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 ADDRESSES 
 
 Made at the 
 
 Fourth Annual Meeting 
 
 of 
 
 The Liability Insurance 
 
 Association 
 
 HOTEL PLAZA, NEW YORK CITY 
 
 October Twentieth 
 Nineteen Ten 
 
 Presented with the Compliments of 
 
 THE LIABILITY INSURANCE ASSOCIATION 
 
 I 
 
/■ 
 
Digitized by the Internet Archive 
 
 in 2008 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/addressesmadeatfOOIiabrich 
 
ADDRESSES 
 
 Made at the 
 
 Fourth Annual Meeting 
 
 of 
 
 The LiabiUty Insurance 
 Association 
 
 HOTEL PLAZA, NEW YORK CITY 
 
 October Twentieth 
 Nineteen Ten 
 
 11 * > ' > 
 
 > » 'i 
 
 i' > » ) 1 
 
 

 C.'aAJiaLUA.OuUX. 
 
 . • • 
 
 •! • • 
 
 » • 
 
 ^ • • .. : : 
 
 • • • c. 
 
 
Liability Insurance Association. 
 
 MEMBERS 
 
 JEtna. Life Insurance Company, Hartford, Conn. 
 
 Casualty Company of America, New York, N. Y. 
 
 The Employers' Liability Assurance Corporation, Ltd., United States 
 
 Branch, Boston, Mass. 
 The Empire State Surety Company, New York, N. Y. 
 Employers' Indemnity Company, Philadelphia, Pa. 
 The Fidelity and Casualty Company, New York, N. Y. 
 The Frankfort Marine, Accident and Plate Glass Insurance Company, 
 
 United States Branch, New York, N. Y. 
 General Accident Fire and Life Assurance Corporation, Ltd., United 
 
 States Branch, Philadelphia, Pa. 
 London Guarantee and Accident Company, Ltd., United States Branch, 
 
 Chicago, 111. 
 Maryland Casualty Company, Baltimore, Md. 
 New Amsterdam Casualty Company, New York, N. Y. 
 The Ocean Accident and Guarantee Corporation, Ltd., United States 
 
 Branch, New York, N. Y. 
 The Pennsylvania Casualty Company, Scranton, Pa. 
 Peoples Surety Company, New York, N. Y. 
 The Philadelphia Casualty Company, Philadelphia, Pa. 
 Pacific Coast Casualty Company, San Francisco, Cal. 
 The Standard Accident Insurance Company, Detroit, Mich. 
 The Travelers Insurance Company, Hartford, Conn. 
 United States Casualty Company, New York, N. Y. 
 United States Fidelity and Guaranty Company, Baltimore, Md. 
 
 OFFICERS 
 
 President 
 
 A. Duncan Reid, Executive-Superintendent, The Ocean Accident & 
 Guarantee Corporation, New York, N. Y. 
 
 Vice-President 
 
 Theo. E. Gaty, Superintendent Liability Department, The Fidelity & 
 
 Casualty Co., New York, N. Y. 
 
 Secretary-Treasurer 
 
 Walter E. Hoag, Assistant United States Manager, General Accident 
 Fire and Life Assurance Corporation, Ltd., Philadelphia, Pa. 
 
 EXECUTIVE COMMITTEE 
 
 Chairman 
 
 C. H. Franklin, United States Manager, The Frankfort Marine, Accident 
 & Plate Glass Insurance Co., New York, N. Y. 
 
 E. F. Gkeen, President, Pacific Coast Casualty Co., San Francisco, Cal. 
 
 W. F. MooRE, President, New Amsterdam Casualty Co., New York, N. Y. 
 
 J. J. Murray, General Superintendent, Employers' Liability Assurance 
 
 Corporation, Ltd., Boston, Mass. 
 
 And the Officers of the Association. 
 
 384730 
 
INDEX. 
 
 Page. 
 Address of Miss Crystal Eastman 5 
 
 " *' Mr. Augustus Belmont 16 
 
 " " Mr. H. V. Mercer 22 
 
 '' Mr. John Mitchell 44 
 
 •* *' Mr. Miles M. Dawson 51 
 
 " " Mr. P. Tecumseh Sherman 63 
 
 " Dr. R. S. Keelor • 72 
 
 " Mr. Stanley L. Otis 82 
 
 " Mr. Walter G. Cowles 85 
 
• • » 
 
 
 Address of Miss Crystal Eastman 
 
 Last summer when Mr. Lawson wrote asking me to give 
 a paper at this Conference, he suggested for my title — "Work- 
 men's Compensation from the Viewpoint of the Social-Wel- 
 fare Worker." I resented this title for two reasons. First, 
 because I'm not a "Social-Welfare Worker'' — I'd rather have 
 you know that I am a member of the Bar and an officer 
 of the State. Second, because there is no "social-welfare 
 worker's" point of view toward the problems of progress — 
 no special point of view, I mean. The social worker's point 
 of view is the point of view of the manufacturer when the 
 competitive struggle lets up long enough for him to look 
 rationally upon the life of the community around him — of 
 the workman sure of his job, who dares take time to think of 
 the common good — of the lawyer old and wise, or young and 
 free enough to consider in his idle moments how a law serves 
 justice, not merely how it helps or hinders him in winning a 
 case — of the insurance man, who in the midst of his fight to 
 get risks away from the other fellow, now and then gets a 
 vision of what vast service the insurance business could be to 
 humanity. 
 
 In short, the social worker's point of view is just the 
 average good citizen's point of view, if you catch him in a 
 moment when he is altogether free from that self interest 
 which is as a general thing so necessary to his success in the 
 business world — it is the point of view of human welfare — 
 the common good. And the reason why the social worker 
 takes this point of view all the time, while the average citizen 
 takes it only at his best and freest moments, is that it goes 
 with the social worker's job. 
 
 Now, what I resented was this: that you should assume 
 that the viewpoint of general human welfare belonged ex- 
 clusively to the social worker, that it was none of the em- 
 ployer's business, or the workman's business, or the lawyer's 
 business, or the insurance man's business. That's just as 
 
O** * ••••'• ADDReSS' ©^ *MISS CRYSTAL EASTMAN 
 
 < 
 
 foolish as a man's excusing his own sins with the comfort- 
 able thought that his wife is virtuous. 
 
 I imagined you all gathered here to discuss workmen's 
 compensation — the manufacturer to urge going slow because 
 of the danger to business — labor to stand for retaining its 
 right to sue — the lawyer to tell how hard it is to get around 
 the constitution — the insurance man to figure up the cost — the 
 really important things. Then you would settle back com- 
 fortably in your chairs in a somewhat sentimental mood to 
 listen to the "social-welfare worker," saying to yourselves — 
 "Of course, this isn't important, but its curious and interest- 
 ing and will probably touch our hearts. She's bound to have 
 a different point of view from ours." Let me tell you that's 
 not true. We're all bound to take the same point of view 
 toward this subject — if we stop to think — the point of view 
 of justice and humanity. 
 
 So I wrote back to Mr. Lawson, telling him that I would 
 have none of his title — "From the Viewpoint of the Social- 
 Welfare Worker," but that I would be glad to give a paper 
 on ^'Workmen's Compensation from the Viewpoint of Justice 
 and Humanity" That sounded easy last summer with six 
 weeks' vacation ahead of me, but the other day when I 
 began to think about it, I felt like a little girl who has bravely 
 set out to spell a long word that's too much for her. And 
 I turned to the dictionary to help me out. Well — justice, ac- 
 cording to Webster, means "strict conformity to right and ob- 
 ligation" — "the rendering to every one his due." Humanity 
 means "mankind collectively" — "the human race." It is easy 
 enough to advocate workmen's compensation on practical 
 grounds of economy and common sense, to show how it will 
 reduce litigation, and lessen strife between capital and labor. 
 But can we reconcile it with justice, with "the rendering to 
 every one his due"? And can we prove it a reform important 
 to humanity — to "mankind collectively"? I think we can and 
 
 that is what I will undertake to do this morning. 
 
 The time has passed for arguing that the law of em- 
 ployers' liability as it exists in most of our States today is 
 unjust. We know it is — we admitted it long ago. My task 
 this morning is constructive. It is to prove that the principle 
 upon which workmen's compensation laws are based is funda- 
 mentally just. 
 
ADDRESS OF MISS CRYSTAL EASTMAN 7 
 
 The other day I heard of a company in Kansas City 
 which was going to build a difficult piece of railroad — it 
 would require some blasting and tunnelling. That company 
 established an emergency room and engaged accommodations 
 at a Kansas City hospital before a shovelfull of earth was 
 taken up for the bed of their projected railroad. That's 
 a true story. No doubt many of you could match it with 
 similar ones. Any contractor undertaking to build a sky- 
 scraper, or a tunnel, might well make his hospital arrange- 
 ments beforehand. Every large steel company in Allegheny 
 County has an emergency building and a regular yearly con- 
 tract with a Pittsburgh hospital. What does it all mean? 
 Was that Kansas Railroad Company planning to conduct its 
 operations with criminal negligence, regardless of the lives and 
 limbs of its workmen? Did they intend to employ a set of 
 utterly reckless men who could be counted on to throw their 
 lives away at every opportunity? Were they on the other 
 hand extremely cautious and considerate — were they building 
 an emergency room and engaging hospital beds in the event 
 that possibly some one workman might by some unforeseen 
 contingency break his finger in the course of that job? These 
 are foolish questions. We all know why that company made 
 its emergency and hospital arrangements beforehand. It was 
 because a fairly large number of serious accidents were 
 practically certain — no, absolutely certain — to happen to the 
 workmen engaged on that piece of railroad building; the com- 
 pany knew it — they could even figure about how many men 
 would get hurt. 
 
 Given dynamite, electricity — construction at great 
 heights — work under compressed air — high power machinery 
 — red hot steel in a dozen different shapes — and accidents 
 must follow as surely as night follows day. Statistics prove it, 
 if we need them. Such industrial accident figures as we 
 have, vary about as much as the figures of births, deaths, and 
 marriages. Any intelligent man must see that an employers' 
 liability law based on fault is ridiculous in the face of the 
 industrial accident situation of today. He must ultimately 
 acknowledge the justice of the new principle. 
 
 For Workmen's Compensation is based on the recogni- 
 tion of this fact — that in modern manufacture, mining, con- 
 
8 ADDRESS OF MISS CRYSTAL EASTMAN 
 
 struction, transportation — injury and death to the workers by 
 accident is inevitable. And it is further based on this prin- 
 ciple — that the economic loss which follows the dangerous 
 trade, should not be taken altogether out of the injured work- 
 man's pocket, but should be regularly shared by the employer. 
 Workman and employer alike profit by the dangerous enter- 
 prise; let them share the accident risk. The justice of this 
 fundamental principle of workmen's compensation can hardly 
 be questioned. 
 
 But there remain these vexing questions: "Is it just to 
 make the employer compensate a workman whose injury was 
 due solely to his own carelessness? Is this ^strict conformity 
 to right and obligation'?" "Is it just to allow to the work- 
 man whose injury was due solely to his employer's negligence, 
 only half wages instead of his entire loss from that em- 
 ployer?" "Is this ^rendering to every one his due'?" No — 
 of course not. And it must be admitted that a perfectly 
 logical and complete workmen's compensation system, giving 
 the workman a right to compensation for every accident in 
 the course of work and taking away from him all rights 
 based on negligence, must sometimes result in both the kinds 
 of injustice I have suggested. It is for this reason that there 
 are exceptions to the operation of the compensation prin- 
 ciple in almost all of the European laws. Thus, in England 
 the right to sue for negligence is retained as an alternative to 
 the workman, while an accident due to serious and wilful 
 misconduct on the injured workman's part does not call for 
 compensation unless it results in serious, permanent injury. 
 In France, if the accident is "due to inexcusable fault of 
 victim or employer, compensation may by a court order be 
 respectively decreased or increased." That always seemed to 
 me the most just and rational solution of the difficulty. 
 
 But whatever exception is allowed in your compensation 
 law to cover the case of a grossly negligent workman or 
 employer — so long as it is not a broad enough exception to 
 vitiate your law — it is comparatively unimportant. I say it is 
 comparatively unimportant because there are, as a matter of 
 fact, very few work-accidents due, in the last analysis, al- 
 together to the personal fault of either the workman or the 
 employer. For this there is much authority. I shall give you 
 
ADDRESS OF MISS CRYSTAL EASTMAN 9 
 
 only the results of the study I made in Allegheny County 
 under the direction of the Pittsburgh Survey. 
 
 Almost the first thing we did there was to go to the 
 Coroner's office and make a record of every industrial fatality 
 reported to the Coroner during the twelve months from July, 
 1906, to July, 1907, taking down on a separate card for each 
 case, the name and address of the man killed, his age, oc- 
 cupation, the name of his employer, the circumstances of the 
 accident, the names of important witnesses and the verdict. 
 
 We found that in one year 526 men were killed by acci- 
 dents of employment in Allegheny County; 195 steel workers, 
 125 railroaders, 71 miners, and 135 miscellaneous workers, 
 including housesmiths, carpenters, electric linemen, elevator 
 men, teamsters, and quarry men. Of these, nearly half were 
 American bom, 70 per cent, were workmen of skill and train- 
 ing and 80 per cent, were under forty years of age. 
 
 I made a careful analysis of these fatal accidents accord- 
 ing to personal responsibility, based largely on evidence given 
 at the inquest. Roughly, this was the result: for 30 per cent, 
 of the accidents no one was responsible; for 30 per cent, the 
 workman killed or his fellow workmen were responsible; for 
 30 per cent, the employer, or some one representing him in 
 a position of authority, was responsible, and for 10 per cent, 
 both the employer and workman were responsible. On the 
 face of it, these figures would seem to disprove my contention. 
 But a detailed study of the accidents in these different groups 
 brought me to the conclusion just expressed — that work acci- 
 dents seldom can be laid to the direct personal fault of any 
 one. In a few cases, the workmen's carelessness was actu- 
 ally inexcusable fault. But for the most part it was ignorance, 
 or inattention due to long hours and intensity of work, or 
 recklessness inevitably developed by a trade which requires 
 daring. In short the careless workman we hear so much 
 about is just the natural product of a dangerous trade. You 
 cannot blame him for his carelessness. You must blame the 
 trade. Again — in a few cases the employer's carelessness was 
 deliberate disregard for safety in the construction of his plant, 
 but for the most part it was the human frailty of his agents, 
 the hasty mistaken orders of foremen, or the putting off of 
 
10 ADDRESS OF MISS CRYSTAL EASTMAN 
 
 necessary repairs from day to day so as not to delay the 
 game — an ordinary outcome of competition. 
 
 Accidents happen in the course of industry — they are 
 due to the inherent risks of trade — that is the fundamental 
 fact. A compensation law which should altogether disregard 
 the small element of personal fault involved in the happen- 
 ing of these accidents — and divide the economic loss resulting 
 from each accident evenly between the two presumably re- 
 sponsible parties engaged in the dangerous enterprise, would 
 be fundamentally just, because it would be based on that 
 fundamental fact. But we need not altogether disregard per- 
 sonal fault in a compensation system, for, as we have seen, ex- 
 ceptions can be included in the law — so framed as to avoid 
 rewarding a wilfully disobedient workman with money taken 
 from his employer's pocket, and so as to avoid letting an em- 
 ployer, whose conscious violation of the factory law has 
 meant death to his workman, get ofiF with a payment of three 
 years' wages to that workman's widow. 
 
 Assuredly we may conclude that it is possible to re- 
 concile workmen's compensation with justice. But I go fur- 
 ther. I think that a law embodying the principle of work- 
 men's compensation — i. e., the principle that the employer 
 should regularly share the risks of trade — is the only law 
 on this subject which can be reconciled with justice in the 
 modem industrial world. 
 
 So much then for justice. Now let us consider humanity. 
 Is this reform of the employers' liability laws, this adoption 
 of a just and sane system of distributing the industrial acci- 
 dent risk, important to humanity — not to the men who fol- 
 low dangerous trades only — not to their wives and children 
 only — ^but to "Mankind collectively" — society as a whole? 
 
 Three years ago we were in the dark about the actual 
 results of our employers' liability system. We knew that 
 once in a long while, a small employer would be ruined by 
 a big verdict — we knew that pretty often the workman was 
 non-suited — we knew that a lot of money went to lawyers 
 and insurance companies that did nobody much good — ^but 
 we knew nothing about the injured workmen who never 
 brought suit or even made a claim — we had no idea of the 
 number of accident cases in which the entire loss was borne 
 by the workman. Now we have all the figures we need — from 
 
ADDRESS OF MISS CRYSTAL EASTMAN II 
 
 Pennsylvania, Wisconsin, New York, Minnesota, and prob- 
 ably by now from many other States. Here are some of the 
 figures — just to refresh your memories: 
 
 In the Pittsburgh accident study, among the families of 
 married men killed, one-half suffered the entire loss, i. e., they 
 got from the employer either no compensation whatever, 
 or merely funeral expenses. Only one-fourth of these fam- 
 ilies got more than $500. Among the families of single men 
 with dependents 65 per cent, stood the whole loss and only 17 
 per cent, got more than $500. 
 
 In injury cases we found roughly the same proportion — 
 56 per cent, of married men, 66 per cent, of single men with 
 dependents and 69 per cent, of single men without depen- 
 dents — stood the whole income loss resulting from their in- 
 juries. For the 139 cases of married men killed, where we 
 learned both the yearly wages and the compensation, the 
 total compensation was $74,305 ; the total yearly wages $109,- 
 262. Thus the total compensation paid to the dependent 
 widows and children amounted to less than three-fourths of 
 their first year's income loss. 
 
 During the past year, the New York State Commission 
 on Employers' Liability carried on an investigation similar 
 to the Pittsburgh study. Here are a few of the figures result- 
 ing: In 236 fatal cases, to more than half of the dependents' 
 families no compensation above funeral expenses was paid. 
 In 1040 temporary disability cases, 44 per cent, did not receive 
 even medical expenses from the employer. 
 
 The Wisconsin Industrial Insurance Commission found 
 that out of 306 injury cases, less than a third received any- 
 thing more than medical expenses while in 51 death cases, only 
 one-third of the families were paid more than $500. 
 
 It seems hardly necessary to prove by statistics that these 
 innumerable income losses resulting from work accidents, 
 borne wholly or almost wholly by the workers and their 
 families, result in hardship and privation. Yet from the 
 Pittsburgh study we have figures which give some idea of 
 what a work fatality means in the home: Among 132 families 
 where a husband and father had been killed, 53 of the widows 
 went to work, 22 children were taken out of school and put 
 
12 ADDRESS OF MISS CRYSTAL EASTMAN 
 
 to work, and 19 families moved to poorer quarters — all this 
 within a year of the accident. 
 
 These three items upon which we have definite figures 
 merely suggest the problem of poverty which those families 
 had to face. One-half of the work-accident victims were 
 earning less than fifteen dollars a week — obviously not enough 
 to carry adequate life insurance at the high rates necessitated 
 by their occupations. The economic struggles of a family 
 suddenly deprived of that small income can be left to the im- 
 agination. 
 
 The New York Commission found from its investiga- 
 tion that among 186 families of married men killed, 93 widows 
 went to work, 9 children under sixteen went to work, 2*] 
 families reduced rent, 33 families had received aid, 10 fam- 
 ilies were destitute. 
 
 Now it doesn't take a social- welfare worker to see that 
 all these hardships and privations — repeated in thousands and 
 thousands of workingmen's families all over the country — are 
 a tax upon our real prosperity. Every child robbed of free 
 growth and education, compelled to go to work too soon, is 
 a loss to the community, a loss of possible vigorous, think- 
 ing citizenship. Every young family, whose income provider 
 has been taken, whose children are left neglected, while the 
 mother, overburdened with care and anxiety, struggles to do the 
 work of two — every such thwarted family represents a social 
 loss. Every helpless cripple left an unwilling burden on those 
 who can ill-afford to support him is a burden upon society. 
 Every serious injury to a bread-winner, with weary weeks 
 of sickness passed in a scene of increasing poverty, with re- 
 covery retarded by anxiety, with savings dwindling away and 
 debts looming bigger and bigger, the courage and cheer of the 
 two homebuilders finally lost in the long disaster, and per- 
 haps never to be regained — every such instance is a community 
 loss. 
 
 We have facts enough before us to adopt for the whole 
 country the conclusion reached by the New York Commission 
 in its final report, "that only a small proportion of the work- 
 men injured by accidents of employment and the dependents 
 of those killed get substantial damages; that comparatively 
 few of the workmen in occupations which involve special 
 
ADDRESS OF MISS CRYSTAL EASTMAN 1 3 
 
 hazard are earning enough to enable them to provide adequate 
 insurance against it; that, therefore through accidents of em- 
 ployment thousands of workingmen's families are brought to 
 extreme poverty and privation, the State suffers through the 
 lowered standard of living of a vast number of its citizens 
 and the public is directly burdened with the maintenance of 
 many who become destitute." 
 
 Workmen's compensation laws will change all that — 
 there's no doubt about it. They will insure the injured bread- 
 winner at least half his wages while he is disabled— enough 
 to keep his family from actual want. They will insure to the 
 widow and children of a workman killed enough to tide them 
 over the first few years — to keep them from sinking into 
 destitution — to give them a breathing space in which to ad- 
 just themselves to their permanent loss. From the viewpoint 
 of national welfare, the importance of preserving the stand- 
 ard of living of those thousands of workmen's families — is 
 enough to warrant this reform if there were nothing else at 
 stake. 
 
 But there is also the prevention of accidents — humanity*s 
 first concern. Will workmen's compensation help to reduce 
 the number of work-accidents in this country? If it will — 
 the argument for it is complete — unanswerable. Opinions 
 differ as to this and there are no reliable figures to support 
 either side. My reason tells me that a law which would make 
 every serious accident a certain and considerable expense to 
 the employer would be more effective in reducing the number 
 of industrial accidents than any other law that could pos- 
 sibly be devised. And in saying this I do not go back on 
 my former statement that accidents are seldom due directly 
 to any one's personal fault. 
 
 We know, from the much lower death and accident rates 
 in the industries of many E^uropean countries that a great 
 many of our accidents could be prevented. When I got 
 through studying my 800 Allegheny County accidents, I de- 
 
14 ADDRESS OF MISS CRYSTAL EASTMAN 
 
 cided that the chief preventable conditions from which work- 
 accidents result are these: 
 
 { 
 
 I. Lack of provision for safety in construction. 
 
 2. Long hours of work. 
 
 3. Too great speed maintained in many lines of work. 
 
 4. Inadequate plant inspection. 
 
 5. Failure to remedy known defects. 
 
 6. Inadequate warning and signal systems. 
 
 7. Inadequate instruction and direction of ignorant 
 workers. 
 
 I separate these conditions into two groups : Lack of pro- 
 vision for safety in construction and long hours of work 
 — make the first group — ^because they indicate the public's 
 chief lines of direct attack through prohibitive legis- 
 lation. The industrial accident rate can be somewhat reduced 
 by better factory, mining and railroad acts. It is not im- 
 possible to enforce such laws. Furthermore, a short work- 
 ing day in all employments where accidents are common 
 could be secured directly by legislation and might be expected 
 to considerably reduce those accidents due to flagging at- 
 tention on the part of foremen and workers. 
 
 But all the other preventable conditions named must be 
 dealt with for the most part indirectly, through the will of 
 the employer. The law can, under good administration, ac- 
 tually bring to pass such mechanical protections as railings 
 and guards, and it can prevent men from working twelve 
 hours in twenty- four. But it can much less effectively pre- 
 scribe how often chains are to be inspected, or at what stage a 
 defective car is to be retired from use, or what signaling 
 system is to be inaugurated for the protection of men in 
 defenceless positions, or what part of the work is to be done 
 by ignorant foreigners, or at what speed work is to be carried 
 on. Many of these things are too intricately connected with 
 the special problems of different industries to be reached by 
 law. Moreover, they are the details of daily management in 
 each particular enterprise, and must depend upon the will 
 of him who directs it. 
 
ADDRESS OF MISS CRYSTAL EASTMAN 1 5 
 
 To reach this group of causes, therefore, the prevention 
 of accidents must be made of primary importance to each 
 employer. How can the motive for prevention be strength- 
 ened in him, urged as he is by all the forces of a competitive 
 industrial society to make economy and rapidity of production 
 his controlling motives? 
 
 In the face of this unremitting pressure for output, that 
 motive for prevention can never be compelling, I think, until 
 to each injury and death is affixed a uniform and unescapable 
 penalty. If accidents became a heavy and determinable cost 
 to the business not dependent upon the cleverness of lawyers, 
 the leanings of judges, or the sympathies of juries, but directly 
 proportioned to the number of deaths and the number and 
 seriousness of injuries among the men on the payroll, then 
 the prevention of them would become of direct economic in- 
 terest to the employer. One economic motive would be set off 
 against another. If safe, slow ways of producing involve a 
 reduction in profits, we must see that the human waste result- 
 ing from dangerous quick ways shall involve a greater re- 
 duction in profits. This is not because the employer is wicked 
 and must be punished, but because he, like most of us, is held 
 closely in the grip of economic motives. 
 
 The interests of our common welfare then — the interests 
 of humanity — emphatically demand a workmen's compensa- 
 tion law — because it must tend to lessen that terrible toll in 
 human life which our industries exact, and because it will 
 so distribute the accident loss that the families of workers 
 killed and injured shall not endure serious privation — so that 
 the State shall not permanently sufiFer by their lowered 
 standard of living. The fundamental principle of workmen's 
 compensation is just — so obviously just that when you have 
 once grasped it — any other law seems appallingly unjust. 
 There remain details — matters of administration and cost to 
 be worked out — but I submit that in the long run — justice and 
 humanity are the only considerations. 
 
l6 ADDRESS OF MR. AUGUST BELMONT 
 
 Address of Mr. August Belmont 
 
 m 
 
 I presume that I have been invited to come and say a 
 iew v^ords to you because The National Civic Federation has 
 called upon the various companies which you represent for 
 information bearing upon the subject which you are discussing. 
 I regret that I was not able to arrange my affairs this morning 
 so that I could listen to the various addresses here, but it 
 was impossible and I simply will outline to you what the pur- 
 poses of the Federation are. 
 
 I have been appointed Chairman of the Committee on 
 Compensation for Industrial Accidents and Their Prevention — 
 a matter which, of course, you are discussing today and which 
 bears very much upon the purposes and work of the Civic 
 Federation. 
 
 Our department is composed of employers, representative 
 labor men, attorneys who have given special consideration to 
 the subject, insurance experts, economists. State officials, mem- 
 bers of State compensation commissions and all elements con- 
 cerned about this great problem, from thirty-five States, "But 
 quite apart from that it is a matter of interest to every in- 
 dividual of the community, because it is recognized that the 
 subject is a burning one; that something must be done and 
 that something is being done in one direction or another, al- 
 • ways bearing upon the one thing as its ultimate result. The 
 one thing that is most prominent before the people to-day is 
 the cost of living, for you can put no burden in any form 
 upon the employer which, in the long run, he is not compelled 
 to secure. If it is a burden greater than anything that his 
 industry has borne in the past, that he must ultimately secure 
 from the consumer. Of course, then, so far as the insurance 
 is concerned, the lower the rate that you find that you can 
 allow for such insurance as will result from this question when 
 it is settled, so much less will be the burden upon the industries 
 and therefore, so much less will it bear upon the cost of 
 
ADDRESS .OF MR. AUGUST BELMONT VJ 
 
 production. That is why every man, woman and child in this 
 country is interested in this particular subject." 
 
 The three natural divisions of the work have been assigned 
 to the following committees: 
 
 1. The Legal Committee, which is drafting a tentative 
 compensation plan for uniform State legislation, as a substitute 
 for the present liability laws, with P. Tecumseh Sherman, as 
 Chairman. 
 
 2. The Committee on Statistics and Cost, of substituting 
 the compensation principle for the present liability laws, with 
 Sylvester C. Dunham, as Chairman. 
 
 3. The Committee on Improvement of State Factory In- 
 spection, it being equally important to prevent as to compen- 
 sate for accidents. Mr. Louis B. Schram is Chairman of this 
 committee. 
 
 Our Legal Committee is now considering a formulate bill. 
 "Now that must not frighten you, because it is tentative, the 
 object, of course, being something that will be fundamentally 
 useful." 
 
 Any plan adopted must conform to State constitutions and 
 court decisions; therefore, the Committee will soon submit 
 its plan to the Commissioners on Uniform State Laws in the 
 forty-six States and territories and to the Committee on Com- 
 pensation appointed by the American Bar Association, as well 
 as to the Executive Committee of the various State Bar As- 
 sociations, to obtain their opinions upon its constitutionality 
 in their respective States. 
 
 At the request of The National Civic Federation the na- 
 tional conference of Commissioners on Uniform State Laws 
 and the American Bar Association appointed committees on 
 compensation, at their recent annual meetings, to co-operate 
 with the Federation's Department on Compensation for In- 
 dustrial Accidents and Their Prevention. 
 
 The Federation's Legal Compensation Committee hopes 
 to receive the advice sought from the commissioners and mem- 
 bers of the bar before reporting its plan finally to the Federa- 
 tion's Compensation Department at its next meeting. 
 
 Allow me to emphasize the fact that while our Legal 
 Committee has been hard at work, it has not reported as yet, 
 and it would not do for me at this time to foreshadow its 
 report. 
 
1 8 ADDRESS OF MR. AUGUST BELMONT 
 
 I will omit reference to any technical features of its work. 
 
 Suffice it to say that remedial legislation to be advocated 
 by the Civic Federation will be thoroughly discussed by all 
 parties in interest before it is presented for passage to the 
 different State Legislatures. 
 
 Our Committee on Statistics and Cost at present is secur- 
 ing the experience of Insurance Companies relative to work- 
 men's collective insurance, believing that statistics to be so de- 
 rived showing the total payroll upon which such business has 
 been written during the past five years, the number of em- 
 ployes who sustain occupational injuries, the period of disa- 
 bility in every case, the number and nature of dismember- 
 ments, the number of fatal cases, the number of cases of per- 
 manent disability and like statistics would be more likely to 
 furnish the information necessary to determine the cost of a 
 compensation plan than any other. 
 
 If you approve of our movement, of course, you can bring 
 to us the information on these very lines, giving us your 
 opinions which will be an important element in our effort to 
 bring about the necessary legislation. I hold in my hands a 
 copy of the letter, circular and schedule, which is being sent 
 to your companies, and which has been most carefully drafted. 
 We have the promise of many of the companies to furnish the 
 statistics desired. 
 
 I think it would be as well, and why I give you this de- 
 tail, is that you may understand better the purposes of the 
 Federation — the Federation does not assume, nor has it ever 
 on any question, (and let it not be understood with regard to 
 that) assumed to be the arbiter to decide these questions, but 
 its purpose always is to promote the carrying out of any- 
 thing which attempts to bring about a better understanding 
 between capital and labor. That was what it was originally 
 organized for, and when you find it active in one direction or 
 another, you will understand that it is doing so because it feels 
 that it, above all other organizations, is capable of bringing 
 together the greatest variety of opinions and men of different 
 callings in a manner that no other association either attempts 
 or has made in a successful endeavor. 
 
 This was the form of letter which was addressed to the 
 
ADDRESS OF MR. AUGUST BELMONT I9 
 
 presidents of the various liability insurance companies dealing 
 in accident insurance: 
 
 Dear Sir: — The Committee on Statistics and Cost — 
 one of the committees of the "Department on Compen- 
 sation for Industrial Accidents and Their Prevention" — 
 has requested me, as chairman of the department, to 
 place before you the enclosed circular and schedule with 
 a view to obtaining information, from your experience, 
 upon workmen's collective insurance and employer's lia- 
 bility insurance written in concurrence with the workmen's 
 collective. The information sought is for the use of the 
 aforesaid committee charged with the duty of collecting 
 statistics upon the cost of substituting compensation for 
 the present employer's liability laws. 
 
 We are asking all the liability companies, which have 
 written these lines of insurance, for this information with 
 the understanding that the data obtained will be treated 
 as combined experience only. 
 
 In order that the committee may begin its examination 
 of the combined experience as early as possible, we re- 
 quest that you give this matter your early attention, if 
 convenient. 
 
 If there are any questions which occur to you or any 
 suggestions you can give the committee it will be glad to 
 receive them. 
 
 Under separate cover, you will receive a number of 
 the blank forms, corresponding exactly to the schedule 
 above mentioned, for entry of the statistics desired. Ad- 
 ditional supplies of these sheets for the compilation of 
 statistics will be sent you upon request to the Secretary 
 of the Executive Committee. 
 
 Hoping that you will co-operate with us in this im- 
 portant endeavor, I am. 
 
 Very truly yours, 
 (Signed) August Belmont, 
 
 Chairman. 
 
 Now, I am glad to say that I understand our committee 
 on cost is meeting with very favorable response from the 
 various companies, showing that they feel we are co-operating 
 and working in the lines in which you are yourselves. Of 
 course, your whole object is to insure against a liability. 
 Naturally, it must be a matter of interest to you to have con- 
 ditions improved and to have your liability minimized. On the 
 other hand, it is to the interest of the employers to have this 
 same condition obtain. 
 
20 ADDRESS OF MR. AUGUST BELMONT 
 
 A result of the tabulation of statistics secured by our 
 Committee on Statistics and Cost will have a serious bearing 
 on what is recommended in the way of a bill. The important 
 thing is this : That from the employer's standpoint and from the 
 standpoint of the insurance companies, the fundamental prin- 
 ciple is to insure, all based upon a law of averages, and the 
 more complete and more general the employments covered by 
 a compensation plan, the more will be reduced the cost of insur- 
 ance, and uniformity of legislation will help in this way. 
 
 Personally, I believe, and it is the one question that tran- 
 scends all the rest, that is the idea of uniformity. Uniformity 
 means, as I stated before, less cost, and as a business man I 
 think that is essential. Nothing is worse than that this ques- 
 tion should be left on the one hand to, perhaps, the over- 
 conservative employer who always feels in the regulation of 
 his business, naturally as you do, that he is better fitted to 
 manage it than anybody else (that is his general attitude, no 
 matter how progressive he is) and on the other hand, the 
 pressure of labor which is seeking its betterment without any 
 necessary references to the altruistic features. And the third 
 is the sentimentalist who does not consider very much the 
 economic questions at all. So that you recognize in The 
 National Civic Federation an ally that wishes to bring to this 
 question the most practical thought obtainable. 
 
 It is obvious where one State has one kind of risk and 
 another State another kind, the insurance company cannot take 
 the risk of both at the same cost. We all know that New 
 York has increased the rates as a result of its amended lia- 
 bility law passed at the last session of the Legislature. With 
 uniform State laws, insurance companies could insure an em- 
 ployment as a whole. 
 
 The compensation principle has been accepted by all as 
 being desirable. To make it applicable to all industries, with 
 due consideration to the interest of employers and employees, 
 is our object, and, from your standpoint, I believe that if it 
 is found constitutional to apply the principle to all occupa- 
 tions, the immediate danger of a prohibitive schedule of in- 
 demnities will be eliminated. 
 
 I don't want to detain you any longer, but I wish to say 
 to you that I hope you will, in every way, assist the Civic 
 
ADDRESS OF MR. AUGUST BELMONT 21 
 
 Federation in obtaining data and statistics upon which to 
 found a conclusion through which it can co-operate with you 
 and all those interested in bringing about a wise, effective and 
 economical result of this important question. 
 I thank you, gentlemen. 
 
22 ADDRESS OF MR. H. V. MERCER 
 
 Address of Mr. H. V. Mercer 
 
 Mr. Chairman, Ladies and Gentlemen: 
 ^ Question. 
 
 Can we pass constitutional laws in this country that will 
 change the basis of recovery by an employee for injuries re- 
 ceived in, and arising out of, the course of his employment 
 from that of negligence or fault of the employer to that of a 
 risk of the industry or compulsory compensation with per- 
 missible insurance? 
 
 Our answer is in the affirmative, provided our courts give 
 to the police power that breadth of vision consistent with the 
 origin and increasing growth of the general welfare — if they 
 treat it with the breadth it deserves and that which other great 
 subjects have received. 
 
 There is an agitation throughout this country unequaled 
 upon any other single subject in favor of a fairer system of 
 compensation as a substitute for, or an addition to, the com- 
 mon law and statutory liabilities, somewhat along the lines 
 now in operation in twenty-three foreign countries. 
 
 No legislative subject in this country has been studied 
 more deliberately in recent years. Employees have awakened 
 to the conditions in a substantial and rational way. Employ- 
 ers are willing that they should have something that would 
 work out more fairly and substantially. The State needs a 
 good system for its own protection and that of its people. 
 
 Various estimates covering such accidents of this country 
 place the number at from 300,000 to 2,000,000 per year. A 
 safe estimate would seem to be 500,000. 
 
 The total losses in killed and wounded in the Union Army 
 was 385,245. (See Edwin Emerson, Jr., History of the 19th 
 Century Year by Year, p. 1426.) The same authority puts the 
 total killed in the Confederate Army at 94,000. Of course 
 there were not so many men employed as are now in our 
 
ADDRESS OF MR. H. V. MERCER 23 
 
 industries; but the whole Confederate Army — ^valiant men 
 fighting for their liberty as they saw it — was unable to kill and 
 cripple as many Union men in five years of war as are killed 
 and crippled in our industries in a single year now. 
 
 As early as the first message of Benjamin Harrison to 
 Congress in 1889 we find this language, later quoted by the 
 Supreme Court in sustaining the Safety Appliance Act: 
 
 Johnson v. Southern Pacific Company, 196 U. S. I. 
 
 "It is a reproach to our civilization that any class of 
 American workmen should, in the pursuit of a necessary 
 and useful vocation, be subjected to a peril of life and limb 
 as great as that of a soldier in time of war." 
 
 More people understanding this to be the situation are 
 willing, and are going to be willing, to have laws that will 
 tend, — first, to prevent accidents, and, second, fairly to com- 
 pensate the injured for them in such way as to be an induce- 
 ment to both the employer and employee to prevent the acci- 
 dents. 
 
 No better time will ever come for fair legislation upon 
 this subject, than at the beginning. If the movement is uni- 
 form and held in check long enough for the question to be 
 understood and the difficulties and remote consequences appre- 
 ciated, there ought not to be any serious difficulty in passing 
 the necessary laws. 
 
 At the present time, as is very well known, fault is the 
 basis of recovery for such compensation under the common law 
 and substantially all of the statutes, and workers* compensa- 
 tion acts would be revolutionary. 
 
 Caution. 
 
 When a discussion starts as to the rights of injured 
 humanity, it often carries with it a sympathy too great for calm 
 judgment. 
 
 In such times our constitution has been used both as to 
 humanitarian and property rights, as the great bulwark of our 
 liberty. It was created as such by its framers; it has been 
 construed as such by the courts; and loved as such by the 
 people. Indeed, it has been the inspiration of liberty within, 
 the admiration of it without; and until the trend of modem 
 times shall cease, the world will grow nearer its model. 
 
24 ADDRESS OF MR. H. V. MERCER 
 
 Some laws have been passed on this subject in other coun- 
 tries that may be well enough for them, but could not be main- 
 tained here or be well enough for us. 
 
 So it was on other subjects when and why the constitution 
 was made. Through the system which we call our Bill of 
 Rights, drawn largdy from the historic experiences of our an- 
 cestors, we have in times past felt much security. There are 
 those who think that the constitution needs amendment for the 
 present subject to allow more radical legislation than it will 
 permit ; but we must not forget that it has served us well upon 
 other subjects; that it has stood as limitations against unreason- 
 able conduct; that it has been blended to meet the actual con- 
 ditions in most valuable respects as they have arisen during 
 our history, and that being only fundamental law declaring 
 general inhibitions and prohibitions, with a few grants, it ought 
 not to be disturbed unless necessity requires. 
 
 Some times erroneous decisions have been made under 
 it ; so have they under other laws ; but on the whole, if under- 
 stood and treated with respect to the relations of the particular 
 subjects under decision, very little criticism can be found from 
 the beginning of our Government to the present day upon the 
 decisions of the courts of last resort upon constitutionality of 
 laws. As a rule courts are bound to respect the law as it is 
 written ; to attempt to treat it with that consideration which it 
 deserves and to accomplish the end it was made to reach as a 
 system. 
 
 The courts have, as a rule, attempted to close their ears 
 to the special clamor of temporary enthusiasm unless it be 
 enacted into legislation which is the only legitimate way a 
 people can speak to its courts. They may recognize a well 
 regulated system of what is known as judicial knowledge. It 
 is their purpose to aid government in a fair and just manner 
 to accomplish the ends of public necessity, in accord with our 
 constitutional or fundamental law, but not against it. 
 
 In the case of Evans-Snider-Busl Co., et al., v. McFadden, 
 et al, 105 Fed. 293 (8 C. C. A.), the Court said: 
 
 ''When called upon to resolve questions like the one 
 in hand, the courts have never deemed it necessary to 
 close their eyes to the equities of the case, but have fre- 
 quently permitted their judgments to be influenced by the 
 
ADDRESS OF MR. H. V. MERCER 2$ 
 
 consideration that that which the legislature has done in 
 the way of disturbing rights acquired under existing laws 
 was morally right, and in accordance with justice and fair 
 dealing." 
 
 And in McCulloch v. Maryland, 4 Wheaton, 416, in holding 
 that Congress had not exceeded its powers in creating the 
 national bank, the great Chief Justice Marshall said: 
 
 "Let the end be legitimate, let it be within the scope 
 of the constitution, and all means which are appropriate, 
 which are plainly adapted to that end, which are not pro- 
 hibited, but consistent with the letter and spirit of the 
 constitution, are constitutional. * * * 3^1- ^here the 
 law is not prohibited, and is really calculated to effect any 
 of the objects entrusted to the Government, to undertake 
 here to inquire into the degree of its necessity, would be 
 to pass the line which circumscribes the judicial depart- 
 ment, and to tread on legislative ground. This Court dis- 
 claimed all pretensions to such a power." 
 
 And in Knox v. Lee, 12 Wallace, 457, in speaking again 
 for that great court as to The Legal Tender Cases, Mr. Justice 
 Strong said : 
 
 "It is not to be denied that acts may be adapted to the 
 exercise of lawful power and appropriate to it in seasons 
 of exigency which would be inappropriate at other times." 
 
 In the course of that opinion he also said, in requoting 
 from I Wheaton, 326: 
 
 "The Constitution unavoidably deals in general lan- 
 guage. It did not suit the purpose of the people in fram- 
 ing this great charter of liberties to provide for minute 
 specifications of its powers, or to declare the means by 
 which those powers should be carried into execution." 
 
 He also said in that connection : 
 
 "We do not expect to find in a constitution minute 
 details. It is necessarily brief and comprehensive. It 
 prescribes outlines, leaving the filling out to be deduced 
 from the outlines." 
 
 Now, will the Court treat this subject with that breadth 
 consistent with the origin and increasing growth of our consti- 
 tution, and with that respect and consideration which they have 
 given other great subjects of public necessity? 
 
26 ADDRESS OF MR. H. V. MERCER 
 
 In this respect, too, we must not overlook the fact that the 
 employer and the employee do not stand upon an equality in 
 their negotiations with respect to dangerous employments. 
 Stripped of political perplexities and personal prejudices and 
 ambitions, the fact is, and must be recognized, that the funda- 
 mental reason for the interference by the State with respect to 
 these matters rests upon the bare fact of the inequality of abili- 
 ties of the respective parties to take care of their interests by 
 reason of the peculiar situations. In the case of Harbison v. 
 Knoxville Iron Co., 53 S. W. 955, the Act required time checks 
 to be redeemed in money instead of merchandise if demanded, 
 and the Court said : 
 
 "The Legislature, as it thought, found the employee 
 at a disadvantage in this respect, and by this enactment 
 undertook to place him and the employer more nearly upon 
 an equality. This alone commends the Act, and entitles 
 it to a place on the statute book as a valid police regula- 
 tion." 
 
 The Supreme Court of the United States approved this 
 opinion in Knoxville v. Harbison, 183 U. S. 13. 
 
 In respect to the length of hours dangerous labor may 
 be required, it was said by the Supreme Court in Holden v. 
 Hardy, 169 U. S. 366: 
 
 "The Legislature has also recognized the fact, which 
 the experience of Legislatures in many States has cor- 
 roborated, that the proprietors of these establishments 
 and their operatives do not stand upon an equality, but 
 that their interests are, to a certain extent, conflicting." 
 
 Then in the case of Narramore v. Cleveland, etc., Ry. Co., 
 96 Fed. 298, a case involving the rights of railway employees 
 to have switches blocked, while Judge Taft was sitting on the 
 Circuit Court of Appeals, he used this language: 
 
 "The only ground for passing such a statute is found 
 in the inequality of terms upon which the railway com- 
 pany and its servants deal in regard to the dangers of 
 their employment. The manifest legislative purpose was 
 to protect the servant by positive law, because he had 
 not previously shown himself capable of protecting him- 
 self by contract; and it would entirely defeat this pur- 
 pose thus to permit the servant 'to contract the master 
 out' of the statute," 
 
ADDRESS OF MR. H. V. MERCER 27 
 
 holding in fact that the statute must not be destroyed by con- 
 tract. This is not the only decision where Judge Taft favored 
 labor. See Baltimore & O. R. Co. v. Henthorne, y2> Fed. 634, 
 wherein he said: 
 
 "The defendant complains of the action of the 
 court below in permitting evidence of the general repu- 
 tation of Harrison for drunkenness and consequent in- 
 competency as an engineer. It should be premised that 
 this was accompanied by evidence that Harrison's drunken 
 condition was the cause of the accident, and by further 
 evidence that Harrison was in the habit of getting drunk. 
 It was entirely competent to show Harrison's general 
 reputation for the purpose of showing that the defendant 
 was negligent in retaining him in its employ. * * * * 
 
 This is one of the personal obligations of the master 
 to the servant which he cannot rid himself of by dele- 
 gating it to an agent to perform. * * * * 
 
 Nor does he fully discharge all of the obligation to 
 his servants by fully inquiring concerning the applicant's 
 fitness at the time he takes him into the service. It is 
 the master's duty to exercise proper supervision over the 
 work of his servants, and through such supervision to 
 keep himself advised as to the continued fitness of those 
 in his employ. * * * 
 
 Objection is made by counsel for the company also 
 that the plaintiff's contributory negligence was made out 
 so clearly that the case should have been taken from 
 the jury. This objection cannot be sustained. The de- 
 fendant swore that he did not know of Harrison's drunk- 
 enness, and the circumstances were such as to make this 
 possible, and an issuable fact for the consideration of 
 the jury. The Court charged the jury that if he did know 
 of Harrison's drunkenness, he could not recover. We 
 do not wish to be understood as affirming that it would 
 necessarily have been contributory negligence on the part 
 of a new brakeman, which would bar him from recovery 
 in this case, not to leave the engine when he found the 
 engineer drunk.'* 
 
 An employee cannot successfully say to a railway presi- 
 dent, "Run your business carefully or I will quit." 
 
 There is an apparent suggestion to the contrary on equal- 
 ity in Lochren v. N. 7., 198 U. S. 45, but carefully limited to 
 non-dangerous employments where there was no inequality 
 of capacity or ability to contract. 
 
28 ADDRESS OF MR. H. V. MERCER 
 
 We must then assume that the courts and our president 
 as a court are rather inclined to favor legislation which tends 
 to recognize and overcome the disadvantages of the employee 
 in dangerous employments; indeed little can be found in the 
 history of our constitutional law, that contradicts the fact that 
 in most lines of conduct judicial questions are ultimately set- 
 tled, consistently with progress and within the Constitution. 
 
 In most instances when necessary laws have been vitiated 
 it has been the fault of the law, not of the constitution. In 
 many, if not most instances, adverse decisions have been 
 valuable to jurisprudence as a system, and consequently to 
 society. 
 
 This subject will only be an exception, if at all, because 
 better safeguarded. 
 
 The fear of our constitutions, both Federal and State, 
 is unnecessary; their clear understanding as a system is quite 
 essential. The fear has become so great in this country that 
 when the commissioners of a great State, appointed to study 
 this question, stood up in the Interstate Convention of Com- 
 missioners, at Atlantic City, and again at Washington, they 
 told us that almost all the opinions they got from numerous 
 inquiries at the bar were adverse to the power to create such 
 legislation. We believe then and believe now that enough 
 study would create different opinions — provided that State 
 too, observed well settled principles in enacting the law. They 
 did pass a law that was perhaps not the best system they 
 could have made with more time and thought, and the first 
 court of New York holds even it valid. 
 
 Can we, within our system, pass legislation accomplishing 
 the following results: 
 
 (o) A code or system of law of workers' compensation 
 repealing all other liabilities and containing permissible insur- 
 ance features ; 
 
 (b) Defining all occupations as dangerous in just pro- 
 portion to their accidents ; 
 
 (c) Establishing a board of arbitrators, consisting of one 
 from employers, another from employees, and one mutual 
 member to determine the amount and nature of the injuries 
 
ADDRESS OF MR. H. V. MERCER 29 
 
 on fair hearing and making submission a condition precedent 
 to the right to recover; 
 
 (d) Fixing the compensation on the wage basis and for 
 the length of disabihty and nature of disfigurement, and 
 allowing the employer, if sufficiently insured, to keep a small 
 percentage of the carrying charges out of the wages, raising 
 the compensation correspondingly higher. 
 
 Dual System of Constitutions. 
 
 We must not overlook the fact that our constitutional 
 system is a dual one consisting of a Federal Constitution of 
 but delegated powers and State Constitution of limitations 
 upon powers. 
 
 We study the Federal Constitution to see whether the 
 powers have been delegated to that government or prohibited 
 or limited to the States; we study the State Constitution to 
 see if the subject has been prohibited to it for general legis- 
 lation; and if done through paternaHsm to see if special power 
 has been given or special lines of limitation placed. Under 
 the scheme we suggest, the latter principle will not necessarily 
 
 be discussed. 
 
 Federal Power. 
 
 The Federal Constitution has three separate and distinct 
 lines of delegated powers for legislation: 
 
 (a) The things specifically delegated, which touch 
 this matter through the power to regulate commerce — 
 foreign, interstate and Indian — but not the police power 
 with respect to such commerce. 
 
 In Railway Co. v. Husen, 95 U. S. 465, L. ed. 530-1, in 
 reaching the conclusion that the State of Missouri had unduly 
 regulated interstate commerce, the Court stated in effect that 
 while the police power was not granted over such commerce 
 to the Federal Government, the rights were so nearly granted 
 as to compel the courts to guard it with diligence against need- 
 less intrusion, but admitted the following principle : 
 
 "We are thus brought to the question whether the 
 Missouri statute is a lawful exercise of the police power 
 of the State. We admit that the deposit in Congress of 
 the power to regulate foreign commerce and commerce 
 among the States was not a surrender of that which may 
 properly be denominated police power." 
 
30 ADDRESS OF MR. H. V. MERCER 
 
 In the case of Mayor, Alderman, et al. of New York v. 
 Miln, II Peters, 102 L. ed. 660-62-64, there is an elaborate 
 opinion on the poHce powers. In February, 1824, the legisla- 
 ture of New York passed an act providing that the Master 
 of every vessel arriving in New York from a foreign port, or 
 from a port of any of the States other than New York, was 
 required under certain penalties within a certain time to report 
 in writing, containing the names, ages, and last local settle- 
 ment of every person who should have been on board the 
 vessel during the voyage, and that if any of the passengers 
 should have gone on board any other vessel and landed at any 
 other place with a view to proceed to New York the same 
 should be stated in the report. The corporation of the City 
 of New York instituted an action under this law for debt 
 against the Master of the ship Emily to recover the penalties 
 imposed by this act, etc. The defendant demurred to the 
 declaration and the judges of the Circuit Court being divided 
 in opinion as to whether or not this act regulated trade and 
 commerce between New York and foreign ports and was 
 therefore unconstitutional and void, certified the case to the 
 Supreme Court. The Supreme Court reached the conclusion 
 that it was not a regulation of commerce but of police. That 
 Court held that all those powers which relate to merely muni- 
 cipal legislation or which may more properly be called internal 
 police are not surrendered or restrained; consequently, in rela- 
 tion to them the authority of a State is complete, unquali- 
 fied and exclusive. 
 
 The Court said on page 134: 
 
 "We shall not enter into any examination of the 
 question whether the power to regulate commerce be or 
 be not exclusive of the States, because the opinion which 
 we have formed renders it unnecessary; in other words, 
 we are of opinion that the act is not a regulation of com- 
 merce, but of police; and that being thus considered, it 
 was passed in the exercise of a power which rightfully 
 belonged to the States. * * * 
 
 We choose rather to plant ourselves on what we 
 consider impregnable positions. They are these: that 
 a State has the same undeniable and unlimited jurisdic- 
 tion over all persons and things within its territorial 
 limits as any foreign nation, where that jurisdiction is 
 not surrendered or restrained by the Constitution of the 
 
ADDRESS OF MR. H. V. MERCER 3 1 
 
 United States. That, by virtue of this, it is not only the 
 right but the bounden and solemn duty of a State, to ad- 
 vance the safety, happiness and prosperity of its people, 
 and to provide for its general welfare, by any and every 
 act of legislation which it may deem to be conducive to 
 these ends; where the power over the particular subject, 
 or the manner of its exercise is not surrendered or re- 
 strained in the manner just stated. That all those powers 
 which relate to merely municipal legislation, or what may, 
 perhaps, more properly be called internal police, are not 
 thus surrendered or restrained; and that, consequently, 
 in relation to these, the authority of a State is complete, 
 unqualified and exclusive." 
 
 In McLean v. Denver & R. G, R, R. Co., 203 U. S. 38-47 
 (L. ed. 78), it is said: 
 
 "It has been too frequently decided by this Court to 
 require the restatement of the decisions, that the exclu- 
 sive power to regulate interstate commerce is vested by 
 the Constitution in Congress, and that other laws which 
 undertake to regulate such commerce or impose burdens 
 upon it are invalid. This doctrine has been reaffirmed 
 and announced in cases decided as recently as the last 
 term of this court. While this is true, it is equally well 
 settled that a State or a Territory, for the same reasons, 
 in the exercise of the police power, may make rules and 
 regulations not conflicting with the legislation of Con- 
 gress upon the same subject, and not amounting to regu- 
 lations of interstate commerce." 
 
 (b) The delegation of all legislative power for the dis- 
 trict which has been designated as District of Columbia, the 
 forts and arsenals, etc. 
 
 (c) The power to make all rules and regulations respect- 
 ing the territories. Both of these delegations cover the police 
 power and general powers of legislation. The commerce 
 clause, as such, was not, in my opinion, intended to cover the 
 territories. 
 
 (d) The power, then, to legislate upon this question by 
 the Federal Government within the States does not come 
 as an element of the police power, unless that power can be 
 spelled out of the taxing powers of the Government, a ques- 
 tion too technical and intricate to develop in a semi-lay paper 
 on such short notice. It would seem that without considering 
 the relation which the State has to the police power, the 
 
32 ADDRESS OF MR. H. V. MERCER 
 
 majority of the Court meant to hold the power to legislate 
 to protect employees to exist under the interstate commerce 
 clause in Howard v. ///. Central R. Co., 207 U. S. 461. And 
 without considering the question of police power in Pierce v. 
 Van Dusen, 78 Fed. 693 (6 C. C. A.) Mr. Justice Harlan and 
 then Circuit Judges Taft and Lurton (now President and 
 Associate Justice respectively) held that until Congress acted 
 upon safety appliances as to employees engaged in inter- 
 state commerce, the States might do so. 
 
 In Adair v. U. S., 208 U. S. 161, the Supreme Court held, 
 with two dissents and one absent judge, that there was no 
 such connection between interstate commerce and member- 
 ship in a labor organization as to authorize Congress to make 
 it a crime against the United States for an agent or officer of 
 an interstate carrier to discharge an employee from service 
 to such carrier because of his membership in a labor union; 
 the Court holding that in the matter of the refusal of em- 
 ployment, and discharge from employment, they stood on an 
 equality, and that Congress did not have power to make either 
 a crime, holding that this was not in fact a regulation of com- 
 merce. 
 
 The Court said: 
 
 "No such rule of criminal liability as that to which 
 we have referred can be regarded, in any just sense, a 
 regulation of interstate commerce." 
 
 Whether the taxing power or the power to regulate com- 
 merce give any authority to Congress to legislate uniformly 
 on this question as has been suggested from numerous 
 sources, we prefer not at this time to express an opinion; 
 but that the States do have sufficient power to legislate for 
 self-protection under the police power, we have no doubt. 
 
 (e) It is true of both the State and Federal Government 
 that they have power to legislate covering the regulation of 
 those in their own employ. 
 
 Atkin V. Kansas, 191 U. S. 205 (148-159). 
 
 (/) The prohibitions upon the part of the Federal Gov- 
 ernment, so far as they apply to the States, are found in the 
 14th Amendment to the Federal Constitution. Those prohi- 
 bitions, in so far as they are difficult to meet and put into 
 popular language, are: 
 
ADDRESS OF MR. H. V. MERCER 33 
 
 1. The requirement that the laws shall give equal pro- 
 tection ; 
 
 2. That they shall be reasonably necessary and limited to 
 
 dangerous employment, and not mere arbitrary enactments 
 
 seeking to make employments dangerous which are not in 
 
 fact dangerous. 
 
 Power of the States. 
 
 1. The State may repeal the common law and statutory 
 liabilities as to all subsequent accidents. 
 
 Generally speaking, it is the rule that a party has no 
 vested interests to a right of action at common law for a 
 future injury. A tort action grows out of a breach of the 
 duty which the State provides that one of its individuals owes 
 to another, either by reason of the peculiar situation as be- 
 tween the parties, or by reason of a public burden which has 
 a peculiar favor in it for the one who is injured. This direct 
 liability the State has imposed by the implied adoption of the 
 common law or by statute, both of which it has the power to 
 repeal. It has repealed or has modified the common law or 
 statutes every time it has imposed a new obligation or taken 
 away an old obligation with respect to tort actions. See Mar- 
 tin V. Pittsburgh and L. E. R. Co., 203 U. S. 284; Holden v. 
 Hardy, 169 U. S. 366; Snead v. Central of Georgia Ry. Co., 
 151 Fed. 608. 
 
 2. With respect to the remedy, we think that the remedy 
 suggested here is the appropriate and proper one. It would 
 be so if it were fire insurance. See Wild Rice Lbr. Co. v. 
 Royal Ins. Co., 99 Minn. 190. Such a law, leaving the gen- 
 eral question of liability to be determined and simply pro- 
 viding a reasonable method of estimating and ascertaining the 
 amount of the loss, is unquestionably valid in both this coun- 
 try and Europe. See Hamilton v. The Liverpool and London 
 Ins. Co., 136 U. S. 242, and cases therein cited. 
 
 3. The fact that the liability is conditioned upon the appli- 
 cation of a remedy does not in any way affect the constitu- 
 tionality if it is carried out as we suggest. The theory is that 
 until the appraisal is made by the award provided there is no 
 liability. See President, etc., F. & H. Canal Co. v. Penn. 
 Coal Co., 50 N. Y. 250 ; Wolff v. Liverpool, L. & G. Ins, Co., 
 
34 ADDRESS OF MR. H. V. MERCER 
 
 50 N. J. Law, 453 ; Hall v. Norwalk Fire Ins. Co., 57 Conn. 
 105 ; Reed v. Washington Ins. Co., 138 Mass. 572. 
 
 4. The State must avoid its own restrictions and comply 
 with the 14th amendment: 
 
 (a) Equal mlegal protection under the 14th Amendment 
 has given alarm in some quarters. It has not seemed to us 
 serious if the law he properly drawn. 
 
 "The amendment gave no new privileges or immuni- 
 ties to the citizens of the States, but only additional guar- 
 antees to those then existing. 
 
 See Boutwell on the Const., at end of First Cent. 
 Minor v. Hoppersett, 21 Wall. 162, L. Ed. 627. 
 
 The office of the United States is limited to the 
 enforcement of the duty of the States to secure the 
 equality of immunities and privileges. 
 
 U. S. V. Cruikshank, 92 U. S. 542, L. Ed. 588." 
 
 It also seems to be the general rule that the matter of 
 equal protection of the laws is construed by the Federal Court 
 as it is by our own State Court, to permit reasonable classifi- 
 cations if all within the class are treated alike. 
 
 In Hold en v. Hardy, 169 U. S. 366, L. Ed. 780, it is said : 
 
 "The 14th Amendment does not profess to secure 
 to all persons in the United States the benefit of the same 
 laws and the same remedies. * * * 
 
 'There is nothing in Magna Charta, rightly con- 
 strued as a broad charter of public right and law, which 
 ought to exclude the best ideas of all systems and of 
 every age ; and as it was the characteristic principle of the 
 common law to draw its inspiration from every fountain 
 of justice, we are not to assume that the sources of its 
 supply have been exhausted. On the contrary, we should 
 expect that the new and various experience of our own 
 situation and system will mould and shape it into new 
 and not less useful forms. We have seen no reason to 
 doubt the soundness of these views.' " 
 
 H olden v. Hardy, 169 U. S. 366. , 
 
 And again in Atchison, Topeka & Santa Fe Ry. Co. v. Mat- 
 thews, 174 U. S. 96, the Court said : 
 
 "The equal protection of the laws which is guar- 
 anteed by the Fourteenth Amendment does not forbid 
 
ADDRESS OF MR. H. V. MERCER 35 
 
 classification. That has been asserted in the strongest 
 language. Barbier v. Connolly, 113 U. S. 27 (28 L. Ed. 
 
 823)." 
 
 And again: 
 
 "It is the essence of a classification that upon the 
 class are cast duties and burdens different from those 
 resting upon the general public. * * * Indeed, the 
 very idea of classification is that of inequality so that it 
 goes without saying that the fact of inequality in no man- 
 ner determines the matter of constitutionality." 
 
 Atchison, Topeka & Santa Fe Ry. Co. v. Matthews, 
 174 U. S. 96 (L. Ed. 909-915). 
 
 And in Consolidated Coal Co. v. Illinois, 185 U. S. 203, an 
 act of the legislature of Illinois requiring inspection of mines 
 where more than five men were employed was before the 
 Court; it said: 
 
 "The regulation of mines and miners, their hours of 
 labor, and the precautions that shall be taken to insure 
 their safety, health, and comfort, are so obviously within 
 the police power of the several States that no citation 
 of authorities is necessary to vindicate the general prin- 
 ciple. * * * It is true that the act of 1897 amended 
 the former law of 1895, by limiting its application to coal 
 mines, 'where more than five men are employed at any 
 one time.' This is a species of classification which the 
 legislature is at liberty to adopt, provided it be not wholly 
 arbitrary or unreasonable. * * ♦ jj^ ^.j^^ ^,^sg under 
 consideration there is no attempt arbitrarily to select 
 one mine for inspection, but only to assume that mines 
 which are worked upon so small a scale as to require only 
 five operatives would not be likely to need the careful 
 inspection provided for the larger mines, where the 
 workings were carried on upon a larger scale or at a 
 greater depth from the surface, and where a much larger 
 force would be necessary for their successful operation. 
 It is quite evident that a mine which is operated by only 
 five men could scarcely have passed the experimental 
 stage, or that precautions necessary in the operation of 
 coal mines of ordinary magnitude would be required in 
 such cases. There was clearly reasonable foundation 
 for a discrimination here." 
 
 Consolidated Coal Co. et al. v. Illinois, 185 U. S. 
 203, L. Ed. 873. 
 
36 ADDRESS OF MR. H. V. MERCER 
 
 In State v. Smith, 58 Minn. 35, our Court sustained an 
 act requiring street railway companies to make enclosures for 
 their motormen. The Court said : 
 
 *'The objection that this is class legislation is based 
 on the fact that the act is confined to street cars pro- 
 pelled by cable, steam, or electricity, and does not include 
 street cars drawn by mules and horses, or carriages or 
 wagons; and it is assumed that here is an attempt at 
 purely arbitrary classification for the purpose of the act. 
 
 The evil sought to be remedied does not exist in 
 case of the slowly going mule or horse car, or carriage 
 or wagon, to the same degree as in the case of cable, 
 electric, or steam cars." 
 
 But there must be a basis for distinction. 
 
 Dobbins v. Los Angeles, 195 U. S. 223. 
 
 On the question of equal protection a somewhat lengthy 
 and what at first seems a formidable opinion against classi- 
 fication for equal protection in the State liability laws (S. D. 
 Stat.) was rendered on April 12, 1910, in M. & St. P. Ry. Co. 
 V. Westby, 178 Fed. 619, by the 8. C. C. A., holding the law 
 void because the classes are too extensive. 
 
 But in the case of Louisville & N. Ry. Co. v. Milton, 
 
 argued April 28-29, 1910, and decided May 31, 1910, p. 676, 
 
 the Supreme Court in construing the Indiana statute held 
 
 that : 
 
 "In other words, reduced to its ultimate analysis the 
 contention comes to this: that by the operation of the 
 equal protection clause of the 14th Amendment, the 
 States are prohibited from exerting their legitimate police 
 powers upon grounds of the generic distinction obtaining 
 between persons and things, however apparent such dis- 
 tinction may be; but, on the contrary, must legislate upon 
 the basis of a minute consideration of the distinctions 
 which may arise from accidental circumstances as to the 
 persons and things coming within the general class pro- 
 vided for. When the proposition is thus accurately fixed 
 it necessarily results that in effect it denies the exist- 
 ence of the power to classify, and hence must rest upon 
 the assumption that the equal protection clause of the 
 14th Amendment has a scope and effect upon the lawful 
 authority of the States contrary to the doctrine main- 
 tained by this Court without deviation. This follows, 
 since the necessary consequence of the argument is to 
 virtually challenge the legislative power to classify, and 
 
ADDRESS OF MR. H. V. MERCER 37 
 
 the numerous decisions upholding that authority. To 
 this destructive end it is apparent the argument must 
 come, since it assumes that, however completely a classi- 
 fication may be justified by general considerations, such 
 classification may not be made if inequalities be detected 
 as to some persons embraced within the general class by 
 a critical analysis of the relation of the persons or things 
 otherwise embraced within the general class." 
 
 In that opinion the Court also said: 
 
 *'The equal protection of the law clause. That the 
 14th Amendment was not intended to and does not strip 
 the States of the power to exert their lawful police au- 
 thority is settled, and requires no reference to authorities. 
 And it is equally settled — as we shall hereafter take occa- 
 sion to show — as the essential result of the elementary 
 doctrine that the equal protection of the law clause does 
 not restrain the normal exercise of governmental power, 
 but only abuse in the exertion of such authority, there- 
 fore, that clause is not offended against simply because, 
 as the result of the exercise of the power to classify, 
 some inequality may be occasioned. That is to say, as 
 the power to classify is not taken away by the operation 
 of the equal protection of the law clause, a wide scope 
 of legislative discretion may be exerted in classifying 
 without conflicting with the constitutional prohibition. 
 
 It is beyond doubt foreclosed that the Indiana 
 statute does not offend against the equal protection clause 
 of the 14th Amendment, because it subjects railroad em- 
 ployees to a different rule as to the doctrine of fellow 
 servant from that which prevails as to other employ- 
 ments in that State. Tullis v. Lake Erie & W. R. Co., 
 175 U. S. 348, 44 L. ed. 192, 20 Sup. Ct. Rep. 136; Pitts- 
 burg, C. C. & St. L. R. Co. v. Ross, 212 U. S. 560, 53 L. 
 ed. 652, 29 Sup. Ct. Rep. 688." 
 
 The essence of the whole thing is that classification, if 
 reasonably necessary, may be made, if all in a class are equally 
 treated. 
 
 Some argument has been produced to the effect that it 
 would be difficult to hold the employer in case he had no 
 fault, but fault is not necessarily the basis of liability in such 
 cases. See Chicago, R. I. & Pac. Ry. Co. v. Zernicke, 183 U. 
 S. 582. 
 
 The man who put into operation the dangerous machinery 
 of dangerous employment would be liable by reason of public 
 necessity to be controlled under the elements of the police 
 
38 ADDRESS OF MR. H. V. MERCER 
 
 power for the protection of the general welfare. It has been 
 intimated that this rule would not apply except in the case 
 of quasi public corporations, but this is not the law. Rela- 
 tions otherwise private may become public under public 
 necessity if the State decides that the public needs protection. 
 See State v. Wagener, 'jy Minn. 483; Harbison v. Knoxville 
 Iron Co., 183 U. S. 13. 
 
 It is for the Legislature first to determine whether or not 
 this is a proper classification, and if there be reasonable basis 
 for declaring the employment to be dangerous, the courts will 
 follow the judgment of the Legislature, even though their 
 own judgment might not accord with that of the Legisla- 
 ture. See Lochner v. N. Y., 198 U. S. 45 ; Holden v. Hardy, 
 169 U. S. 365. 
 
 The police power of the several states was never dele- 
 gated by the Federal Constitution, nor prohibited by that in- 
 strument from reasonable State exercise. 
 
 A search of the Federal Constitution fails to reveal any 
 delegation of the police power within the States; neither the 
 Federal nor State Constitutions have prohibited it to the 
 State, except to the extent of requiring equal, reasonable, and 
 lawful regulations: 
 
 In United States v. DeWitt, 9 Wall. 41, L. Ed. 593-4, 
 the Court said : 
 
 "If the public safety or the public morals required 
 the discontinuance of any manufacture or traffic, the 
 hand of the Legislature cannot be stayed from provid- 
 ing for its discontinuance by any incidental inconvenience 
 which individuals or corporations may suffer. All rights 
 are held subject to the police power of the State." 
 
 In the United States v. DeWitt, 9 Wall. 41, L. Ed. 593-4, 
 through an opinion by Chief Justice Chase, the Supreme 
 Court said, in relation to a Federal law, making it a misde- 
 meanor to mix certain kinds of oils : 
 
 "As a police regulation relating exclusively to the 
 internal trade of the States, it can only have effect where 
 the legislative authority of Congress excludes territorially 
 all State legislation as for example in the District of Co- 
 lumbia. Within State limits it could have no constitu- 
 tional operation. This has been so frequently declared 
 by this Court; results so obviously from the terms of the 
 
ADDRESS OF MR. H. V. MERCER 39 
 
 Constitution, and has been so fully explained and sup- 
 ported on former occasions, that we think it unnecessary 
 to enter again upon the discussion." 
 
 In Mugler v. Kansas, 123 U. S. 623, it is said: 
 
 ****** State legislation, strictly and legiti- 
 mately for police purposes, does not in the sense of the 
 Constitution, necessarily intrench upon any authority 
 which has been confided, expressly or by implication, to 
 the National Government." 
 
 This makes it evident that the police power, generally speak- 
 ing, rests in the State government, except over such terri- 
 tory as Congress has the power to control. 
 State Police Power not Delegated to the Federal Government. 
 In Mugler v. Kansas, 123 U. S. 623-668, re-quoting from 
 a former decision, it is said: 
 
 **That power belonged to the States when the Federal 
 Constitution was adopted. They did not surrender it and 
 they all have it now — It rests upon the fundamental princi- 
 ple that every one shall so use his own as not to wrong 
 and injure another." 
 
 The 14th Amendment not Designed to Destroy the State's 
 
 Police Power. 
 
 In Barbier v. Connolly, 113 U. S. 27 L. Ed. 923, it is 
 clearly held : 
 
 **It would be an extraordinary usurpation of the 
 authority of the municipality if a Federal tribunal should 
 undertake to supervise such regulations." 
 
 And: 
 
 "But neither the Amendment, broad and compre- 
 hensive as it is, nor any other amendment, was designed 
 to interfere with the power of the State, sometimes termed 
 its police power." 
 
 Liberty of Contract Between Employer and Employee Does 
 
 Not Mean License. 
 
 There is no appreciable constitutional difficulty in uni- 
 form State legislation for workmen's compensation acts if 
 we treat this subject with a comprehension of the few limita- 
 tions as distinguished from the fear of the many bugaboos. 
 
40 ADDRESS OF MR. H. V. MERCER 
 
 The Fourteenth Amendment secures the Liberty of Con- 
 tract between Employer and Employee except when limited 
 by the Police Power; the Exercise of the Police Power rests 
 in the Legislative Department; the Courts interfere to uphold 
 the Constitution only to prevent Arbitrary power from being 
 exercised under cover of the Police Power. 
 
 Freedom of Contract Is Liberty. 
 
 This is the great Federal Constitutional question with 
 respect to Workmen's Compensation Acts. Can we say that 
 employer and employee must stand by regulations upon this 
 question. In my opinion, yes. 
 
 The police power — the public power to protect the inter- 
 ests of humanity for public preservation is the safety valve 
 here. 
 
 In Adair v. U. S., 208 U. S. 161 (L. Ed. 436), Mr. Jus- 
 tice Harlan re-quotes from Lockner v. New York, 198 U. S. 
 45, as follows: 
 
 "The general right to make a contract in relation to 
 his business is part of the liberty of the individual pro- 
 tected by the 14th Amendment of the Federal Constitu- 
 tion." 
 
 Later on the Court says: 
 
 « * * * 'pj^g right to purchase or to sell labor 
 is part of the liberty protected by this amendment, unless 
 there are circumstances which exclude the right." 
 
 Liberty of Contract Not Absolute When Applied to Employer 
 and Employee in Dangerous Employments. 
 
 In Holden v. Hardy, 169 U. S. 366 (L. Ed. 789), the 
 Supreme Court held: 
 
 "This right of contract, however, is itself subject to 
 certain limitations which the States may lawfully impose 
 in the exercise of its poHce powers." 
 
 The Court also said: 
 
 "Of course, it is impossible to forecast the character 
 or extent of these changes, but in view of the fact that, 
 from the day Magna Charta was signed, to the present 
 moment, amendments to the structure of the law have 
 been made with increasing frequency, it is impossible to 
 suppose that they will not continue, and the law be forced 
 
- y 
 
 ADDRESS OF MR. H. V. MERCER ' 4I 
 
 to adapt itself to new conditions of society, and particu- 
 larly, to the new relations between employer and em- 
 ployees, as they arise." 
 
 In Atchison, etc., Ry. Co. v. Matthews, 174 U. S. 96 (L. 
 Ed. 909), in discussing a statute of Kansas respecting fire 
 cases, the Court said: 
 
 "But neither the amendment (14th) — ^broad and com- 
 prehensive as it is — nor any other amendment — was de- 
 signed to interfere with the power of the State, some- 
 times termed its police power, to prescribe regulations 
 to promote the health, peace, morals, education and good 
 order of the people, and to legislate so as to increase the 
 industries of the State, develop its resources, and add to 
 its wealth and prosperity." 
 
 In the case of Johnson v. Southern Pacific Ry. Co., 196 
 U. S. I, it was held that the equipment of cars with automatic 
 couplers might be required by Congress. 
 
 In Knoxville Iron Co, v. Harbison, 183 U. S. 13, the 
 Court said: 
 
 "But it is also true, that, inasmuch as the right to 
 contract is not absolute in respect to every matter, but 
 may be subjected to the restraints demanded by the safety 
 and welfare of the State and its inhabitants, the police 
 power of the State may, within defined limitations, extend 
 over corporations outside of, and regardless of, the power 
 to amend charters. Atchison T. & S. F. R. Co. v. Mat- 
 thews, 174 U. S. 96 L. Ed. 909, 19 Sup. Ct. Rep. 609." 
 
 In 208 U. S. 411, with respect to the limitations upon the 
 right of contract, the Court said: 
 
 "It is undoubtedly true, as more than once declared 
 by this Court, that the general right to contract in rela- 
 tion to one's business is part of the liberty of the indi- 
 vidual, protected by the 14th Amendment to the Federal 
 Constitution ; yet it is equally well settled that this liberty 
 is not absolute and extending to all contracts, and that 
 a State may, without conflicting with the provisions of 
 the 14th Amendment, restrict in many respects the indi- 
 vidual's power of contract. * * * » (Muller v. Oregon, 
 208 U. S. 411, L. Ed. 551-555)- 
 
 The majority opinion in the case of Lochner v. New York, 
 198 U. S. 45, refers to Holden v. Hardy as one of the cases 
 wherein the Court has treated the police powers with liberal 
 
42 ADDRESS OF MR. H. V. MERCER 
 
 construction, but the Lochner case although holding against 
 the validity of that law admits : 
 
 "The State, therefore, has power to prevent the indi- 
 vidual from making certain kinds of contracts, and in 
 regard to them the Federal Constitution offers no pro- 
 tection." « 
 
 The general control of moral conduct, health provisions 
 and bodily protection have always been conceded to stand 
 above individual rights of conduct. Organized society is 
 charged with general security and protection. It must use 
 good judgment to ascertain the necessities and execute the 
 remedies. The individual must act in subservience to this 
 protection and within this judgment; if such it be as distin- 
 guished from arbitrary action, the State may provide the 
 remedy. 
 
 Indeed in Holden v. Hardy, the Court said: 
 
 "These employments, when too long pursued, the 
 legislature has judged to be detrimental to the health of 
 the employees, and so long as there are reasonable 
 grounds for believing that this is so, its decision upon this 
 subject cannot be reviewed by the Federal Courts." 
 
 At page 57 the Court said: 
 
 "This is not a question of substituting the judgment 
 of the Court for that of the Legislature. If the act be 
 within the power of the State it is valid, although the 
 judgment of the Court might be totally opposed to the 
 enactment of such a law. But the question would still re- 
 main: Is it within the police power of the State, and 
 that question must be answered by the Court." 
 
 It is upon this theory that the Court is able to protect 
 and preserve this power and to hold as it did in Muller v. 
 Oregon, 208 U. S. 412, L. Ed. 551, that while the liberty of 
 contract is a property right of the individual 
 
 "Yet, it is equally well settled that this liberty is not 
 absolute and extending to all contracts, and that a State 
 may, without conflicting with the provisions of the Four- 
 teenth Amendment, restrict in many respects the individ- 
 ual's power of contract." 
 
 This whole question relates to the use of property, as 
 well as personalty; it may be machinery or the right to con- 
 
ADDRESS OF MR. H. V. MERCER 43 
 
 tract — each equally property — but it is, nevertheless, a limit- 
 ation upon the use. This limitation is based upon the theory 
 that the use is dangerous and the consequences must follow 
 as a legal duty. Judged by the usual rule of following moral 
 obligations with human law, this legal duty is a proper one. 
 Judged by the implied condition that law only recognizes 
 the ownership and use of property by virtue of the social com- 
 pact, the owner is not an absolute one, except in the private 
 sense — his rights are always subservient to the necessary public 
 
 control. When he enters or adopts the social compact he im- 
 pliedly so agrees. 
 
 With an evil as disastrous in totals as was our civil war; 
 with twenty-three of the greatest foreign countries committed 
 to the change; with several States acting through commissions 
 to form scientific legislation on the question; with a fair, al- 
 most urgent, agitation by substantially all persons who under- 
 stand the evils and insufficiences of the present system, it 
 would seem to require a very peculiar judge to hold that a 
 law fairly drawn, as a compensation act in dangerous employ- 
 ments, should be held an arbitrary, as distinguished from a 
 discreet, legislative act. 
 
 For a fuller discussion see Report of Atlantic City Con- 
 ference, July 29-31, pp. 54-216. 
 
44 ADDRESS OF MR. JOHN MITCHELL 
 
 Address of Mr. John Mitchell 
 
 Mr. Chairman: — 
 
 "Industrial accidents and compensation for losses caused by 
 them" is a subject in which the workingmen are more directly 
 interested than any other group in society, and while I hold 
 no commission from the wage earners that gives me the 
 right to speak for them, yet, I am confident that in a general 
 way that which I have to say will also express their sentiment. 
 Primarily, the working men are more concerned with the 
 means of preventing industrial accidents, than they are with 
 the subject of compensation for losses caused by them. It is 
 all very well for a workman to receive looo dollars for the 
 loss of an eye or the loss of a leg, but it is much better for 
 the workman, as it is for society, that the eye or the leg be 
 not lost. 
 
 It is, of course, impossible to prevent all industrial acci- 
 dents. However sure the precautions, however perfect the 
 arrangement, it is inconceivable that the gigantic industrial 
 movements of the American people should be conducted with- 
 out some fatalities. The industrial structure is a huge ma- 
 chine, hard running, and with many unguarded parts, and 
 many of the fatalities, many of the deaths in general are simply 
 and solely the result of conditions beyond human control, and 
 inseparable from the ordinary course of existence. But 
 thousands of easily preventable accidents and fatalities occur 
 each year, and it is from these that the wage earners strive to 
 secure relief. 
 
 In the United States the number of persons killed and 
 injured is not even counted, but Mr. William Hard credits 
 the American Institute of Social Service with the statement, 
 that 536,165 workmen are killed or maimed every year in 
 American industry, while Dr. Hoffman has estimated the an- 
 nual number of industrial accidents at approximately 2,000,000. 
 As a matter of fact, however, the death roll of industry is 
 longer than is evident from official figures. No one can com- 
 pute, of course, the number annually yielding up their lives, or 
 
ADDRESS OF MR. JOHN MITCHELL 45 
 
 compelled to become a burden upon their friends or relatives, 
 or dependent upon the charity or munificence of society, who 
 have come to their death or disability as a result of disease 
 contracted in their occupation. It is a strange commentary 
 upon our boasted American civilization, that in this country 
 twice or three times as many persons per looo employed, are 
 killed and injured in the course of their employment as in 
 any other country in the world. 
 
 It is not my purpose to disparage the institutions of my 
 own country, because I believe that with all our failings, with 
 all our sins of omission and commission, we have, in many 
 respects, the best government ever instituted among men ; but, 
 I cannot blind myself to the fact that in the matter of providing 
 protection for the life and safety of the workman, and in com- 
 pensating him for injury sustained in the course of his em- 
 ployment, we are lagging far behind the nations of the Old 
 World. It may be said that this is not a parental government, 
 and that the State should not be called upon to regulate our 
 industrial relations, and while I agree that, "they are best 
 governed who are least governed," I contend, nevertheless, 
 that it is a proper function of the government to throw around 
 the weakest of its citizens all the safeguards and all the pro- 
 tection possible. 
 
 In a letter to the Exposition of Safety Devices and In- 
 dustrial Hygiene, Mr. Roosevelt, then President of the United 
 States, expressed thus his view upon this subject: "As 
 modern civilization is constantly creating artificial dangers of 
 life, limb and health, it is imperative upon us to provide new 
 safeguards against the new perils. In legislation and in our 
 use of safety devices for the protection of workmen, we are 
 far behind European peoples, and, in consequence, in the 
 United States, the casualties attendant upon peaceful industry 
 exceed those which would happen under great perpetual war. 
 Many, even most, of these casualties are preventable, and it is 
 not supportable that we should continue a policy under which 
 life and limb are sacrificed, because it is supposed to be cheaper 
 to maim and kill men than to protect them." 
 
 In the matter of the health and the safety of the work- 
 men, society has not yet learned its full lesson. There was 
 a time when the criminal law was a matter of private settlement, 
 and a man could relieve himself of responsibility for the mur- 
 der of his neighbor by making a "blood payment" of so much 
 
46 ADDRESS OF MR. JOHN MITCHELL 
 
 money to the kinsmen of the murdered man. Our attitude 
 toward industrial accidents is still much the same. If the 
 employer pays a ludicrously inadequate sum to his injured em- 
 ploye, or to the widow of a workman who has been killed, 
 society assumes that he has performed his full duty, and 
 that his concern m the affair has ceased. As a matter of fact, 
 most employers minimize their financial responsibility for the 
 death or injury of their workmen by a system of insurance in 
 Employers Liability Companies. In consideration of the pay- 
 ment of a small fee for each person employed, or a small 
 amount upon their pay roll, these companies guarantee to de- 
 fend, in the courts, all suits instituted for damages, and to pay to 
 the plaintiff, in such suits, any judgment that may be rendered 
 against the employer. Because of this system, it is frequently 
 less expensive to permit a workman to be killed or maimed, 
 than to provide adequate safeguards against his injury. 
 
 Regrettable and alarming as is the number of accidents 
 attendant upon the peaceful conduct of our industries, yet, we 
 might reconcile ourselves to even the conditions as they now 
 exist, if it were not possible, by the exercise of reasonable 
 precautions, to reduce the number of industrial accidents. But 
 when we observe the contrasts between the number killed and 
 injured in the industries of other nations with that of our own, 
 we are led to the conclusion, that, if it cost more to kill a 
 workman in America than to protect him — as it does in 
 Europe — the American workman would not be killed, he would 
 be protected, and the number of industrial accidents would be 
 reduced at least one half. As an illustration of what has been 
 accomplished in foreign countries, and as an evidence of what 
 could be accomplished under proper regulations in the United 
 States, your attention is directed to the conditions prevailing in 
 the mining industry of the following countries: 
 
ADDRESS OF MR. JOHN MITCHELL 47 
 
 Average number Total number Death rate 
 men employed men killed. per i,ooo 
 
 each year. employed. 
 
 India, 79,007 676 0.86 
 
 Austria, 53>794 928 i.74 
 
 Belgium, 132,251 1,401 1.06 
 
 France, 162,917 2,944 1.81 
 
 Prussia, 397,oo2 8,460 2.13 
 
 Great Britain, . . . 796,303 10,319 1.29 
 
 United States, . . . 544,756 19775 346 
 
 In considering these statistics it is well to remember that 
 the physical conditions of mining in the United States are 
 not more hazardous than the conditions prevailing in the 
 countries of the Old World. Indeed, the natural conditions 
 of American mining are more safe than are the natural condi- 
 tions in the countries enumerated in this table. Therefore, 
 the disproportionate number of fatal mining accidents in the 
 United States, as against all European nations, must be at- 
 tributed to inadequate mining regulations. It is, therefore, 
 highly important to the preservation of life and the promotion 
 of health, that the factory and mining laws of all our States — 
 which at the present time are wholly inadequate — should be 
 greatly extended, and should be enforced with the utmost 
 vigor. Manufacturers should be required, under pain of severe 
 penalty, to equip machinery and working places with every 
 practical safety device that it is possible to secure, and the 
 State itself should establish museums of safety devices and in- 
 dustrial hygiene in which should be exhibited drawings or 
 models of all safety appliances, that are in use in this and other 
 countries. 
 
 As a further means of reducing accidents, our iniquitous 
 and antiquated liability laws should be supplanted by an auto- 
 matic system of compensation to workmen for losses caused 
 by industrial accidents. If the money now spent by employers 
 in defending themselves against personal injury litigation were 
 paid directly to the injured workman, or to the dependents of 
 workmen who have been killed, it would go a long way to- 
 ward relieving their distress, and toward extricating the nation 
 from the disgraceful and humiliating position it not occupies in 
 respect to this question. 
 
48 ADDRESS OF MR. JOHN MITCHELL 
 
 The United States is now the only industrial nation on 
 earth that maintains the old stystem of liability based upon 
 negligence. We still live under the common law only slightly 
 modified by statute. This law was evolved more than a century 
 ago, and at a time when there was not a mine, mill, factory 
 or railroad of any importance in the United States. The sys- 
 tem may have been just then, but it is unjust now. We were 
 wholly an agricultural people one hundred years ago, we are 
 now an industrial nation, and our machinery is more complex 
 than that of any other nation on earth. Our men work harder, 
 they live under a severe nervous strain. We are a hetero- 
 geneous people. Hundreds of thousands of immigrants come 
 to our shores each year, we and they work and live together, 
 and it is not to be wondered at that we more readily fall 
 victims to industrial accidents and occupational diseases than 
 do the workmen in the more slow going homogenous nations 
 of Europe. Therefore, we, even more than they, require protec- 
 tion against the dangers of modern industriaHsm. 
 
 As a rule, an injured workman has no remedy at law if 
 his injury were caused by the act of a fellow workman, or 
 if he contributed, in any degree, to his own injury. In many 
 instances he has no remedy at law whatever, because it has 
 been held by the courts, that the workman in accepting employ- 
 ment assumes all the risk of his work. The result of all this 
 judge-made law has been that the workman is practically help- 
 less, the employer is under heavy expense defending himself 
 in the courts, and the courts of the States and nation are 
 burdened beyond their capacity with litigation, that in every 
 other nation is eliminated because of the automatic settlement 
 of such claims. 
 
 I shall not undertake a discussion of the laws of other 
 countries, because I assume that the members of your associa- 
 tion are thoroughly familiar with them; but it may be inter- 
 esting to consider the expense and the useless waste of money 
 which is involved under our present liability system. Mr. 
 Hard states in his booklet, that in the eleven years, 1894- 1905, 
 the employers liability companies of America took in 99,959,076 
 dollars in premiums from American employers, and that these 
 companies paid out in the settlement of claims of injured 
 workmen 43,599,498 dollars, or 43 per cent, of the amount they 
 
ADDRESS OF MR. JOHN MITCHELL 49 
 
 took in. Of the 43,599,498 dollars paid in the settlement of 
 claims of injured workmen, I believe it is safe to say that 
 35 per cent, was expended by the injured workmen in the 
 payment of attorneys' fees and court expenses, so that in the 
 final analysis, the injured workmen received less than 30,000,000 
 dollars out of the 100,000,000 dollars paid by employers dur- 
 ing this period in premiums to liability companies. Allowing 
 $15,000,000 for expenses of administration and for reserve, 
 it would mean that $55,000,000 were wasted, worse than wasted, 
 because the money was used in burdening our courts with liti- 
 gation and in delaying or defeating the settlement of claims — 
 many of them just claims — when it should have been used 
 and would be used under a wise system for the immediate 
 relief of the men and their families, who are the victims of 
 the hazard of industrial pursuits. 
 
 I am not prepared to say that even though the entire 
 one hundred million dollars had been paid directly to the in- 
 jured workmen, that it would have been sufficient to have 
 indemnified them for their losses ; but I do believe that it would 
 not have required very much more to have compensated them 
 on the basis of the British Workmen's Compensation Act. I 
 believe that industry should bear the burden of the pecuniary 
 loss sustained by workmen as a result of industrial accidents, 
 just as it is now required to repair its machinery and to offset 
 the loss caused by depreciation in the value of its plants. 
 The workmen and those dependent upon them, are, and will 
 be, under any system, required to bear all the physical pain 
 and mental suffering. For this, they cannot be reimbursed, 
 but they should be relieved of the harrowing fear of hunger 
 and want, they should be guaranteed against the humiliation 
 and degradation of becoming objects of charity. 
 
 On the whole, it would seem to me that from every con- 
 sideration of business judgment, economy and fair dealing 
 between man and man, we should not hesitate longer in 
 abandoning a system that has been productive of so much 
 misery and injustice, to say nothing of the friction and ill feel- 
 ing engendered between employer and employe. Under our 
 present laws an injured workman is compelled to sue the only 
 man on earth upon whom he has a moral claim for employ- 
 ment, whereas under a compensation system he receives as 
 
50 ADDRESS OF MR. JOHN MITCHELL 
 
 a matter of right — not as a benefaction — a definite amount 
 of money — a sufficient amount to tide him or his dependents 
 over the period of adversity. 
 
 The law enacted by the last legislature establishing, in 
 the State of New York, a system of automatic compensation 
 for losses caused by industrial accidents, is a long and sub- 
 stantial step in the right direction. While this law applies only 
 to a limited number of extra-hazardous trades, yet when we 
 remember that New York is the first American State to recog- 
 nize legally the principles involved in legislation of this char- 
 acter, we have every reason to feel encouraged and gratified, 
 because there is no doubt but that if the constitutionality of the 
 New York Act is sustained by the courts, it will only be a 
 question of a short time until the principles embodied in the 
 law are extended to all States and broadened so as to include 
 all wage earners engaged in the mining, manufacturing and 
 transportation industries. 
 
 I have no hesitancy in expressing the opinion that this 
 compensation act is the most significant and beneficient piece 
 of legislation ever enacted by the Legislature of the State of 
 New York, not because I regard the law itself as perfect in 
 every detail, but because it establishes a principle which can 
 be developed into a comprehensive, economical and equitable 
 legal system of just compensation to workmen for losses 
 caused by industrial accidents. 
 
ADDRESS OF MR. MILES M. DAWSON 5 1 
 
 Address of Mr. Miles M. Dawson 
 
 I am honored to have been invited to address this com- 
 pany of specialists upon casualty insurance on two subjects 
 to which I have given much attention, without, however, 
 arriving at any final conclusions concerning the wisdom of 
 this or that course, especially in view of the great variance of 
 conditions in one country from those in another. 
 
 Your chairman has asked me to speak on two distinct, 
 though correlated subjects, one being the governmental aspect 
 of what is in other countries called social insurance, of which 
 employers* liability or workmen's compensation insurance is 
 a part, and the other the actuarial aspect of the same subject. 
 
 In the leading European countries, as is now well known, 
 within the last twenty-five years the laws relating to the 
 liability of employers to employes who are injured in the 
 course of their employment, and to the dependents of em- 
 ployees who are killed in the course of employment, are upon 
 an entirely new basis, viz., not that the employer should, as 
 an individual, pay for his own negligence and not otherwise, 
 but that he should, as a mere means of transferring all the 
 costs of the product into the price to be paid by the con- 
 sumer, reasonably compensate all who suffer because of acci- 
 dents occurring in the course of their employment. 
 
 It is customary in discussing legislation of this type to 
 state the principle much as I have stated it, but the fact is that 
 this is a very incomplete statement. If the legislation and the 
 conditions which it produces were no more than is included in 
 that statement the very thing upon which the principle is based 
 would surely fail of realization; for if employers did not insure 
 against their risk under these workmen's compensation laws 
 there would be at best a very imperfect distribution of the costs 
 of industrial accidents, so as to form a part of the price of the 
 product. This may be seen very readily by considering what 
 
52 ADDRESS OF MR. MILES M. DAWSON 
 
 would take place in sub-contracting, where many of the sub- 
 contractors would, we will say, run the risk themselves, and 
 would not take into account this part of the cost in making 
 their bids. It would follow that other contractors who did 
 wish to take it into account could not do so, and that, therefore, 
 the entire cost would come out of the profits of contractors, 
 and would not fall upon the consumer. Moreover, a very large 
 part of the work is done in the form of service directly 
 performed for the employer, and most frequently this likewise 
 is when there are few employes. If in such instances the em- 
 ployers do not insure, it may happen, and often will, that the 
 individual employer will be heavily penalized. 
 
 The fundamentally correct principle perhaps was that 
 which was first enunciated, so far as proposed legislation is 
 concerned, by Emperor William I of Germany, when, in words 
 which were no doubt supplied by Bismarck, he addressed the 
 Reichstag, asking for legislation of this character. It was his 
 proposal, however, that the entire cost of the casualties of a 
 given group of industries which are so related that they could 
 and should bear this cost in common, should in the first instance 
 be borne by those industries through a system of insurance, 
 which, of course, absolutely assures that these costs will enter 
 into the price of the product and be paid by the consumer. 
 
 Only in Austria, Hungary, Norway, Holland and Italy has 
 the German principle of compulsory insurance been accepted, 
 and in none of these countries excepting Hungary has it taken 
 a form similar to that which was introduced in Germany. 
 
 In all the countries, however, which have passed laws of 
 the workmen's compensation type, it has been found in prac- 
 tice that a very large percentage are covered by insurance, vary- 
 ing in number of employers from 50 per cent, to 80 per cent., 
 and in number of employes reaching even as high as 90 per cent. 
 Therefore, in actual practice these workmen's compensation 
 acts have proved in effect to be insurance acts. This has been 
 found to be true, even when the principle has been extended to 
 agricultural labor and to household servants, as in Great Britain. 
 The employers who do not insure are found in all countries to 
 be in part a considerable number of those who have but one 
 employe, and in part to be a few of the large corporations 
 which by reason of the large number of employes can have a 
 
ADDRESS OF MR. MILES M. DAWSON 53 
 
 reasonably safe average of loss without transferring their risks 
 to insurance companies. 
 
 The various attitudes of European governments toward 
 insurance and insurance companies are exceedingly interesting 
 and instructive. It will be found that they flow more or less 
 directly out of the varying nature of the workingmen's com- 
 pensation laws themselves. They may be recapitulated as 
 follows : 
 
 As stated, in Germany, Austria, Hungary, Norway, Italy 
 and Holland there is a compulsory insurance. These countries, 
 however, deal with this subject in widely different manners, as 
 follows : 
 
 In Germany all of the employers of a certain group of in- 
 dustries must be insured in a mutual society conducted and 
 managed by themselves. This society has the right to fix rates 
 of premiums for classes of industries, and also for individual 
 industries, to inspect, to enforce regulations, to pay claims and 
 its own expenses, including expenditures for prevention, for 
 care and cure of the injured, etc. During the year the sums 
 required to make these payments are furnished by the State 
 savings bank, interest being charged for the use of the same, 
 and at the end of the year the actual cost is apportioned among 
 the members according to the rates fixed by the society itself, 
 and each member is notified of the amount of his assessment. 
 If there is any failure to pay within the prescribed time the 
 State enforces payment in the same manner as the payment of 
 other taxes. 
 
 Actuarially, the German system is also pure assessment. 
 It is so completely an assessment system that there is no attempt 
 even to collect within the year (or for the purposes of the year, 
 although at its close) a sufficient amount not merely to pay the 
 portion of the claims due to the accidents of the year which 
 become payable during the year, but also to set up a sufficient 
 fund out of the receipts for the year to meet the claims payable 
 in future because of the accidents of that year. Instead, only 
 enough is asked for to cover the payments actually made dur- 
 ing the previous year, whether due to accidents of that year, 
 or the year before, or any year previous thereto. The cor- 
 rective that is applied is that in order to meet extraordinary 
 situations, such as the prostration of industry by war or panic, 
 
54 ADDRESS OF MR. MILES M. DAWSON 
 
 the government insists upon a certain quota being collected for 
 contingency reserve. 
 
 In Austria, under a compulsory insurance system, the gov- 
 ernment divides the country into seven districts, each with an 
 insurance society or fund governed in part by employers, in 
 part by employes, and in part by the State. Each of these 
 societies covers all the hazards of that district, and all who are 
 obliged to insure must be insured with the society of the dis- 
 trict in which their business is carried on. 
 
 Actuarially, the intention in Austria was to collect premi- 
 ums each year, which should be large enough both to cover the 
 payments of that year in respect of accidents occurring in that 
 year, and also to set up "capitalized values" sufficient to meet 
 all payments that would fall due in future because of accidents 
 occurring in that year. This has been realized in but one of 
 the seven district societies, and the most important of them are 
 impaired to an extent almost, if not quite, equal to half the 
 reserves which they should hold. 
 
 In Hungary, where compulsory insurance has but recently 
 been introduced, the system is like that of Austria, in that there 
 are two district societies instead of separate mutual associa- 
 tions for groups of similar industries. But actuarially it is 
 like that of Germany, in that, although some reserves are to 
 be accumulated for emergency purposes, the claims payable 
 are each year paid from the proceeds of assessments levied 
 that year, without regard to whether the claims arise from 
 accidents occurring that year or in previous years. 
 
 In Norway, where there is also compulsory insurance, in- 
 troduced in 1894, the system is pure State insurance. Every 
 employer must be insured in the State insurance society, unless 
 specially excepted by the Storthing. A few such exceptions 
 have been made, as, for instance, the State railways, which 
 have a system of their own. 
 
 As in Austria, the Norwegian Government Insurance De- 
 partment has aimed at collecting premiums sufficient in amount 
 to pay each year the claims arising out of accidents occurring 
 that year which are payable during the year, and also to set up 
 "capitalized values" for all claims arising out of accidents 
 occurring that year which become payable in the future. The 
 Norwegian department has succeeded much better than the 
 
ADDRESS OF MR. MILES M. DAWSON 55 
 
 district societies in Austria. There was a small deficiency at 
 one time — about $100,000 in amount — to cover which an appro- 
 priation was made but not all of this appropriation proved to 
 be required. At the present time the department is, in fact, 
 strengthening its reserves out of current salvages. This it is 
 doing for the reason that the mortality table used for measur- 
 ing the lives of the totally disabled has proved unreliable, the 
 experience of the Norwegian department having been that 
 the totally and permanently disabled, omitting the first few 
 months of disability, are quite as long-lived as the average of 
 the Norwegian population. 
 
 In Italy, where there is also compulsory insurance, there is 
 free choice of companies. Under these circumstances it would 
 hardly do for the Government to require all employers to in- 
 sure, unless it furnished some institution in which they must 
 be insured if not insured elsewhere, and unless also such insti- 
 tution were ready to accept all employers who might be refused 
 insurance elsewhere. Such an institution has been set up in 
 Italy through the influence of the Government. It is conducted 
 on the mutual plan, and aims at maintaining solvency on a 
 "capitalized values" basis. This company has a large share of 
 the Italian business 'naturally, but by no means all, and private 
 companies have competed with it successfully. 
 
 In Holland there is a peculiar sort of State insurance, viz., 
 the State has set up an insurance institution in which everybody 
 is considered to be insured. This institution adjusts all losses 
 and sets up reserves for all deferred payments and particularly 
 for all annuities, for widows, orphans and the permanently dis- 
 abled. In case the employer does not insure elsewhere, thus 
 rendering the other insurance company liable to make good all 
 payments which the State Insurance Department may make on 
 his account, and all reserves which it may set up to cover future 
 payments to be made on his account, the employer must pay to 
 the State Insurance Department the premium which it fixes as 
 the proper one for his establishment. He may, however, pay a 
 premium to any insurance company doing business in Holland 
 which will conform to the requirements of the State, and which 
 will promise to indemnify the State Insurance Department for 
 all payments which it may make and all reserves which it may 
 set up. The private companies, which, notwithstanding these 
 conditions, are successfully competing with the State Insurance 
 
56 ADDRESS OF MR. MILES M. DAWSON 
 
 Department in Holland, must also make deposits with the de- 
 partment to secure that they will carry out their agreement, 
 upon which deposits it may draw as the money may be required, 
 and they must contribute toward the payment of the expenses 
 of the State Insurance Department as that department may 
 determine. 
 
 In Denmark, where they do not have compulsory insurance, 
 the State, as in Holland, adjusts all claims and determines the 
 amount to be paid. It does not permit employers or insurance 
 companies to make these adjustments for themselves. Under 
 these conditions likewise, which were at first very much re- 
 sented, private insurance companies, both mutual and stock, are 
 thriving. 
 
 In Sweden the law does not require the employer to insure ; 
 but notwithstanding a State insurance department has been set 
 up and a leading and able casualty man has been put in charge 
 of it. This department is required to accept all risks which 
 offer. In consequence, the private companies have weeded out 
 the poorer risks, and, notwithstanding that the State depart- 
 ment is so favored by the Government that all its expenses of 
 whatever character and nature, including commissions of 6 
 per cent, on the premiums, are paid by the State out of the 
 proceeds of general taxation, some of the private companies 
 have fairly held their own and made money. There is no pro- 
 vision in Sweden, as in Denmark, for the State department's 
 adjusting all claims, but as its adjustments are of a fixed and 
 almost arbitrary character, well-known throughout the country, 
 it is difficult for the private companies to adjust a claim at a 
 less amount. There is no requirement as in Holland that the 
 private companies deposit with the State department money to 
 assure the payment of claims falling due in the future, but 
 arising out of accidents taking place presently ; but the oppor- 
 tunity is given to the companies to purchase such annuities if 
 they choose, and it is very generally availed of by the private 
 stock companies, especially when the injury, though disabling, 
 is such that they do not think it will materially shorten life. 
 
 In France there is also a State insurance department, but 
 with free choice of companies, and without employers being 
 obliged to insure. The State Insurance Department has about 
 I per cent, of the business only. It is not permitted to cover 
 
ADDRESS OF MR. MILES M. DAWSON 57 
 
 temporary disabilities, which fact has proved a great handicap. 
 It must also accept all who apply, and it would seem from the 
 high rates which it has found necessary to charge, that it has 
 been made a target for poor risks which were either refused 
 insurance by the private companies, or heavily penalized in 
 
 rates. 
 
 As in Sweden, the Government also offers to French com- 
 panies the privilege of purchasing the annuities to cover their 
 liability for pensions to the permanently disabled, or widows, 
 or orphans; and this is often taken advantage of, the rates 
 offered by the Government being attractive, and involving a 
 considerable loss. 
 
 There is one remarkable thing in France, viz., that while 
 the Government does not compel employers to insure at all, and 
 much less to insure with it in the first instance, it does require 
 all employers to pay a small tax into a Government fund which 
 guarantees the payment of benefits to workmen or their de- 
 pendents in event the employer or the company in which he is 
 insured fails. France also completely releases the employer 
 from liability in event he is insured in a French company regu- 
 larly licensed to do business. 
 
 In Belgium, as in France, a Government department has 
 the right to insure employers against their risk under the work- 
 men's compensation act. This power, however, was given in 
 Belgium to a department which is already a State savings bank, 
 a State life insurance company and a State annuity fund, and 
 is very successful in all of these branches, besides doing much 
 to encourage the building of workmen's houses to be sold to 
 them on the instalment plan. This department has no work- 
 men's compensation insurance whatever, its manager believing 
 that to engage in a business which would call for close and 
 careful adjustment of workmen's claims would prejudice all 
 the other branches of its business, which are conducted chiefly 
 for the benefit of workingmen and their families. 
 
 As in France, if the employer insures in a Belgian com- 
 pany, duly licensed to do business in that country, he is re- 
 lieved from liability. He may insure in a foreign company if 
 he chooses, but in such case he would continue to be liable in 
 case the company failed to fulfil its obligations. 
 
 In Great Britain, as in Denmark, there is no State insur- 
 
58 ADDRESS OF MR. MILES M. DAWSON 
 
 ance of employers against their risks under the workmen's com- 
 pensation act, but as in Sweden and in France the Government 
 does permit private companies, if they choose to do so, to re- 
 lieve themselves from liability by purchasing annuities from a 
 government department, covering payments to be made in the 
 future because of accidents which have occurred presently. 
 The terms upon which such an annuity is bought in Great 
 Britain are that the single premium therefor shall be three- 
 fourths of the premium charged in the Government Annuity 
 Department for a life annuity when purchased directly. The 
 idea is that, roughly, the totally and permanently disabled 
 will not average by one- fourth to live so long as the healthy 
 persons who come forward to buy annuities. Companies must 
 in any event report reserves computed on this basis, but not 
 as a liability. 
 
 In Great Britain, when the workmen's compensation act 
 took effect in 1897, it was fully expected that establishment 
 funds or mutual associations to which both employers and em- 
 ployes contributed, would prove to be the cheapest and most 
 satisfactory method of insuring the risks imposed by the act. 
 This has not proved wholly true, which fact is not attributed 
 so much to any want of economy or dissatisfaction with these 
 establishment funds, either on the part of their members or 
 the employers, as to the fact that whatever difficulties have 
 arisen have become very widely known, while the merits and 
 virtues have not been widely heralded. At the same time, these 
 establishment funds have been used by some employers as a 
 weapon to break down labor unions, so that the sentiment of 
 the trade unions of Great Britain has been adverse, and fre- 
 quently severely adverse. Moreover, since these establishment 
 funds must, according to the terms of the act, have adequate 
 rates and be maintained solvent at all times, they have not been 
 so attractive to employers. This brings me to one of the most 
 interesting features of workmen's compensation insurance as 
 carried on by mutual societies, which is that employers virtu- 
 ally everywhere resist to the last degree the payment of premi- 
 ums large enough both to meet the current disbursements in 
 payment of claims and to set up "capitalized values" to cover 
 claims payable in the future because of accidents which have 
 occurred presently. 
 
ADDRESS OF MR. MILES M. DAWSON 59 
 
 Undoubtedly, their resistance was one of the reasons why 
 the German system was estabHshed on the assessment plan, 
 though, of course, in view of the fact that compulsion really 
 takes the place of reserve, because the purpose of a reserve is 
 to assure the payment, and the compulsion of itself assures 
 the payment, it is doubtless true that the great imperial Chan- 
 cellor had in mind the advantages that might accrue to German 
 industries if this burden were imposed upon them gradually, 
 instead of the full burden at one time. 
 
 In Austria, as has been seen, the resistance of the employ- 
 ers has been so potent that the mutual district societies are, 
 with one exception — and that by no means one of the most im- 
 portant districts — heavily impaired. In Hungary, which is un- 
 der the same crown, their influence has been strong enough to 
 cause the system to be modelled on that of Germany, neglecting 
 entirely to set up "capitalized values.'* 
 
 In countries such as Sweden, where there is no require- 
 ment that reserves fully equal to the capitalized values be set 
 up, it is found that, while the State department, as a matter 
 of course, and the better of the private stock companies, amply 
 secure their claims by means of adequate reserves, the mutual 
 associations of employers as a class hold much lighter reserves, 
 and quite a number of them of the inter-insurance type hold 
 very small reserves, asserting that they need no reserve, and 
 that all the group of employers is doing is to go without in- 
 surance and average up their losses. This plausible but falla- 
 cious argument is sufficient to excuse their laxity — to them- 
 selves, at least. 
 
 The same phenomenon is found in other countries. It 
 would not be fair to say that it is absolutely without exception, 
 because unquestionably some of the voluntary mutual societies 
 are conducted with exemplary prudence, and do maintain as 
 large reserves as in the judgment of the trained actuaries asso- 
 ciated with them are absolutely necessary. But even in these 
 the tendency to keep the reserves down to the lowest point be- 
 lieved to be absolutely necessary is marked, and, indeed, the 
 pressure for greater economy of cost may be said invariably to 
 take this form in mutual associations of employers, which is 
 decidedly dangerous when insurance in them is not compulsory. 
 Laxity on this point, however, is not confined to mutual associa- 
 
6o ADDRESS OF MR. MILES M. DAWSON 
 
 tions, but in countries where strict standards of adequacy and 
 solvency are not enforced there is a strong disposition on the 
 part of some of the stock companies likewise to hold reserves 
 which may or may not be sufficient. It ought not to be so 
 difficult to determine within reasonable limits what reserves 
 are required under a workmen's compensation act, even 
 though benefits *be payable in the form of pensions or 
 annuities, for all that is necessary is to ascertain the fair 
 present value of these pensions and charge the same as 
 a liability. It will be seen, therefore, that, furnished proper 
 tables of mortality and making proper assumptions as to future 
 interest, the amount of reserve required may be computed with 
 great accuracy. The problems are not nearly so serious, for 
 instance, as are those of setting up ample employers' liability 
 insurance reserves under the existing laws of most of the States 
 of the United States, because in determining what reserves 
 each company shall carry we are dealing chiefly with the uncer- 
 tain questions involved in litigation, of which the two most im- 
 portant are, first, is the company liable at all, and, second, if 
 so, for what amount? Under workmen's compensation acts 
 both of these questions are supposed to be settled promptly, 
 and the sole thing required in order to fix the amount of the 
 reserve is to ascertain within reasonable limits the duration of 
 the lives of the disabled, and of widows and orphans. 
 
 The question arises very naturally as to what attitude 
 ought the Government of the United States or the various State 
 governments to take toward insurance under workmen's com- 
 pensation acts. Doubtless there will be found persons who will 
 argue in favor of one or another of these systems. Clearly, if 
 the system of Germany or the system of Norway, for instance, 
 were introduced the solution would be very thorough and com- 
 plete. Among the arguments in favor of doing this will prob- 
 ably be found the proposition that such a system might be 
 nation-wide, and that therefore a large saving might be eflFected 
 by avoiding the creation of an enormous army of agents with 
 commission payments to them of lo or even 15 per cent, of the 
 premiums involving perhaps a charge upon industry of at least 
 $30,000,000 per annum for commissions alone. Similar argu- 
 ments will doubtless be advanced for State insurance, though 
 confined to a single State, and, indeed. State insurance, on a 
 
ADDRESS OF MR. MILES M. DAWSON 6l 
 
 compulsory basis at that, was already a fait accompli, so far as 
 mining is concerned, in the State of Montana before any other 
 State had passed an act which in any way recognized the prin- 
 ciple of workmen's compensation. 
 
 Notwithstanding this, it is perhaps improbable that in our 
 country a system of State insurance, or even of compulsory 
 mutual insurance will soon be introduced. It is wildly im- 
 probable that a system such as in Sweden or Denmark, under 
 which a State insurance department is competing with private 
 companies, will be introduced, and there is no great probability 
 that there will be a widespread call for any system of the State 
 guaranteeing that claims will be met whenever employers or 
 the companies in which they are insured become insolvent, as 
 is the law of France. 
 
 It seems, therefore, much more probable, and by many it 
 is believed to be absolutely called for by the genius of our insti- 
 tutions, that the workmen's compensation acts in this country 
 should take the form of merely holding the employers liable, 
 and definitely fixing the limits of their liability, and then per- 
 mitting them to insure or not, as they please, and in such com- 
 panies or societies as they please. If this, which is precisely 
 what has been done in New York, which has alone, so far, pro- 
 vided directly for the application of the principle of workmen's 
 compensation, is to be the policy throughout the country, then it 
 is respectfully suggested that it should be accompanied by pro- 
 visions as follows: 
 
 First. — Requiring the maintenance of absolute solvency on 
 the part of the stock companies and the voluntary mutual asso- 
 ciations of employers which cover this risk. To assure this 
 solvency proper standards should be determined upon and set 
 up, and it seems to me that mutual companies should also be 
 required to deposit from time to time with the State, assets 
 sufficient in amount to cover the capitalized values of all pay- 
 ments to fall due in future because of accidents which have 
 already occurred. Stock companies should likewise be held up 
 to the same standards, but provided they maintain themselves 
 amply and abundantly solvent, perhaps deposits may not be 
 necessary. 
 
 Second. — Provision should be made for definitely encour- 
 aging the taking of insurance. This can be done by providing 
 
62 ADDRESS OF MR. MILES M. DAWSON 
 
 in the law that the employer is entirely relieved of liability if he 
 insures in a company or association licensed to do business in 
 the State, and also that he may insure his employes against acci- 
 dents of all kinds, including those which do not arise in the 
 course of the employment, as well as those which do so arise, 
 and that in such case he may collect a certain portion of the 
 premiums by deducting the same from the wages of the em- 
 ployes. It would be well also as a further inducement to permit 
 employers to insure employes against both sickness and accident, 
 and possibly also death from any cause, making proper deduc- 
 tions from the wages of the employes in sums not exceeding 
 the excess of the cost of this insurance over the cost and value 
 of insurance of the benefits under the workmen's compensation 
 act. 
 
 Under such conditions, definitely encouraging the taking of 
 insurance, it is probable that almost all the employers would 
 protect themselves and thereby the workmen, their dependents, 
 and thus society itself, against disasters which will at times 
 overwhelm employers if made liable under workmen's com- 
 pensation acts and not so protected by insurance. 
 
ADDRESS OF MR. P. TECUMSEH SHERMAN 63 
 
 Address of Mr. P. Tecumseh Sherman 
 
 Mr. Chairman and Gentlemen: I presume that there 
 is no difference of opinion among us as to the correctness 
 in general of the conclusions reached by the preceding 
 speakers. But the difficulties and differences arise when we 
 try to formulate a compensation law for this country. 
 
 As I understand it, or as I believe, the desiderata of a 
 good compensation law are very numerous. In the first 
 place it should assure to all employees in hazardous indus- 
 tries some certain, sure and prompt relief for all injuries, 
 which arise or occur therein through any other causes than 
 their own moral fault. In the second place, it should free 
 employers from the liability to verdicts for unliquidated 
 damages where they are not morally at fault, and it should 
 free them from liability to fake claims, and it should dis- 
 tribute the money which they pay out on account of acci- 
 dents amongst the injured people without wasting so much 
 of it in litigation, as occurs under the present system. It 
 should also in some way, clarify the problem of the pre- 
 vention of accidents, and not obscure it, — as does our pres- 
 ent law by making both the employers and the injured em- 
 ployees hide and falsify the evidence as to the causes of 
 accidents. It should also reduce the volume of litigation 
 on the subject of accidents, which at present is a heavy 
 burden upon the public. It should also establish a liabil- 
 ity which is fairly and reasonably insurable. And, finally, 
 it must be constitutional. 
 
 Now, can we draft a bill or a law at once which will 
 accomplish all these purposes? I am afraid that we can not. 
 We can not satisfy all these wants at once. We will have 
 to take some intermediate step. But how far towards the 
 ideal should the first compensation laws of our various 
 States go? And what is the form of the ideal law which 
 we should seek as an object? The New York law, with 
 
64 ADDRESS OF MR. P. TECUMSEH SHERMAN 
 
 which most of you are familiar, is, of course, only a halting 
 step in the right direction. It not only, as Mr. Mitchell 
 says, declares a great and true principle; but it will also be 
 useful as a feeler on the question of constitutionality. Yet 
 it does not comply with many of the requirements of a just 
 and complete compensation law. Now, speaking for my- 
 self alone, and not for any committee that I happen to be 
 a member of, I would like to present to you some of the 
 questions that arise in drafting or formulating a compen- 
 sation law and to express my opinions as to how it should 
 be formulated, — wishing you to understand, however, that 
 on every one of these questions there are serious differ- 
 ences of opinion. 
 
 The first proposition I advance is, that a compensation 
 law should fix a legal liability in all employments to which 
 it applies ; that it should not leave it optional to the em- 
 ployer to adopt the liability for compensation as a substi- 
 tute for the liability for tort, as we call the existing liabil- 
 ity. The next proposition is that the first form of a com- 
 pensation law should apply only to those industries which 
 are in fact comparatively hazardous. I would determine 
 the question of comparative hazard according to your in- 
 surance tables, adopting any fair rate of risk as a standard, 
 and applying the liability for compensation to all general 
 industries in which the rate exceeds that standard. Now, 
 there is a very strong feeling that compensation should 
 be applied to all employments. I do not believe in that 
 myself, neither as an ultimate goal nor as a first step. I 
 approach this subject from the standpoint of the factory 
 inspector, because I was at one time Commissioner of Labor 
 of this State, in charge of its factory inspectors, and it was 
 there that I first came upon this problem. And I arrived at 
 my opinions in this way: — When you study the causes of 
 accidents in industries, you find that our law practically 
 assumes that every accident is due either to the fault of 
 the employer or the fault of the employee injured; and to 
 determine liability you investigate and find out which one 
 was at fault. If the employee injured was at fault there 
 is no liability on the employer's part. If the employer was 
 
ADDRESS OF MR. P. TECUMSEH SHERMAN 65 
 
 at fault, then he is liable for full legal damages, that is, 
 for the money loss, and for some compensation for the suf- 
 fering of the injured employee. But when we investigate 
 the causes of accidents we are led to believe that no very 
 large proportion of accidents are due to a moral fault or 
 neglect or wrong on the part of the employer or of the em- 
 ployees injured; but that a vast majority of accidents in 
 the hazardous industries are due to trade risks, that is, 
 to specific causes of danger inherent in the business. Now, 
 the law which we have been working under places the bur- 
 den of those accidents on the employees. They assume all 
 those risks. The principal purpose, then, of a compensation 
 law, is to place the burden of those risks in those indus- 
 tries on the industry and to relieve the injured employees. 
 
 A constitutional danger would also be incurred if we 
 should extend the application of a workmen's compensation 
 law to all employments. I do not think that it would be 
 constitutional to provide that the employer should be liable 
 as an insurer to the employee, merely because he is an em- 
 ployer. If I should hire any one of you to do something, 
 I should not, therefore, be liable for all his accidents of life. 
 If you in turn hire me, you should not be liable to me for 
 all my accidents of life. We are trying to apply a remedy 
 in those industries wherein the accidents caused by the in- 
 dustry are really a great burden on the workingman. So, 
 whether we shall eventually go further or not, the first step 
 should be to cover those great industries in which acci- 
 dents due to the risks of the business are common. 
 
 My next proposition is that the liability should apply 
 only to accidents in the employers' trade or business. That 
 is, if you contract with some independent contractor to do 
 something for you, you should not be liable for an acci- 
 dent to his workmen. It is not your business ; it is his 
 business. And if you simply employ one man to come in 
 and mend the roof of your house, you should not be liable 
 to him for any accident, because it is not your business to 
 mend roofs — it is his business. He knows how to do it 
 safely and how to do it unsafely. He is morally responsible 
 and not you. And the same is true about chaulTeurs who 
 are not employed in the employer's trade or business. It 
 
66 ADDRESS OF MR. P. TECUMSEH SHERMAN 
 
 is going too far to ask an employer to insure all his serv- 
 ants against all their own faults — even if they get drunk 
 outside of his jurisdiction and not under his control. It is 
 the employer's business only to render conditions safe in 
 his businss and to exercise discipline and to provide means 
 of safety in that business; but when it comes to all the 
 relations of life, we do not think that it is an expedient first 
 step, at any rate, to make all employers liable as insurers 
 to all employees. 
 
 The next serious question that arises is, shall employ- 
 ers, in the industries to which the compensation law shall 
 apply, be liable for compensation for all accidents arising in 
 those industries in the course of the employment, or shall 
 they be liable only for accidents arising in hazardous occu- 
 pations therein, or only for those accidents due to trade 
 risks or the faults of others. You can see that point illus- 
 trated in the New York law. That law says that the em- 
 ployer shall be liable for compensation only for accidents 
 in the course of the employment arising out of certain 
 causes. Those causes are, negligence of fellow servants; 
 inherent risks of the business, and negligence of em- 
 ployer. The objections to that law are that it will bring 
 up in court, every time, the question of the cause of the 
 accident. And that will continue the problem of tracing 
 accidents to their causes ; and when you try to trace an acci- 
 dent to a trade risk or to negligence, you encounter the 
 question — what is a trade risk and what is negligence? 
 Now, I have been studying the law of negligence for about 
 twenty years, and I have been studying trade risks for 
 about five years ; and I can't find any practical definition of 
 either. What constitutes a trade risk? What is a trade 
 risk? A risk of the business; but that is very hard to de- 
 fine. The Austrian factory inspectors say that seventy per 
 cent, of accidents in factories are due to trade risks, to 
 risks inherent in the business. The German tables say 
 forty per cent. Some American investigators say twenty- 
 five per cent. These differences do not mean that the acci- 
 dents from trade risks have arisen in those diflFerent coun- 
 tries in different proportions. They mean simply that these 
 different people have each taken a different idea of trade 
 
ADDRESS OF MR. P. TECUMSEH SHERMAN 6/ 
 
 risks. If we enact a law limiting the liability to accidents 
 due to the negligence of the employer, to the negligence 
 of a fellow servant or to trade risks, we will have one 
 court taking one view of what constitutes trade risks and 
 negligence, and another court taking another; and you may 
 find as a consequence a very large proportion of accidents 
 which should be compensated for, ruled out by a hostile 
 court or by a court which does not understand the objects 
 of a compensation law. 
 
 The second alternative to making the liability for compen- 
 sation apply to all accidents in the industries to which the law 
 is made to apply, is to enumerate the specific dangerous em- 
 ployments or tasks in those industries, to which alone the liabili- 
 ity shall apply. No such enumeration is practically possible. 
 Take the railroad business. What part of the tasks are danger- 
 ous and what part of the tasks are not? Apply that question 
 through all the hazardous industries and try to classify their 
 dififerent occupations according to that standard, and you will 
 arrive at simply endless confusion. I do not know anybody 
 who has the practical knowledge to make such a classification. 
 
 So we are forced to the conclusion that we should follow 
 the English law and make the liability of the employer for com- 
 pensation apply to practically all accidents occurring in the in- 
 dustries to which the act shall apply. But there are dangers 
 and objections also to that course. The first objection is that 
 it would bring out a great many border line cases, which 
 would seem to render the law absurd. If we should say that 
 the employer in the railroad industry shall be liable for all 
 accidents arising in the course of that employment, then some 
 man in the office might happen to run the end of a pair of 
 scissors into his eye, and the employer would be liable. That, 
 of course, would be a ridiculous application of the law; but 
 such applications would be very rare. Another illustration of 
 the effect of such a provision, and an actual illustration, arose 
 in England, where a railroad paymaster (I suppose many of 
 you know the case) was traveling with money in the service 
 of the company that employed him, and while so traveling 
 with the money he was murdered and robbed. The English 
 court held that his death was an accident arising out of and 
 in the course of employment and that the employer was liable 
 
68 ADDRESS OF MR. P. TECUMSEH SHERMAN 
 
 for compensation. But in spite of the fact that it would 
 sometimes result in undesirable or doubtful applications of 
 the law, the liability, it seems to me, should depend simply on 
 the fact that the accident occur in the course of the employer's 
 business. That would eliminate many difficult questions which 
 lead to a large amount of litigation. But as against this con- 
 clusion it is further objected that there is a serious constitu- 
 tional danger in making the employer liable for all injuries oc- 
 curring in the course of the employment. There was a case 
 recently in the United States Circuit Court, in the West, where 
 the employer — a railroad — was made liable for practically all 
 accidents to its employees; and the Court held that it was 
 necessary to distinguish between the hazardous occupations and 
 non-hazardous occupations of the railroad industry, and to 
 limit the more absolute liability to the former ; but the Supreme 
 Court of the United States has recently held the other way, 
 but not quite as definitely and as certainly as we would like to 
 have it, if we should want to frame a law to place the liability 
 upon the basis which I have been advocating. 
 
 The next serious question that arises is, what acts of an 
 injured employee shall constitute a defense to the liability for 
 compensation. The English law, as you know, excepts from 
 the liability those accidents due to the serious and wilful mis- 
 conduct of the injured workmen. These words, "serious and 
 wilful misconduct," have been fairly defined after a great deal 
 of litigation; but still they are in some respects uncertain 
 in meaning. Now if we wish to have a definite, certain liabi- 
 lity in this country, it seems to me that it would be better 
 to define in our law exactly what acts shall exempt the em- 
 ployer from liability for compensation — exactly what acts of 
 the claimant. That is a hard problem; but it is just one of 
 those things which if we solve in the statute instead of leaving 
 them to the courts to work out will be conducive to reducing 
 litigation and to making the compensation liability more reason- 
 ably and measurably insurable. 
 
 I come now to the last serious difficulty affecting the main 
 question of "liability," — the most serious difficulty of all, and 
 the most serious constitutional danger. When and under what 
 conditions should the option to sue for unliquidated damages 
 in tort — that is, the right which the workmen now has to sue 
 
ADDRESS OF MR. P. TECUMSEH SHERMAN 69 
 
 his employer for damage for negligence — be reserved to the 
 injured workmen? The English law nominally reserves to the 
 injured workman a complete option to sue, that is, to recover 
 compensation or to sue for damages in tort. The New York 
 Compensation Law follows the English law in this respect ; but 
 the effect is far different. In the first place, in England, the 
 injured employee cannot employ an attorney on a contingent 
 fee, as he can here. He has to have a better case so that he 
 can raise some money for attorneys' fees before he can start 
 litigation for the common law or tort remedy. In the second 
 place, the liability for damages for negligence, — that is, what 
 we lawyers call the tort liability, which existed in England 
 at the time of the workmen's compensation act — did not go 
 nearly as far as our corresponding liability law here; — it was 
 more nearly like the old common law liability, with all its de- 
 fenses ; — so that the workman in England does not have such a 
 great incentive to bring his suit for tort, as he does in New 
 York. So, I think, and I think that it is the general opinion of 
 attorneys who have studied this subject fairly, that the existing 
 right of the workman to sue for unliquidated damages should 
 be, as far as possible, revoked. How far it can be revoked is 
 a disputed question also; but in my own opinion it can be 
 altogether taken away in any constitutional manner. Where 
 a man wrongs you — I am talking about absolute justice — where 
 a man really wrongs you, the right to sue that man for damages, 
 in my opinion, cannot be taken away by any statute under our 
 constitutions. But that merely means that the employer must 
 remain liable for damages in tort only where he personally 
 is morally guilty of some serious or wanton neglect or wrong. 
 And I think that if we could get a compensation law so framed 
 as to revoke the right to sue for damages except in such cases, 
 there would be very few cases in tort. But there is still a 
 further difficulty at this point, which is that some of the state 
 constitutions go further and provide that you can not repeal 
 the existing right to sue for damages in tort. In the event of 
 the death of the injured workman, that is the case in New 
 York. So, in New York, we can only go back to conditions 
 in 1895, in case the workman is killed. 
 
 There are quite a number of other points affecting the 
 main question of "liability," but I see I have already exceeded 
 
70 ADDRESS OF MR. P. TECUMSEH SHERMAN 
 
 my time and therefore will skip them. But I wish you to 
 understand that what I have said simply scratches the surface 
 of the difficulties, all of which you would be interested in and 
 all of which will affect your business when they are decided by 
 any legislature. 
 
 The question of arbitration arises: In framing the pro- 
 cedure to determine the liability and the amount of compen- 
 sation can we take away the right of parties to demand a trial 
 by jury; or can we force them to arbitrate? Personally, I do 
 not believe that we can force them to arbitrate. I think that 
 we will have to leave to both parties the right to demand a 
 trial by jury; but I think that if we provide the machinery 
 or point out and authorize methods for easy arbitration, that 
 there will be comparatively few suits at law, and a great many 
 arbitrations. 
 
 The next point I want just to touch on is the fact that 
 when we have provided the basis of liability and the machinery 
 to determine and to make definite and certain the question of 
 liability, there still remains half of the problem unsolved; and 
 that is the determination of the medical facts, the facts as to 
 the injury to the injured workman. Those facts can not be 
 determined in one arbitration proceeding or in one trial. A 
 workman is injured ; he goes through a period of acute distress ; 
 later he gets better; he returns to work; some times there are 
 recurring evil consequences; these things run along so that, 
 in order to determine and make certain the physical injury 
 upon which the amount of compensation is based — for com- 
 pensation aims to give to the injured workman a certain pro- 
 portion of his probable financial loss, measured by his reduced 
 earning power — in order to ascertain the facts (I don't mean 
 to arrive at a verdict or a compromise), it is necessary that the 
 employer, from the time the accident happens, so long as the 
 liability continues, should have the right to medical examination 
 of that injured workman, under fair conditions. And, as an 
 equivalent for that, it is fair that he should have some obliga- 
 tion — and that obligation may be expensive and it may trouble 
 your business — some obligation to provide for first care in 
 case of accident, where he has been notified of the accident. 
 This should simply open up to your minds a subject you are 
 
ADDRESS OF MR. P. TECUMSEH SHERMAN *J1 
 
 perfectly familiar with, I think; but it is a subject just as 
 difficult as the question of liability. 
 
 The last point that I would call to your attention is the 
 necessity of providing some alternative — some elective alter- 
 native to the obligation which a compensation law would impose 
 on the employer. A compensation law to apply generally to 
 all employers, I think it is universally admitted, is necessary; 
 but there will be many employers, especially in large industries, 
 who will get up schemes of their own — there are many already 
 — which schemes will provide for the employees injured on a 
 better basis than the liability which a compensation law would 
 impose on employers in general. Such schemes should be per- 
 mitted by any just compensation law. They should be per- 
 mitted to replace that law from beginning to end and to 
 replace all other liability whatsoever. I think that such schemes 
 present the solution of this problem in the large industries; 
 and that the legal compensation, which we hope to have adopted 
 by law in all the legislatures of all the states of our country, 
 presents the solution for the vast body of small employers. 
 
72. ADDRESS OF DR. R. S. KEELOR 
 
 Address of Dr. R. S. Keelor 
 
 Mr. Chairman and Gentlemen, this subject has been 
 handled now from practically every possible interested view- 
 point, excepting only that of the insurance companies. I 
 propose in what I shall have to say, representing the attitude 
 of the insurance companies toward this question of work- 
 men's compensation, to draw largely upon matters which I 
 had outlined for an entirely different purpose, and if when 
 I get into the discussion of my subject, it shall appear to 
 some of you that I am taking up matters that are not strictly 
 germane, I trust you will suspend judgment until I get 
 further into the subject. 
 
 What I have heard stated here today by other speakers 
 would seem to me to emphasize the need of presentation of the 
 companies' viewpoint of this matter, and I think the insurance 
 companies are pre-eminently entitled to be heard upon it, be- 
 cause it is exceedingly probable that they will be called upon 
 to bear a very important part in giving effect to any com- 
 pensation laws which may be enacted in this country. 
 
 An accident that occurred in England in 1837, incident 
 to the use of a butcher's cart, led to a suit for damages on 
 account of personal injury and started a discussion that has 
 filled page after page in the law books of that country, and 
 likewise in those of the United States, since the common law 
 of this country has, in its development, closely followed pre- 
 cedents established in England. The discontent of the work- 
 men, because of the strict application by the English courts 
 of the doctrine of "assumed risks,'* of "common employ- 
 ment" and "vice-principal" in favor of the employer, led to 
 the enactment, first, of the employers' and workmen's act of 
 1876, and later to that of the employers' liability act of 1880, 
 the substance of which was soon thereafter adopted into the 
 legislation of Alabama and Massachusetts; and one of the 
 important results of this legislation was the introduction of 
 
ADDRESS OF DR. R. S. KEELOR 73 
 
 liability insurance, because it was conjectured that the agita- 
 tion preceding the enactment of these laws and the removal 
 of some of the employer's defenses would increase the chances 
 of success in suits for personal injury damages and must 
 result in a very considerable increase in the number of 
 claims made by workmen upon their employers on account of 
 such injuries, and it was reasoned that liability insurance 
 must soon become more or less of a recognized necessity for 
 the distribution of the burden of loss. Only employers* 
 liability insurance was undertaken at the beginning, but the 
 principle of liability insurance was soon extended and applied 
 to other risks, involving the liability of the employer or 
 of the owner of property for loss arising from personal 
 injury sustained by the public, and while the companies, as 
 a rule, made such segregation of the different kinds of liability 
 insurance as has been necessary for statistical purposes, the 
 reports made to the States have dealt with premiums received 
 and losses paid in the aggregate. In England, and on the 
 Continent of Europe, employers' liability laws have been sup- 
 plemented by the enactment of laws providing in each country 
 a fixed scale for the compensation of all accidents arising out 
 of and in the course of employment, excepting only such ac- 
 cidents as may result from wilful negligence on the part of 
 the injured person. These laws are known as workmen's 
 compensation laws, and it may be noted in passing that they 
 did not originate with the workmen themselves, but were 
 passed in behalf of the governmental authorities as economi- 
 cal measures tending to place a check upon pauperism. The 
 Hon. Joseph Chamberlain, who most strenuously advocated 
 the enactment of the English Workmen's Compensation Law, 
 stated among other things that 20 per cent, of the English 
 working class became a charge upon the community before 
 attaining the age of sixty years, and that such a law would at 
 least place this burden where it belonged. 
 
 In this country the subject of workmen's compensation 
 was brought prominently before the public by Mr. Roosevelt 
 in a notable address delivered at the opening of the James- 
 town Exhibition, and it has since engaged the attention of a 
 class of persons identified with movements for civic better- 
 
74 ADDRESS OF DR. R. S. KEELOR 
 
 ment and social welfare, and through the persistent efforts of 
 those people, commissions have been appointed in certain States 
 to investigate the relation between employer and employee as 
 respects the compensation received by the latter on account 
 of industrial accidents, the cost to the employer for such acci- 
 dents or for insurance covering the same and the advisability 
 of supplementing or supplanting existing laws by the enact- 
 ment of workmen's compensation laws. 
 
 It is to be regretted that some of those who have been 
 most active in spreading this propaganda have assumed that 
 the companies writing employers' liability insurance desired 
 to perpetuate the existing system for compensating workmen 
 for injuries sustained, and it is likewise regrettable that they 
 have made it a point to refer to the operations of such com- 
 panies as extravagant and unfair, and this leads me to the 
 question. What is the attitude of insurance companies toward 
 workmen's compensation? 
 
 Liability underwriters and the casualty insurance interests 
 generally have recognized the fact that such compensatory 
 damages as employees have been able to collect, on account 
 of personal injuries resulting from proven negligence upon 
 the part of their employers, left many employees or their de- 
 pendents more or less helpless, but they have likewise recog- 
 nized the fact that their contractural relations were with the 
 employers who paid their insurance premiums with the under- 
 standing that the companies should only indemnify them 
 against loss incurred by reason of their legal liability for in- 
 juries sustained by employees under existing laws, and yet 
 it may be stated that in any number of instances workmen 
 have fared better at the hands of liability insurance com- 
 panies than they would have fared if required to deal only 
 with their employers. 
 
 The insurance companies' position has been that if the 
 system of compensating injuries was wrong, it was not within 
 their province to correct it, and, doubtless, they would have 
 been unfairly criticized if they had started a movement to pro- 
 vide a more broad law for the compensation of personal 
 injuries. In fact, complaints have recently been made in trade 
 papers that the insurance companies advocated, secretly, if 
 not openly, the enactment of laws in the State of New York 
 
ADDRESS OF DR. R. S. KEELOR 75 
 
 that have made necessary an advance in the cost of insurance 
 for the protection of the employer, and that this advocacy 
 upon the part of insurance companies was in disregard of 
 the interests of their patrons, and that they have made the 
 enactment of these laws a pretext for the charging of ex- 
 orbitant rates for insurance. Nothing can, of course, be fur- 
 ther from the facts than accusations of this character. 
 
 It is unavoidable in the conduct of the liability insurance 
 business that there is at all times a large element of deferred 
 liability, the actual amount of which is not determinable until 
 a period of about seven years has elapsed, and it is, there- 
 fore, misleading to quote any experience that relates to un- 
 completed business. It will be found that the average claim 
 cost of uncompleted business has been about 55 per cent, of 
 the premiums. If, however, only employers' liability pre- 
 miums and losses are considered, the ratio of loss to premium 
 will be found to be considerably in excess of 55 per cent. 
 In the report of the Illinois Employers' Liability Commis- 
 sion, the statement is made that in 1908 $22,000,000 were 
 contributed by employers as premiums to liability insurance 
 companies in the United States, and that only $5,500,000 of 
 this amount reached the injured workmen or their dependents. 
 This statement ignores entirely the fact that a considerable 
 part of the premiums mentioned did not apply to employers' 
 liability insurance, but related to policies covering elevators, 
 buildings and public liability hazards generally, it also ignores 
 the very important factor of deferred liability, the amount of 
 which cannot be ascertained until at least seven years shall 
 have clasped. 
 
 Likewise, it has been unavoidable that the cost of ad- 
 ministration, upon the part of the casualty companies, has 
 approximated 45 per cent, of the premiums. The business is 
 one of small details, requiring a large clerical force for its 
 proper handling; it must be actively solicited by men specially 
 trained, and the risks must be repeatedly inspected by me- 
 chanical engineers and experts, whose business it is to detect 
 defects and unnecessary dangers, and to suggest measures to 
 minimize the chance of accident and personal injury incident 
 to the conduct of the business covered by the insurance 
 policies. Then, too, insurance premiums are taxed and the 
 
'jd ADDRESS OF DR. R. S. KEELOR 
 
 companies are required to pay licenses and other fees, the 
 aggregate of such taxation being greater than that imposed 
 on any other business. From what has been stated, it will 
 be seen that as a business, liability insurance has not been 
 profitable to insurance companies, and for this reason, coupled 
 with the great uncertainty as to the actual amount of de- 
 ferred liability involved in its transaction, insurance com- 
 panies will welcome any system for the compensation of 
 injuries to workmen that will substitute for the uncertainties 
 of existing laws a definite schedule of compensation to be paid 
 for injuries, so that premium tables adequate to meet the 
 same may be established, and the business of insuring the 
 employer against loss sustained by reason of injuries to 
 his workmen placed upon a more certain plan than now exists. 
 
 Casualty insurance companies have offered workmen's 
 collective insurance in conjunction with employers' liability 
 insurance for the purpose of more adequately compensat- 
 ing unfortunate employees for the loss sustained by reason 
 of industrial accidents. Under this plan, a blanket policy is 
 issued to the employer to cover all accidents which arise 
 out of and in the course of employment; half wages being 
 paid during the period of disablement, not to exceed six 
 months or one year, as may be agreed upon, while lump 
 sums are paid for loss of life, sight or limbs (usually half 
 of one year's wages not to exceed $1,500). In some instances 
 the employer has paid the premium for such insurance — 
 in other instances the employer and employee have shared 
 in the premiums. Again, in other instances, employees have 
 paid the premium in easy instalments deducted from their 
 wages. 
 
 Workmen's collective insurance has never been very 
 popular in this country, although the benefits provided to 
 workmen have been quite liberal when the premium rate is 
 considered, and in 1909 the premiums for this kind of in- 
 surance amounted to only $473,907. Statistics covering an 
 exposure equal to one hundred thousand men for one year 
 and involving approximately $50,000,000 in wages paid to 
 workmen, insured under workmen's collective policies, have 
 been gathered together, and, unquestionably, inasmuch as 
 this experience includes light and heavy manufacturing, 
 
 \ 
 
ADDRESS OF DR. R. S. KEELOR ^^ 
 
 a large variety of industries being interested, and particularly 
 in view of the fact that it deals with actual conditions, as 
 they exist in this country, any figures deduced therefrom 
 would be more reliable as an index of the probable cost of 
 workmen's compensation than any theorizing based upon any 
 other kind of experience, either foreign or American. 
 
 I am sure that I voice the consensus of opinion among 
 insurance men when I say, first, that laws should be enacted 
 to require employers to provide every reasonably possible pro- 
 tection against accidents, and to make a wilful disregard of 
 such provision punishable; second, the removal by any em- 
 ployee of safeguards installed by the employer should be 
 made punishable; third, that any bodily injury resulting 
 from an accident arising out of and in the course of em- 
 ployment, and not due to the wilful negligence of the em- 
 ployee, should be compensated. I think I have a considerable 
 following among my confreres in the casualty business when 
 I state that it is questionable whether it is equitable to ignore 
 the responsibility of the employee entirely when, in spite of 
 precautions taken by his employer, he is injured through his 
 own wilful negligence, and that the expediency, from a social 
 and economical viewpoint of any scheme, that in its final 
 analysis, requires the consumer to pay for the workman's 
 disregard of his own safety is likewise questionable. 
 
 If the workman has a constitutional right to seek redress 
 by jury trial that cannot be abridged, or if for any other 
 reason it would be unconstitutional to substitute workmen's 
 compensation for existing methods of compensating injuries, 
 manifestly workmen's compensation can only come as an ad- 
 dition to existing laws, and the workman will then be free to 
 choose his remedy and obviously this will mean that every 
 accident will be paid for at the highest possible cost to the 
 employer. But do workmen, as a class, want workmen's 
 compensation? Apparently not, if their attitude as developed 
 by the Legislative Commission in Illinois, may be taken as a 
 guide (and a similar attitude has been shown elsewhere) and 
 there is reason for believing that any compensation law to be 
 satisfactory to the workmen in this country must provide a 
 scale of compensation very much higher than obtains in 
 any other country, unless they are left free to sue for damages 
 
yS ADDRESS OF DR. R. S. KEELOR 
 
 under provisions of law that practically deprive the employer 
 of all defenses, and if either of these alternatives is adopted 
 a very large increase in the cost of accidents must follow. 
 The so-called Wainwright Compulsory Compensation Law, 
 applicable to certain dangerous employments named therein, 
 and which became effective in the State of New York on 
 September first is unsatisfactory from an insurance point of 
 view, because, first, it does not cover every kind of employ- 
 ment — the reasons for its limitations in this respect are, 
 however, appreciated — and second, it is indefinite and un- 
 certain as to the intention of covering. I may inject here that 
 I had prepared a draft of compensation law which I will 
 omit. In the draft of that law, however, I omit the use of 
 the word "serious" in connection with the word "wilful" in 
 dealing with the question of contributory negligence, because 
 I am convinced its use in such connection would add materi- 
 ally and unjustly to the cost of temporary disablements, and 
 would, moreover, add to the difficulty of reaching prompt de- 
 cisions. A further saving in cost, but how much I am wholly 
 unprepared to say, might be effected by incorporating a pro- 
 vision in any compensation law permitting contracting out 
 of the law, whereby employees who have attained an age of, 
 say, sixty years shall be fully compensated by the payment of 
 indemnities, reduced to, say, one-half of those provided for 
 in the law, and it is important that all persons considering 
 workmen's compensation as an economic question shall be made 
 to see the inadequacy of any estimates that have heretofore 
 been made with respect to the ultimate cost of compensation 
 upHDn such scales of benefits as have from time to time been 
 under consideration. And in passing I want to emphasize the 
 fact that there is grave doubt whether the going rates for 
 employers' liability insurance at the present time are high 
 enough to meet the increased cost growing out of the modifi- 
 cation of the Employers' Liability Law in this State. This 
 subject has been referred to by one or two of the speakers. 
 It remains to consider briefly what would probably be the 
 cost of such compensation as is provided for in the British 
 Workmen's Compensation Law if applied in this country, and 
 when I refer to cost or to experience under workmen's col- 
 lective policies I would be understood as dealing with the 
 
ADDRESS OF DR. R. S. KEELOR 79 
 
 claim cost only. Heretofore, under the employers* liability 
 policies issued in this country about one employee in every 
 eight persons injured received compensation from the insurance 
 companies for industrial accidents, existing laws not per- 
 mitting a recovery of damages where the accident resulted 
 from negligence upon the part of the injured employee or one 
 of his fellow servants, or from any ordinary or obvious risk 
 of the employment, and among those who have received com- 
 pensation must be included those whose claims were com- 
 promised and paid upon the theory of saving expense of litiga- 
 tion and without regard to the liability of the employer, the 
 insurance companies frequently taking the ground that it was 
 better to pay something by way of compromise than to incur 
 recovery of damages in a comparatively small percentage of 
 the expense of litigation. If in place of laws permitting a 
 cases, laws are enacted making the employers liable in practi- 
 cally every case for such damages as a jury may award, or 
 for such compensation as is provided by proposed compensa- 
 tion laws, the increase in cost must be self-evident. 
 
 Returning now to the experience contributed to the Bu- 
 reau of Liability Statistics by companies writing workmen's 
 collective insurance, I repeat that the conditions under which 
 this experience was accumulated by the companies contribut- 
 ing to the Bureau, approach the conditions that would exist 
 under the operation of a workmen's compensation law in this 
 country more closely than any experience derived from other 
 countries or from any other source, and while I cannot, with- 
 out the special authorization of the Conference of Liability 
 Companies, publish this experience, I am able to state the 
 individual experience of one of the companies, extended to 
 cover a scale of benefits such as is contemplated in the pro- 
 posed law, and I have checked this experience with that of 
 the Company with which I have the honor to be connected, 
 and I feel warranted in stating that the experience of any one 
 company is fairly indicative of what is shown by the combined 
 experience upon $50,000,000 of payroll, to which I have re- 
 ferred. 
 
 Upon the basis stated the death indemnities would cost 
 .741, but a deduction may be made from these figures to cover 
 such cases as leave no dependents or leave persons only 
 
8o ADDRESS OF DR. R. S. KEELOR 
 
 partly dependent. The indemnities for the second week of 
 disablement would cost .105 and the indemnities for the third 
 and all subsequent weeks up to 28 weeks, .356. All further 
 disablement after the first 28 weeks would cost .729, making 
 a total of 1.39. If the first week of disablement were to be 
 included in the i\ct, it would be necessary to add .191 to the 
 cost, making the total cost 2.12 for each $100 of payroll with- 
 out loading of any kind for expenses or other purposes. It 
 may be interesting to note in passing that the experience of 
 casualty companies shows that in addition to the loss payments 
 made under these workmen's collective policies it has required 
 about 20 cents per $100 of payroll to pay the losses under the 
 concurrent liability policies, this indicating the extent to which 
 the employees were dissatisfied with the compensation pro- 
 vided for under the collective policies, and representing the 
 amounts recovered where employees sued for damages not- 
 withstanding the existence of workmen's collective policies, 
 under which they received compensation in stated amounts 
 for injuries received. 
 
 It would be obviously impossible for a mutual organi- 
 zation to set aside and maintain such reserves as will make 
 future loss payments reasonably sure unless premium rates 
 practically as high as those of joint stock companies are 
 charged, because any resources carried in the pockets of the 
 mutual stockholders may not be available when needed, and 
 this would seem to be unanswerable as an argument against 
 mutual insurance to cover workmen's compensation. Surely, 
 if the State commits itself to the principle of compensation it 
 cannot consistently put aside the duty to see that tangible 
 reserves are provided to make the loss payments certain, and 
 this can only be done through the operation of joint stock 
 companies authorized and supervised by the Insurance De- 
 partment of the State. There is, however, another reason 
 why the mutual plan of insurance does not lend itself to 
 risks of the character under consideration. The payment of 
 the premium to joint stock companies disposes of the em- 
 ployers' liability for further payments and insures the pay- 
 ment of losses whenever they may mature, although his lia- 
 bility for such losses may not be finally determined for ten 
 or even twenty years thereafter. If, however, the employer 
 
ADDRESS OF DR. R. S. KEELOR 8 1 
 
 pays for mutual liability or compensation insurance, he makes 
 himself and his heirs liable for his pro rata share of the ulti- 
 mate cost of all policies issued during the term of his insur- 
 ance and the ultimate cost may not be determined during his 
 life time. In this way partnership and private estates may 
 become seriously affected, as a result of carrying mutual in- 
 surance of this character, the ultimate cost of which may 
 be many times its original cost. 
 
 Mutual insurance will, moreover, not cost less for inspec- 
 tion, investigation and handling of claims than stock com- 
 panies are obliged to pay for these items and the cost of 
 administration generally when added to the claim cost 
 will approximate so closely the cost of such service on the 
 part of stock companies that the difference would not make 
 up for the objectionable feature arising from deferred liability 
 and the liability of solvent policyholders to make up for the 
 insufficiency of original premium, even including the share of 
 those who have in the meantime become insolvent. 
 
82 ADDRESS OF MR. STANLEY L. OTIS 
 
 Address of Mr. Stanley L. Otis 
 
 Beyond a shadow of doubt the principle of workmen's 
 compensation is fight; of that I am sure we are all agreed. 
 What concerns us, then, what concerns the commissions of 
 the several States, is to draft a law that will be fair and just 
 to the employer, employee and the general public who in the 
 last analysis will carry the burden. The position of the in- 
 surance companies is an incidental one. They are organized 
 to carry on the business of insurance and to furnish the ma- 
 chinery for the distribution of the losses. 
 
 Under any form of Employers' Liability Law — ^under any 
 scheme of Workmen's Compensation, they are prepared to 
 write the business at rates only sufficient to meet the payment 
 of losses, the necessary administration expenses including get- 
 ting the business, the tax of from 2 per cent, to 5 per cent, on 
 the premiums levied by the different States, a small return to 
 their stockholders, and the cost of inspection of the plants of 
 the assured. For of equal importance, yes, even greater im- 
 portance than the payment of indemnity to the injured person 
 is the inspection of the plant, elevators, boilers, etc., of the 
 assured — the pointing out of defects — the recommendation of 
 safe-guards and the insisting that the recommendations be 
 carried out or the policy cancelled. The companies pay out 
 many thousands of dollars yearly making inspections and 
 through them not only is loss by death averted, but also many 
 accidents which would result in temporary and permanent in- 
 juries. Far better is this money spent in preventing accidents 
 to workmen than in paying for them afterwards. And so 
 the premiums collected in the past have included a sum for this 
 purpose and so the premiums to be collected in the future 
 should include this item. Any statement of the monies paid 
 out by insurance companies for the benefit of workmen should 
 include not only the money they received for injuries, but the 
 money spent to save them from injuries. 
 
ADDRESS OF MR. STANLEY L. OTIS 83 
 
 The cost under any scheme of workmen's compensation 
 is going to be considerable. When you agree to pay every 
 workman or nearly every workman who is injured where here- 
 tofore you have only paid one in eight, it is going to require 
 more money. The cost to the employer is bound to be ma- 
 terially increased — no matter how economically you collect this 
 money and distribute it to the unfortunate ones entitled to 
 receive it, no matter how little you pay the man who brings 
 the attention of the employer to his need of protection and 
 thus saves him ofttimes from heavy financial loss and possible 
 bankruptcy. It is going to cost some money to the employer 
 or the general public who will ultimately pay it, but every one 
 is ready to contribute their share for all fully appreciate the 
 injustice of the present situation. 
 
 The way to make the cost a reasonable one is to make 
 the scale of compensation a reasonable one. If you fix the 
 compensation too high, it puts an undue burden on the em- 
 ployer as well as the temptation to malingering on the part 
 of the employee, both of which are to be avoided. Also direct 
 your efforts to having the State tax on premiums abolished 
 or greatly reduced, having better factory inspection laws, 
 requiring the use of safeguards and other devices for the pre- 
 vention of accidents. Devise some plan whereby all em- 
 ployers will readily see the advantage of protection and thus 
 reduce the expenses of obtaining sufficient risks to distribute 
 the losses and make the loss ratio a normal one. 
 
 We are facing a situation in the United States that calls 
 for the utmost care, the utmost wisdom in its handling. We 
 cannot afford to follow the assessment plan in use in some of 
 the foreign countries and thus at the very beginning endanger 
 the stability of the scheme and defeat its purpose — the com- 
 pensation of the workman, through injury, partially or totally 
 incapacitated from further work. 
 
 The present value of the money needed to make the future 
 payments to the workman should be collected at the outset and 
 set aside as a reserve — carefully guarded under the super- 
 vision of the proper authorities. It should not remain in the 
 pockets of the employer — thus subjecting him to an ever in- 
 creasing cost — resulting in dissatisfaction to the employer — 
 trouble and annoyance to those in charge of the administration 
 
84 , ADDRESS OF MR. STANLEY L. OTIS 
 
 of the scheme and poor protection at best for the workman 
 for whose benefit these laws are devised. 
 
 I repeat, the cost of Workmen's Compensation is going 
 to be heavy, but if we go about it in the right way and with 
 the right spirit, it will result in countless good — the cause of 
 humanity will be immensely benefited and our nation take its 
 place at one bound in the vanguard of the countries having as 
 their chief aim the protection, betterment and uplift of the 
 millions of industrial workers on whose prosperity and well 
 being the very life of nations depend. 
 
ADDRESS OF MR. WALTER G. COWLES 85 
 
 Address of Mr. Walter G. Cowles 
 
 Mr. President and Gentlemen: I am genuinely surprised 
 to be called upon to address you this afternoon. I have been 
 away for a couple of months, and I came down here to the 
 first gathering of this nature I have had the privilege to 
 attend, to listen. I have listened, I hope, to a good purpose. 
 I have heard a lot and learned a lot, and I shall not take your 
 time now, because perhaps there has been talking enough and 
 if I should add anything, it would be too much. As I am on 
 my feet, however, I crave your indulgence for a very few 
 minutes while I say a little something for the insurance com- 
 panies. 
 
 Beyond all question, there is a necessity for a change in the 
 existing laws. What it will be is not within the province of the 
 insurance companies. We have a trite saying in our business 
 that the people make the laws and the insurance companies 
 the rates, and perhaps that should be the rule. I have noticed 
 here an underlying, and I think unintentional line of comment 
 which seems to be in criticism of the insurance companies. 
 I am not yet quite convinced that the mortality in a community 
 can be lowered by abusing the undertaker. 
 
 Now, I do not apprehend that anybody discussing or study- 
 ing this question desires to deceive himself or be guilty of any 
 misrepresentation, however slight, which is unfair to the in- 
 surance companies, and my purpose in the few minutes that 
 I shall take is to appeal for fairness to that organization through 
 which might come the solution of these problems. The work- 
 man, the employer, the commissioner or orator, whoever he 
 may be, presents to you problems which will be solved some 
 time. We will no doubt some time, perhaps by the accumula- 
 tion of experience, be able to provide compensation for injured 
 employees. When that is accomplished, who deals with the 
 problem but the insurance companies ? 
 
86 ADDRESS OF MR. WALTER G. COWLES 
 
 Gentlemen have said here in the course of these discus- 
 sions that out of the total premiums received by the liability 
 insurance companies, only 25 per cent, reaches the injured. 
 In the first place I challenge that statement. It is at variance 
 with all published statements of casualty insurance in this 
 country. How much of it stops between the insurance com- 
 pany and the injured in the hands of the shyster lawyer, 
 for whom a poor system of jurisprudence is responsible, I 
 don't know. You cannot charge that to the insurance com- 
 panies. 
 
 The insurance companies are charged with wasting money 
 in litigation. The insurance companies only litigate unworthy 
 and unjust claims. A very large percentage of the claims — I 
 cannot at the moment state just what, but I know it is a very 
 large percentage — are won in the courts because ^inder the 
 laws that exist no liability for that claim can be established. 
 Are the insurance companies doing wrong in setting up a 
 defense which the law provides? Is not insurance the distri- 
 bution of loss by means of the payment of premiums? Isn't 
 it the duty of the insurance company to pay claims and not give 
 away its money? I have never heard it claimed expressly that 
 because some man endorses the note of another, and has it to 
 pay, and because that note happens to be held by a poor widow 
 or a needy individual, he ought to pay the amount twice instead 
 of once. I have not understood that there is anything which, 
 as a business proposition, compels the payment of money not 
 due, and yet we have the underlying comment that the in- 
 surance companies do not pay enough; that they ought to pay 
 more claims. To whom? To those to whom they are not 
 due ? Is that the proper way to distribute a trust fund ? Are 
 the insurance companies to be criticised because a jurisprudence 
 exists which permits a shyster lawyer to bring a suit for 
 $10,000 which he hopes to settle for $50? Is there any fault 
 to be charged to the insurance companies because, knowing of 
 the existing conditions, lawyers in this great city and in others, 
 beset the offices of the adjusters with their arms full of papers 
 representing suits which they propose to sell for what they 
 can get? Is it wrong for the insurance companies to spend 
 the money which policyholders have placed in their hands for 
 the purpose of putting down a practice like that, so long as the 
 
ADDRESS OF MR. WALTER G. COWLES 87 
 
 law exists ? We are told that one of the first things that will 
 happen is to compel the insurance company to pay when the 
 employer is insolvent. At the same time, in the interest of 
 fairness, why not make the insolvent policyholder pay his 
 premium ? Why, gentlemen, the money lost by the liability in- 
 surance companies of this country, through the non-payment 
 of premiums because of the insolvency of policyholders, will 
 many, many times pay the amount saved because of the in- 
 solvency of the employer. 
 
 I hear that loo per cent, ought to be saved to be distributed 
 among the injured workmen and that all this waste above 
 45 or 55 per cent., which is positively proven as the payment 
 on account of claims by the experience of all companies, should 
 be eliminated. I was very glad to hear Mr. Mitchell, who 
 has been a great student of this situation and who has worked 
 along that line, say to you that there was something else to be 
 done besides compensating the injured — to prevent the injury. 
 That is something you can do to-morrow — that is something 
 you can do without raising any question respecting the con- 
 stitutionality of your action. 
 
 It is useless to talk about the expenses of various kinds 
 to which the insurance companies are subjected for taxes, 
 licenses, and so forth, which to a certain extent are proper, 
 but in the judgment of many have been overworked. I chal- 
 lenge anybody to correct my statement that there is no fund 
 existing, whether collected by the State or by a private corpora- 
 tion, or in any other way, that is distributed without cost. The 
 expense of distribution exists everywhere. The question is, 
 how much ; that is all. Under the German system the expenses 
 have been as high as 15 per cent. In England the expense 
 to-day is over 40 per cent., where the average commission to 
 brokers is below 15 per cent., probably 10 or 11 per cent. The 
 reduction of commission is a difficult question for the insurance 
 companies to deal with. It is just as difficult for the whole- 
 saler to try to regulate the rate of profit which the retailer shall 
 accept. Commissions grow out of competition. The gentle- 
 man from Australia who spoke to us a few minutes ago illumi- 
 nated the whole situation in that single remark of his, "a 
 tariff is the best thing for the policyholder, and produces 
 the best general result." We are not permitted to have it here. 
 
88 ADDRESS OF MR. WALTER G. COWLES 
 
 Tariffs are not permitted, and yet in the formation, under 
 proper regulation, of tariffs that fix the price of insurance, 
 lies the remedy for many of these troubles. It is said we do 
 not furnish data. Why, Heaven knows we would gladly fur- 
 nish it if we had it. There is no data. Who has it? I hap- 
 pen to be connected with one of the large companies — we 
 haven't it. It i^ said that in making an effort to raise the 
 rates we have acted unjustly. Withhold your judgment, until 
 you know about it. What the trade papers of the country 
 took upon themselves to write about this question is simply 
 absurd. What do they know about it? Nothing. We are 
 doing the best we can to meet the situation as best we know how 
 — working weekdays, Sundays, nights, and all the time — trying 
 to find some solution of the problems which exist under the 
 laws of the States of New York and Ohio. We do not criticise 
 them. We deal kindly with them. We meet their defects on 
 the plane of friendship, but we don't wish to be condemned 
 while we are finding our way out for the benefit of all. In- 
 surance men are decent men. We are all brought up with a 
 certain regard for honesty. We all have that amount of business 
 training which carries with it a desire to keep on good terms 
 with our fellow men, with men in other lines of business. We 
 are trying to preserve a maligned institution, and some people 
 are unintentionally making it difficult for us to do so by 
 criticising us unfairly. Gentlemen, there is a lot to be said on 
 this subject, and a lot that somebody else can say better than I 
 can. I can only offer you the earnestness of my purpose as an 
 apology for what I have said. 
 
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 UNIVERSITY OF CALIFORNIA LIBRARY