B-106643, MAR 6, 1952

B-106643: Mar 6, 1952

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LTD.: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 15. WAS APPLIED IN LIQUIDATION OF THE INDEBTEDNESS OF SAID COMPANY TO THE UNITED STATES. THE AMOUNT SET FORTH IN THE SETTLEMENT AS DUE FOR THE DAMAGES IS ITEMIZED THEREIN AS FOLLOWS: VALUE OF TANK DESTROYED $1. WHICH IS THUS ARBITRARILY ASSESSED AND DEDUCTED FROM THE CONTRACT PRICE. THAT NOBODY HAD ANY POWER TO COMPROMISE THE MATTER AND NO EFFORT SEEMS TO HAVE BEEN MADE TO HEAR YOUR ASSURED'S SIDE OF THE CONTROVERSY. THAT MANY OF YOUR ASSUREDS ARE CONFRONTED WITH THE SAME PROBLEM IN PERFORMING GOVERNMENT CONTRACTS. THE PROCEDURE WHICH MUST BE TAKEN FOR THE ADJUSTMENT OF CASES OF THIS KIND IN WHICH YOU FEEL A RIGHT EXISTS FOR A REASONABLE REDUCTION IN THE AMOUNT OF DAMAGES WHICH HAVE BEEN CLAIMED BY THE GOVERNMENT.

B-106643, MAR 6, 1952

PRECIS-UNAVAILABLE

GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD.:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 15, 1951, YOUR FILE 27LP 317- B.A. MONTGOMERY ET AL. - BUREAU OF RECLAMATION, RELATIVE TO SETTLEMENT DATED JANUARY 19, 1951, WHEREIN A PORTION OF THE SUM OF $1,923.66 FOUND TO BE OTHERWISE DUE THE MONTGOMERY ELECTRIC COMPANY, YOUR ASSURED, NAMELY, THE AMOUNT OF $1,603.66, WAS APPLIED IN LIQUIDATION OF THE INDEBTEDNESS OF SAID COMPANY TO THE UNITED STATES. THE INDEBTEDNESS AROSE FROM DAMAGES CAUSED TO A GOVERNMENT-OWNED WATER TANK THROUGH THE NEGLIGENCE OF EMPLOYEES OF THE ASSURED ENGAGED IN THE PERFORMANCE OF CONTRACT NO. IBP- 6352, DATED JUNE 14, 1949, FOR THE DEPARTMENT OF THE INTERIOR, BONNEVILLE POWER ADMINISTRATION, PORTLAND, OREGON.

THE AMOUNT SET FORTH IN THE SETTLEMENT AS DUE FOR THE DAMAGES IS ITEMIZED THEREIN AS FOLLOWS:

VALUE OF TANK DESTROYED $1,180.00

COST OF DISMANTLING AND REMOVING SAID TANK 348.66

EROSION DAMAGE TO ADJACENT SLOPES 75.00

TOTAL DAMAGE $1,603.66

YOU STATE THAT YOU REALIZE THAT AUTHORITY EXISTS FOR THE ACTION TAKEN BY THIS OFFICE IN THE MATTER, BUT SUCH ACTION DOES NOT AFFORD EITHER YOU, OR THE ASSURED, AN OPPORTUNITY TO ACCURATELY DETERMINE THE DAMAGE, WHICH IS THUS ARBITRARILY ASSESSED AND DEDUCTED FROM THE CONTRACT PRICE. IN THIS CONNECTION, YOU STATE THAT YOUR REPRESENTATIVE INSPECTED THE DAMAGE AND ESTIMATED IT AT ABOUT $800, BUT THAT NOBODY HAD ANY POWER TO COMPROMISE THE MATTER AND NO EFFORT SEEMS TO HAVE BEEN MADE TO HEAR YOUR ASSURED'S SIDE OF THE CONTROVERSY; THAT MANY OF YOUR ASSUREDS ARE CONFRONTED WITH THE SAME PROBLEM IN PERFORMING GOVERNMENT CONTRACTS, AND YOU WOULD LIKE TO KNOW, IF POSSIBLE, THE PROCEDURE WHICH MUST BE TAKEN FOR THE ADJUSTMENT OF CASES OF THIS KIND IN WHICH YOU FEEL A RIGHT EXISTS FOR A REASONABLE REDUCTION IN THE AMOUNT OF DAMAGES WHICH HAVE BEEN CLAIMED BY THE GOVERNMENT.

THE CONTRACT CALLED FOR THE CONSTRUCTION OF A POWER TRANSMISSION LINE, AND IT APPEARS THAT A BULLDOZER WHICH WAS BEING OPERATED BY AN EMPLOYEE ENGAGED IN BUILDING A ROAD ON THE SIDE OF A HILL FOR USE IN CONNECTION WITH THE PROJECT ON AUGUST 4, 1949, DISLODGED SEVERAL BOULDERS WHICH ROLLED DOWN THE HILL AND STRUCK ONE OF A GROUP OF FOUR BUREAU OF RECLAMATION WATER TANKS IN THE VICINITY OF COULEE DAM, WASHINGTON. REPORTING THE MATTER TO THIS OFFICE UNDER DATE OF MAY 2, 1950, THE ADMINISTRATIVE AGENCY CONCERNED FURNISHED A DETAILED REPORT SUBMITTED BY ITS CITY ENGINEER AT COULEE DAM AS TO THE EXTENT OF THE DAMAGE TO THE TANK, THE ESTIMATED COST OF REPAIR AND THE VALUE THEREOF. IN SAID REPORT, DATED AUGUST 22, 1949, IT IS STATED THAT ONE BOULDER OF CONSIDERABLE WEIGHT STRUCK THE TANK A GLANCING BLOW JUST ABOVE THE CROSS, AND TWO BOULDERS STRUCK AT THE CROSS; THAT THE TANK WAS PUNCTURED SUFFICIENTLY TO CAUSE ALL OF THE WATER TO ESCAPE IN A SHORT TIME; THAT, IN ORDER TO REPAIR THE TANK, IT WOULD BE NECESSARY TO BUILD A STAGING AROUND THE TANK, STAPLE OR SPIKE EACH BAND TO THE STAVES TO PREVENT COLLAPSING WHEN CRUSHED STAVES WERE REMOVED, LOOSEN ALL BANDS TO PERMIT REMOVAL OF DAMAGED STAVES, AND REPLACE THE STAVES, TIGHTEN THE BANDS AND REMOVE THE STAGINGS AND THAT PREVIOUS EXPERIENCE WITH THE TANKS INDICATED THAT THE COST OF REPAIR WOULD BE IN THE NEIGHBORHOOD OF $2,000 TO $2,500.

THE ADMINISTRATIVE AGENCY REPORTED THAT, SINCE THE TANK HAD A DEPRECIATED VALUE OF $1,180 AT THE TIME OF THE DAMAGE, IT WAS DECIDED TO RETIRE IT FROM SERVICE; THAT IT WAS IMPOSSIBLE TO LEAVE THE TANK STANDING IN A DAMAGED CONDITION BECAUSE OF THE POSSIBILITY THAT IT MIGHT COLLAPSE AND DAMAGE SOME OF THE OTHER TANKS IN THE GROUP, WHICH WERE NECESSARY TO THE TOWN'S WATER SUPPLY, OR INJURE MAINTENANCE PERSONNEL WHO MIGHT BE IN THE VICINITY AT THE TIME OF COLLAPSE; AND THAT IT WAS, THEREFORE, DISMANTLED AT A COST OF $348.66. THE ADMINISTRATIVE AGENCY ALSO REPORTED THAT THE ESCAPING WATER FROM THE DAMAGED TANK CAUSED CONSIDERABLE EROSION ON ADJACENT SLOPES, THE DAMAGE TO WHICH WAS ESTIMATED AT $75. THE ADMINISTRATIVE AGENCY ARRIVED AT THE VALUE OF THE TANK THROUGH THE FOLLOWING METHOD:

VALUE OF #1 FIRE RESERVE TANK (ELEVATION 1350) AS OF JULY 1, 1949.

TANK ORIGINALLY ERECTED 1938 BY CBI CO. - NEW VALUE, $8,000

USED VALUE, 1938 ............... $4,000

ESTIMATED LIFE ............... 15 YEARS

IN 1942, TANK WAS REBUILT, ADDING $1,000 VALUE TO TANK.

ELAPSED LIFE JULY 1, 1949, WAS 11 YEARS; REMAINING LIFE 4 YEARS.

11/15 OF $4,000 - $2,934.00 VALUE OF TANK DEPRECIATED TO 1942.

REBUILT IN 1942 - 1,000.00

$3,934.00

ESTIMATED LIFE, 10 YEARS AT JULY 1, 1942.

1942 TO 1949 7 YEARS, BALANCE OF LIFE 3 YEARS.

3/10 OF $3,934.00 $1,180.20

PRESENT VALUE, JULY 1, 1949 - $1,180.20

SINCE IT APPEARED THAT THE VALUE OF THE TANK AND THE COST OF REMOVAL THEREOF, AS SET FORTH IN THE ADMINISTRATIVE REPORT, WERE IN EXCESS OF THE AMOUNT FOR WHICH YOU CONTENDED THE TANK COULD HAVE BEEN REQUIRED, THE CLAIMS DIVISION OF THIS OFFICE OBTAINED A FURTHER REPORT FROM THE ADMINISTRATIVE AGENCY RELATIVE TO THE BASIS FOR YOUR CONTENTIONS UNDER DATE OF JANUARY 8, 1951. WITH SAID REPORT, THE ADMINISTRATIVE AGENCY TRANSMITTED A COPY OF A LETTER DATED SEPTEMBER 28, 1949, FROM DICKERSON MACHINERY CO., INC., TO LESTER F. EDGE, YOUR ATTORNEY, WHEREIN THE CONTRACTOR STATES THAT IT ESTIMATES THAT IT WOULD COST $800 TO PUT THE TANK BACK IN GOOD REPAIR, BUT THAT SUCH AMOUNT WOULD NOT INCLUDE MAKING THE TANK AND PUTTING IT BACK IN SERVICE. RELATIVE TO THE MATTER, IT WAS STATED IN SAID REPORT, IN PERTINENT PART, AS FOLLOWS:

"*** THE EDGE LETTER OF SEPTEMBER 28, 1949, REFERRED TO ABOVE, INDICATES THAT REPAIRS TO THE TANKS COULD HAVE BEEN ACCOMPLISHED FOR HALF OF THE GOVERNMENT'S CLAIM. IN RESPONSE TO THAT STATEMENT THE GOVERNMENT SUGGESTED IN ITS REPLY OF OCTOBER 10, 1949, THAT IT WOULD BE WILLING TO CONSIDER REPAIR OF THE TANK IN SETTLEMENT OF THE CLAIM. IT IS SIGNIFICANT THAT THE INSURANCE COMPANY EVIDENTLY DID NOT WISH TO REPAIR THE DAMAGED TANK. THE QUESTION OF REPAIRS TO THE DAMAGED TANK WAS THOROUGHLY CONSIDERED BY THE BUREAU'S MAINTENANCE STAFF HERE AT COULEE DAM. THEY ARE WELL EXPERIENCED IN SUCH MATTERS, ARE FAMILIAR WITH THE CONSTRUCTION OF THE TANKS IN QUESTION, AND HAVE MADE REPAIRS SIMILAR TO THESE NECESSARY IN THE INSTANT CASE. THEIR ESTIMATE ON A MINIMUM BASIS WAS $2000."

PARAGRAPH 206C OF THE SPECIFICATIONS OF THE CONTRACT PROVIDED THAT THE CONTRACTOR WAS TO BE RESPONSIBLE FOR THE PRESERVATION OF ALL PUBLIC AND PRIVATE PROPERTY ALONG, ADJACENT TO, AND UPON THE SITE OF THE WORK AND THAT, IN THE EVENT THAT ANY EACH PROPERTY WAS DAMAGED BY IT, THE CONTRACTOR WAS TO MAKE FULL RESTITUTION. IN VIEW THEREOF, AND SINCE THE VALUE OF THE TANK, AS WELL AS THE OTHER ELEMENTS OF DAMAGE, APPEARED TO HAVE BEEN FAIRLY ARRIVED AT BY THE ADMINISTRATIVE AGENCY AND TO REPRESENT THE AMOUNT OF COMPENSATION TO WHICH THE GOVERNMENT WAS ENTITLED IN THE MATTER, THE SETTLEMENT OF JANUARY 19, 1951, WAS ISSUED.

THUS THERE WAS NO ARBITRARY ASSESSMENT OF DAMAGES. THE AMOUNT INVOLVED WAS COLLECTED FROM YOUR ASSURED BY SET-OFF ON THE BASIS OF DETAILED EVIDENCE FURNISHED BY THE ADMINISTRATIVE AGENCY AS TO THE AMOUNT OF DAMAGES. AS INDICATED ABOVE, YOUR CONTENTIONS IN THE MATTER, INSOFAR AS THEY APPEAR IN THE RECORD, ALSO WERE CONSIDERED.

RELATIVE TO YOUR QUESTION AS TO THE PROCEDURE WHICH MUST BE TAKEN IN CASES OF THIS KIND TO OBTAIN AN ADJUSTMENT IN THE AMOUNT OF DAMAGES CLAIMED BY THE GOVERNMENT, YOU ARE ADVISED THAT THIS OFFICE IS WITHOUT AUTHORITY TO ACCEPT LESS THAN THE AMOUNT DETERMINED FROM ALL THE EVIDENCE TO BE DUE THE UNITED STATES IN A PARTICULAR CASE. IN THIS CONNECTION, CLAIMS ARE SETTLED HERE ON THE BASIS OF THE WRITTEN RECORD AND THERE ARE NO PROCEDURES FOR THE ADJUDICATION OF DISPUTED QUESTIONS OF FACT BY FORMAL HEARINGS. IN THE SETTLEMENT OF CLAIMS, THIS OFFICE FOLLOWS SETTLED PRINCIPLES OF LAW AS DECLARED BY THE COURTS AND APPLIES THOSE PRINCIPLES IMPARTIALLY TO THE FACTS AS THEY APPEAR IN THE RECORD BEFORE IT. PARTIES AGAINST WHOM THE GOVERNMENT HAS ASSERTED CLAIMS ARE FREE TO SUBMIT WHATEVER EVIDENCE THEY DESIRE IN THE FORM OF WRITTEN STATEMENTS, AFFIDAVITS, AND THE LIKE, AS WELL AS BRIEFS AND LEGAL ARGUMENTS. ARRANGEMENTS ALSO ARE MADE FOR CLAIMANTS OR THEIR COUNSEL TO CONFER INFORMALLY WITH REPRESENTATIVES OF THIS OFFICE, AND ALL MATTERS SO PRESENTED, WHEN REDUCED TO WRITING, ARE CONSIDERED FULLY ALONG WITH THE REPORTS OF THE GOVERNMENTAL AGENCY CONCERNED. HOWEVER, THE ADMINISTRATIVE VERSION OF DISPUTED FACTS MUST NECESSARILY BE ACCEPTED HERE UNLESS REBUTTED BY CLEAR AND CONVINCING PROOF.

IN CONCLUSION, IT MAY BE STATED THAT SETTLEMENTS ISSUED BY THE CLAIMS DIVISION OF THE GENERAL ACCOUNTING OFFICE ARE, AS A MATTER OF PROCEDURE, SUBJECT TO REVIEW BY THE COMPTROLLER GENERAL UPON WRITTEN REQUEST OF ANY PARTY IN INTEREST, INCLUDING AN INSURANCE COMPANY WHICH MAY HAVE SUFFERED LOSS IN THE PARTICULAR TRANSACTION.