(5) The United States Longshoremen's and Harbor Workers' Compensation Act Congress provided specifically for subrogation in the Longshoremen's and Harbor Workers' Compensation Act, section 933 of which provides:

(i) Where the employer is insured and the insurance carrier has assumed the payment of the compensation, the insurance carrier shall be subrogated to all the rights of the employer under this section."

(6) Private relief bills

Of special significance is the circumstance that Congress has in the past made provision for the claims of subrogated insurers in numerous private relief bills. In the 77th and 78th sessions, preceding the enactment by the 79th Congress of the Federal Tort Claims Act, Congress enacted the following relief bills:

Private Law 266, 77th Congress, reported in United States Statutes at Large, volume 54, part 2, page 1242 (H. R. 3363), approved January 17, 1940, reimbursed the American Insurance Co., under its subrogation claim, for damages caused to the insured's property by reason of the crash of an airplane owned and operated by the United States Naval Reserve.

Public Law 142, 77th Congress, chapter 341, 1st session (H. R. 3523), approved July 30, 1941, reimbursed several insurance companies, under their subrogation claims, for damages caused to their insureds' property by reason of a crash of a United States Navy airplane.

Private Law 529, 77th Congress, chapter 663, 2d session (H. R. 5651), approved December 2, 1942, reimbursed two insurance companies, under their subrogation claims, for damage caused to their insureds' property by reason of the negligence of an agent of the Soil Conservation Service, United States Department of Agriculture.

Private Law 276, 77th Congress, chapter 82, 2d session (H. R. 3118), approved February 16, 1942, compensated the State Compensation Insurance Fund of California, under its subrogation rights, for personal injuries sustained by their assured when an automobile he was driving was struck by a United States Government truck operated by an employee of the Civilian Conservation Corps.. Private Law 430, 78th Congress, chapter 510, 2d session (S. 1278), approved December 6, 1944, reimbursed the Equitable Fire & Marine Insurance Co., under its subrogation claim, for the insured portion of the damages caused to the property of its assured, the Yellow Cab Transit Co. of Oklahoma City, Okla., which resulted from the negligence of the driver of a United States Army truck in colliding with a tractor and semitrailer with cargo owned by the insured. The Yellow Cab Transit Co. was also reimbursed by this act for the uninsured portion of the damage.

Shortly prior to the enactment of the Federal Tort Claims Act, to wit: on June 5, 1946, a bill was introduced at the 79th Congress, 2d session (H. R. 6683), to reimburse insurance companies for the insured portion of the damage caused to the property of Empire State, Inc., and the other insureds as the result of the crash of an Army plane into the Empire State Building on July 28, 1945. In a report dated July 24, 1946 (H. R. Report No. 2655, 79th Cong., 2d sess.), prior to the enactment of the Federal Tort Claims Act, the Committee on Claims of the House of Representatives recommended "favorable consideration to the proposed legislation as amended."

With the enactment of the Federal Tort Claims Act, and the close of the 2d session of the 79th Congress, both on the same day, August 2, 1946, no further action was taken on the aforesaid bill, nor was it reintroduced in the 80th Congress. The subrogated insurers thereafter instituted suit against the United States under the Federal Tort Claims Act and recovered their losses in that action (Niagara Fire Ins. Co. v. United States, 1948, 76 f. Supp. 850).

Report No. 2655, supra, includes the following significant statement by the Committee on Claims:

"Reference is also made in the report of the War Department to the fact that the insurance companies collect a premium for their insurance policies and that they should therefore not be reimbursed for payments which they were bound to make under their contracts.' It appears to this committee that such conclusion fails to give any consideration to the fact that the insurance companies' right of subrogation is not only preserved under the common law but is made an integral part of the fire-insurance contract and one of the considerations for which the policy is issued. The War Department's conclusion also fails to give any consideration to the proposition that subrogation recoveries are reflected in the rate level. At the hearings conducted by the subcommittee of this committee herein above referred to, on May 7, 1946, several insurance men 78228-5616

of standing testified that subrogation recoveries are credited to losses and, since, the rate level is based in part upon losses paid, it is clear that subrogation recoveries are reflected in the rate level ***.

"In view of the fact that the fire insurance companies' right of subrogation is made a condition for the issuance of the policy, and the fact that subrogation recoveries are reflected in the rate level, this committee does not regard the fact that an insurance company collects a premium for the policy as a sound reason for excluding the insurance companies from the benefits of the Military Claims Act or a sound reason for Congress to refuse to waive the sovereign immunity of the United States against proper claims."

Attention is directed to the report dated June 24, 1947, of the Committee on the Judiciary (H. Rept. 645), accompanying H. R. 669, 80th Congress, 1st session, dealing with the claims resulting from the explosion at Port Chicago, Calif., on July 17, 1944. The report includes the following comments:

"Nowhere in the statutes relative to claims is there anything which differentiates between the rights of an individual or the recognized rights of the insurance company under subrogation. There formerly was a disposition, on the part of some officers handling claims to contend that because an insurance company had collected a premium, regardless of amount, it should be permitted no recovery. This attitude was strengthened by an opinion of the Comptroller General in 1927. "Fortunately, the Attorney General was called upon for an opinion (June 29, 1932, 36 Ops. Att. Gen. 553). This was followed by an opinion of the Comptroller (vol. 22, p. 611), setting aside the former opinion of his office to the effect that insurance companies would not be paid under subrogation.

General on January 7, 1943

"This last opinion discusses this question at length, reviews the earlier opinions, cites the opinion of the Attorney General and the authorities. In view of the full and clear discussion, and the fact that it is in accord with the decisions, this opinion is quoted, rather than again briefing the decided cases

*

Attention is also directed to the fact that the report of the Senate Committee on Judiciary, to accompany H. R. 669 (Rept. No. 1355, dated May 18, 1948) includes the following statement:

"It is the view of the committee that settlement should be made as so recommended, pursuant to Public Law 423 of the 78th Congress, 2d session, and that subrogated claims as well as personal should be paid, there appearing no reason why the Government, having determined its liability, should not pay such subrogated claims."

In several of these instances the facts appear to be such that the Government was not, strictly speaking, legally liable for the damages. This circumstance has not deterred Congress from granting relief when equity and good conscience required such action. Nor has the fact that insurance companies would recover prevented relief from being given, indeed insurance companies have been treated like any other claimants. Likewise, little attention has been paid to the question as to whether the Government might have been able to escape legal liability on the ground of sovereign immunity. Such attitudes on the part of the Government would be quite inconsistent with the policy of doing what equity and good conscience required it to do.

IV. JUSTICE REQUIRES THE DISCHARGE OF THE GOVERNMENT'S MORAL OBLIGATION TO THOSE WHO, BUT FOR SOVEREIGN IMMUNITY, WOULD HAVE LEGALLY ENFORCEABLE CLAIMS FOR REIMBURSEMENT OF LOSSES SUFFERED AT TEXAS CITY

It is difficult to understand and impossible to justify the reasoning of those who suggest that no provision for reimbursement subrogated insurers should be included in a relief bill which undertakes to recognize and provide for the discharge of the moral obligation of the United States to those who suffered losses in the Texas City disaster.

A loss to an insurer is no different from any other loss. Property rights are not different in kind or quality because possessed by a subrogated insurer. We use the term "subrogated insurer" not in a technical sense but simply to designate those insurers who satisfied obligations imposed by law and their contracts in paying losses which occurred at Texas City and who, but for the technical obstacle of sovereign immunity, would have had legally enforceable claims against the United States.

While it may be argued that, strictly speaking, a right of subrogation against the United States cannot exist in the absence of a legally enforceable right in the subrogor in whose shoes the insurer stands, nevertheless, an insurance

company which suffers loss should not be treated differently from any other citizen. It is entitled to equal protection. That a premium was paid to the company for its contract does not change the fact that the company suffered a loss just as any other claimant did. In the case of a mutual insurance company, since it is owned by its policyholders, the property of the policyholders is damaged when their company is compelled to bear a loss, just the same as if their homes were damaged. The insurance function merely spreads loss; it does not change a loss into no loss.

Insurers should not be placed in a position where their function is largely restricted to mere absorption of loss. This would be too narrow a view. What should and does happen is that in return for the premium the insurer by prompt payment of loss prevents the economic dislocations which large losses create. In this particular instance, Liberty Mutual discharged this portion of its responsibility in noteworthy fashion, as evidenced by the following comment from a letter which the company received from the Texas Industrial Accident Board: "We doubt if there is any instance on record where the victims of catastrophe of the magnitude of this one were accorded the cooperation and their claims given the prompt attention that your company has given these unfortunate people."

Having discharged this part of its function the company next undertakes to track down the causes of the loss and the ultimate culprit. It endeavors to place the loss upon the wrongdoer, where it belongs. It undertakes to prevent recurrences wherever possible. An insurance company is and should continue to be far more than a mere loss bearer. The performance of its related functions should be encouraged as a means of aiding this "constructive corollary to enterprise," as insurance has been called, to become even more useful and to make even greater contributions to the general welfare. The right of subrogation, though sometimes criticized, has long been recognized as a valuable and socially desirable part of the equipment which insurers need if they are to fulfill to the utmost their essential functions.

While it is true that the decision of the Supreme Court in the Dalehite case, on a technical jurisdictional point, ruled out the legal enforcement of any claim as of right against the United States on account of the Texas City disaster, this does not justify discriminating among claimants. All claimants are in the same boat in asking Congress to make provision for discharging the moral obligation of the Government.

The suggestion that insurers alone should not be reimbursed for their losses because they undertook for a premium to assume those losses completely overlooks the nature and extent of the disaster. It was by no means the occurrence of a natural peril or a happening susceptible to measurement on the basis of any known probabilities. Rather, as pointed out by Mr. Justice Jackson in the Dalehite case:

"This was a man-made disaster; it was in no sense an 'act of God.' The fertilizer had been manufactured in Government-owned plants at the Government's order and to its specifications. It was being shipped at its direction as part of its program for foreign aid. The disaster was caused by forces set in motion by the Government, completely controlled or controllable by it. Its causative factors were far beyond the knowledge or control of the victims; they were not only incapable of contributing to it, but could not even take shelter or flight from it." And in a comparable situation Congress said, in connection with the Port Chicago disaster relief bill:

"This insurance was not written with any idea that the Navy would establish in the vicinity a potential, and as it turned out, greatly increased and actual hazard, overhanging the whole community. In view of what transpired these towns, plants, business establishments, and dwellings might as well have been located on an active volcano. This, of course, was never within the contemplation of the insurance coverage or the premium rate charged" (H. Rept. 645, accompanying H. R. 669, 80th Cong., 1st sess.).

In the Texas City situation it was developed that the Government had taken licenses under an explosives patent to manufacture the substance which detonated, yet, throughout, labeled and treated it as "fertilizer." Should it now wrap itself in the armor of immunity, but as to insurance companies only? The irony of such a result can only be appreciated in the light of the evidence that the Government succeeded in obtaining various benefits for itself in the form of lower rates for transportation and storage hazards than would have prevailed but for the improper and misleading label.

No moral justification can be found for denying relief to subrogated insurers or for according them treatment which is to any degree less favorable than that accorded others who suffered losses at Texas City by reason of the wrongful acts and omissions of agents of the Government. The doctrine of subrogation is itself a form of moral principle engrafted upon our jurisprudence and to deny it here is to deny a concept which has found almost universal acceptance.

Is the Government any less obligated with respect to a loss where there happened to be insurance protection than where no insurance was involved? What about large corporations which suffered losses at Texas City, some of them underinsured or even self-insured-was the risk of loss which they took any less calculated than that taken by insurers?

What about the homeowner who insured and the one who did not-is the Government to pay in the second case but not in the first? If so, is the first homeowner to be reimbursed for the insurance premium he paid, which the second did not?

We believe that the obligation which Congress has found to exist on the part of the Government toward those who suffered losses at Texas City cannot be discharged by any process based upon a determination that the loss is one which was suffered by an individual or by a corporation or that it is a loss suffered by an insurer.

We submit that the right of an insurer to recover on a subrogated claim is a right of great value, not only to the insurer but to the public as a whole, and ought to be protected. Wrongdoing should be discovered and corrected, whether it involve governments or individuals and loss should ultimately come to rest on the wrongdoer, "on him who in good conscience should bear it." The ancient and now discredited threadbare cloak of sovereign immunity should not be resorted to by the very Government which has so firmly ordained that it should no longer serve to deny its citizens their just recoveries.

Respectfully submitted.

LIBERTY MUTUAL INSURANCE CO.,
FRANKLIN J. MARRYOTT,

Vice President and General Counsel.

TEXAS CITY CLAIMS ACTS

When H. R. 4045 was introduced in the House of Representatives, a companion bill, S. 1077, was introduced in the Senate. The Senate bill, S. 1077, passed the Senate and was referred to this committee where it was considered in lieu of H. R. 4045. For purposes of convenience and reference it was thought advisable to incorporate as part of this record the public law as well as the House, Senate, and conference reports in connection therewith.

[PUBLIC LAW 378-84TH CONGRESS]

[CHAPTER 864-1ST SESSION]

[S. 1077]

AN ACT To provide for settlement of claims resulting from the disaster which occurred at Texas City, Texas, on April 16 and 17, 1947

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, The Congress recognizes and assumes the compassionate responsibility of the United States for the losses sustained by reason of the explosions and fires at Texas City, Texas, and hereby provides the procedure by which the amounts shall be determined and paid.

SEC. 2. The Secretary of the Army or such persons as he may designate shall investigate and settle claims against the United States for death, personal injury, and property losses proximately resulting from the disaster at Texas City, Texas, on April 16 and 17, 1947, commonly referred to as the Texas City disaster.

SEC. 3. (a) Claimants shall submit their claims in writing to the Secretary of the Army, under such rules as he prescribes, within one hundred eighty days after the enactment of this Act.

No claim shall be entertained by the Secretary of the Army unless it shall appear to his satisfaction that such claim was a part of a civil action filed against the United States in a United States district court prior to April 25, 1950, except that, for good cause, the Secretary may waive the limitation date of April 25, 1950, where it is shown that claimant, by reason of infancy, insanity, or other legal reason, was unable to bring such civil action.

(b) The Secretary of the Army shall promulgate and publish rules of procedure for handling the claims referred to in section 2 within sixty days after the date of enactment of this Act.

He shall determine and fix the amount of awards, if any, in each claim within twelve months from the date on which the claim was submitted.

Except as otherwise provided herein, the law of the State of Texas shall apply. SEC. 4. Since it is the intention and purpose of this Act, and of the Congress, to relieve the claimants hereunder, the Secretary of the Army shall limit himself to the determination of—

(1) whether the losses sustained resulted from the explosions and fires at Texas City on April 16 and 17, 1947;

(2) the amounts to be allowed and paid pursuant to this Act; and

(3) the persons entitled to receive the same.

SEC. 5. (a) Claims for awards based on death shall be submitted only by duly authorized legal representatives. No claim under this subsection shall be approved by the Secretary of the Army in amount in excess of $25,000.

(b) No claims for personal injuries may be approved by the Secretary of the Army in amount in excess of $25,000.

(c) No claim for property losses may be approved by the Secretary of the Army in amount in excess of $25,000.

SEC. 6. (a) In determining the amounts to be awarded for death, personal injury, or property losses, the Secretary of the Army shall reduce any such

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