this bill incorporates excessively high levels of benefits, novel and undesirable provisions, and fails to deal with the overriding problem of third-party actions that have seriously uudermined the entire longshore compensation system.

At the beginning, may I point out two important considerations unique to our industry:

First, longshore compensation insurance is a major cost item. The standard, or manual, rate for compensation insurance in New York is now $18.10 for each $100 of payroll. Many employers are forced to pay additional amounts called debits as a result of their individual loss experience. It is such an important overriding cost factor that a company's loss experience will often determine whether it makes a profit or a loss in any given year. Unfortunately, that experience is not always a real measure of the effort that is put into a safety program. Second, the U.S. maritime industry faces serious economic problems. Last year its percentage share of the Nation's waterborne foreign trade dropped to 7.3 percent, the lowest percentage in 45 years. Also, its relative position as compared to the merchant marine fleets of other nations has slipped substantially. For example, of the 606 freighters that are presently under the U.S.-flag fleet, 108 or 18 percent. have been built since 1960. In contrast, nearly 60 percent of the total Russian fleet, or 512 ships of 895, has been built since 1960. This means that since 1960 Russia has built more than four-fifths as many freighters as there are in the whole U.S. privately owned freighter fleet.

Since compensation insurance is a major cost factor, and in view of our industry's financial problems, it is of critical importance that your committee consider the impact of this bill on the future of the maritime industry.

Senate bill S. 2485 would increase the maximum weekly benefit level by 50 percent, from the present $70 to $105 per week. It would also increase the maximum death benefit from $105 to $140 per week and would remove the present $24,000 maximum aggregate compensation benefit.

By any standards these are substantial increases. The National Council of Compensation Insurance has advised that for only some of its provisions the bill would cause an increase in insurance rates by about 40 percent.

This estimate does not include other increased costs for changes proposed by sections 4, 5, 6, 7, 8, 12, 13, 14, and 15 of the bill which include major additional cost items such as the special user assessments, imposition of legal fees on top of compensation awards where a claim. is resisted, broadening of the disfigurement provision, and continuance of compensation after payment for specific losses expires.

The total anticipated cost of the bill in its present form would obviously be of major proportions, certainly in excess of 50 percent. How much more no one really knows at this time. The result is clear. It is prohibitive and will further damage the American maritime industry.

The 50-percent increase in the maximum weekly benefit proposed by this bill is excessive by any realistic standard. Since the act was last amended in 1961:

The Bureau of Labor Standards Consumer Price Index has risen by 13.2 percent on a nationwide basis. A similar percentage increase in the weekly benefit would raise it to $80.

The hourly wage rate for longshoremen in North Atlantic ports increased by 22 percent, from $2.97 in 1961 to $3.62 per hour today. A 22-percent increase in the $70 benefit would raise it to $86.

Even if the historic formula were followed of establishing the maximum benefit at two-thirds of the injured worker's actual wage loss during the period of disability, a maximum benefit level of about $88 per week would result based on earnings data applicable to the port of New York. Of course, the ultimate level adopted should be based on nationwide data.

This approach, basic to all compensation acts, recognizes that compensation benefits are not taxable and that the injured worker does not incur the usual expenses of going to work. At the same time it encourages the injured longshoreman to return to work as soon as he is genuinely physically able to do so.

Any increase in the benefit level, however, will be a difficult burden for the industry to bear, apart from the other changes proposed by this bill, unless the Congress takes the long overdue step of eliminating third-party suits against the vessels. This would reestablish the original and basic doctrine that workmen's compensation is the exclusive remedy for work injuries. This step would permit our industry to support realistic adjustments of benefits levels. We would much rather prefer a higher compensation remedy provided that such was the full and only remedy.

We are also opposed to the proposal to increase the percentage formula for establishing compensation benefits from 66% percent of a man's average weekly wages to 75 percent if he has a dependent. This is merely a transparent device to increase the longstanding twothird formula to a three-quarter formula, since in over 90 percent of the cases the injured worker will have one or more dependents.

If this formula is adopted, an injured worker would realize very close to his actual take-home earnings, although he would not incur the expenses of going to work.

In its presentation to this committee, the Department of Labor representative supported the $105 benefit level by emphasizing_earnings data of longshoremen employed on the west coast. But the Longshore Compensation Act is a national law applicable to every area of the United States. To set a national benefit level based on earnings only of the highest area, and one which has only one-half of the longshore work force of the port of New York, would create an unfair economic burden on other areas.

Our association also objects to the assessment of attorneys' fees proposed by section 12 of the bill. This would permit the Deputy Commissioner to add to an award an amount to pay for the claimant's attorney's fees if the employer resists payment of compensation.

It would appear that the penalty would apply not only to those cases where payment is resisted, which are very rare, but in those many cases where the employer raises a fair and reasonable question as to the amount of the compensation. Certainly the employer who pays for the injured worker's compensation should be able to question

the amount of such compensation in particular cases. This amendment would effectively curtail that right. An employer would hesitate to question the amount, knowing that, with the addition of attorneys' fees, he would end up paying as much or more than if he had not resisted. This is not the American way of providing a fair hearing. Another provision of the bill which we must strongly oppose is the attempted imposition of so-called user charges on the industry to pay for the cost of administering the compensation and safety programs. We note that the Department of Labor, in its testimony to this committee, stated that the imposition of user charges represented a well-precedented method of financing services performed by the Government, and that in 1965 collections for these charges were $1,408,000 for the entire Federal Government. Yet, in this bill the Federal Government proposes to collect approximately $3.3 million from our industry alone, more than twice what it has collected in all other areas of its operations.

Here is yet another substantial and open-ended cost provision that would divert available limited moneys away from benefits into uncontrolled administrative channels.

The single most critical problem of the longshore compensation system is the proliferation of third-party suits against the vessels. Longshore employees are the only group of workers in the United States that enjoy dual rights when injured: They have one of the most generous compensation acts in the world, while, at the same time, retain the right to sue their own employer for unlimited amounts of damages.

The judicial bootstrapping that brought about this problem has been reviewed and analyzed by other witnesses and in the maritime. industry booklet entitled "Compensation and Common Sense." The result of these court decisions is to bring about a dangerous and costly breakdown in the entire system of longshore compensation.

I am quite sure that if the original drafters of this worthy legislation were to look at the situation in our industry that now exists, they would literally throw up their hands in horror. While the injured longshoreman still has the benefit of rapid and assured payment of compensation during his disability, his stevedore employer no longer has a limitation of his liability to offset its absolute character under

the act.

The representative of the Department of Labor emphasized in her testimony before this committee the basic theory of workmen's compensation—namely, that the benefits "are a substitute for the valuable right of an employee to sue an employer for damages when injured in employment." She pointed out that under workmen's compensation "the employer's ultimate liability is certain and limited." But this concept of a balancing of rights simply no longer holds true under the longshore compensation system because of the recent escalation of third-party suits.

And the crisis worsens steadily. The courts continue to expand and enlarge on their original misconceptions and third-party suits have gathered momentum. At the present time it has been conservatively estimated that they now arise in from one-third to one-half of all longshore compensable cases in the Port of New York.

The experience of one major stevedore member of our association illustrates this accelerating trend. This company's experience is representative of all stevedoring companies. In 1956 that company had 207 Federal compensable cases in one major port and 28 third-party actions for a ratio of 13.5 percent. In 1965 compensable cases rose to 344 while third-party suits shot up to 107 for a ratio of 31.1 percent.

In another major port its ratio of third-party cases to Federal compensable cases increased from 5 percent in 1956 to 47.9 percent in 1965. In yet another major port this company's third-party actions rose tenfold from a ratio of 10.5 percent of its Federal compensable cases in 1956 to 111.9 percent in 1965.

Now that last figure of 111.9 percent may raise a question in your mind, but it illustrates the mushrooming nature of this problem. In that particular port, the company was impleaded on nearly all of its Federal compensable cases and, in addition, on some of its State compensation cases.

In other words in these State cases the particular injury did not occur on the vessel or elsewhere "upon the navigable waters," to bring it within the jurisdiction of the Federal Longshore Compensation Act. Nevertheless, the claimant filed suit against the vessel on the theory that it was unseaworthy and that its unseaworthy condition caused, or contributed to, his injury.

Senator MORSE. I think we should have available to the committee a memorandum that gives us an analysis of State compensation acts, workmen's compensation acts, and third-party suits. We should know to what extent, if any, third-party suits are allowed under workmen's compensation acts administered by the States.

Mr. Talbot, if you have any information in your files that would be helpful to us in collecting such data, I wish you would make it available to us in supplemental memoranda.

Mr. TALBOT. We shall do that, Senator.

The "bag of beans" case is an example. This is a fairly recent but disturbing trend in third-party cases.

Another example is the Hagans decision where a longshoreman working on the pier slipped on sand that had leaked from sand bags being unloaded. Benefits under the State compensation law were paid and, in addition, the employee recovered a substantial judgment. against the vessel owner on the grounds that the vessel was unseaworthy. The vessel owner, in turn, recovered from the longshoreman's employer.

I know that the subcommittee is aware of many of the examples of cases where the doctrine of seaworthiness has been stretched to absurd lengths. The result of these decisions is that in any case where a longshoreman is injured on the vessel, or near the vessel, or by some material or equipment in some way connected with the vessel, he has a potential third-party claim. And the courts are doing everything they can to eliminate traditional concepts of fault in these cases to make the steamship owner an absolute insurer of such injured longshoremen. Thus, in an ever-growing number of cases the longshoreman's own employer is paying him both compensation and damages. Every longshore employer in the country is faced with this problem. Is this what Congress intended when it passed the Longshore Compensation Act?

Certainly both the Longshoremen's and Harbor Workers' Compensation Act itself and the reasons behind it have been nullified by these developments in a substantial manner. One commentator has stated: "The basis for the act has been undermined to such an extent that its necessity and effectiveness are now questionable."

Do third party suits place heavy cost burdens on the compensation system? By their nature they must. One estimate is that the additional wasteful cost to the industry is about $20 million per year. I personally, from 40 years of experience, believe this estimate to be conservative.

In 1946 when the maximum weekly benefit level in the longshore act was $25, the insurance premium in New York was $8.53 per $100 of payroll. Today the premium rate has more than doubled and is now $18.10 per $100 of payroll.

While the longshore rate was more than doubling in New York in this period, the rate for virtually every other so-called hazardous industry in New York declined. For example, coal mining went from $10.01 in 1946 to $9.30 today; stone crushing went from $10.71 in 1946 to $3.30 today; pipeline construction declined from $10.52 in 1946 to $5.40 today; and sign erection outdoors dropped from $8.78 in 1946 to $4.20 today.

Nor can this increase in insurance rates be explained by any change in the work frequency injury rate. Indeed, that rate has undergone a steady decline over the years. As shown by Department of Labor statistics, between 1963 and 1966 the work injury frequency rate for the marine cargo-handling industry declined 20 percent. Also, at the same time the seriousness of injuries declined as well as the number of days lost per injury.

The accident statistics for the Port of New York also reflect this dramatic decrease. As shown in the attached exhibit the number of lost time accidents per million man-hours worked in the Port of New York dropped from 80.5 in 1956 to 63.5 in 1966.

Increases in the benefit level in the Longshore Compensation Act made over the years can account for only about one-half of this increase. For example, increases in the benefit level in 1956 and 1961 resulted in rate increases totaling $4.50 in the State of New York.

If it is assumed then that only $4 to $5 of the increase in the premium rate in New York is attributable to third-party suits, it would mean that, for the Port of New York alone, third-party cases cost our industry about $5 million per year. This is a staggering amount of money to divert from more worthwhile purposes.

Representatives of labor have discussed this problem in terms of the injured longshoremen's traditional right to bring an action against a "stranger" to the employer-employee relationship. They said that if any limitation was placed on this right, it would do violence to sacred concepts of our legal system.