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Answer. There are two possible objectives served by insurance coverage for the
Commission: 1. Management of risk; and 2. Administration of claims.
Regarding management of risk, it is the policy of the U.S. Government to self-
insure for all risk, including catastrophies. I am not aware of any special circum-
stances of the Panama Canal Commission which would justify a variation from the
policy of the U.S. Government generally.
The administration of claims is a complex and time consuming matter. Whether
an insurance company could perform this function in a more cost effective manner
would require a special study to determine. We have performed no such study.
Question 2. How would the costs compare nowadays? Would it cost $12 million a
year or more in insurance premiums to cover current claims?
Answer. It is not possible to quantify the cost of insurance with the current cost
provision of $12 million annually. If the Commission purchases insurance, the pre-
miums would reflect the actual accident experience of the Panama Canal plus the
cost of administering claims. Only if an insurance company could administer the
claims in a more cost effective manner would the cost be less than that being in-
curred by the Commission.
Question 3. Do you have any information on how the cost of the marine accident
reserve compares with the purchase by individual vessels of sufficient insurance to
cover their possible accidents?
Answer. The insurance coverage of vessels currently does not include the cost of
accidents in the Panama Canal. If such coverage were to be obtained by vessels,
quite obviously the premium to the vessels would be higher than currently incurred.
TOOLE, TAYLOR, MOSELEY & JOYNER,
Jacksonville, Fla., 32202, December 10, 1982.
Congressman CARROLL HUBBARD,
Chairman, Subcommittee on Panama Canal/Outer Continental Shelf Committee on
Merchant Marine and Fisheries, House of Representatives, Washington, D.C.
DEAR CONGRESSMAN HUBBARD: Thank you very much for the honor and pleasure
of appearing before your Subcommittee on Thursday of last week about a matter of
great importance to uniformity and equity in the maritime law. During the course
of the hearing, you had invited any of the witnesses present to provide written re-
sponses to any of the questions posed by members of the subcommittee. I appreciate
your offer to make these written responses part of the record.
There was an important question posed by Congressman Tauzin, which deserves a
more thorough response. Essentially the question was: Under the present procedure,
will the Canal Commission be responsibile for payment of claims regardless of fault,
unless it is shown that the negligence of the ship, its crew, etc., caused or contribut-
ed to the accident? As I perceive the question, essentially Congressman Tauzin
wanted to know whether the Canal Commission is strictly liable for these vessel ac-
cident claims to the extent of being an insurer?
The basic short answer is the Canal Commission is not serving as an insurer of
the vessel for either inside or outside-the-locks claim. The difference between the
Commission's liability on inside-the-locks and outside-the-locks claims is simply a
difference in the burden of proof of a claim. Under 22 U.S.C. 3771 [inside-the-
locks], the Commission will be required to pay the claim unless it can affirmatively
show that the accident was caused by the negilgence of the ship, its crew, passen-
gers, etc. On the other hand, if the accident occurs outside-the-locks [22 U.S.C.
3772] the shipowner, crewmember, etc., have the burden to prove that negligence
of the Canal or its employees caused the injuries. In both cases, the shipowner,
crewmember, etc., may not recover for their damages if the injury was proximately
caused by the negligence or fault of the vessel, master, crew or passengers. In both
instances partial negligence or fault of the vessel, master, crew or passengers will
reduce the award of damages in proportion to the percentage of negligence or fault
on the part of the vessel, master, crew or passengers. Both the inside and outside-
the-locks accidents totally rest on fault principles which are basic to the American
tort system. In no event is the Canal Commission absolutely liable as an insurer.
The reason for the burden of proof distinction between the inside and outside-the-
locks claims is the degree of control the Canal Commission exercises over the vessel
during its transit. When the vessel is in the locks, its movement is in the absolute
control of the Commission and its employees. The vessel is assisted in entering the
locks by tugboats. After the first line is attached to the vessel, the ship rarely uses
its own propulsion. The vessel is guided into the locks with the use of the Canal's
locomotives.
The practical effect of the Canal's close control over the vessel while in the locks
is in almost every instance if a vessel accident occurs, it will be due to improper or
negligent handling on the part of the Canal. However, if the Commission can dem-