percent right. I was largely a tort trial lawyer in the years of my practice and you couldn't settle a case until a week before the trial. It is a practical fact of life.

Without changing the Constitution, it would not seem possible to deny such a right to a trial by jury. But there are other methods of pretrial hearings before the court to narrow down the issues, and also to refer the case to a referee. My State is largely a rural area and I understand we don't have the problems you have in New York City, but nevertheless, such procedures have proven to be effective. The CHAIRMAN. The Senator from Michigan.

Senator HART. Thank you, Mr. Chairman, Mr. Secretary.

I certainly share the view expressed by the chairman and others that this report, overall, is excellent. It does not surprise me that it would be, since to your right sits Dr. Dick Barber who contributed enormously some years ago to the antitrust subcommittee study of automobile insurance.

Now back in 1967 that other committee on which I sit got into this field, and as a result I have made some suggestions as to how we could cure it. And with that recommendation of your administration, I hope along with it will come comment on three bills I have filed.

Maybe I won't be here next year, and if I am not, I hope nobody who survives will assume that my defeat was because I filed such far-reaching legislative proposals, and I hope that somebody will put them in.

I have a feeling that we may be kidding ourselves that there is any way effectively to cure the court clogging until we go to first party coverage, no-fault. I wonder whether the tort concept makes any sense any longer when you have 90 million privately owned automobiles, you throw in 16 million trucks on the road. You can talk about appointing referees, pre-trial, liability being admitted. When you are in the right, you have to prove it. Philadelphia tried, among others, a referee arbitration, and their court docket is in just as bad shape as anybody elses.

Even if you cured this aspect of it, which I tentatively suggest we can't, that doesn't do anything for the fellow that is denied insurance to begin with, or who is arbitrarily canceled after he gets it.

There is another area where I think we may be teasing ourselves into the notion that we can avoid an ultimate confrontation with the States, this notion that we can guide, persuade, outline, and so on. As my legislative proposals indicate tentatively, I think we have to be much more direct, much more preemptive.

Senator PASTORE. Would the Senator yield for a question?
Senator HART. Yes.

Senator PASTORE. What would it do to the premiums, no fault? Would it increase them?

Senator HART. We would like to think not. And the antitrust subcommittee, I am compelled to admit, can't give you a solid answer on it.

But certainly in the evaluation of these proposals we ought to as well as we can in advance of actual experience answer it, I agree. My own feeling is that overall costs would go down.

I am sympathetic with lawyers' incomes that would go down, too. And, Mr. Chairman, if I may, let me add to the record at this point the three legislative bills I introduced along with my remarks on the floor.

The CHAIRMAN. Without objection, so ordered.

(The three legislative bills follow:)

By Mr. HART:

[From the CONGRESSIONAL RECORD, Sept. 14, 1970]

S. 4339. A bill to regulate interstate commerce by requiring certain insurance as a condition precedent to using the public streets, roads, and highways, and for other purposes; and

S. 4340. A bill to promote the greater availability of motor vehicle insurance in interstate commerce under more efficient and beneficial marketing conditions; to the Committee on Commerce.

S. 4341. A bill to amend the Internal Revenue Code of 1954, and for other purposes; to the Committee on Finance.

(The remarks of Mr. HART when he introduced the bills appear below under the appropriate heading.)

S. 4339, S. 4340, AND S. 4341-INTRODUCTION OF AUTO INUSRANCE REFORM BILLS

Mr. HART. Mr. President, today, I plunge in where perhaps a wiser man would not tread. By introducing the first automobile liability insurance reform bill in Congress, I know I am volunteering as a lightning rod for the criticism that will come from those wedded to the status quo.

Nevertheless, it is clear that the status quo in the auto insurance fault field is not good enough.

Use whatever indicator you like-complaints to governmental agencies, complaints to newspapers, complaints to congressional offices-auto insurance is a major problem to millions of consumers both as policyholders and claimants.

Three years ago, the Senate Antitrust and Monopoly Subcommittee decided to determine both the validity and basis for these complaints. We launched an investigation that took us into the auto insurance fault system's innards.

Touched off by the complaints of cancellation, unavailability, high cost and claims practices, our study meandered through the technicalities of investment income, classifications, loss ratios, reserves, assigned risk plans and the fault-finding process itself.

At the end of it all, only one reasonable solution seemed possible: Reform. The present insurance system evolved from common law and was designed to protect the assets of the few who could afford the very early cars.

Plastered on a society where there are more cars than households-where even the man with few assets to protect may find owning two cars essential-the old system does not meet the needs. Today, as a study done for DOT pointed out, the problem of auto crashes is a public health problem. "Only diseases of advancing age are more significant causes of death than auto crashes." Further, "only heart disease causes the loss of more man-years of productivity in the country each year."

To my view, the social benefit we seek from insurance today is not protection from the other fellow's losses, but compensation for our own.

The present auto liability insurance-fault system is not giving us that.

Of each dollar, consumers pay into the system for liability protection, only 40 cents goes to compensate accident victims. Of this 40 cents, only 13 cents actually ends up compensating for out-of-pocket losses. Seven cents goes for duplicate recovery and 20 cents for "pain and suffering."

This is the system that about 20 million Americans looked to for compensation from July 1965 to July of this year. It is the system that was to compensate 300,000 families in that period for death of a member.

The total economic loss-including insurance company overhead and all future income loss discounted-during that period was more than $61 billion.

53-006-70

The DOT Economic Consequences of Auto Accident Inquiries study gives an idea of how much victims got back of their losses.

Of $5.1 billion of personal and family loss suffered by one-half million serious injury and fatality victims of auto accidents in 1967, the auto insurance fault system provided only $813 million. No-fault auto insurance coverages-medical payments and collision-provided another $248 million.

Thus, there was only 20 percent recovery from auto insurance.

Another study conducted for DOT by the insurance industry itself showed that claimants with a permanent total disability had an average total economic loss of $78,000, yet received an average insurance payment of $12,556-only 16 percent of economic loss.

That uncompensated loss took its toll on the victims. The DOT study-which covered 513,000 victims-showed that 27 percent of those victims-or 136,000— with losses over $5,000 accounted for 85 percent of the total loss.

The families of 37 percent of those 136,000 victims-or 50,300-had to change their way of life. Thirty-two percent-43,500-had to take money from savings or sale of property. Twenty percent-27,200-missed payments. And-9 percentor 12,200-had to move to cheaper quarters.

Mr. President, if we are to make our insurance system one which truly protects auto accident victims and their dependents from economic catastrophe if we are to avoid creating new social burdens-if we are to put fairness into the system-we must have the courage to change the system.

What we have now is not-has not been-and cannot be good enough, or close to it.

Several days ago, as you know, I introduced legislation to cut the cost of auto insurance for protection of property.

Today, I introduce three bills aimed not only at bringing down the premium covering injury to people but at increasing compensation to accident victims. Both objectives are possible through a more fair and efficient allocation of the insurance premium dollar.

There are other benefits in the package-perhaps more psychological than economic.

The most important, to my mind, is the guarantee that any licensed driver— be he young or old, married or divorced, a minister or an oil-rig operator-would get and keep insurance.

During our hearings, insurance companies told us that such personal factors as age, sex, occupation, court and accidents records are valid criteria for identifying individual "bad" drivers or "bad" prospective court witnesses.

A recent study for DOT claims that

"Although such factors could be used to distinguish groups of drivers with significantly different accident rates, they were not reliable in predicting whether or not particular individuals would be involved in accidents."

Statistical tests "applied to random sample of all drivers, could eliminate all but the best drivers but could not identify only the worst."

Unavailability is perhaps the most universal complaint of consumers about auto insurance. In fact, in a study done by the University of Michigan, 14 percent said they either had been cancelled, refused renewal, or knew someone who had. That consumers would complain is understandable.

The insurance market is unusual. Consumers across the Nation-by various types of State laws are virtually required to buy auto liability insurance. Yet, after guaranteeing the industry a market, we have allowed it to refuse to supply the product.

Under the Uniform Motor Vehicle Insurance Act, this no longer would be possible.

The only grounds for refusing or cancelling a policy would be loss of a driver's license or nonpayment of premium.

To me, those are the only valid reasons.

Unfortunately, in the past, insurance has been refused for reasons far more arbitrary and in some cases, almost ludicrous.

For example, several companies flagged various occupations as “undesirable.” Incredibly, these included law enforcement officers, doctors, lawyers, reporters, editors, and others normally considered the stabilizing elements of society. For many companies, thousands of applicants were either "too young or too old" and were refused.

Further, sections of cities have been blacked out as areas in which no residents could buy that company's auto policies.