B-35379 July 17, 1943

B-35379 July 17, 1943

The Honorable, The Secretary of Commerce.

My dear Mr. Secretary,

I have your undated letter, delivered June 29, 1943, requesting a decision as to whether the Civil Aeronautics Administration is authorized to expend appropriated funds for the procurement of hull insurance on certain aircraft used in the flight training of Army and Navy personnel.

It appears from statements in the submission that, among the problems which have arisen in connection with aircraft damaged in the course of operations, major difficulties are encountered in fixing the liabilities of War Training Service contractors, to which the aircraft are leased for training purposes, for such damage, in appraising the same, and in arranging for and supervising immediate repairs, the disposition of salvage, etc. You point out that, while private insurance companies now have, and for the past 15 years have had, expert appraisers and adjusters who are assigned by such companies to the localities which planes are being operted, the War Training Service does not have in its employ, and is unable at this time to recruit, an adequate force of qualified personnel to handle this type of work.

Also, you advise that a sum sufficient to underwrite expected losses is budgeted as a part of the estimated hourly cost of training; that the procurement of hull insurance is not expected to result in a cost to the Government in excess of said allowance; and that:

"After several months of study, the Executive Director of the Civil Aeronautics Administration War Training Service has determined that it would not only be in the public interest, but also that all of these problems would be solved, without additional net cost to the Government, if the Government should procure the insurance covering the hulls and pay the premiums therefor."

A related question concerning the propriety of designating the Defense Plant Corporation, through which the aircraft are being acquired, as the payee of any insurance proceeds realized apparently need not be considered at this time, in view of the contemplated out-right purchase of the aircraft by the Civil Aeronautics Administration, which was the subject of decision of July 10, 1943, B-35362, to you.

As recognized in your letter, it is the established policy of the Government to assume its own risks of loss--on the theory that the magnitude of its resources, holdings and the wide distribution of its risks, permits it to do so and thus effect a saving of the amounts that ordinarily would be included in the premiums charged by private insurers. This office consistently has held that appropriated moneys are not available for the payment of insurance premiums generally on Government- owned property, in the absence of specific statutory authority therefor. See 21 Comp. Gen. 928.

However, the Government's practice of self-insurance is one of policy and not of positive law, and it does not necessarily follow that the procurement of insurance must be regarded as prohibited in all cases. The very economy sought to be attained under the general rule would be defected if the purchase of such insurance were not permitted, in an otherwise appropriate case, when sound business practice indicates that a saving can be effected or that services or benefits not otherwise available can be obtained thereby. Also, see my letter of December 30, 1942, B-592, relating to the auhority of the Civil Aeronautics Administration to procure property damage and liability insurance in connection with the aircraft used for pilot training.

Under the circumstances, and in view of the administrative determination as to the economy and necessity of purchasing hull insurance-including incidental services--in the present case, this office will interpose no objection to the use of otherwise available Civil Aeronautics Administration funds to defray the cost thereof.

Respectfully,

(Signed) Frank L. Yates Acting Comptroller General of the United States