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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1861 Introduced in Senate (IS)]

104th CONGRESS
  2d Session
                                S. 1861

 To provide for legal reform and consumer compensation, and for other 
                               purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                             June 11, 1996

Mr. McConnell (for himself and Mr. Dole) introduced the following bill; 
  which was read twice and referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL

 
 To provide for legal reform and consumer compensation, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Legal Reform and Consumer 
Compensation Act of 1996''.

SEC. 2. TABLE OF CONTENTS.

    The table of contents for this Act is as follows:

Sec. 1. Short title.
Sec. 2. Table of contents.
Sec. 3. Findings.
                TITLE I--EARLY OFFER AND RAPID RECOVERY

Sec. 101. Early offer and rapid recovery mechanisms.
                    TITLE II--FAIRNESS IN LEGAL FEES

Sec. 201. Findings and purpose.
Sec. 202. Definitions.
Sec. 203. Creation of a fiduciary relationship.
Sec. 204. Written hourly rate fee agreement.
Sec. 205. Nature of demand for compensation.
Sec. 206. Time limit for, and requisite contents of, response setting 
                            forth settlement offer.
Sec. 207. Consequences of failure to include prescribed material with 
                            settlement offer.
Sec. 208. No obligation to issue response; inadmissibility of demands, 
                            responses, and failure to respond.
Sec. 209. Effect of pre-demand settlement offer.
Sec. 210. Pre-retention offer.
Sec. 211. Post-retention offer when a pre-retention offer has been 
                            made.
Sec. 212. Post-retention offer when no pre-retention offer has been 
                            made.
Sec. 213. Calculation of attorney's fee when there is a subsequent 
                            resolution of the claim.
Sec. 214. Provision of closing statement.
Sec. 215. Effect of contravening agreements.
Sec. 216. Inapplicability.
           TITLE III--APPLICABILITY AND RULE OF CONSTRUCTION

Sec. 301. Applicability to States; choice of law; jurisdiction; and 
                            construction.
Sec. 302. Effective date.

SEC. 3. FINDINGS.

    The Congress finds that--
            (1) the current liability system is, all too often, a 
        frustrating experience for many personal injury claimants, 
        resulting in a time-consuming process which provides inadequate 
        compensation for their injuries;
            (2) for other personal injury claimants, the system can 
        provide a windfall of financial gain, greatly in excess of 
        their actual losses;
            (3) the unpredictable and erratic system is a product of a 
        perverse incentive structure in which the magnitude of 
        noneconomic damages is directly linked to, and is a multiple 
        of, the out-of-pocket expenses incurred by the claimant;
            (4) the incentives of the litigation system perpetuate the 
        overuse and abuse of the medical system, costing the economy 
        billions of dollars and costing every United States family 
        hundreds of dollars in unnecessary insurance premiums and 
        health care expenses;
            (5) the system as it has recently developed--
                    (A) is highly regressive;
                    (B) is often duplicative of and inconsistent with 
                Federal regulatory and social welfare programs for the 
                protection of injured parties;
                    (C) is burdened by an administrative cost structure 
                that causes a disproportionate amount of its dollars to 
                go to lawyers rather than to injured parties;
                    (D) is particularly prejudicial to the competitive 
                position of the American small business community;
                    (E) is a major and increasing threat to the 
                economic viability of American cities;
                    (F) imposes a major burden on the American economy 
                and if reformed would significantly enhance American 
                productivity and consumer wealth;
                    (G) is replete with incentives that reward abusive 
                claiming and defensive behavior; and
                    (H) is therefore a major cause of the dangerous 
                disesteem increasingly felt by increasing numbers of 
                Americans toward the legal system and, indeed, the rule 
                of law itself; and
            (6) there is a need for a system of early offer, rapid 
        recovery and consumer choice to enable claimants to be made 
        whole and recover all economic losses without resort to complex 
        and protracted litigation.

                TITLE I--EARLY OFFER AND RAPID RECOVERY

SEC. 101. EARLY OFFER AND RAPID RECOVERY MECHANISMS.

    (a) Purpose.--The purpose of this title is to establish a system of 
early offer and rapid recovery to permit personal injury claimants to 
recover their economic losses from a responsible party in a timely 
manner.
    (b) In General.--Chapter 111 of title 28, United States Code, is 
amended by adding at the end the following new section:
``Sec. 1660. Early offer and rapid recovery mechanisms
    ``(a) For purposes of this section:
            ``(1) The term `allegedly responsible party' means a 
        person, partnership, or corporation, and an insurer thereof, 
        alleged by the claimant to be responsible for at least some 
        portion of an injury alleged by a claimant.
            ``(2) The term `claimant' means an individual who, in his 
        or her own right, or vicariously as otherwise permitted by law, 
        is seeking compensation for personal injury.
            ``(3) The term `clear and convincing evidence' means that 
        measure or degree of proof that will produce in the mind of the 
        trier of fact a firm belief or conviction as to the truth of 
        the allegations sought to be established. The level of proof 
        required to satisfy such standard shall be more than that 
        required under preponderance of the evidence, and less than 
        that required for proof beyond a reasonable doubt.
            ``(4) The term `collateral benefits' means all benefits and 
        advantages received or entitled to be received (regardless of 
        the right of recoupment of any other entity, through 
        subrogation, trust agreement, lien, or otherwise) by an injured 
        individual (or other entity) as reimbursement of loss because 
        of personal injury--
                    ``(A) payable or required to be paid by--
                            ``(i) Federal, State, or other governmental 
                        disability, unemployment, or sickness programs;
                            ``(ii) under the terms of any Federal, 
                        State, or other governmental or private health 
                        insurance, accident insurance, wage or salary 
                        continuation plan, or disability income 
                        insurance; or
                            ``(iii) any other program or compensation 
                        system, if the payment is intended to 
                        compensate the claimant for the same injury or 
                        disability which is the subject of the claim; 
                        minus
                    ``(B) the amount paid by such individual (or by the 
                spouse, parent, child, or legal guardian of such 
                individual) to secure the payments described in 
                subparagraph (A).
            ``(5) The term `economic loss' means any objectively 
        verifiable pecuniary loss resulting from the harm suffered, 
        including past and future medical expenses, loss of past and 
        future earnings, burial costs, property damage accompanying 
        bodily injury, costs of replacement services in the home, 
        including child care, transportation, food preparation, and 
        household care, costs of making reasonable accommodations to a 
        personal residence, loss of employment, and loss of business or 
        employment opportunities, to the extent recovery for such 
        losses is allowed under applicable State law.
            ``(6) The term `entity' includes an individual or person.
            ``(7) The term `intentional misconduct' means conduct 
        whereby harm is intentionally caused or attempted to be caused 
        by one who acts or fails to act for the purpose of causing harm 
        or with knowledge that harm is substantially certain to follow 
        when such conduct caused or substantially contributed to the 
        harm claimed for, except a person does not intentionally cause 
        or attempt to cause harm--
                    ``(A) merely because his or her act or failure to 
                act is intentional or done with the realization that it 
                creates a risk of harm; or
                    ``(B) if the act or omission causing bodily harm is 
                for the purpose of averting bodily harm to oneself or 
                another person.
            ``(8) The term `liability claim' means a demand for 
        compensation by certified mail to an allegedly responsible 
        party, which shall set forth the material facts relevant to the 
        claim including--
                    ``(A) the name, address, age, marital status, and 
                occupation of claimant, which term for the purposes of 
                this section includes the injured party if claimant is 
                operating in a representative capacity;
                    ``(B) a brief description of how the injury 
                occurred;
                    ``(C) the names, and, if known, the addresses, 
                telephone numbers, and occupations of all known 
                witnesses to the injury;
                    ``(D) copies of photographs in claimant's 
                possession that relate to the injury;
                    ``(E) the basis for claiming that the party to whom 
                the claim is addressed is at least partially 
                responsible for causing the injury;
                    ``(F) a description of the nature of the injury, 
                the names and addresses of all physicians, other health 
                care providers, and hospitals, clinics, or other 
                medical service entities that provided medical care to 
                the claimant or the injured party including the date 
                and nature of the service;
                    ``(G) a copy of the medical records relating to the 
                injury and those involving a prior injury or 
                preexisting medical condition which an allegedly 
                responsible party would be able to introduce into 
                evidence in a trial or, in lieu of either or both, 
                executed releases authorizing the allegedly responsible 
                party to obtain such records directly from health care 
                providers that produced or possess them; and
                    ``(H) relevant documents, including records of 
                earnings if a claimant is self-employed and employer 
                records of earnings if a claimant is employed, and any 
                medical expenses, wages lost, or other pertinent 
                damages suffered as a consequence of the injury.
            ``(9) The term `noneconomic loss' means nonmonetary losses 
        including punitive damage claims and further including without 
        being limited to pain, suffering, inconvenience, mental 
        suffering, emotional distress, loss of society and 
        companionship, loss of consortium, hedonic damages, injury to 
        reputation, and humiliation.
            ``(10) The term `punitive damages' means damages awarded 
        against any person or entity to punish such persons or entity 
        or to deter such person or entity, or others, from engaging in 
        similar behavior in the future.
            ``(11) The term `reasonable attorney's fee' means an hourly 
        fee for services rendered subsequent to the execution of a 
        written agreement establishing an attorney-client relationship 
        that bears a reasonable relation to the attorney's actual 
        efforts on the client's behalf. Fees shall not be deemed 
        reasonable to the extent that services provided by an attorney 
        are attributable to any failure to provide reasonably prompt 
        notice pursuant to subsection (b)(1)(A)(ii).
            ``(12) The term `serious bodily injury' means bodily injury 
        which results in death, dismemberment, significant and 
        permanent loss of an important bodily function, or significant 
        and permanent scarring or disfigurement.
            ``(13) The term `wanton misconduct' means conduct that the 
        allegedly responsible party realized was excessively dangerous, 
        done heedlessly and recklessly, and with a conscious disregard 
        of the consequences to or rights and safety of the claimant.
    ``(b)(1)(A) After an occurrence that may give rise to a civil 
action or claim against any person, in any Federal or State court based 
on any cause of action to recover damages for personal injury, any 
potentially allegedly responsible party has the option to offer, not 
later than the later of--
            ``(i) 120 days after the injury; or
            ``(ii) 120 days after the initiation of the liability 
        claim,
to compensate a claimant for reasonable economic loss, including future 
economic loss, less collateral benefits, and including a reasonable 
attorney's fee for the claimant.
    ``(B) If within 30 days of receipt of a liability claim an 
allegedly responsible party notifies an unrepresented claimant or a 
claimant's attorney of a request for a medical examination of the 
claimant, and the claimant is not made available for such examination 
within 10 days of receipt of the request, the time provided by this 
section for issuing a response is extended by 1 day for each day that 
the request is not honored after the expiration of 10 days from the 
date of the request. Any such extension shall also include a further 
period of 10 days from the date of the completion of the medical 
examination.
    ``(C) The claimant may extend the time for receiving the offer 
specified in subparagraph (A).
    ``(2) States may establish for all cases, including cases covered 
by this title, a minimum dollar value for defined classes involving 
death or serious bodily injury. A claimant shall have the option of 
accepting such minimum dollar value payable in lump sum, or accepting 
the benefit specified in paragraph (1)(A).
    ``(c) An offer under subsection (b) may include other allegedly 
responsible parties, individuals, or entities that were involved in the 
events which gave rise to the civil action, regardless of the theory of 
liability on which the claim is based, upon their request or consent.
    ``(d) Future economic losses shall be payable to an individual 
under this section as such losses occur.
    ``(e) If, after an offer is made under subsection (b), the 
participants in the offer dispute their relative contributions to the 
payments to be made to the individual, such disputes shall be resolved 
through binding arbitration in accordance with applicable rules and 
procedures established by the Attorney General of the United States.
    ``(f)(1) The claimant may reject an offer of compensation made 
under subsection (b) and elect to bring or maintain a civil action. 
Upon rejection of the offer, the claimant may recover economic loss, 
including future economic loss, less collateral benefits. The amount of 
collateral benefits shall be determined by the court in a pretrial 
proceeding. In any subsequent proceeding in the action, no evidence 
shall be admitted as to the amount of economic loss for which 
collateral benefits have been paid to, or will be paid to, the 
claimant. The claimant may recover for noneconomic loss to the extent 
authorized by other applicable law only if the claimant proves each 
element of the claim for noneconomic loss by clear and convincing 
evidence, that the allegedly responsible party caused the injury by 
intentional or wanton misconduct.
    ``(2) A notice of such a rejection is required to be made not later 
than 90 days after the date on which the offer of compensation benefits 
is made. A failure to accept the offer within the 90-day period is 
deemed a rejection.
    ``(g) Rejected offers may not be disclosed in any subsequent action 
brought by the claimant.
    ``(h) Nothing in this section shall be construed to--
            ``(1) waive or affect any defense of sovereign immunity 
        asserted by any State under any law;
            ``(2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            ``(3) affect the applicability of any provision of chapter 
        97;
            ``(4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation;
            ``(5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum;
            ``(6) affect any applicable statute of limitations of any 
        State or of the United States, except as expressly provided in 
        this title; or
            ``(7) impair any right of a provider of collateral benefits 
        to seek reimbursement outside of the claimant's cause of action 
        where permitted by State law, other than by a lien on the 
        recovery of the claimant.
    ``(i)(1) This section shall not apply to accidental bodily injury 
caused by the operation or the use of a motor vehicle in claims in 
which an uninsured motorist or a personal protection insured is 
involved.
    ``(2) For purposes of this subsection the term `operation or use'--
            ``(A) means operation or use of a motor vehicle as a motor 
        vehicle, including, incident to its operation or use as a 
        vehicle, the occupation of the vehicle;
            ``(B) does not cover conduct within the course of a 
        business of manufacturing, selling, or maintaining a motor 
        vehicle, including repairing, servicing, washing, loading, or 
        unloading; and
            ``(C) does not include such conduct not within the course 
        of such a business unless such conduct occurs while occupying a 
        motor vehicle.''.
    (c) Technical and Conforming Amendments.--The table of sections for 
chapter 111 of title 28, United States Code, is amended by adding at 
the end the following new item:

``1660. Early offer and rapid recovery mechanisms.''.

                    TITLE II--FAIRNESS IN LEGAL FEES

SEC. 201. FINDINGS AND PURPOSE.

    (a) Findings.--The Congress finds that contingency fees play a 
useful and often critical role in ensuring access to counsel and the 
courts on the part of those who would otherwise be unable to afford 
such access, but that--
            (1) personal injury claimants are often subjected to 
        unnecessary costs, delays, and inefficiencies in processing 
        their compensation claims;
            (2) virtually all such claimants who are represented by 
        attorneys are charged contingent fees;
            (3) the ethical and legal validity of a contingent fee is 
        dependent upon an attorney undertaking risk in exchange for 
        sharing proportionately in the proceeds of a claim;
            (4) the perverse incentives of the existing system often 
        encourage and reward defendants who take intransigent 
        settlement positions and otherwise unethically add to the costs 
        and delays of settling meritorious claims for, among other 
        reasons, the purpose of reducing the marginal rates of 
        compensation received by claimants' counsel;
            (5) many deserving claimants receive inequitable 
        compensation because--
                    (A) such claimants are required to pay attorneys 
                approximately one-third or more of any recovery even 
                when there is little or no issue of liability or 
                damages and therefore little or no assumption of risk 
                by the attorney; and
                    (B) when a defendant or its insurer has made a 
                substantial settlement offer before the attorney's 
                retention or shortly thereafter and the attorney has 
                added little or nothing to the value of the claim to 
                that point, payment of a substantial contingent fee is 
                nonetheless generally required;
            (6) the current compensation system often fails to provide 
        sufficient financial incentives to effectuate prompt and 
        adequate compensation to deserving claimants, resulting in--
                    (A) delays in adjudications and case settlements 
                often caused by intransigent defendant conduct that the 
present system perversely rewards and thereby deprives claimants of 
prompt compensation;
                    (B) a substantial burden on Federal and State 
                courts contributing to very high case backlogs; and
                    (C) regressive cost burdens and substantial 
                avoidable costs imposed on all parties resulting from 
                the long delays in resolving many claims;
            (7) the current tort compensation system which results in 
        delays in resolving claims and which effectively provides for 
        increased noneconomic damages and, therefore, increased legal 
        fees as medical care costs increase, provides perverse 
        financial incentives for both more intensive and unnecessary 
        use of medical care providers and the fraudulent incurrence of 
        medical care expenses, thereby adding materially to the 
        Nation's health care costs and burdens;
            (8) delays in resolving claims often result in more 
        intensive and unnecessary use of medical care providers, 
        thereby adding to the Nation's health care burden;
            (9) the claims process gives rise to substantial, avoidable 
        transaction costs because of the lack of adequate incentives 
        for defendants and their insurers to offer prompt and equitable 
        settlements to meritorious claimants and because claimants' 
        attorneys exact a significant share of any settlement even when 
        their efforts do not generate or augment the settlement offer;
            (10) contingency fee practices, as described in the 
        preceding paragraphs, expose a clear and impermissible gap 
        between (A) the ethical standards established and promulgated 
        by courts and professed by the Bar, and (B) the actual 
        practices of the Bar;
            (11) contingency fee practices, as described in the 
        preceding paragraphs, bring substantial disrepute to the Bar 
        and to the legal system as a whole and loss of confidence in 
        the rule of law itself, not the least because they create and 
        expose broad gaps between the stated ethical principles of the 
        legal profession and its real world practices;
            (12) the inability of the Bar and the courts to curb 
        contingency fee abuses has led to higher settlement costs, 
        lowered compensation to injured persons, excessive medical care 
        costs and delayed claims processing; and
            (13) there is a need for adopting a procedure to implement 
        appropriate ethical and legal standards and to resolve personal 
        injury claims more fairly and promptly.
    (b) Purposes.--The purposes of this title are to--
            (1) enforce more efficiently and effectively ethical 
        standards governing the reasonableness of lawyers' fees and 
        correspondingly to implement the stricter scrutiny that courts 
        are obliged to apply to contingent fees;
            (2) reverse systemic incentives now in effect so as to 
        reward, and not to penalize, defendants who make substantial 
        early settlement offers;
            (3) compensate claimants' attorneys more rationally by 
        calculating their compensation in relation to the value of 
        services rendered and risks undertaken;
            (4) compensate more fairly those seeking redress for 
        injuries by giving them a larger share of promptly achieved 
        settlements;
            (5) further enhance the likelihood of early settlement of 
        claims by preserving a larger share of early settlement offers 
        for claimants;
            (6) lower the costs of the personal injury tort 
        compensation system including unnecessary medical and defense 
        costs;
            (7) remove the burdens on interstate commerce and the 
        Nation's health care programs that are imposed by the current 
        tort compensation system;
            (8) create a simple, self-enforcing system, controlled by 
        the parties, which forms an early basis for establishing the 
        sums and issues that are in dispute;
            (9) reduce unworkable burdens now placed on courts and bar 
        grievance boards presently charged with enforcing ethical 
        standards through ex post facto, case-by-case fact finding 
        processes that pose difficult burdens of proof and impose 
        disproportionate transaction costs on both parties and fact 
        finders; and
            (10) provide alternatives to across-the-board fee cap 
        reforms, which often provide defendants with unearned 
        advantages and further encourage many defendants in unethical 
        protraction of settlement of meritorious claims.

SEC. 202. DEFINITIONS.

    For purposes of this title:
            (1) The term ``allegedly responsible party'' means a 
        person, partnership, corporation, and an insurer thereof, 
        alleged by a claimant to be responsible for at least some 
        portion of a personal injury alleged by claimant.
            (2) The term ``claim'' means an assertion of entitlement to 
        compensation for personal injury from an allegedly responsible 
        party and, to the extent subject to a contingent fee agreement, 
        to all other related claims arising from such injury.
            (3) The term ``claimant'' means an individual who, in his 
        or her own right, or vicariously as otherwise permitted by law, 
        is seeking compensation for personal injury.
            (4) The term ``contingent fee'' means the fee negotiated in 
        a contingent fee agreement that is payable in fact or in effect 
        only from the proceeds of any recovery on behalf of claimant.
            (5) The term ``contingent fee agreement'' means a fee 
        agreement between an attorney and claimant wherein the attorney 
        agrees to bear the risk of no or inadequate compensation in 
        exchange for a proportionate share of any recovery by 
        settlement or verdict obtained for claimant.
            (6) The term ``contingent fee attorney'' means an attorney 
        who agrees to represent claimant in exchange for a contingent 
        fee.
            (7) The term ``fixed fee'' means an agreement between an 
        attorney and claimant whereby the attorney agrees to perform a 
        specific legal task in exchange for a specified sum to be paid 
        by claimant.
            (8) The term ``hourly rate fee'' means the fee generated by 
        an agreement, or otherwise by operation of law, between an 
        attorney and claimant providing that claimant pay the attorney 
        a fee determined by multiplying the hourly rate negotiated, or 
        otherwise set by law, between the attorney and claimant, by the 
        number of hours that the attorney has worked on behalf of 
        claimant in furtherance of claimant's interest. An hourly rate 
        fee may also be a contingent fee to the extent it is only 
        payable in fact or in effect from the proceeds of any recovery 
        on behalf of claimant.
            (9) The term ``injury'' means personal injury.
            (10) The term ``personal injury'' means an occurrence 
        resulting from any act giving rise to a tort claim, including, 
        without limitation, bodily injury, sickness, disease, death, or 
        property damage accompanying bodily injury.
            (11) The term ``post-retention offer'' means an offer of 
        settlement in response to a demand for compensation made within 
        the time constraints, and conforming to the provisions of this 
        title, made to a claimant who is represented by a contingent 
        fee attorney.
            (12) The term ``pre-retention offer'' means an offer to 
        settle a claim for compensation made to a claimant not 
        represented by an attorney at the time of the offer.
            (13) The term ``response'' means a written communication by 
        claimant or an allegedly responsible party or the attorney for 
        either, deposited into the United States mail and sent 
        certified mail or delivered by an overnight delivery service.
            (14) The term ``settlement offer'' means a written offer of 
        settlement set forth in a response within the time limits set 
        forth in this title.

SEC. 203. CREATION OF A FIDUCIARY RELATIONSHIP.

    For purposes of this title, a fiduciary relationship commences when 
a claimant consults a contingent fee attorney to seek professional 
services.

SEC. 204. WRITTEN HOURLY RATE FEE AGREEMENT.

    Contingent fee agreements for the representation of parties with 
claims shall also include alternate hourly rate fees. If a contingent 
fee attorney has not entered into a written agreement with claimant at 
the time of retention setting forth the attorney's hourly rate, then a 
reasonable hourly rate is payable, subject to the limitations set forth 
in this title.

SEC. 205. NATURE OF DEMAND FOR COMPENSATION.

    (a) In General.--At any time after retention, a contingent fee 
attorney pursuing a claim shall send a demand for compensation by 
certified mail to an allegedly responsible party, which shall set forth 
the material facts relevant to the claim including--
            (1) the name, address, age, marital status, and occupation 
        of claimant, which term for the purposes of this title includes 
        the injured party if claimant is operating in a representative 
        capacity;
            (2) a brief description of how the injury occurred;
            (3) the names, and, if known, the addresses, telephone 
        numbers, and occupations of all known witnesses to the injury;
            (4) copies of photographs in claimant's possession that 
        relate to the injury;
            (5) the basis for claiming that the party to whom the claim 
        is addressed is at least partially responsible for causing the 
        injury;
            (6) a description of the nature of the injury, the names 
        and addresses of all physicians, other health care providers, 
        and hospitals, clinics, or other medical service entities that 
        provide medical care to claimant or the injured party including 
        the date and nature of the service;
            (7) medical records relating to the injury and those 
        involving a prior injury or pre-existing medical condition 
        which an allegedly responsible party would be able to introduce 
        into evidence in a trial or, in lieu of either or both, 
        executed releases authorizing the allegedly responsible party 
        to obtain such records directly from health care providers that 
        produced or possess them; and
            (8) relevant documentation, including records of earnings 
        if a claimant is self-employed and employer records of earnings 
        if a claimant is employed, or any medical expenses, wages lost, 
        or other pertinent damages suffered as a consequence of the 
        injury.
    (b) Mailing of Copies.--At the time of the mailing of the demand 
for compensation, a claimant's attorney shall mail copies of each such 
demand to the claimant and to every other allegedly responsible party.
    (c) Limitation on Fee.--A fee received by or contracted for by a 
contingent fee attorney that exceeds 10 percent of any settlement or 
judgment received by his or her client after reasonable expenses have 
been deducted is unreasonable and excessive if the attorney has sent a 
timely demand for compensation but has omitted information of a 
material nature that is required by this section which he or she had in 
his or her possession or which was readily available to him or her at 
the time of filing.

SEC. 206. TIME LIMIT FOR, AND REQUISITE CONTENTS OF, RESPONSE SETTING 
              FORTH SETTLEMENT OFFER.

    (a) Post-Retention Offer.--To qualify its response as a post-
retention offer under this title, an allegedly responsible party 
shall--
            (1) issue a response stating a settlement offer within 60 
        days from receipt of a demand for compensation;
            (2) send the response to claimant's attorney with a copy to 
        claimant;
            (3) state that the offer is open for acceptance for a 
        minimum of 30 days from the time of its receipt by claimant's 
        attorney and further state whether it expires at the end of 
        this period or remains open for acceptance for a longer period 
        or until notice of withdrawal is given; and
            (4) include with the offer copies of materials in its or 
        its attorney's possession concerning the alleged injury upon 
        which the allegedly responsible party relied in making the 
        settlement offer except material that such party or its 
        attorney believes in good faith would not be discoverable by 
        claimant during the course of litigation.
If reproduction costs under paragraph (4) would be significant relative 
to the size of the offer, the allegedly responsible party may, in the 
alternative, offer other forms of access to the materials convenient 
and at reasonable cost to claimant's attorney.
    (b) Time Limitations.--If within 30 days of receipt of a claimant's 
demand for compensation an allegedly responsible party notifies an 
unrepresented claimant or a claimant's attorney that it seeks to have a 
medical examination of claimant, and claimant is not made available for 
such examination within 10 days of receipt of the request, the time 
herein provided for issuing a response is extended by 1 day for each 
day that the request is not honored after the expiration of 10 days 
from the date of the request. Any such extension also includes a 
further period of 10 days from the date of the completion of the 
medical examination.
    (c) Increase in Offer.--The settlement offer may be increased 
during the 60-day period set forth in subsection (a)(1) by issuing an 
additional offer stating that the time for acceptance is 10 days after 
receipt of the additional offer by claimant's attorney or 30 days 
from receipt of the initial response, whichever is longer, unless the 
additional response specifies a longer period of time for acceptance as 
set forth in subsection (a)(3).

SEC. 207. CONSEQUENCES OF FAILURE TO INCLUDE PRESCRIBED MATERIAL WITH 
              SETTLEMENT OFFER.

    (a) In General.--If an allegedly responsible party or its attorney 
willfully fails to include the material required by section 206(a)(4) 
with a response stating a settlement offer or does not otherwise make 
such material available--
            (1) a claimant may revoke its acceptance of such settlement 
        offer within 2 years of having accepted it; and
            (2) any fees and costs reasonably incurred by a claimant in 
        revoking its acceptance of such settlement offer and 
        reinstating its claim is recoverable from the allegedly 
        responsible party, including the losses suffered by a claimant 
        who is precluded from reinstating its claim by operation of a 
        statute of limitations.
    (b) Sanctions for Party.--Willful failure of an allegedly 
responsible party to comply with section 206(a)(4) shall subject such 
party to the sanctions applicable to a party who fails to comply with 
requests for the production of documents.
    (c) Sanctions for Attorney.--Willful failure of an attorney for an 
allegedly responsible party to comply with section 206(a)(4) shall 
subject that attorney to the same sanctions applicable to attorneys who 
improperly counsel their clients not to produce documents for which 
there has been a discovery request.

SEC. 208. NO OBLIGATION TO ISSUE RESPONSE; INADMISSIBILITY OF DEMANDS, 
              RESPONSES, AND FAILURE TO RESPOND.

    (a) No Obligation To Respond.--Nothing in this title imposes on an 
allegedly responsible party an obligation to issue a response to a 
demand for compensation.
    (b) Inadmissibility of Offer.--Demands for compensation, early 
settlement offers, or the failure of an allegedly responsible party to 
issue same, are inadmissible in any subsequent litigation, proceeding, 
or arbitration, to the extent that evidence of settlement negotiations 
is inadmissible in the jurisdiction where the case is brought.

SEC. 209. EFFECT OF PRE-DEMAND SETTLEMENT OFFER.

    A settlement offer to an injured party represented by a contingent 
fee counsel made before receipt of a demand for compensation, which is 
open for acceptance for 60 days or more from the time of its receipt 
and which conforms to the requirements of section 206, is deemed a 
post-retention offer and has the same effect under this title as if it 
were a response to a demand for compensation.

SEC. 210. PRE-RETENTION OFFER.

    (a) Prohibition of Percentage Fee of Pre-Retention Offer.--It is a 
violation of this title for an attorney retained after claimant has 
received a pre-retention offer to enter into an agreement with claimant 
to receive a contingent fee based upon or payable from the proceeds of 
the pre-retention offer, provided that the pre-retention offer remains 
in effect or is renewed until the time has elapsed for issuing a 
response containing a settlement offer as defined under section 206.
    (b) Unreasonable and Excessive Fee.--An attorney entering into a 
fee agreement that would effectively result in payment of a percentage 
of a pre-retention offer to a claimant has charged an unreasonable and 
excessive fee.
    (c) Presumptive Reasonable Fee.--An attorney who contracts with a 
claimant for a reasonable hourly rate or a reasonable fixed fee, or who 
is paid such a fee for advising claimant regarding the fairness of the 
pre-retention offer, has charged a presumptively reasonable fee.

SEC. 211. POST-RETENTION OFFER WHEN A PRE-RETENTION OFFER HAS BEEN 
              MADE.

    (a) Reasonable Fee Based on Hourly Fee.--A fee paid or contracted 
to be paid to a contingent fee attorney by a claimant who has rejected 
a pre-retention offer and who later accepts a post-retention offer of a 
greater amount is an unreasonable and excessive fee unless it is an 
hourly rate fee that does not exceed 25 percent of the excess of the 
post-retention offer over the pre-retention offer.
    (b) Reasonable Fee Based on Percentage.--If the accepted post-
retention offer is less than the pre-retention offer, a total fee for 
all services rendered that is greater than 10 percent of the first 
$100,000 of the post-retention offer plus 5 percent of any amount 
that exceeds $100,000 after all reasonable expenses have been deducted 
is an unreasonable and excessive fee.

SEC. 212. POST-RETENTION OFFER WHEN NO PRE-RETENTION OFFER HAS BEEN 
              MADE.

    A fee paid or contracted to be paid to a contingent fee attorney by 
a claimant who has not received a pre-retention offer and who has 
accepted a post-retention offer is an unreasonable and excessive fee 
unless it is an hourly rate fee that does not exceed 10 percent of the 
first $100,000 of the offer plus 5 percent of any amount that exceeds 
$100,000 after all reasonable expenses have been deducted.

SEC. 213. CALCULATION OF ATTORNEY'S FEE WHEN THERE IS A SUBSEQUENT 
              RESOLUTION OF THE CLAIM.

    Irrespective of any pre-retention offer, the provisions of section 
212 regarding maximum allowable fees remain in effect if a post-
retention offer is not accepted by claimant within the time provided by 
this title. Contingent fees are unreasonable and excessive unless 
charged against the difference between an unaccepted post-retention 
offer and the judgment or settlement ultimately obtained by claimant. 
When such judgment or settlement is lower than the unaccepted offer, 
the fee limitations of section 212 apply against the judgment or 
settlement.

SEC. 214. PROVISION OF CLOSING STATEMENT.

    Upon receipt of any settlement or judgment, and prior to 
disbursement thereof, a contingent fee attorney shall provide claimant 
with a written statement detailing how the proceeds are to be 
distributed, including the amount of the expenses paid out or to be 
paid out of the proceeds, the amount of the fee, how the fee amount is 
calculated, and the amount due claimant.

SEC. 215. EFFECT OF CONTRAVENING AGREEMENTS.

    (a) Violation.--A contingent fee attorney who charges a fee that 
contravenes this title has charged an unreasonable and excessive fee.
    (b) Excessive and Unreasonable Fees.--If the fee violates 
subsection (a), then it is also excessive and unreasonable to the 
extent that it has not been reduced by any reasonable fees and costs 
incurred by claimant in establishing that the fee agreement contravened 
this title.
    (c) Unenforceable Fee Agreements.--Fee agreements between claimants 
and contingent fee attorneys who have charged fees defined under this 
title as unreasonable or excessive are illegal and unenforceable except 
to the extent provided in this title.

SEC. 216. INAPPLICABILITY.

    (a) Evaluations and Collections.--Except for the provisions of 
section 203, nothing in this title applies to an agreement between a 
claimant and an attorney to retain the attorney--
            (1) on an hourly rate fee or fixed fee basis solely to 
        evaluate a pre-retention offer; or
            (2) to collect overdue amounts from an accepted pre-
        retention or post-retention settlement offer.
    (b) Agreements in Which Certain Offers Not Made.--The provisions of 
this title prohibiting the charging of contingency fees in the absence 
of assuming meaningful risk and defining reasonable and unreasonable 
fees, shall have no effect on contingent fee agreements in cases in 
which neither a pre-retention nor a post-retention offer of settlement 
is made.
    (c) Motor Vehicle Accidental Bodily Injury.--(1) This title shall 
not apply to accidental bodily injury caused by the operation or the 
use of a motor vehicle in claims in which an uninsured motorist or 
personal protection insured is involved.
    (2) For purposes of this subsection the term ``operation or use''--
            (A) means operation or use of a motor vehicle as a motor 
        vehicle, including, incident to its operation or use as a 
        vehicle, the occupation of the vehicle;
            (B) does not cover conduct within the course of a business 
        of manufacturing, selling, or maintaining a motor vehicle, 
        including repairing, servicing, washing, loading, or unloading; 
        and
            (C) does not include such conduct not within the course of 
        such a business unless such conduct occurs while occupying a 
        motor vehicle.

           TITLE III--APPLICABILITY AND RULE OF CONSTRUCTION

SEC. 301. APPLICABILITY TO STATES; CHOICE OF LAW; JURISDICTION; AND 
              CONSTRUCTION.

    (a) Applicability to States.--Title I or II of this Act shall not 
apply in a State if such State enacts a statute that--
            (1) cites the authority of this subsection; and
            (2) declares the election of such State that the title 
        shall not apply.
    (b) Choice of Law.--In disputes between citizens of States that 
elect nonapplicability under subsection (a) and citizens of States that 
do not so elect, ordinary choice of law principles shall apply.
    (c) Jurisdiction.--This section shall not confer jurisdiction on 
the district courts of the United States under section 1331 or 1337 or 
title 28, United States Code.
    (d) Construction.--Nothing in this Act shall alter or diminish the 
authority or obligation of the Federal courts to construe the terms of 
this Act.

SEC. 302. EFFECTIVE DATE.

    This Act shall take effect on the date of enactment of this Act.
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