Self Insured Without Recourse
Self Insured Without Recourse

Self Insured Without Recourse

Our research suggests that the primary gold cargos aboard the Republic (if they exist) were government cargos, part US Navy funds but mostly Czarist gold.

Many commercial businesses will self-insure certain risks. Governments, as a matter of sound fiscal policy, self-insure their risks. The criteria for the selection of a self-insurance policy over insuring risks, generally, is that if a loss were to occur, the cost of paying that loss (when it occurs) would be less than having paid insurance premiums. A government's assets are so vast, widely held and diverse that the payments of premiums to cover all the possible losses that a government may suffer would greatly exceed the cost of actual losses. Of course, another factor in deciding upon a self-insurance policy is that, should a loss occur, the loss would not be so catastrophic as to jeopardize the survivability of the entity that has suffered the loss.

In the event of insured losses, both the insured and insurer generally acknowledge the loss. The insured does so because he wants his stakeholders to know that his loss will be reimbursed; he will not suffer any loss. The insurance company acknowledges the loss because it has to pay anyway (and the insured has most likely also publicly acknowledged the loss), so the insurance company might as well gain some publicity along the lines "Insure with us, because we pay promptly."

However, in the case of the loss of self-insured government cargos, if political exigencies exist, governments may conceal their self-insured losses. One example of government concealment of a self-insured loss would be the loss of British Government gold aboard the 15,340 ton RMS Laurentic, another White Star passenger liner that, during World War I, was carrying gold from Britain to Canada to pay for the British Government's war supplies; the Laurentic had sunk on January 25, 1917 as a result of striking a mine. Her cargo was "secret" and the gold cargo's loss was not publicly disclosed until only after the government had successfully salvaged almost 100% of it during the years 1917 - 1924.1

Another example of government concealment of the loss of a self-insured gold cargo would be the loss of 8 tons of gold bars shipped by the Bank of England and lost aboard the 13,415 ton RMS Niagara when that passenger liner struck a mine and sank June 19, 1940 while in transit from Auckland, New Zealand to Vancouver, British Columbia, Canada. The Niagara's secret gold cargo was shipped for British account in payment of war supplies purchased from the United States and, also, was not publicly disclosed until only after the conclusion of a successful eleven month salvage in 1941. 2

Yet another example of government concealment of a gold loss is the British and Soviet Governments' concealment of the loss of gold aboard the World War II British light cruiser HMS Edinburgh. Like both RMS Niagara and RMS Laurentic, HMS Edinburgh was carrying government gold to pay for war supplies; she was torpedoed April 30, 1942. Originally, HMS Edinburgh's cargo had been only rumored to exist. Her gold cargo's actual existence was not confirmed until almost 40 years later, only AFTER an agreement had been worked out between the British and Soviet Governments (the "owners") and the salvors; only then did the governments release the documentation that substantiated Edinburgh's gold cargo and enabled its recovery in 1981.

Perhaps the best example would be the loss of gold cargos - both insured AND self-insured gold cargos - aboard the SS Central America, a gold-rush era steamship that was lost in an 1859 hurricane. SS Central America had carried a well-documented gold cargo, well documented because most of her cargo was non-government gold - and therefore privately insured. The loss of these privately insured gold cargos were well publicized in contemporaneous newspaper accounts concerning the SS Central America's loss. However, SS Central American had also carried a US Government shipment of gold; that part of her cargo was only rumored to exist, and was not confirmed by the Government until only after salvage had commenced in the late 1980s.

In RMS Republic's case, the US Government has filed a claim in the Company's admiralty action for the loss of their gold, but, they state specifically that they have done so based solely upon "Mr. Bayerle's good faith research." The US Government claims, at this point, that they do not have supporting documentation to confirm the Company's conclusions.3 The Company had also been in discussions with the Soviet Government, and it has been in discussions with the Russian Government - but, apparently, documents of the Czarist Foreign Department of their Special Credit Office - the Czarist agency responsible for foreign loans - were destroyed at the outbreak of the revolution. So, apparently, the Russian Government cannot provide supporting documentation, if, indeed, the Company's conclusions concerning Republic's cargo are correct.4

Political Exigency - No Recourse

At a critical period when France was attempting to accumulate sufficient gold for (and foster confidence in) the impending Russian loan, which had dominated European and American financial markets, it would have been imprudent to acknowledge the loss. As a sovereign, France is self-insured and would have borne the entire loss. Any other government title holder - if, for example, title had passed to the Russian Government effective with the operation of the loan on January 22 - would have borne the entire loss because there was no satisfactory judicial recourse to recover their loss against the owners of either the FLORIDA or the REPUBLIC. The steamship owners were protected by the Harter Limitation of Liability Act, an act enacted by Congress [Congressional references footnoted] designed to foster the growth of merchant shipping.

SEC. 4281.
If any shipper of platina, gold, gold dust, silver, bullion, or other precious metals, coins, jewelry, bills of any bank or public body, diamonds, or other precious stones, or any gold or silver in a manufactured or unmanufactured state, watches, clocks, or time-pieces of any description, trinkets, orders, notes, or securities for payment of money, stamps, maps, writings, title-deeds, printings, engravings, pictures, gold or silver plate or plated articles, glass, china, silks in a manufactured or unmanufactured state, and whether wrought up or not wrought up with any other material, furs, or lace, or any of them, contained in any parcel, or package, or trunk, shall lade the same as freight or baggage, on any vessel, without at the time of such lading giving to the master, clerk, agent, or owner of such vessel receiving the same a written notice of the true character and value thereof, and having the same entered on the bill of lading therefor, the master and owner of such vessel shall not be liable as carriers thereof in any form or manner; nor shall any such master or owner be liable for any such goods beyond the value and according to the character thereof so notified and entered.

SEC. 4283.6
The liability of the owner of any vessel, for any embezzlement, loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel, or for any loss, damage, or injury by collision, or for any act, matter, or thing, lost, damage, or forfeiture, done, occasioned, or incurred, without the privity, or knowledge of such owner or owners, shall in no case exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.

SEC. 4284.7
Whenever any such embezzlement, loss, or destruction is suffered by several freighters or owners of goods, wares, merchandise, or any property whatever, on the same voyage, and the whole value of the vessel, and her freight for the voyage, is not sufficient to make compensation to each of them, they shall receive compensation from the owner of the vessel in proportion to their respective losses; and for that purpose the freighters and [owner][sic] [owners][sic] of the property, and the owner of the vessel, or any of them, may take the appropriate proceedings in any court, for the purpose of apportioning the sum for which the owner of the vessel may be liable among the parties entitled thereto.

SEC. 4285.8
It shall be deemed a sufficient compliance on the part of such owner with the requirements of this Title relating to his liability for any embezzlement, loss, or destruction of any property, goods, or merchandise, if he shall transfer his interest in such vessel and freight, for the benefit of such claimants, to a trustee, to be appointed by any court of competent jurisdiction, to act as such trustee for the person who may prove to be legally entitled thereto; from and after which transfer all claims and proceedings against the owner shall cease.

Applicable law, 1909

The act limits the vessel owner's liability to the value of his vessel. The Florida's lawyers stated the situation succinctly:

[A] member of the firm of Wallace, Butler & Brown, of No. 54 Wall Street, counsel for the Lloyd Italiano, or Societa di Navigazione, as the company which owns the Florida is variously known, said that the line purchased the Florida three years ago for $1,000,000. The value of the fares and cargo carrying charges amounted to $20,000. No matter how many millions the Republic and what went down with her may be worth [Emphasis supplied.], the owners of the Florida cannot be held responsible beyond the value of the Florida.

New York Evening World, January 26, 1909, 3:4 & 5

When the REPUBLIC sank, she could not be salvaged and, therefore, could not be levied upon. Her value became zero. The only other vessel that was subject to litigation was the FLORIDA. Her owners filed in the U. S. District Court, Southern District of New York, and were successfully given protection under the Harter Act. In the FLORIDA's damaged state, she sold at auction for only $175,000. This sum, according to the Harter Act, was the entire amount to which the owners were responsible to apply toward all claims. Without a gold cargo claim, claims had already totaled $1,789,770. If the gold claim were filed, the new total claims of $4,789,770 applied against a fund of $175,000 (at settlement) would yield a return of only $110,000 against a $3,000,000 loss - just slightly more than 3% of the actual loss. If a settlement had not been reached - if the $3,000,000 claim had been filed, the costs of any extended litigation would have further reduced the amount available to settle claims.


Republic's Loss to Result
in Claims Totaling

Upon the question as to whether there was any element of negligence in the manoeuvering of the Republic or the Florida when they collided hinges the settlement of claims aggregating at least two millions[sic] of dollars.

This vast amount is at stake in possible suits that may ensue after some tangible idea is had as to just what circumstances or set of circumstances the accident was due. The claims of which this amount is made up consist of the following:

First - Damages for the deaths of passengers.
Second - Damages for the deaths of employees.
Third - Losses to passengers - jewelry, money and clothing.
Fourth - Loss of the Republic.
Fifth - Loss of the Republic's cargo.
Sixth - Salvage money for standing by the Republic.


Facts to Be Found First

The answer to these questions depend upon a state of facts. These facts are not yet known, nor can they be determined until a court of inquiry sits and sifts the evidence. There are certain conditions, however, that will be controlling against whichever ship was at fault. These conditions will apply no matter whether it was the Republic that fouled the Florida, or vice versa.

Admiralty lawyers give answers to these enumerated questions thus:

First - There can be no recovery for loss of life, as there is no law controlling or actionable for the loss of life upon the high seas.
Second - Relatives of employees of vessels have no recourse, no help except such as the charity of the steamship company interest may give.
Third - Recovery limited to $100 upon all baggage, as each passenger in purchasing a ticket accepts the provisions of the ticket to that effect.
Fourth - If the Florida fouled the Republic and was responsible for her loss, she can be libelled only to the amount of the value of the ship, which amount, plus the Florida's cargo receipts and passenger receipts, are the only amounts that can be touched by the White Star Line to compensate the passengers on the Republic and the company for the loss of the ship.


Insurance Personal Affair.

Fifth - The loss of the Republic's cargo where it was insured will be paid by insurance companies. Where not insured it will get a pro rata share of the damage money collected against the Florida if the Florida was at fault. The insurance money going to the White Star Line for the loss of the Republic will not be an effect against claims of passengers. Such insurance money is a 'personal' claim of the White Star Company and cannot be touched by passengers of the Republic, nor may it be used to offset claims against the Florida's passengers either for loss or damage to the Florida or loss or damage to the Florida's passengers.
Sixth - There is no question of salvage value to be considered, as the Republic is a loss and will continue to be such until she is floated and docked safely in some port. This means that loss of life at sea is not actionable at law no matter what the negligence nor by whom caused.

This may seem to The American reader as a very strange case, but it is the fact avowed by the most eminent admiralty lawyers in this country, Wing, Putnam & Burlingham, of No. 27 William Street.

It means also that a vessel valued at $100,000 sinking a vessel valued at $2,000,000 can be libelled only for $100,000, and where the loss is divided among a hundred passengers and another hundred owners of freight that $100,000 must be apportioned among the owners of the lost vessel, her passengers and the cargo owners in proportion to their adjudicated losses.

Damage for Each Person

This means that each person damaged would get 10 per cent of his or her loss whether it were the corporation owning the ship, the individual or corporation owning the cargo and the individual passenger.

If it be found that the lost Republic was at fault in the collision all the passengers and the owners of the Florida can claim is their pro rata share of the money taken in by the White Star Line Company for passage money.

Addressing himself to this subject yesterday, Mr. Burlingham, who is a member of the Maritime Association, said:

'Realizing that this situation was one that needed immediate remedy, the Maritime Association had framed a bill which was submitted to Congress this session. It is a measure intended to change this condition. The laws of the United States and those of England differ widely as to this matter of damages for losses at sea.

'We have tried time and again to bring about some uniformity of maritime law between Great Britain and the United States, but without avail. There will be a conference in Brussels next May in which the matter of uniform laws for the rule of ships on the high seas will be approached.'

N. Y. American, January 26, 09,4:1

It has been held that a steamship line is not responsible for loss of life or property beyond the actual value of the ship. The line cannot be sued on any assets it may possess outside the vessel concerned. ...

Had the FLORIDA become a total wreck, there would have been absolutely nothing except the passage and freight money on which to levy. However, [now that the FLORIDA has reached dock] it will be possible to levy against her for her full value.

Journal of Commerce, January 26, 09, 15:7

To what extent the company is liable for the cargo it carried is uncertain, but Admiralty lawyers said yesterday that it was doubtful if the company could be sued because of the stipulation under which freight was generally accepted. Most of the cargo was insured by the shippers. Its value has not yet been computed, but the loss of baggage to passengers will amount to fully $175,000, it is estimated. ...

N. Y. Tribune, January 27, 09, 1:4

The Times obtained yesterday from Eugene P. Carver of the firm of Carver, Wardner & Goodwin a discussion of some of the phases of the situation. Mr. Carver is prominent as an admiralty lawyer and is Vice President of the International Law Association. He said: . . .
"The position of the owner of the cargo of the Republic presents also questions of law which, briefly stated, are that under the Harter Act (so-called) no action could be maintained against the White Star Line, provided the vessel was perfectly seaworthy at the time she left the port, and, under the English doctrine, the cargo owner cannot recover under the form of bills of lading given in this case, so that the only remedy for the owner of the cargo would be against the steamer Florida herself."

NY Times, Jan. 31, 09, 9:2

The filing of claims for damages and property losses against the Lloyd Italiano Societe de Navigazione, the owners of the steamship FLORIDA, which rammed and sank the REPUBLIC off Nantucket Shoals on January 3 [23], were completed yesterday.
The Italian company filed a petition in the U. S. District court on January 28 to have its liability for damages limited to the proceeds of the sale of the FLORIDA, which was knocked down for $175,000 and its freight charges. This will amount in all to about $200,000. The total amount of claims filed with United States Commissioner Alexander up to yesterday was approximately $1,725,000. An extension of time has been granted to several claimants.
The largest single claim was filed by the Ocean
[ic] Steam Navigation Company, the owners of the REPUBLIC, on behalf of officers, crew and passengers, the claim totaling $1,662,100, as follows:
Loss of steamship REPUBLIC, equipment, stores, freight, etc., $1,250,000; personal effects of 96 first class passengers, $265,200; personal effects of 47 second class passengers, $13,900; personal effects of 40 first class passengers, not included above, $40,000; personal effects of 170 second class passengers, $45,000; effects of master, officers and crew, $40,000. ...
There are upwards of forty other individual claims by passengers on the REPUBLIC, ranging from $30 to $7,500. Most of the claims of the women were for the loss of effect and aggregate about $2,500. ...
Commissioner Alexander expects to have the claims totaled in a few days. ...

Journal of Commerce, May 19, 09, 16:1

Attorneys for existing claimants suggested the following to their clients:

No doubt, in heretofore submitting our tentative agreement of settlement to your various clients, you have already acquainted them with the advantages to be derived from a settlement on the above basis. The advantages that suggest themselves are, among others, the avoidance of protracted and expensive litigation, extraordinarily so on account of the number of the litigants; the uncertainty as to the outcome of a trail of the merits; the fact that unless proofs can be produced in court satisfactorily establishing the legal fault of the FLORIDA, notwithstanding the testimony of her own witnesses showing their care and freedom from fault, innocent sufferers from the disaster will have no remedy whatever, since the White Star Line is in any event completely protected by the United States Limited Liability Act, owing to the loss of the REPUBLIC; the fact that even were the FLORIDA to be held in fault, only a small dividend or percentage would be received by each claimant upon his claim, representing his share in a small fund (already depleted by the taxable costs and disbursements of the court proceedings) after dividing it with other claimants of enormous amount, so that if the expenses of carrying the litigation to the court of last resort (whither the FLORIDA would certainly carry it, in the absence of a settlement, unless she won in the lower courts) should prove to be as heavy as we believe they might be, the claimants would actually receive less as the result of a wholly successful litigation than our present offer will yield them. ...

Messrs. Wallace, Butler & Brown, attorneys,
correspondence to attorneys of other claimants,
5 November, 1910

The United States did file an appeal to the Circuit Court of Appeals in an attempt to exempt itself from the provisions of the limitation of liability act "on the ground that the United States not being mentioned in the limitation of liability act was not bound thereby." The United States... a meeting of all the attorneys interested held the other day... also took the position that although the cargo shipped by the United States on the steamship 'Republic' was shipped under the usual printed form of bill of lading of the White Star Line annexed to the form of bill of lading prescribed by the Controller of the Treasury, which annexed bill of lading contained a provision that the freight shipped was subject to all the terms and exceptions contained in the Harter Act, while the form of bill of lading prescribed by the Controller contained no such provision, or in fact any provision or exception, the Government was not bound by the provisions contained in the annexed bill of lading on the theory that the quartermaster who shipped the cargo under the form of bill of lading provided by the Controller has no authority to consent to the addition of any stipulations not contained in such form, and that the owners of the 'Republic' must be held to have had notice in dealing with the quartermaster as a public officer, that his powers were limited and that he could not without authority from his superior bind the Government by any stipulations not contained in the form of bill of lading prescribed by the Controller. ...

Letter of Henry A. Wise, U. S. Attorney for the
Southern District of New York, to the Attorney
General, Washington, D.C., November 14, 1910

The United States Circuit Court of Appeals for the Second Circuit ruled:



Circuit Judges.


It appears from the papers and was admitted at the argument that a decision of the interesting question debated, no matter how it may be determined, will in no way affect the disposition of the fund as directed by the final decree entered in the District Court.
The fact that the question is one which the shipping interests of this and other countries
[emphasis supplied] wish to have settled is unimportant. This court does not sit to hear and decide moot questions.
Appeal dismissed.

NARA Department of Justice File No. 145107.

If the United States had won the appeal, which she did not, it would have allowed her to press a claim to recover 100% of her loss of $61,0009 directly from the shipowners. It is presumed that, if the United States had been successful in her plea to the appeals court "on the ground that the United States not being mentioned in the limitation of liability act was not bound thereby," either France or Russia, whoever held title to the gold cargo at the time of loss, would have been allowed the same exemption from the limitation of liability act; under this circumstance, a claim could have allowed the gold title holder the ability to collect 100% of its loss directly from the owners of the White Star Line.

Without any recourse to the steamship owners, with a gold cargo that was beyond salvage at that time (See: Past Salvage), and with a Russian loan whose passage acted as a barometer to political and economic stability, it was in the Entente's best interests not to indicate the loss and to contain the information to those parties who knew the complete details, namely, the French bank who initiated the purchase of this gold at New York, White Star Steamship Company, and to other parties who had or were on a need to know basis. This would include:

The United States:

  1. The wreck occurred proximate to U. S. territorial waters and the circumstances of the collision were subject to U. S. judicial review. U. S. Revenue Cutters were also directly involved in rescue efforts in the unsuccessful attempt to tow the REPUBLIC into shoal water;
  2. The REPUBLIC's cargo was drawn on the U. S. Sub-Treasury in New York;
  3. The U. S. controlled Assay Office and Customs records;
  4. The REPUBLIC also carried a US Navy cargo;

and Britain:

The REPUBLIC was a British registered vessel and subject to a Board of Trade investigation, Customs, and other British regulatory agencies.

The British were also allied to the Russian government and, although to a lesser degree than the French, also their creditors.


LONDON TO TAKE $30,000,000

One-Eighth of Russian Loan Sub scribed
For by Bankers of British Capital


London, January 14 - Lord Revelstoke, acting for Baring Bros. & Co., and M. Routkowsky, the Russian financial agent resident in London, concluded arrangements to-day for the English portion of the new Russian loan of $240,000,000 about to be issued in Paris.

The London bankers will take $30,000,000, but little of that will be paid over in cash, the greater part going toward the taking up of the [1904] Russian treasury bonds falling due in May. The London allotment will undoubtedly be readily absorbed, as investors have been waiting for it for some time. The 1906 loan is now at a good premium and will help the issue.

Lord Revelstoke soon after signing the agreement said that it was too early to talk about it, as not even the prospectus was ready; but that there was every indication that the English share would be over-subscribed.

Brooklyn Daily Eagle, January 14, 09, 1:4 and
N. Y.Evening Mail, January 14, 09, 12:5

Thus the Russian government loan of 1906 was issued, in part, in London, the first large new direct Russian government loan in that market in three decades. It marked the encouraging advancement of a project of understanding which embodied the Anglo-Russian Agreement of 1907. It signified the evolution into intimacy of the Triple Entente. In 1909 another Russian government loan was issued in London. Earlier government issues were admitted to the stock exchange price list. ... With their country's policy, the ventures of British savers changed. While there is no evidence to show that the British Government intervened in the process officially its favor was, however, assured.10 The adjustment of political relationships permitted economic incentives to operate.11

Certainly the French (and/or Russian - depending on the sequence of title) and British governments would have known immediately about the loss of gold. A mere request by them to the United States Government would be all that was necessary to restrict this information. Market stability would be maintained and the Russian loan would be unhindered; a loan which attempted to assure the stability, alliance, and governance of the Russian autocracy.


1 More information regarding the Laurentic's loss and the recovery of her gold cargo can be found at Previous Salvage Efforts, Gold Storage, infra.
2 See: Gold from the Sea, an account of the salvage of RMS Niagara's gold, by James Taylor, George G. Harrap & Co. Ltd., London, 1943.
3 Additional information concerning the US Government's claim, and other legal issues, and be found within the Legal section of this website, infra.
4 See also: Source Documents - Financial - Specific, infra.
5 28 Feb., 1871, c. 100, s. 69, v. 16, p. 458.
6 3 Mar., 1851, c. 43, s. 3, v. 9, p. 635.
7 Ibid., s. 4., 27 Feb., 1877, c. 69, v. 19, p. 251.
8 3 Mar., 1851, c. 43, s. 4, v. 9, p. 635.
9 for food stores as verified by a bill of lading. Regarding potentially lost monies destined for the Atlantic Battleship Fleet (See: Other Cargos), for security reasons, the United States, as a self-insured entity, may not have identified shipped monies on a bill of lading. Theoretically, if the U.S. Government's appeal had prevailed, a claim could have also been brought for lost U.S. monies.
10 "An interesting episode in connection with Russian financing that would seem to indicate King Edward's familarity with the situation occurred in 1907. Sir Ernest Cassel, private financial adviser to the King, asked him to intercede with the Czar in regard to a proposed loan Cassel was trying to negotiate. The King consented to ask the Czar to receive the financier. Sir S. Lee, King Edward VII (New York, 1927), II, 595. See, in connection with Cassel's negotiations, J. H. Schiff, Life and Letters (New York, 1928), II, 141."
11 Ibid 4, pg 234.