^mmnm^M:'^.-'^'--: 
 
 FIRE INSURANCE DEVELOPMENT 
 
 ON THE PACIFIC COAST 
 
 BY 
 
 HERBERT H. KIRSCHNER 
 
FIRE INSURANCE DEVELOPMENT 
 
 ON THE PACIFIC COAST 
 
 BY 
 
 Herbert H. Kirscliner 
 
 ' > 
 
 Published By 
 
 UNDERWRITERS' REPORT 
 
 San Francisco 
 
 ^l'^u-^'- 
 
COPYRIGHT, 1922 
 
 BY 
 
 UNDERWRITERS' REPORT 
 
FOREWORD 
 
 IT IS doul)tful whether any business has had a greater inHiience upon 
 the indiistrial growth of the Pacific Coast, and San Francisco in particular, 
 than that of fire underwriting. As an example: Had it not been for the 
 insurance indemnity afforded the community of San Francisco at the time of 
 the 1906 conflagration, the great metropolis of the West might have been 
 wiped out, never to be reconstructed. From the ashes, dust and ruins, insur- 
 ance restored the baker, the butcher and the tailor. Figuratively, it put each 
 and every line of endeavor "on its feet" again. So, over the entire Pacific 
 Coast, the extension of fire coverage has been the business savior and stabi- 
 lizer. Inasmuch as fire underwriting has been so prominently interlinked 
 with the history of the West, the growth of fire insurance practices on the 
 Pacific Coast has been flavored with that color and picturesqueness that have 
 marked the development of this section of the country. "East is East, and 
 West is West, and ne'er the twain shall meet," said Rudyard Kipling, world- 
 renowned author. From its inception, fire underwriting development on this 
 Coast has been distinctively different from the growth of the business in 
 Eastern centers. Even today the business is conducted in the East — the 
 Eastern way; in the West — the Western way. Perhaps Ijecause "East i> 
 East, and West is West" (although Kipling had in mind the Orient and the 
 Occident). The foregoing is our introduction to the following chapters 
 devoted to the history of fire underwriting on the Pacific Coast. 
 
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FIRE INSURANCE DEVELOPMENT 
 
 Chapter I 
 
 SEVENTY YEARS AGO 
 
 IT IS known that conflagrations will drive 
 companies out of the territory in which 
 their loss ratios are boosted considerably. 
 But a conflagration attracting a company, that 
 is to say. to cause it to do business in a sec- 
 tion, which has been almost completely "wiped 
 off the. map," is a rare occasion. 
 
 Primarily, there is little business left. But 
 suppose that section to be handicapped with a 
 conflagration hazard, which, although the sec- 
 tion might be rebuilt, and offer business for 
 insurance companies, would make likely a 
 repetition of disaster, it would seem unlikely 
 that company officials would clamor for im- 
 mediate entrance into that section. Yet it was 
 the result of a conflagration and a marked fire 
 hazard that brought the first fire insurance 
 company to San Francisco and the Pacific 
 Coast. 
 
 Following what has been recorded by his- 
 torians of early San Francisco as the conflagra- 
 tion of 1851, a company 6000 nriles away from 
 the disaster saw through the smoke the possi- 
 bilities of conducting a profitable insurance 
 business in this territory. While a majority of 
 the citizens of San Francisco who were left 
 homeless and penniless, as the result of the 
 1851 fire, despaired at the outlook for the 
 future, in London, officials of the Liverpool 
 & London & Globe were working out a solu- 
 tion, to the end that the fire menace would no 
 longer be rooted in the hearts of San Francis- 
 cans. Protection against fire was brought to 
 the Pacific Coast, when in 1852 the English 
 company appointed Joshua P. Haven its agent 
 at San Francisco. Thus, Pacific Coast -'nsur- 
 ance history began seventy years ago. 
 
 ALONE IN FIELD 
 
 Mr. Haven, issuing policies for the Liver- 
 pool & London & Globe, enjoyed a monopoly 
 for two years. Two reasons account for this. 
 First of all, San Francisco and the Pacific 
 Coast were too primitive from an insurance 
 
 company standpoint. It must be remembered 
 that the big gold excitement in California did 
 not occur until 1849. This was a milestone 
 in the history of San Francisco, which was 
 then known as Yerba Buena, for from that 
 year the city showed visible growth. How- 
 ever, in 1852 the population had not yet reached 
 a degree that might interest insurance com- 
 panies. 
 
 Secondly, news traveled slowly in those days. 
 It was not until at least a year after the 
 establishment of the Liverpool & London & 
 Globe agency at San Francisco that other 
 companies became aware of the fact. Even 
 then it was regarded as either gossip or idle 
 hearsay. The American companies writing 
 business in Eastern centers had heard tha^ 
 what San Francisco there had been built up 
 prior to 1851, had all been swept away by the 
 conflagration. Since the foreign companies 
 had not as much information about the con- 
 flagration situation as the American companies, 
 it will thus be readily understood why four 
 English concerns were writing fire insurance at 
 San Francisco before an American company 
 entered the field. 
 
 In 1854 the Imperial Fire, Monarch Fire 
 and the Northern Fire, all British companies, 
 established an agency at San Francisco. Falk- 
 ner, Bell & Co. represented the Imperial Fire, 
 the agency for the Monarch Fire was planted 
 with William Lane Booker, and Smith Broth- 
 ers represented the Northern Fire. Four Eng- 
 lish companies and not one American. 
 
 Gossip developed to be the truth. And before 
 the year 1854 had drawn to a close the Con- 
 tinental of New York had come to the Pa- 
 cific Coast, and appointed Adolphe Lowe & Co. 
 its agents at San Francisco, while the Home 
 of New York named Case, Heiser & Co. its 
 representatives. The year 1854 saw fire under- 
 writing off to a substantial start. 
 
 [Page rive] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter II 
 
 EARLY DAY UNDERWRITING DIFFICULTIES 
 
 FROM 1854 to 1857 four English and two 
 American fire insurance companies had 
 the San Francisco field exclusively for 
 themselves. However, this should not be taken 
 to indicate that, in the event of a favorable loss 
 experience, these companies were enjoying a 
 healthy premium income. On the contrary, 
 fire insurance was something new to the peo- 
 ple of the West. Furthermore, with the ex- 
 ception of mercantile risks, there were but 
 few structures worth insuring. Residences 
 were but huts or hovels. Redwood was the 
 predominating structural material. 
 
 Conducting an insurance business, in the far 
 western section of the country in the early 
 fifties was a difficult task as far as keeping 
 in touch with the home office was concerned. 
 In fact, early records show that it was a rare 
 company that knew whether it was "in busi- 
 ness" or "out of business." Then, an insurance 
 agency was in most cases a side issue of a firm 
 or individual. Instead of the insurance com- 
 pany being uppermost in the minds of the 
 agent, his interest lay more directly in some 
 everyday trade for, as is required of the pio- 
 neers of every country, there was considerable 
 constructive work to be done. A condition, in 
 which the interests of the insurance companies 
 were but secondary, figured prominently in re- 
 tarding the early development of fire under- 
 writing in this section of the country. Espe- 
 cially when it is considered that, when as at 
 the present time a company can get in touch 
 with its agents within a few hours, it took 
 several months to reach its Pacific Coast rep- 
 resentatives in 1854. 
 
 Agents were given instructions as to the 
 sort of risks to write. But often questions 
 arose. In many cases property owners were 
 delayed two and three months in their quest 
 for insurance, while letters from the San Fran- 
 cisco agent traveled by pony express over the 
 plains or vessel via the Isthmus of Panama to 
 New York, and then proceeded on the slow 
 return journey. There were a few cases where 
 the building was destroyed by fire before the 
 requested information reached the local agent. 
 The mail situation resulted in "daily" reports 
 being dispatched monthly. 
 
 FIRE PROTECTION POOR 
 
 Lack of fire protection discouraged other 
 companies from extending their operations to 
 this field. In fact, there was almost a complete 
 absence of fire-fighting apparatus. 
 
 The "Adjuster," in 1898, devoted several 
 
 pages to a discussion of the Pacific Coast un- 
 derwriters early day hardships. Regarding the 
 early day fire protection afforded the commu- 
 nity of San Francisco, the "Adjuster" stated, 
 "The fire protection was composed of volun- 
 teers, and the machinery used in their battles 
 with the flames was of the crudest and most 
 unsatisfactory character. The men were rarely 
 drilled, and the science of fire-fighting, as we 
 recognize it today, was undreamed of. Hand 
 engines, inadequate water supply and topog- 
 raphy of the then business part of the city, 
 were more than a match for the admitted brav- 
 ery and energy of the unorganized forces that 
 were hastily summoned to resist the advance 
 of the flames, so that during the first six or 
 eight years of the city's history, at least a 
 half dozen serious conflagrations were recorded 
 in which fortunes were swept away and very 
 general loss sustained." 
 
 In other words, when a policy was written by 
 the pioneer companies in this field, it was more 
 or less of a gamble whether or not the risk 
 would be destroyed by fire. As far as de- 
 pending upon the volunteer fire department for 
 the prevention of fire, insurance companies in 
 the l)eginning made their rates without regard 
 to the fire-fighting facilities. This condition 
 of fire protection existed for about two de- 
 cades following the Liverpool & London & 
 Globe's entrance to San Francisco. 
 
 FOUR PIONEERS STILL LIVE 
 
 Four of the original half dozen companies 
 are still operating in the Pacific. Coast terri- 
 tory, which is highly complimentary to the 
 aggressiveness and stability of these companies. 
 The Liverpool & London & Globe, Northern 
 Assurance, Continental and Home, of the six 
 pioneers, are at present all leaders in this field. 
 The Monarch and Imperial withdrew many 
 years ago. Of the first six San Francisco local 
 agents, no traces have been left— that is to 
 say. none of their present-day descendants are 
 conducting the agencies which they estab- 
 lished. 
 
 It will be concluded from the above chapter 
 that although there were but six companies 
 operating at this city from 1854 to 1857, there 
 was not enough business to attract others, 
 while what risks were offered would probably 
 be passed up today by ordinary underwriters. 
 But to the original half dozen fell the task of 
 pioneering the field, and records indicate they 
 did nobly. 
 
 [Page Six] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Early San Francisco conflagrations as reproduced from original engravings m old local histories. On 
 
 the left is a view illustrating the conflagration of June, 1851, which subsequently led to the establish- 
 
 ment of an insurance agency at San Francisco by the Liverpool & London & Globe, the first pioneer. 
 
 Cuts furnished by the courtesy of the Fireman's Fund. 
 
 Chapter III 
 
 MANY LOCAL COMPANIES ORGANIZED 
 
 BEFORE the curtain had rung down on 
 the. year 1857, three more American fire 
 insurance companies turned their atten- 
 tion westward. It was that year that the Hart- 
 ford, Phoenix and the Merchants of New York 
 appointed Edward McLean agent at San Fran- 
 cisco for all three companies. Shortly after 
 his appointment, McLean formed a partner- 
 ship with John Fowler and C. T. Hopkins. 
 This partnership is responsible in a large 
 measure for the first real impetus given fire 
 insurance in this territory. McLean, Fowler 
 & Hopkins determined that coverage should 
 be extended elsewhere in the State of California, 
 and accordingly named various sub-agencies 
 at the more populated points. This subse- 
 quently led to the appointment by companies 
 of general agents at San Francisco, and the 
 establishment of local agency plants through- 
 out the Pacific Coast. The early day agency 
 plant of a company consisted of between six 
 and twelve agents, for there were few Coast 
 towns of large enough population in which 
 an insurance company could write business. 
 It should also be noted that the McLean, 
 Fowler & Hopkins combination was the first 
 to represent more than one company. 
 
 During the ten years, 1857 to 1867, there 
 was a great "rush" of Eastern companies to 
 the Pacific Coast. This oncoming was sup- 
 plemented by the organization of a number 
 of local companies. No other ten-year period 
 in the history of Pacific Coast fire underwrit- 
 ing to date has seen as many fire and marine 
 insurance companies organized at San Fran- 
 cisco as the 1857 to 1867 decade. Twelve 
 
 local companies commenced operations on the 
 Pacific Coast during this time. 
 
 FIRST LOCAL COMPANY 
 
 The first San Francisco fire insurance com- 
 pany to receive its charter was the German 
 Mutual Fire. Although records show the Ger- 
 man Mutual to have been organized in June, 
 1§S7, it did not really begin to function until 
 early in 1858. As ambitious as the officers 
 of the first San Francisco company were to 
 make it a success, its business career was 
 short. Following the enactment of a law 
 requiring of all incorporated insurance com- 
 panies a paid-up capital of $100,000, it was 
 decided to wind up the affairs of the German 
 Mutual, and on June 24, 1868, the company 
 went into oblivion. 
 
 Following close on the heels of the German 
 Mutual's organization, eleven companies sprung 
 into existence before the first local company 
 quit. They were: The California Mutual Ma- 
 rine, California Insurance Company, San Fran- 
 cisco Fire, Fireman's Fund, Pacific Insurance 
 Company, California Home Insurance Com- 
 pany, Home Mutual, Occidental Insurance 
 Company, Union Insurance Company, National 
 Insurance Company and the People's Insur- 
 ance Company. 
 
 TWO COMPANIES WEATHER STORM 
 
 In the year of this writing, 1922, but two 
 companies of the first twelve are flourishing. 
 The Fireman's Fund has been continuouslj^ 
 in business since May 3, 1863. The California 
 Insurance Company, which was incorporated 
 in 1861, went into voluntary liquidation in 
 
 [Page Seven] 
 
FIRE INSURANCE DEVELOPMENT 
 
 April, 1892, but thirteen years later, in June. 
 1905, reorganized and resumed operations. 
 
 Fire underwriting was carried on crudely 
 and unscientifically during the pioneer period. 
 From records available of the fire insurance ac- 
 tivities during the fifties and sixties, there ap- 
 pear= to have been no confusion, but the 
 bufiness was conducted on a plane slightly 
 higher than a common every-day trade. This 
 was due to the many obstacles. As has been 
 mentioned in the preceding chapter, means 
 of communication greatly hindered progress. 
 Fire underwriting was unlike most businesses, 
 it had to be conducted at a long range. This 
 probably accounts for the large number of 
 local companies which were organized. These 
 enjoyed a distinct advantage over their con- 
 temporaries, inasmuch as they were "right on 
 the spot" of their operations. 
 
 The disadvantage of being "two months" 
 away from the home office is reflected in the 
 following story, which has been handed down 
 and appears to be authentic: 
 
 A man named Curtis L. North, upon the 
 departure of the mail ship for New York via 
 the Isthmus of Panama, made an extensive 
 drive for insurance at San Francisco. It is 
 stated that North, posing as the representa- 
 tive for the United States Fire of New York, 
 accepted any and all risks, and cut rates so 
 indiscriminately that his competitors suspected 
 him of being a fraud. However, they could 
 prove nothing. Since their means of com- 
 munication had left for New York prior to 
 North's drive, they were obliged to content 
 themselves with a several months' wait before 
 they could ascertain whether North was 
 clothed with authority by his company. How- 
 ever, the United States Fire representative fled 
 to parts unknown ere this information could 
 be received from the East. This case served 
 as a future warning to the property owner, 
 and only agents of known integrity were 
 patronized. It is said that the North instance 
 was the only time that dishonest practice was 
 so prominently brought into the fire insurance 
 business on the Pacific Coast. 
 
 Fire protection as afforded the community of San Francisco about 1860, and for many years afterward, 
 is well pictured in the above reproduction from an original engraving. Almost the entire volunteer 
 fire-fighting force was summoned at the outbreak of a blaze. Twenty-seven men are here seen answer- 
 ing an alarm. Cut furnished by courtesy of the Fireman's Fund 
 
 [Page night \ 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter IV 
 
 CLIMB TOO HARD FOR COAST COMPANIES 
 
 WITH the exception of the Fireman's Fund, 
 the twelve local insurance companies, 
 which were organizedi during the period 
 1857 to 1867, found the struggle for existence 
 considerably harder than they had anticipated. 
 Nine did not live longer than eleven years, 
 and several of them were forced to retire at 
 the age of one, two, three and four years, re- 
 spectively. The Union Insurance Company, 
 which was organized at San Francisco in April, 
 1865, flourished for twenty-six years, alter which 
 it was bought by the Alliance Assurance Com- 
 pany. Although the California re-insured its 
 business with the Fireman's Fund in April 1892, 
 after twenty-nine years of fire insurance opera- 
 tions in the Pacific Coast field, as stated in the 
 preceding chapter, the company re-organized in 
 June, 1905. 
 
 Because some of the early San Francisco fire in- 
 surance companies were too ambitious they fell by 
 the wayside. In many cases, shortly after their or- 
 ganization they extended their operations to 
 Eastern fields. Had not the great conflagration 
 occurred at Chicago in 1871, four of the first 
 twelve companies organized at San Francisco 
 might still be in business. One company, the 
 Builders', suffered a peculiar fate, a fate, which, 
 however, became more common at a later date. 
 It was organized in September, 1886, and placed 
 into the hands of the receiver two years later 
 when the president and promoter, Thomas 
 Mooney. disappeared with the company's funds. 
 
 CONTINUE TO ORGANIZE 
 
 The disastrous experience of the pioneer Cali- 
 fornia companies did not discourage the organiza- 
 tion of more fire insurance companies in this 
 State. It will be noted that few charters were 
 taken out during the twenty years following 
 1867. Ten companies saw the first light of day 
 during the two decades. None enjoyed a long 
 life. 
 
 Other California cities having attained a popu- 
 lation large enough to interest insurance com- 
 panies, four of the "home" concerns, which came 
 into existence during the period 1868 to 1888, 
 established their head offices in cities outside of 
 San Francisco. The Alameda County Fire Insur- 
 ance Company was the first California underwrit- 
 ing institution to perfect its organization else- 
 where than San Francisco. It was in July, 1874, 
 that the company was organized at Oakland. Six 
 years later the Oakland Home Insurance Com- 
 pany was also formed at that city. In May, 1885. 
 the Southern California of Los Angeles secured 
 
 its charter. Stockton was chosen as the home 
 office headquarters for the Alta Fire in Septem- 
 ber, 1888. The companies, which were incor- 
 porated at San Francisco during the two decades. 
 1868 to 1888, were : The State Investment and 
 Insurance Company, Commercial Insurance Com- 
 pany, California Farmers' Mutual, Western Fire 
 & Marine, Sun Insurance Company and the Anglo 
 Nevada Insurance Company. 
 
 NORTHWEST ASSUMES IMPORTANCE 
 
 While the population of California was in- 
 creasing during the eighties, the Northwest was 
 also assuming importance as an insurance cen- 
 ter. But as a breeding ground for fire insurance 
 institutions, that section of the Pacific Coast 
 proved disastrous for backers of the would-be 
 companies. Seattle, Spokane, Portland, Salem 
 and Tacoma were selected as headquarters by 
 fifteen companies, all of which, however, op- 
 erated but a short time. 
 
 The Northwest fire insurance companies, which 
 had not passed out of their infant stage before 
 they were obliged to seek a graveyard, were : 
 Organized at Seattle — The Home, Farmers', Se- 
 attle and the Cascade ; organized at Spokane — 
 The Security and the Washington Farmer; or- 
 ganized at Portland — The NortBwest Fire & Ma- 
 rine, Oregon Fire & Marine and the Pacific Fire; 
 organized at Salem — The State ; organized at 
 Tacoma — The North Pacific, West Coast and 
 the Tacoma Guarantee. 
 
 On December 31, 1888, there were 104 insur- 
 ance companies transacting a fire insurance busi- 
 ness in California. Of this number eleven com- 
 panies had been incorporated in this State, sixty- 
 seven were of other States and twenty-six were 
 foreign. Fifty-one of the fire insurance com- 
 panies, which were operating in California dur- 
 ing 1888, are still writing insurance here, the 
 fifty-three remaining either discontinued busi- 
 ness or withdrew from this territory during the 
 ensuing years. 
 
 STAND TEST OF TIME 
 
 The companies which have stood the test of 
 time, emerging through the tria's and tribula- 
 tions, are:; California companies — The California 
 and the Fireman's Fund; incorporated in other 
 States — Aetna, Agricultural, American, American 
 Central, Citizens, Concordia, Connecticut, Con- 
 tinental, Fire Association, Firemen's, Franklin. 
 Great American, Girard F. & M., Glens Falls, 
 Granite State, Hanoyer, Hartford, Home, Insur- 
 ance Company of North America, Insurance 
 
 [Page Nine] 
 
FIRE INSURANCE DEVELOPMENT 
 
 HOME OFFICE OF THE ALTA FIRE OF STOCKTON, CALIF. 
 
 Organized in May, 1888, the only company organized at Stocl<ton, was obliged to re-insure and retire 
 
 a little over four years later. At the extreme left appears Chas. W. Dohrmann, manager at the home 
 
 office. M. D. Baker, who was the secretary of the company, is seen standing next to Dohrmann 
 
 Company of Pennsylvania, Mechanics & Traders, 
 Michigan F. & M.. National, New Hampshire, 
 Niagara, Orient, Pacific Fire, Pennsylvania. 
 Providence-Washington, Security, Springfield 
 F. & M., St. Paul, United States and the West- 
 chester; foreign companies — Atlas, Commercial 
 Union, Liverpool & London & Globe, London 
 Assurance, London & Lancashire, New Zealand, 
 North British & Mercantile, Northern, Nor- 
 wich LTnion, Phoenix, Queen, Royal Scottish 
 Union & National. Sun, and the Svea. 
 
 The extent to which the fire insurance busi- 
 ness had grown from its early beginning in 
 California at the time considered in this chapter 
 is shown in the annual report of Insurance 
 Commissioner J. C. L. Wadsworth for the 
 year ending December 31, 1888. Risks valued 
 at $352,831,786 had been covered against fire, 
 netting a premium income of $6,087,041. Losses 
 paid that year totaled $3,049,030, showing a 
 loss ratio of 50 per cent. 
 
 [Page Ten] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter V 
 
 FIRE INSURANCE PRACTICES REGULATED 
 
 THE business of fire insurance I)ccause of 
 its technical nature can not be conducted 
 without rules, rates and regulations. This 
 was clearly illustrated by the early action of 
 the pioneer fire insurance companies in uniting 
 for a common cause. Five years after fire cov- 
 erage had been extended to the Pacific Coast 
 an organization known as the Board of Fire 
 Insurance was formed. This was in the year 
 1857. Since San Francisco hud been the only 
 city wherein companies had appointed agents, 
 the first fire insurance rating organization was 
 more of a local board than that of a company 
 association. 
 
 Members were enrolled under individual or 
 firm names. The following nine comprised the 
 first Board: C. Adoiph Lowe, E. W. Croweli, 
 Jonathan Hunt, Joshua P. Haven, McKinley. 
 Garrios & Co., Falkner, Bell & Co., William 
 Lane Booker, Smith Bros. Sc Co., and Dickson 
 De Wolf & Co. The first president of the 
 Board of Fire Insurance was E. R. Falkner. 
 and Joshua P. Haven was the first secretary. 
 These agents represented the following com- 
 panies during 1857, the organization year: 
 Continental, Phenix of Brooklyn, Home, Ni- 
 agara, Washington, Park, Liverpool & London 
 (Globe was added to the name of the company 
 at a latter date), Royal, Imperial, Monarch, 
 Northern and the Unity. 
 
 PROMULGATED RATES 
 
 The principal function of the Board of Fire 
 Insurance was to promulgate rates for the limi- 
 ted territory, which was exploited by the 
 pioneer companies. Its life was short, and in 
 January, 1861, was succeeded by a stronger 
 organization known as the San Francisco 
 Board of Underwriters. William Lane Booker, 
 vvho represented the Monarch, was elected the 
 first president of the second Board. He was 
 h-ghly efiicient, and wras exceptionally well 
 liked by the insurance fraternity, which ac- 
 counts for h's serving as president for the en- 
 suing ten years. He was succeeded in this 
 capacity by David J. Staples, who was at that 
 time president of the Fireman's Fund. 
 
 The activities of the San Francisco Board 
 of Fire Underwriters were not confined to the 
 making of tariffs and schedules. Members of 
 the Board also interested themselves in legis- 
 lative and fire prevention work. At the re- 
 quest of the San Francisco Board of Fire Un- 
 derwriters, the California Legislature created 
 the office of Fire Marshal at San Francisco, and 
 
 empowered the Board to nominate and elect 
 the man for this office. Incidentally the insur- 
 ance coiTipanies paid his salary. 
 
 With the expansion of the territory of the 
 agents, who made their headquarters at San 
 Francisco, the Board extended its rate-making 
 activities. However, the business of fire insur- 
 ance companies operating on the Pacific Coast 
 grew so quickly, that it was found necessary 
 in March, 1870, to reorganize. The name was 
 also changed to the Board of Underwriters of 
 San Francisco. 
 
 BIG AND LITTLE BOARDS 
 
 Every San Francisco agent did not become a 
 member of the "big Board," as it was called. 
 There were a few outsiders. But even these 
 outs'ders appreciated the fact that their fate 
 was dependent upon, at least, some co-opera- 
 tion. So they too made agreements, and had 
 understandings. They were known as the 
 "little Board." 
 
 In May. 1884, the "big" and "little" Boards 
 disbanded, and the Pacific Insurance Union 
 was organized. The following announcement 
 clearly describes the fire insurance organiza- 
 tion, wh''ch many present day underwriters will 
 remember, for the Pacific Insurance LTnion con- 
 tinued until February, 1895. 
 
 PACIFIC INSURANCE UNION 
 401 California street, 
 San Francisco, December 31, 1885. 
 
 To THE Fire Insurance Agents 
 IN Idaho and Utah: 
 
 Gentlemen: In accordance with resolution 
 of the executive committee, I hereby notify 
 you that the rules and regulations of the "Pa- 
 c'fic Insurance Union" will be enforced in your 
 territory on and after January 15, 1886. 
 
 The Pacific Insurance Union is an associa- 
 tion of officers and managers combined for the 
 purpose of arresting the progress of demor- 
 alization, and placing the business on firmer 
 ground. For the purpose of effecting this "The 
 Union" (of Chicago) has agreed to subject all 
 its members to the provisions of the consti- 
 tut'on and by-laws of this Union. 
 
 These provisions, briefly stated, are as fol- 
 lows: 
 
 First: To require all agents to join local 
 unions as soon as formed. 
 
 Second: Not to allow any insurance to be 
 granted at less than such rates, nor in a dif- 
 ferent manner to that prescribed in such rules 
 as may be promulgated. 
 
 [Page Eleven] 
 
FIRE INSURANCE DEVELOPMENT 
 
 PIONEER CALIFORNIA LOCAL AGENTS 
 
 ''T'tr 11*" whose likenesses appear above were prominently Identified with the San Francisco local agency 
 of Falkner-Bell & Co., which was organized in the early fifties. The firm was later succeeded by the 
 Catton, Bell & Co. general agency. From left to right: John A. Jones, manager for the fire depart- 
 ment; James E. Bell, son of one of the founders of the firm; Kenneth Catton, one of the managers of 
 the concern; Louis Mel, adjuster for the fire insurance companies represented by the agency, and Don- 
 ald F. Tillinghast, cashier. 
 
 Third: Not to allow the cancellation of any 
 policy in any other form than that prescribed 
 by the condition of such policy. 
 
 Fourth: Not to allow the payment of any 
 brokerage or rebate on any bus'ness placed or 
 written, except to members of the Unions above 
 named, their agents, solicitors or brokers. 
 
 Fifth : Not to allow the payment of more 
 than 15 per cent commission as brokerage on 
 Inisiness placed. 
 
 Sixth: Not to pay any country agent more 
 than IS per cent as agency comm'ssion (save on 
 growing grain and grain in warehouse on which 
 agency commission must not exceed 20 per 
 cent). 
 
 Seventh: Not to allow any insurance to be 
 placed with any company not represented in 
 this Union, nor to allow any insurance to be 
 accepted from agents of companies not mem- 
 bers of the Union. 
 
 Local LTnions will be formed as rapidly as 
 possible by the s'gning of agreements by all 
 the local agents of each district, and special 
 rates will be made as soon as possible on all 
 the business risks of your town. 
 
 Until such special rates are made, the rates 
 and rules prescribed in Book of Rates No. 4, 
 will be the rates and rules of this Union in your 
 agency territory, subject to such changes as 
 may be promulgated by the executive com- 
 mittee and general manager. 
 
 The tariff rates made bv the "Idaho and 
 
 Montana Underwriters Association" are hereby 
 abrogated. 
 
 To avoid some of the annoyances incident to 
 the establishment of the system of supervision 
 of risks in this office, agents are requested to 
 make careful diagrams and descriptions of 
 premises insured and their exposures, when not 
 accurately described on Sanborn map. Reports 
 of renewals of old business should have new 
 diagrams attached. 
 
 All applications and daily reports of risks 
 taken or renewed, accounts current, reports of 
 endorsement and written evidences of return 
 premiums relating to business which you write 
 for principals in St. Paul, Chicago or other 
 Eastern cities, must be forwarded to them in 
 envelopes properly addressed, enclosed in cover 
 address "Pacific Insurance Union, Salt Lake 
 City, Utah." 
 
 Remittances, however, should be sent direct, 
 and not through the union office. 
 
 Reports of business to Pacific Coast man- 
 agers must be forwarded direct to them, to be 
 by them delivered to the office of the Union 
 in San Francisco. 
 
 Sub-agents reporting to general agents in 
 Montana, Idaho or Utah can continue to send 
 their papers direct to such general agents, who 
 must forward same to proper office for ap- 
 proval. 
 
 Yours truly, 
 
 Alfred Stillman, General Manager. 
 
 [Page Twelve] 
 
FIRE liXSURANCE DEVELOPMENT 
 
 Chapter VI 
 
 A DECADE WITH THE PACIFIC INSURANCE UNION 
 
 ALMOST clev^en years was the span of 
 life of the Pacific Insurance Union, but 
 the latter period of its existence was 
 marked by a greater flurry and excitement in 
 fire insurance than has been witnessed since 
 that time. 
 
 When the "big" and "little" Boards dis- 
 banded in 1884, and the members thereof 
 joined to form the Pacific Insurance Union, 
 the new body was, by no means, a strong 
 organization, as will be seen in the following 
 account of the early trials and tribulations of 
 the organization. In the late spring of 1884 
 the union began to function officially with the 
 establishment of an office in the old Home 
 Mutual building on Sansome street, between 
 Pine and California. 
 
 The membership was composed of individ- 
 uals and firms, companies having no direct 
 interest in the organization. At one time every 
 company representative was a member of the 
 Union. In January, 1885, half a year after 
 the organization had been formed, the mem- 
 bership was comprised of the following: Hop- 
 kins & Bromwell, Hutchinson & Mann, Geo. 
 C. Boardman, J. F. Houghton, Chas. R. Story, 
 Hugh Craig, William J. Landers, Smith, Snow 
 & Moody. A. P. Flint, C. F. Mullins, Tom C. 
 Grant. W. J. Callingham, Jacobs & Easton, 
 Brown, Craig & Co., John H. Wise, Chas. 
 A. Laton. Robert Dickson. J. A. Jones, Butler 
 & Haldan. C. L. Taylor, E. E. Potter. Jos. C. 
 Jennings & Co., Chas. D. Haven, D. J. Staples, 
 William J. Dutton, Walter Speyer, William 
 P. Jones, William F. Blood, George D. Dornin, 
 Gutte & Frank, Speyer & Herold, Gustave 
 Touchard. James D. Bailey, Harry W^. Syz, 
 George W. Spencer. P. J. White, R. G. Brush, 
 A. J. Bryant, Chas. H. Gushing, Cesar 
 Bertheau, William Macdonald, Franz Jacoby 
 & Co., Hagan, Manheim & Co., Jonathan Hunt 
 Sons & Co., Oliver Hawes, H. M. Newhall & 
 Co.. J. M. Philip, and D. L. Beck & Sons. 
 
 Chas. R. Story was president of the Union, 
 A. E. Magill, vice-president, and Chas. D. Haven 
 served as secretary. 
 
 UNIMPORTANT FACTOR 
 
 The Pacific Insurance Union, unlike the Pa- 
 cific Board, which represents organized fire in- 
 surance today, was not a very important fac- 
 tor in the Pacific Coast fire underwriting v/orld 
 at its outset. The office of the Union was a 
 small room, in which was one desk. The actual 
 
 work of conducting the organization was di- 
 vided between Alfred Stillman, general man- 
 ager, E. F. Mohrhardt, his assistant, and Chas. 
 M. Nichols, surveyor. 
 
 Although such an organization as the Pacific 
 Insurance LInion -was deemed necessary to the 
 good and welfare of Pacific Coast fire unier- 
 writing, members did not take it very seri- 
 ously at first. It is related that often when a 
 representative told a clerk in an office that he 
 came from the Union, the latter was puzzled, 
 and declared that he knew of no organisation 
 bearing this name. Collecting assessments 
 from many of the members was a difficult task 
 during the early years of the Union. How- 
 ever, as the fire underwriting organization 
 grew in activity, this indifference disappeared. 
 
 Montana, Idaho and Utah were taken into 
 the jurisdiction of the Pacific Insurance Union 
 in January, 1886, as district C, a branch office 
 being opened at Salt Lake to care for this ter- 
 ritory. Oregon and Washington were included 
 in the latter part of 1887, the Union then cover- 
 ing all of the eight Pacific Coast States Head- 
 quarters of the organization were always main- 
 tained at San Francisco. 
 
 As stated in the preceding chapter, the princi- 
 pal functions of the Pacific Insurance Union 
 were promulgating rates, and regulating com- 
 missions. With each succeeding year follow- 
 ing its organization the Union gained in pres- 
 tige. Although there was squabbling and 
 fighting at times, which was to be expected in 
 an organization of this kind, it appeared as 
 though the Union was to take a permanent 
 place in Pacific Coast fire underwriting affairs. 
 In 1892 it was threatened for a short time with 
 disruption, when the Home of New York, 
 Phoenix of Hartford, Continental and the 
 Northwestern National representatives resigned 
 from membership. All four companies were 
 conducting a large business in this territory, 
 and it was feared that others might follow suit. 
 However, matters were adjusted, and dissolu- 
 tion was prevented. 
 
 COMPETITION KEEN 
 
 During this period of Pacific Coast fire un- 
 derwriting, companies were allowed to have 
 agents at San Francisco as elsewhere. They 
 also employed men who were known as so- 
 licitors. With the coming to the Coast of many 
 more companies each year, competition for 
 business grew keener, and general agents and 
 managers cast their eyes about for the agents 
 
 [Fayc Thirteen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 who controlled the most business, and the so- 
 licitors who were the best hustlers. In their 
 eagerness to secure volume, company managers 
 sometimes overlooked Union rules. Early in 
 1894 it came to the attention of those man- 
 agers who were living up to their agreem.ents, 
 as members of the Union, that excess commis- 
 sions were being paid to San Francisco agents 
 and solicitors by some of the managers. This 
 practice grew, and before many months had 
 passed, each manager was suspicious of the 
 
 other and in self-defense did not hesitate 
 to violate rules and regulations. .Then rates were 
 cut. and rebating took on large proporrions. 
 
 The situation was growing hopeless da}" by 
 day. Efforts to come to an understanding 
 were fruitless. A break was evident. During 
 1894 twenty companies either withdrew from 
 the Union or gave notice that they would soon 
 retire. And, subsequently, in February, 1895, 
 the Pacific Insurance Union breathed its last. 
 
 Pacific Insurance Union. 
 
 General manager-s Office. 
 
 401 CALIFORNIA STREET. 
 
 )Zycx.M^ ^1 
 
 -J J^^e-c-t-KM.'Z^,^ ^J, JSS^. 
 
 M G Fire ilnsurance Agents in the Terrilori^ of DytGnlaria: 
 
 '^Q^it^LJL-i^i^ : 
 
 ANNOUNCING THE PACIFIC INSURANCE UNION 
 
 Whenever the Pacific Insurance Union extended Its jurisdiction, a notice was sent out to agents in the 
 
 new territory. The above is a reproduction of part of a notice sent to agents in the "Territory of IVIon- 
 
 tana." The notice is not handwritten, as it appears to be, but is printed in a peculiar style of type, 
 
 used frequently in the iate eighties. Notice is reproduced by courtesy of E. F. Mohrhardt 
 
 {Page Fourteen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter VII 
 
 THE RATE WAR OF 1895 AND 1896 
 
 TWO years of bitter warfare between Pa- 
 cific Coast fire underwr'ters had begun. 
 The hatred, which was raised, is evidenced 
 in a report of an early contemporary to the fol- 
 lowing effect: "San Francisco was from the 
 outset a common battleground, and in this 
 field was never even a truce called to bury 
 the dead." 
 
 As was stated in the preceding chapter, pay- 
 ment of excess commissions, rate cutting and 
 rebating resulted in the dissolution of the Pa- 
 c'fic Insurance Union. Immediately thereafter 
 the Board of Fire Underwriters of the Pacific 
 was organized. This was in February, 1895. 
 The president of the Board, George W. 
 Spencer, dispatched telegrams to local agents 
 in the principal cities and towns on the Pa- 
 cific Coast notifying them to continue to ob- 
 serve the rates issued by the Pacific Union. 
 
 MEMBERS OF BOARD 
 
 Unlike previous organ'zations, the Pacific 
 Board included companies among its member- 
 sh'p and not general agents or managers. The 
 following companies were the charter members 
 of the Board: Aachen & Munich, Aetna, Agri- 
 cultural, Alliance of London, American Cen- 
 tral, American of New York, American of 
 Ph'ladelphia, American of Newark, Atlas, Bal- 
 oise, British America, Broadway, Caledonian, 
 Commercial Union Assurance, Connecticut, 
 Delaware, Fire Association, Fireman's Fund, 
 Fireman's of Baltimore, German American, 
 Germana, Glens Falls, Girard, Greenwich, 
 Hamburg-Bremen, Hanover, Hartford, Hel- 
 vetia Swiss, Home of Utah, Home Mutual, Im- 
 perial, Insurance Company of North America, 
 Insurance Company of Pennsylvania, Lanca- 
 shire, Lion, Liverpool & London & Globe, Lon- 
 don & Lancashire, London Assurance, Mag- 
 deburg, Manchester, Merchants' of New Jersey, 
 Milwaukee Mechanics, National, New Zea- 
 land, New York Underwriters, Niagara, 
 North British & Mercantile, North Ger- 
 man, Northern Assurance, Northwest F. & 
 M., Norwich Union, Orient, Pacific, Pala- 
 tine, Patr'otic, Pennsylvania, Phenix of 
 Brooklyn, Phoenix of London, Prussian Na- 
 tional, Providence-Washington, Queen, Rhode 
 Island Underwriters, Royal Exchange, Royal, 
 Scottish Union & National, Springfield, St. 
 Paul, Sun of Calif orn'a. Sun of London, Svea, 
 Teutonia, Traders', Transatlantic, Union of 
 Philadelphia, Union of London, United Fire- 
 
 men's, United States Fire, Westchester and 
 the Western. 
 
 Eighty-one companies out of the 110 licensed 
 by the State were members of the Pacific 
 Board when it took over the activit'es of the 
 Pacific Union. Twenty-nine companies were 
 outlaws. However, during the rate war of 
 1895-96, the original number was cut down by 
 degrees. The Board during these years was 
 not a stable organization. Two months after 
 it had been formed, four companies resigned 
 from membership. After that, resignations 
 were common occurrences. 
 
 Several of the non-Board companies, whch 
 were particularly strong, were always a jump 
 or two ahead of their competitors in the Board. 
 The former would invade a town, cut the rate 
 on every building in town, pay excess com- 
 miss'ons and rebate to such an extent that 
 before the Board membership was aware of 
 this procedure, "the town had gone non- 
 Board." Then Alfred Stillman. who was chair- 
 man of the executive committee, would notify 
 Board agents, in the town invaded, that Board 
 rates were suspended. However, the non- 
 Board compan'es had, by this time, made their 
 clean-up, and with rates suspended, what busi- 
 ness remained was fought for by the Board 
 companies. 
 
 Suspension of rates spread like wildfire. In 
 a little over a half a month the State of Cali- 
 fornia was thrown wide open. It is interesting 
 to note how fast the rate war progressed. The 
 first "ultimatum" was sent out by the Pacific 
 Board on March 28, 1895, as follows: 
 
 "Resolved, That rates in Alameda county be 
 suspended from today noon." 
 
 On April 2d: 
 
 "Resolved, "That rates in San Jose and within 
 a radius of five miles from the city hall be 
 suspended from today noon * * *." 
 
 On April 4th: 
 
 "Resolved, That all rates in Pasadena be 
 suspended from today noon." 
 
 "Resolved, That rates in Grass Valley be 
 reduced 25 per cent from today noon * * *." 
 
 Also on the same day agents at Missoula, 
 Mont., were informed of the following reso- 
 lution adopted by the executive committee of 
 the Pacific Board: 
 
 "Resolved, That agents be permitted to re- 
 write their own risks at any rate of premium 
 wth the non-cancellation clause attached. It 
 
 '_ Page Fifteen ] 
 
FIRE INSURANCE DEVELOPMENT 
 
 being understood that this permission does not 
 extend to the policies of any other Board com- 
 panies, but does permit the writing of new 
 business." 
 
 From the above resolution it will be noted 
 that members of the Board were allowed to 
 cut rates in competition with each other for 
 new business. 
 
 The first large disturbance came w'th the 
 Board notice of April 5th. It was announced 
 that rates in Los Angeles, except on specal 
 hazards that were rated at 2 per cent or over, 
 would be suspended the next day. It was 
 deemed mere folly to carry on this rate sus- 
 pension program town by town, so on April 
 16, 1895, at a general meeting of the Board, the 
 following resolution was adopted: 
 
 "Resolved, That it is the sense of this meet- 
 ing that all rules and rates in the State of Cali- 
 fornia be suspended on and after the 20th inst., 
 excepting in places where the situation is con- 
 trolled by local Boards, or local agency agree- 
 ments, and that members be permitted to so 
 notify their agents." This was the first climax. 
 
 Rates were reduced 20 per cent, except on 
 special hazards rating 2^^ per cent or over, in 
 the following Pacific Coast cities and towns on 
 April 19th, which became known as "the grand 
 slaughter day:" Oregon — Portland (rates 
 were restored on April 25th), Albany, Salem, 
 Corvallis, Eugene, Roseburg, Ashland, Pendle- 
 ton, The Dalles; Washington — Seattle, Ta- 
 coma, Olympia, Walla Walla, Spokane, Port 
 Townsend; Montana — Helena, Butte, Great 
 Falls, Bozeman, Anaconda. 
 
 Never in the history of fire insurance has 
 a rating organization had such a stormy 
 career, as was experienced by the Board of 
 Fire Underwriters of the Pacific during a period 
 of three months. From its commencement of op- 
 erations on February 1, 1895, until it virtually dis- 
 banded May 7, 1895, there were meetings of gen- 
 eral agents and managers practically every day. 
 And these sessions were far from being tea 
 parties. They often ended with several members 
 resigning or threatening withdrawal from the 
 Board. If this was not the order of business at- 
 tention was given to suspending rates. 
 
 The grand crash came on May 7, 1895, when 
 the executive committee of the Board suggested 
 that all the functions of the organization as far 
 as they applied to District A, and as much of 
 District B, as was confined to the State of Cal- 
 ifornia, be suspended. The proposal was adopted 
 and the Board, for the time being, went into 
 oblivion. 
 
 BUSINESS RUNS WILD 
 
 From May until December of that year, the 
 fire insurance business on the Pacific Coast ran 
 wild. There were no agreements in force be- 
 tween companies. They made their rates as they 
 willed. The sentiment generally was "every man 
 for himself and the devil take the hindmost." 
 
 It might properly be thought that the year 
 1895, during which the greatest rate cutting took 
 place, was exceedingly unprofitable for the com- 
 panies. The present-day underwriter would be 
 justified in wondering why home office authori- 
 ties did not insist that departmental managers 
 correct their ways, and establish a little brotherly 
 love. A side light is thrown on the situation by 
 a report of M. R. Hjggins, insurance commis- 
 sioner for the State of California during the 
 year 1895. In his annual report to the Gover- 
 nor, he stated: 
 
 "There is a great hue and cry made about the 
 terrible losses of the insurance companies in this 
 State, but the losses are all calculated upon the 
 rate charged for the past few years. Taking this 
 as a basis, the companies claim to have lost, dur- 
 ing the last year, about $2,000,000. But the fact 
 is overlooked that the rate has steadily increased 
 since the formation of the compact, until just 
 before the rate war it was fully 20 per cent 
 higher, and this notwithstanding the marked in- 
 crease in the efficiency of the fire departments 
 in every city of the State, the invention of auto- 
 matic sprinklers, and the general increased 
 strictness concerning building construction. 
 
 "I have never heard it claimed that immedi- 
 ately prior to the formation of the compact, the 
 companies were doing a losing business in this 
 State, for the fire loss rate then was lower than 
 the average for twenty-one years, including the 
 very high rate of last year, and the expenses cer- 
 tainly proportionately no higher. The margin 
 at that time over losses and expenses was about 
 25 per cent. If, then, we compute the loss ac- 
 cording to the rate prevailing at that time, we 
 find the companies wrote the business of 1895 
 for about $700,000 less than they would have re- 
 ceived at the old rate. But, as there was a mar- 
 gin of 25 per cent in the old rate, it will not do 
 to say that, even writing at the rate of last year, 
 the companies sustained much, if any, loss. This 
 is borne out, also by the sworn reports of the 
 companies, which show that the loss ratio last 
 year was 60.6 per cent, and, adding 35 per cent 
 for expenses, there was still a small margin left." 
 
 That the companies were able to stand the 
 strain of the rate war is also evidenced by the 
 fact that but a few were forced to retire from 
 
 [Page Sixteen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 the Pacific Coast field because of their disastrous 
 experience. 
 
 WILLING TO CALL TRUCE 
 
 Several managers and general agents were 
 willing to call a truce after the first year of war- 
 fare, 1895, but there were too many, who still 
 regarded their competitors with suspicion, and 
 balked at an alliance. However, on December 
 20, 1895. thirty-nine company representatives at 
 San Francisco met and came to the first under- 
 standing since control of affairs went out of the 
 hands of the Pacific Board in the preceding May. 
 They agreed not to write for a longer period 
 than one year on certain classifications. This 
 was but a feeble attempt to restore order. 
 
 A call was next issued for a meeting to be 
 held at Del Monte, Calif., on March 30, 1896, to 
 
 consider plans for the formation of a board of 
 underwriters. For a time it was believed that 
 some agreement would be reached. Managers 
 for the principal companies attended the meet- 
 ing, and, aftf^r three heated sessions, morning, 
 afternoon and evening, the gathering was forced 
 to adjourn with nothing accomplished, other than 
 having further increased the hatred between the 
 various managers and company representatives. 
 However, rate cutting had already reached its 
 greatest intensity, and it was recognized that it 
 was only a matter of time when the situation 
 would be under control again. Although a com- 
 plete failure, the 1896 meeting at Del Monte, 
 made it evident that a rating organization was 
 wanted. Personal antagonisms prevented i*- 
 from becoming a realization at this time. 
 
 Although work in the in- 
 surance offices progressed 
 slowly in the late eighties, 
 since there were no type- 
 writers, adding machines, 
 etc., to speed up the day's 
 labor, time was found for 
 play. The Imperial nine, 
 pictured above, was one 
 of several insurance 
 company baseball teams 
 which invariably gave a 
 good account of itself on 
 the diamond 
 
 [Page Seventeen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter VIII 
 
 PACIFIC BOARD REORGANIZED 
 
 FROM Api-:i. 1896, until April. 1897, the Pa- 
 cific Coast rate war was not carried on as 
 intensively as during the first year of tariff 
 slashing. The non-Boarders had made their 
 cleanup during the year 1895 and the early part 
 of 1896, and there was little left to fight over. 
 Furthermore, managers for all companies were 
 beginning to realize that the business could not 
 be profitable if they continued to cut rates and 
 pay high commissions. 
 
 When a call was again issued to meet at 
 Del Monte on March 30, 1897, to discuss the 
 possibilities of forming a rating organization, 
 many of the managers answered the summons, 
 hoping that the war was over. It was. And 
 as a result the Board of Fire Underwriters of 
 the Pacific was reorganized, and has been 
 steadily functioning up to this day. 
 
 BOARDS PRESERVE SITUATION 
 
 That there was not considerable confusion in 
 getting back to an orderly basis was due to 
 the fact that the formation of local and terri- 
 torial Boards, during the two years of rate 
 war, made it possible for fire insurance prac- 
 tices to be regulated immediately. At the com- 
 mencement of the rate war the Northwest In- 
 surance Association controlled the situation 
 somewhat in the States of Oregon and Wash- 
 ington. Many of the agents in the Mountain 
 States were likewise more or less united. To 
 care for the interests of agents, local Boards 
 were organized at several of the larger cities 
 in California. Boards were formed at Los 
 Angeles, Sacramento, Marysville and San Jose. 
 Later, several of the important cities in Ala- 
 meda county followed suit. 
 
 Upon the reorganization of the Pacific Board, 
 the Pacific Coast territory was divided into six 
 sections. San Francisco was known as Dis- 
 trict A. California, with the exception of that 
 part included in Districts A and C, Nevada and 
 Alaska were District B. District C was com- 
 posed of Southern California counties and 
 Arizona. Oregon, Washington and Idaho were 
 known as District D, Montana as District E, 
 and Utah as District F. Managers were ap- 
 pointed for each district, while the head office 
 of the Pacific Board at San Francisco was 
 placed in charge of Alfred Stillman, who was 
 secretary to the executive committee, and E. 
 F. Mohrhardt, secretary of the Board. 
 
 The following resolution, adopted at the 
 Del Monte meeting in 1897, re-established the 
 Board of Fire Underwriters of the Pacific: 
 
 "Resolved — That pending the promulgation 
 of rates of premium as provided in Article 5 
 of the constitution, the rates and rules of the 
 Board of Fire Underwriters of the Pacific 
 which were in force on the 27th March, 1895, 
 are hereby adopted as an ad interim measure, 
 to be effective from noon March 30, 1897, in- 
 cluding such changes as have been heretofore 
 made by the Northwest Insurance Association, 
 Montana Board of Fire Underwriters, Board of 
 Fire Underwriters of Utah, the Arizona Un- 
 derwriters, the Southern California Insurance 
 Association and all local Boards now in ex- 
 istence in the State of California. It being 
 understood that the authority to promulgate 
 rates for all territory under its jurisdiction is 
 hereby vested solely in the Board of Fire Un- 
 derwriters of the Pacific. That compensation 
 to all agents, solicitors and brokers, permitted 
 by this constitution shall be strictly adhered 
 to on and after April 7, 1897 — in the meantime 
 no member shall be permitted to increase com- 
 pensation to agents, solicitors or brokers, and 
 that all agents' shall file the agreement re- 
 quired by the constitution on and after May 
 1, 1897. 
 
 'Tn San Francisco policies may be written for 
 such applications as are now on file but after 
 the adjournment of this meeting no applica- 
 tions shall be received except upon the explicit 
 understanding that the policies thereon shall 
 be written at the tariff rates as above estab- 
 lished. 
 
 "Every member shall immediately notify each 
 of his agents of the rate of compensation to 
 which he is entitled under the constitution 
 and no member shall cancel any contract with 
 an agent for a consideration without the con- 
 sent and approval of the executive committee, 
 nor agree to make any allowance, payment, 
 present or other valuable consideration of any 
 kind or character to any of his representa- 
 tives, or to any one for their account." 
 
 Thus the war was over. And in the words 
 of a contemporary of 1898, "As their battles 
 are fierce and unrelenting, so is their peace, 
 fair and honorable." 
 
 [Page Eighteen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Considerable improvement lias been made upon fire protection apparatus and appli- 
 ances during the past few years. Fire departments in the principal cities of thi3 
 country have been almost completely motorized within the past decade. However, 
 the apparatus used by fire departments even during the closing years of the nineteenth 
 century was extremely crude, compared with modern standards. The fire cart pic- 
 tured above was once considered "good." Cut by courtesy of Fireman's Fund 
 
 Chapter IX 
 
 CLOSING YEARS OF THE NINETEENTH CENTURY 
 
 THE past twcnty-fivc years have seen a vast 
 change in the fire insurance business as 
 conducted on the Pacific Coast. Today fire 
 underwriting practices are as different from 
 those of the closing years of the nineteenth cen- 
 tury as they are from the methods of running 
 the business in the early days. It will be noted 
 in this chapter that fire insurance practices 
 have greatly improved during the past quarter 
 century. 
 
 Following the reorganization of the Board 
 of Fire Underwriters of the Pacific on March, 
 30. 1897. the activities of several non-Board 
 companies were still marked in various sec- 
 tions on the Coast. When it was realized that 
 these non-Board offices were writing a good 
 portion of business, reinsurance arrangements 
 between Board companies and the outsiders 
 were encouraged through an amendment to the 
 general rules of the Board which allowed ac- 
 ceptance of reinsurance, as long as the busi- 
 ness was written at full Board rates. 
 
 The first attempt of a local Board to induce 
 the Pacific Board to finance the former's or- 
 ganization resulted in the strict ruling that 
 " * * * expenses of any organization other 
 
 than the Board of Fire Underwriters of the 
 Pacific can not be paid." 
 
 NO CREDIT ALLOWED 
 
 Regarding the credit rule. In July, 1897, 
 Board agents throughout the Pacific Coast 
 were informed that the premium on every 
 policy would be due and payable on the date 
 on which the insurance took effect. 
 
 Lack of interest and harmony in Pacific 
 Board circles had disrupted the organization 
 once, and in order to prevent any such occur- 
 rence again the followin;^ resolution was 
 adopted in the latter part of 1897: 
 
 "Resolved — That the roll be called promptly 
 at time of call for meeting, and that each 
 member who reports 'present' in person at roll 
 call be credited $2.50 and that the same be 
 deducted from the amount of the next assess- 
 ment following." 
 
 At the same time a rule was also passed to 
 the effect that any agent, broker, solicitor or 
 employe of the Board, who was convicted 
 three times of willful violation of any rule or 
 agreement, should be disqualified and lose his 
 position. 
 
 [Page Nineteen] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Not until the year 1898 did sprinkler pro- 
 tection receive any attention from Pacific 
 Coast general agents and managers. In Feb- 
 ruary of that year, the Pacific Board sent out 
 the following circular: 
 
 Reduction for Sprinkler Equipment 
 
 That a maximum reduction of 40 per cent be 
 allowed on all wet-pipe sprinklered risks and 
 33y3 per cent on all dry-pipe sprinkler risks, 
 when fully equipped in accordance with the 
 rules of the Board. Said reductions to be made 
 only in manufacturing risks and special haz- 
 ards. 
 
 When it is impracticable to follow the Board 
 standard or equipment, the following reductions 
 shall be made from the maximum allowances 
 for the deficiency set forth. Each policy writ- 
 ten at reduced rate must bear not less than 
 70 per cent co-insurance clause : 
 
 One water supply 50 per cent 
 
 Fire pump not automatic 25 per cent 
 
 No watchman 25 per cent 
 
 Watchman but no clock 15 per cent 
 
 No reliable alarm valve 15 per-cent 
 
 REVENUE STAMPS ON POLICY 
 
 On July 1, 1898, a Government revenue law 
 went into effect, which provided that before 
 a fire insurance policy could be delivered, in 
 ternal revenue stamps had to be affixed. For 
 each dollar a one-half cent stamp was nec- 
 
 essary. Before delivery of the policy the 
 stamps affixed had to be canceled by writing 
 or stamping the initials of the person issuing 
 the policy, and the date upon which the stamps 
 were canceled. Companies cautioned agents 
 against affixing stamps to policies which they 
 were not certain would be accepted by the as- 
 sured. 
 
 In the summer of 1898 rates were reduced 
 at San Francisco upon the equipment of a 
 full-paid fire department. As regards allow- 
 ance for co-insurance the following schedule 
 was effective in San Francisco: 
 
 "* * * special rates of buildings and 
 stocks, including brick theatres in San Fran- 
 cisco, other than special hazards, or public 
 warehouses, are subject to reduction for co- 
 insurance as follows: 
 
 Brick Buildings 
 
 70 per cent co-insurance 15 per cent 
 
 80 per cent co-insurance 20 per cent 
 
 90 per cent co-insurance 25 per cent 
 
 Contents of Brick Buildings 
 
 80 per cent co-insurance 10 per cent' 
 
 90 per cent co-insurance 15 per cent 
 
 Frame mercantile buildings and stocks, other 
 than special hazards or public warehouses: 
 90 per cent co-insurance 10 per cent 
 
 In this chapter it has been endeavored to 
 point out a few of the practices, rules and rates 
 which prevailed during the years 1897-98-99. 
 
 Note the qas jets, old fashioned wall clock, and "youthful" clerks. The above scene represents a busy 
 oiffice in the latter part of the nineteenth cer.tury. Incidentally this was the home office of 
 the Fireman's Fund at San Francisco 
 
 [Pafre Twenty] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter X 
 
 THE DAWN OF A NEW ERA 
 
 WITH the commencement of the twenti- E. Myron Wolf, for the year 1905. The totai 
 
 eth century, it can be stated appropri- premium income during the year was $10,353,- 
 
 ately that a new era in fire underwriting 046, with losses paid amounting to $3,883,540. 
 
 on the Pacific Coast was at hand. It was now or a loss ratio of 38 per cent. The growth of 
 
 three years after the great rate war of 1895-96. the busmess m California during the years 1900 
 
 and the fire insurance business was again in to 1906 is reflected in the following table: 
 
 full swing. Year Premiums Losses Paid Ratio 
 
 During the period 1900 to 1906, the advance- 1900 $ 5,795,507 $2,430,242 42 
 
 ment made by fire underwriters in this section 1901 7,522,401 2,344,581 31 
 
 of the country was noteworthy. Rates were 1902 7,339,984 2,655,302 36 
 
 regulated so that they imposed no hardship 1903 . 8,288,355 4,342,786 52 
 
 upon the assured, nor were they too low for 1904 10,104,033 3,830,253 38 
 
 the companies to make a profit. Loss ratios 1905 10,353,808 3,883,540 38 
 
 varied but slightly during the first five years of During 1905, approximately 7 per cent of the 
 
 this century, and never soared high enough to fire insurance business transacted in this State 
 
 trouble companies. was written by California companies. Com- 
 
 The antagonism which had developed be- panics of other States wrote 54 per cent, and 
 
 tween fire insurance managers, as the result of companies of foreign countries wrote 39 per 
 
 the rate war, had now entirely disappeared. cent. The risks in force at the close of the 
 
 These conditions make it clear why the San year 1905 totaled $933,465,614. 
 
 Francisco conflagration of 1906 halted the pro- One hundred and six companies transacted 
 
 gress of the business only for the time being. a fire insurance business in California during the 
 
 rArcrro^Ar^E- r ^ tj7 c wArfTc ^^^^ ^^^^- '^^^ following companies operated 
 
 INSURANCE LAWS VAGUt in this. State prior to the 1906 conflagration: 
 
 The first agitation against underwriters' an- Organized in California — the California, Fire- 
 
 nexes was voiced during this period, as it was man's Fund and the Home Fire i& Marine, 
 
 then that various companies were organizing Organized in other States— Aetna, Agricul- 
 
 these agencies. An insurance commissioner m ^^ral. Alliance, American of Newark, Ameri- 
 
 one of the Pacific Coast States vehemently de- can of Boston, American of Philadelphia, 
 
 Glared that "this masquerading should not be American Central, Assurance Company of 
 
 permitted." America, Atlanta-Birmingham, Austin Fire, 
 
 Insurance laws in most of the States were British American, Caledonian-American, Calu- 
 vague and indefinite, which accounts for the met. Citizens, Commercial Union, N. Y., Con- 
 many suggestions constantly made for new cordia, Connecticut, Continental, Delaware, 
 legislation. California insurance department Dutchess, Eagle Fire, Equitable, F. & M., 
 records show the following outstanding recom- Fire Association, Franklin, German, German 
 mendations to have been made: Alliance, German-American, German Fire, Ger- 
 
 Submitting of all charters, articles of incor- mania Fire, German National, Girard F. & M., 
 poration, and other documents of similar char- Glens Falls, Globe & Rutgers, Hanover, Hart- 
 acter by a company, desiring admittance to the ford. Home, Indemnity Fire, Insurance Corn- 
 State, to the Attorney-General. pany of North America, Mercantile F. & M., 
 
 Annual licensing of all companies by insur- Michigan F. & M., Milwaukee Mechanics, Nas- 
 
 ance departments. sau. National, National Union, New Hamp- 
 
 Enactment of a law prohibiting a company shire, New York Fire, Niagara, North Ger- 
 
 from withdrawing from a State while it had man, North River, Northwestern F. & M., 
 
 any liability therein. Northwestern National, Orient, Pelican, Penn- 
 
 These suggestions indicate that laws during sylvania, Phenix, Phoenix, Providence- Wash- 
 
 the early years of the twentieth century were ington, Queen, Queen City, Rochester-Ger- 
 
 exceedingly lax. man, Security of Baltimore, Security of New 
 
 Some idea of the volume of stock fire busi- Haven, Springfield F. & M., Spring Gardens, 
 
 ness, which was transacted in the State of Cali- St. Paul F. & M.. Teutonia, Traders, Union of 
 
 fornia prior to the 1906 conflagration, is evi- Philadelphia, United Firemens, Victoria Fire, 
 
 denced in the report of Insurance Commissioner Westchester and Williamsburg City. 
 
 [Page Twenty-one] 
 
F[RE INSURANCE DEVELOPMENT 
 
 Companies organized in foreign countries — 
 Aachen & Munich, Alliance of London, Atlas, 
 Austrian Phoenix, British America, Caledonian, 
 Commercial Union, Hamburg-Bremen, Hel- 
 vetia Swiss, Law Union & Crown, Liverpool 
 & London & Globe, London Assurance, Lon- 
 don & Lancashire, New Zealand, North British 
 & Mercantile, Northern, North German Fire, 
 Norwich Union. Palatine, Phoenix Assurance, 
 Prussian National, Rhine & Moselle, Royal, 
 Royal Exchange, Scottish Union & National, 
 State. Sun, Svea, Transatlantic, Union Assur- 
 ance and Western Assurance. 
 
 It is interesting to note that out of the above 
 106 companies, seventy-two, including those 
 which have since changed their names, or re- 
 entered after withdrawing, are still writing fire 
 insurance in this State. The San Francisco 
 conflagration of 1906 was the great test of 
 financial soundness and stability of fire insur- 
 ance companies. Those which emerged dam- 
 aged but undaunted, and there was a large 
 number considering the extent of the catastrophe, 
 have proved to the world the stability of stock 
 insurance. 
 
 li 
 
 1=1 
 
 ■i^^rt^f^rgjfeaij^i^Ji^^: 
 
 During the closing years of tiie 
 nineteenth century the basement 
 or first story office shown herein 
 was considered as desirable as the 
 present-day ground floor head- 
 quarters. The late beloved Geo. D. 
 Dornin, who founded the Pacific 
 Coast general agency now con- 
 ducted by his sons, Geo. W. and 
 John C, can be seen in this 
 reproduction standing on the stair- 
 way to his office, which was lo- 
 cated at 409 California street. It 
 will be noted that Mr. Dornin rep- 
 resented the National Fire as well 
 as the Springfield, which is still 
 represented by his sons. 
 
 3l [ 
 
 [Page Tweiity-tzi'o] 
 
FIRE INSURANCE DEVELOPMENT 
 
 Chapter XI 
 
 THE SAN FRANCISCO CONFLAGRATION OF 1906 
 
 AT ABOL'T quarter past five on the morn- 
 ing of April 18, 1906, an earthquake of 
 unusual violence was felt along a con- 
 s'derable portion of the California Coast and at 
 San Francisco in particular. Few, if any, de- 
 scriptions tell better of the first impressions on 
 the eventful morning than that written by Geo. 
 W. Brooks, then, as now, secretary and man- 
 aging underwriter of the California Insurance 
 Company, in his book, "The Spirit of 1906." 
 Mr. Brooks states in part. 
 
 "I was bewildered, dazed, and only awakened 
 fully when my wife suddenly screamed, 'Earth- 
 quake!' It was a whopper, bringing with it a 
 ghastly sensation of utter and absolute help- 
 lessness and an involuntary prayer that the vi- 
 brations might cease. Short as was the period 
 of the earth's rocking, it seemed interminable, 
 and the fear that the end would never come 
 dominated the prayer and brought home with 
 tremendous import the realization of our in- 
 significance, of what mere atoms we become 
 when turned on the wheel of destiny in the 
 midst of such abnormal phenomena of na- 
 ture's forces." 
 
 FIRES FOLLOW EARTHQUAKE 
 
 In the cities of San Francisco and Santa 
 Rosa the earthquake was followed by fires. 
 Uncontrolled, the fire raged in the former city 
 for two days. It was brought under control 
 on the third day, and ere the fifth day had 
 closed was entirely extinguished. It was esti- 
 mated at the time that, immediately following 
 the earthquake, as many as fifty fires started. 
 A few of these were promptly extinguished, 
 while the majority united with others and thus 
 spread the terror. The firemen were eager to 
 do their duty. But the Spring Valley Water 
 Companv's feed main had been broken, and 
 the outlook was dark. From an insurance 
 point of view, Brooks writes, "This was the 
 spur I needed. Fires and no water! It was 
 a call to duty." 
 
 Another unfortunate occurrence was the fatal 
 injury of Fire Chief Dennis Sullivan, who was 
 struck by a falling chimney and immediately 
 incapacitated from directing the eflForts of the 
 firefighters — work for which he was so well 
 qualified. Fortunately, however, there was 
 practically no wind, and the dynamiting of 
 bu'ldings finally checked the flames. 
 
 Progress of the fire fighters was further 
 hindered by many smaller causes. The unwise 
 
 use of dynamite resulted in several blazes start- 
 ing anew. A fire in the Hayes Valley district 
 was reported to have been caused by a woman, 
 who started to prepare breakfast after the 
 chimney of her house had been shaken down. 
 The blaze swept over several blocks of valu- 
 able property. Carelessness of soldiers, who 
 were on guard duty, is also blamed for sev- 
 eral fires. 
 
 ALL CLASSES LEVELED 
 
 Again quoting Mr. Brooks: "No lights nor 
 fires were permitted in the houses. It was 
 either retire at sundown or retire in the dark. 
 Whatever water was needed had to be car- 
 ried from the nearest well and even after the 
 mains had been restored to normal efficiency 
 this practice was continued for fear that the 
 possibly broken sewers might contaminate or 
 pollute the water. No fires or cooking were 
 permitted in any building until every chimney 
 and flue had been passed upon by authorities. 
 * * * a food station was opened across the 
 street in an old carriage house which belo.nged 
 to J. L. Flood. Here lines would form to re- 
 ceive rations, the millionaire rubbing shoulders 
 with the laborer. The panhandler got as much 
 as the plutocrat. The disaster leveled all 
 classes. A million dollars in one's pocket 
 would have been of little use. Noth'ng could 
 be bought with it, and it could not serve as 
 either food or drink," 
 
 The records of the California insurance de- 
 partment were saved from the great conflagra- 
 tion. This was exceptionally fortunate, not 
 only because of the value of the records but 
 because of the litigation which followed the 
 1906 disaster. The department reported that 
 the fire had burned over an area of 2593 acres, 
 or 4.05 square miles. Nearly 25,000 buildings, 
 including residences, were destroyed. From 
 official data the loss was estimated at $350,000,- 
 000, on which there was about $250,000,000 in- 
 surance. Eighty per cent of the loss was set- 
 tled by the companies. 
 
 The fires following the earthquake had 
 hardly been extinguished before all thoughts 
 were turned to the insurance phase of the 
 situation. Questions as to the liability of 
 the fire companies, and their ability to meet 
 their obligations, were heard on all sides. 
 Insurance Commissioner E. Myron Wolf re- 
 ported, "* * * the insured generally had 
 given but little consideration to the contents 
 
 [Page Tzvcnty-thrcc] 
 
FIRE INSURANCE DEVELOPMENT 
 
 of his policies, or to the financial standing of 
 the companies in which he had purchased in- 
 demnity, and many ordinarily careful business 
 men had failed to give the close attention to 
 this important feature of commercial activity 
 that generally prevails in commercial affairs." 
 
 Practically all of the insurance companies 
 moved their Pacific Coast departments from 
 the fire-swept metropolis to Oakland, but the 
 insurance department took quarters in a flat 
 on Fillmore street, which had then become the 
 main business thoroughfare. It was at once 
 recognized that many of the companies were 
 badlj^ crippled financially by the conflagration 
 and, fearing adverse action by some of the in- 
 surance departments that would make loss set- 
 tlements more difficult, the California depart- 
 ment sent a letter to the commissioner of each 
 State, requesting that the utmost consideration 
 possible be shown, and the greatest amount of 
 discretion be exercised in dealing with them. 
 
 Through the daily newspapers, the insurance 
 department informed the public that all policies 
 required immediate notice of loss to be given 
 the company by each assured who had suffered 
 loss, and that this notice was to be followed 
 by a proof of loss. Many fire insurance com- 
 pam'es were accused of lack of tact in handling 
 the situation created by the grave disaster. It 
 was declared that many company managers 
 gave their assureds little, if any, satisfaction as 
 to the possibility and time of loss settlements. 
 However, if any of the managers lacked in 
 courtesy, it must be remembered that they 
 dealt with many claimants who were entirely 
 unreasonable. In fact, there were many who 
 tried to press dishonest claims. 
 
 A number of State agents, dissatisfied with 
 the methods adopted by their respective com- 
 panies in the matter of adjustment of losses, 
 resigned. In practically every instance they had 
 been associated with the companies for many 
 years. Prior to the 1906 conflagration, the 
 managers had the authority to adjust and settle 
 losses, and they realized that much business 
 had been placed with their companies on the 
 basis of personal friendship. When Eastern ad- 
 justers were sent here to handle losses, these 
 managers regarded such action as depriving 
 them of their power. This resulted in the ten- 
 dering of many resignations. 
 
 FORGET NAMES OF COMPANIES 
 
 A number of people had lost their policies in 
 
 the fire and did not know the names of the 
 companies with which they were insured. A 
 questionnaire was published in the news- 
 papers, calling upon those who had lost their 
 policies, and did not know the names of the 
 companies, to give specified data in reference 
 thereto. Lists of such unfortunate policy- 
 holders were then made up by the insurance 
 department, and sent to the secretary of a tem- 
 porary organization known as the Fire Un- 
 derwriters' Adjusting Bureau, which was com- 
 prised of all the companies, and were by him 
 submitted to the various managers. In this 
 manner the desired information was secured 
 for many of the policyholders. E. F. Mohr- 
 hardt was secretary of the adjusting bureau, 
 and under his management between 1350 and 
 1400 losses were adjusted, with a settlement of 
 approximately $90,000,000. 
 
 As the end of the period of s'xty days from 
 the conflagration approached, it became evi- 
 dent that, for various reasons, a great many 
 claimants would be unable to file their proofs 
 of loss within the time specified. The records 
 of the assureds and of the brokers, in many 
 cases, had been destroyed. Many were unable 
 to open the vaults which contained their books. 
 Apprec'ating the unusual conditions, and v/ith 
 a commendable spirit of fairness, some of the 
 companies voluntarily waived notice of loss in 
 writing and extended the time for filing proofs 
 of loss. 
 
 SUMMARY OF 1906 RESULTS 
 
 On August 1, 1907, Insurance Commissioner 
 Wolf published a complete summary of fire in- 
 surance results in California during the year 
 1906. This showed premiums received amount- 
 ing to $13,368,351. Losses paid during the 
 year totaled $146,306,377, showing a loss ratio 
 of 1094 per cent. The San Francisco confla- 
 gration had boosted the paid loss ratio for the 
 twenty-year period, 1887 to 1907, to 145 per 
 cent. In less than five days, whatever profit 
 had been made by fire insurance companies 
 operating in the State of California during 
 many decades was turned to a complete loss. 
 
 After order was restored, the verdict, in 
 reference to settlements, as coming from the 
 State insurance commissioner, was, "On the 
 whole, the companies made a remarkably good 
 showing." 
 
 [Page Txvcnty-four] 
 
FIRE INSURANCE DEVELOPMENT 
 
 SAN FRANCISCO AS OF 1906 
 Ruins at the northwest corner of Bush street and Grant avenue, following the big earthquake and con- 
 flagration. Three local insurance men are seen here adjusting the loss. These men, from left to right, 
 Chas. M. Hackmeier, Henry Louis and Sam Louis, are still engaged In the insurance business at this city 
 
 [Page Twenty-five] 
 
FJRE INSURANCE DEVELOPMENT 
 
 Chapter XII 
 
 A PERIOD OF RECONSTRUCTION 
 
 IN A previous chapter, attention was called to 
 the laxity of laws regulating fire insurance 
 practices in the State of California and on 
 the Pacific Coast. Not until the San Francisco 
 conflagration of 1906. did company officials, 
 managers and the public realize that the im- 
 mediate enactment of considerable legislation 
 was necessary for the interests of all. Com- 
 panies appreciated the fact that, unless they 
 were protected under certain conditions, their 
 welfare would be menaced. On the other hand, 
 the public clamored for legislation, which 
 would protect its interests under abnormal cir- 
 cumstances. 
 
 NEIV INSURANCE CODE 
 
 With the realization of the necessity for 
 proper insurance legislation, the California 
 Legislature of 1907 made this one of the prin- 
 cipal subjects of consideration. A complete 
 insurance code was drawn up, and adopted. 
 The main provisions of the code will be dis- 
 cussed in this chapter. 
 
 First of all, the amount of capital required for 
 the transacting of the various branches of in- 
 surance was increased. Prior to 1907, a com- 
 pany was permitted to transact both fire and 
 marine insurance if its capital was no less 
 than $200,000. Under the new California stat- 
 ute, companies, which wrote both fire and 
 marine, were required to have a capital of $400,- 
 000. Owing to the fact that certain California 
 companies requested time within which to in- 
 crease their capital stocks, it was arranged thai 
 the provision should not become operative 
 until January 1, 1908. Companies transactmg 
 business in California, which were organized 
 under the laws of foreign countries, were re- 
 quired to maintain a deposit somewhere in the 
 United Stiites, for the benefit of their policy- 
 holders, equal to the amount of capital stock 
 required of an American company. 
 
 Prior to the time under consideration there 
 had been a certain amount of laxity in the ad- 
 mission of companies to the State, especially in 
 the matter of legal requirements. A provision 
 was adopted by the 1907 Leg'slature, which re- 
 quired the submission to the Attorney-General 
 
 of all papers, upon which the certificate of au- 
 thority to a company to transact business in 
 this State was based. Regard'ng certificates of 
 authority, another change adopted provided 
 that an annual certificate be secured by each 
 company. 
 
 WITHDRAWAL PROCEDURE CHANGED 
 
 The law in reference to the procedure by 
 companies, upon withdrawal from the State, 
 was made more definite. Heretofore the statute 
 merely required that a company surrender its 
 certificate of authority, and that the insurance 
 commissioner make public such withdrawal. 
 Under the new provision, a formal application 
 for withdrawal was made necessary, and was 
 required to be published for one week; fol- 
 lowing that, an examination of the books of 
 the company to determine that it had no out- 
 standing liabilities and no outstanding policies 
 held b}' residents of the State, was required, all 
 expenses in connection with this procedure to 
 be paid by the company. 
 
 Among other features of the new code, sur- 
 plus line insurance was regulated; provision 
 was made for the securing of information from 
 companies by the assured; powers of general 
 agents were broadened, and the amount of their 
 bond was increased from $2000 to $20,000; 
 State fees were increased; time for filing annual 
 statements was advanced, and company invest- 
 ments were regulated. 
 
 DUTIES CLEARLY DEFINED 
 
 In short, the duties of the insurance depart- 
 ment and the companies were more clearly 
 defined, and the new legislation was in line 
 with that of other States at that time. 
 
 The embers of the 1906 conflagration were 
 still glowing, when San Franciscans turned 
 their attention to reconstructing the city. And 
 they wasted no time in rebuilding the homes 
 and buildings, which had been destroyed by 
 earthquake and fire. Similarly, no time was 
 lost in revising the State insurance code. Other 
 Pacific Coast States fell in line. The experi- 
 ence at San Francisco had, at least, caused a 
 great advancement in the fire underwriting 
 business and insurance legislation. 
 
 [Page Txiicnty-six\ 
 
FIRE INSURANCE DEVELOPMENT 
 
 Directly after the San Francisco conflagration of 190 6, the Pacific Coast general agency of Christenson 
 & Goodwin opened temporary headquarters at Oakland, Calif., along with other Pacific departmental 
 offices. The adjusting force of Christenson & Goodwin is shown above. Manager Benj. Goodwin is 
 standing in the center. He can be distinguished by his gray vest. On the right side of the front pole, 
 wearing a derby, is the late Major Christenson. Nine members of the above group are still in the 
 
 employ of Manager Goodwin 
 
 Chapter XIII 
 
 FULL STEAM AHEAD AGAIN 
 
 AS STATED in the preceding' chapter, the at- 
 tempts to correct the evils which existed as 
 the results of a laxity in fire insurance leg- 
 islation were made. Although a few of the laws, 
 which were adopted by the California Legislature 
 of 1907, were not in the best interests of either 
 the fire companies or the insuring public, a dis- 
 tinct step in advancement had been taken. In 
 fact, it remained now for the public to cut down 
 the fire waste, and thus prevent destruction and 
 excessive fire insurance rates. 
 
 CONDITIONS SUMMARIZED 
 
 No better summary of conditions generally as 
 to fire losses can be written, than that contained 
 in a report of the California insurance depart- 
 ment, which was made public early in 1908. Al- 
 though the report refers, in many instances, to 
 San Francisco, the conditions described existed 
 throughout the Pacific Coast, and in many parts 
 of the country. In part, it is as follows : 
 
 "The late reports of this department dealt in a 
 very large degree with the great San Francisco 
 conflagration loss of 1906. Reference was made 
 to the tremendous drain generally upon the re- 
 sources of this country through fire losses. Only 
 a country as rich as ours, blessed with such a 
 wealth of agricultural and mineral products, could 
 stand the drain. Statistics have been compiled 
 
 showing that the average per capita loss for the 
 five years ending December 31, 1907, is $3.02, 
 while the average per capita loss for Germany, 
 France, Italy, Austria, Denmark, and Switzer- 
 land, is 2)3 cents; that thirty foreign cities have 
 a per capita loss of 61 cents as against $3.10 in 
 the five years average of 252 cities in- this country, 
 and that the number of fires to each' 1000 of pop- 
 ulation in the same American cities is 4.05, as 
 against 0.86 for those of Europe. 
 
 "It is claimed that the loss by fire in the United 
 States for the year 1907 was nearly $200,000,000. 
 The indifference on the part of the people upon 
 this subject and their 'failure to appreciate its im- 
 portance are surprising. 
 
 UNFAVORABLE SHOWING 
 
 "It will be seen from these figures that this 
 country makes a very unfavorable showing in 
 comparison with European countries. It is 
 claimed that in Europe fires seldom get beyond 
 the building in which they originate. The people 
 are schooled and educated in the thought of tak- 
 ing great precautions to guard against fire dam- 
 age. In some of the European countries the law 
 makes a landlord responsible to the tenants and 
 neighbors for negligence if a fire starts from a 
 defect in the building, and if the fire is due to 
 the carelessness of the tenant he is held re- 
 sponsible to the landlord and his neighbors. 
 
 [Page Twciity-scvoi} 
 
FIRE INSURANCE DEVELOPMENT 
 
 "It is true that conditions are somewhat dif- 
 ferent in this country in that wood is much 
 cheaper and. therefore, much more generally 
 used, and the growth of our cities and towns 
 is much more rapid. The water supply and 
 the fire-fighting facilities do not keep pace with 
 th's growth; there is a failure to enact proper 
 building regulations, and a laxity in enforcing 
 those enacted; the many uses to which elec- 
 tricity is being put for both light and power, 
 the rapid construction of manufacturing plants, 
 and the fact that these are frequently com- 
 pelled to work overtime without shutting down 
 to overhaul the machinery, in order to meet 
 the demands made upon them, are all causes 
 that contribute to excessive waste by fires in 
 this country." 
 
 It was gratifying to fire underwriters to note 
 that the public responded to this appeal to pre- 
 vent fires and check the economic loss. Dur- 
 ing the ensuing decade, 1909 to 1918, the incur- 
 red loss ratio for the State of California, each 
 year, was as follows: 
 
 1909. 
 1910. 
 1911. 
 1912. 
 1913. 
 
 .31 
 
 1914 
 
 32 
 
 1915 
 
 .30 
 
 1916 
 
 .34 
 
 1917 
 
 44 
 
 1918 
 
 .41 
 .49 
 .35 
 .35 
 .32 
 
 The loss ratio for the ten years was 36 per 
 cent. The total premium income for the ten- 
 year period, 1909 to 1918, amounted to $166,291,- 
 355, or a yearly average of $16,629,135. Fire 
 underwriting again sailed smoothly. 
 
 ^ 
 
 ■'ll.VjMl 
 
 M», 
 
 Home offices of western companies were ne.ther outstanding nor landmarks 
 
 prior to the 1906 conflagration at San Francisco, as is evidenced by the 
 
 above picture of the headquarters of the California Insurance Company 
 
 from June, 1905, to April, 1906 
 
 [Page Twciity-eigitt] 
 
FIRE INSURANCE DEVELOPMENT 
 Chapter XIV 
 
 EFFECTS OF A WAR 
 
 WHEREAS it may be said that fire under- growing demand for almost all products grown 
 
 writing on the Pacific Coast was in- or manufactured in this country, and prices for 
 
 fluenced by conditions "within" during the same kept soaring, practically a complete 
 
 the first fifty years of the business in this section absence of moral hazard was noted. 
 
 of the country, powers "without" have exerted The efifects of the World War upon Pacific 
 
 their influence over fire insurance during the Coast fire insurance operations are evident by 
 
 past two decades. The development of fire scanning the following figures: 
 
 underwriting on this Coast, from 1852 to 1900, PACIFIC COAST FIRE BUSINESS 
 
 depended largely upon the co-operation between Pal^j Incurred 
 
 underwriters and companies. There was enough ^^^r Premiums Loss Ratio Loss Ratio 
 
 business for all. No particularly marked con- 1918 .;;;;;; :'*48;oi2.'883 34 34 
 
 flagrations upset loss experiences. Only the 1919 57,717,222 34 36 
 
 minor differences within the ranks of the busi- ^^^^ 69,453,781 38 39 
 
 ness tended to check progress. In fact, the rate Although premium income increased consider- 
 
 war of 1895 and 1896 almost spelled disaster for ably during 1920 as compared with the year pre- 
 
 the companies. ceding, the higher loss ratio was not welcome. 
 
 Unlike the earlier period in the business, fire Especially in view of the fact that it was, in no 
 
 insurance on the Pacific Coast during the years small measure, due to a growing moral hazard, 
 
 of the twentieth century to date has been affected Values were decreasing during the latter six 
 
 1)y conditions from "without." The 1906 earth- months of the year, the market was tightening, 
 
 quake and conflagration at San Francisco ex- and buying fell off noticeably. All this was di- 
 
 emplifies this. Things had been running along meetly accountable to the after-effects of the 
 
 smoothly for almost ten years. The Pacific World War. 
 
 Coast was an exceedingly bright spot in the rec- "ONE BRIGHT SPOT" 
 
 ords of the companies. And then, beyond any- „, ,„^„ . , , ,. 
 
 one's control but that of Providence, a loss was , ^\^ ^^^' ^^^0 was particularly d.scouragmg 
 
 written on the books of the companies totaling ^f ^5f co^Pames operatmg m the Eastern Alid- 
 
 $250 000 000 Western and Southern States. The Pacific 
 
 Then 'followed a period of reconstruction. An- ^^^'^ "^'"'"^ ^^^^^l t^^T'l^ ^° ''' ^?"'- ,'''' 
 other decade passed. It appeared as though there "io"ths to a year behmd the waves of either 
 were no trials and tribulations for Pacific Coast P^-o^P^^ty or depression, offered the only en- 
 fire underwriters for some time to come. Of ^ouragement. But even this section was to suf- 
 course, the war in Europe during 1914, 1915 and J^'- , ^'^^ business depression of 1921 did not 
 1916 affected business conditions in the United ^'^ }^^ ^f^\^'' ^^^'^ ^^ hard as it did other 
 States, but there was no tendency to disturb '^^^'°"' f ^ ^^^ country, but, nevertheless, it was 
 fire underwriting on the Pacific Coast. During ^" ""Y", '°T J'n'^nnnni^',^ .'""'"L?''"™""' T 
 the aforesaid years, premiums increased slightly. ^^'^"'^ ^f, ^^ $10,000,000 during 1921, while the 
 
 incurred loss ratio established the highest record 
 
 WAR BOOSTS PREMIUM INCOME since the 1906 conflagration at San Francisco. 
 
 In April, 1917, this country entered the world It was in excess of 50 per cent. But despite all 
 
 conflict. Values all over the country increased. this, the Pacific Coast continued to be held by 
 
 And as a result, the premium income of fire company executives as the "one bright spot." 
 
 companies on the Pacific Coast, as well as in But, as conditions have been readjusted dur- 
 
 other sections of the United States, was boosted. ing other periods of distress, so are the abnormal 
 
 However, this territory did not benefit as much effects of the World War gradually disappearing, 
 
 as others. Highly gratifying was the fact that While fire underwriters are still dissatisfied with 
 
 the loss ratio, both paid and incurred, was on conditions in the Eastern, Middle Western and 
 
 the decline. Premiums written on this Coast Southern sections of the country, the Pacific 
 
 during 1917 amounted to $41,767,164. Losses Coast has emerged from the state of "hard 
 
 paid totaled $13,691,857, showing a loss ratio of times." The fire waste is being cut down, and 
 
 33 per cent, while losses incurred were $14,456,- the marked increase in building operations is 
 
 302. showing a loss ratio of 35 per cent. greatly stimulating premium income. There 
 
 With values continuing to mount, the business seems to be a complete lack of pessimism among 
 of fire companies in this section, as elsewhere, Coast fire underwriters, and the future is gen- 
 took on larger proportions. Since there was a erally held as exceedingly bright. 
 
 [Page Tzvciity-uinc] 
 
FIRE INSURANCE r)E\ELOPMENT 
 
 Chapter XV 
 
 AD INFINITUM 
 
 USUALLY all narrat'ons have a happy end- 
 ing; especially if they are fiction. But it 
 is also gratifying to relate that, in this 
 concluding chapter of the history of the first 
 seventy years of fire underwriting on the Pa- 
 cific Coast, the ending is a very happy one. 
 And, moreover, the outlook for the future is 
 exceedingly bright. As stated in the preced- 
 ing chapter, conditions generally must readjust 
 themselves; and this is being accomplished. 
 
 Fire underwriters in th's section of the 
 country have had a harder task in developing 
 the business than might be imagined. In most 
 instances, thousands of miles away from the 
 home offices of their companies, supervision 
 of this field has been left entirely to them. 
 True, the passing years have developed 
 rapid means of communication that have 
 bridged the gap, but. nevertheless, it has taken 
 a Western underwriter to underwrite in the 
 West. Even today conditions on the Pacific 
 Coast are vastly diflferent than those in other 
 sections of the country, and the man best 
 equipped to guide the destinies of his company 
 here is the Pacific departmental manager. 
 
 It is to be hoped that there will be as little 
 friction as possible in underwriting circles in 
 future years, so that the business can continue 
 to grow unhampered. The possibilities in this 
 field, from a fire insurance standpoint, are con- 
 ceded to be very good. Co-operation between 
 company managers is essential to the good and 
 welfare of the business. If this is practiced, 
 the fire insurance business on the Pacific Coast 
 should continue to flourish ad infinitum. 
 
 [Page Thirty 
 

 „« IS DTJB ON THE I-ASt DA« 
 rr^TpToF 25 CENTS 
 
 WILL BE ^S^^^THE DATE ^UE- JHE P ^^„ 
 
 d;,y and to * • __==-== 
 
 OVERDUE. 
 
 ^j^^^EBKEUfi^f- 
 
 LD21-l00m-'?.'3'^ 
 
500680 
 
 UNIVERSITY OF CAUFORNIA UBRARY