B-106961, MAY 28, 1952, 31 COMP. GEN. 616

B-106961, MAY 28, 1952, 31 COMP. GEN. 616

VESSELS - WAR RISK MARINE INSURANCE - LIABILITY LIMITATION THE WORDS "THE AMOUNT OF INSURANCE LIABILITY ALLOWED AND PAID," AS USED IN DECISION OF THIS OFFICE 31 COMP. GEN. 415, CONCERNING MAXIMUM LIMITATION OF LIABILITY UNDER WAR RISK MARINE INSURANCE POLICIES ISSUED UNDER AUTHORITY OF TITLE XII OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, REFER TO "LIABILITY" WHICH RELATES ITSELF ONLY TO PHYSICAL DAMAGE TO VESSELS, SUCH AS ,LIABILITY" FOR TOTAL LOSS AND FOR DAMAGE REPAIRS, AND DO NOT CONTEMPLATE ALL "LIABILITIES" NORMALLY INCLUDED IN COMMERCIAL HULL POLICIES, SUCH AS GENERAL AVERAGE, SALVAGE AND COLLISION LIABILITIES AND SUE AND LABOR CHARGES, OR ALL "LIABILITY" COVERED BY ALL TYPES OF POLICIES ISSUED PURSUANT TO SECTIONS 1203 (A) TO 1203 (F) OF THE ACT. THE WORDS "THE AMOUNT OF THE CLAIM ADJUSTED, COMPROMISED, SETTLED, ADJUDGED OR PAID SHALL NOT EXCEED THE VESSEL'S FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD," APPEARING IN SECTION 1209 (A) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, AND PERTAINING TO WAR RISK MARINE INSURANCE POLICIES, IN CASES OF TOTAL LOSS AND PARTIAL REPAIR, REFER SOLELY TO PHYSICAL DAMAGE, I.E., PARTIAL DAMAGE TO, AND TOTAL LOSS OF A VESSEL, AND TO THE DAMAGE RESULTING FROM ONE CASUALTY ONLY. AMOUNTS PAYABLE UNDER WAR RISK MARINE INSURANCE POLICIES ISSUED UNDER AUTHORITY OF TITLE XII OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, IN THE EVENT OF TOTAL LOSS OF A VESSEL, MAY NOT EXCEED THE "FAIR AND REASONABLE VALUE" OF THE VESSEL AS ESTABLISHED BY THE FEDERAL MARITIME BOARD PURSUANT TO SECTION 1209 OF THE ACT OR THE "JUST COMPENSATION VALUE" AS COMPUTED PURSUANT TO SECTION 902 (A) THEREOF PROVIDING FOR THE PAYMENT OF JUST COMPENSATION TO OWNERS OF VESSELS REQUISITIONED BY THE GOVERNMENT, WHICHEVER IS THE LESSER SUM.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF COMMERCE, MAY 28, 1952:

REFERENCE IS MADE TO LETTER OF APRIL 7, 1952, FROM THE ACTING SECRETARY OF COMMERCE, REQUESTING AMPLIFICATION OF OFFICE DECISION DATED FEBRUARY 25, 1952, 31 COMP. GEN. 415, CONCERNING YOUR AUTHORITY, UNDER THE PROVISIONS OF TITLE XII OF THE MERCHANT MARINE ACT, 1936, AS AMENDED BY THE ACT OF SEPTEMBER 7, 1950, 64 STAT. 773, 46 U.S.C. 1281, TO ISSUE WAR RISK MARINE INSURANCE PROVIDING FOR DUAL VALUATION OF VESSELS TO THE SAME EXTENT PRESENTLY PROVIDED FOR IN COMMERCIAL POLICIES.

THE DECISION OF FEBRUARY 25, 1952, HELD (IN PART) THAT---

"NOT ONLY IS THE STATUTORY DIRECTION CLEAR THAT THE AMOUNT OF INSURANCE LIABILITY ALLOWED AND PAID "SHALL NOT EXCEED THE VESSEL'S FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD," BUT SUBSECTIONS (A) AND (C) OF SECTION 1209 MAY BE CONSTRUED TOGETHER, WITHOUT INCONSISTENCY, ONLY AS EVIDENCING AN INTENT TO AUTHORIZE THE WRITING OF INSURANCE, IN ACCORDANCE WITH COMMERCIAL PRACTICE IN THE MARINE INSURANCE BUSINESS, WITHIN SUCH LIMITS. IT FOLLOWS THAT EMPLOYMENT OF THE DUAL VALUATION BASIS REPORTED TO BE UTILIZED IN COMMERCIAL PRACTICE IS NOT PRECLUDED, ALTHOUGH IT CANNOT PROPERLY BE EXTENDED TO ENCOMPASS A GREATER MAXIMUM LIABILITY THAN THE "FAIR AND REASONABLE VALUE" ESTABLISHED BY THE BOARD OR THE "JUST COMPENSATION VALUE" AS COMPUTED PURSUANT TO SECTION 902 (A) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, AS THAT SECTION IS INTERPRETED BY THIS OFFICE, WHICHEVER IS THE LESSER SUM. SEE B-107600, FEBRUARY 11, 1952.'

THE ACTING SECRETARY ADVISES THAT BEFORE INSURANCE POLICIES SAFELY CAN BE ISSUED ANSWERS ARE REQUIRED TO INCIDENTAL QUESTIONS AS FOLLOWS:

"/1) DO THE WORDS "THE AMOUNT OF INSURANCE LIABILITY ALLOWED AND PAID," AS USED IN THE QUOTED PARAGRAPH, REFER TO "LIABILITY" UNDER WAR RISK POLICIES WHICH RELATES ITSELF ONLY TO PHYSICAL DAMAGE TO THE VESSEL, SUCH AS "LIABILITY" FOR TOTAL LOSS AND FOR DAMAGE REPAIRS?

"/2) DO THE WORDS "THE AMOUNT OF INSURANCE LIABILITY ALLOWED AND PAID," AS USED IN THE QUOTED PARAGRAPH, INCLUDE NOT ONLY THE "LIABILITY" WITH RESPECT TO THE PHYSICAL DAMAGE TO VESSELS AS USED IN QUESTION (1), BUT ALSO ALL "LIABILITIES" NORMALLY INCLUDED IN COMMERCIAL HULL POLICIES SUCH AS GENERAL AVERAGE, SALVAGE AND COLLISION LIABILITIES AND SUE AND LABOR CHARGES.?

"/3) DO THE WORDS "THE AMOUNT OF INSURANCE LIABILITY ALLOWED AND PAID," AS USED IN THE QUOTED PARAGRAPH, INCLUDE ALL "LIABILITY" COVERED BY ALL THE TYPES OF POLICIES THAT ARE ISSUED PURSUANT TO SECTIONS 1203 (A) TO 1203 (F), BOTH INCLUSIVE?

"/4) DO THE WORDS "THE AMOUNT OF THE CLAIM ADJUSTED, COMPROMISED, SETTLED, ADJUDGED OR PAID SHALL NOT EXCEED THE VESSEL'S FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD," APPEARING IN SECTION 1209 (A) OF THE ACT, REFER ONLY TO PHYSICAL DAMAGE TO THE VESSEL (I.E., PARTIAL DAMAGE TO, AND THE TOTAL LOSS OF, A VESSEL/?

"/5) IF THE ANSWER TO (4) IS IN THE AFFIRMATIVE, DO THE WORDS REFER TO THE PHYSICAL DAMAGE RESULTING ONLY FROM ONE CASUALTY OR FROM MORE THAN ONE CASUALTY?

"/6) IF THE ANSWER TO (4) IS IN THE NEGATIVE, DO THE WORDS "THE AMOUNT OF THE CLAIM ADJUSTED, COMPROMISED, SETTLED, ADJUDGED OR PAID SHALL NOT EXCEED THE VESSEL'S FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD," APPEARING IN SECTION 1209 (A) OF THE ACT, REFER TO:

(A) EACH INDIVIDUAL CLAIM OF EACH KIND INSURED BY EACH POLICY

ARISING OUT OF ONE CASUALTY, OR

(B) THE AGGREGATE AMOUNT OF ALL CLAIMS OF ALL KINDS INSURED BY

EACH POLICY ARISING OUT OF ONE CASUALTY, OR

(C) THE AGGREGATE AMOUNT OF ALL CLAIMS OF ALL KINDS INSURED BY

ALL POLICIES ARISING OUT OF ONE CASUALTY, OR

(D) THE AGGREGATE AMOUNT OF ALL CLAIMS OF ONE KIND INSURED BY

EACH POLICY ARISING OUT OF MORE THAN ONE CASUALTY, OR

(E) THE AGGREGATE AMOUNT OF ALL CLAIMS OF ALL KINDS INSURED BY

EACH POLICY ARISING OUT OF MORE THAN ONE CASUALTY, OR

(F) THE AGGREGATE AMOUNT OF ALL CLAIMS OF ALL KINDS INSURED BY

ALL POLICIES ARISING OUT OF MORE THAN ONE CASUALTY?

"/7) IN THE EVENT THAT THE VESSEL'S FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD SHOULD BE LESS THAN THE " JUST COMPENSATION VALUE" FOR SUCH VESSEL AS COMPUTED PURSUANT TO SECTION 902 (A) OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, AS THAT SECTION IS INTERPRETED BY YOUR OFFICE, COULD ANY APPROPRIATED MONIES BE USED TO PAY A TOTAL LOSS CLAIM WITH RESPECT TO SUCH VESSEL COVERED BY A WAR RISK INSURANCE POLICY IN VIEW OF THE WORDS APPEARING IN PUBLIC LAW 137, 82ND CONGRESS, READING: " NO MONEY MADE AVAILABLE TO THE DEPARTMENT OF COMMERCE FOR MARITIME ACTIVITIES, BY THIS OR ANY OTHER ACT, SHALL BE USED IN PAYMENT FOR A VESSEL * * * WHICH IS INSURED BY THE GOVERNMENT AND LOST WHILE SO INSURED, UNLESS THE PRICE OR HIRE TO BE PAID THEREFOR, * * * IS COMPUTED IN ACCORDANCE WITH SUBSECTION 902 (A) OF SAID ACT AS THAT SUBSECTION IS INTERPRETED BY THE GENERAL ACCOUNTING OFFICE? ( ITALICS SUPPLIED.)"

IT MAY BE STATED AT THE OUTSET THAT THE HOLDING IN THE DECISION OF FEBRUARY 25, 1952, AS REFLECTED IN THE ABOVE QUOTED EXCERPT WAS PREDICATED ON THE SITUATION PRESENTED, THAT IS, WHERE "A VESSEL MAY SUFFER SUBSTANTIAL DAMAGE COSTING MORE TO REPAIR THAN THE FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD OR THE LIMITATION ON TOTAL LOSS VALUE IMPOSED BY PROVISIONS OF PUBLIC LAWS 45 AND 137, 82ND CONGRESS, BUT LESS THAN CURRENT MARKET VALUE.' ACCORDINGLY, QUESTION (1) IS ANSWERED IN THE AFFIRMATIVE AND QUESTION (2) IN THE NEGATIVE.

WITH RESPECT TO QUESTION (3) THE LETTER OF APRIL 7, 1952, EXPLAINS AS FOLLOWS:

" WITH RESPECT TO QUESTION (3) ABOVE, IT SHOULD BE REMEMBERED THAT ALL OF THE PROPERTY AND LIABILITIES AUTHORIZED TO BE INSURED UNDER SECTIONS 1203 (A) TO 1203 (F), BOTH INCLUSIVE, ARE NORMALLY COVERED BY WHAT ARE COMMONLY REFERRED TO AS HULL, CARGO, PROTECTION AND INDEMNITY, SECOND SEAMEN'S AND DISBURSEMENTS AND EARNINGS OR INCREASED VALUE POLICIES. IT IS NOT CUSTOMARY TO INSERT IN ANY OF SUCH POLICIES, EXCEPT THE HULL POLICIES, THE VALUES OF ANY VESSELS INVOLVED, AS, OBVIOUSLY, SUCH VALUES HAVE NO RELATIONSHIP TO THE COVERAGES PROVIDED. IN ORDER TO FULLY PROTECT THEMSELVES, THE OWNERS MUST CARRY INSURANCE IN SUFFICIENT STATED AMOUNTS TO COVER THE FULL VALUE OF THE PROPERTY AT RISK AND THE MAXIMUM LIABILITIES THEY MAY HAVE TO OTHERS. EACH POLICY IS A SEPARATE CONTRACT AND CLAIMS ARE SETTLED ON THE BASIS OF THE CONDITIONS OF EACH POLICY.'

IN VIEW OF SUCH EXPLANATION, QUESTION (3) IS ANSWERED IN THE NEGATIVE.

AS INDICATED ABOVE IN CONNECTION WITH QUESTIONS (1) AND (2) THE SCOPE OF THE DECISION OF FEBRUARY 25, 1952, WAS CONFINED TO TOTAL LOSS AND PARTIAL REPAIRS; HENCE, QUESTION (4) IS ANSWERED IN THE AFFIRMATIVE.

WITH RESPECT TO QUESTION (5), YOUR LETTER STATES:

"* * * IT MUST BE KEPT IN MIND THAT THE AMOUNTS OF INSURANCE UNDER COMMERCIAL MARINE POLICIES ARE NEVER REDUCED BY THE PAYMENT OF CLAIMS ARISING OUT OF ONE OR MORE CASUALTIES. THE ONLY TIME THERE ARE ANY LIMITS ON THE AMOUNTS WHICH WILL BE PAID BY THE UNDERWRITERS IS IN CONNECTION WITH ONE CASUALTY, WHEN THE FACE AMOUNTS OF THE POLICIES, OTHER THAN HULL AND SECOND SEAMEN-S, GOVERN. UNDER HULL POLICIES THE UNDERWRITERS HAVE LIABILITY FOR MORE THAN DOUBLE THE FACE AMOUNTS OF THEIR POLICIES IN CONNECTION WITH ONE CASUALTY. SECOND SEAMEN'S POLICIES MUST BE WRITTEN WITHOUT ANY FACE AMOUNT BEING STATED, AS THE AMOUNTS FOR WHICH THE OWNERS OF VESSELS MAY BE LIABLE CANNOT BE ESTIMATED DUE TO THE NATURE OF THE RISKS INSURED, PARTICULARLY, THE LENGTH OF TIME CREW MEMBERS MAY BE INTERNED BY AN ENEMY. IN CONNECTION WITH MORE THAN ONE CASUALTY, THE UNDERWRITERS COULD BECOME LIABLE FOR SEVERAL TIMES THE FACE AMOUNTS OF SOME POLICIES, ALTHOUGH THAT PROBABILITY IS RATHER REMOTE. IT IS POINTED OUT THAT CASUALTIES, OF THE SAME OR DIFFERENT NATURE, OCCURRING AT DIFFERENT TIMES, EVEN ON THE SAME VOYAGE, ARE TREATED BY THE UNDERWRITERS AS SEPARATE CLAIMS AND PAYMENTS ARE MADE WITHIN THE LIMITS MENTIONED ABOVE. IF A VESSEL SUSTAINS DAMAGE ON TWO OR MORE OCCASIONS RESULTING FROM UNRELATED CAUSES AND THE COMBINED AMOUNT OF THE RESULTING CLAIMS EXCEEDS THE AMOUNT COMMERCIAL UNDERWRITERS WOULD PAY FOR THE TOTAL LOSS OF THE VESSEL, EACH WOULD BE CONSIDERED TO BE A SEPARATE CLAIM AND PAID IN FULL.'

IN VIEW OF THE ABOVE AND WITH THE UNDERSTANDING THAT SUCH IS THE PRACTICE IN COMMERCIAL MARINE INSURANCE, THE ANSWER TO QUESTION (5) IS THAT THE WORDS REFER TO ONLY ONE CASUALTY.

SINCE QUESTION (4) IS ANSWERED IN THE AFFIRMATIVE, NO ANSWER IS REQUIRED TO QUESTION (6).

QUESTION (7) IS ADEQUATELY ANSWERED BY THE LAST PARAGRAPH OF THE DECISION OF FEBRUARY 25, 1952, WHICH WAS TO THE EFFECT THAT AMOUNTS PAYABLE UNDER THE POLICY IN THE EVENT OF A TOTAL LOSS COULD NOT EXCEED THE "FAIR AND REASONABLE VALUE" ESTABLISHED BY THE BOARD OR THE "JUST COMPENSATION UE," WHICHEVER IS THE LESSER SUM.