Then the President, in his discretion, could extend this coverage to Japan and to any other foreign countries over which we have control at the present time.

Mr. HERD. I am told, Mr. Wolcott, that the language at the bottom of page 3 and at the top of page 4, the first four lines, would enable the administrative agency to limit even the extension of such protection to citizens, say, of the United States.

Mr. WOLCOTT. But he would not have to extend it at all.

Mr. HERD. That is correct.

Mr. WOLCOTT. And he could extend it.

Mr. HERD. He would extend it.

Mr. WOLCOTT. He could extend it to include the property of Japanese citizens.

Mr. HERD. That is true, as we construe it.

Mr. WOLCOTT. This is getting more complicated as we go along. Mr. HERD. Excuse me, sir. Before you leave that point, I am reminded that we have this language, that you have just read, in either that form or substantially that form in the War Damage Act under which we operated in World War II.

Mr. WOLCOTT. And never used it.

Mr. HERD. We did not use it. That is correct.

Mr. WOLCOTT. Then the general power on page 5:

To appoint such officers, agents, attorneys, and employees as may be necessary for the conduct of the business of the Corporation; and to delegate to them such powers and to prescribe for them such duties as may be deemed appropriate by the Corporation.

Is the interpretation which is placed on that section to authorize the employment of agents, employees, outside the Classification Act or the civil-service laws?

Mr. HERD. Might I ask the general counsel of the RFC, sir, to answer that question?

Mr. DOUGHERTY. I doubt it very much, sir.

Mr. WOLCOTT. RFC now has to hire its employees under the Classification Act and the civil-service laws.

Mr. DOUGHERTY. That was in the charter of the old War Damage Corporation and was put in there in order for this particular kind of business, the right kind of employees could be employed and so the companies

Mr. WOLCOTT. I understand your problem if you are using the agents of the insurance companies to transact this business, but this is so broad as to authorize you to employ any number of employees, attorneys, and agents in Washington under the administrative set-up without consideration to the Civil Service Act.

Mr. DOUGHERTY. That was not intended.

Mr. WOLCOTT. Could you suggest some language that would give you the authority to use the agents of companies that would at the same time authorize you to employ stenographers and clerks and others within the Classification Act and the civil-service laws who are on full-time pay basis, let us say?

Mr. DOUGHERTY. That could be done; yes, sir.

Mr. WOLCOTT. When you use the agent of an insurance company to sell the insurance and collect the premium and they do it without recompense or the minor matter of collecting a few cents or dollars, the power incident to their employment is that of the insurance com

pany and that should cover it. But, of course, the RPC does not have, or any agency does not have, authority to employ full time employees except under the Classification Act of Civil Service. The Repubhenna do not want the Democrats to employ people that way.

Mr. DOUGHERTY. Could we not reach it by providing that any full-time employees should be subject to the Classification Act?

Mr. WOLCOTT. There is one thing in your statement that I do not understand. You distinguish here between one form of cover.mp and another which is called money and securities program. What is that?

Mr. HERD. May I explain that, Mr. Wolcott, and Mr. Chairman? The CHAIRMAN. Yes.

Mr. HERD. If you will turn your mind back to the conditions which existed following Pearl Harbor in December of 1941, the subject of war damage insurance, of course, immediately became a live subject and as is stated in this memorandum, the legislation which was under consideration or the bills that subsequently became legislation granted free coverage prior to the Pearl Harbor occurrence,

Mr. WOLCOTT. Retroactive as to the losses at Pearl Harbor in w amount somewhat under $100,000. An amazingly small amount.

Mr. HERD. Comparatively modest amount, yes, but I think it is given in the statement given this morning by Mr. Dougherty, but you gentlemen fixed a time limit of July 1, 1942, when your fund the legislation in March of 1942, not later than which a prograth had to be available to the public. That is a premium insurance prograin We devoted ourselves immediately to the question of gesting w so-called general insurance program in effect to errime pat, joey and our next step, which was taken in October, I babaze, of bas qhat, was to make available insurance on money and somnijossa in transit and we felt first things fret and we got the WOFT WAY securities program. That, of come *** 16 wagont of

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necessary under a war damage policy and the amount of insurance that he would be carrying, say, against fire or wind storm.

Mr. WOLCOTT. In many States and localities the assessed valuation is ever so much lower than the realty value. Now, if you paid on a piece of property that was valued at $5,000 and the premium was set on that basis and actual loss was $10,000, would the loss be limited to $5,000?

Mr. HERD. We would pay him-Mr. Wolcott, your question has to be answered in two parts. As to the owner of a residence, a dwelling, we did not write what we call CO insurance. In other words, he could elect to insure up to any amount he wished, up to the actual value, insurable value of his property, so to answer your question in respect of residences or dwellings, he would collect his loss up to the limit of the insurance that he purchased or, if he had a $5,000 loss, he would collect $5,000 insurance. If he had a $7,500 loss under your case, he would still collect $5,000 insurance, but where the insurance applied to industrial plants or to mercantile properties, then we wrote it in the customary insurance way, which would be with co-insurance and we tried to get insurance value, so that there would not be a selection against the Corporation.

Mr. MULTER. One or two things. May I address this to Mr. Dougherty?

On page 5 of your statement you recommend a change in H. R. 9802.

Mr. DOUGHERTY. Oh, yes; to bring the coverage within the present exclusions of commercial policies.

Mr. MULTER. Do you have any objection to that being written to cover preparation for attacks and training?

Mr. HERD. Could I respond to that, sir? That happens to be somewhat in our department.

In the last program with the emergency situation that existed, the legislation which was passed either overlapped or created a gap between insurance that was available through private companies and we were constantly trying to dovetail the two things.

If this language, as suggested, should be enacted, it should dovetail, so that the man who has availed himself of the private insurance to the extent available and of the war-damage policy, would have interlocking coverage as it were.

Mr. MULTER. Then you would not need any additional language to cover damage occurring during the course of the training program. Mr. HERD. Well, sir, in the training program, as I answered the chairman or Mr. Wolcott, I believe, we considered that as being embraced in our present private-insurance contracts.

Mr. MULTER. How about a loss that might be caused by a State guard, not the National Guard, not federally supported, but suppose it was a State guard unit?

Mr. HERD. We could construe that the same way, but in making that statement I would like to say that, of course, we always reserve the right to avail ourselves of this Tort Claims Act, and so forth, in the event we feel that there is some right of recovery, but that does not deprive the policyholder of being indemnified properly by private insurance.

Mr. MULTER. There is insurance available today against damage in connection with the State guard unit.

Mr. HERD. We are paying losses every day, sir, in connection with that activity. I am just reminded that when the plane flew into the Empire State Building, I think that was a case in point where the private companies paid promptly.

The CHAIRMAN. It is my recollection that the War Damage Corporation previously, or as it previously operated with the insurers, the people and the insurance companies, I do not think we heard any complaints about it at all.

Mr. HERD. Well, sir, modesty would preclude an elaborate answer to your observation.

The CHAIRMAN. If there are no further questions, we will call the next witness.

The CLERK. There is present Mr. Clay Johnson, who is a former general counsel of War Damage Corporation; unless some of the members wish to direct a question to him we could go on with the next witness.

The CHAIRMAN. We will not be able to proceed much longer because there are too many bills coming up in the House.

The CLERK. The next witness, then, is Mr. Robert B. Ely, representing the Insurance Co. of North America and the Association of Casualty and Surety Companies.

STATEMENT OF ROBERT B. ELY III, REPRESENTING ASSOCIATION OF CASUALTY AND SURETY COMPANIES

Mr. ELY. Mr. Chairman and honorable members, my name is Robert B. Ely, of Philadelphia, a member of the bar of the Supreme Court of the United States, appearing today as a member of the law committee of the Association of Casualty and Surety Companies, also of counsel of the Insurance Co. of North America of Philadelphia, and its affiliated companies, Philadelphia Fire & Marine Insurance Co. and Indemnity Insurance Co. of North America, all of which are authorized by the State of their domicile to write all forms of insurance other than life and annuities.

It is respectfully urged that the committee recommend for passage by the House and enactment by the Congress of a bill, substantially in the form set out below in appendix B, which would grant succession to, or otherwise reactivate the War Damage Corporation and broaden its previous purposes to include the provision through reinsurance, including the insurance of self-insured employers, of protection of employers and their insurers against liability imposed by workmen's compensation and similar laws for injuries to employees arising out of "war risks."

In support of this proposal, it is respectfully submitted that recent experience has shown one of the most effective techniques of modern warfare to be the strategic bombing of densely populated production centers during times of peak activity. It is certain that in any new hostilities in which the United States may engage this technique will be employed against this country as early and as often as may be possible. The prime objective of such strategy is to achieve the simultaneous destruction of as much property and as many persons as possible.

Öther witnesses, speaking in the interest of property insurers have stressed and will stress to your committee the need for reactivating

the War Damage Corporation in its role of providing "protection against loss of or damages to property, real and personal." It is the purpose of this statement to stress the even greater urgency for it to expand this role to include protection against injury, disease, and death suffered by employees arising out of "war risks" in the course in their employment.

As the laws of the various States now stand with respect to workmen's compensation and similar subjects, the primary responsibility for paying compensation for such personal injuries is imposed upon the employers involved. It is not safe to assume that these laws may be changed in time to afford needed relief.

Had these employers, many of whom are self-insured, only their own resources to call upon, a single atom bomb could bankrupt hundreds of them in an instant, and at the same time reduce the dependents of their employees to poverty. In Hiroshima, with a total population less than half that of the District of Columbia, and a density of population only slightly greater, more than 150,000 persons were killed or injured in the single blast. The superintendent of insurance of New York State, in a speech last month before the local chapter of the Society of Chartered Property and Casualty Underwriters, estimated conservatively that this would have meant in the United States claims for personal injuries, at the rates allowed for workmen's compensation, amounting to $125,000,000 from a single bomb not of the latest type.

To protect themselves against such staggering liability, employers and the dependents of employees can only look to their private insurance carriers and to State compensation funds. However, on this point, one may again refer to Superintendent Bohlinger, who says, "It does not require any great stretch of the imagination to realize that even the total admitted assets of the casualty companies which write workmen's compensation insurance would be inadequate to meet a series of such huge losses." Nor are State funds in a stronger financial position to meet such catastrophes.

Neither can one isolate the casualty and State funds insurers as the sole potential victims. Many casualty insurers are the running mates, that is, parents or wholly owned subsidiaries, of fire, marine and even life companies; and the insolvency of one member of an insurance fleet may mean the ruin of all.

In these circumstances the one source of immediate relief is Congress. However, that relief need only be financial. As the analysis of the New York superintendent indicates, the insurance companies have adequate mechanical and personnel facilities for underwriting the risks, servicing the accounts and settling losses in the field under discussion. Their sole lack is of resources, but this lack is critical. Government reinsurance is needed, with crucial urgency.

The intense interest of the entire insurance industry in the problem thus presented, and their unanimity in desiring a solution along the lines herein proposed is evidenced by the fact that on Friday last, December 1, a subcommittee representing the interests of the National Board of Fire Underwriters, the Marine Institute, the Inland Marine Insurance Bureau, the Association of Casualty and Surety Companies, and the American Mutual Alliance, including in their membership the vast majority of all the stock and mutual underwriters of insurance