II

104TH CONGRESS

2D SESSION S. 1860

To provide for legal reform and consumer compensation relating to motor

vehicle tort systems, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 11, 1996

Mr. MCCONNELL (for himself, Mr. DOLE, Mr. MOYNIHAN, and Mr.

LIEBERMAN) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

A BILL

To provide for legal reform and consumer compensation relating to motor vehicle tort systems, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Auto Choice Reform

5 Act of 1996’’.

6 SEC. 2. FINDINGS.

7 The Congress finds that—

8 (1) the costs of operating a motor vehicle are

9 excessive due to the legal and administrative costs
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1 associated with the processing of claims under the

2 tort system;

3 (2) the costly fault and liability insurance sys4 tem often fails to provide compensation commensu5 rate with loss, takes too long to pay benefits and

6 wastes too many dollars on legal fees;

7 (3) the distorted incentives of the tort system

8 for motor vehicles produce—

9 (A) significant fraud in the claiming proc10 ess, thereby dangerously exacerbating the na11 tional distrust felt by many Americans toward

12 the legal process in general and the rule of law

13 itself;

14 (B) significant wasteful, fraudulent, and

15 costly overuse and abuse of scarce health care

16 resources and services, thereby increasing the

17 problems of affordability and accessibility in the

18 health care system;

19 (C) significant and unbearable cost bur20 dens on low-income Americans, which impose

21 on them the Hobson’s choice of driving on an

22 unlawful, uninsured basis or compelling them to

23 forego essential needs;

24 (D) significant reductions in access to, and

25 purchases of, motor vehicles, thereby damaging
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1 the economic well-being of many low-income

2 Americans, while also unnecessarily harming a

3 critical component of the American economy;

4 (E) significant deterioration of the eco5 nomic well-being of most major American cities

6 through the imposition of a massive, differen7 tially greater ‘‘tort tax’’ on urban residents,

8 thereby contributing to the abandonment of

9 cities by many American taxpayers able to

10 achieve substantial after-tax savings on auto11 mobile insurance premiums by the sole act of

12 moving to adjacent suburban communities; and

13 (F) significant inability to achieve market14 based discounts in insurance rates for owners of

15 safer cars, thereby powerfully contributing to

16 the lesser safety of American drivers and pas17 sengers;

18 (4) a system that allows consumers the oppor19 tunity to self-insure and separates economic and

20 non-economic damages for the purpose of purchasing

21 insurance would provide enormous cost savings to

22 drivers;

23 (5) consumer choice in selection of motor vehi24 cle insurance would be greatly enhanced if each
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1 consumer could decide upon the form of insurance

2 that best suits the individual needs of the consumer;

3 (6) insurance to indemnify individuals for per4 sonal injury arising from motor vehicle collisions is

5 frequently unavailable at reasonable cost because of

6 the potential for third-party claims;

7 (7) a system enabling individuals to select the

8 form of motor vehicle insurance coverage that best

9 suits individual needs would enhance individual free10 dom and reduce the costs of motor vehicle insurance

11 for consumers; and

12 (8) a system which targets and emphasizes the

13 scourge of those who drive under the influence of

14 drugs or alcohol will further deter such dangerous

15 and unlawful conduct.

16 SEC. 3. PURPOSE.

17 The purpose of this Act is to authorize consumers

18 of motor vehicle insurance to choose between their present

19 tort remedies under State law and a system which com20 bines first-party insurance and the right to sue negligent

21 drivers for all further uncompensated economic losses.

22 SEC. 4. DEFINITIONS.

23 For the purposes of this Act, the term—

24 (1) ‘‘accident’’ means unforeseen or unplanned

25 event causing loss or injury;
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1 (2) ‘‘economic loss’’ means any objectively veri2 fiable pecuniary loss resulting from the harm suf3 fered, including past and future medical expenses,

4 loss of past and future earnings, burial costs, costs

5 of repair, or replacement costs of replacement serv6 ices in the home, including child care, transpor7 tation, food preparation, and household care, costs

8 of making reasonable accommodations to a personal

9 residence, loss of employment, and loss of business

10 or employment opportunities, to the extent recovery

11 for such losses is allowed under applicable State law;

12 (3) ‘‘financial responsibility law’’ means a stat13 ute (including one requiring compulsory coverage)

14 penalizing motorists for failing to carry defined lim15 its of tort liability insurance covering motor vehicle

16 accidents;

17 (4) ‘‘insurer’’ includes a person who is self-in18 sured within the meaning of applicable State law;

19 (5) ‘‘intentional misconduct’’ means conduct

20 whereby harm is intentionally caused or attempted

21 to be caused by one who acts or fails to act for the

22 purpose of causing harm or with knowledge that

23 harm is substantially certain to follow when such

24 conduct caused or substantially contributed to the
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1 harm claimed for, except a person does not inten2 tionally cause or attempt to cause harm—

3 (A) merely because his or her act or failure

4 to act is done with the realization that it cre5 ates a grave risk of causing harm; or

6 (B) if the act or omission causing bodily

7 harm is for the purpose of averting bodily harm

8 to oneself or another person;

9 (6) ‘‘motor vehicle’’ means a vehicle of any kind

10 required to be registered under the provisions of the

11 applicable State law relating to motor vehicles;

12 (7) ‘‘net economic loss’’—

13 (A) means economic loss, including when

14 payable based on fault, a reasonable attorney’s

15 fee calculated on the basis of the value of the

16 attorney’s efforts as reflected in payment to the

17 attorney’s client; and

18 (B) excludes amounts paid or payable

19 under—

20 (i) Federal, State, or private disability

21 or sickness programs;

22 (ii) Federal, State, or private health

23 insurance programs;

24 (iii) employer wage continuation pro25 grams;
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1 (iv) workers’ compensation or similar

2 occupational compensation acts; and

3 (v) any other source of payment in4 tended to compensate such individual for

5 injuries resulting from a motor vehicle ac6 cident, including amounts paid under per7 sonal protection insurance or tort mainte8 nance coverage;

9 (8) ‘‘no-fault motor vehicle law’’ means a stat10 ute under which those injured in motor vehicle acci11 dents are paid without regard to fault for their pecu12 niary losses as a result of personal injury, in return

13 for which claims based on fault including for non14 pecuniary losses, are to a defined extent limited;

15 (9) ‘‘noneconomic loss’’ means subjective, non16 monetary losses including pain, suffering, inconven17 ience, mental suffering, emotion distress, loss of so18 ciety and companionship, loss of consortium, hedonic

19 damages, injury to reputation, and humiliation;

20 (10) ‘‘person’’ means any individual, corpora21 tion, company, association, firm, partnership, soci22 ety, joint stock company, or any other entity (includ23 ing any governmental entity);

24 (11) ‘‘personal protection’’ means an insurance

25 contract payable without regard to fault for net eco-
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1 nomic loss due to personal injury resulting from a

2 motor vehicle accident, along with waiver of tort

3 claims pursuant to this Act;

4 (12) ‘‘replacement service loss’’ means expenses

5 reasonably incurred in obtaining ordinary and nec6 essary services from others, not members of the in7 jured person’s household, in lieu of the services the

8 injured person would have performed for the benefit

9 of the household;

10 (13) ‘‘resident relative or dependent’’ means a

11 person related to the owner of a motor vehicle by

12 blood, marriage, adoption, or otherwise (including a

13 dependent receiving financial services or support

14 from such owner), and residing in the same house15 hold at the time of accidental personal injury, and

16 a person resides in the same household if he or she

17 usually makes his or her home in the same family

18 unit, even though temporarily living elsewhere;

19 (14) ‘‘serious bodily injury’’ means bodily injury

20 which results in death, dismemberment, significant

21 and permanent loss of an important bodily function,

22 or significant and permanent scarring or disfigure23 ment;

24 (15) ‘‘State’’ means any State of the United

25 States, the District of Columbia, the Commonwealth
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1 of Puerto Rico, Guam, the Virgin Islands, American

2 Samoa, the Northern Mariana Islands, the Trust

3 Territories of the Pacific Islands, and any other ter4 ritory or possession of the United States;

5 (16) ‘‘tort liability’’ means the legal obligation

6 for payment of damages caused by one adjudged to

7 have committed a tort;

8 (17) ‘‘tort liability insurance’’ means insurance

9 by the terms of which an insurer agrees to pay, on

10 behalf of an insured, damages the latter is obligated

11 to pay a third person because of his or her liability

12 to that third person;

13 (18) ‘‘tort maintenance coverage’’ means cov14 erage under which a tort liability insured, when in15 volved in an accident with a personal protection in16 sured, retains his or her right to claim for personal

17 injury under State law without modification by any

18 provision of this Act, except that responsibility for

19 payment for any such claim is assumed by his or her

20 own insurer to the extent of such coverage under

21 section 5(b)(1); and

22 (19) ‘‘uninsured motorist’’ means the owner of

23 a motor vehicle, including his or her resident rel24 atives, uninsured for either personal protection or

25 tort liability insurance at the limits prescribed by the
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1 applicable State’s financial responsibility law or

2 higher under section 5(a)(2)(A).

3 SEC. 5. MOTOR VEHICLE PERSONAL PROTECTION INSUR4 ANCE.

5 (a) INSURANCE POLICY PROVISIONS.—(1) An insur6 ance policy that includes provisions that entitle the in7 sured to receive, without regard to fault or lack of fault,

8 the insured’s net economic losses caused by an injury

9 along with an express, specific waiver of tort rights as pro10 vided in the insurance policy shall be valid notwithstand11 ing any contrary provisions of State law.

12 (2) In order for a personal protection insurance policy

13 to be covered by this Act, a motor vehicle insurance policy

14 issued by an insurer shall, at a minimum—

15 (A) provide personal protection coverage of the

16 greater of—

17 (i) up to the minimum limits of liability in18 surance for personal injury under the State’s fi19 nancial responsibility law; or

20 (ii) in a State covered by a no-fault motor

21 vehicle insurance law, up to the minimum level

22 of insurance required for no-fault benefits; and

23 (B) contain provisions under the State’s finan24 cial responsibility law, including those related to li25 ability for property damage, except to the extent
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1 State law would bar contractual provisions giving ef2 fect to personal protection authorizations set forth in

3 this Act, or to the extent that State law would be

4 contrary to other provisions of this Act.

5 (3) A personal protection insurer is authorized to

6 contract to pay personal protection benefits periodically as

7 losses accrue. Unless the treatment or expenses related

8 thereto are in reasonable dispute, an insurer who does not

9 pay a claim for net economic loss covered by a personal

10 protection insurance under this Act within 30 days after

11 payment is due, shall pay the loss compounded at a rate

12 of 50 percent per annum, as liquidated damages and in

13 lieu of any penalty or exemplary damages.

14 (b) OPERATION OF THE RIGHT TO CHOOSE.—(1)

15 Under this Act, in lieu of buying traditional tort liability

16 insurance for personal injury to protect third parties, mo17 torists have the right to choose personal protection which

18 will be available to themselves and their family members

19 in the event of a motor vehicle accident, including the

20 amount of financial protection they deem appropriate and

21 affordable for themselves and such others. As an alter22 native, motorists have the right to elect traditional tort

23 liability coverage for personal injury at the minimum lim24 its (or higher) under the State’s financial responsibility

25 law.
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1 (2)(A) A motorist who chooses traditional tort liabil2 ity has automatically included in such coverage tort main3 tenance coverage at least at the equivalent of the mini4 mum levels of insurance under the higher of—

5 (i) the State’s financial responsibility law for

6 personal injury; or

7 (ii) the State’s no-fault motor vehicle law, if ap8 plicable.

9 (B) A motorist described under subparagraph (A)

10 who is involved in an accident with another motorist re11 mains subject to tort law for personal injury except that,

12 based on fault, such motorist—

13 (i) may be claimed against by those covered by

14 personal protection insurance or tort maintenance

15 coverage only for net economic loss; and

16 (ii) may not claim against those covered by per17 sonal protection insurance or tort maintenance cov18 erage except for net economic loss.

19 (C)(i) With respect to a claim under subparagraph

20 (B)(ii), a deduction is made against the recovery equal to

21 the limits of tort maintenance coverage applicable to the

22 economic loss of the claimant.

23 (ii) One-half of any amount paid under tort mainte24 nance coverage referred to under clause (i) shall be

25 deemed payable for economic loss.
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1 (3) A motorist who chooses personal protection cov2 erage and who is involved in an accident with another such

3 motorist is compensated under his or her own policy for

4 net economic loss only without regard to fault. But if the

5 motorist sustains net economic loss in excess of his or her

6 policy’s benefit levels, that person retains the right to

7 claim and sue for net economic loss based on fault.

8 (4) If a motorist who has chosen personal protection

9 coverage is involved in an accident with an uninsured mo10 torist, the personal protection insured is compensated for

11 net economic loss without regard to fault according to the

12 terms of his or her personal protection policy, and has the

13 right to claim against the uninsured motorist for net eco14 nomic loss based on fault. The uninsured motorist forfeits

15 the right to claim for noneconomic loss against the motor16 ist who has chosen the personal protection policy.

17 (5)(A) A motorist who chooses either personal protec18 tion insurance or tort liability insurance also binds by such

19 choice his or her resident relatives, provided that—

20 (i) an adult resident relative shall not be bound

21 without his or her consent, which, in the absence of

22 express consent, shall be implied when the relative is

23 present in a motor vehicle operated by the motorist;

24 and
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1 (ii) insurers are authorized to specify reason2 able terms and conditions governing the commence3 ment, duration, and application of the chosen cov4 erage depending on the number of motor vehicles

5 and owners thereof in a household.

6 (B) In order to minimize conflict between the two op7 tions under subparagraph (A), insurers are authorized to

8 maintain underwriting rules that encourage uniformity

9 within a household.

10 (6) A personal protection insured retains the right

11 to claim, and remains subject to a claim, for driving under

12 the influence of alcohol or illegal drugs, both as defined

13 by State law, or for intentional misconduct.

14 (7) A personal protection insured claims personal

15 protection benefits in the following priority:

16 (A) The personal protection of an employer if

17 the person injured is an employee of the employer

18 and the accident occurs while the employee is acting

19 within the scope of the employee’s employment.

20 (B) The personal protection under which the in21 jured person is or was an insured.

22 (C) The personal protection covering a motor

23 vehicle involved in the accident, if the person injured

24 was an occupant or was struck by such motor vehi25 cle at the time of the accident.
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1 (8) A personal protection insurer is authorized to

2 write personal protection coverage—

3 (A) without any deductible or subject to a rea4 sonable deductible not to exceed $1,000; and

5 (B) with an exclusion of coverage for persons

6 driving under the influence of alcohol or illegal

7 drugs.

8 (9) A personal protection insurer is subrogated, to

9 the extent of its obligations, to all of the rights of its per10 sonal protection insured with respect to an accident caused

11 in whole or in part, as determined by applicable State law,

12 by the negligence of an uninsured motorist or driving

13 under the influence of alcohol or illegal drugs, or caused

14 in whole or in part by intentional misconduct or any per15 son who is not affected by the limitations on tort rights

16 and liabilities under this Act.

17 (10) Any person lawfully uninsured under the terms

18 of State law for either personal protection or tort liability

19 insurance retains his or her tort rights in a form unaf20 fected by this Act.

21 (c) RENEWAL OR CANCELLATION.—An insurer shall

22 not cancel, fail to renew, or increase the premium of its

23 insured solely on account of the insured or any other in24 jured person making a claim for personal protection bene25 fits or, where there is no basis for ascribing fault to the
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1 insured or one for whom the insured is vicariously liable,

2 for tort maintenance coverage.

3 (d) IMMUNITY.—No insurer or any agent or employee

4 of such insurer, no insurance producer representing a

5 motor vehicle insurer or any automobile residual market

6 plan, and no attorney licensed to practice law within this

7 State shall be liable in an action for damages on account

8 of an election of the tort liability option, an election of

9 the personal protection option, or a failure to make a re10 quired election, unless such person has willfully misrepre11 sented the available choices or has fraudulently induced

12 the election of one system over the other.

13 (e) RULE OF CONSTRUCTION.—Nothing in this Act

14 shall be construed—

15 (1) to waive or affect any defense of sovereign

16 immunity asserted by any State under any law or by

17 the United States;

18 (2) to preempt State choice-of-law rules with re19 spect to claims brought by a foreign nation or a citi20 zen of a foreign nation;

21 (3) to affect the right of any court to transfer

22 venue, to apply the law of a foreign nation, or to dis23 miss a claim of a foreign nation or of a citizen of

24 a foreign nation on the ground of inconvenient

25 forum;
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1 (4) subject to paragraph (1), to create or vest

2 jurisdiction in the district courts of the United

3 States over any motor vehicle accident liability or

4 damages action subject to this Act which is not oth5 erwise properly in the United States District Court;

6 (5) to prevent insurers and insureds from con7 tracting to limit recovery for lost wages and income

8 under personal protection coverage such that only 60

9 percent or more of lost wages or income is covered,

10 or to offset death benefits under personal protection

11 coverage by amounts paid for lost wages and re12 placement service losses;

13 (6) to prevent an insurer from contracting with

14 personal protection insureds, as permitted by State

15 law, to have submitted to arbitration any dispute

16 with respect to payment of personal protection bene17 fits;

18 (7) to relieve a motorist of the obligations im19 posed by State law to purchase tort liability insur20 ance for personal injury to protect third parties who

21 are not affected by the immunities of subsection (b);

22 and

23 (8) to preclude a State from enacting, for all

24 motor vehicle accident cases including cases covered

25 by this Act, a minimum dollar value for defined
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1 classes of cases involving death or serious bodily in2 jury.

3 SEC. 6. APPLICABILITY TO STATES; CHOICE OF LAW; JURIS4 DICTION; AND CONSTRUCTION.

5 (a) ELECTION OF NONAPPLICABILITY BY STATES.—

6 This Act shall not apply in a State if such State enacts

7 a statute that—

8 (1) cites the authority of this subsection; and

9 (2) declares the election of such State that this

10 Act shall not apply.

11 (b) NONAPPLICABILITY TO STATE BY STATE FIND12 ING.—(1) This Act shall not apply in a State, if—

13 (A) the State official charged with jurisdiction

14 over insurance rates for motor vehicles makes a find15 ing that the statewide average motor vehicle pre16 miums in effect immediately before the effective date

17 of this Act for personal injury will not be reduced

18 by an average of at least 30 percent for persons

19 choosing personal protection coverage in lieu of tra20 ditional tort liability pursuant to this Act (without

21 including any cost for uninsured or underinsured or

22 medical payments coverages);

23 (B) the finding described under subparagraph

24 (A) is supported by evidence adduced in public hear-
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1 ing and reviewable under the State’s administrative

2 procedure law; and

3 (C) the finding described under subparagraph

4 (A) and any review of such finding described under

5 subparagraph (B) occurs no later than 60 days after

6 the date of the enactment of this Act.

7 (2) Premiums for personal injury referred to under

8 paragraph (1)(A) include premiums for—

9 (A) personal injury liability, uninsured and

10 underinsured motorists’ liability, and medical pay11 ments coverage; and

12 (B) if applicable—

13 (i) no fault benefits under no fault motor

14 vehicle law; or

15 (ii) similar benefits under a law not limit16 ing claims based on fault for nonpecuniary

17 losses.

18 (c) CHOICE OF LAW.—In disputes between citizens

19 of States that elect nonapplicability under subsection (a)

20 and citizens of States that do not so elect, ordinary choice

21 of law principles shall apply.

22 (d) JURISDICTION.—This section shall not confer ju23 risdiction on the district courts of the United States under

24 section 1331 or 1337 or title 28, United States Code.
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1 (e) CONSTRUCTION.—Nothing in this Act shall alter

2 or diminish the authority or obligation of the Federal

3 courts to construe the terms of this Act.

4 SEC. 7. EFFECTIVE DATE.

5 This Act shall take effect 60 days after the date of

6 the enactment of this Act.

Æ