may be detonated if given the proper stimulus. Detonating qualities are enhanced by contamination of carbonaceous materials, confinement, and heat" (record, p. 22256). On August 18, 1943, J. E. Tiffany, Bureau of Mines on question of FGAN and its hazards stated, "We know that there have been disastrous explosions with ammonium nitrate and undoubtedly these may recur from time to time. The conditions to bring about these explosions have never been satisfactorily established." Again Tiffany stated, October 29, 1943, in a report to TVA, "Nevertheless accepted precautions in handling these ammonium nitrate mixtures should be observed because numerous disastrous explosions of ammonium nitrate have occurred in the past" (Tiffany exhibit 5 not printed). In February 1944, J. E. Underwood, WPB, writing to Chemical Referee Board, stated, "Considerable data are available in connection with explosiveness of straight ammonium nitrate and some mixtures of this material and other salts. But practically nothing is known regarding the hazards involved through the introduction of organic materials to ammonium nitrate itself" (record, p. 20026). [Italic supplied.] On February 24, 1944, Col. Crosby Field, Ordnance Department, Assistant Director of Safety, directed all Government plants "that ammonium nitrate is an explosive and that its fire and explosive hazards are aggravated when the material is contaminated with combustible or carbonaceous materials as is the case with all oxidizing agents" (record, p. 25196). Ordnance Department 1945 edition, Safety Manual, subdivision C paragraph 70, headed Nitrates reads, "when compounded with combustible substances nitrates are violent fire and explosive hazards and may be subject to spontaneous ignition." Paragraph 4 of the same section reads, "Ammonium nitrate may be exploded by relatively light initiation if it has been sensitized by impurities such as carbonaceous materials" (record, pp. 25139). Col. J. S. Jefferds, commandant, Iowa ordnance plant, testified as to his knowledge in the year 1946 of the hazards of FGAN as follows: "Now, then, in July 1946 you have already discovered what to be fearful of in handling this unpredictable material, ammonium nitrate fertilizer grade." Answer: "We were aware of the hazards" (record, p. 6224). Major General Hughes, Chief of Ordnance, at time of manufacture of FGAN testified in part as follows. He knew that FGAN was going for export because there were hundreds of thousands of tons being shipped and they had to be concentrated (record, p. 4566). He took no steps to determine whether FGAN was safe for concentration in communities such as Texas City (record, p. 4575). Lt. Col. Morton E. Townes, Transportation Corps, United States Army, in charge of shipping FGAN prior to Texas City for the Army testified in summary as follows, A *** never made any inspection of Texas City from safety point of view nor did he cause any to be made nor cause any investigation to be made to see whether Army regulations were being enforced or carried out. B*** between July 1946 and May 1947, he issued no bulletins, letters, or instructions from a safety standpoint covering the handling, storage of FGAN (record, p. 57149). Maj. Donald F. Starr, commanding officer, Nebraska ordnance plant testified in summary that he did not send expert assistance in loading and stowing FGAN at Texas City, Tex., under the requirements and provisions of Army Regulations AR-55-470 (record, p. 6583). Again General Hughes, Chief of Ordnance, testified as follows: "What steps did you take as head of Ordnance to assure yourselves that the fertilizer grade ammonium nitrate was safe for concentration in communities such as Texas City, Tex.?" Answer: "I took none whatever" (record, p. 4574-4575). Following Texas City, the Commandant of the United States Coast Guard employed Arthur D. Little, Inc., of Massachusetts, to make an investigation of the properties and hazards of fertilizer grade ammonium nitrate. A report was filed November 14, 1952, and in part it provided, "FGAN should be considered as a hazardous article and treated like an insensitive explosive." C-5. Speaking of FGAN in a ship's hold and in confinement the report stated at I-3, "Under these conditions in a pile of sufficient size the self-heating from decomposition and the heating from oxidation may become unlimited and thermal explosion or detonation becomes inevitable." Further speaking of FGAN and of the disaster at Texas City the report, at page II-41 stated, "While thermal explosion has been briefly described on the basis of straightforth chemical kinetics the process of detonation is more complicated and remote and yet without doubt, the disaster at Texas City came about by the spontaneous development of the FGAN into detonation." Speaking of ammonium nitrates, a hazardous material, the report at page III-1 has this to say, "Ammonium nitrate in general is potentially a hazardous article of commerce because of the considerable amounts of energy which may be released in any of several reactions. In the low temperature region with organic material and free acid present, self-heating to fire can take place from 30° C. (R. O. E. Davis. See pt. II). At high temperature in a fire explosion may develop-the the energy of which is nearly equivalent to TNT ***. Therefore, FGAN, because of the hazard due to self-heating, to flame in cargo size lots from the region of 100° C. (212° F.) because of its ready combustion in a fire and because of its proven ability to detonate on shipboard from fire should be designated in marine shipment for cargo size lots as a hazardous material" (p. III-2 of the report). [Italic supplied.] The cliamants firmly believe that it was because of all of the foregoing and much more evidence on negligence, fault, notice, knowledge, and proximate cause, that prompted the committee of the House in its 1954 report to state, "The evidence before the committee overwhelmingly proves that FGAN, an inherently dangerous and hazardous explosive was introduced into the flow of commerce by the Government without proper safeguard. That fact alone in the opinion of the committee is sufficient to place the responsibility on the · Government, for it is a well-established jurisprudential principle that the manufacturer of a dangerous commodity who introduces it into the stream of commerce must fully test its properties and even though the product has passed beyond its ownership and control, it must nonetheless take adequate precautions and give adequate warnings for the protection of those who may be exposed to the danger. This, the Government failed to do" (p. 16, report of March 24, 1954). [Italic supplied.] This same evidence relied upon by the claimants unquestionably moves the Senate committee and its report of June 27, 1955, to say "The Government knew it had a good fertilizer in FGAN. It was also aware of the fact that FGAN possessed certain dangerous qualities" (p. 10, report). And again to find that "Any Government claim, therefore, that FGAN'S hazards were unforeseen is unavailing in the light of its knowledge that FGAN possessed explosive characteristics. It had the duty and obligation to know its own product and to ascertain the enormity of the forces it was turning loose on an unsuspecting person" (p. 15, report). HOUSTON, TEX., June 15, 1955. Mr. THOMAS J. LANE, House Office Building, Washington, D. C. DEAR MR. LANE: I listened with a great deal of interest to the hearing before your subcommittee last week on the Texas City disaster claims. I represent 55 death and personal injury claims and 3 corporate property damage claims, and was a member of the working committee which represented the plaintiffs in the tort-claims suits. I enclose, with the request that it be made a part of the committee record, a form of amendment to H. R. 4045 which I believe would furnish a satisfactory method of limiting payments to Texas City disaster victims. This form provides for a 40-percent settlement to both "excess claims" and insurance company subrogation claims. It would give the excess-claim group full settlement of actual damage sustained up to 40 percent of the amount of excess claim sued for in the tort-claims suit. While it would be a large limit for such claims as those of Monsanto and Pan American, it is limited to the actual damage sustained by those firms, over and above payments received from insurance companies. (Much of this damage was to uninsurable property, such as foundations and underground piping.) It would be much more equitable to the death and personal injury claims than a straight $20,000 limitation. The total prayer in the suits (excluding the $40 million claim for unknown plaintiffs) was $170 million, of which $41 million was for insurance company subrogation, leaving $129 million of excess claim. Under this amendment the maximum possible payment would be $52 million to excess claimants and $16 million to insurance companies. I think the actual payment would be around $44 million to excess claimants and $16 million to insurance companies. I hope this suggestion may be of assistance to your committee. Yours very truly, 66 VERNON ELLEDGE. Amend section 3 of H. R. 4045 by adding thereto the following: "(g) Claims for death, personal injuries and property damage made by individuals, firms, companies, associations and corporations, other than insurance companies, shall be approved by the Commission for payment in an amount not exceeding the actual damage sustained, as determined by the laws of the State of Texas, less any payment received by the claimant from an insurance company, and not exceeding 40 percent of the net amount of claim remaining after deducting any payment received by the claimant in a civil action filed against the United States in a United States district court prior to April 25, 1950. The term 'an insurance company' as used herein means an insurance company which has a right of subrogation. No insurance company shall have any right to receive any part of any claim approved under the provisions of this subsection. No part of any claim approved under the provisions of this subsection shall be paid over to any insurance company, and whoever violates the provisions of this sentence shall be fined not to exceed $5,000. "(h) Claims filed by insurance companies (as defined in subsection (g) of this section 3) for reimbursement to them of amounts paid out by them in payment of claims under policies based on losses sustained in the Texas City disaster shall be approved by the Commission for payment in an amount equal to 40 percent of the amount so paid out." Mr. THOMAS J. LANE, HOUSTON, TEX., June 16, 1955. House Office Building, Washington, D. C. DEAR MR. LANE: My letter of yesterday tendering a proposed limitation upon the amounts to be paid Texas City disaster claimants was for use only in event it should be decided to put a limitation of some kind upon the amount to be paid. I would of course prefer a bill which contains no limitation. Yours very truly, VERNON ELLEDGE. To: House Commitee on the Judiciary. THE LIBRARY OF CONGRESS, Subject: Memorandum in support of contention that insurance companies who have paid persons suffering property losses arising out of the Texas City, Tex., disaster will not be entitled to recover from such persons any part of the moneys distributed to them under an act of Congress enacted subsequently to the judicial rejection of claims filed by such persons under the Federal Tort Claims Act. (Attention: Mr. Brickfield.) 1. Any recovery of payments previously made to an insured by an insurer is predicated on the principle of insurance law that the insurer is entitled to succeed to the legal rights of the insured against a wrongdoer for purposes of recoupment. Inasmuch as an attempted assertion by Texas City claimants of a right of recovery against the United States under the Tort Claims Act proved abortive (Dalehite v. United States (1953), 346 U. S. 15), it follows that there do not now exist any legal rights of recovery to which the insurance companies may succeed (Phoenix Ins. Co. v. Erie Transportation Co. (1886), 117 U. S. 312, 321; Washtenaw Mut. Fire Ins. Co. v. Budd (1919), 208 Mich. 483; 175 N. W. 231; Pasley v. Amer. Surety Co. of N. Y. (Tex., 1952), 253 S. W. (2d) 86). That broader definitions of the recoupment rights of insurer have been advanced in prior litigation cannot be denied; but contentions, as for example, that an insurer, under principles of equity, is entitled to succeed to all the ways and means by which an insured receives reimbursement for his loss, have been rejected in controversies factually comparable to the instant one. Thus, in 1874, Congress by law (18 Stat. 245, 247, sec. 12) authorized payments to be made to persons who had suffered losses at the hand of the Confederate privateers, Alabama and others, but limited such disbursements, in the case of claimants who had been compensated by insurers, to the difference between the amount of such compensation and the true value of the loss sustained. When marine underwriters sued to recover any portion of the moneys thus disbursed, they were defeated in British courts on the ground that "title to the indemnity granted in particular terms out of a particular fund at the disposal of the United States by an act of Congress is not a title which can possibly result in law from the [insurance] contract itself. [If such right of recoupment existed, the British judges noted] it must exist by the combined effect of the contract between the insurer and the insured and the act of Congress. It cannot follow from the contract of insurance alone, without the act of Congress. *** Whatever views of moral obligation may be entertained with regard to the act of Congress, *** it is correctly described *** as an act of pure gift from the American Government * * *. If once the right had vested to recover any such sum, of course an act of Congress could not take it away; but when Congress in express terms say, 'We do not pay the money for the purpose of repaying or reducing the loss against which the insurance company has indemnified, but for another and different purpose,' it effectually prevents the right arising. * * * In this case the act of Congress declares in very express terms, *** that no compensation is to be given * * * on account of loss which has been * * * covered by insurance, and secondly that underwriters are not to receive any benefit from the funds distributed under the act. *** It was an act of grace on their part to assign [this fund], and give it either to one or to the other of the losers by the acts of the Alabama, and *** in giving it as they have done, they were attaching a condition to the gift, which condition was not only entirely within their power but which they might attach without violating any legal responsibility or moral obligation" (Burnand v. Rodocanachi (1882) 7 Law Reports (App. Cas.) 333, 335-336, 341, 343: Md. Casualty Co. v. Lincoln Bk. and Trust Co. (1937), 18 F. Supp. 375; (Col. L. R. (1928), 28:208). By way of deduction from a partially relevant New York decision, it also may be appropriate to contend that such rights as Congress intended to confer under the proposed enactment are entirely "personal, and can be neither assigned nor subrogated; and that Congress contemplated only the victims of the disaster as beneficiaries and not the insurance companies (Sun Indemnity Co. of N. Y. v. Bd. of Education of New York City (1942) 34 N. Y. S. (2d) 475). Another deduction 'deriving support from the cited cases is that, notwithstanding 1 This supporting argument has been attached pursuant to request; but the merit thereof is open to question. |