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3. [[underline]]Settlement of Claims Arising from Submarine Accident[[/underline]].

When the Smithsonian first began its submersible and support vessel operations in Fort Pierce, Florida, considerable difficulty was encountered in obtaining adequate insurance to cover the operations of the Johnson-Sea-Link.  Since this was an experimental submarine, there were uncertainties whether the indemnity coverage obtained at Lloyds of London could be relied on in all cases.  In order to have additional resources to provide for those that might be affected by accidents involving the submarine, a key-man life insurance policy was purchased to cover Smithsonian personnel killed while working with the submersible.  The Smithsonian, as named beneficiary under this policy, has received $200,000 for each of the two employees killed in the accident.  Pending the determination of other sources of financial recovery, the families of the decedents were assured that the proceeds of this insurance would be transferred to them at an appropriate time, with any interest accrued in the interval.

Last year, following Lloyd's assertion that its policy did not cover this accident, the Department of Justice reviewed the matter and advised that the claims of the widows might be cognizable under the Federal Employees' Compensation Act (FECA) and, if so, were excluded from coverage under the Lloyds' policy.  Although private roll employees had been held by the Department of Labor, in 1962, to be entitled to federal unemployment benefits, the question of FECA benefits for such employees had never been raised.  In an opinion dated September 30, 1974, the Department of Labor held that these employees are entitled to FECA benefits, and claims on behalf of the widows and children are now being processed by the Department.  These benefits are estimated at about $12,000 a year for Mrs. Stover and her seven children, and $7,000 a year for Mrs. Link and her one child.  As the children come of age these amounts will be reduced, although they are also subject to periodic cost-of-living increases.

In anticipation of the transfer of the insurance proceeds in the near future, counsel for Mrs. Stover and Mrs. Link are establishing trusts to insure that the interests of the children as well as the widows will be protected.  If these trust instruments are adequate, the $200,000 insurance proceeds plus about $25,000 in interest will be sent directly to each trust.  It is hoped that the transfer of the Johnson-Sea-Link, along with the R/V Johnson, to the Harbor Branch Foundation effective November 1, 1974, has eliminated the problems of insuring this particular type of exceptional risk.