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Congressional Record and examine the statements made in support of the resolution calling for the Department of Transportation investigation.

Nevertheless, we have completed our studies, have made our proposals and place our integrity behind them. We will lend our support to the implementation of these proposals and any others which are found similarly sound. We will also re-examine our recommendations in the light of future developments and will add, modify or change proposals if events indicate that the interest of the public merits such action.

We will never in right conscience be able to approve of no-fault schemes wihich deny innocence victims the right to just compensation for loss caused by another's carelessness and recklessness. No-fault plans are offered as cure-alls for all of the problems, real or imaginary, which are claimed to beset us—just as the medicine show peddlers of the past offered a magic elixir claimed to cure everything from baldness to fallen arches. The "medicine man's" standard pitch was to caution the people not to listen to what their family doctor had to say about the product. He would be against it because of the fear of being put out of business by the wonder tonic.

We believe that no-fault is something that the public does not need and, in possession of all the evidence, would not want. We do not mean to impugn the motives of those who propose such plans. We are convinced that they truly believe in their merit. Although they have spent much time and effort in developing these proposals, pride of authorship sometimes tends to dull objectivity. On the other hand, lawyers did not create the principles of individual responsibility and accountability-they arose from a time more ancient and a power greater than mortal man. However, part of the stewardship for maintaining these proposals has been intrusted to lawyers and we as members of the legal profession intend to fulfill that trust by protecting, perfecting and maintaining the principles of individual responsibility and accountability.

JANUARY 8, 1970. Mr. MARK MARTIN, Chairman of the Board, Defense Research Institute, Milwaukee, Wis.

DEAR MR. MARTIN : Thank you for submitting your prepared statement and attachments for the hearing record. In view of the fact that the subcommittee was unable to ask you questions, we would be grateful if you would furnish the following information for the hearing record.

1. Would you please explain why auto insurance based on a tort liability system should be the primary source of indemnity for auto accident injuries?

2. Do you consider the auto liability insurance premium to be in the nature of a tax on motoring?

3. Would you favor the elimination of state financial responsibility and compulsory insurance laws if a universal compulsory insurance law was adopted?

4. What effort, if any, is the Institute making to have the insurance industry and the states provide higher policy limits under financial responsibility and compulsory insurance laws?

5. Witnesses have suggested during our hearings that at least some of the insuring public's dissatisfaction with liability insurance and its more favorable attitude toward physical damage coverages results more from the fact that although the car owner is virtually compelled to buy insurance to protect the potential claimant in case of an accident for which the car owner is legally responsible, yet in the event of an accident involving fault upon the part of the other person, the car owner has no contractual rights against the other person's insurer unless, or until, such car owner obtains a judgment against the other person.

Do you believe that this is a source of dissatisfaction and, if so, would it be eliminated if the damaged car owner was given a direct right of action against the liability insurer, either by statute, or by voluntary elimination of insurance companies of the "no action" clause in the policy?

Does the Institute favor affording the injured person a direct right of action against the insurance company?

6. Do you believe that if auto accident prevention was considered apart from the auto reparation process, society could concentrate its efforts and resources more efficiently and effectively on each of these issues?

7. According to Professor Robert Keetos of Harvard Law School, the following portions of each premium dollar collected for private passenger auto bodily injury liability insurance is paid net to accident victms :

(a) 14.5¢ for out-of-pocket losses not already compensated from other sources, (b) 8¢ for losses also compensated from other sources, and (C) 21.5€ paid in excess of actual loss. We would welcome any comments you would care to make. (The enclosed hearing record at pp. 38-42 contains his complete analysis.)

Has the Institute made any studies, or does it have any information, which would indicate whether or not policyholders are aware of a Koeton-type analysis showing (a) disparity between auto bodily injury insurance benefits and costs, (b) overlapping of these benefits and (c) payments in excess of actual loss?

How would your "Responsible Reform" program specifically correct these deficiencies in the present system?

8. Do you have any studies or information showing that the consumer is aware auto liability insurance is something he is expected or compelled to buy for the benefit of the other party who may become involved in an accident with him?

9. Do you believe that any portion of the financial cost of auto accidents should be shifted from injured parties to auto designers and manufacturers or the public-at-large?

10. Do you believe that guest statutes and inter-spousal and intrafamilial immunities should be eliminated ?

11. Assume the following hypothetical cost:

Driver A and Driver B collide. Driver A is 60% negligent and suffers 90% of the total loss. Driver B is 40% negligent and suffers 10% of the total loss.

(a) Under the Wisconsin comparative negligence rule, which you say on page 30 you advocate, wouldn't Driver A bear 96% of the total loss, and Driver B 4% of the total loss?

If so, doesn't this mean that the Wisconsin comparative negilgence rule doesn't automatically follow distribution of fault and actually ignores chance distribution of loss?

(b) Under the Federal Employee Liability Act, the Jones Act, and the Mississippi comparative negligence rule, wouldn't Driver A bear 60% of the total loss, and Driver B 40%?

12. Under the present auto reparation system, what would you recommend to reduce the cost of repairing motor vehicles ?

How does the present auto reparation system take into consideration inflation and rising accident tolls?

13. You propose that "the amount of any contingent fee should be strictly regulated by appropriate court rule or legislation to eliminate abuse of and misunderstanding about the contingent fee system”.

The subcommittee has heard that some defense attorneys arrive at an informal settlement, but delay formal settlement until after a jury is picked in order to obtain additional face.

If contingent fees are to be regulated, do you believe that there should be a dollar limit on defense costs in order to better balance the position of plaintiffs and defendants?

14. In table 1 enclosed, you will note that defense attorneys have received $5 billion in fees over the period, 1959–1968.

Assuming that this figure is approximately correct, what would you suggest to reduce this expense, which is a part of the public's auto liability insurance premiums?

15. In the event that medicare is extended to cover the entire population, or a universal health insurance plan is adopted, should such programs absorb the medical care aspects of auto liability insurance?

What should be the role of private insurance carriers and government in carrying out any such proposed reform programs?

16. If a guaranteed annual income program were adopted in this country, would there be any need for an auto insurance system to compensate for lost wages for those covered under such a program?

17. Assume a situation in which an accident victim is injured as a result of the sole and clear fault of the other party, who is either uninsured or whose auto insurance is invalidated.

Should this accident victim be deprived of compensation because the wrongdoer doesn't have effective auto insurance?

18. Should the insurance industry eliminate provisions rendering medical pay. ments coverage subrogable in those jurisdictions permitting subrogation with respect to that coverage ?

19. On page 13 you say that "a considerable amount of litigation presently arises under the medical payments provision of the standard auto insurance policy".

What are the principal factual situations that give rise to such litigation ?

Do you believe that there should be mandatory statutory standards for the medical payments provision in order to eliminate the "considerable amount of litigation"?

20. It is our understanding that under many medical payments provisions, medical expenses must be incurred within one year of the accident.

Does this particular condition result in the accident victim not being fully compensated ?

21. Do you believe that there should be a return of medical payments premium to the individual insured whose medical payments benefits are reduced or eliminated by reason of such other benefits as provided by the Veterans' Administration ?

22. If an employee is grossly negligent while driving his employer's commercial vehicle within the complete scope and course of his employment and causes an accident in which he is injured, do you believe that this injured employee should be denied workmen's compensation benefits?

23. Would you consider it necessary to retain fault in order to recover for the items of general damages set forth on page 31 if insurance companies were completely free to innovate coverages for such items?

24. Which aspects of your Responsible Reform program would be advantageous mainly to the plaintiff in settling and litigating auto accident personal injury claims?

25. On pages 3 and 4 you present data in percentages.

Would you please furnish the actual numbers from which these percentages are derived.

26. On page 7 you state that “... delay was limited to a small number of metropolitan jurisdictions".

Would you please furnish the names of these “metropolitan jurisdictions". 27. What percentage and number of claims are settled just prior to trial?

28. Also on page 7 you mention that "other studies have shown that auto accident cases take up only a small percentage of the judicial time".

Would you please furnish these "other studies” or references to them.

29. You say on page 5, “most Americans receive payments for the economic loss normally associated with automobile accidents . . . through first party insurance and benefit programs which are not connected with the operation of the fault system. For these reasons promptness of the payment of duplicate benefits from any auto reparation system is relatively unimportant".

In light of this statement, do you believe that the present third party auto liability insurance system is superfluous and should be eliminated?

30. Since you advocate retention of the fault system to compensate auto accident victims, do you likewise favor compulsory liability insurance with the determination of the insurance companies' contractual obligation upon the occurrence of the accident so as not to deprive the victim of compensation by reason of policy defenses?

Do you believe that auto liability insurance policies should be similar in nature to certified policies under present financial responsibility laws which prohibit the assertion of policy defenses upon the occurrence of an accident?

31. Mr. Lawton characterized one of the assumptions underlying the “no-fault concept” regarding auto accidents as being "little more than the result of random distributions of specific events in a complex social process”. He then indicated various factors that contribute to accidents-youth, fatigue, alcohol, drugs and other psychological deficiencies.

Do you believe that the existence of some identifiable factors disproves that chance plays a major role in auto accidents?

32. The tests relied on by Mr. Lawton to show individual adherence to group norms all involve behavior in small groups over short time periods. Would you please explain the basis for extrapolating these studies to long range, societywide behavior?

33. Would you explain the following statement in your Appendix E p. 6: "Parameter B-An individual's behavior is influenced by group pressure." To what extent is this postulate true?

34. Mr. Lawton states that the phenomenon of "cognitive dissonance” renders ineffective as deterrents the fear of personal injury and of criminal sanctions. Couldn't "cognitive dissonance” similarly render ineffective the fear of tort liability?

35. You outline seven steps which you allege "are the means by which the community's abhorrence of the causing of an accident is focused upon the negligent driver"? Do you believe that the public views with "abhorrence" a person who causes an accident through conduct less than grossly negligent, wanton and reckless?

36. Would you explain more fully the conclusion that "criminal law is not adequate in itself to curtail highway accidents".

Please consider the effect of traffic fines and license suspensions as well as "serious criminal penalties”.

37. What effect, if any, do you believe a system of tort fines would have on driver behavior?

We are grateful for your cooperation and would appreciate receiving the requested information by January 26, 1970. Sincerely,

PHILIP A. HART, Chairman, Antitrust and Monopoly Subcommittee.


Milroaukee, Wis., February 11, 1970.
Chairman, Antitrust and Monopoly Subcommittee, U.S. Senate, Committee on

the Judiciary, Washington, D.C. DEAR SENATOR HART : On behalf of DRI, I wish to thank you for the opportunity to expand further upon the comments made in the statement filed with your Subcommittee on December 16, 1969 by answering the thirty-seven questions posed in your letter of January 8, 1970. I also wish to thank you for the courtesy you showed by your letter of January 23, 1970 in which you extended the deadline for filing our answers to February 16, 1970. This allowed us time to give the issues you posed more serious consideration.

For your convenience and that of your staff, we have not attempted to provide our anwers in the form of a letter. Rather, we have prepared the attached enclosure which restates each of your questions with our answer immediately following each. Some of the answers to your questions refer to exhibits which are also enclosed to provide you with additional information.

I again wish to thank you for the opportunity to be heard on this important matter. We hope that the information we have provided will assist you in making an objective analysis. Sincerely yours,

MARK MARTIN, Chairman of the Board.


1. Would you please explain why auto insurance based on a tort liability system should be the primary source of indemnity for auto accident injuries?

It is our belief that a tortfeasor should be the primary source of indemnity for the actual loss caused by his conduct. This not only applies to the auto accident, but also to situations of professional, product and premises liability and other tortious conduct. The belief of the public in the basic fairness of this approach is demonstrated by the results of the State Farm survey of its policyholders which were made known to this Subcommittee by Mr. Morrill of that company.

In all instances in which it is available and applicable, liability insurance, being a valid risk-shifting mechanism, should be applied to relieve the tortfeasor of the personal loss which would be occasioned by his liability. Again, there should be no difference in the application of this approach merely because one case involves an automobile accident and another involves a product defect or some other type of accident. The application of liability insurance to protect the insured against personal loss should, in all instances, be dependent upon a finding of the insured's liability for the damage caused.

We have taken a position against multiple recovery for the same loss under the tort system in our advocacy of the elimination or modification of the collateral source rule. We would favor any reduction in the size or importance of liability insurance as a source of benefits resulting from a change of the collateral source rule. We believe that the tort system is intended to hold the tortfeasor responsible for the actual loss he has caused. Our position that no actual loss has been caused to a person who has received benefits from collateral sources is fully explained in RESPONSIBLE REFORM. The question of whether a tortfeasor should be held responsible, under principles of subrogation, to the person providing the collateral benefits is another matter. More than anything else, the answer to this question is dependent upon considerations of practicality and cost. We do not oppose the principle of subrogation or the use of liens which keep the responsible tortfea sor as the primary source of indemnity for the actual loss he has caused. However, we do oppose the use of the tort system for multiple recovery by a person who has already been compensated for a loss. This does not provide true indemnity and only leads to an increase in the cost to the insurance buying public.

In those instances in which a loss is suffered as the result of an accident which cannot be traced to the fault of a person other than the one suffering the loss, we have no position as to whether first party coverages under present auto policies or some other forms of non-auto coverages should be primary or secondary. Here again we believe that this question should be determined by the insurer and be based upon considerations of practicality and economy.

2. Do you consider the auto liability insurance premium to be in the nature of a tax on motoring?

No, we do not. The cost of automobile liability insurance is clearly not a "tax" on motoring. It is simply a part of the cost of carrying on an activity-in this case, operating an automobile. If we were to call it a “tax," then the cost of gasoline (excluding actual taxes), oil, parking, etc., would also have to be called a “tax." A "tax" is a payment of money for the use of the government or for the benefit of the general public.

Our position is that the tortfeasor, whether he be the operator of a motor vehicle, or a person engaged in some other enterprise, should be the primary soure of indemnity. Liability insurance, to the extent that it allows an at-fault defendant to satisfy his legal obligation, is no different than taking money from a bank account or borrowing it from a lending agency. It is merely the price for protection, the same as is the purchase of a burglar-proof lock or a fire alarm.

3. Would you favor the elimination of state financial responsibility and compulsory insurance laws if a universal compulsory insurance law was adopted ?

We interpret "universal compulsory insurance law" to mean a federal compulsory automobile insurance law. If such a law were enacted (and presuming it could withstand a constitutional attack), state laws would seem to be superfluous unless some state or states were to determine that the federal law was inadequate and additional safeguards should be provided.

However, this does not mean that we would favor a federal compulsory automobile insurance law or that we favor having all states adopt compulsory insurance laws. A federal system would be premised upon the assumption that what is acceptable and needed in New York City is also of equal application to all of Montana. It is our position that the question of whether compulsory auto liability insurance is necessary or desirable should be left to each state, since each would have sufficient information about local conditions to make a valid judgment on its need or advantages.

4. What effort, if any, is the Institute making to have the insurance industry and the states provide higher policy limits under financial responsibility and compulsory insurance laws ?

We favor having insurers offer adequate policy limits to their insureds. It is not within the scope of our activity, nor within our capacity or knowledge to determine what the limits of financial responsibility or compulsory insurance laws should be. We do believe that the elected state representatives and regulatory officials have this responsibility and that they are in a much better position to make an informed judgment. Their responsibility includes the duty of seeing that adequate insurance protection is available to all of the state's citizens.

5. Witnesses have suggested during our hearings that at least some of the insuring public's dissatisfaction with liability insurance and its more favorable attitude toward physical damage coverages results from the fact that although the car owner is virtually compelled to buy insurance to protect the potential

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