Two, it would establish an independent agency within EPA to compensate victims of pollution-related injuries regardless of fault. This agency would function, in principle, like a workers' compensation system.

Three, it would require EPA to study the relationships between exposure to toxic substances and human disease and authorize EPA to make a requisite nexus finding. This is very important because it would overcome the great problem of proving causation with traditional proof requirements.

Four, it would modify the proof and limitations requirements which claimants must meet in State workers' compensation proceedings and in court actions, permitting the use of a rebuttable presumption based on EPA's requisite nexus findings.

Five, it would subrogate EPA to the rights of the injured party, enabling EPA to seek reimbursement from a negligent manufactur

er.

So you can see, my Toxic Tort Act addresses several of the same issues addressed by S. 420. I would like to focus on two of the key features of these bills and explain what I consider to be the optimum for legislation to address compensation for toxic exposurerelated disease and illness.

My bill proposes establishment of a so-called requisite nexus or cause and effect determination between exposure to a toxic substance and the possible health effects from that exposure. The Toxic Pollutant Compensation Agency, an independent office within EPA would make this requisite nexus determination. This O finding would necessarily precede any award of compensation. However, once made, the requisite nexus would create a rebuttable presumption of causality and thereby provide the standards for compensation in workers' compensation proceedings in all of the States.

It would also provide standards for compensation for nonworkplace toxic exposure which would be handled through the Toxic - Pollutant Compensation Agency.

The Toxic Tort Act acknowledges the fact that before we can consider compensation for injured victims of exposure caused illness or disease, we must have a major research effort into the relationships between exposure and disease, and it makes provision for such an effort. But once that determination is made, it would, through the rebuttable presumption and liberalized statute of limitations, facilitate, without mandating, compensation of innocent victims.

This committee knows full well that the state-of-the-art of knowledge which can match exposure to a particular chemical with a specific illness is rudimentary at best. Only for a few selected diseases such as black lung for coal miners and certain cancers for asbestos workers do we have a reasonable understanding of the cause and effect relationship between exposure and disease.

Thus, I applaud your efforts to include within S. 420 a mandate to the Secretary of HEW to conduct studies of diseases and recommend standards, first, to determine whether a particular disease arises out of, and in the course of, employment; second, to establish criteria for diagnosing diseases; and third, to establish criteria for determining whether death or disability is due to such diseases.

This mandate in large part parallels that proposed by my requisite nexus determination. I consider the matter of improving our knowledge and understanding of the relationships between exposure and disease so critical that I would recommend to this committee the option of creating a separate study bill so that if, by some chance, this bill did not pass the Congress, this research could begin immediately.

The second issue which I would raise with respect to S. 420 also deals with the disease section. With respect to occupational diseases, the bill would allow the Secretary of HEW to propose standards for the compensation of work-related diseases to the Labor Secretary who then may propose a recommended Federal standard. After a relatively comprehensive scientific and public review of the standard, the Secretary of Labor may then publish the standard as an advisory standard which each State Workers' Compensation Agency may choose to implement.

In my view, Mr. Chairman, the fact that the published standard is only an advisory standard which the States may or may not choose to follow in their workers' compensation programs represents a serious difficulty in the occupational disease compensation provisions of this bill. It is true that the bill affords the Congress the opportunity to enact mandatory standards, but only after a 3year time period has elapsed after publication of the advisory standard. I believe, Mr. Chairman, that the problems of workrelated disease and illness caused by exposure to toxic substances are so important and so critical as to warrant the setting of mandatory standards once the necessary cause and effect determination between exposure and a disease is made.

I would now like to turn my attention briefly to the product liability provisions of S. 420. In the 95th Congress, as chairman of a Small Business Subcommittee, I had 15 days of hearings on this issue.

On March 23, 1978, I introduced H.R. 11788, and I am pleased to say that the approach that this committee, your committee, has taken with respect to workplace injuries is identical to that which I recommended.

Our examination dealt with a number of product liability issues, but we singled out workplace injuries as occurrences worthy of special consideration. The reason was because the data available to our subcommittee indicated that workplace injuries, while accounting for a small portion of the number of product liability claims, account for a very substantial portion of claims payments.

Specifically, 10.6 percent of all persons receiving product liability payments are injured in the course of their employment, a workplace injury; however, those 10.6 percent account for in excess of 42 percent of all product liability bodily injury payments made, and on the average, therefore, represent more than three times the mean bodily injury payment made per incident.

Therefore, by dealing with the workplace injury problem, a substantial impact will be made toward alleviating the total product liability difficulties. In connection with my studies in this area, we considered several different proposals, including making workers' compensation the sole source for recovery, and alternatively, applying comparative fault doctrines to apportion damages between the

manufacturer and the employer. We rejected both those approaches.

We rejected the first of these due in part to the present inadequate compensation levels in effect under many of the State systems. Workers presently can seek redress in two ways-through the workers' compensation system and through litigation against the manufacturer of an unsafe product. To eliminate this second right without providing a counterbalancing change in benefit levels would, in our judgment, have been inequitable, at least, and possibly a deprivation of the worker's constitutional right.

However, even if the compensation levels could be raised to deal with the constitutional and equitability problems, there are still three other grave reservations with that approach. First, making workers' compensation the sole source of recovery with increased benefits is likely to produce significant increases in workers' compensation insurance rates for all employers. Moreover, the fact that the entire burden for these product liability claims would be shifted to the workers' compensation system might cause the insurance industry to panic with respect to pricing this insurance in much the same way that it has panic-priced product liability insur

ance.

Furthermore, making workers' compensation the sole source would result in two related, undesirable effects. Capital goods manufacturers whose goods are used in the workplace will lose their incentive to make sure that their products are manufactured with appropriate safety features since only the employer's workers' compensation carrier will be liable in the event of injury. Moreover, this lack of incentive to manufacture safe products could result in blatant disregard by such manufacturers for the safety of the worker resulting in a host of unsafe products coming into the workplace.

We also rejected the proposal to permit the manufacturer recourse against the employer on a theory of indemnity or contribution for the following reasons.

From the vantage point of the total insurance system, this would not appear to reduce the overall claims paid nor would it act as a disincentive to litigation on the part of injured employees. Because it would be creating a cause of action where one does not now generally exist, except in perhaps four States, it is thought that if anything, this would effect an overall increase in the aggregate rate of product liability and workers' compensation rates. While it might over time reduce product liability rates, it would almost certainly increase workers' compensation rates. Hence, this, too, was rejected.

Thus, my subcommittee opted for the identical approach which you and Senator Javits have also decided to opt for; that is, injured employees should maintain the right to bring suits against manufacturers. However, the workers' compensation carrier's lien and/ or right of subrogation for the benefits that it disburses to the injured employee should be eliminated. Further, the employee's recovery would be reduced by the amount of workers' compensation benefits he has already received. The effect of this would leave the injured employee with the same benefits he would otherwise have under the present system while, at the same time, cutting off

the right of the workers' compensation carrier to shift its liability. A manufacturer at fault will be responsible to the injured employee but for a reduced payment. This would remove the incentive for the workers' compensation carrier to institute litigation against manufacturers and would reduce the overall insurance transaction costs since there can be no apportionment between employers and manufacturers.

This approach, in my judgment, strikes the required balance between the need for equity and the desirability of reduced transaction costs. Workers will not lose, but society as a whole will gain. I am pleased with the progress that we have made toward adopting this concept so far, and I hope that you retain this concept as you continue your deliberations on the matter. I trust that you will be very successful in getting that concept enacted.

Mr. Chairman, I thank you. I ask your permission to have the entire text of my remarks introduced into the record, and I remain for any questions that you or Senator Hatch might have.

The CHAIRMAN. Congressman LaFalce, that is one of the most thoughtful and constructive statements we have had before our committee. And, this subject matter has been the subject of hearing many, many times, as you know.

We are most grateful to you for all of the time, work, and constructive thought that you have applied to the subject matter and the way you have dealt in detail with some of the most difficult, thorny, pioneering objectives of our legislation. I am certainly very pleased that you with your expertise in this field, you reach the same result in the area of product liability; that you see the same kind of balancing as we do here. We appreciate your support.

I am advised that the compensation bill that Congressman Beard is considering and which may be introduced in the House very shortly by him will, as I have been told, include a similar provision as we have. Is that your understanding?

Mr. LAFALCE. That is my understanding, yes.

The CHAIRMAN. I know that you are not a member of the Legislative Committee in the House that will deal with that legislation. I am certain that they will recognize in you someone that can be very helpful to them in their deliberations as you have been helpful to us.

Mr. LAFALCE. Thank you, Mr. Chairman.

The CHAIRMAN. We have, as you know, changed the approach, if that is the proper way to describe it, of the occupational disease section of our bill from mandatory standards to standards which are, at the first step advisory in nature, and ultimately which can be mandatory. This is in response to our deeply felt need to move this legislation and to start the processes in law for meeting the needs of the diseased worker where the disease has, to use your phrase, the requisite nexus with employment exposure.

I think we have put in place here all that we need to have the proper areas of Government working toward that knowledge which you admit is not now complete. that is, of course, the relationship of materials and the atmosphere in the workplace and their association with diseases.

So I am just wondering whether you would not agree that there is still an informational vacuum here that has not been filled with knowledge of the certainty of the relationship between materials and disease, and therefore, much study and development must go forward before we can be sure we have established these requisite nexi.

Mr. LAFALCE. I could not agree with you more. We have some knowledge regarding black lung, brown lung, asbestos-related diseases. The state of our knowledge is inexact at this time, and therefore, I applaud the provisions of your bill which call for an exhaustive study to be made. That is also the reason that I argued before the House Commerce Subcommittee on Consumer Protection that there should be a thorough study of the entire issue of exposure to toxic substances and a mechanism for compensating victims of such exposure. I was extremely delighted when it was adopted. I see the two studies, if either of them passes, complementing each other or perhaps working hand-in-hand. By the same token, we ought not to engage in analysis paralysis. We ought not to study a thing to death. We ought not to let such a study prevent us from creating a structure, a mechanism for delivering compensation to innocent victims once we are able to establish the causal effect between a particular substance and a particular injury, illness, or disease.

So I would hope that we would proceed apace with both the study and the creation of the structural mechanism to deal with what is an undoubted problem. We would not give compensation to one person in the United States without having a finding, based upon thorough study, of the requisite nexus, but we ought to begin now to put that structure, that mechanism in place at the same time that we are studying each and every disease.

I am sure the study of the causal relationship between chemical substances and disease will go on ad infinitum. I am sure it will be never ending. It is not something that we will be doing for 2 years or 18 months and then cease. It will be a constant study so long as man exists.

I think we all know that there has been, is, and will be a causal relationship between illnesses and toxic substances. So let us study it. Let us study it carefully, not just for 18 months or 2 months. We are going to have to be studying this forever, but let us now put in place the mechanism to adequately compensate innocent victims, which just does not exist at all right now.

The CHAIRMAN. We have worked and tried to perfect legislation that is based on the theory and the principle that workers' compensation can best be administered at the State level. We have tried to make every effort to encourage the States to make what a consensus of the experts believe to be, the right response to the needs of workers.

These advisory standards still work within that principle which the National Commission gave us-that we can get the best results if we do not federalize the system but rather, that we work with standards to be applied through State administration. Do you accept that?

Mr. LAFALCE. Well, I accept it in part and reject it in part. I certainly accept the concept of national standards to be applied by