7. Flood-insurance endorsement shall not be attached to policies that otherwise include flood damage, such as transportation policies, inland marine policies, and personal property floater policies.

8. The charge for flood endorsement shall be at a rate of 1 cent per hundred dollars on insurance or fraction thereof per year or any portion of a year.

(a) There is to be no return allowed on the flood charge when a policy is reduced or canceled, except that if a policy is canceled for nonpayment of premium within the time prescribed by the other portion of the policy the flood charge may also be canceled.

(b) If a policy is increased in amount the proper charge for flood cover coverage shall be collected for balance of policy period. If less than 1 year, for full year, if more than 1 year for full year intervals.

9. The flood charge to be collected with the insurance premium for the policy and the insurance company shall retain 25 percent of the charge to cover expenses of handling and loss adjustment expense.

10. In case of loss the insurance companies to furnish the facilities of their adjustment arrangements in same manner as they would if loss was a fire or other hazard usually covered.

11. Details of loss and proofs of claim to be forwarded to the Federal flood insurance corporation or fund for their approval and payment.

12. Notice of flood damage must be filed with the insurance company within a reasonable period of time which shall not exceed 30 days.

COMMENTS

1. This is not a charitable proposition.

2. It is a plan to attempt to spread the cost of disasters over all persons, firms or corporations that are prudent enough to insure their property against fire and other hazards.

3. It is not an insurance to be purchased as flood insurance alone and as private insurance companies cannot legally compel others to pay for a coverage they do not think they need, it is to all intents and purposes a Federal tax collected by private industry, acting as fiduciary, for the purpose of setting up a fund to relieve in part flood disaster losses.

4. The size of the original fund can be determined by multiplying the num ber of insurance companies by $5,000 and the income to the fund by multiplying the total amount of fire insurance written by 1 cent per hundred dollars thereof.

Example:

$5,000 insurance companies average $25 million

100 billion fire insurance annual income $10 million

5. If this income is not proper the annual rate can be adjusted accordingly. 6. With a large deductible and with no attempt to protect those who do not choose to protect themselves against fire and other catastrophes (self-insurance programs are not eligible for participation) with no attempt to have this fund applied to flood control, repair or replacement of public facilities, such as roads, bridges, etc. This plan should be workable, with probably changes and enlargements.

7. After trial this plan could probably be enlarged to cover limited loss of income and rentals on business properties.

8. To cover loss of pay a plan might be worked out as a tax on payroll as a part of workmen's compensation insurance.

Submitted by,

C. CONRAD PARKER.

Senator LEHMAN. The first witness this afternoon is Mr. Schumacher, president of the American Optical Co.

STATEMENT OF WALTER A. STEWART, APPEARING ON BEHALF OF AMERICAN OPTICAL CO. AND ON BEHALF OF PEOPLE AND MANUFACTURERS IN VALLEYS OF THE QUINEBAUG AND

FRENCH RIVERS

Mr. STEWART. Mr. Chairman, my name is Walter A. Stewart, formerly president and now a trustee of the American Optical Co. I

am appearing for Mr. E. W. Schumacher, president of the American Optical Co., and also in a dual capacity as the representative of the people and manufacturers located in the valleys of the Quinebaug and the French Rivers in southern Massachusetts and northern Connecticut.

Senator LEHMAN. Do you have a prepared statement?

Mr. STEWART. We have a prepared statement, and I will file that statement.

In relation to that statement, Senator, I would like to say briefly that as the American Optical Co. we represent a manufacturing corporation that endured a loss of $22 million due to the floods of August 18 this year.

Supplementing our good Congressman and our interested Congressman, Philip J. Philbin, if your committee would drive by that place now you would find little evidence of the disaster, because the recovery has been so rapid and so well.

In the Quinebaug and French River Valleys we endured a disaster amounting to $35 million in material and economic loss.

The American Optical Co. is wholeheartedly in favor of flood or disaster insurance. We have canvassed the residents of the Quinebaug and the French River Valleys through their chambers of commerce with only one dissenting vote or voice. They are completely in favor of some form of insurance and are requesting this committee to look after their interest in that respect.

They have asked me to stress the fact or express the hope that the interest in insurance does not divert us from the interest in flood control, because there are certain conditions that we face that can be taken care of only by flood control.

In relation to insurance, we would suggest to the committee to look closely at the question of zoning.

Senator BUSH. The question of what?

Mr. STEWART. The question of zoning, of applying zoning to the insurance. The zoning could raise artificial barriers. It could be a barrier as between communities in their competition with each other for the improvement.

For instance, a city like Hartford with its facilities would undoubtedly earn a better rating than, say, a city like Putnam, and if that were so, then the city of Putnam would be handicapped as against Hartford in seeking to improve its economic opportunity.

We would like to see Federal insurance available. We think that under the circumstances it is the only answer.

I would like personally, Senator, to support your remarks and also the remarks of Senator Bush about flood control being a Federal proposition. The residents in the valley of the Quinebaug River have been working on some form of flood control through their individual efforts and through town and local efforts since 1822. They have not accomplished the result because there has been no overall authority. Therefore, we believe that flood control is a Federal proposition, that once the Federal proposition is stated then there is room for the local, municipal, and other people. But without the dominant Federal influence to establish the standards, the local people cannot function to advantage on their own.

That is what we wish to say, Senator. I would like to divert here a minute to go back to a remark that I heard Senator Bush make

this morning about his interest in the western end of Massachusetts and the western end of Connecticut. We hope, Senator, that your interest there does not divert you too much from the eastern part of Connecticut, because we thing we have a common cause there along the Quinebaug River.

Senator BUSH. Well, Mr. Chairman, I would like to correct the gentleman's impression, because when I spoke of the western part of Massachusetts I did not say anything about Connecticut at that time. I did speak of the western part of Massachusetts because I believe that that was the part of Massachusetts which suffered the most damage and virtually all the damage in these recent floods. But, of course, I did not say anything about the western part of Connecticut. Ithink you misunderstood me, if you will permit me.

Mr. STEWART. I am glad to hear that.

Senator BUSH. I was at Putnam immediately after the flood, and in that whole area, and I certainly agree with you that there is no worse devastated area in the whole of New England than that immediate area. I know the American Optical Co. very well, and I am very sympathetic with the views which you are submitting and which you expressed on their behalf.

Mr. STEWART. Thank you.

Senator LEHMAN. You have several plants?

Mr. STEWART. Yes. We have a plant in Putnam, Conn.

Senator LEHMAN. Where in Massachusetts?

Mr. STEWART. We have two plants in Massachusetts. We have one in New Hampshire. We have one in Vermont. And we have a very good plant in New York State at Buffalo.

Senator LEHMAN. You referred to the loss of $22 million resulting from these floods.

Mr. STEWART. Yes.

Senator LEHMAN. Did you have any insurance on that?

Mr. STEWART. Insurance has not been available to us, to the American Optical Co., since 1936. If it was available from the one source we know of where we could get it, it would have cost us a premium rate of 30 percent. But since

Lloyds?

Senator LEHMAN. What was that? Mr. STEWART. Lloyds. But since the 1936 flood it has not been available. They won't give it to us.

Senator LEHMAN. So this damage resulted in a completely uncompensated loss to the company?

Mr. STEWART. Yes. In respect to that, Mr. Chairman, I would like to make one brief comment on relocation. Somthing can be done in relocation. But these manufacturers are not adjacent to these rivers either stubbornly or capriciously. The water is an asset. In our operation we take more than 4 million gallons a day out of the river and put it back. We have to have the water.

Some relocation can be done, but the water in these rivers to these manufacturers is an economic asset and, in our opinion, just as valuable as the farm soil, the trees, the minerals, and the oil. It is an economic asset of this Nation, and we think that it should be looked upon in that aspect and that flood control should be considered from that standpoint.

Senator LEHMAN. You talked about zoning. Has anything been done in relation to zoning in the localities in which your plants are situated?

Mr. STEWART. Nothing has been done in the past. We are now earnestly interested in maybe working out a planning district as between ourselves and the adjacent townships in Connecticut. That can be done.

Senator LEHMAN. In the bill that I prepared I placed a limit of $300,000 on any individual coverage-commercial facilities. Senator Kennedy based it slightly lower-$250,000, I think. What is your thought about that?

Mr. STEWART. Mr. Chairman, neither of those limitations fits us. So far as our operation is concerned, on a limitation of that kind in respect to the cost of the insurance, we might better carry the insurance ourselves.

That does not alter our opinion of the need and the necessity for an insurance for many other people. In fact, I could give you a list today of people up and down the Quinebaug and the French Rivers, possibly extending to 50 different commercial concerns, whom this insurance would not only fit but is almost today a dire need, a complete, vital necessity.

We are not insurance people. I am not qualified to discuss the various kinds of bills. We have confidence in the testimony I heard here this morning from Professor Harris and from Mr. Yount. This committee will have the viewpoints of the different people who can work those things out. We are confident and will be content with what comes out of your deliberations in respect to that; whether it fits an operation of our size or not we don't know.

Senator LEHMAN. Thank you very much indeed.

Did you have any further questions, Senator Bush?
Senator BUSH. No.

(The prepared statements submitted by Mr. Stewart follow :)

STATEMENT OF WALTER A. STEWART, TRUSTEE AND FORMER PRESIDENT,

AMERICAN OPTICAL CO.

Gentlemen, my name is Walter A. Stewart, and I am a trustee and former president of American Optical Co. I am sure it is recognized that our company suffered as much as any Massachusetts industry as a result of the flood disaster of August 19, 1955.

I want to state these basic facts as background for the position American Optical Co. takes before this committee:

1. Flood insurance has not been available to American Optical Co. since 1936. 2. Were this insurance available, it is estimated by competent authorities that the cost would be excessive-approximately 30 percent.

3. Expensive flood-protection facilities instituted and paid for by the company were entirely inadequate for the volume of water recorded August 19, 1955. Protection against such volume is impossible for a private enterprise.

4. American Optical Co. has property and inventory on the Quinebaug River at Southbridge, Mass., and Putnam, Conn., with a replacement value of $40 million.

5. Complete protection of this property would require an additional $11 million in business interruption protection.

6. American Optical Co. now estimates cash expenditures of $2,500,000 entirely attributable to the August 19 flood.

With these facts in mind, we make these three points :

1. We believe broad-scale, low-cost flood insurance is necessary and can be obtained only under Federal sponsorship; that protection up to $250,000 is better than no protection; that it will give vital assistance to the many small businesses

that are of paramount importance to our economy; but that it obviously is not the answer to the problem faced by industries with multimillion-dollar assets exposed to the threat.

2. We believe that our rivers and the water that flows in them are valuable natural resources, assets just as much as the land in farming areas, the trees in forest areas, and minerals in mining areas. Some form of flood insurance will afford minimum protection to those who use these assets. However, it could be in a temporary or liquidating form because, obviously, it will offer nothing to promote the development or exploitation of these national assets. It will afford no added benefits to those citizens who are resident in areas served by the rivers, but not exposed to the menace of flood. Flood control would develop, exploit, and expand the benefits of these national assets.

3. We believe there is grave danger that efforts to obtain enactment of a flood insurance program would, with or without the expressed or tacit consent of its sponsors, weaken the efforts of those working to obtain flood control, and it is our conviction that effective flood control offers the greatest benefit to all the people.

STATEMENT OF WALTER A. STEWART, CHAIRMAN OF THE ORGANIZING COMMITTEE, SOCIETY OF THE QUINEBAUG

Gentlemen, my name is Walter A. Stewart, and I represent the Society of the Quinebaug, an organization of business people whose interests are in the valleys of the French and Quinebaug Rivers, specifically in Southbridge and Webster, Mass., and Thompson and Putnam, Conn. I speak for them on the related subjects of disaster insurance and flood control.

It is now estimated that damage to public, private, and industrial property in this area resulting from the flood disaster of August 19, 1955, will be approximately $35 million.

We have canvassed the businessmen in the area, through their chambers of commerce, and find that with only a few dissenting voices sentiment is in favor of disaster-relief insurance, with the reservation that the sentiment is expressed without knowledge of proposed rates, coverage, or limitations. These businessmen speak for a program that will fit the needs of the area.

It is the unanimous sentiment of the organization that a program for flood control is of supreme importance. It is emphasized that the manufacturers of the area are not located where they are haphazardly, carelessly, or stubbornly. They are located where they are because water is essential to their operations. Therefore, it is their conviction that if the welfare and economy of the area are to be preserved, there must be proper control of these rivers so that their waters will remain an asset and not a periodic menace.

Senator LEHMAN. Mr. Richard B. Young, chairman, New Bedford Committee on Hurricane Damage.

STATEMENT OF RICHARD B. YOUNG, ACUSHNET PROCESS CO., NEW BEDFORD, MASS., ON BEHALF OF NEW BEDFORD COMMITTEE ON HURRICANE DAMAGE

Mr. YOUNG. I appreciate very much, of course, this honor of appearing before you. I might state I appear very much like Mr. Stewart does as a floodee, not as an expert on insurance. However, we do also have some ideas on this subject.

I do have a prepared statement, Mr. Chairman, that I have passed in. I believe you have a copy there.

Mr. Chairman and members, I would like to start by saying my name is Richard B. Young. I am associated with the Acushnet Process Co., in New Bedford and represent the New Bedford Committee on Hurricane Damage. This committee was formed by the 35 large and small industries in Greater New Bedford which were subjected to damage by flooding salt water during the 1938, 1944, and 1954, hurricanes.