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Panama Canal Commission's inability to pay the claim for damages
in excess of $120,000?
Mr. BROWN. I really don't think there is any way of saying there
has been an increase or not. First of all, I think most shipowners
are under the impression that they still have a valid claim against
the Panama Canal Commission for negligence of pilots, even
though the format has been changed so that now they would have
to go to Congress for these claims outside the locks.
So I think shipowners and their underwriters still now think
that recoveries will be made where recoveries are warranted. So
there is no change there.
Secondly, in handling insurance, I don't think there is a review
of risks as specific and unusual as this; what really happens is a
shipowner's loss experience is examined when he reduces insur-
ance each year. His loss experience for the last several years, actu-
ally, is examined.
Part of that loss experience where it includes claims that have
not yet been resolved will depend upon reserves or estimates but
on the claim which is again based on a forecast of what the result
of recovery attempts will be.
As I have said, I think most shipowners at present think there
will be recoveries with respect to cases in which the Panama Canal
pilot has been negligent; not through the same means as before,
but still recoveries.
So, in short, there is no real way of saying there has been an in-
crease. If there is a situation in which recoveries are not made
which should have been made, that in the long run has to increase
premiums and losses.
Mr. HUBBARD. Mr. Gotimer answered this in part; could you add
to what he said to this question: Why could not the ships using the
canal carry insurance that would fully protect them against any
damages inside or outside the locks?
Mr. BROWN. All ships, all large ships at least, using the canal do
carry insurance.
Mr. HUBBARD. Sure.
Mr. BROWN. It protects them against damage to the vessel itself;
it protects them against damage and liabilities for damage to
others. The issue here really is that where the canal pilot has been
negligent, if the shipowner does not make a proper recovery
against the Canal Commission, his loss experience will be worse
and the cost of that insurance will be increased. Unfairly, in our
judgment.
Mr. HUBBARD. Would it be more expensive for shippers to have
the higher insurance premium if the tolls could be lowered sub-
stantially across the board for all the ships?
Mr. BROWN. Again that is very hard to say. I guess in pure
theory-in pure theory-if the tolls covered liabilities of canal per-
sonnel, the ships using the canal would pay those extra costs, and
the ships that did not use the canal would reap a benefit in having
lower insurance premiums. If insurance losses were charged across
the board to all ships because the Panama Canal Commission did
not respond in damages, presumably that would raise the insur-
ance premiums of all ships generally.