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WHICHEVER IS THE LESSER SUM. 1952: REFERENCE IS MADE TO LETTER OF DECEMBER 28. WITH RESPECT TO ANY VESSEL WHICH IS INSURED UNDER THE PROVISIONS OF THIS ACT. IT IS POINTED OUT THAT. HULL INSURANCE POLICIES OFTEN ARE WRITTEN ON A DUAL VALUATION BASIS. THAT IS. A VESSEL IS VALUED AT ONE AMOUNT FOR TOTAL LOSS AND CONSTRUCTIVE TOTAL LOSS PURPOSES AND AT A HIGHER AMOUNT FOR REPAIR OF DAMAGE. PREMIUMS ARE COMPUTED AND CHARGED ON THE HIGHER VALUATION. IT IS URGED THAT 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. THAT IT WOULD BE IN THE INTERESTS OF THE OWNER AND OF THE UNITED STATES TO HAVE IT REPAIRED.

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B-106961, FEBRUARY 25, 1952, 31 COMP. GEN. 415

VESSELS - WAR RISK MARINE INSURANCE - LIABILITY LIMITATION WAR RISK MARINE INSURANCE POLICIES ISSUED UNDER AUTHORITY OF TITLE XII OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, MAY BE WRITTEN ON A DUAL VALUATION BASIS AS UTILIZED IN COMMERCIAL PRACTICE; HOWEVER, LIABILITY UNDER THE POLICIES MAY NOT EXCEED THE MAXIMUM LIMITATION OF A "FAIR AND REASONABLE VALUE" 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. SEE B-107600, FEBRUARY 11, 1952.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF COMMERCE, FEBRUARY 25, 1952:

REFERENCE IS MADE TO LETTER OF DECEMBER 28, 1951, FROM THE ACTING SECRETARY OF COMMERCE, REQUESTING AN OPINION AS TO WHETHER 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, WAR RISK MARINE INSURANCE POLICIES MAY BE ISSUED PROVIDING FOR DUAL VALUATION OF VESSELS TO THE SAME EXTENT PRESENTLY PROVIDED FOR IN COMMERCIAL POLICIES.

IN PERTINENT PART, SECTION 1209 OF THE ACT OF SEPTEMBER 7, 1950, 64 STAT. 774, PROVIDES:

(A) THE SECRETARY, IN THE ADMINISTRATION OF THIS TITLE, MAY ISSUE SUCH POLICIES, RULES, AND REGULATIONS AS HE DEEMS PROPER AND MAY ADJUST AND PAY LOSSES, COMPROMISE AND SETTLE CLAIMS, WHETHER IN FAVOR OF OR AGAINST THE UNITED STATES AND PAY THE AMOUNT OF ANY JUDGMENT RENDERED AGAINST THE UNITED STATES IN ANY SUIT, OR THE AMOUNT OF ANY SETTLEMENT AGREED UPON, IN RESPECT OF ANY CLAIM UNDER INSURANCE AUTHORIZED BY THIS TITLE, BUT WITH RESPECT TO ANY VESSEL WHICH IS INSURED UNDER THE PROVISIONS OF THIS ACT, 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.

(C) THE SECRETARY, IN ADMINISTERING THIS TITLE, MAY EXERCISE HIS POWERS, PERFORM HIS DUTIES AND FUNCTIONS, AND MAKE HIS EXPENDITURES, IN ACCORDANCE WITH COMMERCIAL PRACTICE IN THE MARINE INSURANCE BUSINESS * * *.

IT IS POINTED OUT THAT, UNDER THE COMMERCIAL PRACTICE IN GENERAL USE TODAY, HULL INSURANCE POLICIES OFTEN ARE WRITTEN ON A DUAL VALUATION BASIS. THAT IS, A VESSEL IS VALUED AT ONE AMOUNT FOR TOTAL LOSS AND CONSTRUCTIVE TOTAL LOSS PURPOSES AND AT A HIGHER AMOUNT FOR REPAIR OF DAMAGE, GENERAL AVERAGE, SALVAGE, COLLISION, AND OTHER PURPOSES. PREMIUMS ARE COMPUTED AND CHARGED ON THE HIGHER VALUATION. IN SUGGESTING THE DESIRABILITY OF FOLLOWING SUCH PRACTICE, IT IS URGED THAT 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, 82D CONGRESS, BUT LESS THAN CURRENT MARKET VALUE, AND THAT IT WOULD BE IN THE INTERESTS OF THE OWNER AND OF THE UNITED STATES TO HAVE IT REPAIRED. THE RESTRICTIVE LIMITATION REFERRED TO IN PUBLIC LAWS 45 AND 137, 65 STAT. 60, 286, IS AS FOLLOWS:

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 THE TITLE TO WHICH IS ACQUIRED BY THE GOVERNMENT EITHER BY REQUISITION OR PURCHASE, OR THE USE OF WHICH IS TAKEN EITHER BY REQUISITION OR AGREEMENT, OR WHICH IS INSURED BY THE GOVERNMENT AND LOST WHILE SO INSURED, UNLESS THE PRICE OR HIRE TO BE PAID THEREFOR, (EXCEPT IN CASES WHERE SECTION 802 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, IS APPLICABLE) IS COMPUTED IN ACCORDANCE WITH SUBSECTION 902 (A) OF SAID ACT, AS THAT SUBSECTION IS INTERPRETED BY THE GENERAL ACCOUNTING OFFICE.

IT APPEARS POSSIBLE THAT THE PARTIAL REPAIR OF A VESSEL MIGHT RESULT IN THE INCURRENCE OF COST DISPROPORTIONATE TO TOTAL VALUE, BUT IT IS NOT CLEAR THAT AS REPAIRS BECOME MORE EXTENSIVE THE COST THEREOF SHOULD EXCEED SUCH VALUE. HOWEVER, ASSUMING THAT IT DOES, BECAUSE OF DISPARITY BETWEEN ,FAIR AND REASONABLE VALUE AS DETERMINED BY THE FEDERAL MARITIME BOARD" AND CURRENT VALUE, THE QUESTION ACTUALLY POSED WOULD APPEAR TO BE ONE CONCERNING AUTHORITY TO ISSUE INSURANCE AND TO PAY INDEMNITIES THEREUNDER EXCEEDING THE VALUE FIXED BY THE LIMITATION. OF COURSE, THE APPROPRIATENESS OF THE LEGISLATIVE ACTION IS NOT IN QUESTION. IT SEEMS SUFFICIENT TO NOTE IN THIS RESPECT THAT THE HOUSE COMMITTEE ON MERCHANT MARINE AND FISHERIES ADOPTED THE LANGUAGE OF THE LIMITATION WITH A VIEW THAT IT---

* * * NOT ONLY OFFERS TO THE BOARD A MORE APPROPRIATE STANDARD, HAVING THE BENEFIT OF LONG-ESTABLISHED AND FAMILIAR JUDICIAL PRINCIPLES, BUT IT ALSO APPLIES THE SAME "FAIR AND REASONABLE" STANDARD FOR THE BOARD AS IT WOULD NECESSARILY BE APPLIED BY A COURT IN A SUIT BROUGHT UNDER SECTION 1212 WHERE THE CLAIMANT DISAGREED WITH THE BOARD'S DETERMINATION OR WHERE THE CLAIM WAS ADMINISTRATIVELY DENIED BY THE SECRETARY.

* * * IT WAS FELT THAT THE DETERMINATION OF "FAIR AND REASONABLE VALUE" SHOULD BE MADE BY THE FEDERAL MARITIME BOARD PURSUANT TO STANDARDS CREATED AND ESTABLISHED BY IT RATHER THAN BY THE SECRETARY ( HOUSE REPORT NO. 2846, 81ST CONGRESS, PAGE 7).

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 PEACETIME 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, 49 STAT. 2015, AS AMENDED, AS THAT SECTION IS INTERPRETED BY THIS OFFICE, WHICHEVER IS THE LESSER SUM. SEE B -107600, FEBRUARY 11, 1952.

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