B-119297, APRIL 22, 1954, 33 COMP. GEN. 507

B-119297, APRIL 22, 1954, 33 COMP. GEN. 507

INSURANCE - MARINE AND WAR RISK - MARITIME ADMINISTRATION PURCHASE AUTHORITY UNDER SECTION 207 OF THE MERCHANT MARINE ACT, 1936, WHICH RECOGNIZES THE BUSINESS NATURE OF THE ACTIVITIES OF THE MARITIME ADMINISTRATION, MARINE BUILDER'S RISK INSURANCE COVERING VESSELS TO BE CONSTRUCTED UNDER THE MARINER PROGRAM MAY BE PURCHASED BY ADMINISTRATION IF IT IS ADMINISTRATIVELY DETERMINED TO BE IN THE PUBLIC INTEREST.

ACTING COMPTROLLER GENERAL WEITZEL TO ADMINISTRATOR, MARITIME ADMINISTRATION, APRIL 22, 1954:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 15, 1954, REFERENCE L13-2 2:440, REQUESTING MY VIEWS WITH RESPECT TO OBTAINING MARINE BUILDER'S RISK INSURANCE ON THE REMAINING VESSELS TO BE CONSTRUCTED UNDER THE MARINER PROGRAM. YOU CALL ATTENTION TO THE FACT THAT OF THE 35 VESSELS BEING BUILT UNDER THAT PROGRAM, 26 HAVE BEEN DELIVERED AND 3 NOW BEING CONSTRUCTED UNDER CONTRACTS OF SALE ARE INSURED COMMERCIALLY.

YOUR PROPOSAL TO OBTAIN MARINE BUILDER'S RISK INSURANCE ON THE REMAINING SIX VESSELS TO BE CONSTRUCTED UNDER THE PROGRAM IS PREMISED UPON YOUR BELIEF THAT WHILE APPROXIMATELY 90 PERCENT OF THE PROGRAM IS COMPLETE, WITH CLAIMS IN THE AMOUNT OF $150,000 RECEIVED, IT CANNOT BE ASSUMED THE GOVERNMENT'S "LUCK" WILL HOLD OUT UNTIL THE LAST VESSEL IS DELIVERED AND THAT ONE SERIOUS LOSS COULD RESULT IN LOSSES OF MORE THAN THE TOTAL SAVINGS IN INSURANCE PREMIUMS TO DATE.

AS YOU APPARENTLY ARE AWARE, IT IS THE ESTABLISHED POLICY OF THE GOVERNMENT TO ASSUME ITS OWN RISKS OF LOSS. THIS IS ON THE THEORY THAT THE MAGNITUDE OF THE GOVERNMENT'S RESOURCES MAKES IT MORE ADVANTAGEOUS FOR THE GOVERNMENT TO CARRY ITS OWN RISKS THAN TO HAVE THEM ASSUMED BY PRIVATE INSURERS AT RATES SUFFICIENT TO COVER ALL LOSSES, PAY OPERATING EXPENSES (INCLUDING AGENCY OR BROKER'S COMMISSIONS) AND LEAVE A PROFIT. IT IS MY UNDERSTANDING THAT DURING THE WORLD WAR II SHIP CONSTRUCTION PROGRAM BUILDER'S RISKS WERE ASSUMED BY THE MARITIME COMMISSION. I AM ADVISED ALSO THAT THE NAVY DEPARTMENT HAS FOLLOWED THE PRACTICE OF ASSUMING SUCH RISKS.

HOWEVER, SECTION 207 OF THE MERCHANT MARINE ACT, 1936, 49 STAT. 1985, RECOGNIZES THAT BECAUSE OF THE BUSINESS NATURE OF THE ACTIVITIES OF THE ADMINISTRATION YOU MAY FIND IT NECESSARY TO MAKE DISBURSEMENTS WHICH FOR OTHER GOVERNMENT DEPARTMENTS AND AGENCIES WOULD BE UNAUTHORIZED. ACCORDINGLY, IF YOU DETERMINE, AS A MATTER OF POLICY, THAT YOU SHOULD OBTAIN MARINE BUILDER'S RISK INSURANCE ON THE REMAINING SIX MARINERS, THERE IS NO LEGAL BASIS FOR OBJECTION THERETO BY THIS OFFICE. COMPARE DECISION OF JANUARY 12, 1942, A-51647, B-15611, TO THE CHAIRMAN, UNITED STATES MARITIME COMMISSION.