To enable drivers to choose a more affordable form of auto insurance that also provides for more adequate and timely compensation for accident victims, and for other purposes.

October 7, 2004

Mr. CORNYN (for himself, Mr. MCCONNELL, and Mr. MCCAIN) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

To enable drivers to choose a more affordable form of auto insurance that also provides for more adequate and timely compensation for accident victims, 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 AND TABLE OF CONTENTS.

(a) SHORT TITLE- This Act may be cited as the `Auto Choice Reform Act of 2004'.

(b) TABLE OF CONTENTS- The table of contents for this Act is as follows:

Sec. 1. Short title and table of contents.

Sec. 2. Findings and purposes.

Sec. 3. Definitions.

Sec. 4. Auto choice insurance system.

Sec. 5. Personal injury protection system.

Sec. 6. Tort maintenance system.

Sec. 7. Protection against insurance fraud.

Sec. 8. Source of compensation in cases of accidental injury.

Sec. 9. Preservation of State and private rights.

Sec. 10. Applicability to States.

SEC. 2. FINDINGS AND PURPOSES.

(a) FINDINGS- Congress makes the following findings:

(1) Auto insurance premiums are too high, largely because the current auto liability insurance system (referred to in this subsection as the `present system')--

(A) encourages costly fraudulent claims and unnecessarily contentious behavior by both claimants and defendants; and

(B) often requires expensive lawyers on both sides of a dispute to settle claims.

(2) The adversarial tort system that is in effect in 36 States poorly compensates the most needy individuals, in that the system--

(A) pays no liability benefits to more than 30 percent of all accident victims;

(B) takes too long to pay victims when it does pay them;

(C)(i) pays victims with minor injuries an average of two to three times the cost of their medical bills and lost wages; but

(ii) pays victims with serious injuries an average of less than 50 percent of those bills and lost wages; and

(D) pays more for plaintiff and defense lawyers combined than it pays for victims' medical bills and lost wages.

(3) The chance of winning the lawsuit lottery in the present system--

(A) results in the filing of billions of dollars of fraudulent or otherwise unnecessary auto insurance claims annually;

(B) generates billions of dollars in unnecessary health care costs for private, Federal, and State health care programs;

(C) raises auto insurance premiums for all drivers, including drivers operating business vehicles; and

(D) makes auto insurance premiums unaffordable for many low-income individuals.

(4) The present system harms cities by--

(A) encouraging the filing of frivolous and inflated claims that cities pay at the expense of all taxpayers; and

(B) contributing to the abandonment of cities by taxpayers who can achieve substantial reductions in their auto insurance premiums by moving to the suburbs.

(5) The present system provides individuals little incentive to purchase safer automobiles.

(6) All of the no-fault insurance reform laws that exist in 12 States provide more timely and equitable compensation for medical bills and lost wages to more accident victims.

(7) Some of those no-fault insurance reform laws, however, have not been successful in controlling insurance premiums, in large part because opponents of such reform have weakened the laws by creating loopholes for unnecessary and costly lawsuits.

(8) The alternative form of insurance, personal injury protection, that may be offered to drivers by reason of this Act, gives drivers the ability to--

(A)(i) insure themselves in all accidents for their own medical bills and lost wages; and

(ii) sue other drivers on the basis of fault for any economic losses that are not covered by their insurance; and

(B) forgo lawsuits against other drivers for noneconomic damages on the basis of fault in return for being free from lawsuits for noneconomic damages by other drivers.

(9) Personal injury protection, by reducing the need for auto liability lawsuits and the incentives they provide for fraudulent and otherwise questionable claims, could--

(A) save drivers billions of dollars annually; and

(B) enable them to receive more adequate and timely compensation when they are seriously injured.

(10) Personal injury protection would benefit society by--

(A) increasing respect for the law by eliminating the incentives of the adversarial present system for fraudulent claims and unnecessarily contentious behavior by both claimants and defendants;

(B) saving precious health care resources;

(C) making it more affordable for low-income individuals to operate an automobile to get to better paying jobs;

(D) reducing the incentives for individuals to abandon cities, by providing greater savings for drivers who reside in cities;

(E) freeing city taxpayers' dollars for reductions in taxes or expanded city programs by reducing the amount of frivolous and unnecessary lawsuits against cities;

(F) encouraging drivers to own safer automobiles by giving insurers the opportunity to reduce premiums for the owners of safe automobiles; and

(G) helping to free up court dockets that are currently overburdened with personal injury lawsuits fueled by the incentives for lawsuits under the present system.

(11) A new auto insurance system that allows drivers to select the form of auto insurance that best meets their needs, by choosing between--

(A) a modified version of the present system, or

(B) the personal injury protection system described in paragraph (9),

would enable drivers to reduce the cost of auto insurance, increase the amount of average compensation in the event of a serious accident, and enhance individual freedom.

(12) The Federal Government should encourage consumer choice, but not exercise regulatory authority over the business of auto insurance, including rates and insurer solvency, as that authority is appropriately exercised by the States.

(13)(A) During the period beginning July 1, 1956, and ending September 30, 2002, the Federal Government spent more than $887,000,000,000, adjusted for inflation, to facilitate highway construction in the United States.

(B) During the period beginning January 1, 1967, and ending December 31, 2001, more than 1,200,000 people were killed in motor vehicles accidents on highways constructed with Federal funds.

(14) The auto insurers who operate in interstate commerce pay more than 73 percent of the compensation paid to accident victims.

(15) Through programs such as medicare, medicaid, and social security, the Federal Government pays a significant amount of the costs for compensating motor vehicle accident victims.

(16) It is necessary and proper for the Congress, in the exercise of its authority to establish post roads and regulate commerce under section 8 of article I of the Constitution, to provide drivers throughout the United States with an alternative to address the problems of the adversarial present system and the inadequate no-fault insurance reforms.

(b) PURPOSES- The purposes of this Act are as follows:

(1) To enable consumers of auto insurance to choose between two insurance systems, which are--

(A) a tort maintenance system based on applicable State law that provides for substantially similar insurance premiums and compensation for injuries as compared to the auto insurance system in existence in that State on the date of enactment of this Act; and

(B) a personal injury protection system that compensates accident victims directly for their medical bills and lost wages with substantially less need to pursue lawsuits and provides the opportunity for--

(i) substantial reductions in auto insurance premiums;

(ii) more comprehensive recovery of medical bills and lost wages in a shorter period of time; and

(iii) the right to sue negligent drivers for any uncompensated medical bills or lost wages.

(2) To preserve the rights of States to regulate the business of auto insurance.

SEC. 3. DEFINITIONS.

In this Act:

(1) ACCIDENT- The term `accident' means an unforeseen or unplanned event that--

(A) causes injury; and

(B) arises from the operation, maintenance, or use of a motor vehicle.

(2) ADD-ON LAW- The term `add-on law' means a State law that provides that persons injured in motor vehicle accidents--

(A) are compensated without regard to fault for economic loss; and

(B) have the right to claim without any limitation for noneconomic loss based on fault.

(3) COLLATERAL SOURCE- The term `collateral source' means a person, other than a tortfeasor or a motor vehicle insurer, that has a legal obligation to pay compensation for economic loss to a person who is injured in an accident.

(4) COMMON CARRIER- The term `common carrier' means a motorized vehicle of any kind, licensed for highway use, that is--

(A) required to be registered under the provisions of applicable State law relating to motor vehicles; and

(B) used in the business of transporting persons.

(5) ECONOMIC LOSS- The term `economic loss' means objectively verifiable pecuniary loss caused by an accident for--

(A) reasonable and necessary medical and rehabilitation expenses;

(B) loss of earnings;

(C) funeral costs; and

(D) replacement services loss.

(6) ELECTRONIC SIGNATURE- The term `electronic signature' means any letters, characters, or symbols executed or adopted by a party with an intent to authenticate a writing that are--

(A) manifested by--

(i) electronic means; or

(ii) any other similar means; and

(B) logically associated with that writing.

(7) FINANCIAL RESPONSIBILITY LAW- The term `financial responsibility law' means a law (including a law requiring compulsory coverage) penalizing motorists for failing to carry defined limits of tort liability insurance covering motor vehicle accidents.

(8) FIRST PARTY BENEFITS- The term `first party benefits' means benefits paid or payable by an insurer to an insured of that insurer under a personal injury protection policy or a tort maintenance coverage policy applicable to that insured.

(9) INJURY- The term `injury' means bodily injury, sickness, disease, or death.

(10) INSURER- The term `insurer' means any person who is engaged in the business of issuing or delivering motor vehicle insurance policies (including an insurance agent, if appropriate) under applicable State law.

(11) MOTOR CARRIER- The term `motor carrier' means--

(A) a person who--

(i) transports by motor vehicle goods for another person or entity for compensation; and

(ii) is liable for the operation of the vehicle under part 387 of title 49, Code of Federal Regulations; or

(B) a person who transports such person's goods by a motor vehicle that such person owns or leases.

(12) MOTOR VEHICLE- The term `motor vehicle' means a vehicle with 4 or more wheels licensed for highway use that is required to be registered under the provisions of the applicable State financial responsibility law relating to motor vehicles.

(13) NAMED INSURED- The term `named insured' means a person designated by name in a personal injury protection policy or tort maintenance coverage policy as the insured.

(14) NO-FAULT MOTOR VEHICLE LAW- The term `no-fault motor vehicle law' means a State law that provides that--

(A) persons injured in motor vehicle accidents are paid compensation without regard to fault for their economic loss that results from injury; and

(B) in return for the payment referred to in subparagraph (A), claims based on fault, including claims for noneconomic loss, are limited to a defined extent.

(15) NONECONOMIC LOSS- The term `noneconomic loss' means subjective, nonmonetary losses recognized under applicable State tort law.

(16) OCCUPY- The term `occupy' means, with respect to the operation, maintenance, or use of a

motor vehicle, to be in or on a motor vehicle or to be engaged in the immediate act of entering into or alighting from a motor vehicle.

(17) OPERATION, MAINTENANCE, OR USE OF A MOTOR VEHICLE- (A) The term `operation, maintenance, or use of a motor vehicle' means any activity involving or related to the transportation by a motor vehicle.

(B) Such term includes occupying or being engaged in the immediate act of entering into or alighting from a motor vehicle before or after its use for transportation.

(C) Such term does not include--

(i) conduct within the course of a business of manufacturing, sale, repairing, servicing, or otherwise maintaining motor vehicles, unless the conduct occurs outside the scope of the business activity; or

(ii) conduct within the course of loading or unloading a motor vehicle, unless the conduct occurs while occupying or being engaged in the immediate act of entering into or alighting from a motor vehicle before or after its use for transportation.

(18) PERSON- The term `person' means any individual, corporation, company, association, firm, partnership, society, joint stock company, or any other entity, including any governmental entity.

(19) PERSONAL INJURY PROTECTION- The term `personal injury protection' means insurance that provides for--

(A) benefits to a personal injury protection insured for economic loss without regard to fault for injury resulting from a motor vehicle accident in accordance with this Act;

(B) a waiver of tort claims against other drivers, other than--

(i) claims for uncompensated economic loss based on fault; and

(ii) other tort claims exempted from such a waiver under this Act;

(C) coverage against claims for uncompensated economic losses based on fault by another party that is entitled to recover those losses under this Act; and

(D) coverage against claims for economic or noneconomic losses of a third party with respect to which the recovery of those losses is not covered under this Act.

(20) PERSONAL INJURY PROTECTION INSURED- The term `personal injury protection insured' means a person covered by the form of insurance described in section 5.

(21) PERSONAL INJURY PROTECTION INSURER- The term `personal injury protection insurer' means an insurer who is engaged in the business of providing personal injury protection.

(22) PERSONAL INJURY PROTECTION SYSTEM- The term `personal injury protection system' means the insurance system described in section 5.

(23) REPLACEMENT SERVICES LOSS- The term `replacement services loss' means expenses reasonably incurred in obtaining ordinary and necessary services from other persons who are not members of the injured person's household, in lieu of the services the injured person would have performed for the benefit of the household.

(24) RESIDENT RELATIVE OR DEPENDENT- (A) The term `resident relative or dependent' means a person--

(i) who is related to the named insured by blood, marriage, adoption, or otherwise (including a dependent receiving financial services or support from such insured); and

(ii) who--

(I) resides in the same household as the named insured at the time of the accident; or

(II) usually makes a home in the same family unit as the named insured, even though that person may temporarily live elsewhere.

(B) Such term does not include any person who maintains or is required to maintain insurance for a motor vehicle that such person owns.

(25) STATE- The term `State' includes the District of Columbia, the Commonwealth of Puerto Rico, Guam, the United States Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands, the Trust Territories of the Pacific Islands, and any other territory or possession of the United States.

(26) TORT LIABILITY- The term `tort liability' means the legal obligation to pay damages for an injury in an accident adjudged to have been caused by a tortfeasor, under applicable State law.

(27) TORT LIABILITY INSURANCE- The term `tort liability insurance' means a contract of insurance under which an insurer agrees to pay, on behalf of an insured, damages that the insured is obligated to pay to a third person because of the liability of the insured to that person.

(28) TORT MAINTENANCE COVERAGE- The term `tort maintenance coverage' means insurance coverage under which a tort maintenance insured, if involved in an accident with a personal injury protection insured, may recover first party benefits for economic and noneconomic losses from the insurer of that insured, based on fault under applicable State law.

(29) TORT MAINTENANCE INSURED- The term `tort maintenance insured' means a person covered by the form of insurance described in section 6.

(30) TORT MAINTENANCE SYSTEM- The term `tort maintenance system' means an insurance system described in section 6.

(31) UNCOMPENSATED ECONOMIC LOSS- (A) The term `uncompensated economic loss' means any objectively verifiable pecuniary loss payable based on fault under applicable State tort law, except for any such loss that is determined by a court of competent jurisdiction to be, in whole or in part, a product of fraudulent activity by the person making the claim.

(B) Such term includes a reasonable attorney's fee calculated on the basis of the time actually expended and the value of the attorney's efforts as reflected in payment to the attorney's client. However, such term does not include attorney's fees when the uncompensated economic loss is attributable only to a deductible for coverage specified in subparagraph (C)(i). The amount of a reasonable attorney's fee under this subparagraph shall not exceed the greater of the amount recovered or $1,000.

(C) Subject to section 8(k)(2), such term does not include amounts paid or payable under--

(i) personal injury protection;

(ii) tort maintenance coverage;

(iii) no-fault or add-on motor vehicle insurance;

(iv) Federal, State, or private disability or sickness programs;

(v) Federal, State, or private health insurance programs;

(vi) employer wage continuation programs; or

(vii) workers' compensation or similar occupational compensation laws.

(32) UNINSURED MOTORIST- The term `uninsured motorist' means the owner of a motor vehicle, including the resident relatives or dependents of the owner, who is uninsured under either the personal injury protection system described in section 5 or the tort maintenance system described in section 6--

(A) at the limits prescribed by the applicable State financial responsibility law; or

(B) an amount prescribed under section 5(a)(1).

SEC. 4. AUTO CHOICE INSURANCE SYSTEM.

(a) OPERATION OF THE RIGHT TO CHOOSE-

(1) IN GENERAL- Under this Act, an insurer may offer a choice between--

(A) the personal injury protection system described in section 5; and

(B) the tort maintenance system described in section 6.

(2) ELECTION BY SELF-INSURED PERSONS- A self-insured person, as determined under an applicable State law, may elect coverage under paragraph (1) by filing a notice with the appropriate State or Federal agency.

(3) EFFECT OF ELECTION BY ELECTRONIC MEANS- For purposes of making an election of an insurance system under this subsection, unless prohibited by applicable State law, an electronic signature shall have the same force and effect as a handwritten signature.

(b) EFFECT OF CHOICE ON RESIDENT RELATIVES OR DEPENDENTS-

(1) IN GENERAL- Except as provided in paragraph (2), a person who chooses either the personal injury protection system or the tort maintenance system also binds the resident relatives or dependents of that person.

(2) EXCEPTION- An adult resident relative or dependent of a person described in paragraph (1) may select the form of insurance that such person does not select if the adult resident relative or dependent makes that selection expressly in writing to the insurer.

(3) TERMS AND CONDITIONS- Insurers may specify reasonable terms and conditions governing the commencement, duration, and application of the

chosen coverage, depending on the number of motor vehicles and owners of such vehicles in a household.

(c) UNIFORMITY RULES-

(1) IN GENERAL- Notwithstanding subsection (b)(2) and in order to minimize conflict between the insurance options, an insurer may maintain and apply underwriting rules that encourage uniformity in the provision of insurance benefits within a household.

(2) UNIFORMITY IN INSURANCE IN EMPLOYMENT- Except as provided in paragraph (6), an employer that elects an insurance option described in subparagraph (A) or (B) of subsection (a)(1) binds the employees of that employer for purposes of coverage of that employee in the course of employment by that employer.

(3) UNIFORMITY IN INSURANCE FOR MOTOR CARRIERS- Except as provided in paragraph (6), a motor carrier that elects an insurance option described in subparagraph (A) or (B) of subsection (a)(1) binds any owner, operator, or occupant of a motor vehicle operated by that motor carrier.

(4) UNIFORMITY IN INSURANCE FOR COMMON CARRIERS- Except as provided in paragraph (6), an owner of a common carrier that elects an insurance option described in subparagraph (A) or (B) of subsection (a)(1) binds the owner and any operator or occupant of that common carrier.

(5) UNIFORMITY IN INSURANCE FOR MOTOR VEHICLE RENTALS-

(A) IN GENERAL- Except as provided in subparagraph (B), a person who is engaged in the business of renting motor vehicles and who elects an insurance option described in subparagraph (A) or (B) of subsection (a)(1) binds any operator or occupant of the rented motor vehicle with respect to the operation of that vehicle. Whether such insurance under such an option shall be in excess of, or primary to, any insurance elected pursuant to subparagraph (A) or (B) of subsection (a)(1) by a customer who rents a motor vehicle shall be determined pursuant to applicable State law.

(B) EXCEPTION- Subparagraph (A) shall not apply if a customer who rents a motor vehicle--

(i) specifically elects to obtain coverage within the rental agreement other than the coverage elected by the person engaged in the business of renting the motor vehicle; and

(ii) pays a separate charge, if required, for that optional coverage.

(6) RIGHT OF EMPLOYEES, OPERATORS, AND CERTAIN OCCUPANTS TO PURCHASE ADDITIONAL COVERAGE-

(A) EMPLOYEES- An employee under paragraph (2) may elect to purchase separate personal injury protection or tort maintenance coverage in excess of the insurance provided by the employer in the scope of the employment of that employee.

(B) OPERATORS AND OCCUPANTS OF MOTOR CARRIERS- An operator or occupant of a motor carrier under paragraph (3) may elect to purchase separate personal injury protection or tort maintenance coverage in excess of the insurance provided to that operator or occupant by the motor carrier as an operator or occupant of that motor carrier.

(C) OPERATORS AND OCCUPANTS OF COMMON CARRIERS- An operator or occupant of a common carrier under paragraph (4) may elect to purchase separate personal injury protection or tort maintenance coverage in excess of the insurance provided to that operator or occupant by the owner of the common carrier as an operator or occupant of the common carrier.

(D) EFFECT OF ELECTION- The election by an employee, operator, or occupant to purchase insurance coverage under this paragraph shall not affect the liability of an employer, motor carrier, or common carrier.

(d) FAILURE TO ELECT TYPE OF INSURANCE-

(1) IN GENERAL- Except as provided in subsection (b)(1), any person who fails to elect a type of insurance under subsection (a)(1) shall be deemed to have elected insurance under the tort maintenance system in effect in the State of that person's residence.

(2) RULE OF CONSTRUCTION- This subsection shall not be construed to prevent a State from enacting a law that deems a person who fails to elect a type of insurance under this section to have elected insurance under the personal injury protection system.

(e) CONSUMER INFORMATION PROGRAM-

(1) STATE PROGRAM- The State official charged with jurisdiction over insurance rates for

motor vehicles may establish and maintain a program designed to ensure that consumers are adequately informed concerning--

(A) the comparative cost of insurance under the personal injury protection system and the tort maintenance system; and

(B) the benefits, rights, and obligations of insurers and insureds under each such system.

(2) INSURER PROGRAM- An insurer that offers a choice of insurance systems under subsection (a)(1) shall provide to each consumer, before that consumer chooses motor vehicle insurance, written consumer information to ensure that consumers are adequately informed about--

(A) the comparative cost of insurance under the personal injury protection system and the tort maintenance system; and

(B) the benefits, rights, and obligations of insurers and insureds under each system.

(3) ADEQUATE NOTICE- If an insurer files consumer information forms under paragraph (2) with the State official charged with jurisdiction over insurance rates for motor vehicles and such forms are not disapproved within a reasonable period of time after that filing, such filing and use of the information in accordance with paragraph (2) shall be presumed to be adequate notice.

(f) SUPERSEDING PROVISION- Subject to section 10, this Act supersedes a State law to the extent that the State law is otherwise inconsistent with the requirements of this Act.

SEC. 5. PERSONAL INJURY PROTECTION SYSTEM.

(a) MINIMUM POLICY REQUIREMENTS- In order to constitute a personal injury protection policy covered by this Act, a motor vehicle insurance policy issued by an insurer shall, at a minimum--

(1) for each accident, provide personal injury protection benefits to each personal injury protection insured in amounts equal to--

(A) the minimum per-person limits of liability insurance for personal injury under the relevant State financial responsibility law applicable to private passenger vehicles; or

(B) in a State covered by a no-fault motor vehicle law, the minimum level of insurance required for no-fault benefits;

(2) contain provisions for a waiver of tort claims against drivers other than the insured, except--

(A) claims for uncompensated economic loss based on fault; or

(B) other tort claims exempted from such a waiver under this Act;

(3) contain provisions for third party liability coverage in amounts equal to the minimum limits required under applicable Federal or State financial responsibility law for--

(A) property damage; and

(B) bodily injury to cover--

(i) uncompensated economic losses for parties who are entitled to recover such losses under this Act; and

(ii) economic and noneconomic losses of third parties whose recovery is not affected by this Act.

(b) PRIMACY OF PAYMENT-

(1) IN GENERAL-

(A) PERSONAL INJURY PROTECTION BENEFITS-

(i) IN GENERAL- Except as provided in subparagraph (B), in any case in which a personal injury protection insurer and a collateral source are obligated to pay benefits for the same economic loss under this Act, the personal injury protection insurer shall be liable for the primary payment of benefits to cover that economic loss.

(ii) LIABILITY OF COLLATERAL SOURCES- A collateral source shall be liable for economic loss only to the extent that the loss exceeds benefits paid or payable by an insurer under an applicable personal injury protection insurance policy.

(B) EXCEPTION- Personal injury protection benefits shall be reduced by an amount equal to any benefits provided or required to be provided under--

(i) an applicable Federal or State law for workers' compensation;

(ii) any State-required nonoccupational disability insurance; or

(iii) any occupational disability insurance covering professional drivers of motor vehicles who are independent contractors.

(2) REIMBURSEMENT OF PAYORS-

(A) IN GENERAL- A personal injury protection insurer may take appropriate measures to ensure that any person otherwise eligible for personal injury protection benefits who has

been paid or is being paid for losses payable by personal injury protection from a source other than the applicable personal injury protection insurer shall not receive multiple payment for those losses.

(B) ACCRUAL OF RIGHTS- Any right to payment for losses referred to in subparagraph (A) from a personal injury protection insurer accrues only to that payor. Payments by a payor referred to in subparagraph (A) shall not be counted against personal injury limits for personal injury protection until such time as the payor is reimbursed under this subparagraph.

(3) PROTECTION AGAINST DUPLICATION- Upon receipt of reasonable notice, a personal injury protection insurer shall reimburse a collateral source for payments made by that collateral source for economic loss for injury resulting from a motor vehicle accident, to the extent that the personal injury protection insurer is obligated to pay for that economic loss.

(c) PROMPT AND PERIODIC PAYMENT-

(1) IN GENERAL- A personal injury protection insurer may pay personal injury protection benefits periodically as losses accrue.

(2) LATE PAYMENT- Except as provided in section 7, a personal injury protection insurer that does not pay a claim for personal injury protection benefits during the 30-day period beginning on the date on which that insurer receives a submission of reasonable proof of the loss for which those benefits are payable, shall pay--

(A) the loss compounded at a rate of 12 percent per annum as liquidated damages during the first 10 days after such 30-day period, and 24 percent per annum as liquidated damages thereafter; and

(B) a reasonable attorney's fee calculated on the basis of the time actually expended or the value of the attorney's efforts as reflected in payment to the attorney's client.

(3) ADMINISTRATION OF PERSONAL INJURY PROTECTION BENEFITS- To the extent consistent with this Act, any applicable provision of a State no-fault motor vehicle law or add-on law governing the administration of payment of benefits without reference to fault shall apply to the payment of benefits under personal injury protection under this subsection.

(d) AUTHORIZATIONS FOR DEDUCTIONS AND EXCLUSIONS-

(1) IN GENERAL- A personal injury protection insurer may write personal injury protection--

(A)(i) without any deductible; or

(ii) subject to a reasonable deductible; and

(B) with an exclusion of coverage for first party benefits to cover the losses of the personal injury protection insured caused by that insured's--

(i) driving under the influence of alcohol or illegal drugs; or

(ii) driving while seeking to intentionally injure another person.

(2) APPLICABILITY OF DEDUCTIBLES- The deductibles and exclusions described in paragraph (1) shall apply only to--

(A) the person named in the applicable insurance policy; and

(B) the resident relatives or dependents of the person described in subparagraph (A).

SEC. 6. TORT MAINTENANCE SYSTEM.

(a) MINIMUM POLICY REQUIREMENTS-

(1) IN GENERAL- The coverage for a person who chooses insurance under section 4(a)(1)(B) shall include--

(A) the type of motor vehicle insurance that is otherwise required under applicable State law; and

(B) tort maintenance coverage at a level that is at least equivalent to the level of insurance required under the applicable State financial responsibility law for bodily injury liability.

(2) RESPONSIBILITY FOR PAYMENT UNDER TORT MAINTENANCE COVERAGE- The responsibility for payment for any claim under tort maintenance coverage is assumed by the insurer of the tort maintenance insured to the extent of such coverage.

(b) ADDITIONAL PAYMENTS FROM UNINSURED MOTORIST COVERAGE AND UNDERINSURED MOTORIST COVERAGE- A tort maintenance insured who also purchases an insurance policy that provides uninsured motorist coverage or underinsured motorist coverage may recover under the terms of that policy for any economic or noneconomic loss arising from an accident involving a personal injury protection insured, in any case in which the amount of those economic or noneconomic losses exceed the aggregate amount recovered or recoverable from the--

(1) tort maintenance coverage of the tort maintenance insured; and

(2) personal injury protection insured.

SEC. 7. PROTECTION AGAINST INSURANCE FRAUD.

(a) TIMELY SUBMISSION OF CLAIMS FOR FIRST PARTY BENEFITS-

(1) IN GENERAL- No insurer shall be obligated to pay first party benefits to a personal injury protection insured for any economic loss that occurred more than 45 days prior to the submission of a claim for such loss.

(2) TOLLING- The time for submission of a claim shall be tolled during any period during which the insured can show that--

(A) the insured was physically unable--

(i) to submit proof of the claim; or

(ii) to supply the identity of the insurer to the provider of services; or

(B) the insured was unable to identify the insurer despite good faith efforts to do so.

(b) LOSS OF FIRST PARTY BENEFITS-

(1) IN GENERAL- No insurer shall be obligated to pay any first party benefits to a personal injury protection insured for any economic loss that a court of competent jurisdiction determines is, in whole or in part, the product of fraudulent activity by the insured with respect to an accident.

(2) ATTORNEY'S FEES- An insurer that prevails in a lawsuit against a personal injury protection insured to recover benefits that were the product of fraudulent activity, as determined by a court of competent jurisdiction, shall be entitled to a reasonable attorney's fee from the insured.

(c) LOSS OF ENTITLEMENT TO PURCHASE INSURANCE- An insurer may cancel, decline to renew, or refuse to issue a personal injury protection policy to any person who a court of competent jurisdiction has determined has engaged in fraudulent activity with respect to an accident during the previous three years.

SEC. 8. SOURCE OF COMPENSATION IN CASES OF ACCIDENTAL INJURY.

(a) ACCIDENTS BETWEEN PERSONS CHOOSING THE TORT MAINTENANCE SYSTEM- A tort maintenance insured who is injured in an accident with another tort maintenance insured shall be subject to applicable State law for injury.

(b) ACCIDENTS BETWEEN PERSONS CHOOSING THE PERSONAL INJURY PROTECTION SYSTEM-

(1) RIGHT TO RECOVER ECONOMIC LOSS WITHOUT REGARD TO FAULT- A personal injury protection insured who is injured in an accident with another personal injury protection insured shall be entitled to recover first party benefits only for economic loss, without regard to fault.

(2) RIGHT TO SUE FOR UNCOMPENSATED ECONOMIC LOSS BASED ON FAULT- A personal injury protection insured who is involved in an accident with another personal injury protection insured may recover uncompensated economic loss (and not noneconomic loss) from that other insured, based on fault.

(c) ACCIDENTS INVOLVING PERSONS CHOOSING THE TORT MAINTENANCE SYSTEM AND THE PERSONAL INJURY PROTECTION SYSTEM-

(1) PERSONS CHOOSING THE TORT MAINTENANCE SYSTEM-

(A) IN GENERAL- A tort maintenance insured who is involved in an accident with a personal injury protection insured shall be subject to applicable State law for injury, except that, based on fault, that person may--

(i) recover first party benefits for economic and noneconomic losses under the tort maintenance coverage of that insured;

(ii) upon submission of proof of insurance, recover uncompensated economic loss (and not noneconomic loss) from the personal injury protection insured; and

(iii) upon submission of proof of insurance, be liable to a personal injury protection insured for uncompensated economic loss (and not for noneconomic loss).

(B) ALLOCATION OF RECOVERY- In determining the extent of recovery of a tort maintenance insured from a personal injury protection insured under this subsection, the payments made to the tort maintenance insured from tort maintenance coverage shall first by allocable to economic loss, and any remainder may be allocable to noneconomic loss.

(2) PERSONS CHOOSING THE PERSONAL INJURY PROTECTION SYSTEM- A personal injury protection insured who is injured in an accident with a tort maintenance insured--

(A) shall be entitled to recover first party benefits for economic loss only, without regard to fault; and

(B) may recover uncompensated economic loss (and not noneconomic loss) from that other insured, based on fault.

(d) ALLOCATION OF COMPARATIVE FAULT- In any case in which a claim is made under this Act for uncompensated economic loss on the basis of comparative fault under applicable State law, the recovery of damages shall be based on the percentage of fault with respect to the amount of uncompensated economic loss.

(e) ACCIDENTS INVOLVING PERSONS CHOOSING THE PERSONAL INJURY PROTECTION SYSTEM AND PERSONS WHO ARE UNLAWFULLY UNINSURED-

(1) RIGHTS OF PERSONAL INJURY PROTECTION INSUREDS- A personal injury protection insured who is involved in an accident with an uninsured motorist--

(A) shall be compensated under the insured person's policy for economic loss without regard to fault; and

(B) may recover from the uninsured motorist (other than under uninsured or underinsured motorist coverage) for economic loss and for noneconomic loss based on fault.

(2) LIMITATIONS ON LAWSUITS BY UNINSURED MOTORISTS- An uninsured motorist may not recover from a personal injury protection insured for noneconomic loss.

(f) ACCIDENTS INVOLVING MOTORISTS UNDER THE INFLUENCE OF ALCOHOL OR ILLEGAL DRUGS OR INFLICTING INTENTIONAL INJURY- Notwithstanding any other provision of this Act, a personal injury protection insured who is in an accident may--

(1) recover all damages based on fault under applicable State law from a person who--

(A) at the time of the accident, was driving under the influence of alcohol or illegal drugs (as those terms are defined under applicable State law); or

(B) caused an injury while seeking to intentionally injure another person; and

(2) be liable for all damages based on fault under applicable State law, if such insured--

(A) at the time of the accident, was driving under the influence of alcohol or illegal drugs (as those terms are defined under applicable State law); or

(B) caused an injury while seeking to intentionally injure another person.

(g) RIGHTS OF LAWFULLY UNINSURED PERSONS- Nothing in this Act shall be construed to affect the tort rights or obligations of any person lawfully uninsured under the terms of an applicable State law for insurance under either the personal injury protection system or tort maintenance system under section 4(a)(1).

(h) RIGHTS OF PERSONS OCCUPYING MOTOR VEHICLES WITH FEWER THAN FOUR LOAD-BEARING WHEELS- Nothing in this Act shall be construed to affect the tort rights or obligations of a person who occupies a motor vehicle with fewer than 4 load-bearing wheels or an attachment thereto, unless an applicable contract for personal injury protection under which that person is insured specifies otherwise. The preceding sentence applies without regard to whether the person is otherwise legally insured for personal injury protection or tort maintenance coverage.

(i) FORFEITURE OF FRAUDULENT CLAIMS- An owner, operator, or occupant of a motor vehicle involved in an accident forfeits the right to make a claim against an insured motorist for economic or noneconomic loss resulting from injury incurred by that owner, operator, or occupant if that owner, operator, or occupant knowingly participated in a scheme to obtain insurance payments for any accident that was staged with the intent to commit insurance fraud.

(j) PRIORITY OF BENEFITS-

(1) IN GENERAL- Except as provided in paragraph (2), a personal injury protection insured or a tort maintenance insured may recover first party benefits only under the coverage of that insured in effect at the time of the accident.

(2) EXCEPTIONS-

(A) IN GENERAL- Except as provided in subparagraph (B), with respect to an accident that occurred while an injured individual was occupying a motor vehicle--

(i) furnished by an employer, the primary coverage shall be the coverage applicable to the motor vehicle; or

(ii) that was being used in the business of transporting individuals or property, the primary coverage shall be the coverage applicable to that motor vehicle.

(B) CERTAIN CLAIMANTS- A claimant may claim first party benefits in an amount greater than the amounts determined under the limits under the primary insurance coverage described in clause (i) or (ii) of subparagraph (A), if that claimant would otherwise be able to receive those increased benefits by reason of insurance coverage of that claimant that would

otherwise apply, but for the operation of subparagraph (A).

(k) REIMBURSEMENT RIGHTS OF PERSONAL INJURY PROTECTION INSURERS AND COLLATERAL SOURCES-

(1) REIMBURSEMENT RIGHTS OF PERSONAL INJURY PROTECTION INSURERS-

(A) IN GENERAL- A personal injury protection insurer may seek reimbursement under subparagraph (B), from--

(i) an uninsured motorist who is liable for damages caused by the accident;

(ii) a motorist who was under the influence of alcohol or illegal drugs at the time of the accident and whose conduct was the proximate cause of the accident;

(iii) a person who caused an injury while seeking to intentionally injure another person; or

(iv) any other person who is not affected by the limitations on tort rights and liabilities under this Act and whose conduct was the proximate cause of the accident.

(B) REIMBURSEMENT- A personal injury protection insurer may seek reimbursement under this subparagraph to the extent of the obligations of that insurer, with respect to payments made to a personal injury protection insured of that insurer for an accident caused in whole or in part, as determined in accordance with applicable State law, from a person referred to in subparagraph (A), for the losses that insurer--

(i) has paid or reimbursed; or

(ii) under applicable law, is obligated to pay.

(2) REIMBURSEMENT RIGHTS OF COLLATERAL SOURCES- With respect to an accident, a collateral source may seek reimbursement from an insurer in a civil action based on fault.

(3) PROHIBITION ON MULTIPLE RECOVERY- In any action to recover losses arising out of an accident, a person may not recover or introduce into evidence in a civil action against another person any amount of a loss that a collateral source or personal injury protection insurer--

(A) has paid or reimbursed; or

(B) is obligated to pay.

(l) CHOICE OF LAW-

(1) APPLICABLE LAW- With respect to a claim relating to a motor vehicle accident involving persons from different States, the choice-of-law principles applicable under the law of the State of competent jurisdiction shall apply.

(2) APPLICABLE COVERAGE IN AN AUTO CHOICE STATE- With respect to an accident that involves a person from a State in which this Act does not apply and a person from a State in which this Act applies, in any case in which the accident occurs in a State in which this Act applies, the coverage of the person from the State in which this Act does not apply shall be deemed to be the form of insurance system (whether personal injury protection or tort maintenance) that most closely reflects the form of insurance that the person maintains in the State of residence of the person.

(m) JURISDICTION- This Act shall not confer jurisdiction on the district courts of the United States under section 1331 or 1337 of title 28, United States Code.

(n) STATUTES OF LIMITATIONS- Nothing in this Act shall supersede an applicable State law that imposes a statute of limitations for claims related to an injury caused by an accident, except that such statute shall be tolled during the period during which any personal injury protection or tort maintenance coverage benefits are paid.

(o) LIMITATIONS ON NONRENEWAL, CANCELLATION, AND PREMIUM INCREASES- An insurer shall not cancel, decline to renew, or increase the premium of a person insured by the insurer solely because that insured person or any other injured person made a claim for--

(1) personal injury protection benefits; or

(2) tort maintenance coverage benefits in any case in which there is no basis for ascribing fault to the insured or one for whom the insured is vicariously liable.

(p) NEGLIGENT DRIVER RATINGS- Nothing in this Act shall be construed to limit insurers from canceling, failing to renew, or increasing premiums for an insured person if there is a basis for ascribing moving traffic violations or fault for an accident caused by that insured or any resident relative or dependent, or employee of that insured.

(q) IMMUNITY-

(1) IN GENERAL- Except as provided in paragraph (2), no insurer, insurance agent or broker, insurance producer representing a motor vehicle insurer, automobile residual market plan, or attorney licensed to practice law within a State, or any

employee of any such person or entity, shall be liable in an action for damages on account of--

(A) an election of--

(i) the tort maintenance system under section 4(a)(1)(B); or

(ii) the personal injury protection system under section 4(a)(1)(A); or

(B) a failure to make a required election.

(2) EXCEPTION- Paragraph (1) shall not apply in any case in which--

(A) a person described in that paragraph--

(i) willfully and intentionally misrepresents the insurance choices available to a customer or client of that person; or

(ii) willfully and with the intent to defraud, induces the election of one motor vehicle insurance system described in paragraph (1)(A) over the other motor vehicle insurance system described in that paragraph; and

(B) the misrepresentation or inducement under subparagraph (A) was the proximate cause of that customer or client's electing or failing to make an election of an insurance system under subparagraph (A) or (B) of section 4(a)(1).

SEC. 9. PRESERVATION OF STATE AND PRIVATE RIGHTS.

(a) RIGHTS OF STATES- Nothing in this Act shall be construed--

(1) to waive or affect any defense of sovereign immunity asserted by any State under any law or by the United States;

(2) to preempt State choice-of-law rules with respect to claims brought by a foreign nation or a citizen of a foreign nation;

(3) to affect the right of any court to transfer venue, 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;

(4) to preclude a State from enacting a law that mandates that claims by personal injury protection insureds for uncompensated economic loss be submitted for nonbinding alternative dispute resolution before any action on such claims may be maintained;

(5) to preclude a State from enacting a law mandating that personal injury protection insureds make co-payments of 10 percent for office visits for medical and rehabilitation expenses;

(6) to preclude a State from requiring personal injury protection insurers to offer first party insurance that establishes a dollar value for noneconomic loss in objectively verifiable defined classes of cases involving death or serious and permanent bodily injury;

(7) to preclude a State from enacting a law applicable to all motor vehicle accident cases, including cases covered by this Act, to establish a minimum dollar value for economic losses for defined classes of cases involving death or serious bodily injury;

(8) to preclude a State from providing that forms of insurance other than those listed in section 5(b) shall be subtracted from personal injury protection insurance benefits otherwise payable for injury; or

(9) to preclude a State from enacting a law that--

(A) allows litigation by tort maintenance insureds against personal injury protection insureds for economic and noneconomic loss; and

(B) assures through a reallocation device that the advantage of tort claim waivers by personal injury protection insureds against tort maintenance insureds is reflected in the premiums of personal injury protection insureds.

(b) PRESERVATION OF STATE REGULATORY AUTHORITY- Nothing in this Act may be construed--

(1) to preclude a State or State official charged with regulatory authority over the business of insurance from fully exercising that regulatory authority, including adopting regulations and procedures regarding--

(A) rates;

(B) policy forms;

(C) company solvency;

(D) consumer protection;

(E) underwriting and marketing practices; and

(F) carrying out the requirements of this Act; or

(2) to allow or provide for Federal regulation of motor vehicle insurance.

(c) RIGHTS OF PRIVATE PARTIES- Nothing in this Act may be construed--

(1) to require a personal injury protection insurer to offer, or a personal injury protection insured to purchase, any coverage for bodily injury in

addition to the coverage required under this Act, including uninsured motorist coverage, underinsured motorist coverage, or coverage for medical payments;

(2) to prevent insurers and insureds from contracting to limit recovery for the loss of earnings under personal injury protection by--

(A) limiting such recovery to only 60 percent or more of lost wages or income;

(B) limiting the amount of such recovery payable per week; or

(C) limiting the period of time after an accident during which the benefits referred to in this paragraph are payable to a period of not less than one year;

(3) to prevent an insurer from contracting with personal injury protection insureds to limit the amounts payable for replacement services loss on a per day or per week basis;

(4) to prevent insurers from requiring reasonable notice of an accident as a precondition for payment for economic loss;

(5) to prevent an insurer from contracting with insureds, as permitted by applicable State law, to have submitted to arbitration any dispute with respect to payment of personal injury protection or tort maintenance coverage;

(6) to affect the worker classification of a person, either as an employee or an independent contractor, on the basis of the election of an employer or motor carrier of an insurance system under section 4(a); or

(7) to affect the awarding of punitive damages, or damages for bad faith refusal to pay a claim, under any applicable State law.

SEC. 10. APPLICABILITY TO STATES.

(a) ELECTION OF NONAPPLICABILITY BY STATES- Subject to subsections (c) through (e), this Act shall apply with respect to a State, unless--

(1) by not later than the earlier of the date that is one year after the date of enactment of this Act or the expiration of the first regular legislative session of the State beginning after the date of enactment of this Act, the State enacts a statute that--

(A) cites the authority of this subsection;

(B) declares the election of that State that this Act shall not apply with respect to that State; and

(C) contains no other provision; or

(2)(A) the State official charged with jurisdiction over insurance rates for motor vehicles makes a finding that this Act does not apply by reasons of the applicability of the conditions described in subsection (b)(1)(A); and

(B) that finding is made and any review described in subsection (b)(1)(B) is completed not later than the date specified in subsection (b)(1)(C).

(b) NONAPPLICABILITY BASED ON STATE FINDING-

(1) IN GENERAL- This Act shall not apply with respect to a State, if--

(A) the State official charged with jurisdiction over insurance rates for motor vehicles makes a finding that the statewide average motor vehicle premiums for bodily injury insurance in effect immediately before the date of enactment of this Act will not be reduced by an average of at least 30 percent for persons choosing the personal injury protection system, in the amounts required under section 5 (without including in the calculation for personal injury protection insureds any costs for uninsured, underinsured, or medical payments coverages);

(B) the finding described under subparagraph (A) is supported by evidence adduced in a public hearing and reviewable under the applicable State administrative procedure law; and

(C) the finding described under subparagraph (A) is made, and any review of such finding under subparagraph (B) is completed, not later than 120 days after the date of enactment of this Act.

(2) COMPARISON OF BODILY INJURY PREMIUMS- For purposes of making a comparison under paragraph (1)(A) of premiums for personal injury protection with preexisting premiums for bodily injury insurance (in effect immediately before the date of enactment of this Act), the preexisting bodily injury insurance premiums shall include premiums for--

(A) bodily injury liability, uninsured and underinsured motorists' liability, and medical payments coverage; and

(B) if applicable, no-fault benefits under a no-fault motor vehicle law or add-on law.

(c) IMPLEMENTATION PERIOD- Except as provided in subsection (d), if a State fails to enact a law by the applicable date specified in paragraph (1) of subsection (a) or if a finding described in paragraph (2) of that subsection is not made and reviewed by the date specified in subsection (b)(1)(C), this Act shall apply to that State beginning on the date that is 270 days after the later of those dates.

(d) ACCELERATED APPLICABILITY-

(1) IN GENERAL- Subject to paragraph (2), a State may enact a law that provides for the implementation of the provisions of this Act in that State before an otherwise applicable date determined under subsection (a).

(2) APPLICABILITY- If a State makes an election under paragraph (1), this Act shall apply to that State beginning on the date that is 270 days after the date of such election.

(e) ELECTION OF NONAPPLICABILITY BY A STATE AFTER THIS ACT BECOMES APPLICABLE WITH RESPECT TO THE STATE- After this Act becomes applicable with respect to a State under subsection (c) or (d), this Act shall cease to apply with respect to that State if the State enacts a statute that meets the requirements of subparagraphs (A) through (C) of subsection (a)(1).

END