"We just couldn't afford to write business in New York any longer," says James O. Steinbarger, vice president of Grain Dealers. "Assigned risk was killing us." Regarded as particularly serious is the situation in Massachusetts, where Aetna Life & Casualty Co., Kemper Insurance Group, Allstate Insurance Co. and several other major insurers are considering getting out of the auto business if an across-the-board 15% rate cut goes into effect Jan. 1. The companies don't object to the rate cut for the no-fault collision coverage on the driver's own vehicle. But they're incensed that it's also supposed to apply to other coverage fire, theft and medical. Insurers contend such policies will cost far more than premiums will bring in. A massive pullout by these firms, which write over $200 million in premiums each year, or about 43% of the state-wide volume, would dump an incredible load on the remaining companies-which say they can't afford to write any new insurance in Massachusetts now anyway. "The snowball effect would be inescapable," says a State Farm Mutual Co. official. "It could lead to little else than a total collapse of private auto insurance facilities in the state." Whether the planned rate cut goes into effect hangs on the outcome of a recent lawsuit filed by over 100 companies contesting the proposals. Senator HART. It is impossible to measure the sweep of public concern about any problem, whether it is Vietnam or shoes coming into this country, or anything else. But 3 years ago I started a study of automobile insurance in the Antitrust Committee. Over those 3 years I have received about 2,500 letters dealing with auto insurance. The bulk of that mail complained about cancellation or failure to renew. In the few weeks since the introduction of this specific legislation that I have discussed, the great bulk of the mail complaints about the failure to compensate under existing insurance systems, the failure to compensate is now the dominant theme of this mail. I would hope, Mr. Secretary, that we are in agreement, and I am sure we are, based on your statement, that the automobile accident compensation problem is an interstate problem in the sense that virtually everybody has a car. Secretary VOLPE. No question about it. Senator HART. And in one form or another you are almost compelled to have insurance. And too often, though they are guaranteed their market―guaranteed in the sense that you can't drive without it— they won't underwrite. Your study suggests, and I am sure we are in agreement, that the present system does a poor job of compensating victims. Would you agree that while this first-party coverage does have its problems, that it may offer a potential as a solution. Secretary VOLPE. I certainly can agree with that statement, sir. Senator HART. I have, as you can guess, a slew of questions I would like to ask, but in fairness to everybody, I better not. I am delighted we have come this far. I remember then Representative Cahill of New Jersey coming before this committee at the time this study proposal was before us. He came in prepared to argue against our going forward with the study in the Commerce Committee, insisting it would be a delaying device which would enable the whole subject to evaporate. And he was after me to oppose the study: "Just go forward with the Antitrust Committee study, don't get diverted," he argued. When Senator Magnuson and I explained we had no intention of permitting this study to intrude on the other activity, he accepted. that. He has gone on to bigger and tougher problems in New Jersey, but I hope when and if he has a chance to get a summary of this study, he will agree that it did make sense to have this kind of information and data available. Secretary VOLPE. I would say as a former Governor I wish I had had available to me this body of information which is now available when I was pushing for reform of insurance in Massachusetts. I am sure Governor Cahill and every Governor will be happy. And I hope our gang-I have already told them-very few Governors or Senators have an opportunity to read 18 volumes—what I would like to see is a summary prepared we do have one now, but one in a little more detail-a summary of the total recommendations, so that Governors and others can review them. They should be very helpful in attacking the problem in the years ahead. Certainly, in one way or another, the States are going to be involved. The degree to which they are involved will depend on the kind of legislation the Congress passes, of course. Senator HART. Amen. You remind us, though, of the problem we confront if we begin our approach on the assumption that this is basically a State problem. You are immediately talking about 50 Governors and 50 legislatures with several thousand legislators, not all of whom are wholly divorced from the insurance business in one form or another, attempting to inhale all of that data and then coming up with basically 50 uniform approaches. Secretary VOLPE. It would be impossible, Senator. Senator HART. It would be historic if it occurred. We will get an awful lot of mail in the meantime if it takes too long. Senator PASTORE. Would you like to add anything, Mr. Secretary? Secretary VOLPE. I would like to set the record straight, if I may, with regard to a little colloquy I had with Senator Cotton particularly. Let me just say the Office of Management and Budget, which was referred to as having delayed some proposals, is actually the result of an effort on the part of the President to try to streamline an operation of the old Bureau of the Budget. It is our hope, and I believe it will come about, as a result of the outstanding capacity of George Shultz and some of the colleagues he has brought together there-I believe that various programs of our Department and other agencies will receive a scrutiny there that I think is desirable. I would just hope there wouldn't be inordinate delay, and I don't expect there will be under the new setup. Senator PASTORE. That is a matter of controversy between you and Senator Cotton for various reasons. Mr. Hart and myself are very much unimpressed, for obvious reasons. We will let you Republicans fight that. We will have our day someday. Senator HART. Mr. Chairman, I thought there might be other of our colleagues who had questions, so I didn't want to take the additional few minutes, but with your leave, let me. To underscore the desirability, to use a mild word, of carefully analyzing a first party coverage approach, let me read excerpts from three of these several thousand letters that I have been getting. Here is a letter from a 62-year-old woman in Maryland. She was hit by a car walking across the road on her way home. She points out that group health insurance paid her entire hospital bill plus almost 70 percent of her doctor bill "without question and without the intercession of an attorney." When she tried to recover her remaining expenses from our automobile insurance compensation system, she was told by the driver's insurance company she couldn't recover because she was 5 percent negligent, as opposed to its driver's 95 percent. It seems pretty hard to rationalize that under one system she is paid promptly, with no additional cost, whereas under the other she must hire a lawyer, go to court, with all of the delay that Senator Pastore talked about. If she is successful, the attorney's fee probably will be the traditional one-third of the recovery. The second letter is from a construction worker, 57 years old, Nashville, Tenn. Secretary VOLPE. He must be good. He's in the construction industry. Senator HART. He was not indestructible, however. Secretary VOLPE. He might not have had his hard hat on, Senator. Senator HART. He was hit by an uninsured motorist. He was thrown through the windshield of his car and out of work 7 weeks. He thought he was protected since he had both liability insurance and an uninsured motorist endorsement. He is now in the position of having to prove he was free from negligence before he can recover from his own insurance company under his uninsured coverage. His case will have been in the courts 2 years as of the end of this year. The last typical letter, really, is from the parents of a 19-year-old girl. The girl was killed on February 4, 1968. The other driver was convicted of vehicular homicide, fined $500, had his driver's license taken away. Here is an individual whom the State determined was at fault; he was convicted, fined, he had his license removed. Yet the parents of this dead girl have been unable to recover. There were no witnesses to the accident. They have to go to court, they have gone to court, attempted to prove their daughter was free from negligence and the case is still on appeal. This is the kind of thing which unless promptly resolved will produce the surge of public opinion that that insurance executive cautioned will produce a national licensed insurance program, which none of us wants. Senator PASTORE. In the last case you gave, does the no-fault insurance apply, inasmuch as one of the parties was uninsured? Senator HART. Yes, the construction worker would have had his insurance, and he would be the beneficiary, he is the first party. Senator PASTORE. But if the defendant who had no insurance was injured, through the fault of the first party, then would your no-fault insurance apply. Senator HART. Excuse me, what was your question? Senator PASTORE. In that case, let's assume the party who did not have insurance is the only party that was injured, as against the party who did have the insurance, that would have to be a tort case? Senator HART. Well, if the individual injured had no insurance, an action would lie, I suppose, against the person who injured him for recovery on the traditional grounds. Senator PASTORE. He would have to go through all this thing of going to court, that is what I am getting at. Mr. WALSH. I think under Senator Hart's bill the uninsured pedestrian, for example, would be covered on a no-fault third-party basis by the insurance company. Senator PASTORE. Then why buy insurance, if you can get recovery without buying insurance, why do you have to buy it? I mean I am trying to get this straight in my own mind. Mr. WALSH. Under Senator Hart's bill, it would be mandated that all car owners carry first-party insurance, both for themselvesSenator PASTORE. Oh, I see. Mr. WALSH. For himclf, for members of his household Senator PASTORE. That explains it. You have the combination of the two. Everybody would have to carry insurance. Mr. WALSH. Everybody except a noncar owner or a member of a noncar owning family. But the car which struck such a person or in which he was riding would be insured and that insurance coverage would cover the noncar owning person. Senator PASTORE. But there would have to be insurance involved on both sides, that is what I am getting at, in order to have the no-fault principle. Secreatry VOLPE. That is correct. Senator HART. I want to add this for clarification. I am reminded by the staff that in the isolated case, as we would have to except, that there would be somebody out on the road who did not have insurance, was not covered, and he hit you the example they had in mind is a pedestrian hit by a hit-and-run driver-there would be an assigned claims pool. Senator PASTORE. He is insured? Mr. WALSH. It wouldn't make any difference. Senator HART. It wouldn't make any different unless you ran him down. This is the disappear in the night and hurt case. Then there is a provision for an assigned claims pool. Senator PASTORE. But if a person came out of another State where compulsory insurance was not required and operated his car in Rhode Island and he was involved in an accident with a Rhode Islander who is covered, in that particular case could the person-let's assume he came out of Rhode Island and he was the injured party-what would be his rights under no-fault insurance? Senator HART. That is the reason I suggest that we are going to have to go to a national plan in order that that neighboring State does not turn that fellow loose on you in Rhode Island. Mr. BARBER. There are other ways that could be dealt with. I believe in the proposed New York plan, this particular issue was anticipated, and they thought that it could be dealt with by having insurance companies insure motorists out of other jurisdictions by simply tacking a rider onto their policies giving them "first party” insurance protection when driving in New York State. For example, if you lived in the District of Columbia and occasionally drove in New York, you would be covered pursuant to the proposed New York no-fault first-party plan. So there are ways it might be worked out short of a Federal approach. But certainly the point is important. Senator PASTORE. Don't misunderstand me. You are talking about the party who is insured. I am talking about a party who is not, and who travels to another State and is injured. In that particular case, wouldn't he have to prove his case under the tort procedure? Mr. BARBER. Yes, he certainly would if the law permitted it. He might, of course, if the person who injured him was carrying a universally applicable, no-fault plan, be able to claim against it, if for example, he were a pedestrian. Secretary VOLPE. I might add, in Massachusetts-who answered the question about a person who might be on the road without insurance, even though the law called for it, and that happens sometimes in Massachusetts, you can't get your registration plates until you show the certificate of insurance. Of course, some people might duck both. Senator PASTORE. In Rhode Island, if a judgment is secured against you and you don't pay it, you lose your license. And that is not a satisfactory solution either. It is quite a problem, we all admit that. And you are going to come up here with recommendations. Secretary VOLPE. Yes, sir. Senator PASTORE. It is the fervent hope of Senator Pastore and Senator Hart that we will be here to listen to you when you do. Secretary VOLPE. Should I, as a good Republican, say no comment? Senator HART. We didn't expect one. Senator PASTORE. Thank you very much, Mr. Secretary. LEGISLATIVE HISTORY OF P.L. 90-313 SENATE JOINT RESOLUTION 129 To authorize the Secretary of Transportation to conduct a comprehensive study and investigation of the existing compensation system for motor vehicle accident losses, and for other purposes. Messrs. Magnuson, Bartlett, Brewster, Cannon, Cotton, Dodd, Hart, Hartke, Lausche, Long of Louisiana, Monroney, Moss, Pastore, and Scott (H.J. Res. 958, by Mr. Moss, companion bill.) Staff members: Frederick Lordan and Michael Pertschuk Feb. 14, 1968-Referred to Subcommittee on Consumer. Mar. 12, 13, 14, 1968-Hearings held. (Serial 90--60.) Mar. 28, 1968-Considered in executive session by full committee and ordered reported favorably with amendments. Apr. 8, 1968-Reported by Mr. Magnuson. (S. Rept. 1086). Note: Dec. 14, 1967-H.J. Res. 958 was introduced by Mr. Moss and referred to House Committee on Interstate and Foreign Com merce. Mar. 19, 1968-Referred to Subcommittee on Commerce and Mar. 19, 20, 1968-Hearings held. (House Serial 90-30.) ment. |