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the accident have to be borne by the Commission on the basis of
the conclusion reached by Congress if delegated to some other out-
side authority? Companies have the same problem. The decision
may be reached by a court of law, outside of their authority, but
they must account for it or the potential cost of it on their books.
Mr. LENT. You are assuming then-and this may be the correct
assumption, I don't know-that even though the Congress adjudi-
cates the claim, that the claim will be paid out of the Panama
Canal funds?
Mr. KUJAWA. That is an assumption in the accounting that is
being followed.
Mr. LENT. One other question. This is just an opinion question.
In your opinion, would it be more sensible for you, the accountant,
for a business enterprise that is some business enterprise not con-
strained by the various constraints contained in the Panama Canal
implementing legislation, would you advise your client to attempt
to cover this entire area of contingent liability by the purchase of
liability insurance? Or would you advise him to continue, as they
presently are, covering this contingent liability through the esta-
bishment of a reserve?
Mr. KUJAWA. That is a decision that I have seen clients deal
with and entails consideration of the cost of administering their
own claims or engaging a third party insurance company to deal
with it. In a company environment, it also has tax consequences
that must be dealt with. But essentially, it is a cost comparison,
how much it cost for you to do it versus how much does it cost-to
engage a third party.
An insurance company is going to charge you for your experi-
ence in this kind of insurance. So ultimately, as part of your premi-
ums, they will come back to you in terms of your experiences. I see
this, for example, in airlines insurance. Lloyds, for example,
charges the airlines based upon what the actual experience has
been in the last 2 or 3 years in airline accidents. It gets directly
into your current premiums.
So I think in the Panama Canal environment, it would be pri-
marily a cost-benefit relationship as to what would it cost you to
administer it yourself versus contracting with an insurance compa-
ny.
Mr. LENT. Thank you.
Mr. HUBBARD. Thank you very much, Mr. Leonard J. Kujawa,
partner with Arthur Andersen and Co., for your testimony today.
Mr. HUBBARD. We now call a panel composed of Peter Luciano,
Ernest Corrado, and Harry Gotimer. Mr. Luciano is the executive
director of the Transportation Institute; Mr. Corrado is vice presi-
dent of the American Institute of Merchant Shipping; Mr. Gotimer
is an attorney with the law firm of Kirlin, Campbell, & Keating in
New York City. They are accompanied by two other attorneys,
Raymond Burke and Bob Phillips. Welcome.
We will call first on Mr. Peter Luciano, executive director of the
Transportation Institute.