This is a subject to be considered by the investor regarding certain classes of securities. A street railway may be earning enough to pay the interest on its bonds and also good dividends upon its stock; in other words, may be looked upon as a corporation in good financial standing. At the same time, a serious accident may occur, causing a loss of the lives of many passengers and the injury of many others, the blame for which may rest upon the railway company, necessitating large payments in the way of damages. It is possible that the amount of money required for this purpose may not only be equal to the earnings of the railway for a long time to come, but actually cause financial disaster to the company.1 There are companies which will insure a railway to a limited extent, against loss resulting from accident. The expense of such insurance, however, is so great that comparatively few companies can afford it. The majority of railroads are such large corporations that the loss resulting from any one accident would hardly be serious enough to embarrass the road, so that in this connection the investor, as a rule, need only consider the smaller road. In the latter case, therefore, in lack of the existence of liability insurance, the investor must take into consideration the physical condition, grades, curves, construction, etc., of the property. In such sections of the country where it is possible to build long stretches of road practically without curves and appreciable grades, the danger of accidents is slight. Bad curves and hills, therefore, are very important things to consider in a street railway property, for not only do they count in considering the risk of an accident, but the cost of operation in such a country is far greater than in one with more favourable conditions.
1 As a general proposition, unless there is special State legislation to the contrary, a claim for damages is subservient to a mortgage. This has been shown by a recent decision of the Supreme Court confirming a decision of the District Court in a Montana case; the Court holding that the section of the statutes of that State which provided that a personal injury claim had a prior right over a mortgage applies only to railroads of commerce and not street railroads, there having been special legislation in re-fard to the former; the case in question being a claim against the Great 'alls Street Railway Co.
Gas and electric light companies do not offer a great risk of accident to the public for which such companies can be held responsible; at least, the loss resulting from any one such accident would probably be a comparatively small matter, and the investor, as a rule, need not consider "liability insurance" in looking into that class of investment. As a matter of fact" liability insurance" is quite generally carried by gas and electric light companies.
For liability in event of accident or damage in relation to vessel property, refer to "Steamship Company Bonds."
Many corporations carry what is known as " Employees Liability Insurance," which insures, in a very satisfactory way, against loss to the company on account of accident to its employees resulting from its own negligence. This class of insurance is not very expensive and is advisable.