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I further believe that the cost of excess insurance would be acceptable, and that
the cost thereof could well be absorbed by an insurer-guided loss control program.
e. Obtain legal opinions as to the risk impacts of Chapter 4 as now written, and
suggested changes to meet risk management objectives.
f. Establish long range internal financing plans for all categories of risk.
As of this writing, an umbrella policy, excess of negotiated deductibles, is availa-
ble to blanket all risks of the Canal Commission. Supplemental services could be
arranged. The cost could be very materially affected by revisions in Chapter 4 of
Public Law 96-70.
PREPARED STATEMENT OF THE AMERICAN HULL INSURANCE SYNDICATE
The American Hull Insurance Syndicate was created in 1920, when Congress, rec-
ognizing the need for a strong national merchant marine and a stable independent
insurance market to support it, included in the Merchant Marine Act of 1920 provi-
sions encouraging collecitve action between marine insurance companies. This en-
abled marine insurers in the United States to create a single agency for the under-
writing of hull business; to include negotiation of terms and rates, issuance of poli-
cies, collection of premiums and settlement of claims on behalf of its member com-
panies. These member companies, called subscribers, today number 58 and consist of
major domestic insurance companies and of foreign insurance companies admitted
to do business in the United States. Today, in addition to the Syndicate, there is a
substantial independent market in this country insuring all types of vessels.
The Syndicate insures many shipowners, both domestic and foreign, whose ships
use the Panama Canal. Among the former are American Trading and Production
Corporation, Central Gulf Lines, Inc., Keystone Shipping Co., Lykes Bros. Steamship
Co., Inc., Ogden Marine, Inc., Sea-land Service, Inc., United States Lines, Inc., and
Waterman Steamship Corporation.
We are submitting this statement for consideration by the subcommittee because
of our desire to support those of our assureds who use the Panama Canal in their
wish to amend the present procedure for settling damage claims arising out of casu-
alties that occur outside of the locks.
The type of casualties that usually occur outside of the locks, such as groundings,
standings and collisions, do, to the extent that they exceed applicable policy deducti-
bles, result in claims on hull underwriters. These claims are almost always for the
cost of repairing the insured vessel's damage and, sometimes, in addition, for the
cost of refloating a stranded vessel, or, in the case of a collision, and to the extent
the insured vessel is at fault, for the assured's liability for the damage to the other
vessel and the cargo thereon.
Whereas these claim payments by underwriters reimburse the shipowners for
their repair and related costs, they do not make them financially whole. For one
thing, the shipowners must bear their uninsured losses themselves (such as loss of
use of the vessels during the periods of repair and the amounts of the hull policy
deductibles). For another, the claim amounts recovered from hull underwriters may
have a bearing on future hull insurance premiums.
The latter statement refers to the fact that hull insurance is experience rated, i.e.,
the individual shipowner's annual premium cost is affected by his own past loss ex-
perience, so that the greater this experience is the more premium he must pay and
vice-versa. It follows, therefore, that if the shipowner can recover from negligent
third parties the cost of repairing vessel damage caused by them and credit such
recoveries to the hull underwriters under the doctrine of subrogation, the ship-
owner's loss record will be improved to that extent.
The point of all of this is that the shipowner is bound to suffer financial loss, even
if insured. Therefore, there should be some fair and effective way for the shipowner
to recover all claims for vessel damage caused by the fault of Panama Canal person-
nel.
The current claims procedure requires Congress to make the final decision on
claims arising out of casualties occurring outside of the locks in excess of $120,000.
It appears to us that Congress has enough to do without this task and that funds for
payment of such claims should come out of Panama Canal tolls, i.e., the payment of
all claims should be considered a cost of doing business by the Panama Canal Com-
mission.
It is our understanding as laymen that as an inducement to the exercise of due
care the public policy of the United States calls for parties at fault to bar the cost.
This prompts two comments: