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Purpose And Scope Of War Risk Insurance

Creator: Samuel McCune Lindsay (author)
Date: September 1918
Publication: Annals of the American Academy of Political and Social Science
Source: Available at selected libraries

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The War Risk Insurance Act is now the official designation of that body of law which began with the establishment of a Bureau of War Risk Insurance in the Treasury Department by the Act of Congress of September 2, 1914. The Bureau's powers and duties have been greatly expanded and modified by numerous amendments and subsequent enactments. It may be well to trace briefly at the outset the various steps in the history of this momentous legislation which constitutes so important a chapter of our special war legislation.

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The act of September 2, 1914, passed within a little over a month after the outbreak of the European war and while we were still a neutral nation, explained its purpose in a preamble which said:

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Whereas the foreign commerce of the United States is now greatly impeded and endangered through the absence of adequate facilities for the insurance of American vessels and their cargoes against the risks of war; and whereas it is deemed necessary and expedient that the United States shall temporarily provide for the export shipping trade of the United States adequate facilities for the insurance of its commerce against the risks of war; therefore be it enacted, etc.

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Then followed the authority granted to the Secretary of the Treasury, through the Bureau of War Risk Insurance, to issue insurance on American vessels and their cargoes, and the appropriation of funds for these purposes. It was intended as a temporary measure and the President was authorized to suspend the operations of the act whenever in his judgment the necessity for further war insurance by the United States ceased to exist; and in any event such suspension was to take place within two years after the passage of the act without, however, affecting outstanding insurance or claims pending at the time. This provision for suspension of what is now the Division of Marine and Seamen's Insurance has been extended by subsequent acts until by the amendment of July 11, 1918, it is required to take place when the President so directs, but in any event within six months after the end of the war, except that "for the purpose of the final adjustment of any such outstanding insurance or claims, the Division of Marine and Seamen's Insurance may, in the discretion of the President, be continued in existence for a period not exceeding three years after such suspension." It would seem, therefore, that as far as marine and seamen's insurance is concerned Congress has consistently declared its intention to provide government insurance merely as a temporary war measure.

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Insurance Acts of Congress

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Congress extended the scope of marine insurance by the Act of June 12, 1917, which directed the bureau subject to the general direction of the Secretary of the Treasury to make "provisions for the insurance by the United States of masters, officers and crews of American merchant vessels against loss of life or personal injury by the risks of war, and for compensation during detention following capture by enemies of the United States whenever it shall appear to the Secretary that in any trade the need for such insurance exists."

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This act not only authorized the bureau to make provision for insurance and compensation for injury, death and detention following capture by enemies for officers and crews of American merchant vessels, but it made such insurance and compensation compulsory by providing that in the event of failure of the owner of any vessel to effect the insurance of master, officer and crew prior to sailing, in accordance with the plan it outlined, the Secretary of the Treasury was authorized to effect it with the bureau at the expense of the owner. The expense of the premium with interest and a penalty not to exceed $1,000, in addition, with interest and costs was made a lien on the vessel.

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The compensation provided by this amendatory act for seamen is as follows:

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In case of death or permanent disability which prevents the person injured from performing any and every kind of duty pertaining to his occupation, or the loss of both hands, both arms, both feet, both legs, or both eyes, or any two thereof .... An amount equivalent to one year's earnings or to twelve times the monthly earnings of the insured, as fixed in the articles for the voyage .... but in no case .... more than $5,000, or less than $1,500.

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A percentage of this sum is allowed for the loss of one hand (50), one arm (65), one foot (50), one leg (65), one eye (45), total loss of hearing (50) and the bureau may include in its policy specified percentages for other losses or disabilities.

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In case of detention by an enemy of the United States, following capture, payment is made during the continuance of such detention at the same rate as the earnings immediately preceding such detention, but the aggregate payments under all these provisions may not exceed one year's earnings as above determined. Payments are made only to the master, officer or member of the crew except, in case of loss of life, to his estate for distribution to his family free from liability of debt, and in case of capture, to his dependents if such have been designated by him.

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