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that from 30 to 45 percent for the cost of doing business, is my opinion. You can come to a conclusion with that.

Mr. MITTELMAN. I would assume, of course, that all longshoremen would be able to take advantage of the increase in the maximum permissible benefit for not earning over, what is it, approximately $150 per week, they wouldn't get full advantage of the increase involved or suggested in S. 2485, isn't that correct?

Mr. ROBERTSON. That would be true.

Mr. MITTELMAN. Mr. Dewey testified that it was his best estimate that the cost of third party liability actions to west coast ship operators approximated 15 to 20 percent over and above the approximately $15 million of annual premiums or self-insured costs incurred under the State acts and the Federal act. Would that be generally in accord with your own estimate?

Mr. ROBERTSON. I really don't have figures to back up any statement that I would make on that. I do know most of the companies that are not self insured have their third party liability insurance tied in with heir workmen's compensation insurance, and I doubt that they could give you an individual rate for your third party. Unfortunately, carriers, when they are compiling records asking for an increase in premiums, they can put the losses wherever they want to, whether it is under compensation or third party. It is hard to get a true picture.

Mr. MITTELMAN. It occurs to me that if the amendments, or at least some of them, suggested in S. 2485 are enacted into law, and, for example, the third party amendment which you favor is enacted into law, there will have to be an adjustment in premiums and someone is going to have to cost out these various changes. What I was wondering more specifically was whether you could submit to us some cost estimate of these various changes and just exactly what is involved with all of these particular items that we have been discussing this morning.

Mr. ROBERTSON. I think I will defer that to Mr. Lindsay. I believe he will have some information on that.

Mr. MITTELMAN. I just have two more questions. I just want to clarify one part of your testimony. You distinguish between “temporary” and “permanent” disability suggesting that while an increase should be made in the temporary_disability benefits payable but no increase for permanent disability. I want to know if you are referring to permanent partial disability or permanent total disability or both.

Mr. ROBERTSON. You may have a conflict there. A permanent total gets benefits for the rest of his life, so to speak, but permanent partial, you are talking about a man that has returned to work and usually about a year after the injury his condition is considered permanent and stationary. He has returned to work and in, I would guess, 95 percent of the cases he is making as much or more than he made prior to the injury. In most cases he has returned to the exact same duties he had at the time of injury. I think that the present limit of $70 a week is fair compared to the State of California. The permanent disability rate in the State of California is $52.50 per week.

Mr. MITTELMAN. I am still confused as to whether you are referring to permanent partial disability or permanent total. With permanent partial you have two awards.

Mr. ROBERTSON. Permanent partial, to answer your question.
Mr. MITTELMAN. My last question concerns the statute of limita-

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tions. The bill, as you noted in your prepared testimony, to change the existing 1-year rule providing a claim could be filed anytime within a period when the longshoreman is excuse me, within 1 year after the longshoreman with reasonable diligence should have been aware of the injury. I was wondering whether your opposition to that suggested change might be lessened if a requirement that a longshoreman undergo a semiannual or annual complete physical were included in the act in order to submit a claim past the 1-year period now specified.

Mr. ROBERTSON. My answer would be “Yes.'
Mr. MITTELMAN. That is all.

Senator MORSE. There was one point I forgot to mention. In your statement you say, “Defer permanent disability payment or awards until such time as the rehabilitated worker shows an actual wage loss. Exceptions should be made for amputations.” I think that needs to be greatly enlarged upon. I think, on the basis of the showing you have made in your statement, we will probably run into difficulty with that suggestion unless you clarify it and strengthen it, subject to change on the basis of what the record findings show. :- In the establishment of deferred permanent disability it is taken for granted that the payments will also be made connected with the disability rather than with the subsequent actual wage loss. Here you get into the need for clarifying what the theory of payment for disabilities is going to be. Standing alone, I think we will have trouble with that proposal, but you may be able to expand and educate us so we will understand it better.

Mr. ROBERTSON. Senator Morse, the purpose of permanent disability awards under workmen's compensation, as I understand it, is to make up for loss of ability to work in the open labor market. In my opinion, until there is some loss of actual wages due to this permanent disability, if you wish to call it that, well, then, there is no permanent disability. If he returns to the same occupation, longshoring, and continues to make as much money as he did before, he is not demonstrating a permanent disability.

In the event of—I really have no basis for my thinking on what I am going to say now-for amputations, I suggested in my testimony that we shouldn't have deferred payment on amputations. I don't know, amputations to me are, I feel it is a different situation. A man, for instance, with an amputated arm may not be able to return to some occupation and he feels a terrible loss here.

а. Senator MORSE. I am not talking about specific cases. I am talking about hypothetical cases involving the theory of providing legislation for awards for permanent disability. I think if we follow the rule you suggest, you would be encouraging an injury. You would be encouraging their not going back to work, stretching the disability for everything it is worth. Human frailties being what they are, I don't think we ought to encourage that. Our practice has been, as I understand it, to make the awards upon the finding of permanent disability. I question whether we would create more problems than we would solve by trying to change that. I may be dead wrong, but it is up to you to show me. I am asking you to supplement your testimony with a full memorandum. Mr. ROBERTSON. Thank

you,

sir. Senator YARBOROUGH. Thank you, Mr. Robertson.

(The following communication was subsequently supplied for the record.)

a

METROPOLITAN STEVEDORE COMPANY, INC.,

Wilmington, Calif., February 28, 1968, Re S. 2485 (Longshoremen and Harbor Workers Act). Hon. RALPH W. YARBOROUGH, Chairman, Labor Subcommittee, Senate Committee on Labor and Public Welfare,

Senate Office Building, Washington, D.C. DEAR SENATOR YARBOROUGH: Mr. Donald B. Robertson, Vice President of this organization, testified before your committee in Portland, Oregon, and pointed out in his testimony the technical aspects of this company's position. I wish to concentrate on the economic impact of the proposed legislation.

It is obvious to a man in your position that the economic status of the contracting stevedore and his client, the steamship company, has become progressively worse since World War II. Costs have increased to the point where some companies have had to cease operations. Insurance has been a major part of this cost, and with the advent of the third party suit and the indemnity over action against the stevedore, said costs are beyond all reason.

In my opinion there is an answer to this problem. Your committee now has an opportunity to take legislative action which is the only remedial avenue to alleviation of this matter. Now is the time to legislate the third party action out of the picture and return to the original intent of the lawmakers who designed the Longshoremen & Harbor Workers Compensation Act. In this way benefits under the Act may be improved as warranted by the results of your committee's investigation.

The elimination of the third party suits would do much to alleviate the economic plight we find ourselves in and would certainly go a long way to pay for increased compensation benefits for the worker.

We would appreciate the inclusion of this letter, together with the testimony already submitted by Mr. Donald B. Robertson, in the official record of your committee. Yours very truly,

JOHN H. ANTHONY, President. Senator YARBOROUGH. We will proceed with the next witness. The next witness is Mr. Chester Eschen, Jr., San Francisco.

Mr. Eschen, if you have anyone with you, counsel or other people, you may bring them with you. You may proceed, Mr. Eschen, in your own way and identify yourself for the court reporter.

STATEMENT OF CHESTER ESCHEN, JR., PRESIDENT, CALIFORNIA

STEVEDORE & BALLAST CO., SAN FRANCISCO, CALIF.

Mr. ESCHEN. Mr. Chairman, Senator Morse, Senator Yarborough, staff members. I greatly appreciate the opportunity to be here to present the position of a direct employer in the contracting stevedoring industry. It is a great pleasure for me to see democratic processes in operation and the consideration that you gentlemen have given us and the fact you would give up your important time to listen to a citizen to present his side of the problem. Even though I am from California I greatly appreciate your coming out here and I greatly appreciate being here and it is really a wonderful thing to see the democratic processes in action.

I am not as well versed a speaker as some of the men here and I have prepared a statement and I am going to have to deviate from it many times because since I have been here and listened to the others I think there are other points that are well worth mentioning.

My name is Chester Eschen, Jr. I am from the San Francisco Bay area and am president of the California Stevedore & Ballast Co. I have been in the terminal, stevedore, and shipping industry for over 30 years.

I am testifying before you today because it is believed that I can present some of the facts on how the proposed changes will be seriously detrimental to the foreign trade of the United States.

Deviating some, our shipping industry is in terrible shape. The ships we work make you sick to go on board them. The American ships that we have to use in our overseas efforts, in Vietnam, Korea, are mostly over 20 years old. They are getting progressively worse. We are having more failures on these ships. The American shipping industry is in terrible shape. We have got to help ourselves, and even though this isn't right in our problem here, today about 7 percent of our freight is carried in American ships. If it were up to 50 percent there would be no foreign trade balance against us. When you see the conditions of these ships and go on board them, and they say things like this, “we made it last time, I hope we can make it again, and I have seen ships that fortunately after they got off military control came into real trouble like the one that was lost

up

north here or the one that turned, practically turned in the dock in the Hawaiian Islands. We loaded her for the Government. You could see daylight through the weather deck. These have to be brought to our attention. You have to realize that the shipping business is the fourth arm of our military.

Coming back to the points at hand, the other members of the industry testifying have ably presented the tremendous increase in costs and problems caused by the third party suits which make us uneconomic in our competition with Canadian ports and to even some extent Mexican ports.

We have to realize that with intermodal transportation and a tremendous change in the industries, the ports of the entire west coast are in competition. For example, the Japanese can get to Vancouver faster than they get to San Francisco. They can ship over Canadian lines at about the same rates they would ship on American rail lines. These third party suits of which our company is experiencing many make great raises in the cost of handling vans. We are trying to hold this trade for the United States and put them on our railroads and through our ports, but steamship operators, and we handle many foreign lines, are getting more and more worried about these huge lawsuits. Very recently we had some gentlemen, directors of our Norwegian accounts, and they are real excited about these lawsuits. They are having trouble covering their costs in fighting them.

About 6 months ago I went to Europe, to England, to Lloyds of London to fight a demand on our overinsurers for a $2.50 raise

per hundred dollars of insurance just to cover the additional cost of third party suits as they then existed. The trend goes steadily up.

There is a great many of our cargoes that are barely moving. There are a great many cargoes going out of this coast, bulk cargoes, of which 25 to 30 cents a ton is the gross income to the stevedore contractor even including wharfage, and a raise of a few cents a ton on things like carbon coke, iron ore, wood chips, and many of these things which are actually like carbon coke, a surplus item we are trying to get rid of or scrap iron which if the Japanese didn't take it it would just be laying around being a problem to us; re have over a million tons a year of scrap iron on the west coast that there is no market for except Japan and when they don't buy it it just stacks. These third party suits, and we have a great many in the handling of scrap iron, constantly raise the cost.

Our iron ore is the highest priced of any in the world. The main reason the Japanese buy it is for insurance, so that they are sure of having a market and

a balance, and it is also to keep some favor with the United States. They can buy better iron ore out of Australia cheaper. They bought as high as six and a half tons a year out of Goa which is now taken over by the Indians. We are just pricing ourselves out of the market on many of these things.

The thing that worries me the most is the fight for our foreign trade on raisins, canned goods, dried fruit, and fresh fruits that move from the whole Western States, grapes, pears, apples, we are barely holding our own now and the basic problem is that we have got to take care of these men. I consider these men my friends. They are part of our industry. We work together. They are not enemies, they have got to be taken care of, but the basic problem is how do we take care of them and how can we afford it. We don't want to kill the goose, either, so the best thing that I can see from where I sit is to knock out as much of the third party liabilities as possible.

I have even heard insurance people say that they could raise the compensation insurance paid out to their man by 50 or 60 percent without raising the cost at all if we could get out of the third party. It is something that no other is not normal in our country. We don't have recourse to two different things. The purpose of compensation is to take care of the injured man, it isn't to take care of a flock of lawvers. Often when these fellows, I have seen them get an award, maybe the award is $200,000, the attorneys will take $80,000 or $90,000 of it, then the fellow gets what's left. He isn't used to handling money like this and a year from now he is broke. Is this what we want? I think what we want to do is take care of the man and give him a real raise in compensation. I believe that if you will check it out that when you average out all the third party awards and lawsuits what the men finally get is not a great deal more on the average than what they would have gotten as Workmen's Compensation. We spend endless times worrying and finding about these suits. We get two, three teams of attorneys. We had a small one the other day. The ship's attorney got $3,000, our attorneys got $2,500, the man's attorneys got $2,000 and the poor guy got $2,000 finally' for himself. Eighty percent of the money goes to the attorneys, it doesn't seem to me like a good deal.

Our courts are flooded enough and you have problems, I think we should steadily work on this idea. By working in this manner we have something that the industry can afford and something that the men need and should have. I think it brings it back to the main purpose of the Longshoremen's Act in its original status. I know, a lot of attorney don't think I have too great a mind for them, I will tell you why I get bitter on this. We have had men injured and before they got them off the ground he has got an attorney card in his hand. There is a man in every gang in southern California that acts as an agent for the attorney and phones him and gets a commission for getting the business for him. We find that where we used to have one thirdparty lawsuit 5 years ago we now have 10.

You go back to Philadelphia, 80 percent of the ship cases wind up in third party lawsuits to the point that steamship companies avoid

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