tated to spread stories that the state fund was bankrupt and would have to go out of business in the near future. Every invention of this kind travels a long route and does much harm before the truth can overtake it.

Right here is found the strongest argument for conferring a monopoly upon the state fund. The competitive plan of insurance, under which employers are offered the four options of state, stock, mutual, and self-insurance, is attractive as a theoretical proposition, but, in practice, it has its serious limitations. In theory, this plan promises to result in securing the lowest rates and the best service to employers, but in practice it seems destined to result in imposing a needless burden of expense upon employers at large, as they are deterred from placing their insurance in the state fund through the mischievous activities of agents of the old line companies. The enormous difficulty of securing really fair and equal competition between the state fund and the companies makes it a serious question whether the competitive plan will not result in greater evil than good to employers in general. The grant of a monopoly to the state fund may be defended as a measure of protection for employers themselves against a form of exploitation that is costing them millions of dollars annually in unnecessary overcharges for compensation insurance.

A second advantage of state fund insurance is that, in addition to its low cost, it offers a high degree of security to employers and to employees. An employer paying a premium to the state fund in New York, and in some other states, is released once for all from all liability for personal injuries or death sustained by his employees. The appellate division, third department, Supreme Court of New York, declares that the "law gives absolute immunity to the employer after insurance in the state fund, while such immunity is not given after insurance with any other carrier." If a stock or mutual company fails, its policyholders are personally liable for the payment of compensation to their employees. Employers insured in the state fund secure complete release from such liability. The critics of state fund insurance point to this feature as a weakness, alleging that it deprives the employees of the guarantee of the payment of the benefits prescribed in the act, since the state releases the employer from his liability for such payment and does not at the same time assume any financial obligation to maintain the solvency

of the state fund. It is true that in the law governing the administration of the state fund it is provided that such fund shall be administered without liability on the part of the state beyond the amount contributed by the employers in the form of premiums. The state, however, by creating such a fund and guaranteeing release from liability to all employers insured in it, has assumed a moral obligation toward the employees covered by such insurance, which would be absolutely binding if the need of further action on the part of the state should arise. The state by releasing the employer from the liability virtually assumed such liability and could not evade or repudiate the moral obligation thus incurred. It is inconceivable that any widow would be deprived of her compensation pension, if the employer were insured in the state fund. State fund insurance thus affords the highest degree of security both to employer and to employee.

The provision of the New York compensation act, releasing state fund policyholders from all liability under the act, has been criticised severely by the casualty companies as conferring an unfair advantage upon the state fund. This feature of the law, however, can be justified as a measure needed in order to make the state fund an effective competitor of the stock companies. The same justification holds, by the way, for the temporary expense subsidy granted to the state fund in New York. No one can deny that the stock companies had enormous initial advantages over the state fund. The vice-president of one of the largest stock companies stated in a letter to the manager of the state fund:

You have admitted publicly that the state fund conducts its competition with the stock insurance companies at some disadvantage, and if you should say that that disadvantage was great, we should agree with you.

The initial advantages enjoyed by the stock companies consisted in the possession of large surplus and reserve funds; in their connections with an army of insurance brokers and agents throughout the state; in their ability to write other forms of insurance needed by employers in addition to compensation insurance-public liability, employers' liability, boiler insurance, elevator insurance, fire insurance; and finally in the advantage afforded by the natural preference of most business men for private enterprise as opposed to state management. In all these respects the state fund was at the start heavily handicapped. In order to offset these handicaps it

was proper, and indeed necessary, to give the state fund some positive assistance. Without such assistance the state fund could hardly have become an effective competitor of the companies and a real factor in the insurance situation. The assistance took the form of a temporary expense subsidy and the assurance of complete release from liability under the act to employers taking insurance in the state fund.

In this connection, the critics of state fund insurance allege that, notwithstanding the release clause, or the immunity provision, it fails to give the employer complete protection on his liability for injuries to employees, since the state fund policy covers only the liability for compensation and does not include the liability in connection with damage suits at common law brought by employees who may not be covered by the compensation act. This alleged disadvantage has been exploited most ingeniously in the voluminous literature of the stock companies, issued in their campaign against the New York state fund. The state has been flooded with circulars purporting to show the limitations of state fund insurance. The payment of compensation in many cases in which awards have been made has been held up, and the cases have been dragged into court in order to secure, if possible, some decision that might embarrass the state fund. In one case, in which an employee had his ear bitten by a horse, the right of action on his part was sustained by a lower court on the ground that the injury, which caused disfigurement but not disability, did not come within the schedules of the compensation act, and therefore, the employee had the right of the old remedy at common law. In another case, the same court held that a carpenter called in by a manufacturer to do a piece of construction work was not covered by the act, on the ground that his occupation was not in the usual course of the business of the employer, and, therefore, he was entitled to bring suit at common law. In still another case, the same court held that a janitor, injured while climbing a pole to put up a flag, was not covered by the act. In another case of this sort, a justice of the supreme court handed down a decision sustaining the right of action of non-dependent relatives of a deceased employee for loss of services.

It is important to note that in all these cases, which are advertised as prize exhibits by the stock companies, the insurance was carried by one of the latter and not by the state fund. The big outstanding

fact is that no single instance can be cited in which the state fund policy has failed to give complete protection to the employer. The state fund has over 8,500 policies in force, and has been operating for nearly eighteen months. It would seem that, if there were solid substance in the arguments about liability not covered by the state fund policy, a concrete case would have arisen to which the competitors of the state fund could point as proof of their contention. It is true that a few suits have been instituted against state fund policyholders by employees seeking damages in the courts, but such suits have been discontinued or withdrawn when the facts regarding the provisions of the law have been laid before the employees and their attorneys.

It is an intolerable situation, however, that employers desiring insurance in the state fund should be deterred or disquieted by reason of any questions as to coverance under its policy. Employers are entitled, at the hands of the legislature, to a speedy remedy for this condition. The compensation act should be amended so as to remove all possible doubt as to the completeness of the coverance afforded by the state fund policy. The legislature about to assemble should take prompt action to make such coverance definite, clear and complete. This can be done readily, either by extending the scope of the act to cover all employments and all injuries, excepting possibly domestic service and farm labor, or by granting to the state fund authority to issue a policy covering not only the liability for compensation, but also an incidental liability for injuries to employees that might arise outside the compensation act.

An amendment extending the scope of the act would be the preferable solution of this difficulty. Such an amendment is called for as a measure of fairness and justice to labor. If the principle of workmen's compensation is sound and right, its application should be extended to employees in occupations of low hazard as well as those of high hazard. The right of an injured employee to receive compensation cannot fairly and logically be made dependent upon the degree of hazard involved in his employment. An employee in a trade in which the accident frequency is low, averaging perhaps only one accident per 1,000 employees annually has the same basic right to compensation as has the employee in a trade whose accident frequency is high, running up to 500 accidents per 1,000 employees annually. The accident in the former case cannot properly be made

a burden upon the individual rather than a charge upon the industry, simply because the injured employee happens to be one out of 1,000 injured each year instead of one out of two. The amendment suggested is also called for in the interest of employers, who would be relieved of the uncertainty and perplexity now attendant upon the application of the act to various classes of employees and the needless addition to the insurance burden of those who feel obliged to carry liability as well as compensation insurance. The interest of employers and employees at large, as well as that of the state fund, would be served by the proposed amendment.

It is argued by the critics of state fund insurance that a most serious disadvantage lies in the necessity of accepting all applicants and the impossibility of rejecting bad risks. The prediction was freely made, at the time the New York state fund was established, that it would secure an undue proportion of undesirable business, and consequently would show an abnormally high loss ratio. Employers were warned against placing their insurance with an institution that could not protect itself against adverse selection. This argument is greatly overdrawn. As a matter of fact, the power to fix rates and to impose differentials in the case of individual risks of an extra hazardous character affords a measure of protection against adverse selection. It is true that a state fund cannot reject any risk outright, but by its power to fix rates it can discourage undesirable classes of business or at least secure an adequate premium for all risks insured in the fund. The experience of the New York state fund goes far toward discrediting this argument. The fund has obtained a large amount of very desirable business, on which the hazard is light and well distributed. The loss ratio of the fund for the first fifteen months was 63 per cent. This was below the normal or hypothetical loss ratio under the New York act, which might be taken as 663 per cent, that being the allowance for insurance costs in the rates adopted by the casualty companies, 33 per cent being allowed for expenses. In comparing the loss ratio of the New York state fund with the loss ratios of the casualty companies, allowance should be made for the fact that the fund rates are considerably lower than the company rates. If the state fund had charged the same rates as the companies did, and had collected the larger premium income which these rates would have yielded, its loss ratio for the first fifteen months would have been approxi