THE UNIVERSITY 
 OF ILLINOIS £ S 
 LIBRARY 
 
 3G8 
 
 N^llrn 
 
Return this book on or before the 
 Latest Date stamped below. A 
 charge is made on all overdue 
 books. 
 
 University of Illinois Library 
 
 L161 — H41 
 
 
 
 <€ ^ aTa- 
 
 
 
 
 
 wm 
 
 
 mm&Sm 
 
 
 H y/Swr*) 
 
Digitized by the Internet Archive 
 in 2017 with funding from 
 
 University of Illinois Urbana-Champaign Alternates 
 
 https://archive.org/details/mutualinsurancemOOnati 
 
ttBRARV 
 
 OF THE 
 
 UMVERSflV Of II4JN0I8 
 
W. D. FORBES, DES MOINES, IOWA. 
 
 W. D. Forbes has been president of the National Organiza- 
 tion of Mutual Insurance Companies from its beginning and has 
 been prominent in Mutual Insurance work for thirty-five years. 
 He is a man of great energy and ability as an organizer and ad- 
 ministrator. His devotion to the cause of Mutual Insurance has 
 never wavered; and, although still in the flower of a vigorous 
 manhood, he has lived to see his fondest hopes realized and even 
 far exceeded by the measure of success achieved. 
 
MUTUAL INSURANCE 
 MANUAL 
 
 A HAND BOOK 
 
 C. F. MINGENBACK, Chairman of Committee. 
 S. G. MEAD, Compiler. 
 
 1906 
 
 McPherson, Kansas, 
 
MANUAL COMMITTEE 
 
 C. F. MINGENBACK, Chairman 
 
 S. G. MEAD, Compiler 
 
 Authorized by the National Association of 
 Mutual Co-operative Fire Insurance Com- 
 panies to issue this Hand Book of Mutual 
 Insurance. 
 
N ZjW-YYI, 
 
 
 I. 
 
 
 n. 
 
 
 hi. 
 
 I 
 
 IV. 
 
 # 
 
 V. 
 
 
 VI. 
 
 <'0 
 
 VII. 
 
 
 VIII. 
 
 
 IX. 
 
 
 X. 
 
 
 XI. 
 
 
 XII. 
 
 
 XIII. 
 
 
 XIV. 
 
 <? 
 
 XV. 
 
 
 XVI. 
 
 4 
 
 XVII. 
 
 
 XVIII. 
 
 $ 
 
 xrx. 
 
 j 
 
 XX. 
 
 
 XXI. 
 
 xxn. 
 
 
 XXIII. 
 
 A 
 
 XXIV. 
 
 
 XXV. 
 
 X 
 
 XXVI. 
 
 
 
 \ 
 
 CONTENTS. 
 
 PAGE 
 
 EXPLANATORY AND HISTORICAL - - 17 
 
 WHAT THE MUTUALS MUST DO - - 22 
 
 CO-OPERATION, WHAT IT IS - 37 
 
 COMPARISONS 47 
 
 IMPORTANT STATISTICS 71 
 
 THE ECONOMIC VIEW ----- 79 
 WHAT IS INSURANCE - - - 86 
 
 THE AGENT 97 
 
 ASSESSMENTS 151 
 
 ASSETS, RESERVES AND SURPLUS - - 171 
 
 ADJUSTERS AND ADJUSTMENTS - - 185 
 
 OVER INSURANCE ----- 214 
 
 CLASSIFICATION OF RISKS - 234 
 
 THE POLICY AS A CONTRACT - - 277 
 
 CANCELLATION OF POLICIES 306 
 
 CLASS MUTUALS 311 
 
 STATE FIRE MARSHAL - 333 
 
 LIVE STOCK INSURANCE - 363 
 
 HAIL INSURANCE 373 
 
 WIND STORMS, CYCLONES, ELECTRICITY, 
 
 STORMS, THEIR CAUSE - - - 400 
 
 INSURANCE FUNDS 410 
 
 NEW ENGLAND FACTORY MUTUALS - 415 
 
 THE PHILADELPHIA CONTRIUTIONSHIP - 429 
 
 MISCELLANEOUS MATTERS - 440 
 
 LAWS AND COURT DECISIONS - - 448 
 
 THE STATE AND THE MUTUALS - - 460 
 
 8 1 0783 
 
INDEX 
 
 Acetylene, 258 
 Aetna Insurance Co., 61 
 ADJUSTERS, 184, 305 
 Qualifications, 185 
 Avoid Tricks, 189 
 Bribery Case, 187 
 Agents should not act, 315 
 ADJUSTMENTS, 190 
 
 Farm Buildings, 190, 272, 273 
 Country Stores, 190 
 Dishonest, 192 
 Actual experience, 193 
 Common Case, 195 
 Cost of Buildings, 198 
 Methods of Estimating, 199 
 Depreciations, 275 
 AGENTS 
 
 Qualifications, 97, 99, 107 
 Country farmers, 98 
 Transactions, Binding 
 When, 99 
 
 Laws Concerning, 100, 140 
 Decisions, 100 
 Neglect by, 101 
 Responsibility, 102, 103 
 Certificates, 104 
 How Secured, 106 
 How Paid, 108 
 Duties in Case of Loss, 112 
 Talks With Tough Custo- 
 mers, 113 
 Maxims, 144 
 A Good One, 231 
 Should Not Adjust, 305 
 Advertising, 148 
 Anti Compact Law, 449 
 ARBITRATION AND AP- 
 PRAISAL, 208 
 Cautions, 209 
 Contested Losses, 210 
 Machinery, 212 
 Over Insurance, 215 
 Armstrong, F. L., 473 
 
 Arson, 353 
 Ashes, 244 
 Ashes, Wood, 262 
 Axle Grease, 262 
 ASSESSMENTS 
 
 Basis of Mutualism, 151 
 State Laws, 141, 153 
 Valid, 152 
 When Levied, 155 
 Advance, 157 
 Proof of Service, 159 
 Safe Rule, 160 
 How Collected, 166 
 Returned Letters, 167 
 Failure to Pay, 169 
 Legal Notice, 158 
 Atkinson, Edward, 415 
 Factory Mutuals, 415, 510 
 Atlanta Address, 420 
 Baltimore Fire, 55 
 Blackman, Clawson, 58 
 Bridgens, N., 193 
 
 Brokerage, 138 
 Cellars, 245 
 Census, The, 47, 49 50 
 Circulars, Scurrilous, 47 
 Chimneys and Flues, 241 
 Cities and Towns, 266 
 CLASS MUTUALS, 311 
 Retail Lumber, 313, 316 
 Retail Hardware, 321, 322 
 Retail Hardware, list of, 326 
 Retail Druggists, 329 
 Plate Glass, 330 
 See also Hail, Live Stock, etc. 
 Co-Insurance, 440 
 Coal Oil, 254 
 Coffin, E. M., 453, 473 
 
 Collins, C. S., 220, 462 
 
 Comparisons, 47 
 Conflagrations, 28, 251 
 Contract Valid, 293 
 Constructions, Bad, 248 
 
 6 — 
 
OF MUTUAL INSURANCE 
 
 7 
 
 Construction, Better, 356 
 Comributionship, 49, 61, 429 
 Early Method, 430 
 Modification, 431 
 CO-OPERATION 
 What it is, 37 
 Successful, 27 
 An Old Theory, 37 
 Not a Sentiment, 38 
 Not Socialism, 42 
 Not Profit Sharing, 42, 95 
 Methods, 45 
 Must be Honest, 45 
 Counterfeit Mutuals, 63 
 Cyclones, 400 
 Dearth, Supt., 53, 386, 488 
 Economic Theories, 79 
 Electricity, 400 
 Electric Lighting, 259 
 “Failed Mutuals,” 47, 57, 63 
 Fighting Fire, 360 
 Fire Marshal, 227, 333 
 Inspection by, 345 
 Forbes, President, 54 
 Franklin, Benjamin, 49 
 Fraternalism, Must be Hon- 
 est, 83 
 
 Gas and Gas Machines, 256 
 Gasoline, 252 
 Gasoline Permit, 252, 291 
 Gas, Natural, 259 
 Goodsheller, V., 367 
 
 HAIL INSURANCE, 369 
 Climate, 374 
 Plans, 377, 389 
 Commissioner Dearth, 386 
 Statistics, 393 
 Valuation of Crops, 397 
 Hay, 261 
 
 Hazardous Risks, 264 
 Heating Apparatus, 267 
 Host, Commissioner, 55 
 Hyatt, W. R., 467 
 
 Illegitimate Losses, 370 
 Indemnity, 90, 133, 138 
 
 Insulation, 407 
 Insurable Interest, 290 
 Inspection by Firemen, 245 
 Insurance, Co-Operative, 92 
 Insurance Funds, 410 
 Insurance Year Book, 65 
 Lamps, 255 
 
 Laws and decisions, 448 
 Liabilities of Members, 443 
 LIVE STOCK, 363 
 Proof of Loss, 365 
 Particulars Required, 368 
 Illegitimate Losses, 370 
 Loan Companies, 174 
 Losses, 112, 302 
 McManima, J. C., 18, 492 
 
 Machinery, Farm, 275 
 Manual Authorized, 17 
 Scope Widened, 19 
 Martin, F. J., 18, 67, 71 
 
 Matches, 243 
 Mutuals the Oldest, 49 
 Mohler, J. D., 495 
 
 Natural Gas, 259 
 Nowlin, H. L., 475 
 O’Brien, Supt., 490 
 Osgood, E. S., 495 
 
 Over Insurance, 215 
 Permanent Fund, 486 
 Photographic Views, 206 
 Plate Glass, 330 
 POLICY as a Contract, 277 
 Standard, 280 
 Delivery, 291 
 
 Conflict With Application, 294 
 When Delinquent, 295 
 Rights Waived, 297 
 Cancellation, 306 
 Preventable Fires, 270 
 Railway Fires, 203 
 Re-Insurance, 138, 441 
 RESERVES, 171 
 Aid to Loans, 174 
 How Accumulated, 177 
 How Invested, 179 
 
8 
 
 A HAND BOOK 
 
 How Large, 178 
 Safe, 183 
 
 Retail Lumber Insurance 
 Companies, 313, 316 
 Retail Hardware, 321, 322, 326 
 Retail Druggists, 329 
 Returned Letters, 167 
 Reward for Incendiaries, 229 
 Safety Limit, 445 
 Salvage, 202 
 San Francisco Fire, 16 
 Sentiment, 207 
 Smith, J. Somers, Jr., 439 
 Shiel, A., 494 
 Short Rate Table, 307 
 SPONTANEOUS COMBUS- 
 TION, 260, 262 
 Hay, 261 
 Oil Shades, 261 
 Ashes, Wood, 262 
 Axle Grease, 262 
 State, Duties of, 446 
 
 Strange, A. T., 476 
 Stoves, 243 
 Subrogation, 442 
 Swallow, J. A., 476 
 
 Taxation, 446 
 Technicalities, to be Avoid- 
 ed, 201 
 
 Telephone Wires, 407 
 Tenant Farm Risks, 263 
 Three-Fourths Value Clause, 226 
 Total Loss, What, 200 
 Underwriters’ Review, 33, 62, 216 
 Upham, Roger F., 61, 482 
 
 Vacant or Unoccupied, 204 
 Valid Contract, 293 
 Valued Policy Laws, 216 
 Waiver, 205 
 Welch, L. R., 206 
 Wilkinson, Commissioner, 66 
 Windstorms, 400 
 Zimmer, John F., 390 
 
 INDEX- SECOND DIVISION 
 
 THE STATES. 
 
 Alabama, Alaska, Arizona, Florida, Louisiana, Mississippi 
 Montana, Nevada, New Mexico, North Carolina, South Caroli- 
 na, Utah and Wyoming fnrnish little or no information. Most 
 of them have no mutuals. 
 
 Arkansas, 141, 220, 462 
 California, 463 
 Colorado, 376, 463 
 Connecticut, 141, 154, 444, 446 
 Delaware, 222, 465 
 Georgia, 461 
 Idaho, 466 
 
 Illinois, 61, 153, 473 
 Indiana, 445 
 
 Iowa, 64, 60, 63, 380, 393, 376, 
 448, 476 
 
 Kansas, 376, 444, 478 
 Kentucky, 460 
 Maine, 141, 153, 445, 480 
 
OF MUTUAL INSURANCE 
 
 0 
 
 Maryland, 56, 346, 481 
 Massachusetts, 153, 178, 221, 224, 
 351, 444, 445, 4S2 
 Michigan, 487 
 Minnesota, 53, 60, 102, 142, 
 
 223, 378, 386, 393, 449, 488 
 Missouri, 491 
 Nebraska, 221, 383, 390, 393, 
 
 453, 495 
 
 New Hamshire, 221, 444, 497 
 New Jersey, 153, 445, 498 
 New York, 63, 56, 68, 60, 63, 
 
 77, 102, 600 
 
 North Dakota, 376, 600 
 Ohio, 223, 341, 347, 600 
 
 Oklahoma, 376, 501 
 Oregon, 501 
 
 Pennsylvania, 65, 60, 604 
 Rhode Island, 506 
 South Dakota, 376, 507 
 Tennessee, 461 
 Texas, 508 
 Vermont, 155, 509 
 Virginia, 461 
 Washington, 55, 445, 510 
 West Virginia, 222, 461 
 Wisconsin, 65, 222, 376, 393, 
 445, 611 
 Wyoming, 446 
 
PREFACE 
 
 \ 
 
 The preface, the “prefatio,” the “ first sayings,” is prob- 
 ably so called because it is never written until the rest of the 
 book is finished. And so in accordance with the moss covered 
 custom we put our last words at the beginning. 
 
 And first of all, let us acknowledge our obligations to the 
 enthusiastic Mutual men who have so kindly aided us in our 
 labors, and without whose assistance and measure of success 
 would have been impossible. 
 
 “ First among his equals’ ’ is W. D. Forbes of Omaha, 
 Nebraska, the efficient president of the National Organization. 
 Peculiarly fitted by experience and by position, he has fur- 
 nished us with much valuable material, has criticized and cor- 
 rected our work, and in many other ways has rendered valuable 
 service. 
 
 The legal adviser of the National Organization, Hon. E. 
 M. Coffin of Lincoln, Nebraska, the foremost Mutual insurance 
 lawyer of the country, has kindly taken time from his own 
 pressing affairs to furnish us with legal information. The 
 brief printed in the account of the State of Nebraska is his, 
 and while of special value to that state, enunciates principles 
 and quotes authorities which will be applicable everywhere. 
 For this and many other favors the Committee are under great 
 obligations. 
 
 In the “New Northwest” in far off Washington, the Com- 
 mittee found a statistician of pre-eminent ability, F. J. Martin 
 of Seattle. His table of comparative statistics is the most 
 important in this line ever published and adds greatly to the 
 value of the Manual. 
 
 10 — 
 
OF MUTUAL INSURANCE 
 
 11 
 
 Coming a little nearer home it is with sadness that we 
 refer to the brilliant and scholarly Chas. Grissen of McMinn- 
 ville, Oregon. Uniting in himself the polish of the scholar, the 
 energy of the business man, and the urbanity of the gentleman, 
 his future seemed spanned by a bow of promise. But the wis- 
 dom of Providence planned differently and he passed away 
 March 28, 1906. 
 
 To M. G. L. Roberts of Chattanooga, Tennessee, the Com- 
 mittee also return their thanks for his earnest efforts to obtain 
 statistics of many skates for which they were unable to get any 
 information whatever. 
 
 W. B. Linch, for many years secretary of the National 
 Organization, has rendered the Committee aid which is appre- 
 ciated. He was never so busy that he could not stop to give 
 us needed information at once. 
 
 J. J. Furlong of Austin, Minnesota, has hunted up much 
 very useful matter. If there is a good thing in Minnesota Mr. 
 Furlong knows just where it is and just how to get it. The 
 Manual is the better for his kind assistance. 
 
 C. S. Collins of Little Rock, Arkansas, has written an ex- 
 cellent account of the conditions in his state. The Committee 
 and the readers will appreciate this. 
 
 James A. Swallow of Shenandoah, Iowa, has a claim for 
 thanks for valuable contributions along general and special 
 lines. His matter is thoroughly practical. 
 
 John Weyer of Cincinnati, Ohio, sent us an excellent ac- 
 count of the Retail Drug Mutual Insurance business. It will 
 be appreciated by the readers of the Manual. 
 
 The Committee are under obligations to Marshall Cushing 
 of New York City for a copy of the report of the transactions 
 of the National Association of Manufacturers, a pamphlet of 
 very great practical usefulness. 
 
 0. W. Tefft of Greenwich, New York, sent us reports of 
 his company and other valuable information. 
 
It 
 
 A HAND BOOK 
 
 J. Y. M. Swigart of Lincoln, Nebraska, has ever been ready 
 with counsel and advice and in many ways has materially aided 
 the progress of the work. 
 
 J. T. McGavock of Waterford, Virginia, has given us an 
 account of conditions in his vicinity. His experience very 
 nearly duplicates that of Mr. Roberts, but it will not be his 
 fault if there is not a change for the better very soon. 
 
 From J. Somers Smith, Jr., the secretary of the oldest and 
 strongest Mutual in the United States, “The Philadelphia Con- 
 tributionship for the Insurance of Houses from Loss by Fire,” 
 the Committee have received several historical documents and 
 also much other information which is intensely interesting. 
 For this they acknowledge their indebtedness to Mr. Smith. 
 
 J. C. McManima of Springfield, Missouri, has made the 
 Committee his debtor by kind notices, reviews of manuscript, 
 etc. A. Shiel of Burlington Junction, Jesse D. Mohler of War- 
 rensburg and E. S. Osgood of Mendon, in the same state, also 
 deserve credit. 
 
 Mrs. M. A. Leekly of Perry, Oklahoma, has kept the Com- 
 mittee informed as to the progress of matters in that section 
 of country. She is transforming matters, and under her leader- 
 ship, Mutual Insurance is coming to the front in Oklahoma. 
 
 James Miller of Elizabeth ville, Pennsylvania, has laid the 
 Committee under obligations for many valuable hints drawn 
 from his experience of nearly forty years. 
 
 To J. L. Fowle of Ionia, and J. E. Taylor of Belding, Michi- 
 gan, the Committee are indebted for an account of conditions 
 in Michigan, and also for hints which they found useful in the 
 body of the work. 
 
 From Illinois, A. T. Strange of Walsh ville and C. M. 
 McMillan of West Point have sent excellent accounts of their 
 state. 
 
OF MUTUAL INSURANCE 
 
 13 
 
 In Kansas the Committee have found such hosts of friends 
 that they cannot find space to mention. They can only mention 
 R. M. Scott of Pittsburg, the writer of the able article on the 
 State Fire Marshal. 
 
 From New England the Committee have received many 
 favors. Hon. Roger F. Upham of Worcester has re-written his 
 mangnificent article on Mutual Underwriting in Massachusetts; 
 Hon. Edward Atkinson, now gone to a good man’s reward, has 
 sent the Committee much matter of very great value; Col. R. 
 F. Barrett of Concord, Hon. L. R. Welsh and Hon. E. L. Saun- 
 ders of Worcester, Massachusetts, and Fred E. Smith of Mont- 
 pelier, Vermont, have given the Committee full information re- 
 garding the other states. 
 
 Thanks are due also to R. A. Hitchcock for generous notices 
 of the Manual in his Mutual Insurance Journal. 
 
 Also the Committee wish to thank M. S. Matthews of St. 
 Paul, Minnesota, for valuable papers and letters. 0. J. Johnson 
 of Glenwood, Minnesota, has given his experience, a valuable 
 favor on practical lines. 
 
 To R. J. Young of Oelwein, Iowa, and to F. D. Babcock of 
 Ida Grove, Iowa, the Committee are indebted for hints, circulars 
 and good will generally. 
 
 J. H. Tinvoorde of Minneapolis, Minnesota, has put the 
 Committee under obligations in many ways. 
 
 S. R. VanMeter of Marietta, Ohio, is another Mutual 
 fighter to whom the Committee are under obligations. 
 
 From Indiana, R. A. Kirkman and Dr. J. Saunders of And- 
 erson have sent information which cost them no little trouble, 
 and which will be interesting to all Mutual men. They will 
 accept the thanks of the Committee. 
 
 Scott Rutledge of Des Moines, Iowa, has aided the Com- 
 mittee with information and support for which the Committee 
 are grateful. 
 
14 
 
 A HAND BOOK 
 
 The Zimmers, J. F. and P. F., of Lincoln, Nebraska, have 
 sent practical information on hail matters, which the Committee 
 consider exceedingly valuable. They will accept the thanks of 
 the Committee. 
 
 The Commissioners of the several states have invariably 
 treated the Committee with courtesy. When they had the infor- 
 mation desired it was furnished. When they had not, an ex- 
 planation was given. The readers will find frequent quotations 
 in the body of the work. Especial mention is due to Dearth, 
 Host, Wilkinson, and O’Brien. 
 
 If the Committee, in the rush of getting out these last few 
 pages have omitted any one, they hope that this paragraph will 
 be accepted as an apology for an unintentional error of omis- 
 sion. 
 
 In finishing the work the Committee wish to reiterate one 
 statement: So long as Mutual insurance is furnished at cost, 
 absolute safety is guaranteed, economy is practiced and bad 
 risks eliminated, there should be no attempt at enforcing uni- 
 formity of practice. Each Company should be left to adopt its 
 details to its environments. State supervision should demand 
 safety and honesty, but go no further. 
 
 The Manual will serve as a starting point for discussion. 
 It occupies the position of a motion introduced for the purpose 
 of getting something before the house. 
 
 The compilers have learned much themselves, and it is to 
 be hoped that the work of correspondence, comparison and 
 fraternal consultation will go on for all time. The advance of 
 co-operation is the progress of humanity. And one service of 
 which the Committee think they may justly feel proud is the 
 uniting of so many active, intelligent, patriotic co-operators in 
 the enterprise. In nearly every state there are members who 
 have aided and who are ready to help in anything which will 
 further the cause. 
 
OF MUTUAL INSURANCE 
 
 15 
 
 All this information, as well as a valuable collection of 
 correspondence, reports, pamphlets, books, etc. is the property 
 of National Association and available for future use. 
 
 The Committee had set their mark high, but after two 
 years of hard work, they think they have learned something 
 about the difficulties of the task. While there was much that 
 was inspiring, there was also much that discouraged. The in- 
 cessant research, the thousands of letters sent out without even 
 an echo of a response, the drudgery of detail during two long 
 years, sometimes induced despondency, but after all it was a 
 labor of love. The compensation and the difficulties both fell 
 out of sight, and having embarked in a good cause the Com- 
 mittee took new courage and persevered and here the conven- 
 tion has the result. 
 
 And finally, to each and all, officers and members of the 
 National Association, of State Associations and of local Com- 
 panies, who have been so kind to us, we offer our sincere thanks 
 and we hope that the many pleasant acquaintances which we 
 have formed in the course of our work may continue during 
 future years. 
 
 Respectfully, 
 
 C. F. MINGENBACK, Chairman. 
 
 S. G. MEAD, Compiler. 
 
16 
 
 A HAND BOOK 
 
 SAN FRANCISCO. 
 
 The awful catastrophe, which has called forth the sympathy 
 of the civilized world, has a lesson for Insurance Companies 
 and for policy holders. This Manual nowhere includes all joint 
 stock companies in a sweeping condemnation so far as their 
 integrity of management is concerned, and in this case it is a 
 pleasure to say that out of the wreck and the crush many well 
 managed companies have come unscathed. They have lost, but 
 not enough to injure their business nor their credit. For them 
 there is a place in the world which they may fill and fill honor- 
 ably. 
 
 But there are others which seem to have acted more as 
 plungers than as sensible business men. Urged on by greed, 
 dazzled by immense premium incomes, they have disregarded 
 the warning voices of conservative men, they have gambled in 
 conflagration risks, they have wagered more than their holdings, 
 and they have lost, and the innocent share holder and the inno- 
 cent public, both alike suffer. 
 
 Here, then, is presented a vivid object lesson as to the 
 difference between Mutual and Line company insurance. The 
 line companies with their reserve of sixty million lost three 
 hundred millions, and many are wiped off from the face of the 
 earth, the little Mutuals, with their reserve of twenty-five to 
 fifty thousand each are still doing business at the old stand, 
 paying dollar for dollar, and unlike some of the stock companies 
 which advocate an immediate advance of twenty-five per cent 
 to reimburse for losses, the Mutuals will continue to furnish 
 safe indemnity at the old rate; 
 
CHAPTER I. 
 
 EXPLANATORY AND HISTORICAL. 
 
 The idea of this Manual originated with a few 
 earnest Mutual Insurance men, who believed that the 
 system was capable of better results than were being 
 produced. They had studied the merits of co-oper- 
 ation and were filled with faith in the possibilities 
 yet in the future. There was an active and vigorous 
 National Organization and in every state where 
 there were even a few Mutuals, there was some sort 
 of a State Association. The membership of these, 
 however, was limited and their proceedings, valuable 
 and instructive as they might be, were only published 
 in pamphlet form and were soon scattered and lost. 
 There were no statistics. Not a single volume could 
 be discovered which treated Mutual Insurance as a 
 science or even as a system. 
 
 Believing that this state of affairs might be bet- 
 tered, the National Association of Co-operative 
 Mutual Fire Insurance Companies of the United 
 States, at their meeting at Chattanooga, May 5 to 9, 
 1903, appointed a committee to prepare a Manual 
 for the use of the Mutual Fire and Storm Insurance 
 Companies of the United States. The following 
 resolution was passed : 
 
 “We earnestly recommend that in the near 
 future, in some manner, this association publish a 
 
 2 —17 
 
18 
 
 A HAND BOOK 
 
 Manual on Mutual Insurance and that a proper com- 
 mittee be appointed to consider and report to the 
 Executive Committee, and with such Executive Com- 
 mittee to act, if deemed advisable.” 
 
 At the same meeting the following resolution 
 regarding a statistician was passed, after a discus- 
 sion of the subject of statistics: 
 
 “ Resolved, That we recommend to this associ- 
 ation the appointment of a statistician, whose duty it 
 shall he to furnish at each annual meeting of this 
 association such statistics as complete as it is possi- 
 ble to compile them . 9 9 
 
 In pursuance of these resolutions, C. F. Mingen- 
 back of McPherson, Kansas, was appointed Chair- 
 man of the Committee on Manual and F. J. Martin 
 of Seattle, Washington, Chairman of the Committee 
 of Statistics, each being given power to choose his 
 own assistants. 
 
 The Manual Committee was afterward enlarged 
 by the addition of J. C. McManima of Springfield, 
 Missouri; F. J. Martin of Seattle, Washington; and 
 the compiler, S. G. Mead, of McPherson, Kansas. 
 Owing to the unexpected pressure of personal busi- 
 ness affairs, Mr. McManima, much to his regret, was 
 unable to co-operate with the other members. 
 
 The Committee on Manual at once entered upon 
 their task. As the mariner, before he can decide 
 upon his course, must know where he is, and so takes 
 an observation, the Committee believed it best to 
 begin by ascertaining the actual and present status 
 of Mutual Insurance, and commenced investigation 
 in that line. State reports were procured, leading 
 
OF MUTUAL INSURANCE 
 
 19 
 
 Mutual Insurance men were written to, lists of 
 questions sent out and every method suggested was 
 used to forward the work. In almost every case the 
 Committee received encouraging responses and the 
 requested information was always cheerfully fur- 
 nished when it was to he had. New sources of infor- 
 mation were suggested and the aid thus rendered 
 proved most valuable. There were no rebuffs, but 
 now and then a company seemed to think best to 
 watch the progress of the work rather than to commit 
 itself by action, assuming an attitude which has aptly 
 been compared to that of a cat inspecting a lighted 
 fire-cracker. 
 
 It soon became apparent that the importance of 
 Mutual Insurance had been underestimated, that 
 both in numbers and in amount at risk the Mutuals 
 were occupying places far more important than those 
 usually assigned to them, and that, owing to the mul- 
 tiplicity of interests involved and the varying condi- 
 tions, legal and other, under which the companies 
 were working, more ground must he covered than 
 was at first intended. Accordingly, at a meeting of 
 the Executive Board at Omaha, not long after the 
 appointment of the Manual Committee, the scope 
 was materially widened and the list of subjects great- 
 ly enlarged. 
 
 Had the Committee published the work at that 
 time, many important subjects would have been 
 passed by without mention. They, therefore, took 
 the responsibility of deferring publication and bent 
 their energies to making further researches, to de- 
 veloping subjects of great importance and to the ac- 
 
20 
 
 A HAND BOOK 
 
 cumulation of matter unthought of when the Manual 
 was first suggested as a hand book, and it is because 
 further delay is undesirable, and not that they have 
 exhausted the subject matter, that the Committee 
 send the book to press at this time. In fact, the sub- 
 ject is inexhaustible. This book is but the first of a 
 series, expanding and developing with the lapse of 
 time till the Mutuals shall be provided with a litera- 
 ture of their own, full, complete and worthy of their 
 cause. 
 
 The system of co-operation is firmly intrenched 
 in this country. The laws, however, are not always 
 in its favor. Some Mutuals are obliged to adopt 
 methods which they would not use were they not 
 under compulsion. Other Mutuals still have grown 
 up in isolation, developing their methods from their 
 own experience, others again have been obliged to fit 
 their practice to their environments. But in all these, 
 the aim and object has been to furnish Insurance to 
 the members at cost, and this they have accomplished 
 in the face of opposition and in spite of difficulties. 
 
 What the Committee hope they have accom- 
 plished is the presentation of a fair representation 
 of Mutual Insurance as it is, as a basis for future 
 discussion and future action, together with some 
 hints to officers and members as to how to accomplish 
 the best results under present circumstances. 
 
 But the committee do not offer or propose any 
 plan of uniformity. This is not possible even were 
 it desirable. So long as the grand principle of co-op- 
 eration is kept steadily in view, the disposition of 
 technicalities is of very little moment. But if the 
 
OF MUTUAL INSURANCE 
 
 21 
 
 Manual shall be of service in the way of stimulating 
 thought and action, if it shall point out how individ- 
 ual companies or district and state associations may 
 better the work within their lines or how they may 
 improve external conditions by securing better legis- 
 lation, doing away with prejudice and misconception, 
 then its work will not have been in vain. 
 
 No one can know better than the Committee the 
 faults of the work. It is the pioneer in the field and 
 is offered as a starting point. The more earnest the 
 discussion of its statements and the more severe and 
 thorough the criticism of its positions, the better for 
 the general cause of co-operation. 
 
 And to the Mutual Insurance public the Commit- 
 tee respectfully offer this book hoping that it will be 
 of service along the lines indicated, and that it may 
 aid in the success of one form of that co-operation 
 which seems to he our best defense against the greed 
 and the unscrupulous methods of some of the im- 
 mense business combinations of the day. 
 
CHAPTER II. 
 
 INTRODUCTORY. 
 
 WHAT THE MUTUALS MUST DO. 
 
 It is incumbent on those who advocate any the- 
 ory or plan of action to prove that there is a reason 
 for its existence. This proof must be positive and 
 complete. It will not be sufficient to show its harm- 
 less nature, for while it may be free from evil, it may 
 also be useless, a mere cumberer of the ground. Nor 
 is it enough to show that it produces some good re- 
 sults. The proof must go far enough to establish 
 the fact that the theory or plan is capable of produc- 
 ing more and better results in its line than any other 
 offered to the public. Nothing short of this will be 
 acceptable. To state it in different language: the 
 plan must either be the best plan, or be set aside for 
 the one that is. This is one of the fundamental laws 
 of nature and is the keynote of human progress, for 
 the history of that progress is but the account of the 
 setting aside of the crude and imperfect for the more 
 finished and complete, after the new has proven its 
 superiority. 
 
 THEY ACCEPT THE CHALLENGE. 
 
 To this test the friends of Mutualism gladly ac- 
 cede, And if they cannot prove by positive and irre- 
 futable evidence that their claims are correct and 
 
 22 — 
 
OF MUTUAL INSURANCE 
 
 23 
 
 their theories and methods are the best, they will 
 abandon the field. The advocates of Mutual or Co- 
 operative Insurance are well aware that in accepting 
 this challenge they are facing the opposition of the 
 combined power of capital and of the traditions of a 
 distorted political economy,— distorted for the same 
 reason that theology has been distorted to prove the 
 doctrine of the divine right of kings, or to justify 
 the slave owner in holding human beings in bondage, 
 to ease the consciences of those whose wealth was 
 acquired by the exploitation of mankind. At this 
 point, let it be said that the mutuals and co-oper- 
 atives wage no war on wealth or capital. Honestly 
 earned and legitimately used, wealth is a good thing, 
 both for its possessor and for the community. No 
 fortune can be too large, and no profits too great, for 
 the public good, if untainted with fraud or oppres- 
 sion. But, when combinations form to suppress all 
 competition, when corruption enters the halls of 
 legislation to purchase the enactment of measures 
 depriving the people of the right to transact their 
 own business, and to make it easy for the large estab- 
 lishments to crush out the small ones, then wealth is 
 a curse to the community and to the nation. 
 
 The mutuals of the country have been the vic- 
 tims of attack and misrepresentation for many years. 
 This has gone on until the mere continuous repeti- 
 tion of the statements has induced many to believe 
 them, possibly the promulgators themselves, for it is 
 said that when a man has repeated a lie a sufficient 
 number of times, he ends in believing it. The effect 
 of this continuous and persistent misrepresentation 
 
24 
 
 A HAND BOOK 
 
 lias been to bring the mntnals under suspicion and to 
 popularize the idea that a large capital, subscribed 
 and paid up, is the one thing, and the only thing 
 which makes an insurance company safe, and that all 
 others are to be classed as wild cats or visionaries 
 to be avoided by men of good common sense and 
 ordinary business judgment. 
 
 UNFAIR ACTION. 
 
 Capital is quick in forming combinations, bodies 
 of individuals move but slowly. Hence, while all 
 insurance was originally mutual in form and spirit, 
 and its promoters looked only to the general inter- 
 est, without thought of personal aggrandizement, 
 companies were slow to combine for mutual protec- 
 tion and mutual help. Each occupied its own limited 
 field— limited, for there were but few to be insured — 
 and each pursued the even tenor of its way with very 
 little desire to extend its borders. But capital saw 
 its opportunity and organized joint stock companies 
 for the purpose of selling indemnity. In this there 
 was nothing wrong, nor do the advocates of the mu- 
 tual system object to it. Fair competition is never 
 injurious. But not all was fair. Combination 
 against competition began to develop among the un- 
 scrupulous of the old line companies. Legislatures 
 were approached, and laws, ostensibly guarding the 
 rights of the public but really creating monopolies 
 for the joint stock companies, were smuggled 
 through in almost every state. It is doubtful wheth- 
 er most of the legislators fully realized the intent of 
 the laws for which they voted. But in many states, 
 
OF MUTUAL INSURANCE 
 
 25 
 
 when those who desired to do business on the mutual 
 principle made efforts to organize, they found them- 
 selves hampered by numerous restrictions. It has 
 been remarked that in several states the laws passed 
 at an early date before any insurance organizations 
 were thought of, looked as if they were designed in 
 advance to shut out the mutuals entirely. All this 
 put the mutuals at a disadvantage, but they are now 
 making a steady and successful fight against this 
 order of things, and are occupying the ground they 
 never should have lost. That the joint stock com- 
 panies resorted to such tactics, is itself a strong 
 proof that they felt their own inability to cope with 
 the mutuals in a fair contest. 
 
 THE MUTUAL SYSTEM TRUE TO HUMAN NATURE. 
 
 The mutual or fraternal business organization, 
 is more in consonance with true human nature than 
 any other. The first impulse of men is to work to- 
 gether. That the selfish will try to take advantage 
 of the others is true, but it is also true that, notwith- 
 standing the sneers of the selfish, this fraternal feel- 
 ing is well nigh universal, while greed and selfishness 
 are confined to the very few. More than a century 
 ago, a cynical philosopher, after a view of things as 
 they were, announced, as the results of his observa- 
 tions, the doctrine that every man is “a wolf to his 
 f ellowmen . 9 ’ It was contradicted at once, though it 
 describes some business methods of that day with 
 considerable accuracy, and seems to state correctly 
 the ethics of some modern corporations. More re- 
 cently, an article justifying their practices was at 
 
26 
 
 A HAND BOOK 
 
 once condemned as “The ethics of the jungle.” 
 Mutualism opposes all this pessimism in toto. It be- 
 lieves the doctrine that men were put into this world, 
 not to hurt, but to help each other. It believes that 
 when every man will help his fellow man, then every 
 man will be prosperous himself. It repudiates and 
 scorns the fatalistic theory recently advocated in a 
 book circulated at the expense of one of the great 
 trusts of the United States, that modern business 
 methods are the result of an inevitable and necessary 
 evolution, and cannot be avoided or evaded. It 
 believes in the Sermon on the Mount, and in the 
 Golden Rule, as setting forth the wisest political 
 economy, and the best business methods. It believes 
 in helping to bear one another’s burdens, in uniting 
 to help each other and at the same time in leaving 
 an equal chance for those not in the organization. 
 This is its first argument. It is never directly at- 
 tacked. People say, in a patronizing way, that it is 
 idealistic, visionary, but not practical, very pretty, 
 might do in the millennium, etc. To all this, mutual- 
 ism makes answer that if the theoretically true can- 
 not be made to work out in real practice, if co-oper- 
 ation is true, but cannot be made available in actual 
 life, then this world is a stupendous failure, and the 
 Creator has missed his aim and the ideal inhabitant 
 of this world is not man created in the image of his 
 Maker, but the creature of the forest best fitted for 
 destroying his fellows. 
 
OF MUTUAL INSURANCE 
 
 27 
 
 CO-OPERATION SUCCESSFUL. 
 
 But these positions are not true. There never 
 has been a time when co-operation was not a success. 
 From the dawn of history, or as the lawyers say ‘ ‘ so 
 long that the memory of man runneth not to the con- 
 trary,’ 9 have human beings joined hands with their 
 fellows for the common weal. Nor is it true, as is 
 sometimes sneeringly remarked, that the cases of 
 success are only to be found among those affairs of 
 life which require no business ability for their man- 
 agement. Co-operation has succeeded everywhere, 
 it has managed the farm and the store, the shop and 
 the factory, its realm covers the land and the sea. 
 There is no business too complex, no task too diffi- 
 cult, for it to undertake. Nay, it has demonstrated 
 its ability to deal successfully with the greatest prob- 
 lems of the world. The United States of America is 
 today the leading power of the world, and what is it 
 but a grand example of successful co-operation by 
 the people in self government? And so thoroughly 
 is it imbued with this principle, that it is today reach- 
 ing out and persuading other nations to follow its 
 own peaceful example, to substitute arbitration for 
 war, and to work in harmony for the accomplishment 
 of the civilization and enlightenment of the whole 
 human race, including those very peoples who less 
 than a century ago were considered to have been 
 brought into this world by the Creator only to be 
 doomed to hopeless and helpless slavery. That is, 
 the only really successful nation of today, is the only 
 purely co-operative nation. No well informed per- 
 
28 
 
 A HAND BOOK 
 
 son will today attack those positions. They are too 
 well established and the facts are too widely known. 
 
 Turning now to the special phase in which the 
 Manual is interested, to Mutual Insurance, it will be 
 found that the experience of centuries is in its favor, 
 all the early insurance companies of the old world 
 were Mutuals and every one of them did a useful 
 and beneficial work. In the United States, the oldest 
 and strongest companies are Mutuals, and when a 
 great conflagration sweeps over the congested dis- 
 tricts of a Boston or a Baltimore, it is the joint stock 
 companies and not the Mutuals which show the heav- 
 iest per cent of failures. This subject, however, is 
 treated more fully in the chapter ‘ ‘ Comparisons ’ 9 to 
 which the reader is referred. 
 
 EVILS ELIMINATED. 
 
 Aside from their undoubted safety, there are 
 other advantages in the Mutuals which should not be 
 passed by without mention. Mutual Insurance elim- 
 inates the so-styled rate wars. These are generally 
 originated by some agent who gives a rebate to se- 
 cure a large risk, others retaliate, and finally rates 
 are forced down below the cost of indemnity. The 
 deficiency must be made up and this burden gener- 
 ally falls on persons of small means or on those re- 
 siding in other localities. In either case, gross in- 
 justice results. 
 
 Such occurences are impossible under the Mu- 
 tual System, for the only competition among them is 
 that which never aims to harm another. That com- 
 petition which injures itself to injure another still 
 
OF MUTUAL INSURANCE 
 
 29 
 
 more, is iniquitous and the Mutual System wipes it 
 out. It also wipes out the attempt so often made to 
 gain undue advantage, and in so doing, does away 
 with all temptation to tamper with legislation with 
 the intent of harming a competitor. 
 
 NO IMMENSE ACCUMULATIONS. 
 
 The Mutual System also dispenses with the im- 
 mense accumulations of money by Insurance Com- 
 panies. Such aggregations of capital in the hands 
 of a few, have always been looked upon as somewhat 
 of a menace to the community. Comparing the mod- 
 est reserves of the Mutuals with these enormous ac- 
 cumulations, even the largest of them shrinks into 
 insignificance. Remembering that the vast majority 
 of the Mutuals carry scarcely any reserve above the 
 unearned premiums and assessments on hand, the 
 contrast becomes still greater. Much of the joint 
 stock advertising about their surplus has no solid 
 foundation. They use the expression “ surplus as 
 regards policy holders.” It is true that in case of 
 loss, all the assets of a company are liable, but what 
 assurance has the policy holder that all the surplus 
 will be there when he has a loss ? Whose is that sur- 
 plus ? Not his, nor has he or his fellow policy holders 
 any control of it whatever. It belongs to the stock 
 holders. Should the company choose to distribute 
 that portion of it above the legal requirements 
 among the stock holders, what is to prevent? So 
 long as they comply with the requirements of the sta- 
 tutes and carry the amount provided for, they may 
 dispose of the rest as they please. And it is no fancy 
 
30 
 
 A HAND BOOK 
 
 sketch which pictures an organized band of wreckers 
 acquiring control of such a company and converting 
 the surplus to their own use. Not long ago three 
 thousand dollars was offered for a single share of 
 one of the large life insurance companies of New 
 York city. Its par value is one hundred dollars and 
 its investment value is far below the offer. While 
 the surplus of a joint stock company belongs to the 
 stock holders, the surplus of the Mutuals belongs to 
 the policy holders. The courts and the official in- 
 vestigations of the eastern states have shown a state 
 of affairs endorsing every position taken in this 
 chapter. The columns of the newspapers have been 
 crowded with exposures of official misconduct, and 
 the end is not yet. 
 
 Again, the small reserves of the Mutuals can 
 easily find investment in first class mortgage loans 
 or similar gilt-edged securities, close at home. These 
 are beyond the reach of the fluctuations of the 
 market, and are untouched by panics. They are safe 
 in all kinds of financial weather. But the investment 
 of the millions of the joint stock companies is a seri- 
 ous matter. Railroad stocks and bonds are used to 
 an enormous extent. Other corporation securities, 
 state and local bonds, are bought up ; in fact, every- 
 thing which it is hoped will pay, is in demand. In- 
 surance companies publish lists of their investments, 
 but what does the average policy holder know about 
 it? Suppose a panic occurs. The gilt-edged securi- 
 ties of the Mutuals will hold their own, but what 
 about the stocks and bonds of the others. There will 
 be as there was before in the periods of depression, 
 
OF MUTUAL INSURANCE 
 
 31 
 
 a flow of eloquence about shrinkage of value, etc. But 
 suppose the Baltimore fire had occurred in the midst 
 of the last panic, where would the prices of these 
 joint stock securities have gone to? It was well for 
 the country that this conflagration took place when 
 the treasuries of the insurance companies were flush 
 with money and stocks were high. It is no answer 
 to this to say that such a condition of things is not 
 likely to occur. Panics do occur in spite of all human 
 efforts, and they occur when least expected. The 
 fire risk in the large cities is such that a conflagra- 
 tion may occur any day in any one of them, wiping 
 out more property than has ever heretofore been 
 consumed at once. To provide absolute safety, not 
 only the probable must be guarded against, but even 
 the possible, no matter how improbable. 
 
 MUTUALS NEVER MANIPULATE THE MARKET. 
 
 What security have the stock holders that these 
 vast funds will not be used to manipulate the stock 
 market? There are charges that this has been done 
 and is being done, and so well founded are these 
 charges, that State Superintendents of Insurance 
 have deemed them worthy of notice and investiga- 
 tion. And even now the courts are busy with cases 
 of this nature. Could any one use the small reserves 
 of the Mutuals in that manner? Is it supposable 
 that Mutual officials could ever promote any finan- 
 cial scheme with the expectation of unloading their 
 stock upon the companies? The very question is 
 absurd. But suppose the presidents of half a dozen 
 of the larger insurance companies united to dabble 
 
32 
 
 A HAND BOOK 
 
 in stocks. They can juggle with the market as they 
 please. But under the Mutual system, these im- 
 mense reserves would be left in the pockets of the 
 policy holders and only enough carried to insure a 
 working balance in the case of heavy losses. 
 
 Where are the interests of the stockholder of 
 these enormous insurance companies? They are 
 with the railroads and other corporations whose 
 stocks they own. WTiere are the interests of the Mu- 
 tuals ? They are with the people who are their policy 
 holders. The Mutuals only ask a fair field and no 
 favor. They welcome state supervision which in- 
 sists upon safe management and shuts out all that 
 which is doubtful. They have no other favors to ask. 
 
 There are not a few who think that co-operation 
 is to offer the solution of the trust problem. WTiile 
 this is not true universally, yet it is a long step in 
 the right direction. Those railroads whose stocks 
 are owned along the line, those banks whose shares 
 are widely distributed, in a word, all those corpora- 
 tions which are largely owned by their customers, 
 make little or no trouble. But in the sphere occupied 
 by the Mutuals, they have fully solved the corpora- 
 tion problem and, at no distant day, will occupy the 
 entire field, to the exclusion of every other form of 
 insurance. 
 
 A MUTUAL TRUST IS IMPOSSIBLE. 
 
 There is no possibility of combination to fix 
 rates or of unhealthy competition among Mutuals. 
 Each one does business as cheaply as it can and 
 charges its members only actual cost. Nor does it 
 
OF MUTUAL INSURANCE 
 
 33 
 
 really make any difference what their rates are. 
 Two Mntnals in the same vicinity will naturally do 
 business for just about the same cost. All premiums 
 collected in excess of that cost will be returned, be 
 they large or small. 
 
 The late developments should be a warning 
 against the accumulation of immense funds. The 
 following from the Underwriters’ Review, of May 
 25, 1 905, is interesting : 
 
 “An item, the correctness of which has not, we 
 believe, been disputed, has lately gone the rounds of 
 the daily press, which states that eleven prominent 
 business men of New York City are directors in 553 
 corporations, such as banks, trust companies, rail- 
 way companies, and the like, an average of about 
 fifty directorships to one man. Referring to this the 
 United States Investor calls timely attention to the 
 obvious fact that no man can discharge properly the 
 obligations which such a multiplicity of director- 
 ships involves. Chauncey M. Depew, an Equitable 
 Life director, and James H. Hyde, the Equitable 
 vice president, hold respectively seventy-four and 
 forty-seven places on sundry boards of directors. 
 These and other cases of directors who do not direct, 
 illustrate the thoroughly bad phase of loading down 
 a corporation with names of ‘influential’ men who, 
 perforce, while nominally responsible, let two or 
 three men in immediate control run the corporation 
 to suit themselves. The public, which is caught by 
 big names, may be swindled right and left, while the 
 directors can only weakly ‘plead the baby act.’ 
 
 3 
 
34 
 
 A HAND BOOK 
 
 Since the extract above quoted was published, 
 some of the directors have been forced out, but it is 
 doubtful if those who took their places are much bet- 
 ter. But the paragraph shows how intimate is the 
 connection between the great corporations, and how 
 ‘ ‘ two or three men in immediate control ’ ’ manage al- 
 most a billion dollars, belonging to other people. 
 
 As was said before, such a state of affairs is 
 absolutely impossible among Mutuals. 
 
 4 ‘The total assets of the old line fire and life 
 insurance companies in the United States are in ex- 
 cess of $2,500,000,000. The exact amount invested 
 in railroad stocks and bonds is not easily ascertained. 
 In those companies in which those investments are 
 separately stated it runs over seventy per cent. But 
 estimating it at sixty per cent, to be on the safe side, 
 the railroad investments of these companies are at 
 least $1,500,000,000. Of this amount over one-third 
 is owned within two miles of the New York post 
 office. 
 
 “How much of the remaining forty percent is 
 invested in other corporations, how much is loaned 
 to them on collateral security, the published records 
 do not show. But considering only the railroad 
 holdings, the power of these directors is enormous. 
 The eleven men named above could meet by them- 
 selves, arrange a program for all the rest and carry 
 it out. They have the power to so manipulate the 
 markets as to crush out all except those in their own 
 combination and thus stifle competition to the end 
 that they may charge what they please for what they 
 offer to the public. How long the American people 
 
OF MUTUAL INSURANCE 
 
 35 
 
 will endure this state of affairs, depends upon the 
 vigor and patriotism of the friends of co-operation. ,, 
 
 MAN A SOCIAL BEING. 
 
 There is in humanity, and ever has been, a so- 
 cial instinct. Man is classed as a gregarious animal. 
 This desire for companionship is so strong and so 
 general that the exceptional cases, the hermit and 
 the recluse, at once suggest some mental disorder. 
 Each family makes its own society in the ordinary 
 every day affairs of life, nevertheless, this does not 
 satisfy all the desires of man’s nature. He is inter- 
 ested in his fellows, he reaches out and where occa- 
 sion presents itself, he is ready to offer his services. 
 This is but the natural manifestation of his social 
 instincts. In isolated communities or where the 
 population is sparse, it is seen in the “ raising,” 
 when the neighbors unite to erect a dwelling, expect- 
 ing that in the future they shall be aided in time of 
 need. It appears in the “bees,” where neighbors 
 gather to help some other neighbor and have a good 
 time while at their work. 
 
 Besides the social instinct just alluded to, there 
 is another incentive, the desire for some advantage 
 or relief from some material evil. This gives rise to 
 larger organizations, the co-operative store, the fac- 
 tory, the insurance company and other business 
 establishments. The material rather than the social 
 element first presents itself to view in these, but the 
 social element exists and must not be lost sight of. 
 When the co-operators are scattered, as in the case 
 of Mutual Insurance Companies, there is a liability 
 
36 
 
 A HAND BOOK 
 
 to forget that the man in the next township is as 
 much our neighbor as the man whose home is just 
 across the street. But ignoring the fact of the com- 
 mon humanity and common interests of the race, 
 reduces co-operation to the level of the trust and the 
 corporation and defeats the very end for which it 
 exists. 
 
 But while the importance of the social side may 
 not always be fully realized it is seldom entirely 
 ignored. It is a fortunate circumstance that an 
 organization which is co-operative in form but not 
 in spirit suffers the fate of any other corpse. It 
 becomes offensive and is taken away. A co-opera- 
 tive enterprise exists as a business and is to be con- 
 ducted as a business, this is the material side. But 
 were it not for the social side it would not exist at 
 all. As said above, there are two elements, the ab- 
 sence of either one is fatal. 
 
CHAPTER III. 
 
 CO-OPERATION. 
 
 WHAT IS IT? 
 
 In the broad sense of the word, co-operation is 
 the union of several persons to accomplish some re- 
 sult. This definition has been limited in general use 
 to the union of persons for the purpose of producing 
 or purchasing some products or some services at 
 cost, and in this sense it will be used in this Manual. 
 
 AS OLD AS HUMANITY. 
 
 Co-operation began with the birth of the human 
 race, and it is the normal law of labor in the family 
 today. In the community, though its sphere has been 
 narrowed by illegitimate methods, it is gaining its 
 former place. The enormous economic changes of 
 the last two centuries, gave opportunities for combi- 
 nation of which avarice has eagerly taken advantage. 
 Partnership and joint stock combinations were orig- 
 inally for the purpose of co-operating in producing 
 results which were beyond the power of the individ- 
 ual, and, confined to this field, they were useful insti- 
 tutions. But when the monopolistic idea developed, 
 then the evil side of these organizations began to 
 show itself. The wealthy devoured the poor, the 
 large establishment drove out the little one, and the 
 unscrupulous and the grasping set the prices and 
 
 —37 
 
38 
 
 A HAND BOOK 
 
 compelled the would-be honest to follow. In short, 
 the era of the trusts was upon the people before they 
 suspected it. 
 
 Meanwhile, the Mutual or co-operative institu- 
 tions had been quietly pursuing their way, and as the 
 corporations became more and more aggressive, the 
 people again turned to them for relief. This was 
 especially the case in the insurance field. The old 
 co-operative companies grew stronger and new Mu- 
 tuals sprang up everywhere. 
 
 CO-OPERATION NOT A MERE SENTIMENT. 
 
 Occasionally there was a misconception as to the 
 true sphere of co-operation and then there was 
 trouble and perhaps failure. The underlying prin- 
 ciple of co-operation is equal and exact justice to all 
 without regard to external conditions or circum- 
 stances, and any disregard of this principle does 
 harm and may even work disaster. It is said that 
 there is a moral as well as a business side to co-oper- 
 ation, that men work together not only for their own 
 good but to benefit their fellow men. This is true, 
 but the more exactly the rules of justice are observed, 
 the more will be the benefits on the moral side. 
 
 Sympathy, sentiment and compassion have their 
 place in the world. The man whose soul has no such 
 emotions is not far from a demon, but efforts to 
 substitute them for justice in business transactions 
 will only result in evil. 
 
 On the other hand, co-operation cultivates all 
 the finer feelings of humanity, it makes its adher- 
 
OF MUTUAL INSURANCE 
 
 89 
 
 ents sympathetic and charitable. They will be of 
 more service to their fellowmen as individuals than 
 would be possible in any other way. 
 
 To put it differently, co-operation teaches the 
 highest form of benevolence, but it must be with 
 one ’s own. It does not believe in being generous with 
 what belongs to another. It does not believe in that 
 form of benevolence which boasts of its gifts and 
 raises the price of its products to compel the public 
 to pay its subscriptions. 
 
 Co-operation harms no man who is engaged in 
 any legitimate business. It drives no one out of 
 work, it employes as many people as any other or- 
 ganization or method of conducting business, and it 
 pays as good wages. While it occupies its own field, 
 it leaves an equal chance to every one else. It is for 
 the benefit of all, but for the injury of none. 
 
 IT HAS RAISED THE STANDARD OF COMFORT. 
 
 It has had an important influence in the world 
 in raising the standard of human comfort. Years 
 ago in England the condition of the working men in 
 some districts was appalling. They were worse 
 housed and worse fed than the cattle. Finally in 
 Rochdale, amid the jeers of the mob, a little co-oper- 
 ative store was opened in Toad Lane. It was but a 
 few months before the public saw that the patrons 
 of “the Store” seemed better fed and better dressed 
 than the others. Landlords said they paid their 
 rents more promptly. Success followed, and today 
 the co-operative institutions of England are number- 
 ed by the thousands and their capital by the millions 
 
40 
 
 A HAND BOOK 
 
 of pounds. And the working men can never be 
 forced back to their old style of living. How was 
 this accomplished? By charity? Not one penny 
 was ever so given by the organization. It was by 
 equal and exact justice in business methods. There 
 is a lesson in this. 
 
 The Mutual Co-operative Insurance Companies 
 of the United States have done a grand work. How 
 much their savings to the policy holder amount to 
 is a matter which cannot even be estimated. It is 
 somewhere in the billions of dollars and that is be- 
 yond comprehension. Nor can anyone estimate the 
 increased comfort in living coming from the higher 
 standard of Mutual Insurance with regard to keep- 
 ing homes in better condition, in fostering habits of 
 promptness and a general care for each other’s in- 
 terests. 
 
 The usefulness of co-operation is just beginning. 
 The world is growing better, wiser and more honest. 
 It is the few who are rapacious and oppressive, and 
 with each successive year there will come into the 
 field a new army of co-operators, and so the force is 
 growing which will finally overthrow the whole trust 
 system. This will not only clear the way for co-oper- 
 ation, but will make it possible for many organiza- 
 tions which are now compelled to adopt trust meth- 
 ods, to do an honest and respectable business. 
 
 CO-OPERATION REQUIRES BUSINESS ABILITY. 
 
 Sometimes it is said that a co-operative enter- 
 prise is a simple affair, something that will almost 
 run itself. This is a most pernicious error. There 
 
OF MUTUAL INSURANCE 
 
 41 
 
 is no form of business which requires more skill in 
 the general management, more accuracy in the ac- 
 counts and more care in details, than this. More- 
 over, there must be strict and absolute honesty 
 everywhere. Lacking any one of these essentials, 
 failure will inevitably ensue. This suggests a word 
 of caution. When a man needs reforming it is the 
 best plan to reform him first and admit him after- 
 ward. It will be well to have it understood that 
 membership in a Mutual is a certificate of character, 
 but the certificate should never be dated back. If a 
 building needs repairing, let these repairs be made 
 before the policy takes effect, not afterwards. 
 
 Friends of co-operation injure the cause when 
 they claim too much. It holds a large place in the 
 world but not to the entire exclusion of every other 
 method of transacting business. The corporation 
 organizer, the captain of industry, the inventor and 
 the man of genius will always be in demand and will 
 always be able to command large rewards for legiti- 
 mate services. Co-operation is not a weapon of of- 
 fense, its mission is not to destroy but to build up, 
 its voice is not for war but for peace, and its watch- 
 word is not conquest but fraternity. WTiile it takes 
 care of its own, it will always leave an equal chance 
 for every one else, and while it thrusts its hands into 
 no one ’s pocket it does not permit any other hand to 
 remain long or comfortably in its own. 
 
42 
 
 A HAND BOOK 
 
 CO-OPERATION MUST NOT BE CONFOUNDED WITH 
 PROFIT SHARING. 
 
 Co-operation is often confounded with profit 
 sharing. The two are different in every particular. 
 In profit sharing there is either corporate or indi- 
 vidual ownership and these owners employ and pay 
 the laborers. Capital draws a share in the profits 
 and this share goes to its owners. Sometimes a por- 
 tion of this share is awarded to the laborers but al- 
 ways as a method of payment. It accomplishes the 
 same results as a sliding scale of wages. In both 
 cases there is the private or corporate organization, 
 profit to capital, ownership by those who do not 
 labor and labor by those who do not own. 
 
 IS NOT SOCIALISM. 
 
 Above all it must be clearly distinguished from 
 socialism. Co-operation asks from the state no fav- 
 ors. The same right of existence which is accorded 
 to other business organizations is all it requires. 
 
 On the contrary, socialism is practically a 
 monopoly by the nation. All service, all producing 
 of whatever kind, is done by the government. No 
 ownership is recognized but that of the nation. No 
 further explanation is needed to make the difference 
 clear and these outcries of the enemies of co-opera- 
 tion, that it is socialistic should be disregarded. 
 
 A FALSE CRITICISM. 
 
 A common criticism on co-operative enterprises 
 is expressed somewhat as follows : 4 ‘Yes, your busi- 
 
OF MUTUAL INSURANCE 
 
 43 
 
 ness is getting along all right, it will continue to 
 prosper till it becomes large enough to attract at- 
 tention. Then some ambitious persons will conspire 
 to get hold of it and as the ‘outs’ are frequently 
 stronger than the ‘ins’ there may be a change and 
 the business may fall into the hands of persons who 
 care for nothing but their own aggrandizement . 9 1 
 As evidence, showing that their criticism is not un- 
 founded, they point to the strife raged in the eastern 
 cities for the control of the funds of the great life 
 insurance companies, and to the continual quarrels 
 in the management of many other organizations. If 
 such things occur where only a few are privileged 
 to vote what will be the situation where every policy 
 holder has a voice in the control ? 
 
 In the past there has been force in these criti- 
 cisms. Many a well planned co-operative enterprise 
 has failed because some one obtained control who 
 was either incompetent or dishonest. An idea pre- 
 vailed that co-operation did away with the need of 
 skill and experience in the manager, that any body 
 could run a co-operative enterprise, the members 
 took no particular care in the selection of the offi- 
 cers, they voted for the smooth tongued talker or the 
 jolly good fellow and disaster followed. 
 
 But as time elapsed it became evident that co- 
 operation is a form of business and a form which re- 
 quires as much education, experience and skill as 
 any other method, and as that fact impressed itself 
 upon the fraternals of the community they became 
 more and more careful in the selection of their offi- 
 cers. The tendency at the present time is to retain 
 
44 
 
 A HAND BOOK 
 
 those who have given good service and to value ex- 
 perience and skill at their proper worth. Faithful 
 servants are retained as long as they will serve, 
 especially in the Mutual Insurance Companies. One 
 secretary in one of the largest Mutuals has a record 
 of forty-five years, another of thirty-six, while there 
 are a large number who have served from twenty to 
 thirty years. Great care is also exercised in select- 
 ing directors. Terms of service are from three to 
 five years and at each annual election, those who are 
 willing to continue are generally re-elected. 
 
 In every community will be found a class of 
 people who will not work and who are complete and 
 absolute failures in life, but who have, nevertheless, 
 innumerable schemes for making everybody rich. 
 It is a peculiar characteristic of these plans that they 
 invariably include as a condition of success that 
 their originator be put in charge of the business at 
 a good salary. These men sometimes succeed in in- 
 fluencing enough votes to secure them positions in 
 co-operative institutions. When this takes place, the 
 establishment might as well close its doors at once. 
 The man who is a failure in his own business is not 
 fit to have any part in the management of a co-oper- 
 ative enterprise or of any other. It will be a bright 
 day for the country and its institutions when public 
 sentiment is advanced enough to relegate all such 
 botches and grafters to the rear. 
 
 Mutual Insurance men should never elect to 
 office a man whom they would not trust with the 
 management of their own private business. Wreck- 
 ing is possible on a small scale as well as on a large 
 
OF MUTUAL INSURANCE 
 
 45 
 
 one; so is grafting. The late developments in the 
 case of the large life insurance companies of New 
 York state should be a warning. 
 
 Let every co-operator remember that eternal 
 vigilance is the only safeguard, and to put in office 
 only men whose lives have demonstrated their capa- 
 bility and integrity. 
 
 Co-operatives sometimes settle a transaction all 
 at once. They may buy a quantity of goods. As 
 soon as the purchase price, freight and other ex- 
 penses are ascertained, the exact cost can be arrived 
 at, each one can pay his share and the transaction 
 may be closed. Generally the matter is not disposed 
 of so summarily and in the case of Insurance such 
 settlements would be impossible. The exact cost 
 cannot be ascertained till the expiration of the 
 policy. In the advance premium and the note com- 
 panies there is an unused balance which is returned 
 to the policy holder. Agents frequently forget this, 
 and in comparing different methods of doing busi- 
 ness they take the whole note or advance premium 
 as a basis. They lose an important advantage in 
 doing so. The comparisons should be made between 
 the cost of the two as shown by actual experience, 
 that is what the policy holder has paid for a com- 
 pleted term in a Mutual and what the usual charges 
 for the same indemnity would amount to under other 
 methods of doing business. 
 
 WILL HOLD THE FORT. 
 
 But the soul of co-operation is honesty. Not the 
 negative character which simply avoids the evil, but 
 
46 
 
 A HAND BOOK 
 
 the positive “ virtue’ ’ of the old Koman, who not 
 only had convictions, but courage enough to fight for 
 them. Such honesty is aggressive and makes con- 
 verts, it is the honesty of true co-operation. 
 
 That co-operation will succeed without a strug- 
 gle is not to be expected. It will be attacked on 
 every side by those interested in other lines of busi- 
 ness. The fight will be a fierce one. No great prin- 
 ciple, no improved method was ever adopted with- 
 out a contest. Why should it be otherwise with co- 
 operation ? 
 
 Wliat can be had for nothing is worth nothing. 
 The man who is in nobody’s way is a nonentity, and 
 the organization which no one opposes is of no use 
 to anybody. The Mutuals have a fight on hand. 
 There is no cause for discouragement. They can 
 hold the fort in spite of all opposition. They are 
 here because they are needed and being needed, they 
 will stay. 
 
CHAPTER IV. 
 
 COMPARISONS. -The Joint Stock and 
 the Mutuals. 
 
 SCURRILOUS ATTACKS. 
 
 The perpetual and persistent attacks upon the 
 Mutuals have been a vexatious hindrance. It has 
 been reiterated in season and out of season, that the 
 Mutuals are inherently weak and are dragging out a 
 precarious and short lived existence, which only 
 averages about fifteen years. Circulars have been 
 scattered broadcast over the country giving purport- 
 ed lists of “Failed Mutuals,” and in fact, every 
 scheme and device imaginable has been resorted to 
 in order to weaken the faith of the people in their 
 ability to manage their own insurance business. 
 
 To set at rest all these misrepresentations, a 
 statement of the hare facts will suffice. In the ab- 
 sence of any compilation of statistics of the Mutual 
 business, the following has been gathered from vari- 
 ous sources, the authority for each fact being given. 
 
 THEIR RECORD. 
 
 In the census of 1890 there is a volume of insur- 
 ance statistics. It is now fifteen years old, but is 
 valuable as a basis for comparison. The tables are 
 not summed up, and the following results were ob- 
 tained by going over the pages line by line, and mak- 
 ing an actual count. Table one of the census gives 
 
 — 47 
 
48 
 
 A HAND BOOK 
 
 the names, dates of organization, dates of commen- 
 cing business, and in case of retiring during the de- 
 cade, the date of retirement, just the bare facts for 
 the years 1880 to 1889 inclusive, and only concerning 
 such companies as were in business during the de- 
 cade or some portion of it. 
 
 In ten states, southern and Pacific, there is no 
 mention of Mutuals. Presumably there was adverse 
 legislation. In two states they seem to have been 
 wiped out. In a few other states there seems to have 
 been no interest whatever in insurance, there being 
 very few either joint stock or Mutuals reported. 
 
 But in twenty-three states, where the Mutuals 
 have been given a fighting chance for their lives, 
 they have made an unapproachable record. Espec- 
 ially is this true in Illinois, Iowa, New York, Penn- 
 sylvania and Wisconsin, each with over a hundred 
 Mutuals at that time. Indiana, Minnesota, Ohio, 
 Missouri, New Jersey, Connecticut and others, fol- 
 low with records as good in proportion, while 
 Rhode Island, Delaware, Tennessee, Virginia and 
 West Virginia, each report farm Mutuals, but no 
 failures. 
 
 Bear in mind that in these figures everything 
 is put down to the discredit of the Mutuals except an 
 absolute and positive success. Consolidations, 
 changes of name, withdrawal from business without 
 loss after reinsuring, reorganizations, unused chart- 
 ers, have all been counted as Mutuals retired. 
 
MRS. MARY A. LEEKLEY, PERRY, OKLA. 
 
 Mrs. Mary A. Leekley was born in Iowa. In 1897 with her 
 husband she removed to Oklahoma. Following the death of her 
 husband she served as deputy register of deeds three years and 
 refused the nomination tendered her by her political party for 
 the same office. Subsequently she was elected as secretary and 
 manager of the Oklahoma Farmers' Mutual Insurance Company 
 of Perry. Oklahoma, which position she has held for a number of 
 years. Mrs. Leekley is a woman of many accomplishments, 
 is a charming conversationalist and possesses a keen instinct and 
 relish for business transactions. She illustrates what can be 
 done by a woman who will set her mind upon the task. 
 
LIBRARY 
 OF THE 
 
 UKIYERSfTV CF ILLINOIS 
 
OF MUTUAL INSURANCE 
 
 49 
 
 THE CENSUS FIGURES. 
 
 The census enumerates five hundred and thirty- 
 five home stock companies, as doing business in the 
 United States during part or all of the decade, at 
 the close, one hundred and seventy-four were out of 
 business, many of them old established companies. 
 There were five changes of name. 
 
 In the same period there were one thousand 
 four hundred and three farm Mutuals. Of these, 
 one hundred and three retired and some of these 
 were Mutuals only in name. 
 
 That is 32.6 per cent of joint stock companies 
 retired but only 7.2 per cent of farm Mutuals. This 
 shows the staying power of these Mutuals to be near- 
 ly five times as great in proportion as that of the 
 joint stock companies. 
 
 THE MUTUALS THE OLDEST COMPANIES. 
 
 An examination of the comparative ages of the 
 companies, as found in the table, shows that the 
 Mutuals are the old companies. The oldest of all, 
 of which Benjamin Franklin was an officer, “The 
 Contributionship for the Insurance of Houses from 
 Loss by Fire,” dates back to March 25, 1752, and is 
 a Mutual. The next company, The Mutual Assur- 
 ance Company of Philadelphia, chartered July 5, 
 1784, is also a Mutual. In all the table gives ten 
 companies chartered prior to 1801, and consequently 
 dating back to the eighteenth century. Six, includ- 
 ing the two oldest, are Mutuals, the other four are 
 stock. 
 
 4 
 
50 
 
 A HAND BOOK 
 
 A further inspection of the table shows that 
 three hundred and twenty-six of the companies were 
 in business prior to January 1, 1861, one hundred 
 and nine of them are stock companies and two hun- 
 dred and seventeen are farm Mutuals, almost exactly 
 two to one in favor of the Mutuals. 
 
 A count of the Mutuals of the state of Wisconsin 
 shows that of one hundred and eighty-six companies 
 mentioned in the table, one hundred and fifty-three 
 had been in business over ten years. Of these only 
 three retired during the decade under consideration 
 and only one of those started during the next ten 
 years, had retired up to 1890. Not one of the forty- 
 seven companies organized before 1874 had failed 
 or retired. Other states show similar excellent rec- 
 ords. 
 
 An attempt to procure census statistics of a later 
 date, elicited the following reply : 
 
 UNITED STATES CENSUS OFFICE 
 
 Washington, D. G., December 11, 1905. 
 Mr. G. F. Mingenback, Chairman, 
 
 McPherson, Kansas. 
 
 Dear Sir: 
 
 I am in receipt of your letter of December 7th, in 
 which you ask for statistics on fire insurance — if any were 
 published by the Twelfth Gensus. 
 
 In reply, I beg to advise you that under the provisions 
 of the Gensus Act, this subject was not designed for special 
 investigation. I am therefore unable to furnish you with 
 statistics concerning it. I regret my inability to comply 
 with your request. Very respectfully, 
 
 S. N. D. North, Director. 
 
OF MUTUAL INSURANCE 
 
 51 
 
 The priceless value of another set of tables ten 
 years later, for the purpose of comparison, is appar- 
 ent to every member of this organization. In fact, 
 about the only real value there is in census tables is 
 for such purposes. 
 
 Why was this particular subject left out of the 
 provisions of the census bill? There is no explana- 
 tion. 
 
 MR. UPfiAM’S QUOTATIONS. 
 
 The following from Mr. Eoger H. Upham’s 
 magnificent address at Chattanooga in 1903 will 
 serve as a basis for some comparisons. It originally 
 came from the report of the State Insurance Com- 
 missioner of Massachusetts for 1877. 
 
 “Twenty-one (all but six, and those small ones 
 with but a single exception) of the Massachusetts 
 stock companies were bankrupted by the Boston fire 
 of 1872, with two exceptions these companies had 
 an unimpaired capital and a liberal surplus when the 
 great conflagration came, yet they were able to pay 
 but 50 per cent of their insurance losses. 
 
 “Four Mutuals were forced into liquidation by 
 the Boston fire. Three of them paid their losses and 
 debts in full. The other paid 85 per cent of its losses 
 and debts. 
 
 “Several other Mutuals suffered losses that 
 greatly exceeded their cash funds and would have 
 bankrupted stock companies of equal size, but they 
 met their obligations from drafts upon their contin- 
 gent liability funds and are strong, excellent institu- 
 tions to-day. 
 
52 
 
 A HAND BOOK 
 
 i i This relatively shows the strength of Mutual 
 companies with that of stock companies in case of 
 trouble. ’ ’ 
 
 That needs no comment, the wayfaring man, 
 though a fool, need not err therein. 
 
 A JOINT STOCK WAIL. 
 
 Now compare a paragraph taken from the Un- 
 derwriter’s Review, Des Moines, Iowa, June 10, 
 1903. The companies referred to are joint stock. 
 
 “The optimistic projectors of the numerous two 
 hundred thousand dollar fire insurance companies 
 being launched throughout the country might study 
 with profit the long list of companies which have 
 failed and retired during the past twenty years. In 
 conservative Boston alone, according to a list pre- 
 pared by the Standard, out of fifty-four companies 
 organized since 1803, only three remain, now that 
 the North American has voted to go into liquidation. 
 Of these thirty-seven have retired since 1871 and six- 
 teen since 1880. The fire underwriting highway is 
 strewn with wrecks and retirements throughout its 
 entire course, most numerous, however, since the 
 i Seventies’, the Boston experience being only sug- 
 gestive of a more widespread mortality elsewhere.” 
 
 The same paper, the Underwriters Review, 
 March 25, 1905, says : 
 
 “A striking illustration of the unprofitableness 
 of fire insurance is found in the list of companies 
 either failed or retired as given in the just issued 
 New York report. This shows that since the insur- 
 ance department was organized in 1859, 147 New 
 
OF MUTUAL INSURANCE 
 
 5a 
 
 York stock fire and marine companies have ceased 
 business and that 220 companies of other states and 
 33 foreign companies have retired from New York, 
 not all, but the major portion of which are dead. 
 This shows that over two and a half times the num- 
 ber of stock companies now doing business in New 
 York have disappeared from the state in the past.’* 
 
 SUPERINTENDENT DEARTH QUOTED. 
 
 Turn now to Minnesota, compare her Mutuals 
 with the joint stock companies of Boston. Also bear 
 in mind that the Boston and New York companies 
 have been aided in every possible way by legislation, 
 while the Minnesota Mutuals had to fight for their 
 lives. The following is taken from the speech of 
 State Insurance Commissioner Elmer H. Dearth, 
 delivered before the National Association of Co-op- 
 erative Mutual Insurance Companies in 1902. 
 Speaking of the laws of 1875, previous to which 
 Mutuals were barred from the State, he says, ‘ ‘ Dur- 
 ing the first year after the passage of the act there 
 were but two companies organized— The Feather- 
 stone Mutual of Goodhue county, and the Manches- 
 ter Mutual of Freeborn county. The Featherstone 
 Mutual, however, never transacted any business, 
 surrendering its charter within the first year after 
 the organization. It is interesting to note that with 
 the exception of this particular company, and one 
 other organized some years later, which also sur- 
 rendered its charter before transacting any business, 
 none of the township Mutuals in this state have ever 
 retired from business, there not having been a single 
 
54 
 
 A HAND BOOK 
 
 failure through unprofitable underwriting, and up 
 to date, or at the close of the year 1901, there have 
 been 132 incorporated, 130 of which are in active 
 operation and enjoying a high degree of prosper- 
 ity.' ’ 
 
 The total number now in operation is one hun- 
 dred and forty-two, and the total saving to date is 
 estimated at over twelve millions of dollars. In his 
 Preliminary Report issued February 23, 1904, Mr. 
 Dearth says that “No other class of business, wheth- 
 er of insurance or of any other line, is conducted so 
 eminently successful at such a very small cost.” 
 
 PRES. FORBES’ STATEMENT. 
 
 Again, compare with that Boston jeremiad the 
 following Iowa statistics furnished by President 
 
 Forbes of the National Association : 
 
 “There have been organized in the State of 
 Iowa, 192 Mutual Insurance Companies, under what 
 is known as Chapter 5 of the code of laws. There 
 are now in successful operation, 187 companies do- 
 ing business under Chapter 5 of the code. There 
 have been five companies suspended or failed to do 
 business. Some of these companies, while organized 
 under Chapter 5, were not really mutual co-oper- 
 ative companies, and for this reason they were com- 
 pelled to suspend business and went into the hands 
 of a receiver, and I hereby enclose you a clipping 
 from our daily paper of the last one that succumbed 
 to pressure, which will give you an idea of all the 
 companies that have suspended and for what reas- 
 on.” 
 
OF MUTUAL INSURANCE 
 
 55 
 
 The clipping shows that the companies which 
 failed were not entitled to he classed as Mntnals. 
 
 _ OTHER AUTHORITIES. 
 
 Wisconsin has had forty-four years experience 
 with Mntnals and Commissioner Host writes in his 
 last report, ‘ ‘ Kept within the meaning and pnrposes 
 of Mntnality, and the well tried limitations and re- 
 strictions adhered to, with the economy and care 
 that has characterized the management of these com- 
 panies, there never will be a failnre, and the protec- 
 tion afforded will always he the best. ’ ’ 
 
 The Insurance Commissioner of Pennsylvania 
 writes concerning farm Mntnals, “ There are about 
 two hundred of these companies which confine their 
 business entirely to farm properties and I presume 
 there have not been more than eight or ten of such 
 companies that have gone out of business in the last 
 twenty years.” 
 
 The Commissioner of Washington writes that 
 there are eleven Mutuals doing business in that 
 State, and so far as he can find, only one has with- 
 drawn after being organized. 
 
 THE BALTIMORE FIRE. 
 
 Shortly after the great conflagration in Balti- 
 more, an old line journal made the statement con- 
 cerning the Insurance Companies of that city, that 
 all but two of the local companies were in the hands 
 of a receiver, and that 4 1 The local Mutuals were gone 
 for good.” The Manual Committee wrote to the 
 
56 
 
 A HAND BOOK 
 
 Insurance Department of the State of Maryland. 
 The following pungent reply was received : 
 
 G. F. Mingenback, McPherson, Kansas. 
 
 Dear Sir: Your requisition of the 18th inst. received. 
 In reply, beg to advise that the Baltimore Equitable Fire 
 Insurance Society referred to in your letter is A No. 1, and 
 there is no necessity or prospect of their discontinuing 
 business. I am afraid your informer did not know what 
 he was talking about. Yours Very Truly, 
 
 LLOYD WILKINSON, 
 Insurance Commissioner of Maryland. 
 
 At a later date, after the effects of the great fire 
 were fully developed, a list of failures was procured. 
 Of the seven Maryland Mutuals doing business be- 
 fore the fire, two went into the hands of the receiver, 
 leaving five to continue. There were eight joint 
 stock companies of which five became bankrupt, 
 leaving three to go on. Several joint stock com- 
 panies of other states were forced out of business by 
 this fire. But taking the insurance companies of 
 Baltimore alone, the score is two to one, in favor of 
 the Mutuals. 
 
 The New York State Insurance Department has 
 collected statistics of the companies under its juris- 
 diction. Many New York companies did no business 
 in Baltimore owing to the enormous local taxes. But 
 thirty-eight companies insured property there and 
 suffered loss. Every one was well managed, with 
 unimpaired capital and ample surplus. And with- 
 out that surplus, every one would have been thrown 
 into the hands of a receiver. Most of them would 
 have been hopelessly bankrupt, a few might have 
 
OF MUTUAL INSURANCE 
 
 57 
 
 continued in business after levying a heavy assess- 
 ment to replace the lost capital, for incredible as 
 it may seem after all the talk about mutual assess- 
 ments, the old line stock holder is not infrequently 
 liable to assessment himself. 
 
 Four companies lost an amount equal to their 
 entire capital. Their surplus saved them. The 
 fourth paid in full but reinsured and went out of 
 business rather than levy an assessment to make 
 good its capital. Its surplus was entirely absorbed. 
 Two others lost all of their surplus and part of their 
 capital. 
 
 THOSE FAILED MUTUALS. 
 
 Some years ago a list of failed Mutuals was cir- 
 culated to frighten the public. It contains about 150 
 companies of which some were only chartered and 
 some were Mutuals in name only, and over thirty did 
 not pretend to be farm Mutuals, but admitting, for 
 the sake of the argument, that they were all fail- 
 ures, how does the list compare with the old line rec- 
 ord,— as 8 per cent to 35, or more than four to one, 
 in favor of the Mutuals. That is, taking the worst 
 they can say about the Mutuals, the stock companies 
 are four times as risky as the Mutuals. But this is 
 not a fair showing. It is not claimed that farm Mu- 
 tuals never fail. There are promoter’s Mutuals as 
 well as old line wild-cats. The organizer who starts 
 new lodges for the charter member fees is a familiar 
 character. Such men sometimes enter the Mutual 
 field. Again, there are organizations which are lim- 
 ited or which have a joint stock capital and which 
 
58 
 
 A HAND BOOK 
 
 adopt the name Mutual without any right, whatever. 
 Failures of this kind have all been charged up to the 
 Mutuals, but in the states where statistics have been 
 accessible, the showing is different, as in Minnesota 
 and Iowa, for instance. Among a total of nearly 
 300 Mutuals, not a single failure of a genuine farm 
 Mutual has come to light. 
 
 FROM NEW YORK STATE. 
 
 At the meeting of the National Association at 
 Topeka, Kansas, in 1904, a very able paper from 
 Clawson Backman, president of the New York Cent- 
 ral Association, was read. The following are ex- 
 tracts from it : 
 
 “We have yet to find in the State of New York 
 where any Mutual Company ever retired or discon- 
 tinued business and failed to pay 100 cents on the 
 dollar. ’ ’ 
 
 “We some times come into competition with 
 old line companies where they are trying to find 
 some old bankrupt Mutual Company, ’way back, 
 years ago, and see if they cannot get someone to sue 
 on a premium note, and then have this published in 
 the papers, that the Mutuals have had another 
 assessment which cost from $10,000 to $20,000. Now 
 there is as much difference between these Mutual 
 Companies in the State of New York, as there is be- 
 tween day and night. There are so called, the old 
 stock mutuals, where it requires $20,000 in cash, and 
 $80,000 of capital stock notes, and they issue non- 
 participatory policies. ’ ’ 
 
 The assured has nothing to do with these com- 
 panies whatever. The only people who have formed 
 
OF MUTUAL INSURANCE 
 
 59 
 
 these companies become stockholders and derive the 
 benefits. These should have been called joint stock 
 companies, for the assured never derives any benefit 
 from this kind of insurance. 
 
 Careful inquiry among the officers of State 
 Associations has resulted in a great number of re- 
 plies of the same tenor. The farm Mutuals seldom 
 or never fail. The much advertised failures are fail- 
 ures of companies which either were not Mutuals, or 
 which never were organized as legitimate companies, 
 and were never managed by farmers. 
 
 In a recent address, an old line official said that 
 the Mutuals might be successful in narrow limits 
 where the problems were simple, etc. 
 
 The Mutuals will accept that challenge at once, 
 and the speaker might as well have put his covert 
 sneer into plain language and said that the farmers 
 were a lot of chumps who did not know what was 
 good for them. 
 
 Articles have been going the rounds for some 
 time stating that the records of the great mercantile 
 agencies show that only one per cent of the business 
 firms fail in a year in the United States. Now the 
 Mutuals will accept that as it stands and they will 
 count nothing as a failure among joint stock com- 
 panies which is not absolute bankruptcy, i. e. non- 
 payment of liabilities. On the other hand, they will 
 count as failures, among Mutuals every charter is- 
 sued but never used, every consolidation, every re- 
 tirement from business, whether liabilities are paid 
 or not. The joint stock men shall have all of these 
 advantages, for they need them. 
 
60 
 
 A HAND BOOK 
 
 FROM OTHER STATES. 
 
 In Minnesota there are one hundred and forty- 
 two farm Mntnals, all organized since 1875 and most 
 of them shortly after that date. At the mercantile 
 rate of one per cent a year, the failures for the 
 period of twenty years would have been at the lowest 
 estimate, between twenty and thirty. How many 
 were there? One charter was taken out and re- 
 turned unused, and one company paid up and re- 
 tired. 
 
 In Iowa, out of 192 farm Mutuals, five have gone 
 out of business. The mercantile ratio requires thirty 
 or forty. 
 
 Pennsylvania has two hundred farm Mutuals, 
 and the commissioner thinks that not more than 
 eight or ten have gone out of business in twenty 
 years. The mercantile ratio requires forty or over. 
 
 The same testimony comes from other States. 
 Correspondents everywhere say that they never 
 have heard of the failure of a farm Mutual managed 
 by farmers alone. 
 
 Let it he repeated again and again that there is 
 no business in the known world which can show as 
 good a record as these same farm Mutuals managed 
 by the farmers themselves. 
 
 Compare again the failures among the Mutuals 
 with the business records. Count the mercantile 
 firms in any city, then count those, who through lack 
 of success or actual bankruptcy, have gone out of 
 business during the last two decades, and it will be 
 found that the dead outnumber the living. It is 
 doubtful if there is a city or a town in the whole 
 
OF MUTUAL INSURANCE 
 
 61 
 
 country where one-half of the firms started during 
 the last twenty years are still alive. Against this 
 pnt the record just given and the result is ten to one, 
 in favor of the Mutuals. 
 
 OTHER EVIDENCE. 
 
 There is still other evidence on this question. 
 The State Insurance Commissioner of Illinois has 
 computed the amount of assets per $100 of total risks 
 in his state. He gives it at $1.30 for the joint stock 
 companies and $7.68 for the Mutuals. Data for the 
 same comparison are to be had in very few states. 
 New Hampshire shows $1.60 for the joint stock, to 
 $2.75 for Mutuals, the cash Mutuals only being given. 
 Connecticut shows $1.80 to $2.01, eleven mutuals 
 only, being given. Ohio shows $3.21 to $6.92, the 
 town Mutuals not being included. 
 
 Every computation of this kind has shown a 
 decided advantage on the side of the Mutuals. 
 
 A single comparison between two companies 
 will answer. The Aetna, of Hartford, Connecticut, 
 the strongest and best managed joint stock company, 
 is taken on the one hand, and The Philadelphia Con- 
 tributionship, the oldest insurance company in the 
 United States, a Mutual, on the other. 
 
 NAME COM. BUSINESS GROSS ASSETS GROSS RISKS 
 
 Aetna 1819 $15,306,151.13 $643,937,568.00 
 
 Contributionship 1754 4,990,474.84 15,034,459.00 
 
 Compute these ratios and see which is the 
 strongest. 
 
 To sum up, the public records, the testimony of 
 the State officials where the Mutuals are numerous, 
 
62 
 
 A HAND BOOK 
 
 with but a single dissenting voice, and that one dis- 
 trusted, give evidence that the Mutuals are more en- 
 during than the joint stock companies. The failures 
 are far fewer in proportion to the number, and when 
 a great conflagration sweeps over a city, it is the 
 Mutual which stands the shock. A comparison of 
 resources, the real test of ability to pay, shows tiiat 
 in proportion, the Mutuals are far better prepared 
 for a storm than are the old line companies. In 
 short, the charge of weakness, so often made against 
 the Mutuals, is a pure fabrication of the basest kind. 
 
 These facts should be scattered broadcast, and 
 the true state of the case put before the people. The 
 Mutuals have been on the defensive too long. They 
 should assume the aggressive at once and let their 
 opponents do the defensive work. 
 
 The reason why farm Mutuals were made the 
 basis of comparison in this article is that there was 
 no possible method of classifying the others as the 
 data were incomplete. In some states there was no 
 distinction, in others the basis was different. An 
 attempt to classify the Mutuals from reading their 
 reports, met with no success. There is also another 
 reason, these Mutuals have been derided, sneered at 
 and so outrageously vilified, that it seemed that they 
 had a special claim to a good defense. 
 
 COUNTERFEIT MUTUALS. 
 
 That Mutuals never fail is not claimed. All 
 that is asserted is that the per cent of failures is 
 smaller among the Mutuals than among the joint 
 stock companies. The old line companies circulate 
 
OF MUTUAL INSURANCE 
 
 63 
 
 lists of failed Mutuals. Some of these should be 
 charged up to the old lines. In New York State, 
 years ago, joint stock companies were organized 
 with 20 per cent paid up and 80 per cent in notes. 
 They called themselves Mutuals, hut they had not a 
 single co-operative feature. Most of them failed. 
 They are all charged up to the Mutuals in these 
 lists. 
 
 Iowa furnishes another illustration. There 
 were several so called Mutuals there which are 
 known as ‘ 6 stock mutuals. ’ ’ They are not recognized 
 as Mutuals. Some have failed, some have organ- 
 ized as joint stock companies. It is only a question 
 of time when all will go, yet they are charged up as 
 “Failed Mutuals.’ ’ 
 
 Swindlers have claimed to he agents for Mu- 
 tuals which never existed, have collected premiums 
 and then absconded. These are put down as ‘ 4 Failed 
 Mutuals.” Every shift or device to swell the list 
 has been adopted and yet in proportion to the num- 
 ber of joint stock companies which have become 
 bankrupt it is still insignificant. 
 
 The joint stock fire insurance companies have 
 invested heavily in the stocks and bonds of the sev- 
 eral western railroads. The interest of these great 
 corporations are bound up together. The Mutuals 
 are organized in the interests of the people. Shall 
 they he crushed out to leave the field free to great 
 trusts? 
 
 Who are the men who advocate these changes? 
 They are the agents of the old line companies. Have 
 they any interest in common with the mutual policy 
 
64 
 
 A HAND BOOK 
 
 holder ? How did they treat the farmer in the hard 
 times years ago? How many farms did these men 
 help the insurance companies to foreclose on? 
 
 A CONFESSION OF WEAKNESS. 
 
 There is another argument in favor of the Mu- 
 tuals that cannot be gainsaid or refuted. It is that 
 joint stock companies resort to legislation to shut out 
 the competition of the Mutuals. No man or set of 
 men will use such means if it can possibly he avoided. 
 They are the last resort and a confession of weak- 
 ness. Looking after the necessary legislation is 
 troublesome and expensive even if there is no actual 
 bribery. There is a continual fight on hand. Monop- 
 olies are unpopular and the people will demand un- 
 friendly legislation and it will cost something to re- 
 sist that, and the resulting public prejudice will make 
 itself felt with courts and juries. Business men 
 avoid all these whenever they can and so would the 
 joint stock company if it could. But the average 
 American who knows a good thing when he sees it 
 has learned the truth about the Mutuals. He has 
 seen that they are safer and cheaper. There is no 
 evading the conclusion. Then the old liners go to 
 the legislature with a batch of innocent looking laws 
 designed to protect the people. They go through. 
 And then the lawyers begin to construe them and 
 before long they are construed into all sorts of pro- 
 hibition against the Mutuals. To have asked for this 
 legislation openly and frankly would have been to 
 have defeated it. The fact that such legislation has 
 
OF MUTUAL INSURANCE 
 
 65 
 
 to be smuggled through is another evidence against 
 the joint stock companies. 
 
 STATISTICS PROVE IT. 
 
 The Insurance Year Book for 1905-1906 con- 
 tains some interesting matter. The National Board 
 Tables show that in the decade, 1871-1880 inclusive, 
 the number of joint stock companies in the United 
 States, whose statistics that body obtained reached 
 its maximum average, 162. This number diminished 
 to 98 in 1896, then rose to 127 in 1899 and fell to 112 
 at the present date. Their total of foreign and home 
 companies combined is now 144. The average in- 
 surance written annually by the United States Com- 
 panies was in 1871-1880, $4,858,438,135, in 1904 the 
 amount was $16,724, 349, 419. That is, while the num- 
 ber of companies has diminished over thirty per 
 cent, the business has increased almost three hun- 
 dred and fifty per cent. 
 
 There are some companies not included in these 
 figures for on page 233 the Year Book gives figures 
 which show a decrease in the number of home and 
 foreign companies from 1900 to 1904 inclusive, from 
 321 to 303 or 18, five of this was in the foreign com- 
 panies. Deducting the 68 foreign companies from 
 the total number there remains 235 as the net total 
 of home stock companies. During this period the 
 number of Mutuals large enough to be reported by 
 the Year Book increased from 172 in 1900 to 212 in 
 1904, a net growth of 40. 
 
 5 
 
66 
 
 A HAND BOOK 
 
 The census report for the decade 1881-1890 in- 
 clusive, shows that 535 United States joint stock 
 companies did business during that period. Of these 
 five changed their name and 174 disappeared, leav- 
 ing 356 in existence at the end of the decade. At 
 present the latest estimate is 215, which agrees very 
 closely with the Year Book figures. 
 
 The period from 1881 to 1905 has been one of 
 growth, new towns have been built and the older 
 ones have enlarged their borders. Insurable prop- 
 erty has increased rapidly and with it the amount of 
 insurance written. But the joint stock system pre- 
 sents the anomalous spectacle of an increasing busi- 
 ness, transacted by a decreasing number of compan- 
 iee and with a decreasing capital. 
 
 That this is legitimate no one will believe. One 
 of two things must be true. Either the joint stock 
 system is structurally weak, is inherently wrong, or 
 that it is concentrating into a trust. There is no 
 other conclusion, there is no escaping from the 
 dilemma. 
 
 This Year Book also contains a table or list of 
 failed or retired insurance companies, both old line 
 and Mutual. It gives the date of failure, withdrawal, 
 reinsurance, merger, or whatever else took place. 
 It is fairly and carefully made out and is probably 
 as near correct as possible. It is not summed up but 
 a casual inspection will show that it more than cor- 
 roborates the figures given elsewhere in this chapter. 
 
OF MUTUAL INSURANCE 
 
 67 
 
 ANOTHER ATTACK. 
 
 A recent issue of an old line journal says that 
 “what the premium payers want are concerns that 
 will pay losses and only the stock companies can be 
 depended on for that.” 
 
 The figures of accepted authorities on insurance 
 matters will furnish the best refutation of that state- 
 ment. 
 
 The census reports for the decade 1881-1890 
 show that the failures among the Mutuals were 7.2 
 percent of the entire number, the failures among the 
 old line companies were 32.6 percent— the net ratio 
 being four to one, in favor of the Mutuals. 
 
 The Spectator Insurance Year Book for 1905 
 gives an up to date list of failures, withdrawals, 
 mergers, etc. It shows that the ratio in favor of the 
 Mutuals is increasing steadily. 
 
 Mr. F. J. Martin’s paper published elsewhere, 
 a full and faithful compilation, gives the compara- 
 tive resources of the two classes. The Stock Com- 
 panies carry in all, $4.90 to each $1000 of insurance. 
 The cash ability of the Mutuals is $6.37 per $1000, 
 or in round numbers, one and one fourth times as 
 much as the amount carried by the old liners. 
 
 The total liabilities of the stock companies 
 equals 68 per cent of their assets, the total liabilities 
 of the Mutuals equals 34 per cent of their assets. 
 This is 2 to 1, in favor of the Mutuals. 
 
68 
 
 A HAND BOOK 
 
 The figures stand thus far, 
 
 Mut Joint 
 ual Stock 
 
 Strength as indicated by failures, 4. 1 
 
 Strength as indicated by resources to $1000. .1.25 1 
 Strength as indicated by assets to liabilities. .2. 1 
 
 There are still other considerations. There is 
 a mercantile maxim that the lower the expenses the 
 greater the ability to meet obligations. The average 
 expense of the joint stock companies, acording to 
 Mr. Martin’s table is $2.91 per $1000 at risk, exclud- 
 ing fire losses. This is only 45 cents less than the 
 average total expenses of the Mutuals, fire losses 
 and all. 
 
 The probability of contested losses cannot be 
 assertained from the published reports, but so far 
 as the amount is given they indicate a far greater 
 proportion among the old liners than among the 
 Mutuals. 
 
 Adding all these probabilities together, it is 
 very easy to see that instead of the old liners being 
 the only ones that can be depended upon, the ratio is 
 heavily against them in every case, and that they re- 
 alize this fact is evidenced by their course, for it is 
 always the weaker in the fight that makes the most 
 outcry. 
 
 But enough space has been taken up with this 
 matter. It is not a pleasant subject. The Manual 
 does not make a sweeping condemnation for there 
 are many joint stock companies which are honorably 
 conducted and which never resort to questionable 
 
OF MUTUAL INSURANCE 
 
 69 
 
 tactics. But the flood of circulars, the venomous 
 letters, and the frequent misrepresentation, all de- 
 signed to injure the Mutuals, require an answer and 
 it is hoped that no further allusion to the subject 
 may he necessary. 
 
 AGGRESSIVENESS A DUTY, 
 
 No man liveth to himself. Bound together by 
 ties as old as the creation, mankind will always be 
 dependent on each other. In social life the Golden 
 Rule is the paramount law. In statesmanship there 
 is a maxim “The first duty of a minority is to be- 
 come a majority.” This means that whoever de- 
 velops a useful idea, a beneficent theory or an advan- 
 tageous plan of action, is in duty bound to publish 
 abroad his discovery, to convert others to his own 
 belief, that they, as well as himself, may enjoy its 
 benefits. The mercantile world recognizes this, even 
 its most flamboyant advertising is, on its face, an in- 
 vitation to share in some benefit, to purchase some 
 useful article, or if nothing more, to share in the 
 benefits resulting from a reduction of manufacture. 
 This duty appeals strongly to the Mutuals. They 
 have a system which they find to be beneficial. This 
 alone would impose upon them a duty. But there is 
 another phase, the Mutual plan dispenses with the 
 immense aggregations of wealth which are piled up 
 under the joint stock plan. The danger of these, 
 from a moral standpoint, may easily be estimated 
 by any one who has read the astounding develop- 
 ments among certain life insurance companies of 
 New York City. 
 
70 
 
 A HAND BOOK 
 
 It is true that New York is an exceptional city, 
 and that these were exceptional companies, it is also 
 true that the exposures may do something to check 
 the evil. But so far there is no evidence that any 
 one of the parties concerned in these transactions 
 has been brought to justice or has even lost social 
 position. 
 
 Turn now to the great assessment companies. 
 With just a working balance in their treasuries, and 
 a small emergency reserve, these organizations are 
 paying their losses promptly and with a far less pro- 
 portional expense. And having no heavy invest- 
 ments to make, they are not entangled with railroad 
 stocks and bonds, or any other corporation invest- 
 ments. 
 
 If the Mutuals occupied the position to which 
 they are entitled, if they had the business which real- 
 ly belongs to them, how much of this evil would be 
 avoided. It is then clearly the duty of the Mutuals 
 to advocate their plans and theories as aggressively 
 as possible, not merely to increase their own business 
 and influence, but to do their share of the duty which 
 falls upon every man, to so live that he shall leave 
 the world better than he found it. 
 
CHAPTER V. 
 
 IMPORTANT STATISTICS. 
 
 In constructing tables to show how much has 
 been saved to the assured by the Mutuals, it is custo- 
 mary to compare the rates of the Mutuals and the 
 joint stock companies as they are at present. This 
 does not cover the ground. In many localities the 
 rates of the stock companies have been cut fifty per 
 cent or more since the organization of the Mutuals. 
 While the policy holders of the Mutuals are not di- 
 dectly benefited by this, other people are, and as 
 there is no reason to believe that these reductions 
 would have been made had not the Mutuals come into 
 the field, they should have credit for the saving. The 
 fair method is to take the cost of Mutual insurance 
 and compare it with the rates of the joint stock com- 
 panies when there was no competition. 
 
 F. J. MARTIN’S LETTER. 
 
 ‘ ‘ Mr. C. F. Mingenback, 
 
 1 4 Concerning your request to furnish an article 
 for your Mutual Insurance Manual, treating of the 
 comparative cost of mutual and stock company in- 
 surance, I think the most valuable information I can 
 furnish you would be a tabulation showing the insur- 
 ance carried and the cost of same in both mutual and 
 stock companies in all the States. I, therefore, sub- 
 mit these tabulations and will simply call attention 
 to some comparisons. 
 
 —71 
 
STOCK COMPANIES 1904. 
 
 (D-o 
 
 »© 
 
 ^ o Cl. 
 
 CO CO 00 
 
 r*C CM 
 
 to 
 
 CO Ttn 
 
 05 to 
 
 05 
 
 ©rjqcq 
 
 cqcq 
 
 Oq 
 
 cfcfcf 
 
 of tf 
 
 of 
 
 to 
 
 oo oo 
 
 Cq 
 
 Oq 
 
 cq 
 
 r*c 
 
 of 
 
 of 
 
 
 
 i— i 
 
 
 TtKDl>H051O05N00OC0HH 
 OQ0(N05MHH(MC0 '^(N'Ho 
 r-^rj^OD^C^lO t- Cqoo Jqt- (M cqco 
 oo cT cf cf rf rf tf ef 00" of cf o' if rf 
 
 (N rH t- (N GO CO CO TjH h h © © CO l-H 
 
 ^ O^rH Lq 
 
 — T cfcf of rf 
 
 co o 
 
 O Tfl 
 05 Iq 
 
 if 
 
 fr- 
 ee 
 
 00 05 CO 
 O CM CO 
 fr— ^© r*l 
 
 cf cf cf 
 
 rH CM 
 05 
 
 to CO 
 
 05 
 
 CO 
 
 CO 
 
 05 CO 
 
 iq 
 
 rfcf 
 
 of 
 
 CO 05 
 
 o 
 
 o 
 
 CM 
 
 fr- CO 05 O 05 © 
 00 © © © rH © 
 
 iqcM © OqCqeq 
 
 of of of of if tf 
 TfH CO 00 CM to 1-1 
 © CM © rH rH © 
 
 CO CO rjn O i-i r^ 
 tO ^ CO CM CO OO 
 CM CO CM CM 05 CO 
 ef cffrfrf cf cf 
 CM 05 CO fr- CO O 
 CM O CO H 05 
 
 2-0 
 E 05 
 , . 3 > 
 
 rj^ d 05 
 
 'w' E 0 
 
 05 a, 
 
 CO 05 CO 
 t— © CM 
 
 oqcqeq 
 efif cf 
 
 <M GO 
 tO 
 
 CO 05 
 O 05 
 fr- T* 
 
 cf ef 
 CO Tfrt 
 t- 
 
 C005fr-05OO00CDlO00(Mfr-t0 
 
 t-t-THcoO©CCCMGOCOCOC\l© 
 
 »OI>ONtO(MCOO)J>(NtOOOTf< 
 
 TH 00 
 
 CO to 
 CO cq 
 oT ocT 
 
 t— 05 
 
 to ■q 
 
 of 
 
 
 00 © <M 
 
 to 00 
 
 © 
 
 Tf©(MTti©rHC0©lO^t-©00 
 
 © 
 
 TfH TH 
 
 
 (M OO lO 
 
 to Ol 
 
 t-H 
 
 ©OCO©OOCO©©COOq©t— rjl 
 
 r* 
 
 rjt fr- 
 
 
 to co t- 
 
 CD r$H 
 
 t- 
 
 rfi©©rtiCq 00 ©©t-©t-©© 
 
 cq 
 
 © © 
 
 cc 
 
 00 to oo 
 
 M 05 
 
 00 
 
 efcffrfeffrfofcfcfrfofrfafrf 
 
 l-H 
 
 of frf 
 
 o g 
 
 to 05 00 
 
 00 CM 
 
 © 
 
 ©C000C-©©Ot-©©00©r* 
 
 © 
 
 © © 
 
 "5 
 
 CM rH Oq 
 
 rtqcq 
 
 CO 
 
 COrtHtOHO>t>l>l>CDH^CO 
 
 rH 
 
 eqoq 
 
 CD< 
 
 to 
 
 rf 
 
 tH 
 
 00 rH rt< rH CO 
 
 <M H (M 
 
 i—l 
 
 if -if 
 
 
 tH 
 
 to 
 
 
 
 tH 
 
 
 rH 
 
 
 O 00 00 
 
 O r* 
 
 00 
 
 CO rH t- © CO to CM © 00 CM 00 (M 
 
 fr- 
 
 rH CO 
 
 
 tOHit 
 
 CO CO 
 
 rH 
 
 rH fr-COrH©©oqoOCO©COCO 
 
 i—l 
 
 Ttt © 
 
 cc 
 
 N H N 
 
 oqrq 
 
 cq 
 
 cq t- uqcqrqcq cm cq© t- i-h cq 
 
 cq 
 
 eqoq 
 
 Z3 
 
 f — S — 
 
 cfcf of 
 
 co'oT 
 
 of 
 
 cf CO*' cf tf oT frf cf cf cf rf rf cf 
 
 of 
 
 if cf 
 
 OO Q- 
 
 © rH 
 
 tH CM 
 
 © 
 
 t- iohOnNI>H , COCON^ 
 
 t- 
 
 © © 
 
 ZZs *— 
 
 T— 1 CO 
 
 cq 
 
 CO 
 
 ^ © rH CO © © © to © rH CO 
 
 rH 
 
 © © 
 
 3 
 
 CO 
 
 ccT 
 
 co* 
 
 t-H 
 
 
 CM rH 
 
 i— l M rH i — i 
 
 
 rf if 
 
 
 o o o 
 
 o o 
 
 © 
 
 ©©©©©CO©©©©©©© 
 
 
 © © 
 
 
 © © © 
 
 o o 
 
 © 
 
 ©©©©©rr©0©©©©© 
 
 
 © © 
 
 
 
 O^HO^ 
 
 cqcq 
 
 cq 
 
 © 0^0 o^oq©^© ©0 0^0 
 
 
 cqcq 
 
 _ C3 
 
 cfofcf 
 
 o' o' 
 
 cT 
 
 
 
 tfcf 
 
 t- -- 
 
 to CO o 
 
 to 
 
 © 
 
 ©©fr-©©rfH©(MO©©rH© 
 
 
 t- © 
 
 w Q- 
 
 HHCO 
 
 rH rH 
 
 to 
 
 <M^t-rH©fr-CM©fr-©©<MCM 
 
 
 rf ao 
 
 CJ> 
 
 of 
 
 cT 
 
 1— 1 
 
 
 rH rH 
 
 CO i— l 
 
 
 l-H CO 
 
 05 
 
 H CO CO 
 
 i— 1 rH 
 
 i— i 
 
 © © CO © © rH 
 
 eo t- © CM CM © 
 
 TjC 
 
 CM © 
 
 o 
 
 O co co 
 
 05 rH 
 
 to 
 
 co © © © ao 
 
 © t- Tf< t- Ht< © 
 
 © 
 
 fr- 
 
 J= 05 
 
 OqrqCq 
 
 rH rH 
 
 cq 
 
 cq^cqi-qcqt^©^ 
 
 t-^tq^rqoqGq 
 
 cq 
 
 rqcq 
 
 *- o 
 
 rf if cf 
 
 © i—l 
 
 cf 
 
 cf rf frf cf rf rf 
 
 cf of of cf if of 
 
 of 
 
 rf cf 
 
 /T“N t — 
 
 fr- t- t- 
 
 *“ * fr— 
 
 to 
 
 © to ^ 00 OJ N 
 
 a © fr- os © t- 
 
 © 
 
 rH rtl 
 
 CO go 
 
 «r*<M 
 
 oqoq 
 
 cq 
 
 ©©©©©!> 
 
 oqcq^oqi-qcq^cq 
 
 tq 
 
 l-H © 
 
 \ x u_ 
 
 rfcf Iff 
 
 frfrf 
 
 frf 
 
 rf of frfrf ofrf 
 
 i — 1 © i— 1 co o © 
 
 rH 
 
 of cf 
 
 "c«.E 
 
 CO 
 
 co 
 
 r* 
 
 rH © CM © CO 
 
 rH rH © © rH OO 
 
 © 
 
 CM fc- 
 
 
 to 
 
 3q 
 
 
 fr- <M rH 
 
 t-H © H CM CM 
 
 
 CO fr- 
 
 © 
 
 l~ 
 
 
 of 
 
 
 
 
 
 
 05 
 
 CD CM 05 
 
 00 00 
 
 
 © CO © © 
 
 t-OOTHCMt- 
 
 © 
 
 r^ 
 
 LJ 
 
 co co o 
 
 © Cq 
 
 
 fr- © © © 
 
 fr- © M CM © 
 
 rH 
 
 0<J 
 
 
 cqt-^tq 
 
 © cq 
 
 
 oqcqcq©^ 
 
 -q^cq^cqoqi-q 
 
 rq 
 
 oq 
 
 V) 
 
 if rf iff 
 
 rf CO 
 
 
 rft © rH fr— 
 
 of cf of of rf 
 
 cf 
 
 rH 
 
 
 00 CM CO 
 
 © rH 
 
 
 t- © © CM 
 
 rH © CO © © 
 
 ao 
 
 oq 
 
 <M £ C 
 
 O O* CO 
 
 t^tq 
 
 
 oqcqcqfr^ 
 
 cqo^cqcqoq 
 
 rq 
 
 rq 
 
 ^t<o 
 
 of of if 
 
 cf rf 
 
 
 S© tf (?f rf 
 
 rf rf of Cf of 
 
 tf 
 
 cf 
 
 
 CD 
 
 CO 
 
 
 OO l-H r*( 
 
 CO r^ rH CO 
 
 CO 
 
 CO 
 
 CO C 
 
 
 
 
 
 
 
 
 c (35 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 O £ 
 
 
 
 
 
 
 
 
 ^O'E 
 
 CqcOOt-CMOOqOCOCOCOOIrtlOO 
 
 C0r^C0<MC0CM©T*l©©!— 1 
 
 ^ 6 o. 
 
 
 
 
 t-H 
 
 
 
 rH 
 
 E 
 
 
 
 
 
 
 
 
 5,468,2811 1,984,0511 2,674,735 
 
,682 
 
 t> 05 CO 
 CO 00 CO 
 ^O^Tfrl 05 
 
 cT NOW 
 00 CD rH 
 CD (N tr 
 
 <N 00 
 O 00 
 05^10 
 
 of of 
 
 05 tJH 
 05 00 
 
 CO i— I 00 05 
 CO CO CO l> 
 
 off oq"cf 
 
 CD O 00 CD 
 05 (M LO 
 
 CD 00 05 00 
 CDtXNH 
 r-^LO (N CO_ 
 
 tfif cfcT 
 
 O CO O O 
 CO Tfi <M 
 
 05 CO 
 00 00 00 O 
 OOrHWJN 
 
 if cf cf cf 
 00 t- ooo 
 
 X> CO lO 
 
 ao oo 
 co ^ 
 C0« 
 
 cfof 
 
 LO t- 
 
 05 o 
 
 oq co co oo 
 
 rH rH rH CO 
 CO 05 05 05 
 
 cf cf if rf 
 O O O <N 
 CD CO rH (M 
 
 t> (N 
 tH CO 
 
 »o» 
 
 ooVT 
 
 t- CD 
 
 T— I lO 
 
 O 05 o o 
 
 O lO o o 
 ©NO©, 
 o' cf o' o' 
 
 IQ l' O lO 
 00 00 (M (M 
 
 lo o 
 t- o 
 00 o 
 of o' 
 O (M 
 CD O 
 
 oq co io 
 oq 05 o 
 
 rH co oo 
 
 s: 
 
 b- CD 
 LO t- 
 
 T*L O 
 
 TtH TtH 
 
 b- b- 
 
 lo CO 
 b- co oq 
 *•»©» 
 
 <M 
 
 rH 
 
 rH 
 
 CO h* 
 0^05^ 
 
 05 
 
 rfr-T 
 
 CO O 
 ©.rl 
 
 rjTcfcf 
 
 05 CO rH 
 rH 
 
 if 
 
 cf tf 
 lo oq 
 o^ 
 
 of 
 
 05 
 
 ©^ 
 
 rH rH 
 rH 
 
 
 
 of 
 
 of 
 
 CD 
 
 o oq 
 
 CD 00 rH 
 
 CD 
 
 ^ CD 
 
 oq 
 
 cd oq 
 
 CO b- O 
 
 00 
 
 rH oq 
 
 o 
 
 rH^CO^ 
 
 CD^O^O^ 
 
 
 05^ 
 
 ofr-T 
 
 cT eftf 
 
 b- oo oq 
 
 rH 
 
 Lifer 
 
 CO 
 
 oq co 
 
 S 
 
 TjH LO 
 
 00 
 
 b- oq 
 
 rH 
 
 rH 05^ 
 
 » 
 
 
 
 rH 
 
 CO 
 
 of 
 
 LO 
 
 CD 
 
 LO 
 
 tr 
 
 '■*1 
 
 o 
 
 *> 
 
 CO 
 
 LO 
 
 O 
 
 oq 
 
 05 
 
 LO 
 
 CO 
 
 oq 
 
 
 oq 
 
 rH^ 
 
 rH 
 
 TiH_ 
 
 b^ 
 
 b^ 
 
 CD 
 
 “co 
 
 'o' 
 
 if 
 
 © 
 
 Tjf 
 
 eT 
 
 LO 
 
 o 
 
 CO 
 
 CO 
 
 rH 
 
 o 
 
 05 
 
 LO 
 
 05 
 
 CO 
 
 00 
 
 00 
 
 ©^ 
 
 
 
 
 
 ■f 
 
 
 oT 
 
 co" 
 
 
 
 
 
 
 
 co 
 
 
 
 
 
 
 
 co 
 
 io cq n 
 o h* oq 
 
 00 05 CD 
 
 b- H* 
 
 LO CO 
 rH^OO^ 
 
 cf cf 
 O CO 
 CO 05 
 
 O t> o 
 © o 
 
 O^CD^O^ 
 
 o'ho 
 
 LO O LO 
 Ttn CD oq 
 
 o o o 
 o o o 
 o_ 
 
 njT o'er 
 oq LO lo 
 
 00 C0TJH 
 
 c3 
 
 rt ss 
 
 o ° 
 
 •a 
 
 ^ oa 
 
 ha 
 
 L5-P O 
 
 3 3 o 2 
 > 
 
 o W* ® 
 
 fl’g 
 
 : 3 b/j W 
 
 a bc£ *53 
 
 ?P.S bo 
 
 d 
 
 §•!•§> §1 
 
 fc&&OOe5««oaiS55>(>^i?^ 
 
 Oq CD 05 LO 
 
 oq tr 
 
 O 05 o 
 
 oq 
 
 oq cd 
 
 tr 
 
 05 rH CO CO 
 
 ^ LO 
 
 05 o CO 
 
 05 
 
 CO T* 
 
 co 
 
 LO^OO^LO^OO^ 
 
 05 oq 
 
 OOtrLO 
 
 
 H^CO^ 
 
 CO 
 
 cf cfrfof 
 
 cTco' 
 
 oftfef 
 
 oq" 
 
 oo"i>" 
 
 gf 
 
 O) 05 N CO 
 
 1> CD 
 
 NQOLO 
 
 o 
 
 o oq 
 
 co^wio 
 
 t> oq 
 
 t^CD^05^ 
 
 LO^ 
 
 
 LO^ 
 
 off tfrjT 
 
 ccTi>r 
 
 cf if tf 
 
 rH 
 
 cf rf 
 
 of 
 
 TiH LO 
 
 cd oq 
 
 rH 
 
 05 
 
 rH O 
 
 o 
 
 rH rH 
 
 co^co 
 
 
 
 t> 
 
 
 CO 
 
 of 
 
 
 
 
 rH 
 
 
 
 
 
 
 oq 
 
 CO rH 00 TjH 
 
 05 rH 
 
 NOb 
 
 
 oq 
 
 05 
 
 05 00 LO 
 
 05 O 
 
 co ^ oq 
 
 
 CO 
 
 05 
 
 00 05 rH LO 
 
 WO^ 
 
 CD 05 LO 
 
 
 
 
 05 O 05 05 
 
 cf of 
 
 H rH H 
 
 
 oo' 
 
 oq" 
 
 tjh cd io oq 
 
 O 05 
 
 OHIO 
 
 
 1> 
 
 o 
 
 ^r^CO^ 
 
 t^CD^ 
 
 CD 05 LO 
 
 
 00^ 
 
 o^ 
 
 tf «f ofcf 
 
 cf of 
 
 "f rf-f 
 
 
 rf 
 
 if 
 
 ^ CO LO 
 
 Htl rH 
 
 rH 
 
 
 Tt< 
 
 co 
 
 b^ 
 
 CO 
 
 
 
 
 t- 
 
 rH 
 
 
 
 
 
 cf 
 
 9 
 
 o 03 
 [rt © 
 S GQ 
 
 © 
 
 «+H 
 
 o 
 
 c3 
 
 3 *-£ 
 
 © c3 
 
 ft § 
 
 m ^ 
 
 © . 
 
 S fe 
 
 5 £ 
 
 $ ^ 
 
 -g .3 
 
 V-| 
 
 n g 
 
 • pH 
 
 q. m 
 
 g-J 
 
 O m 
 « -43 
 
 8 5 
 g M 
 2, © 
 
 tie. It is the most valuable paper in this line ever 
 furnished to the public.) 
 
MUTUAL COMPANIES, January 1. 1905. 
 
 74 
 
 A HAND BOOK 
 
 Liabilities 
 
 248,628 
 
 162,025 
 
 489,095 
 
 91,602 
 
 302,068 
 
 731,073 
 
 144,21 2 
 
 145,686 
 
 6,958 
 
 211,709 
 
 649,978 
 
 6,464,951 
 
 1,731,567 
 
 408,225 
 
 104,522 
 
 345,416 
 
 93,665 
 
 162,804 
 
 Cash 
 
 Assets 
 
 105,844 
 
 124,894 
 
 2,283,318 
 
 2,837,280 
 
 o a 05 j— oo co r- 
 
 t* 03 05 iC o i© 05 
 1© £ ©UOtf^pH^ 
 
 t^*r! r i©*'i©'i©'©i r- 
 00 atco rl^OCDO 
 O pH CO CD 00 00 
 
 pH Oc<T 
 
 £5 
 
 138,804 
 
 1,788,043 
 
 13,346,162 
 
 2,106,233 
 
 678,336 
 
 617,670 
 
 577,277 
 
 154,029 
 
 284,728 
 
 c 
 
 i© 
 
 ©q 03 CO 
 
 CO CD O pH O l© 
 
 pH CO O l© t© 
 
 ©q 
 
 CD 
 
 CO CD 
 
 03 
 
 CD 
 
 CO P*l pH 
 
 O O Tti O CD CD I"* 
 
 ©HOOQO 
 
 
 1 © 
 
 O O 
 
 -t— ■ 
 
 CU 
 
 CD^ 
 
 CD 
 
 CO *© 05 f- ©q 00 T*H 
 
 OTO t~* pH CO 
 
 05_ 
 
 r- 
 
 O 00^ 
 
 43 
 
 oT 
 
 oo'o'oT 
 
 co't^'i© co" cd" ■Hh'tjT 
 
 ©1 00©T O' CO~ 
 
 CO*' 
 
 
 oo‘i>' 
 
 
 05 
 
 05 CO pH 
 
 O O CD co P+I ©1 t- 
 
 lO H CD O K5 
 
 H 
 
 tH 
 
 hH pH 
 
 !i ^ 
 
 r- 
 
 (M i -^O^ 
 
 HOh©I©1COI> 
 
 ©q^co 1 © cd^ 
 
 O^ 
 
 00^ 
 
 tp O 
 
 i= E 
 
 ©q’ 
 
 t-Ti© ccT 
 
 00 pH 10 1H* ©q 05 pf 
 
 oT cTr-T co'uo' 
 
 l©* 
 
 pT 
 
 oV 
 
 O 
 
 i— 1 
 
 pH ©O ©J 
 
 Pf «^05 +-+1© rH CO 
 
 ©q h i> t> 05 
 
 ©q 
 
 i© 
 
 ©q co 
 
 C/3 “ 
 £=-= 
 
 
 
 ++ p — 1 CO 
 
 -H- 
 
 pH 1 © CO rH 
 -tH- 
 
 pH 
 
 pH 
 
 100 
 
 
 CO 
 
 CD 
 
 05 H 00 
 
 05 0 CO O CO 00 l© 
 
 H OOONH 
 
 pH 
 
 pH 
 
 pH pH 
 
 CD 
 
 ©1 
 
 CO 05 L© 
 
 pf 0 00 CO CO 0 l© 
 
 C CD CD 05 pjH 
 
 1> 
 
 00 
 
 00 00 
 
 co 
 
 CD^ 
 
 l© 1© rH 
 
 ©q^c^ ©i^i©^ 00 ^ 1 © 0 
 
 pH 05 00 05 00 
 
 
 «©^ 
 
 CD^ CO 
 
 c 
 
 0} 
 
 l©~ 
 
 Cd'ph'oo' 
 
 ©Ti©''t^t>Ti©'afco'' 
 
 p-T >©' cd' o' US' 
 
 ©T 
 
 i©' 
 
 Uo'p-T 
 
 r-> 
 
 CD 
 
 l© 1> 00 
 
 00 ++ CO 0^000 
 
 l© CO p^ 05 CO 
 
 
 CO 
 
 co ©q 
 
 X 
 
 rH 
 
 
 CO pH l© pH 
 
 pH O^CH pH 
 
 pH 
 
 ©q 
 
 
 UJ 
 
 
 
 
 pH 
 
 
 
 
 
 00 
 
 pH CO 05 
 
 co tp 05 ©q ©q 0 co 
 
 l© 05 CO O O 
 
 HH 
 
 0 
 
 l© pH 
 
 
 Tt^ 
 
 *> pH T* 
 
 0 t> 00 00 00 ©q 0 
 
 05 ©q co 05 cd 
 
 l© 
 
 pH 
 
 HU t> 
 
 CO 
 
 ©^ 
 
 co^oo^©q 
 
 pH OO^ ©q HlONt- 
 
 ©q 0 
 
 
 °L 
 
 0^00^ 
 
 09 
 
 i>T 
 
 ocToToT 
 
 ccT -^7 cT ocT »©'i>'i>r 
 
 oTcd'h^ 05 CO 
 
 
 pH 
 
 ph'o' 
 
 CO 
 
 05 
 
 1> pH CO 
 
 05 CO l© CO pH CO 
 
 l> 00 pH pH ^ 
 
 O 
 
 CO 
 
 
 o 
 
 
 ©q 
 
 |> pH 05 pH 
 
 0 ©q^oo co 
 
 co 
 
 ©q 
 
 
 
 
 
 
 ©Tph' 
 
 
 
 
 »© : ©q co 
 co -p co oo -« 
 
 £h CO pH_'t~' 
 
 05 Q.co'r* 05 
 05 JT 1 ^ ©q pH 
 N ©(M00O 
 
 ©T ph\©'co' 
 r-i o rH O (M 
 
 £ 1-1 
 
 otoo 
 
 O O CO 
 ©0*0^ 
 co't'T os' 
 00(0 
 P-^O©^ 
 oofTio 
 
 i© 
 
 (NO^lO 
 
 OfflCOI> 
 
 ^ ©qao^ 
 
 oq'o'TjTrjT 
 Tjn ©I t- 
 
 oo^co^t^ 
 ©'©ToTt*' 
 ©q I© th CO 
 CO 
 
 --COCOHH 
 
 o Th 05 ©q t> 
 
 o > oo > c^cm© i 
 
 ©T cTp-T CD cT 
 1© TfH t> l© 
 
 ©q CO^^t^OO^ 
 oT o' o' ccTtjh' 
 
 ©q H CO 05 o 
 HHM(M 
 
 <M CD CO CD 
 
 TtH l© O O 
 
 05^ 0^00^ 
 
 CO T)T coVT 
 
 Tfl pH t*I pH 
 
 O CD l> © 
 
 O 03 
 
 <^’E 
 
 O 02. 
 
 z E 
 
 OCOCOO^HCOCOMQOHOOOOSClOOt'OOOiOO^D 
 HH * ©H-l>pH©q Tfl pH rf 03 l© 03 l" <M * 
 
 ©q pH pH * 
 
 d 
 
 gO:§ 
 £ d ® 
 
 a 
 
 tf c 3 .$ ; OQ 2 
 
 fn ’d ?h r! 2 d 
 
 ta 
 
 oo 
 
 © 
 rrt § 
 
 ^ § ° 
 
 Oh 
 
 pH-r 
 
 CO . 
 
 Qj >» 
 
 d ® 
 
 a ® 
 
 l§-|®.t§.&|j§|i|w5 
 
 •2 O O ^ Oj © n ^ ^ C3 *rH *3 tH *rH O <£ £) <£ 
 
 ^•§666oEoSa55MMjSSSggggS^!2i^a 
 
 s S°-§5. 
 
572,4801 45,197 
 
 OF MUTUAL INSURANCE 
 
 O rH T* to 
 
 CO rtc 
 
 rH tO O 
 
 CM 
 
 r- 05 05 <M 
 
 00 -H 
 
 Ip* M CO 
 
 CO 
 
 ° 
 
 CO t- 
 
 00 •H^rH 
 
 to 
 
 co'm'-h'oo" 
 
 t© r-T 
 
 NHuo’' 
 
 c o' 
 
 rH CO CO 
 
 rfl 
 
 to O CO 
 
 o 
 
 M^ OCO. 
 
 
 rH CO 
 
 rH 
 
 <M~ co'co"' 
 
 
 
 
 Ci n CD O O 
 00 £ <M CO M rH 
 CM £ rH 
 
 tcT<M rjTod 
 
 u£0O t- OO CO 
 ^ CM^ O^CO_ 
 
 O co'oo' 
 
 □ 050 
 
 >ooc& 
 
 cMQOCO 
 CO tO to 
 
 oo co to 
 
 rfl rtt i— I 
 
 co co t- 
 
 CO 00 H 
 
 H O O CO 05 CO 
 t- CM t— to M M O 
 00 Ip* -H 1 C5_ 
 
 05 CO CO M~ rH 00 to 
 
 £• o h os cq t- oo 
 
 Ip- -^05 jq io 05 H 
 
 cTr-rcMY-TiM CoVf 
 
 CO rH (M M t> nfi 
 
 CO ttS'ifO t~* to 
 
 O 00 
 -cfH o a 
 CC^ gj 
 CO to" > 
 
 o 
 
 N £ 
 
 to O M 
 oo r- Oi 
 
 °OtO_ 
 
 ocfcrT t-T 
 
 I'- tO TfC 
 CM hJH rH 
 
 OS CM O CO 05 00 rH 
 ■ o 05 00 Tf 00 
 QOOlOOHO 
 
 8 
 
 rH 00 Tfl Ttl 
 
 d i- rH 
 
 £ Ip. 
 
 .£ -rn o 
 UoTt-T 
 
 P H CD 
 
 o 
 
 £ 
 
 (MHCO 
 CO 00 CM 
 O CO CM 
 
 CO O O CO CM tO O 
 t> H CM H H -c CO 
 00 ^ 
 
 10 s C<T CO^cT C0*r-T o' 
 CO Ol tH to t> CO 
 CO CO ^lO 
 
 to o t> 
 
 CO 00 05 
 TfiCNCO 
 
 CO 00 05 
 CO T* Tft 
 CM 00 to 
 
 rH rH 
 
 CO 
 
 tH 
 
 rH O O O Ip* 05 o 
 
 O 00 
 
 t© O CM 
 
 CM 
 
 I> 
 
 MMMOOCIH 
 
 Tfod 
 
 00 l> 05 
 
 O 
 
 
 00 CM^H^OCMp. Tfl CO 
 
 CO^C^gj 
 
 0^0^ i©^ 
 
 lp^ 
 
 o^ 
 
 oT o' «T Otf r-T 0?T r-T 
 
 oft©' > 
 
 ©T CO* r-T 
 
 ccT 
 
 CO* 
 
 t> O rH CO CM tr QO 
 
 00 I> *tH 
 
 I> l© T* 
 
 o 
 
 CO 
 
 tv* <» 00 10 05 
 
 l© 00 ofi 
 
 CM^ rH^ 
 
 l©^ 
 
 O^ 
 
 o' r-TccT ipTcq' co' o' 
 
 cT-nT-g 
 
 o'ccTcm’' 
 
 cm’' 
 
 o' 
 
 CO rH 00 CM CO ^ 
 
 CM O 
 
 05 rH CM 
 
 
 o 
 
 CO unio 00 
 
 fc 
 
 
 CO 
 
 rH 
 
 '^t'COHCDCDIMONOOOOCOlMCMONO 
 CM (MTfH CO CM rH CM * — t rf 
 
 rH T-( CM CM 
 
 : c$ ■ 
 
 ! ! i i c« j : 
 
 
 : SS 
 
 : a'S.S 3 i 
 
 : 
 
 13 8 
 ! 
 
 )Ofi 
 ■) _ 
 
 : »r* M »-H O 
 
 C O S = 
 
 : ^ CD 53 rH © 
 
 ■ HH 5? 5 © 
 
 : r~> Oh m 
 
 : « £i» (D 3? ‘ 
 
 ! is! i 
 
 ■S bo 
 
 d 5> d 
 
 )' V fH jH © 
 
 i 'd d 
 
 ^ Si Si : O toJH rH <H © 05 
 
 £S5i*§©H2E3BflM^3s ) §©.8>» 
 
 ££&00<1<P SoqodH Eh 
 
 bJD 5=5 = _ _ . . 
 
 © d ® S fl fl 
 
 Incomplete, f Does not include Farmers Mutuals. % Estimated. § Ain’t written in 1904 
 
76 
 
 A HAND BOOK 
 
 “It will be seen that all the American stock 
 companies have insurance in force to the amount of 
 $21,309,535,367. The net premiums collected during 
 the year amounted to $158,883,712. This is an aver- 
 age of $7.45 for each $1,000 of insurance in force. 
 Of this amount $2.91 on each $1,000 of insurance was 
 consumed for expenses. The insurance in force is 
 about 20 per cent more than the amount written, con- 
 sequently the rate charged on the insurance written 
 amounted to about 89.4 c. 
 
 “The mutuals had insurance outstanding of 
 $6,100,036,041. The average cost for both losses and 
 expenses was $3.36 per thousand, or but little more 
 than the amount consumed for the expense of the 
 stock companies. 
 
 “In the tables published in the minutes of the 
 National Association two years ago, it was shown 
 that the insurance carried by American stock com- 
 panies was $17,671,153,442. Therefore, in the two 
 years the insurance carried by the American stock 
 companies has increased 20 per cent. The mutual 
 companies two years ago carried insurance to the 
 amount of $4,591,375,173, so that the mutuals have 
 made an increase of 35 per cent. 
 
 6 ‘ The insurance written by the stock companies 
 in their own home states two years ago was $3,067,- 
 739,394. Last year it amounted to $2,755,002,499, 
 showing an actual decrease. The amount in force, 
 however, is about 20 per cent more than the insur- 
 ance written, therefore the insurance in force by all 
 
OF MUTUAL INSURANCE 
 
 77 
 
 the stock companies in their home states amounts to 
 approximately $3,306,002,998. 
 
 “The mutual companies are carrying in their 
 own home states $4,832,073,625, or about 46 per cent 
 more than the amount carried by the stock com- 
 panies. Of the whole amount carried by stock com- 
 panies in their own home states, 63 per cent of the 
 amount is in the State of New York, where the stock 
 companies have succeeded in maintaining laws un- 
 favorable to mutual insurance. 
 
 “It is also interesting to notice the comparison 
 in strength of the two classes of companies. The 
 cash surplus of the stock companies amounts to $4.90 
 for each $1,000 of insurance in force, while the cash 
 surplus of the mutual companies averages $6.37. 
 The surplus of the stock companies would pay their 
 average cost for less than eight months. The cash 
 surplus of the mutual companies would pay their 
 cost for more than twenty-two months. 
 
 “The liabilities of the stock companies equal 
 68 per cent of their assets. The liabilities of the 
 mutuals is less than 34 per cent of their assets. 
 
 “In compiling these statistics no attempt has 
 been made to show the ratio of failures in the two 
 classes of companies. However, the statistics in the 
 minutes of the National Association published two 
 years ago show that for twenty-three years the per- 
 centage of failures among mutual companies has 
 only been one-fourth as great as the percentage of 
 failures in stock companies. It is not believed that 
 the last two years’ record has made any material 
 change in this ratio. 
 
78 
 
 A HAND BOOK 
 
 “It is interesting to note that as a result of the 
 Baltimore fire, only one mutual company was forced 
 to liquidate, namely, the Atlas Mutual of Boston, 
 which was really insolvent before the fire and which 
 never was at any time on a substantial footing. 
 
 “It is also interesting to note that the largest 
 loss paid by any company in the Baltimore fire was 
 paid by a mutual, namely, the Baltimore Equitable, 
 which paid over $1,900,000, and which still has a 
 handsome surplus left. 
 
 “The system of insurance which has nearest 
 reached perfection, is that of the factory mutuals, 
 in which, under their careful inspection service, the 
 losses have been reduced to the minimum. Many 
 factory owners say that the inspection service they 
 receive is well worth all the insurance costs. 
 
 “These factory mutuals have taken classes of 
 risks, such as cotton mills, on which the stock com- 
 panies would not make a rate of less than $25 per 
 thousand, and by improved methods of construction 
 and equipment have reduced the cost to less than 
 $1.00 per thousand. 
 
 1 4 Yours most truly, 
 
 “F. J. Martin.” 
 
CHAPTER VI. 
 
 THE ECONOMICAL VIEW. 
 
 TWO HOSTILE CAMPS. 
 
 In discussing the science of economics, men di- 
 vide into two hostile camps, one holding that all 
 that is results from evolution. The laws of nature 
 are fixed, any attempt to interfere with their opera- 
 tion will only recoil most disastrously upon the head 
 of the one who meddles with the due course of the 
 universe. In short, it is a species of fatalism; what 
 is, must be. It is hardly necessary to say that this is 
 a favorite theory with those whose wealth has been 
 acquired by practices not generally approved. Not 
 long since, a book was written with the design of 
 showing that one of the great corporations, whose 
 methods have been the subject of much adverse criti- 
 cism, was only the production of the forces of the 
 time, that such a company was a necessity, and if 
 this one had not met the long felt want another 
 would have developed; that the members of this 
 company were, therefore, free from all responsibil- 
 ity for the bankruptcies of those whose business they 
 crushed, whose fortunes they ruined, and of whose 
 property they became possessed. It is a somewhat 
 remarkable co-incidence that complimentary copies 
 of this book were received by a number of people 
 
 —79 
 
80 
 
 A HAND BOOK 
 
 who were very much interested in securing dona- 
 tions for benevolent purposes along a line in which 
 one member of this company had already made 
 heavy investments at the expense of the public. It 
 may be said that all of that class, whether in the 
 great trusts of the world or in the petty village pool, 
 are ardent admirers of this doctrine which sings such 
 a sweet lullaby to their uneasy consciences. 
 
 THE WAR ON THE WEAK. 
 
 This theory of necessity, of development along 
 fixed lines, is not always honestly held. If it were, 
 then the intentional and willful crushing out of the 
 weaker concerns would never occur. If, as its advo- 
 cates aver, this theory foreshows that the weaker 
 must go to the wall, that there is no evading such a 
 result, then why does an occasional great combina- 
 -Oju resort to doubtful means for the purpose of rid- 
 ding itself of a small competitor? The word “ occas- 
 ional ” is used advisedly, for the Manual believes 
 that the average man is sincere, and that most 
 wealth is gained honestly. It appears to be demon- 
 strated also that a single establishment doing an 
 illegitimate business will disturb the management of 
 every other concern in the country engaged in the 
 same line. One man who gets rebates, one man who 
 reduces wages, one man who cheats in the quality 
 of his goods, will force all others to do the same 
 thing. The people who look on may not always see 
 through the matter and may blame all the parties, 
 when only the greedy mischief maker should be cen- 
 sured. 
 
W. B. LINCH, LINCOLN, NEBRASKA. 
 
 Mr. Linch is a native Nebraskan, was born in Cass county in 
 18*56, assisted in the organization of the Farmers Mutual Insur- 
 ance Company of Lincoln. Nebraska, in 1891. Three months 
 after the organization he was elected secretary and still holds 
 the position. His abilities are shown by the fact that the com- 
 pany now carries $54,000,000 of farm insurance in Nebraska. 
 At the third meeting of the National Association he was 
 elected secretary and treasurer, and has since been re-elected 
 seven times. 
 
 He is secretary of the Nebraska Mercantile Mutual Insur- 
 ance Company, the largest exclusively mercantile in the state. 
 He is also one of the board of directors of the National Mutual 
 Fire Insurance Company of Omaha, and is also one of the audit- 
 ing committee. 
 
JAMES M. PIERCE, DES MOINES, IOWA. 
 
 James M. Pierce, publisher of the Iowa Homestead, Des 
 Moines, Iowa, and four other agricultural and rurul newspapers 
 and magazines, known collectively as “The Pierce Publications”, 
 has been a powerful factor in the promotion of Mutual Insur- 
 ance among the farmers of the Middle West. When others have 
 flinched or proven to be “fair weather friends” of the cause. Mr. 
 Pierce has staunchly upheld the banner of Mutual Insurance, 
 lending to its upbuilding the valuable support of his five period- 
 icals, which have over a quarter of a million circulation among 
 western farmers. 
 
OF MUTUAL INSURANCE 
 
 81 
 
 There are localities where the old line compan- 
 ies do not join in the attacks upon Mutnals. The two 
 dwell together in unity and both are the better for 
 it. But the flood of scurrilous literature concerning 
 the Mutuals proves that there are companies which 
 will stop at nothing to injure a weaker competitor. 
 And it is stated that recently certain large life insur- 
 ance companies of the east have been detected in in- 
 stigating vexatious and injurious law suits against 
 the weaker local companies in the middle west, with 
 a view of causing them embarrassment. The com- 
 panies adopting these tactics show by their works 
 that they are insincere, that they do not believe the 
 theory that they hold their position by virtue of the 
 law of the survival of the fittest. 
 
 IT IS DIFFERENT WHEN THEIR OX IS GORED. 
 
 While the men composing these great concerns 
 hold the doctrine that their own enormous acquisi- 
 tions are the result of laws for which they are in no 
 way responsible, they are far from holding such a 
 theory regarding others. 
 
 Should their pastures be invaded, there is 
 trouble at once. The law and the courts are invoked, 
 legislative lobbies are organized and every possible 
 method is resorted to that the interloper may be shut 
 out. The let alone doctrine receives a practical con- 
 struction which confines its application to their indi- 
 vidual cases, an inconsistency born of dishonesty. 
 
 The war on Mutuals is carried on, not because 
 of their system, but because they are generally small 
 6 
 
82 
 
 A HAND BOOK 
 
 and unable to carry on a protracted fight in court. 
 It is a part of the struggle of the great trusts to crush 
 out all that they do not control. 
 
 THESE POSITIONS DENIED. 
 
 The other class deny all these positions. They 
 assert that the so-called laws of political economy 
 are not laws at all, but merely tendencies, that the 
 doctrine that there is a hard and fast necessity is not 
 held by any of the great writers of political economy, 
 that it is not true anywhere in the moral universe. 
 They hold that no man is obliged to rob his fellow 
 men, that those who combine to oppress the weak are 
 enemies of society, that their millions are tainted 
 and that their much vaunted benevolences are given, 
 not to benefit mankind, but to purchase the silence of 
 the recipients. They utterly and emphatically deny 
 that wealth cannot be secured except by dishonest 
 means, and affirm that the reverse of this is always 
 and universally true. 
 
 Holding these views, and also holding that as 
 the whole community prospers each individual will 
 prosper with it, it is natural that the great army of 
 co-operators and Mutualists should be found in ac- 
 cord with them. 
 
 The working out of these doctrines, of course, 
 is in very different directions and leads to very dif- 
 ferent courses of action. If life is all a chain, the 
 links of which are forged by an eternal necessity, 
 nothing can be done ; the link may be gold, let it re- 
 joice; it may be iron, let it accept its condition; re- 
 pining is useless, and why waste energy in trying to 
 
OF MUTUAL INSURANCE 
 
 83 
 
 change that which is unchangeable? This is the 
 “let alone” policy. 
 
 But the other theory shows its nature by its 
 works. Believing that all men are brothers, it organ- 
 izes plans for mutual aid, it opens co-operative 
 stores, organizes Mutual Insurance Companies, and 
 in other ways brings men together with a view of 
 enabling them to render assistance to each other. 
 
 FRATERNALISM IS HONESTY. 
 
 It needs no argument to prove that the very soul 
 of fraternalism is honesty. The man who fails to 
 do his share, be that share a contribution of funds, 
 a performance of service, or whatever it may, is de- 
 frauding his fellow men. No permanent and pros- 
 perous organization of society or business is possi- 
 ble till all such frauds are eliminated. And no one 
 who is not willing to live up to principle, and intelli- 
 gent enough to recognize the true principle when he 
 sees it, is a fit member of any co-operative organiza- 
 tion. There are men who honestly think that they 
 can pay their way everywhere. So long as they do 
 not steal they morally give themselves a clean bill of 
 health. But that is not enough. This is proven by 
 the conditions of so many of our voluntary organi- 
 zations. Men join lodges, churches, unions, etc., pay 
 their dues promptly, but never attend. They would 
 be grossly offended if they were told that they were 
 offenders in this respect, that they were shirking 
 their duties, and that they were putting upon other 
 shoulders the burdens their own ought to bear. Yet, 
 such is the fact, and till their moral senses have be- 
 
84 
 
 A HAND BOOK 
 
 come educated up to the proper point, till their 
 mental vision is so cleared that it can plainly per- 
 ceive these facts, the individual will fall short of the 
 full performance of his duty. 
 
 The first effort of co-operators should be to de- 
 velop and cultivate this sense of duty, to each other. 
 It is not always through crime that it is absent; 
 more often it is because the individual has never seen 
 any real co-operation and is therefore in total ignor- 
 ance on the subject. One of the best methods of ac- 
 complishing the desired end is to set forth to the 
 world exactly what co-operation is. Many things 
 need correct definition much more than they do cor- 
 rect arguing. Presented in the clear light of accur- 
 ate description they are their own best advocates. 
 This duty of explaining and advocating is itself not 
 unfrequently neglected. It is to be hoped that the 
 future may bring forth a change for the better in this 
 respect. 
 
 A THIRD THEORY. 
 
 Beside the “let alone’ ’ theory and the co-opera- 
 tive theory there is still a third proposition, to put 
 all men on a common level. This is impossible, for 
 ignorance and intelligence cannot be held together 
 even with chains of iron. Moreover, if it were possi- 
 ble the only common level is the dead level at the 
 bottom. The true ecenomy is that of co-operation, 
 which has as its financial end the best possible ser- 
 vice for the least possible cost, and for its social and 
 moral aim the education and elevation of each indi- 
 vidual to the highest possible position he can be 
 made able to fill. 
 
OF MUTUAL INSURANCE 
 
 85 
 
 PRACTICAL RESULTS. 
 
 The morality of the individual and of the organ- 
 ization is affected by these conditions. An environ- 
 ment of temptation is conducive to evil. While some 
 temptation seems to be necessary to exercise the 
 moral fibre, and to prevent men from degenerating 
 into mere weaklings whose virtue is due only to the 
 absence of temptation, there may be conditions in 
 which men are tried beyond their power of resist- 
 ance. To avoid the possibility of this it is well to do 
 away with temptation, as much as may be. And this 
 is one of the services of co-operation. Each member, 
 while dealing with others, is also doing business with 
 himself. And why should a man defraud or deceive 
 himself? And if services and goods are furnished 
 at cost, why should there be adulteration or decep- 
 tion? As a matter of fact, it is claimed that in the 
 places where co-operative stores are able to procure 
 unadulterated goods they sell scarcely any others. 
 This has been especially true of stores conducted 
 on the Eochdale plan. Thus, habits of honesty are 
 formed and gradually the tone of the whole commun- 
 ity is raised. 
 
 It is not claimed that co-operation is available 
 in all lines of business nor that none but co-operators 
 are honest. No such sweeping claims are made. But 
 the positions taken above are fairly and substantial- 
 ly true, co-operation is a moral force which acts for 
 good on the co-operator, and on the community in 
 which he lives. 
 
CHAPTER VII. 
 
 WHAT IS INSURANCE? 
 
 Insurance is developed from a desire to break 
 the force of the blow in case of loss. It first mani- 
 fested itself as a form of sympathy for the unfortun- 
 ate and some of the older Mutuals retain traces of 
 this in such names as “The Helping Hand,” “The 
 Contributionship, ” etc. Commercial insurance be- 
 gan on the sea. Merchants were deterred from fit- 
 ting out ships for voyages because they feared risk- 
 ing their entire ship and cargo. 
 
 Wealthy individuals, who met at Lloyd’s Coffee 
 House in London, in order to relieve the difficulty 
 and encourage commerce, began insuring by making 
 personal subscriptions of the amount each was will- 
 ing to risk, generally not over $500 to $750, charging 
 such premiums as were agreed upon. That practice 
 is still kept up to some extent at the present day, but 
 most of the business has fallen into the hands of 
 large companies. 
 
 THE FUNDAMENTAL PRINCIPLE. 
 
 The fundamental principle is indemnity for loss, 
 insurance which accomplishes more than this is eith- 
 er fraud or gambling. Nor can an illegal business 
 or an unlawful enterprise be insured. Nor can in- 
 
 86 — 
 
OF MUTUAL INSURANCE 
 
 87 
 
 demnity be guaranteed in any case in which the pub- 
 lic interest will be endangered. In days gone by, 
 sailors were not permitted to insure their wages on 
 the ground that this would tend to make them less 
 careful in navigating the vessel. But now anything 
 which does not contravene honesty or good morals 
 may be protected by insurance in favor of those who 
 have an interest in it. The words, “have an inter- 
 est’ 9 are used because it is not the thing which is in- 
 sured but the person. And because of this personal 
 element insurance does not pass with sale of prop- 
 erty. No one is allowed to insure that in which he 
 has nothing at risk. There is scarcely anything 
 which cannot be insured against loss from almost 
 any cause, but the scope of this work does not extend 
 beyond loss by fire, lightning and tornado and wind- 
 storm, and to the loss of buildings and their contents, 
 live stock and grain on farms, and similar risks, 
 and the discussion must be kept within these limits. 
 
 As society developed, so did the forms of insur- 
 ance. Two great classes came into being, the joint 
 stock and the Mutual. The Lloyds still exist, but 
 they form but a very small class. The joint stock 
 companies which furnish indemnity for pay and at 
 a profit and the co-operatives, or Mutuals, which 
 furnish insurance at cost, practically cover the field. 
 
 COMMON DEFINITIONS. 
 
 A common legal definition, incorporated into 
 the statutes of Maine and adopted elsewhere with 
 some modifications, is: “A contract of insurance, 
 
88 
 
 A HAND BOOK 
 
 life excepted, is an agreement by which one party, 
 for a consideration, promises to pay money or its 
 equivalent, or to do some act of value to the assured 
 upon the destruction, or injury of something in 
 which the other party has an interest.” This is 
 formal and complete. It expresses the general idea 
 admirably. It brings out the fact that in all bona 
 fide insurance there are these three elements: An 
 insurer, something at risk, and a party having an 
 interest therein. 
 
 It is more briefly stated thus: Insurance is a 
 contract whereby one, for a consideration, under- 
 takes to indemnify another if he shall suffer loss. 
 Any contingent or unknown event, past or future, 
 which may damnify a person having an insurable 
 interest or create a liability against him, may be in- 
 sured against, excepting those which are contrary 
 to public policy, for example, chances in a lottery. 
 But insurance upon that in which one has no inter- 
 est is a wager in law and is legally null and void. 
 
 THE ELEMENTS OF THE CONTRACT. 
 
 Entering into the contract are several elements : 
 The insurer who agrees to indemnify, the insured, 
 the person to be indemnified, an insurable interest, 
 and a contingent danger. By persons are meant 
 either single individuals, or combinations such as 
 partnerships or corporations, the legal sense of the 
 word “ persons” including them all. It will be seen 
 that in each insurance contract one party insures 
 another party against damage to some interest by an 
 
OF MUTUAL INSURANCE 
 
 89 
 
 unknown peril. The common expression— “A’s 
 house is insured’ ’ is not correct. It is not the house 
 which is insured, but an interest in it. This explains 
 why if he sells or mortgages his house the policy is 
 void, his interest has changed. 
 
 An interest in property or relation thereto, or 
 liability in respect thereof such that a contemplated 
 peril might injure the owner directly, is an insur- 
 able interest. But one cannot insure that in which 
 he has no actual interest based on actual ownership 
 or on a valid contract for it, nor can he he insured 
 for more than his interest in it. 
 
 All gambling insurance is void. There is one 
 exception to the rule that a change of interest with- 
 out consent of the insurer voids the policy. If the 
 change occurs by the death of the insured the in- 
 surance still holds good, and passes to the person 
 taking the interest, and in some states a transfer 
 from one of the owners in a joint interest to another 
 owner in that interest does not render the policy 
 
 These definitions are descriptions of insurance 
 as a business transaction between two persons. The 
 following describes insurance in its wider relations 
 to the public. 
 
 “A common agreement among many different 
 persons, that upon each paying a fixed sum into the 
 common fund, the proceeds acquired shall be used to 
 repair any loss which may befall any of the contri- 
 butors.” The fixed sum is the premium and this 
 phrase, as well as the expression “ common fund” 
 renders the definition inapplicable to the Mutuals 
 generally. Mutual insurance is “A common agree- 
 
90 
 
 A HAND BOOK 
 
 ment between many different persons that the con- 
 tributions of the many shall be used to repair any 
 loss which may befall anyone of the parties to such 
 common agreement. ,, 
 
 ANOTHER VIEW. 
 
 Viewed from still another standpoint insurance 
 against a loss is a means of breaking the force of 
 the blow upon one individual by dividing it among 
 many. That this was originally the intention is 
 shown by the names of the oldest societies, 4 ‘Hand 
 in Hand,” “ Contributionship, ” “Helping Hand,” 
 etc. These were all Mutuals. In fact there were no 
 other than Mutuals till the development among the 
 wealthy classes of that particular style of benevo- 
 lence which feels itself called upon to take charge 
 of the affairs of men of moderate means at a cost of 
 “all the traffic will bear.” Since then the joint 
 stock company has done the most of the business, 
 and by fair means or foul has driven the Mutuals 
 from many a field rightfully their own, and from 
 which they should never have suffered themselves 
 to be driven. But they have learned the old lesson 
 that eternal vigilance is the price of liberty, and will 
 not again be caught napping, and the Mutual phase 
 of insurance is again the important one. 
 
 INDEMNITY. 
 
 Invisible, and generally intangible, indemnity 
 is an abstract idea which many do not comprehend. 
 There are persons who cannot see why, at the end of 
 
OF MUTUAL INSURANCE 
 
 91 
 
 a year in which they have had no loss they should 
 be called upon to pay for this vague non-existence. 
 At least, that is the way in which their mental pro- 
 cess runs. But is indemnity a vague abstraction or 
 an actual reality? The members of an insurance 
 company agree to pay for all the property destroyed 
 by fire during a year. They have a million dollars 
 at risk and on the average pay in something less than 
 four thousand dollars a year, or forty cents on each 
 hundred dollars worth of property owned by the 
 members. The sufferers by fire receive pay for their 
 losses, but what have the others had? They have 
 had just the same promise of remuneration that the 
 losers had and it is to that promise that value at- 
 taches in the business world. 
 
 When a merchant makes a report of his assets 
 for the purpose of obtaining credit, he finds in the 
 blank which he is to fill out, a line “Insurance car- 
 ried ” and that is estimated in making 
 
 up the amount which it is safe to credit him. So 
 when a man procures a loan he finds that uninsured 
 buildings are considered as very poor security but 
 that the insurance policy will go at its face. This 
 value becomes a reality in the cases cited as soon as 
 the policy is issued. And if indemnity is thus a real 
 something of value in getting mercantile credits and 
 loans from banks and elsewhere it must certainly be 
 worth something to the person insured. The safety 
 which insurance affords against fire and storm, or 
 to put it more accurately, the surety that the de- 
 struction which may come from these elements will 
 
92 
 
 A HAND BOOK 
 
 be paid for so that the insured will find his loss made 
 good, is certainly not a mere barren ideality. It is 
 something positive which can be comprehended. 
 But how is the value of this indemnity ascertained! 
 By experience, keeping records of losses for years 
 until an average is arrived at which is correct 
 enough for all practical purposes. Insurance, then, 
 has nothing visionary about it nor is there any taint 
 of gambling. It is simply a plain ordinary business 
 proposition. 
 
 CO-OPERATIVE OR MUTUAL INSURANCE. 
 
 Co-operation, in its broad sense, is a joint action 
 of any two or more causes producing a result. In 
 mercantile circles the word applies to the harmoni- 
 ous and concerted action of men associated together 
 for a definite purpose. But when used as synony- 
 mous with mutual it refers to organizations in which 
 each patron is a member and receives back the entire 
 profits on the business he brings to the organization. 
 Its function is the distribution of wealth, that is, 
 instead of permitting the profits on business to re- 
 main in the hands of a few stockholders, it distrib- 
 utes them among the general mass of customers who 
 constitute the membership. Co-operative or Mutual 
 societies are peculiar in their treatment of capital. 
 They use capital in their business, they accumulate 
 funds, they have stock and membership fees, but 
 capital, as such, gets no share in the profits. If 
 hired, it gets the current rate of interest, no more, 
 no less. And the dividends are paid, not to capital 
 
OF MUTUAL INSURANCE 
 
 93 
 
 or to capitalists but to persons. The profits go not 
 to the investment, but to the business. For example, 
 in England the co-operative stores were started with 
 a small capital subscribed by friends of the enter- 
 prise. Each of these shares was owned by a differ- 
 ent individual and paid an interest of five per cent 
 annually. But the profit all went to the owners in 
 proportion to their purchases. And in dividing this 
 profit, expenses and interests were first paid, the 
 material in hand made good, 2Vz per cent of the 
 profits set aside for increasing the common fund, 
 and the balance credited or returned to the patrons 
 in proportion to their business. It must be borne in 
 mind that the broad distinction lies between dividing 
 the profits equally among the shares of capital 
 stock, regardless of those whose business furnished 
 these profits, and distributing these profits among 
 the membership in proportion to their business with- 
 out any regard to any capital which may be invested. 
 
 Some Mutual Associations, in their infancy, 
 have been obliged to start with a capital stock or 
 guarantee fund, on which dividends were paid, but 
 they had a proviso that they might purchase the 
 stock at any time at par value. And they bought it 
 in as soon as they could. Many fraternal societies 
 have erected their lodge buildings in this manner. 
 This is an exceptional case and is only mentioned to 
 show that Mutual Societies can succeed under very 
 adverse circumstances. 
 
94 
 
 A HAND BOOK 
 
 PROFIT SHARING NOT MUTUALISM. 
 
 Profit sharing is sometimes classed with Mutual- 
 ism or co-operation. This does not always hold good 
 for while all mutualism is profit sharing, all sharing 
 is not mutualism. The store which returns a portion 
 of its profits to its customers as a means of increas- 
 ing its trade and the factory which sets aside a por- 
 tion of its profits as an addition to the wages, are 
 not mutual, for in both cases the capital stock re- 
 ceives dividends and neither the customer nor the 
 workmen have any voice in the direction of affairs. 
 
 This illustration will be sufficient to show that 
 careful discrimination is necessary in deciding 
 whether any particular organization is or is not en- 
 titled to be classed among co-operative or Mutual 
 societies. 
 
 Mutual organizations are found in almost every 
 line of business. Their methods of organization 
 vary with their objects and their surroundings, but 
 the principle of furnishing goods or services at 
 cost is always and every where kept in view. 
 
 Some are managed by the co-operators directly, 
 others by agents or managers employed for the pur- 
 pose. The larger ones are generally handled by 
 trustees or directors, many of whom serve for very 
 small remuneration. 
 
 With regard to the capital employed, the differ- 
 ences are equally wide. Some have absolutely none, 
 levying assessments from time to time as needed, 
 while on the other hand many of the co-operative 
 stores have enormous stocks and some of the older 
 
OF MUTUAL INSURANCE 
 
 95 
 
 Mutual Insurance Companies have large reserves. 
 These accumulations of capital are justified by the 
 fact that the reduction of cost which follows the ad- 
 vantage given by the capital will in time more than 
 repay those who contributed it or from whose profits 
 it was taken. A good illustration of this is furnished 
 by the co-operative stores of Great Britain. They 
 were all retail establishments for a long time till 
 finally they accumulated the means to start whole- 
 sale stores of their own. These at once reduced cost 
 materially and soon paid for themselves. So the 
 New England Fire Mutuals, which have large guar- 
 antee funds, say that these have been the cause of 
 reduced expenses and increased business, and no 
 one thinks of giving them up. 
 
 In the matter of profits there is the settled prin- 
 ciple that they belong to the membership but there 
 are numerous methods of dividing them. Some 
 Mutuals avoid profits, doing all Insurance at actual 
 cost, paying no losses nor expenses till after they 
 accrue, but most make a charge and return the un- 
 used portion as profits. Some charge current rates, 
 others fix their own, some divide the profits annually 
 and at stated periods make a supplementary divi- 
 dend of the remainder. 
 
 Some charge membership or initiation fees, 
 some require a stock subscription while others ad- 
 mit every one without preliminary charge. Some 
 divide profits equally with every customer, others 
 confine their distribution to those holding a paid 
 membership. Others still have a differential in 
 
96 
 
 A HAND BOOK 
 
 favor of long standing and they shut out transient 
 customers. The last is frequent among Mutual In- 
 surance organizations. 
 
 A REPETITION. 
 
 At the risk of some repetition it may be well to 
 emphasize the fundamental difference between the 
 joint stock and the Mutual companies. It is some- 
 times said that the one has stock while the other has 
 not. This is not conclusive, as institutions may have 
 a capital stock and yet be purely Mutual. The case 
 of the co-operative stores illustrates this. There 
 must be a stock of goods to start with and the funds 
 to buy this are usually hired by the co-operators, 
 who pay interest thereon. The fact that they gener- 
 ally advance these funds themselves and in amounts 
 of fixed value, which they term shares, sometimes 
 confuses people, but it should not. This capital is 
 simply hired as they hire the building in which they 
 do business; what they pay for it is charged up to 
 expenses. They pay this stated amount whether the 
 business is good or bad, whether the profits have 
 been much or little. And this expense must be paid 
 whether there are any dividends paid or not. In 
 the joint stock company this is reversed. The custo- 
 mers get nothing. The expenses are first paid and 
 the entire balance goes as a dividend on the stock, if 
 there is no balance, then there is no dividend. The 
 object of all this discussion is that people may be 
 able to discriminate clearly between joint stock com- 
 panies, Mutual or co-operative enterprises, and so- 
 cialism. 
 
Hr 
 
 HON. E. M. COFFIN, LINCOLN, NEBRASKA. 
 
 Mr. Coffin is prominent in the State of Nebraska, in fact he 
 has made himself a reputation in many states of the Union. He 
 is an authority on Mutual Insurance. He is the legal adviser of 
 the national association and is also chairman of the legislative 
 committee. He is president of the National Mutual Fire Insur- 
 ance Company of Omaha and holds a number of other important 
 positions. He is a hard worker and has won many important 
 battles for the cause of Mutual Insurance for which he deserves 
 the gratitude of the whole fraternity. 
 
W. B. GASCHE, TOPEKA, KANSAS. 
 
 Mr. Gasche is a native of Ohio. In 1895 he became interested 
 in the question of Co-operative Insurance and was one of the 
 leaders in organizing the Alliance Co-operative Insurance Com- 
 pany, one of the successful and progressive Mutuals of Kansas. 
 In 1900 he was elected president and still holds the position. 
 Since 1900 his company sent him to every annual meeting of the 
 National Association, and is the Western member of the trans- 
 portation committee of the body. He was largely instrumental 
 in organizing the Kansas State Association of Mutual Fire In- 
 surance Companies and has been president of that body since it 
 started. 
 
CHAPTER VIII. 
 
 THE AGENT. 
 
 The agent is one who acts for another. Among 
 Insurance men the agents are those who solicit busi- 
 ness for the company. Mutuals, whose territory 
 does not exceed a few square miles, sometimes dis- 
 pense with solicitors, but the great mass of Insurance 
 business is brought to the companies by their agents, 
 who secure it by personal canvass. Hence the char- 
 acter and qualifications of the agent, his abilities, 
 his methods and his relations to the company all be- 
 come questions of the greatest importance, and upon 
 their proper solution, will depend, in most cases, the 
 success or failure of the organization. 
 
 WHO HE IS AND WHAT HE SHOULD BE. 
 
 What kind of a man must the agent be? He 
 should be endowed with unflinching integrity, good 
 common sense, keen perceptive powers, a fair knowl- 
 edge of men and things, and full control of his tem- 
 per. He should stand well in his community, be able 
 to make a favorable impression upon new acquaint- 
 ances, and to be persistent without being annoying 
 and be able to bring men to a conclusion without 
 seeming to drive them. He should be well informed 
 on the subject of Insurance in general and should 
 
 7 —97 
 
98 
 
 A HAND BOOK 
 
 thoroughly understand the methods of his own com- 
 pany. He should have the by-laws and the policy 
 so thoroughly at command that he can turn at once 
 to any provision and explain it fully while the pros- 
 pective member reads it. This will enable him to 
 avoid the common error of quoting or reading too 
 much. Men understand what they read themselves 
 much better than they do what is read to them, and 
 many an over zealous agent has lost a risk by read- 
 ing so much that he has fairly overwhelmed the cli- 
 ent. It is impossible to give full directions in such 
 cases. Common sense and tact are the only guides. 
 
 Country farmers of good judgment and mature 
 experience and possessing other qualifications allud- 
 ed to, make the very best agents. But they must be 
 sought after. Like first class men in any other line, 
 they are not under the necessity of looking after em- 
 ployment, it comes to them. Moreover, they are 
 scarce. And they are not cheap. But in the long 
 run, they are the most economical. They give better 
 satisfaction, avoid quarrels, reject undesirable risks 
 and save in losses and expenses more than their 
 extra cost. 
 
 Such an agent will never exceed the scope of 
 his authority. All cases of doubt he will refer to the 
 home office. He will solicit business for his own 
 company exclusively, and will not dabble in other 
 lines. He will do business in the customary way, fol- 
 lowing approved methods, never misrepresenting, 
 always doing exact justice, and never getting his 
 company into trouble. And when the application is 
 
OF MUTUAL INSURANCE 
 
 99 
 
 made out, his description will be accurate. Guess 
 work he will not tolerate, but will measure in every 
 case, and his reports will be practically adjustments 
 in advance. He will finish up business as he goes 
 and when he secures a risk it will be for all time. 
 The policy holder will be a permanent customer of 
 the company and the agent. Such a man will keep 
 his eye on the best risks and will secure desirable 
 members who could not be reached by the ordinary 
 solicitor. 
 
 A bad agent is worse than none. The average 
 farmer detests the man who refuses to work but 
 picks up his living here and there in some mysterious 
 way. To appoint such a man agent is almost equiv- 
 alent to quitting business in his locality. 
 
 HIS TRANSACTIONS MAY BIND THE COMPANY. 
 
 A brief sketch of some late decisions will show 
 the application of what has been said. The tendency 
 is to make the transactions of the agent binding on 
 the company, this rule being subject only to limita- 
 tions common in all similar cases and which are sup- 
 posed to be generally known by the public. This 
 doctrine is very distasteful to many corporations 
 and numerous are the shifts and devices by which 
 they attempt to evade it. Various provisions are 
 printed in the contract or policy which the would-be 
 customer is obliged to sign, the purpose of which is 
 to relieve the company from all responsibility for 
 the acts of the agent. The courts have invariably 
 ruled that these were null and void and have held 
 
100 
 
 A HAND BOOK 
 
 the company to a reasonable responsibility for the 
 acts of the agent. 
 
 THE LAW— DECISIONS QUOTED. 
 
 Massachusetts has a law that “An insurance 
 agent or broker who acts for a person other than 
 himself in negotiating a contract of insurance shall 
 be held to be the company’s agent whatever condi- 
 tions or stipulations may be contained in the con- 
 tract or policy.” This is in line with the decisions 
 alluded to above. The principle enunciated is that 
 a man cannot be agent for insurer and insured at 
 the same time. But “Whether one acts as agent for 
 the insurer or insured is to be determined by the 
 circumstances of the particular case. One cannot 
 be agent for both parties.” See J. C. Smith & Wal- 
 lace Co., vs. Prussian Nat. Ins. Co., 54 At. Rep. 
 
 An agent of a Mutual Hail Company settled 
 with an insured suspended for non-payment of as- 
 sessment. He had no authority to adjust losses, but 
 did so, taking note which the company retained. It 
 afterward notified the member that an assessment 
 for another year was due. Held that by ratifying 
 the act of the agent, the company had restored in- 
 sured to membership. Barritt vs. Des Moines Mut . 
 Hail and Cyclone Ins. Asso., 94 Mo. Rep. 
 
 Where the applicant answers the questions of 
 an agent truthfully, and the agent, without his 
 knowledge, and to aid in effecting insurance, modi- 
 fies or falsifies those answers, the company is es- 
 topped from relying on the untruthfulness of the 
 
OF MUTUAL INSURANCE 
 
 101 
 
 description as a defense to an action on the policy. 
 
 Receiving and retaining a preminm makes the 
 company responsible. It should he returned or tend- 
 ered to the policy holder if collected without author- 
 ity by an agent. 
 
 In order that an insurance company may suc- 
 cessfully assert that its agent has exceeded his pow- 
 ers in waiving conditions of a policy, the assured 
 must have actual notice of the limitations placed on 
 agent’s powers, either by having his attention called 
 to the stipulation of the policy containing such limi- 
 tation, or otherwise. The constructive notice afford- 
 ed by the circumstance that the policy contains the 
 limitation is insufficient. 
 
 In general, an insurance company, being in pos- 
 session of certain facts at the time of issuing the 
 policy, in case of loss is estopped from taking ad- 
 vantage of those facts. If the agent knows those 
 facts the company is generally supposed to know 
 them also. 
 
 The Minnesota Supreme Court decided that the 
 company was liable on a policy having no gasoline 
 permit, for a loss from fire arising from the use of 
 gasoline, because the agent knew it was used. 
 
 MUST BE PROMPT. 
 
 An agent should finish up business promptly or 
 at least get it committed to writing. A’s policy ex- 
 pires Friday noon. He notifies the agent the day 
 before that he wishes to renew. The next day that 
 agent is called away and leaves word that it will be 
 
102 
 
 A HAND BOOK 
 
 all right. Before he gets back A’s building burns. 
 The company claims that A overstepped his author- 
 ity, a law suit results, the company is beaten, but the 
 policy holder is out an attorney fee. 
 
 A large proportion of insurance law suits orig- 
 inate in just such affairs as the one supposed above. 
 In fact there is no more prolific cause of quarrels 
 than the same habit of half doing business, and then 
 putting off the other half to a more convenient sea- 
 son. 
 
 RESPONSIBLE IF HE WORKS FOR WORTHLESS COMPANY. 
 
 An insurance agent must use reasonable care 
 to avoid defrauding his patrons. As it is within his 
 power to ascertain the standing of any company by 
 writing to the Insurance Department of the State in 
 which it is located, he is without excuse if he sells a 
 policy in a worthless company. The New York 
 Weekly Underwriter says: “ Edward C. Beirne, 
 local fire insurance agent at Port Jervis, N. Y., is- 
 sued a policy of fire insurance from a Chicago ‘wild 
 cat’ company. The property burned. The ‘cat/ as 
 usual, refused to pay. The property owner sued 
 the agent, whose defense was that he acted as a 
 broker in good faith, believing the company solvent. 
 The appellate court would not accept this plea, nor 
 the New York Court of Appeals. The agent was 
 held responsible for the insurance with interest and 
 costs. The same doctrine has been held elsewhere. 
 
 Two late decisions, one in Iowa and one in New 
 York, have thrown light on the responsibility of the 
 
OF MUTUAL INSURANCE 
 
 103 
 
 agent. In each case an insurer effected insurance 
 in several companies, an agent making the division. 
 In each case there was a loss and in each case one of 
 the companies was an irresponsible “wild cat”. The 
 insurer brought suit against the agent who claimed 
 that he was only a broker and not responsible. The 
 court, however, held differently and brought in a 
 verdict against him. This seems reasonable. That 
 an agent is hound to use reasonable care to avoid 
 representing a fraudulent company or selling worth- 
 less goods, is consonant with common sense. In 
 justice, the agent and the employer are mutually 
 responsible for each other, and to each other, and 
 the agent is more responsible because the assured 
 trusts everything to him. 
 
 responsible: for urns clerks. 
 
 Courts will hold the agents responsible for what 
 is done in their name. They must look after their 
 clerks as other business men are compelled to do. 
 An agent for a “wild cat” in Minnesota procured 
 power of attorney from the assured, authorizing 
 him to purchase insurance wherever he could. Held 
 that under that power of attorney he had a right to 
 purchase insurance where he chose. It would seem 
 that in this case the power of attorney made him 
 agent of the assured rather than of the company, 
 and shifted the responsibility. 
 
104 
 
 A HAND BOOK 
 
 PEOPLE SHOULD SEE THE AGENT’S CERTIFICATE. 
 
 People ought to know something about the men 
 they deal with. There is very little excuse for a 
 man who is defrauded by a bogus agent or a “wild 
 cat” company. The agent should have his certifi- 
 cate and be called on to show it. The standing of the 
 company can be learned by addressing the State Sup- 
 erintendent of Insurance, for no commissioner will 
 issue a license to an agent for a “wildcat.” 
 
 WILL STUDY HIS BUSINESS. 
 
 The agent, who wishes to be as effective as possi- 
 ble, will study his own business thoroughly ; he will 
 know all about Mutuals in general, and his own com- 
 pany in particular. He will understand its princi- 
 ples. He will make a study of other methods that 
 he may be able to show the advantages of his own. 
 He will be watchful and learn all that is going on and 
 will report to the company all cases that he does not 
 fully understand, and will call for decisions on law 
 points and for statistics whenever he needs them. 
 
 He will study the community and when he finds 
 a good risk that is not insured in a Mutual, he will 
 ascertain why. To do this requires skill and tact. 
 Some men will inform the agent the first time they 
 fall into conversation, others need to be asked, and 
 others still, need to be treated as if the agent did not 
 care. There are not a few people in this world who 
 will tell everything they know if one only gives them 
 time and asks no questions. 
 
OP MUTUAL INSURANCE 
 
 105 
 
 In doing this, agents are only acting as do other 
 business men. If a grocer, for example, discovers 
 that he gets no trade from a certain family, he does 
 not rest until he learns the reason and whether the 
 trouble can be remedied. That is just good business, 
 and the agent should follow the example. In these 
 modern days, trade does not come of itself, the 
 rustler gets it. It is not sufficient to have a good 
 thing, the people must be told of it. Advertising has 
 become a necessity, and whether by signs, circulars, 
 newspaper articles or in whatever method seems fit, 
 the man who gets business must somehow advertise. 
 
 WILL COVER HIS TERRITORY. 
 
 The good agent will also thoroughly cover his 
 territory. He will look after the risks carefully, 
 omitting none. This will be profitable to himself and 
 the company. He will secure a permanent good will 
 and as he rides over his field will seldom make a trip 
 during which he does not call upon several men. By 
 the exercise of a little care he can make appoint- 
 ments with those at a distance or in out of the way 
 places and thus save himself much time. 
 
 The agent should keep a record in which are 
 noted the particulars of every policy, such as the 
 amount, the date and the expiration, together with 
 such private memoranda as he sees fit to make. The 
 courts have decided that this book is the private per- 
 sonal property of the agent, to be disposed of by him 
 or retained, as he desires. Such a book in time 
 acquires a value in use. It is a great convenience to 
 the agent. He will be able to keep a close watch 
 
106 
 
 A HAND BOOK 
 
 upon expirations and anticipate the action of com- 
 petitors for business. 
 
 The agent should look after new buildings. They 
 are generally excellent risks. It is well for him to 
 be on good terms with the carpenters and builders 
 and also with the lumber dealers. He can get valu- 
 able information from them. 
 
 HOW TO SECURE GOOD AGENTS. 
 
 MUST GO AFTER THEM. 
 
 The officers of the company must go after them. 
 This is generally the work of the President or Secre- 
 tary, but the Directors can render efficient aid. First 
 class farmers make the best agents. The company 
 should select such men in localities where they wish 
 to have agents, and then secure their services by 
 personal solicitation. In fact, the company gets an 
 agent about as an agent gets a risk, it locates him 
 first and then, at an opportune moment, makes the 
 contract. There is room for exercise of discretion 
 here. While the farmers are generally the best, 
 there is a class of energetic young men who teach in 
 the winter, and busy themselves about something else 
 the rest of the year. As they often have from four 
 to seven months out of school, they have ample time 
 to canvass for the company. Occasionally one of 
 them who has a home of his own and teaches in his 
 own neighborhood, makes an ideal agent. And now 
 and then there are men already in business, who can 
 be induced to take the interests of the company in 
 charge. But as previously stated, these men will 
 
OF MUTUAL INSURANCE 
 
 107 
 
 not come of themselves, the company must go after 
 them. 
 
 In securing agents it is well to bear in mind that 
 the trend of modern decisions is toward making the 
 company responsible for everything that the agent 
 does and says, and that a man who cannot be trusted 
 that far is not desirable as an agent. The Mutual 
 standard for agents is high, very high. 
 
 The agent should never forget that he is the 
 company so far as most policy holders are concerned. 
 He transacts all the business ; they trust everything 
 to him and expect fair treatment. If he fails in this 
 respect, he will lose business for himself and for the 
 company. Attempts have been made on the part of 
 various organizations to evade the force of this, but 
 without avail. It is just that it should be so. Other- 
 wise, the policy holder would be making a contract 
 binding on himself and on nobody else, with all the 
 rights on the side of the company and none on his 
 own. 
 
 MUST HAVE COMMON SENSE. 
 
 Men are expected to exercise common sense and 
 to know how to transact ordinary business, but in 
 special lines they must rely largely upon the repre- 
 sentations of those with whom they are dealing. It 
 is so in Insurance, it is so in every day transactions. 
 Agents should remember this and be careful never 
 to misrepresent or mislead in the least. 
 
 After all the various plans for the prevention of 
 incendiarism are considered, the honest agent, who 
 will not over insure, is the one effective remedy. 
 
108 
 
 A HAND BOOK 
 
 ARE NECESSARY. 
 
 It is frequently proposed that Mutuals shall 
 dispense with agents and that the soliciting be done 
 by the members of the company. Human nature is 
 not generally so constructed. In rare cases, in small 
 communities, the plan is feasible, but generally it is 
 a failure. The agent is a necessity at present. 
 
 MUST LOOK AFTER THE RECORDS OF APPLICANTS. 
 
 Agents should he particular in looking up a 
 man ’s record. If a would be policy holder has been 
 moving from place to place and has had several 
 losses, it is well to turn him down. Sometimes it 
 may be necessary to demand references, especially 
 when the amount of insurance desired seems large. 
 
 When the Fire Marshal laws of the several 
 states are perfected the professional incendiaries 
 will be detected and their descriptions will be furn- 
 ished to the Insurance companies and their careers 
 will be ended. Meanwhile agents should be on their 
 guard against them. 
 
 HOW SHALL THE AGENT BE PAID? 
 
 THREE PLANS IN USE. 
 
 There are three common answers to this quest- 
 ion : By a fixed salary, by a fixed fee on each policy, 
 or by a commission. Each of these methods has its 
 advocates. It is claimed that the salary plan is the 
 best because it presents no temptations to wrong 
 doing. The agent gets his pay without regard to the 
 
OF MUTUAL INSURANCE 
 
 109 
 
 amount of business, hence he will not take risks 
 where the moral hazard is great, nor will he over 
 insure. This is true in theory, but in actual practice 
 it will be found that if the commissions on the busi- 
 ness he brings in do not amount to very nearly his 
 salary, his services will be dispensed with. It is so 
 in all departments of business. In the great retail 
 establishments of the larger cities it is becoming a 
 custom to discharge clerks unless their sales are so 
 large that their salaries fall below a certain per cent 
 of the profits. So while the salary plan seems to be 
 the ideal, it is generally only the commission method 
 in disguise. 
 
 COMMISSION. 
 
 With regard to the commission plan of remun- 
 eration, it is argued that it stimulates the agent to 
 more diligent effort and objected that it is a constant 
 temptation to the agent to take bad risks and to over 
 insure. Both of these positions are correct and it 
 depends upon the integrity of both company and 
 agent what the result shall be. If the company is 
 greedy, it will wink at the misdeeds of the agent and 
 there will be any amount of illegitimate business. If 
 the company is reputable, it will compel its agent to 
 do a fair business though the agent and the policy 
 holder may juggle together to swindle the company 
 and sometimes with success. When both the agent 
 and the company aim at fair dealing, it matters very 
 little whether the agent is paid a salary or a commis- 
 sion. 
 
110 
 
 A HAND BOOK 
 
 FIXED FEE. 
 
 There are many experienced Insurance men who 
 advocate paying a fixed sum for each risk. One of 
 the most successful Mutuals in the United States 
 says : ‘ ‘ The method of obtaining business is entirely 
 different from that of stock companies, inasmuch as 
 the agents of the Oregon Fire Relief Association, 
 instead of receiving a commission on the amount of 
 each risk they write, receive a fixed fee which is the 
 same whether they write a risk for $100 or one for 
 $1000. ’ ’ The reason for this is obvious, it eliminates 
 the tendency on the part of the agent to over insure 
 where over insurance is desired. 
 
 ‘ 4 This one element in the business method of the 
 association has in no small measure contributed to 
 the remarkable reduction in the loss ratio compared 
 with the Stock Companies.” 
 
 In Wisconsin, where the Mutuals have been pre- 
 eminently successful, nearly all the city and village 
 Mutuals pay a percentage commission, hut of the 
 hundred and ninety-nine Township Mutuals reported 
 Dec. 31, 1903, only three pay a percent commission. 
 Of others, a few have no agents, a few pay a per 
 diem, but the greatest number pay a fixed fee per 
 application or policy. 
 
 Statistics from other states are lacking, but the 
 expense account seems to indicate that the commis- 
 sion plan is generally followed. In many cases the 
 companies have been in existence several years, and 
 have old, well tried and faithful agents. With these 
 the method of renumeration makes no difference. 
 
OF MUTUAL INSURANCE 
 
 111 
 
 the agents will do good work. In all such cases it is 
 well to be very slow in making changes. The whole 
 question is more a matter of men than methods. 
 
 SALARY. 
 
 And yet, it seems to be very generally true that 
 among Mutuals which confine themselves to single 
 territories or within narrow limits, the commission 
 system is scarcely known. The members do the work 
 gratuitously, a modest per diem is paid, or a flat rate 
 per policy. As the field of the company widens out, 
 the commission comes in until, in the larger cities, 
 there is no other method. The old line companies 
 established this precedent and the Mutuals must fol- 
 low it for the present. 
 
 As has been remarked the environments often 
 govern. In the local Mutual where “everybody 
 knows everybody” and much work is done gratuit- 
 ously, the question is easily solved ; in the large com- 
 panies, whose field is several counties or even a 
 whole state, the problem is much more complicated. 
 But in either case is there any method which will 
 make a bad man honest, or a knave, sincere 1 
 
 The following from section 30, Insurance Laws 
 of Massachusetts, while not of general application, 
 shows how the legislature views the commission plan 
 so far as its influence over agents and other officers 
 is concerned: 
 
 “No officers or other person, whose duty it is to 
 determine the character of the risks, and upon whose 
 decision the application shall be accepted by a Mu- 
 
112 
 
 A HAND BOOK 
 
 tual fire company, shall receive, as any part of his 
 compensation, a commission npon the premiums, but 
 his compensation shall be a fixed salary, and such 
 share of the net profits as the directors may deter- 
 mine. Nor shall such officer or person aforesaid, be 
 an employee of any officer or agent of the company.” 
 
 IN CASE OF LOSS. 
 
 DUTIES OF THE AGENT. 
 
 The agent shall look after the interests of the 
 company and while he represents the whole member- 
 ship and is employed by them, should treat the loser 
 fairly and even liberally, and thus gain friends and 
 patrons for the company. He should impress upon 
 the loser that the company is ready and willing to 
 pay all losses, only requiring the same proof of loss 
 that would be required by any ordinary business 
 men. It is well enough to congratulate him on this 
 fact, but the agent should not fix the amount of the 
 loss nor lead him to expect a large sum. When the 
 joint stock agents come around and tell the loser that 
 he will never get a cent, as they often do, the agent 
 should make a note of it, and when the loss is settled 
 he should get a written statement of the fact, and 
 that statement should be kept before the old line 
 agent henceforth and forever. 
 
 TRIFLING LOSSES. 
 
 Trifling losses the agent may be permitted to 
 adjust himself, and sometimes in cases where there 
 
OF MUTUAL INSURANCE 
 
 113 
 
 can be no possible dispute he may be employed to 
 settle the matter; generally, an adjuster should be 
 employed. And if the agent has been scrupuously 
 careful in drawing up the policy, the work of the 
 adjuster will be much easier, and there will be almost 
 a certainty of satisfactory settlement. 
 
 TALKS WITH TOUGH CUSTOMERS. 
 
 These talks are such as may take place at any 
 time in the average town and among average men. 
 The agent is supposed to be an upright, honorable 
 man, respected by his fellow citizens and in the busi- 
 ness for all the commission he can legitimately get 
 out of it. He has studied the subject of Insurance 
 and is familiar with it. He knows all about his own 
 company, and has its by-laws at his tongue’s end. 
 He is a resident of the community and is acquainted 
 with its citizens and since taking up the business of 
 Insurance he has studied them somewhat carefully 
 with a view to securing their patronage. 
 
 With the everyday farmer and business man he 
 has no difficulty. He finds most of them insured, 
 some in Mutuals and some in joint stock companies. 
 He manages to learn when their policies expire, and 
 in due time is on hand with proposals for renewal. 
 He goes after the best risks first, secures the men 
 whose judgment is respected and whose example is 
 followed, as soon as he can, but turns down all doubt- 
 ful and extra hazardous risks. In short, he works 
 to build up a permanent business which shall afford 
 him an income for years to come. 
 
 8 
 
114 
 
 A HAND BOOK 
 
 Generally he has no trouble. He gets along 
 easily. But now and then he meets with a tough case, 
 something entirely out of the ordinary. 
 
 THE MAN WHO DOES NOT BELIEVE IN [INSURANCE. 
 
 First comes Mr. A., an excellent man, a model 
 citizen living in a fine house a few miles out of town. 
 He does not believe in Insurance. He is industrious, 
 always busy, and does not like to be annoyed by 
 agents and candidates when he has anything to do. 
 So the agent waits for his opportunity. He makes it 
 convenient to ride past Mr. A.’s home occasionally 
 and engages in conversation with him when he meets 
 him in town. He discovers that he is proud of his 
 home and devoted to his family. Not a word is said 
 about Insurance and when he passes Mr. A. ’s home, 
 a friendly nod, or a cheery “Good Morning” is all 
 that is permissible. 
 
 But one day, after harvest is over, he sees Mr. 
 A. leaning on the fence. Now is his chance. He 
 drives up and accosts Mr. A. After the usual saluta- 
 tions he says : 1 ‘ Mr. A. you have a lovely home here, 
 it must have cost you a lot of hard work to get things 
 in such good shape.” “Yes,” replies Mr. A., “I did 
 have to work hard.” The conversation runs on in 
 that line for awhile, the agent talking of the beauty 
 of the home, its convenience, and how the family 
 must enjoy it after all their hard work. The agent 
 soon sees that Mr. A. made that home for his family 
 and directs the conversation accordingly. To talk 
 to Mr. A. about saving himself from pecuniary loss 
 
OF MUTUAL INSURANCE 
 
 115 . 
 
 would be idiotic. So he praises the comforts and 
 conveniences of the home and before long the two 
 are on good terms and ready to talk to each other. 
 
 Finally the agent says , 4 4 Mr. A., this is a beauti- 
 ful home, you must live a happy life here. It would 
 be a pity to see the result of so much toil and labor 
 burn up, and yourself and family deprived of all 
 these comforts and all the work to do over again.” 
 Mr. A. replies, ‘ ‘ There is no danger ; my family and 
 myself are careful people, we never have accidents. 
 Besides that, I don’t believe in Insurance.” The 
 agent replies, “Yes, Mr. A., you must have been very 
 careful people to have gotten things in such nice 
 order, but somehow, our experience as Insurance 
 men teaches us that fires do sometimes occur in just 
 such cases. In fact, it is an old saying that it is the 
 unexpected which happens. Looking at it from your 
 standpoint, I should say you would never have a 
 loss. Looking at it as I see it now, I should say that 
 a loss is exceedingly improbable, but the experience 
 of the companies makes a different showing. ’ ’ 
 
 Then the agent draws from his pocket a list of 
 losses paid by the company and shows it to Mr. A. 
 Some of the names may be known to Mr. A. If so, 
 the agent can take advantage of it. The agent then 
 says, “Probably few of these were quite as careful 
 as you, but all felt confident that they would not have 
 a loss. In fact some of them seemed to feel that 
 insuring was throwing money away. But they had 
 fires, nevertheless. ’ ’ 
 
116 
 
 A HAND BOOK 
 
 Then the agent takes another list from his 
 pocket. He has taken trouble to go to the local news- 
 paper offices and to look over the files for two or 
 three years past and get a list of the fires occuring 
 in the county during that time. He has ascertained 
 the value of the property destroyed and the amount 
 of Insurance thereon. This list he reads over to Mr. 
 A., emphasizing the cases in which there was no 
 Insurance. When he finishes, he says, “Now, Mr. A., 
 would not you sleep a little sounder in that lovely 
 home of yours if you were assured, that, if in some 
 mysterious manner, and by no fault of yourself or 
 family, it should burn, they would be saved from the 
 hard labor necessary to make another home as 
 good?” 
 
 Then he produces one of the inquiry blanks used 
 by the great commercial agencies when they wish to 
 ascertain a man’s standing, and shows him the 
 question “How much Insurance carried?” Then he 
 says: “You see, Mr. A., what the business public 
 think of Insurance. They do not regard it as tempt- 
 ing Providence, or as gambling, but as an act of 
 ordinary prudence. They do not doubt the careful- 
 ness and good intentions of men in general but they 
 know that fires do come, and not unfrequently origin- 
 ate in causes thought to be thoroughly guarded 
 against. ’ ’ 
 
 The agent goes on pressing hard on the facts 
 shown by the statistics he has, that fires do occur, 
 that carrying one’s own risk has been disastrous in 
 many cases, that the public look upon Insurance as 
 
OF MUTUAL INSURANCE 
 
 117 
 
 an act of ordinary business prudence, that Mr. A. ’s 
 family would suffer if a loss occured, and that a 
 reasonable Insurance would shield them from harm, 
 etc. Possibly he will not get Mr. A. ’s application at 
 the first visit. He may deem it best to leave some 
 circulars for Mr. A. to look over before coming to a 
 final decision. 
 
 But the agent has done several things. He has 
 supplied himself with all the facts and figures, next 
 he has cultivated the acquaintance of Mr. A., then 
 he has gotten on good terms with him and lastly he 
 has tried to show Mr. A. that it would be to the inter- 
 est of his family to insure. 
 
 The agent is also cautious to avoid contradicting 
 Mr. A. He does not desire any head end collisions. 
 That would spoil everything. He does all prudently 
 and carefully, with no haphazard or guess work. He 
 also appeals to the highest motive, Mr. A. ’s love for 
 his family. If he had driven up with, “Well, Mr. A., 
 I came out here to insure you.” If he had said, “It 
 is not good business to let so much property go un- 
 protected” or used any similar expression, he would 
 have closed the case against himself at once. Or if 
 he had failed to have the necessary statistics, his 
 success would have been more than doubtful. But, 
 by doing the right thing at the right time, Mr. A. 
 will probably be won over, and if he is, many of his 
 friends will follow, and in the future, a list of com- 
 missions will loom up which will more than pay for 
 the time he has expended on this case. 
 
118 
 
 A HAND BOOK 
 
 THE MAN WHO DOES NOT LIKE ASSESSMENTS. 
 
 Next comes Mr. B. who does not like assess- 
 ments. The old line agents have discovered this and 
 loaded him down with circulars. The agent meets 
 him and gets into conversation. “I like everything 
 about your company except those assessments. 
 Guarantee me against assessments, and I will give 
 you my business . 9 9 In the states where the all cash 
 or cash deposit methods are possible, Mr. B. can be 
 accommodated at once. Explanation is made that 
 the advance premium is so large that there is no pos- 
 sibility of using it all, and that there will be an un- 
 used balance returned to him at the end of the term. 
 But in some states this cannot be done. A premium 
 note must be taken or the pure assessment method 
 adopted. The agent explains these methods, shows 
 the records of the company, and expatiates upon the 
 cheapness and safety of the Mutual methods. “But 
 I want a company which never assesses.’ ’ “Very 
 well, the old line companies never assess, neither do 
 they give you a share in the profits. ’ 9 
 
 Then the agent takes a list of actual cost of 
 Insurance in that locality for the past few years in 
 both stock and Mutual companies. He shows it to 
 Mr. B. and explains the workings of the Mutual plan, 
 that it is the best and the cheapest. He shows that 
 for several years the cost of assessment has been 
 below the rate demanded by the joint stock compan- 
 ies. Mr. B. admits the cheapness, but says, “I want 
 a company that does not assess. I don’t want to put 
 a mortgage on my property if it is only for five dol- 
 
OF MUTUAL INSURANCE 
 
 119 
 
 lars. ’ 9 In some states the best way to answer this is 
 to produce a copy of the Insurance laws of the state, 
 and show him that there is no liability beyond the 
 face of the note. In other states, it might be best to 
 ask him if he had ever heard of a policy holder in 
 this company who gave a note being compelled to 
 pay more than the face thereof. 
 
 Having settled this, the agent says: “Mr. B. 
 nobody ever heard of you refusing or neglecting to 
 pay a debt, yet you give notes in other transactions, 
 why not in this case?” Mr. B. repeats that he does 
 not like assessments and does not want to give a 
 note. 
 
 “Well,” says the agent, “let us look at this 
 mortgage business a little more closely. You always 
 keep everything paid up and your assessments would 
 bfc no exception. That note would be non-negotiable, 
 would be worthless in the hands of any body else but 
 the company. With your policy expired and your 
 last assessment paid, the note and the policy will die 
 together. Did you ever see one of these Mutual 
 Insurance notes recorded in an abstract of title as a 
 lien against any property ? ’ ’ Mr. B. does not remem- 
 ber that he has. 
 
 “I will tell you why,” says the agent. “If you 
 should sell the property you know that the Insurance 
 would become void so far as you were concerned. 
 Now the note dies with the Insurance, except the 
 assessment you happen to owe. That is all the note 
 would cover and all which could be collected. In 
 
120 
 
 A HAND BOOK 
 
 your case there would be no trouble about that 
 When it was paid the balance of the note would be 
 returned to you. ’ ’ 
 
 “But,” says Mr. B., “I have heard of men who 
 have sold out being followed up and sued.” “Mr. 
 B., when a man runs away owing you, don’t you fol- 
 low him up and collect if you can? Isn’t an assess- 
 ment an honest debt ? ” “Of course. ’ ’ 4 'Well, when 
 a man tries to defraud us, what are we to do? Can 
 we do justice to our members if we do not bring 
 delinquents to time? Now all these things being 
 true, where is the danger of giving a note which you 
 intend to pay, which you are willing to pay, or at 
 least so much of it as is required ? How can it possi- 
 bly work you harm?” 
 
 Mr. B. has been holding something back all the 
 time and now he lets it out. “Lawyer X. told me 
 that if I joined a Mutual on the assessment plan, I 
 would be liable for all I am worth, and if the com- 
 pany failed to pay any one who had a loss, he could 
 sue me, and collect it and I could not help myself. 
 He #aid he had supreme court decisions to show.” 
 
 The agent knows perfectly well that the lawyer 
 lied, and is tempted to say so, especially if, as is 
 often the case, the lawyer is an old line agent. But 
 he keeps his temper. “Mr. B. did you see those 
 decisions ? ” “No, but he said he had them. ” “ Hid 
 he tell you when and where they were rendered?” 
 “No.” “Hid you ever hear of them before?” “No.” 
 
 “Well, Mr. B. I do not claim to be a lawyer, and 
 I do not know much about law, but I have heard of 
 
OF MUTUAL INSURANCE 
 
 121 
 
 these decisions before, but I have never been able to 
 see them. I have never found any one else that has. 
 Mr. B. you know something about business partner- 
 ship, joint stock concerns, etc.?” “Yes.” “Well, 
 have you seen partnerships wound up?” “Yes.” 
 “And joint stock concerns?” “Yes.” “Well, when 
 a partnership is wound up, is it not true that all the 
 partnership property must be exhausted before the 
 members of the firm can be called on, and then they 
 must be assessed pro rata at first and so on, each 
 paying his full share as far as possible?” “Yes.” 
 “Is it not true that in case of a brankrupt joint 
 stock company the property of the company goes to 
 pay the debts, and when that is used up, it is only in 
 rare cases that there is any further liability and then 
 only to an additional amount equal to the stock held? 
 Mr. B., if all this is true, can it be true that in any 
 organization any one man is liable to any other one 
 man for all that he has? Don’t you see that the set- 
 tlements must be made pro rata, and not as that law- 
 yer told you?” 
 
 Mr. B. will probably say nothing to this. The 
 agent then goes on. “You know many of the mem- 
 bers of this company. After years of experience, 
 their own and others, they have found that their 
 losses and expenses have never exceeded a certain 
 rate. For the sake of absolute safety, they have put 
 the premium note still higher. They have never 
 needed the full amount of the notes. Now as a man 
 of experience, of observation, and of judgment, tell 
 me what are the chances that you would be called on 
 
122 
 
 A HAND BOOK 
 
 individually to pay a loss? What are the chances 
 that such a suit as was spoken of by Lawyer X. ever 
 came off or ever will come off ? ’ ’ 
 
 Many policies contain stipulations to the effect 
 that there shall be no liability beyond the face of the 
 note, and these stipulations are taken from state 
 laws. WTien this is the case the fact can be pointed 
 out to Mr. B., and it can be explained to him again 
 that the note is put high enough to make it absolutely 
 sure that he will get his pay in case of loss. 
 
 Many companies work purely on the assessment 
 plan. In these there is no question about a person’s 
 liability beyond the pro rata share. Such a thing 
 was never heard of. The agent should be prepared 
 with statistics showing the rate of assessment in his 
 company as far back as possible. These ought to 
 convince Mr. B. that the bugaboo which has fright- 
 ened him is a lively imagination interested on the 
 anti-Mutual side. If the agent has time, he can cor- 
 respond with headquarters and get all the facts. 
 These he can show to Mr. B. His key note in all this 
 talk is to show by general observation of ascertained 
 facts that Mutuals do not assess in the style charged 
 against them, and that they do pay their losses; in 
 short, that they are successful in the business world, 
 and entitled to credit for having succeeded. 
 
 THE MAN WHO DOES NOT WISH TO BE SWINDLED. 
 
 Then Mr. C. comes to the front. He does not 
 want to be swindled. These Mutuals are not to be 
 trusted. He has suffered himself. This objection 
 
OF MUTUAL INSURANCE 
 
 123 
 
 presents itself in different shapes at different times. 
 Sometimes Mr. C. is noisy, and tries to draw the 
 agent into a quarrel. The agent keeps his temper 
 and in time learns the whole story. He writes it out 
 in full, giving names, dates etc. and then sends it 
 to the company, and they in turn investigate it 
 through the state and national organization. 
 
 That he has been a member of a genuine Mutual 
 which failed to pay its losses is hardly probable. 
 The committee have made diligent inquiry for such 
 Mutuals and have so far discovered but one, and it 
 is doubtful if that made any trouble. Cases have 
 come to light in which companies were organized by 
 professional sharpers, who collected the fees and as- 
 sessments till the first loss occured and then abscond- 
 ed with the funds. In other localities, men have ap- 
 peared claiming to be agents for Mutuals, having 
 policies, etc., in due form, who canvassed for Insur- 
 ance and collected considerable sums of money. 
 After gathering in what they could they left. When 
 the first loss occured a letter to the address given on 
 the policy, came back, “uncalled for,” and further 
 inquiry revealed the fact that such a company never 
 had been heard of at the post office or any where 
 else, in short, that the policies, etc., were forgeries 
 from beginning to end. These are the usual methods 
 in which people are defrauded, and there would have 
 been very few of them, had state officials been faith- 
 ful in doing their duty. 
 
 If Mr. C. has actually lost by the failure of a 
 genuine Mutual, and is abusive, the only thing to do 
 
124 
 
 A HAND BOOK 
 
 is to avoid him. To argue with him would only make 
 the matter worse, and a street quarrel would degrade 
 the agent in the eyes of the community. The only 
 thing for the agent to do when he comes near Mr. 
 C. is to avoid him, and if he opens up his batteries of 
 abuse, make no reply. This will soon break the force 
 of his attacks. When Mr. C. is quoted by some one 
 whose business the agent is soliciting, the statistics 
 can he produced to show that his was a very unusual 
 case, that the Mutuals have the best record, even if 
 Mr. C. did have bad luck, etc. If the agent solicits 
 people at their homes, he will he in no danger of a 
 personal conflict with Mr. C. and will have a better 
 chance to present the arguments. 
 
 If Mr. C. does not make any attack, but just 
 refuses to patronize a Mutual, the best way is to treat 
 him kindly, never attack him, never deny what he 
 says, not attempt to condone the wrong, and it may 
 be that in time he will soften down and become 
 friendly. 
 
 If, however, as is more probably the case, Mr. 
 C. has been swindled by a bogus company, then the 
 course to he pursued is entirely different. At first, 
 as before stated, the agent is to keep quiet, but when 
 he has ascertained all the facts and reported them to 
 headquarters and has received replies, he is ready 
 for action. In the case supposed at first, it would 
 be better for him to avoid public meetings, now an 
 encounter in a crowd is just what he wants. He gives 
 Mr. C. an opportunity to attack him, and stands 
 quietly until he has exhausted himself. Then it is 
 
OF MUTUAL INSURANCE 
 
 125 
 
 his turn. ‘ 4 Mr. C. did you say you were swindled by 
 a Mutual (giving its name and post office) ?” “Yes.” 
 “Well, Mr. C. here are some letters about that case 
 which may be of interest. ? ’ Then he reads a letter 
 from the state superintendent of insurance, saying 
 that he never heard of such a company. He has an- 
 other from the secretary of the state organization, 
 and he knows nothing about it. The county treas- 
 urer writes that it is not on the tax roll and never 
 has been. The post master says nobody knows any- 
 thing about it. 
 
 Then he goes on, “Mr. C., who was the agent 
 who took your application? Did he have a license 
 like this? (showing his own). Was he an acquaint- 
 ance or a stranger?” The agent has now fairly 
 turned the tables on him. Mr. C. will probably try 
 to say that the agent is accusing him of falsehood. 
 “Oh no,” the agent will reply, “You have paid your 
 money and gotten your policy, but these letters 
 which I have read show that your policy is a forgery. 
 The agent was no agent but just a common scamp. 
 You were swindled, that is all there is to it. Do you 
 know why people counterfeit bank notes ? I will tell 
 you. It is because the bank note is worth its face 
 value, and that is why this fellow counterfeited a 
 Mutual Policy, because Mutual policies are worth 
 their face. Here is a list of losses we have paid 
 which goes to prove it.” And then he distributes 
 his circulars through the crowd. Mr. C. will prob- 
 ably continue to sputter but his power for harm is 
 gone. 
 
126 
 
 A HAND BOOK 
 
 This fraud is sometimes perpetrated by a single 
 individual and sometimes by two or three working 
 together. In either case the course of the agent is 
 the same, to investigate thoroughly, arm himself 
 with proper proofs and then expose the fraud pub- 
 licly. If necessary, publish the correspondence in 
 the local newspapers. While such encounters are 
 unpleasant, the agent cannot afford to have his busi- 
 ness destroyed by continued misrepresentation. If 
 the agent will take the pains, he can prepare himself 
 so that he can avoid trouble from all these cases. He 
 may not be able to get their business, but he can sil- 
 ence their opposition. 
 
 THE MAN WHO DOES NOT LIKE MUTUALS. 
 
 This man does not believe in co-operation. 
 Mutuality has no charms for him. He has but two 
 objects of worship, first the potent and almighty 
 dollar, and second, the man who owns the most of 
 said dollars. 
 
 The agent approaches him and mentions Mutual 
 Insurance. 4 ‘Oh no, Mr. Agent, you have mistaken 
 your man. You may succeed in duping country 
 farmers and such people, but I am a business man 
 and we business men have studied these things and 
 we know the facts. We know that your ideas are 
 visionary. Why, you are nothing but a lot of 
 cranks.” “You think so?” “Yes, I know it.” 
 
 ‘ * Mr. D., you are familiar with the early history 
 of the country, you know something about its public 
 men. Wliat do you think of Benjamin Franklin? 
 
OF MUTUAL INSURANCE 
 
 127 
 
 Was lie not a good business man? In fact, was he 
 not the practical man of that age?” Mr. D. admits 
 that at once. “Well, Mr. D. did you ever hear of his 
 Mutual Insurance Society?” “Why, no, what did 
 he have to do with Mutual Insurance ? ” “ He started 
 a Mutual Insurance Society?” “Well, what if he 
 did?” “Why, one of the best business men of that 
 age was a believer in Mutuals, he started the first 
 Mutual in the United States. It was called the Phila- 
 delphia Contributionship, and it is running on the 
 same plan yet. Now you would not call a business 
 which has been running successfully for a century 
 and a half visionary, would you ? ’ ’ Mr. D. will prob- 
 ably have nothing to say to this and the agent should 
 be careful not to crowd him. 
 
 The agent goes on. “You heard of the Balti- 
 more fire ? ” “Yes, and all the Mutuals are gone and 
 gone forever.” “Oh no, Mr. D. we saw that in a 
 joint stock paper, and we wrote to the Commissioner 
 of Insurance. Two of the seven Mutuals went into 
 hands of a receiver, and four out of the eight joint 
 stock companies of Maryland failed. But the com- 
 pany that paid with the least trouble was the Balti- 
 more Equitable, a Mutual started more than a hun- 
 dred years ago. Now that does not look visionary, 
 does it?” 
 
 The agent waits a moment, then goes on, “The 
 fact is, Mr. D. most men are busy. I know that you 
 are very busy. You have one rule which you can 
 apply in this case, and that is, that which succeeds 
 must be practical. Now the Mutuals have the figures 
 
128 
 
 A HAND BOOK 
 
 to show that they do succeed, and that they do save 
 money. Have you ever heard of the failure of a 
 genuine farm Mutual, I mean a failure to pay in full. 
 Sometimes, too many Mutuals are started in the 
 same territory, and some of them retire or consoli- 
 date. I do not mean this, but a failure to pay losses, 
 a bankruptcy f ” Mr. D. has never troubled his head 
 about such matters. “Well, Mr. D., I am ready to 
 show you official figures to prove that such failures 
 are almost unheard of, that the business record of 
 these societies is better than that of any other class 
 of commercial institutions in the country. Now if 
 I prove that, and then show you that they offer 
 cheaper Insurance than any other, will you consider 
 it visionary to give me your business? Now you 
 know a good thing when you see it. What do you say 
 to this ? ’ ’ 
 
 Talk along this line may win. Genuine business 
 men like pluck, they like to see a man push his busi- 
 ness and will not get offended if he does. The tactful 
 agent will probably make a friend, if he does not get 
 the business. 
 
 The business man who has become suddenly 
 rich by some stroke of fortune, or by swindling his 
 neighbors, is generally too self conceited to be easily 
 approached, and too ill mannered to talk with. 
 While it is the duty of the agent to go after all busi- 
 ness, he may be permitted to make an exception in 
 that case and let the man alone. 
 
 THE MAN WHO DOES NOT LIKE ANYTHING SMALL. 
 
 Now and then the agent meets some one who 
 does not believe in Mutuals because “They must 
 
M. G. L. ROBERTS, CHATTANOOGA, TENNESSEE. 
 
 Mr. Roberts is one of the successful men of the South. He 
 is the pioneer Mutual Insurance man in his state, president of 
 the United States Fire Insurance Company of Chattanooga, a 
 most prosperous organization and the only one financially able 
 to go on a legal reserve basis and still have a net surplus over 
 all liabilities, re-insurance reserve included. He is also at the 
 head of other important business enterprises, member of the 
 Georgia Society of Chattanooga, a charter member of the Chat- 
 tanooga Historical Society— in fact is active in all lines of public 
 usefulness. 
 
F. D. BABCOCK, IDA GROVE, IOWA. 
 
 Mr. Babcock is secretary of the Grain Shippers Mutual Fire 
 Association of Ida Grove. This does a state business and is in- 
 creasing its risks very rapidly, although it exercises great care 
 to avoid all which are doubtful or undesirable. He was the or- 
 ganizer of this Company and has been a leading man in Mutual 
 Insurance in Iowa for many years. 
 
OF MUTUAL INSURANCE 
 
 129 
 
 fail, sir. Nothing can succeed in circumscribed terri- 
 tory. No sir. A single state is too small a field. An 
 Insurance company to be safe must operate widely, 
 must draw its patronage from the whole country. 
 Your Mutuals cannot live. They are too small, sir, 
 too small, sir!” 
 
 The experienced agent has run against this 
 snag more than once. It is one of the standing argu- 
 ments of the larger joint stock companies, not only 
 against the Mutuals, but against the smaller joint 
 companies. It is really the business creed of the 
 trust. They have been active in propagating it and 
 it is astonishing how many people have accepted it 
 without thought. This man is sometimes too large 
 to talk to anything less than an international com- 
 pany. But perhaps he will listen. If so, the agent 
 says: “Well, Mr. E. you own a nice property out 
 there in the country (but Mr. E. is never a farmer). 
 I should like to insure it. Our company has total 
 assets so much, total risks so much, that is so much of 
 assets to a hundred dollars of risk, a greater percent 
 than most of your so-called strong companies have. 
 Moreover, those large companies have greater 
 amounts bunched in the dangerous districts of Chi- 
 cago, St. Louis, San Francisco and other cities. If 
 a hundred million dollar fire should occur and the 
 company should be obliged to sell large amounts of 
 stocks and bonds on a low market, you could not tell 
 what the result would be. But look at our company. 
 Our largest risk is $3,000. We have no two risks 
 exposed to each other, hence the worst fire can only 
 
 9 
 
ISO 
 
 A HAND BOOK 
 
 cost us $3,000, and that would make us no trouble at 
 all. If we are a small company, we have scattered 
 our risks till they are smaller in proportion to our 
 ability to pay them than those of the great compan- 
 ies. Hence, we claim we are safer . 1 9 Lists of losses, 
 etc., may he produced and all available statistics may 
 be used. 
 
 Possibly he will consider an appeal to his finan- 
 cial interest. Probably he will prefer to boast that 
 he is insured in the largest company in the country, 
 even though he has to pay heavily for the privilege. 
 
 All of these characters, and possibly others will 
 be encountered by the active and energetic agent. 
 And for all of them he must be ready. He never 
 knows when he starts out in the morning, what he 
 will meet before he returns. He should pick his man 
 and go after him. Firing at a flock for general re- 
 sults is a poor way of hunting. Each time he wins a 
 patron will make it easier to win the next. 
 
 OLD LINE AGENTS AND HOW TO TREAT THEM. 
 
 Many old line agents are honorable and court- 
 eous. There are also some who are destitute of prin- 
 ciple and decency. They will try to provoke quar- 
 rels. The Mutual agent should avoid these as much 
 as possible. If he solicits his customers in their 
 homes or places of business, he will generally be 
 safe from interruption. Above all, the Mutual agent 
 should avoid doing business on the town street corner 
 where he will be surrounded by a gaping crowd. 
 
 But he should be on the guard against wilful 
 misrepresentation. The old line agent will not be 
 
OF MUTUAL INSURANCE 
 
 131 
 
 slow in approaching the Mutual man, and from this 
 the agent can learn what is going on. He should se- 
 cure copies of all circulars distributed and send them 
 to headquarters. He will get replies and these 
 should be distributed. If the old line agent says he 
 has adverse court decisions and says so to his face, 
 let the Mutual agent take out pencil and paper and 
 say, “Now just give me the volume and page of that 
 decision. ’ ’ If he says he has it at his office, then the 
 thing to do is to offer to go with him and look at it. 
 If he says he saw it somewhere else, then let him tell 
 where. The Mutual agent should never stop till he 
 has pinned the other man down. The result will be 
 that he has either no decision touching the case, or 
 else has misquoted something. If the agent can 
 learn in advance what the joint stock man asserts 
 and correspond with headquarters, he can be fully 
 prepared to meet anything and everything. 
 
 THE MAN WHO IS FRIGHTENED. 
 
 This man is one who has already insured but 
 who hears so much about Mutuals that he is begin- 
 ning to regret it. He is startled and worried by the 
 talk until life becomes almost a burden. He can be 
 made very useful, and well satisfied at the same time. 
 The opportunity will come when a large fire occurs, 
 in which the company is interested. The news will 
 get to his ears. “Told you so,” says the old liner, 
 “Your company is busted, your Insurance is gone 
 and you will have to pay a big assessment. You 
 ought to have taken my advice,” etc., etc. 
 
132 
 
 A HAND BOOK 
 
 He meets the Mutual agent. ‘ ‘ Say did you hear 
 of that big loss over there ? Can the company pay it t 
 How much will they assess me V 9 The agent replies, 
 “Yes, I heard of that loss, the company can manage 
 it. Your assessment will not he heavy.” (In some 
 companies the assessment is made in advance, here 
 the agent would use different language). The policy 
 holder shakes his head. “Well,” says the agent, “Did 
 you not get one of our last reports'?” He produces 
 one and reads the list of losses. “Now you see, here 
 is a long list of just such losses, they were all paid, 
 and there was no trouble about it. ” So he leaves him, 
 telling him not to be troubled. 
 
 A few days pass by and the assessment comes. 
 It is but a moderate sum. He hunts up the agent. 
 ‘ ‘ What ’s this ? ” “ Your assessment. ” “To pay for 
 that loss?” “0, no, that pays for several losses, not 
 very heavy it is?” “No, that’s all right, but will it 
 holdout?” “You wait and see. The agent gets the 
 loss receipt and shows it to his timid friend. “The 
 company is all right, I ’m satisfied , 9 9 and off he goes 
 to tell the story to every man he meets. He will do 
 any amount of good advertising for the agent and 
 the company. 
 
 The shrewd agent can very frequently use such 
 men to turn the tables on his opponent and gain 
 friends and business for the company at the same 
 time. 
 
 THE MAN WHO WISHES TO ARGUE THE CASE. 
 
 In every community there is an individual who 
 always wants to argue. He is contrary because 
 
OF MUTUAL INSURANCE 
 
 133 
 
 Mother Nature made him so. He is “agin it” no 
 matter what the “it” happens to be or how he stood 
 the last time he argued that same question. His 
 stock in trade consists of tricks and catches and his 
 great delight is to badger some honest man for the 
 amusement of a gaping crowd. He is proficient in 
 his line, and is expert in getting the laugh on his op- 
 ponent. He is a good illustration of the old saying 
 that any fool can ask questions that a wise man can- 
 not answer. 
 
 This man is dangerous only to those who argue 
 with him. The agent must avoid that error. He 
 must he treated civilly, answered courteously, but 
 not allowed to discuss matters. In conversing with; 
 such a man the art of saying nothing and saying it 
 well is a valuable accomplishment. The best way of 
 meeting him is to turn the tables on him by asking 
 questions about some other matter. Let them come 
 thick and fast so that he will have no time to advance 
 his own ideas. Not a moment should be allowed him 
 in which to argue. As a rule the men who spend 
 their time disputing have no business worth going 
 after and the best course is to get rid of them as 
 soon as possible. A volley of questions is pretty 
 sure to put the enemy to flight. 
 
 THE MAN WHO DOES NOT UNDERSTAND INDEMNITY. 
 
 Occasionally the agent meets a man who says, 
 “I have been insured for ten years. I have never 
 had a loss. You have never paid me a cent. My 
 
184 
 
 A HAND BOOK 
 
 Insurance has not cost you a cent. I don ’t believe in 
 that kind of business.” Or perhaps he will refuse 
 to pay his assessments on the ground that as he has 
 cost the company nothing, he owes them nothing. 
 
 Such men are often perfectly sincere and should 
 be treated fairly and candidly. The agent should 
 endeavor to convince them that after all they did 
 have something of value. It is best at first to avoid 
 the use of technical terms, such as ‘ ‘ indemnity, ’ ’ etc. 
 Begin with simple language. 4 ‘ Well, Mr. G. it is 
 true that you have received no money from the com- 
 pany, do you regard what you paid the company as 
 a dead loss?” “Of course, it is, any fool ought to 
 see that. ,, The agent should keep his temper and 
 give the man a minute or two to think. Then he may 
 say, “Mr. G. several of your neighbors are insured 
 in this company. One or two had losses, did not the 
 company pay them promptly?” “Oh, yes, of course.” 
 “Then the company lives up to its obligations.” 
 “Yes, it pays its losses.” “And if others had burned 
 out it would have paid them also. Then these others 
 were safe from loss if they had burned out.” “Yes, 
 I suppose so.” “Did not your neighbor X buy a 
 farm not long ago?” After the agent has talked a 
 while about the new farm he asks, “Did not Mr. X. 
 have to give a mortgage for part of the purchase 
 money ? ” “I believe so. ” “ And give a Fire Insur- 
 ance policy in addition as part security?” “Yes.” 
 “Then this Fire Insurance policy enabled Mr. X. to 
 buy that farm?” “Yes.” “Well, if it helped him 
 out that much was it not worth something to him, 
 
OF MUTUAL INSURANCE 
 
 135 
 
 even if he did not have a loss?” 
 
 “Well my case is different, I did not buy any 
 farm. ’ ’ The agent at this point should refer to some 
 improvement made or some expenditure of Mr. G., 
 and then say, 4 ‘ Mr. G. you spent that money wisely. 
 But suppose that while your Insurance policy was 
 in force your house had burned, the company would 
 have paid your loss would they not?” “Oh, Yes.” 
 “And the fact of the loss would not have interfered 
 with the expenditure you made.” “I suppose that is 
 so. ” “ And if your house had burned without Insur- 
 ance you would have had to take that money to re- 
 build another instead of expending it as you did?” 
 “Yes.” “Well, then the Insurance made you safe?” 
 “Yes.” “Well now Mr. G., isn’t that safety worth 
 something even if you did not have a loss? If, as 
 you said a while ago, your neighbors who are insured 
 are safe, if Insurance made Mr. X.’s credit safe, if 
 it made you safe, wasn’t it worth something to you 
 after all? You pay for enjoyment, for comfort, was 
 it not actually worth something to you to know that 
 you were safe?” “Well maybe it was, but how do I 
 know how much it was worth? I can’t see it yet.” 
 
 “Well Mr. G., things are generally worth what 
 they cost. The members of this Mutual have com- 
 bined to make each other safe as far as they wish 
 to be. Every kind of property has been kept account 
 of, and what it costs to insure each kind is figured 
 out very closely. The company knows what it costs 
 and each man pays that cost and no more. In other 
 words, the losses of property by fire and storm are 
 
136 
 
 A HAND BOOK 
 
 averaged on the whole property insured and that is 
 the cost. The assessments yon paid are just what it 
 cost to make you safe. Now, was it not worth that 
 much to you? Would you he satisfied to let your 
 property go uninsured and take the risk yourself !” 
 
 Perhaps Mr. G. will take the ground that those 
 who had losses should pay their assessments but 
 that the others do not owe anything. If he still ad- 
 heres to this opinion the agent may say, 4 ‘ Well, Mr. 
 G. the company cannot pay out any more than it 
 takes in, can it ? ’ ’ “Of course not . 9 9 “ Then if those 
 who do not lose, do not owe anything and only the 
 losers do owe, these losers are the only ones who 
 should pay an assessment. Don ’t you see this would 
 simply be making the losers pay their own assess- 
 ments, in effect, paying their own loss, and that they 
 would have no safety whatever ? ’ ’ 
 
 Argument along these lines will generally con- 
 vince reasonable men. But the agent must remember 
 that there are many men who are slow to compre- 
 hend the idea that anything invisible, which cannot 
 be counted nor weighed can have a cash value, that 
 this safety or indemnity is worth something in 
 money, that the purchaser thereof has received bene- 
 fits for which he should pay. Patience and forbear- 
 ance will work wonders in such cases. 
 
 THE FALSIFIER. 
 
 A new industry has been started lately by some 
 ingenious joint stock people. Their emissaries 
 travel over the country ostensibly engaged in some 
 
OF MUTUAL INSURANCE 
 
 137 
 
 canvassing business, but at every farm house where 
 they stop they make it a point to deliver a long lect- 
 ure on the short comings of the Mutuals. It is un- 
 necessary to say that their statements are pure fabri- 
 cations. If the agent warns his customers in advance 
 such people will do no harm. But on no account 
 should the agent enter into dispute with them. Let 
 them work out their own affairs and the more the 
 agent ignores them the better. 
 
 It is sometimes provoking to meet the villainous 
 calumnies of the enemies of the Mutuals. But vitu- 
 peration in reply will accomplish no good. Official 
 publications are legitimate and should be used in 
 favor of the Mutuals, but the 4 ‘you’re another” style 
 of argument should never be indulged in. Let the 
 opponents of the Mutuals have the monopoly of that 
 kind of talk. Above all things the agent must keep 
 his temper. No matter how indignant he may be at 
 the personal abuse or the malignant misrepresenta- 
 tion of his assailants, he must keep cool. To get 
 angry is to lose his advantage. 
 
 INSURANCE AT COST. 
 
 The Mutual Insurance agent should keep before 
 the people the idea that the end and object of his 
 company is to furnish Insurance at cost. He should 
 explain that cost is ascertained as time passes and 
 cannot be accurately ascertained till the close of the 
 term. He should be provided with facts and figures 
 to show exactly what the cost has been in different 
 cases. If he can get a few cancelled notes which 
 have expired and show that the credits thereon leave 
 
138 
 
 A HAND BOOK 
 
 a good balance to be returned to the policy holder 
 they will be evidence which cannot be contradicted. 
 They will enable him to show, in each case, exactly 
 the amount paid by the policy holder. 
 
 These facts and figures will furnish the answer 
 to a question which is frequently asked, “Why does 
 your company charge such high rates V 9 The fact 
 should be brought out in clear relief that it is not the 
 note which he signs but the part which he pays which 
 interests the policy holder. If it costs a man $30 
 to insure a $1,000 risk for five years, it does not mat- 
 ter whether he signs a note for $30 or $300, the $30 
 is all it costs. The balance is returned to him. 
 
 When a cash payment is made it is placed to the 
 credit of the policy holder, and only that which is 
 used is retained. The company returns the rest as 
 a dividend. The principle is the same whether cash 
 or notes are used. 
 
 It is becoming a custom to charge rates high 
 enough to cover all possible risks. In some states 
 the companies still hold the rates of fifty or a hun- 
 dred years ago. The mill Mutuals of the east illus- 
 trate this. Their dividends are not unfrequently 
 ninety-five per cent of the amount of cash payment. 
 If the agent will keep the average cost before the 
 policy holder, these questions will not trouble. 
 
 BROKERAGE AND REINSURANCE. 
 
 The agent must inform himself on these sub- 
 jects. Illustrations will show the different condi- 
 tions. If a risk of $10,000 is offered to the agent, 
 
OF MUTUAL INSURANCE 
 
 139 
 
 the limit of the company being $2,000, there are sev- 
 eral courses. He can take $2,000 and let the owner 
 look after the rest. He will see of course that the 
 proper permission for concurrent insurance is in- 
 serted in the policy and that his company is fully 
 informed concerning the whole transaction. 
 
 He may take the whole $10,000 and turn it over 
 to the company which will re-insure the $8,000 ex- 
 cess. In both cases the responsibility of the agent is 
 confined to one transaction and one policy and no 
 more. He is not accountable for the concurrent in- 
 surance placed by the policy holder, nor for the re- 
 insurance by the company. There is a third course. 
 He may agree with the policy holder to place the 
 whole $10,000. He will then insure $2,000 in his own 
 company and place the balance in other companies 
 as best he can. In placing the $2,000 he is agent for 
 his own company with all the rights, duties and re- 
 sponsibilities that pertain to the position. But in 
 placing the other $8,000 he becomes a broker and his 
 position is entirely different. He is then the agent 
 of the policy holder, if he fairly represents the con- 
 ditions of the property to the insuring companies 
 his responsibility is at an end. 
 
 Though the doctrine that a man cannot be agent 
 for both parties is well established, the case cited be- 
 low holds that the application of the rule must be con- 
 fined to matters of the same import. In this case, 
 the court holds that for the purpose of procuring and 
 canceling policies the man was agent for the insured 
 although agent for the company at the same time. 
 
140 
 
 A HAND BOOK 
 
 The force of this decision is that he had the right to 
 cancel policies and that policies issued through him 
 to the insured were binding. That is, he was agent 
 for one party for one purpose and another party for 
 another, but not for both parties for the same. 
 
 LAWS AND DECISIONS. 
 
 “In a suit on a policy of Fire Insurance the 
 proof showed that a previous agreement existed be- 
 tween the president of the insured corporation and 
 an Insurance agent that the corporation’s property 
 should be kept insured. No particular Insurance 
 company or companies were mentioned, and the cor- 
 poration ’s president gave no concern to that matter. 
 He made the Insurance agent his agent for the pur- 
 pose of selecting the company or companies, and, 
 pursuant to the arrangement, the agent, without 
 notice to the president, cancelled a policy in one 
 company and substituted therefor a policy in the 
 defendant, and mailed it to the president of insured 
 before the fire occured. Held, that the agent, though 
 the agent of the Insurance companies, was made 
 agent of the insured for the purpose of procuring 
 and canceling policies, and defendant’s policy was 
 in force.” Phoenix Ins. Co. vs. State, to Use of 
 Saline River Shingle & Lumber Co., 88 S. W. (Ark.), 
 917. j 
 
 STATE LAWS. 
 
 There are in many states laws defining the sta- 
 tus and duties of agents. For violation of these laws 
 there is generally a penalty. In order to avoid both 
 the transgression and the penalty, the agent should 
 
OF MUTUAL INSURANCE 
 
 141 
 
 always act fairly, avoid dealing with unauthorized 
 companies and never put off business which can be 
 closed up. While making no attempt at an exhaust- 
 ive treatise, a few cases may be given and a few laws 
 cited which will give an idea of the application of 
 these principles. 
 
 Arkansas says that “Any person who shall here- 
 after solicit Insurance or procure applications shall 
 be held to be the soliciting agent of the Insurance 
 company or association issuing a policy on such ap- 
 plication, or a renewal thereof, etc.” 
 
 Connecticut includes surveyors among agents. 
 The broker is also mentioned in some codes. 
 
 The object of these definitions seems to be to 
 include all those who transact business for foreign 
 companies, and to fix a liability in cases of fraud or 
 misconduct. 
 
 Maine has a rather stringent law. “An agent 
 authorized by an Insurance company, whose name is 
 borne on the policy, is an agent in all matters of In- 
 surance, any notice required to be given to said com- 
 pany or any of its officers by the insured may be 
 given to such agent, any application for Insurance, 
 or valuation or description of the property, or of the 
 interest of the insured therein, if known by said 
 agent, is conclusive on the company, but not upon the 
 insured although signed by him, and all acts, pro- 
 ceedings and doings of such agent with the insured 
 are as binding on the company as if done and per- 
 formed by the person specifically empowered or de- 
 signated therefor by the contract. ’ ’ 
 
142 
 
 A HAND BOOK 
 
 The pith of all these laws is that the man who 
 induces another to insure in any company is the 
 agent of that company and the company is responsi- 
 ble for his acts. At the same time he must exercise 
 reasonable diligence to assure himself that he is 
 working for a legitimate company. 
 
 An agent is responsible for sub-agents, also for 
 his clerks and book keepers. This is a well known 
 maxim of commercial law. 
 
 In some cases this responsibility is far reaching. 
 If an application for Insurance is given to an agent 
 which he cannot take and he turns it over to an- 
 other who places it, but collects the fee himself, he 
 is liable to be held as the agent of the company 
 which issues the policy, although he had no direct 
 communication with them. But this is good policy. 
 Men must be responsible for what they do. The 
 agent is like the man who shoots, responsible for his 
 bullet, no matter where it goes or what it does. But 
 the assured is also bound to use common sense, and 
 common prudence in all such cases. 
 
 Nearly all courts have held that latent restric- 
 tions upon the authority of the agent of which the in- 
 sured has no knowledge are not binding upon a 
 policy holder. 
 
 Minnesota has the following law, “Any person 
 who solicits Insurance and procures the application 
 therefor shall be held to be the agent of the company 
 thereafter issuing the policy upon such application, 
 or a renewal thereof, anything in the application or 
 policy to the contrary notwithstanding. ’ ’ This law 
 
OF MUTUAL INSURANCE 
 
 143 
 
 puts a stop to the practice of printing in applications 
 for Insurance, loans, etc. in some obscure position 
 and in microscopic type “and constitute him my 
 agent.’ ’ This was generally overlooked by the ap- 
 plicant, but when a dispute arose the applicant was 
 sometimes led to believe that it was binding on him. 
 
 If an agent cuts a rate without authority from 
 the company he is liable for the balance of the prem- 
 ium. (See Continental Ins. Co. of N. Y. vs. Clark , 
 et al , 100 N. W.). 
 
 The acts of an agent performed within the 
 scope of his real or apparent authority are binding 
 upon his principal. The public have a right to rely 
 upon an agent’s apparent authority and are not 
 bound to inquire as to his special powers unless the 
 circumstances are such as to put them upon inquiry. 
 
 There are several decisions along this line. The 
 principle is general. The idea seems to be that, as 
 among policy holders the great mass are entirely 
 ignorant of the laws relating to agencies, but gener- 
 ally accept what an agent does as representing his 
 principal, no advantage shall be taken by means of 
 secret instructions or other evasions. The tendency 
 is toward making principals completely responsible 
 for their agents, and for all their acts. 
 
 The representations of an agent to the insured 
 must be full and complete. If otherwise, he may be 
 held to have waived what was not mentioned. And 
 so in the other case, if the agent performs certain 
 acts he may be held to have waived any objections 
 to the conditions precedent to such acts. If there 
 
144 
 
 A HAND BOOK 
 
 are several reasons why the company objects to pay- 
 ing a loss, etc. and the agent states only one, he may 
 be held to have waived the others. It is not asserted 
 that the company will be held liable in these cases, 
 but only that it may be, and it is best for the agent 
 to avoid all dangers. 
 
 MAXIMS. 
 
 The same principle applies to the acts of the 
 agent. Failing to do the right thing at the right 
 time, may act as a waiver. The agent should scrupu- 
 lously avoid parol or verbal contracts. Everything 
 should be reduced to writing and signed as soon as 
 possible. 
 
 The following maxims will apply to all Insur- 
 ance transactions. 
 
 1. Always adhere strictly and accurately to 
 the facts. 
 
 2. See that the applicant reads and under- 
 stands the application, the by-laws and the policy. 
 
 3. See that the descriptions are full, clear and 
 exact. 
 
 4. The powers and authorities granted by the 
 company to the agent should, under no circumstances 
 be transcended. 
 
 5. In case of loss or damage the agent should 
 inform the loser that the company will pay all just 
 claims, but should not estimate the amount of loss, 
 nor act as adjuster without authority. 
 
 6. All doubtful questions should be referred to 
 headquarters. 
 
OF MUTUAL INSURANCE 
 
 145 
 
 The agent who lives up to these maxims will 
 never come in conflict with the laws. 
 
 GIVE FULL DESCRIPTION. 
 
 The location of insured property should be 
 plainly and clearly set forth. Buildings should be 
 accurately described and lot and block numbers 
 should be correct. When errors occur, courts will 
 order the policy reformed to comply with the inten- 
 tion of the contracting parties. But it is much better 
 to avoid trouble by giving full and accurate descrip- 
 tions. Generally, if the insured can show that he in- 
 tended to insure a certain property and that he 
 pointed it out to the agent who took due notice of 
 his act, the courts will hold the company, even if 
 error should be found in the description. 
 
 While there is very little trouble about build- 
 ings, merchandise, household furniture and movable 
 property generally may raise questions not so easily 
 disposed of. The courts have not always followed 
 in line, and some decisions have added to the con- 
 fusion. To begin with, there is the famous sealskin 
 case. A sealskin garment insured as in a certain 
 dwelling house was taken elsewhere for repairs and 
 while in that place was burned. Held that it was 
 covered by the policy. On the other hand a hack or 
 vehicle insured as contained in a certain stable is 
 insured or not when elsewhere depending somewhat 
 on the courts. Three courts so far have held that no 
 liability attaches when in a shop for repairs. Two, 
 
146 
 
 A HAND BOOK 
 
 so far, have decided that the words “ contained in” 
 merely indicate the ordinary location of the vehicle 
 and that the company was liable when the vehicle 
 was destroyed by fire in a shop at some distance. 
 
 Linen, insured as part of household goods con- 
 tained in a certain building, was not covered by the 
 policy when hanging on the clothes line. 
 
 A harvesting machine insured during operation 
 and in transit is not covered while standing still. 
 
 Differences in the wording of the policy may ac- 
 count for a few of these cases but there are also in- 
 consistencies. 
 
 To avoid all such perplexities it is well to see 
 that the descriptions in the policies are made to ex- 
 press just what is intended. In the sealskin case if 
 it was intended that there should be no risk except 
 while the garment was in the building, it should have 
 been stated that the policy was in force only while 
 the garment was in said building. 
 
 In the case of the vehicle the same is true. The 
 matter should have been clearly stated. In the har- 
 vester case it is plain that there was an omission. The 
 machine was insured when running, and while mov- 
 ing from place to place, but the policy contained 
 nothing about the risk while standing still or while 
 it was stored for the idle season. 
 
 The agent and the company also should be care- 
 ful to see that the policy covers just what the policy 
 holder desires. In some of the cases alluded to it is 
 probable that the loss took place under circumstances 
 
OF MUTUAL INSURANCE 
 
 147 
 
 not anticipated by either the insurer or the insured. 
 In others, the policy holder was evidently not aware 
 of the omission. 
 
 GIVE FAIR DESCRIPTIONS. 
 
 In the interest of fairness as well as of avoiding 
 trouble the agent should see that the application and 
 the policy cover the risk as desired by the policy 
 holder. In the case of the harvester, the agent 
 should have called attention to the fact that the 
 machine was not insured during the idle season. The 
 company would have profited by it in the long run. 
 
 There is an old saying, “Let the buyer beware,’ ’ 
 meaning that he must take all risk of his own lack 
 of business knowledge and of the agent’s errors in 
 filling out the policy. This has no place in Mutual 
 dealings. A fair contract, understood in the same 
 sense by both parties, is the only true Mutual Insur- 
 ance. 
 
 These should be avoided, and also any other 
 matter which may relate to or change in any manner 
 the printed terms. The careless remarks of Insur- 
 ance officials are a source of endless trouble. Verbal 
 permits by agents, if within the lines of their duty, 
 bind the company, and not unfrequently they hold 
 even when in conflict with the policy. It is not worth 
 while to quote authorities to show just what the 
 agent may say and what he may not, the broad prin- 
 ciple that he shall commit to writing all agreements, 
 permits, or other matters of business, will keep him 
 safe. If he violates this he is almost sure to get into 
 trouble. 
 
148 
 
 A HAND BOOK 
 
 HINTS ON ADVERTISING. 
 
 Mutuals and Mutual agents must advertise. It 
 is not a question of inclination, but of duty. If they 
 can benefit their fellow men they are in duty bound 
 to make the fact known as widely as possible. This 
 statement needs no proof. 
 
 How shall Mutuals advertise? They should use 
 the same means employed by all other business es- 
 tablishments. Circulars, pamphlets, signs, advertis- 
 ing novelties, newspapers, all these are good. Effec- 
 tive advertising does three things, it calls the atten- 
 tion of the people, tells them precisely what they 
 wish to know, and adheres to the exact truth. 
 
 Evidently the first requisite of general advertis- 
 ing is to be attractive. In circulars, pamphlets, etc., 
 neatness and style are important. The heading or 
 the title should be neat and conspicuous. Every- 
 thing coarse, “loud” or vulgar should be carefully 
 avoided. Too much ornament is also bad. Neat and 
 simple circulars, pamphlets, with attractive covers, 
 novelties which are useful as well as new, are all 
 available and a reasonable use of these will pay. 
 They are generally furnished by the company. 
 
 The local advertising in done by the agent. This 
 is confined to the distribution of matter furnished by 
 the company, and to advertisments and reading mat- 
 ter inserted in the local newspapers. Here is the 
 opportunity for a shrewd agent. A fire occurs in the 
 county. If in his company, he watches matters and 
 when it is adjusted he gets the certificate of the loser 
 
OF MUTUAL INSURANCE 
 
 149 
 
 that he was paid in full and is satisfied. This is the 
 best kind of an advertisement. It gives confidence. 
 
 If the loser was insured in some other company, 
 or not at all, the merits of the agent’s own company 
 should be set forth, and some certificate of loss from 
 another locality may accompany the matter if 
 deemed best. 
 
 These advertisements of whatever kind should 
 always give the information the people ask for. The 
 agent will remember the questions propounded to 
 him, and if he answers those he will get up good mat- 
 ter for the company. What one man wants to know, 
 the others generally ask about, and will read about. 
 It requires some judgment to do exactly the right 
 thing at the right time, but a little practice will ren- 
 der one quite expert. 
 
 Above all, and over all, advertisments must be 
 exactly and strictly truthful. To impress on the cus- 
 tomer the facts just as they are is always good policy. 
 To do anything else is unsafe. Supposing an Insur- 
 ance contract to be made on the basis of a deceptive 
 advertisement, is case of suit the jury would assur- 
 edly consider the fact in construing the contract. 
 
 But no matter how, when or where the adver- 
 tising is done, it must be done carefully. A slovenly 
 or carelessly written notice is offensive. Circulars 
 scattered without discretion are wasted, but judici- 
 ous work will pay and pay well. 
 
150 
 
 A HAND BOOK 
 
 MUTUAL AGENCY RESPECTABLE AND PLEASANT. 
 
 In closing this chapter, it may be remarked that 
 the unpleasant cases alluded to are the exceptional 
 ones. The agent will find his position respectable 
 and his work pleasant. The great mass of men with 
 whom he comes in contact will be fair and courteous. 
 There are no more disagreeable complications in the 
 Mutual line than in any other. Unreasonable men 
 are found everywhere. Happily they are in a very 
 small minority. Eascals are still fewer, though they 
 do sometimes trouble. And further, the Mutual 
 agent who has selected this line for his life business 
 will in a very few years get beyond and above these 
 tormentors and where he will be entirely out of their 
 reach. And then there will be few positions which 
 will be more desirable than his. 
 
CHAPTER IX. 
 
 THE ASSESSMENTS. 
 
 THE BASIS OF MUTUALISM. 
 
 The basis of Mutualism or co-operation, and 
 without which there can he neither Mutualism nor co- 
 operation, is that each shall pay his just and equit- 
 able share of actual cost. In a Mutual company 
 there is neither stock nor stockholders to draw divi- 
 dends at the expense of the insured, but every policy 
 holder is a member entitled to a voice in the manage- 
 ment and a share in the benefits. The assets of a joint 
 stock company belong to the stockholders, the policy 
 holder has no other interest than the safety of his 
 Insurance. The possessions of the Mutuals belong 
 to its policy holders. The joint stock company has 
 very little trouble in fixing its rate, it charges all it 
 can, and, as in many other lines of business, that is 
 the simple solution of the whole matter. 
 
 Not so with the Mutuals. How to collect the 
 funds required to pay expenses and fire waste in the 
 manner least burdensome to the policy holder is not 
 an easy question to settle. The word “assessment” 
 itself conveys this idea, it means literally a “sitting 
 down together” hence, a thorough consideration. 
 There are broad differences both in theory and in 
 practice. There are Mutuals which collect in ad- 
 
 —151 
 
162 
 
 A HAND BOOK 
 
 vance for the full term of the policy, returning the 
 unused excess in the shape of dividends, annually or 
 otherwise, as may be convenient. At the other ex- 
 treme, there are Mutuals which carry absolutely no 
 funds on hand, assessing on the occasion of every 
 loss. Between these extremes there is a bewildering 
 variety of methods, the outgrowth of the circum- 
 stances which surround the several companies. Each 
 organization seems to be satisfied with its own man- 
 agement, and all seem to work together smoothly. 
 However the funds are raised, they are, nevertheless, 
 assessments. It matters not whether they are col- 
 lected all at once, in advance, annually, or as needed 
 to pay accrued losses, they are sums levied to cover 
 fire waste and expenses, and not fixed charges for in- 
 demnity. They are sums based on certain carefully 
 ascertained needs, and not prices limited only by 
 the competition of the market. 
 
 WHAT IS A VALID ASSESSMENT? 
 
 Under these circumstances, in the Mutual field, 
 the assessment becomes a matter of the first impor- 
 tance. It must be levied (1) by the proper authority, 
 (2) for the proper purpose, and (3) in the proper 
 manner. And the notices to the policy holder must 
 be legal. 
 
 The authorities in these matters are (1) the laws 
 of the state in which the company is located, (2) the 
 by-laws of the company itself, (3) the rulings of the 
 courts in cases which have been decided, and (4) the 
 ordinary and usual business practices. 
 
OF MUTUAL INSURANCE 
 
 153 
 
 The statutes of many states are silent on the 
 matter. In those, the by-laws of the company will 
 govern. 
 
 A valid assessment is one levied in exact accord- 
 ance with the laws of the state and the by-laws of the 
 company. Every provision is observed, every tech- 
 nicality complied with, the proper condition authoriz- 
 ing the levy being shown to exist at the time. 
 
 STATE LAWS. 
 
 Most of the states have but few provisions. 
 
 Illinois has somewhat elaborate provisions. The 
 president shall convene the directors, etc. In the 
 case of live stock companies, in the absence of a quo- 
 rum, the president, secretary and treasurer shall 
 estimate the rate percent necessary to cover the loss, 
 etc. 
 
 Maine places the whole matter in the hands of 
 the directors. 
 
 Massachusetts provides that the directors shall 
 manage the business and that assessments shall be 
 made from time to time. 
 
 New Jersey directors may assess over and above 
 the amount required not to exceed 20 per cent of de- 
 posit note. 
 
 These are sufficient to illustrate. 
 
 The second authority is the by-laws of the com- 
 pany. Generally these provide that the directors 
 shall levy the assessments as well as manage the de- 
 tails. 
 
154 
 
 A HAND BOOK 
 
 Great care should be taken that the officials 
 should be able to show conclusively that all the pro- 
 visions of the statutes and the by-laws were fully and 
 fairly complied with. The records of the meeting at 
 which the assessment is levied should be complete 
 and in proper form. When the publication of notice 
 is required, a copy of the affidavit of publication 
 should be filed as part of the records. And after all 
 this is done, the ordinary business rules and customs 
 and the constructions of the courts must he carefully 
 observed. Technicalities must he avoided as much as 
 possible. They increase risks. When possible, such 
 business should be transacted at regular meetings. 
 The chance of irregularity in calling a special meet- 
 ing will then be avoided. 
 
 The assessment must be for a purpose within 
 the provisions of the state laws and also of the by- 
 laws. As there are over two thousand Mutuals in 
 the United States, the variety of usage is beyond 
 the range of discussion. 
 
 CHARTERED AND OTHER COMPANIES. 
 
 And there is still another class of companies. In 
 Connecticut, and perhaps some other states, each 
 company has a special charter from the general as- 
 sembly or legislature. Any attempt to discuss them 
 would be a failure, for they have very little relation 
 to the subject in general. Each company looks to 
 its own charter for its guidance. 
 
 Among the so styled 4 i Cash Mutuals, ’ ’ which are 
 numerous in the eastern states, and among the class 
 Mutuals which make annual settlements, and also in 
 
OF MUTUAL INSURANCE 
 
 155 
 
 some other forms, which collect for the full term in 
 advance, the question of assessments changes its 
 form. The estimate of expenses and fire waste is, 
 in many instances, made for years at once and the 
 whole amount is paid in when the policy is issued. 
 In this case there are no forms of notice to consider. 
 The amount to be returned to the policy holder, as 
 profit or dividend, is the one which receives the care- 
 ful attention of the directors. 
 
 Nor is the question of reserve a disturbing ele- 
 ment. As these reserves are generally more an evi- 
 dence of good faith and ability to pay than anything 
 else, they may be counted in as part of the necessary 
 expenses for which the levy is made. 
 
 A Vermont decision that “A member of a Mu- 
 tual company is presumed to know its by-laws, and 
 is bound by them, they being on the same sheet as 
 the policy issued by it to him, and attention being 
 directed to them in the body of the contract” is im- 
 portant only where such a form of policy is used, and 
 even then a jury might disregard this. 
 
 WHEN TO LEVY ASSESSMENTS. 
 
 There is no general rule. Some companies levy 
 assessments after each loss, raising only the amount 
 actually required ; others assess when ten percent is 
 required to pay losses and others still make annual 
 calls. In the two cases last mentioned the companies 
 borrow to meet the payments due on losses in the 
 meantime. Others still, whenever an assessment is 
 required, call for a little more than is needed, hold- 
 
156 
 
 A HAND BOOK 
 
 ing the small surplus until it is exhausted. Then 
 there are those which assess in advance, either as the 
 directors think advisable or annually ; and finally, 
 there are those which call for the whole premium in 
 advance, returning the unused portion in the shape 
 of dividends. All of these methods are advocated, 
 each having its partizans who show proofs of its use- 
 fulness. The different methods are used in different 
 localities. The old settled farming communities of 
 the western states assess after a loss, and in order to 
 avoid too frequent assessment, borrow to pay small 
 losses. Where the population is changing, the annual 
 advance assessment is the favorite, while in the east, 
 the cash in advance plan is very popular though by 
 no means universal. 
 
 The arguments of those who only assess after a 
 loss, are that this plan entirely prevents the accumu- 
 lations of funds in the hands of the company, that 
 the money remains in the hands of the policy holder 
 until it is actually needed to pay losses, and that 
 there is no loss of interest. Those that borrow argue 
 that frequent assessments are expensive and waste- 
 ful, that while the member has to pay his share of the 
 interest, he has had the use of the delayed assess- 
 ment as an equivalent and the saving in the expense 
 of assessments is a considerable item. These argu- 
 ments are conclusive in the case of those companies 
 which do business in a limited area, and among peo- 
 ple whose residence is permanent, and where by a 
 process of continual selection they have eliminated 
 the moral hazard. There are cases in which every 
 insured member is known at headquarters. They 
 
OF MUTUAL INSURANCE 
 
 157 
 
 are doing all the business they care to do, and such 
 occurences as default in assessment, dropping out 
 while in debt to the company or making a fraudulent 
 claim are entirely unknown. But such forerunners 
 of the millennium are all too few. The greater num- 
 ber of companies do not do business with such ex- 
 ceptional constituencies, which have reached their 
 high plane only after years of effort. In the average 
 company it has been found advisable to use some 
 method which will secure it from loss if a member 
 should allow his policy to lapse for non-payment of 
 assessment. In case of sale of property or of change 
 of residence, men are often careless about transfer- 
 ing their policies to the buyer or having them can- 
 celled, and the first notice the company has is the re- 
 turn of its notice of assessment. If the company fails 
 to collect, it loses. But where the company assesses 
 in advance, in case of failure to collect, it cancels the 
 policy without loss and that ends the matter. Some- 
 times small membership fees, or policy fees, are 
 charged in addition to make it absolutely sure that 
 the member cannot leave the company in its debt. 
 
 ADVANCE ASSESSMENT. 
 
 The cash in advance, or rather the full advance 
 assessment, plan is in favor with lodges, churches 
 and all bodies whose business is transacted by boards 
 of trustees or directors. These find it inconvenient 
 to meet on the occasion of every assessment and pre- 
 fer to deposit in advance to cover the probable cost 
 during the life of the policy, receiving its unearned 
 
158 
 
 A HAND BOOK 
 
 portion as a dividend at the expiration of the term. 
 This is actually nothing more than depositing in the 
 hands of the company, a sum to be drawn on as as- 
 sessments are called for. 
 
 There is still another class which collect in ad- 
 vance and never assess at all. Nearly all of these 
 companies are located in the eastern states. Their 
 rates are high, but they return large dividends, 20, 
 40 or 60 per cent, according to the time the policy 
 runs, giving the long term an advantage. Besides 
 this, most of them make an extra dividend in such a 
 manner that each five-year policy holder gets back 
 whatever he has paid in over the actual cost of his 
 Insurance. 
 
 Most of these companies carry strong reserves, 
 too. This is done to meet the competition of the old 
 line companies, which never tire of tooting their 
 horns about the surplus which they carry on hand. 
 These Mutuals are successful. Among them are some 
 of the oldest and strongest Mutuals in the country. 
 
 In all these the Mutual principle is strictly ob- 
 served, for each member pays his share of the cost, 
 and no more. The method of collection cuts no fig- 
 ure at all. 
 
 LEGAL NOTICE OF ASSESSMENT; WHAT IT IS. 
 
 This is a question which especially concerns the 
 Mutuals in cases of assessment. Statutory enact- 
 ments require Mutual officials to notify all members 
 of assessments levied, and to collect by legal means 
 from those who neglect or refuse to respond. Fail- 
 
OF MUTUAL INSURANCE 
 
 159 
 
 ing to perform this duty, they are themselves held 
 responsible. Litigation may occur when the holder 
 of a suspended policy, having a loss, claims that he 
 had no notice of assessment, and also when a col- 
 lection is resisted on the same ground. 
 
 Service by mail is the only practicable method, 
 and in many states this is established by statutory 
 enactment, in others it prevails by custom. The ser- 
 vice is complete when the notice is deposited in the 
 postoffice, properly directed and duly prepaid, i. e., 
 the official has done all that there is for him to do. 
 Such service should be proved by the affidavit of the 
 party mailing the notices. 
 
 PROOF OF SERVICE. 
 
 In some states there is no prescribed form of 
 proof, in others the affidavit is set forth in the stat- 
 utes. In Kansas, for example, Section 3490 of the 
 Revised Statutes of 1890 says: “After publication 
 of such notice of assessment and the service of such 
 upon each member by mail postpaid, directed to him 
 at his postoffice as written upon his application for 
 Insurance,’ ’ etc. In all such cases the affidavit should 
 conform strictly to the statutes. 
 
 The following affidavit is from forms appended 
 to the Insurance laws of New Jersey. It was intend- 
 ed to apply to notices to stock holders but is of gen- 
 eral use. 
 
 “I, carefully and in person, compared the names 
 and addresses on the said envelopes with the books 
 of the said company and can swear of my own knowl- 
 
160 
 
 A HAND BOOK 
 
 edge that there was a separate envelope addressed 
 to each member of said company in the United 
 States. I deposited these myself, personally in the 
 
 postoffice at on the day of 
 
 nineteen hundred and ” 
 
 Such an affidavit relieves the company and its 
 officers from personal responsibility but in case of 
 suit in a distant court, a jury might hold that a pro- 
 cess sufficient to release an official from further re- 
 sponsibility still fell short of what was necessary to 
 hold a delinquent. A shrewd attorney would not find 
 it difficult to convince a jury, already inclined to 
 favor a neighbor against a 4 ‘foreign corporation’ ’ 
 that the testimony that the notice had not been re- 
 ceived was ample proof that it had not been mailed, 
 that there was a blunder at headquarters. A verdict 
 against the company would be sure to follow. In 
 bringing suit it is unsafe to rely solely upon the mail- 
 ing of the notice. Where the statute or form of 
 notice uses the word “postoffice,” depositing the 
 notices in a mail box will not answer. They must be 
 put in the postoffice. 
 
 A SAFE PRACTICE. 
 
 Fortunately the troublesome class is extremely 
 limited. Men insure for protection and will gener- 
 ally respond to an assessment at once in order to 
 keep their policy good. But there are others, some 
 are careless, occasionally some one desires to avoid 
 his obligations. Sometimes a man sells out and then 
 attempts to evade his assessment, and some men will 
 
JOHN J. FURLONG, AUSTIN, MINNESOTA. 
 
 Though a native of Ireland, Mr. Furlong has lived over forty 
 years in Minnesota where in the early eighties he began a career 
 in the State Legislature. About this time he was one of the or- 
 ganizers of the Mower County Mutual Fire and Hail Insurance 
 Co., and was for many years and is now its president. He is also 
 treasurer of the -»tate Cyclone Mutual Insurance Co. and was 
 vice president of the National Association. He has been very 
 active in public life but has a model stock farm which is his 
 pride. His is a life whose motto, ‘‘Keep busy and you will be 
 happy,” is practically exemplified. 
 
J. C. McMANIMA, SPRINGFIELD, MISSOURI. 
 
 J. C. McManima was born in Ohio of Scotch-Irish parentage 
 and as a young man went to Iowa, thence to Dakota in 1884. He 
 took an active part in politics, and was the last territorial audi- 
 tor of Dakota. He moved to Springfield, Mo., in 1894, and has 
 been engaged in literary work much of his time since 1877. He 
 established the “ Policy Holder" in 1897. 
 
OF MUTUAL INSURANCE 
 
 161 
 
 not take from the postoffice anything which they sus- 
 pect contains a dun. As the officials are often obliged 
 to deal with these men in court, they must have indis- 
 putable proof of service of notice. In case the first 
 notice receives no reply, a second should be sent, and 
 it should be registered. If received and receipted 
 for, the evidence of service is complete. If returned 
 as not delivered, the matter should be investigated 
 still further. The postoffice regulations concerning 
 returned matter say: (Sec. 672-7) “All request, 
 card, or official matter of any class returned to sender 
 must bear upon its face the reason of such return as 
 ‘Refused’, ‘Removed’, ‘Present address unknown’, 
 ‘Deceased’ ‘Unclaimed’, ‘Cannot be found’ and must 
 also, in every instance, be endorsed ‘Returned to 
 Writer’, and bear the postmark of the office from 
 which it is returned. ’ ’ 
 
 The returned registered letter should be exam- 
 ined and the endorsements on the envelope noted. 
 If there is the least doubt, the postmaster should be 
 written to for further information and if possible 
 the present address of the delinquent should be ob- 
 tained. A simple “Unclaimed” should never be ac- 
 cepted as final. 
 
 All this is not legally incumbent upon the offic- 
 ials but it works so well that in practice they are just- 
 ified in adopting it, the additional collections and the 
 saving of trouble more than compensating for the 
 trifling additional expense of obtaining conclusive 
 evidence upon all who can be found and ascertaining 
 the names of those who are out of reach and should 
 10 
 
162 
 
 A HAND BOOK 
 
 no longer be carried on the books. It is the safe 
 method legally and the best from a business stand- 
 point. These principles apply elsewhere, bearing in 
 mind that it is only necessary to register letters when 
 litigation is possible. It is sometimes asked if the 
 fact that a letter bearing a return request does not 
 come back to the writer is not proof that it was duly 
 received by the party addressed. It raises a pre- 
 sumption. It will not do to depend upon it as proof. 
 
 HOW ONE COMPANY MANAGES IT. 
 
 A large and successful Mutual, whose business 
 covers an entire state, has adopted substantially the 
 following plan: When an assessment is made, a 
 notice is mailed to each policy holder in an envelope 
 bearing a request to the postmaster to return after 
 thirty-five days if not delivered. This is five days 
 longer than the time in which the assessment must be 
 paid. A very large percentage of these will be an- 
 swered by return mail and nearly all before the expi- 
 ration of the thirty-five days. Occasionally some 
 postmaster returns a notice before the expiration of 
 the time with the mark 4 ‘ Unclaimed , ’ 9 ‘ ‘ Removed,’ ’ 
 etc. This is immediately forwarded to the Postoffice 
 Department with the request that it remain at the 
 proper postoffice the proper length of time. The De- 
 partment attends to the matter and that postoffice 
 makes no further trouble. At the end of the thirty- 
 five days all unclaimed notices come back properly 
 endorsed and postmarked by the returning office. 
 These are proofs that the notice was mailed and that 
 
OF MUTUAL INSURANCE 
 
 163 
 
 it lay in the postoffice for a period covering the entire 
 time allowed to pay the assessment. 
 
 There will also be a few which are not returned 
 and which have not been heard from, presumably 
 they have either been received and neglected or lost 
 on the way. Then, the registry method is tried and 
 the agents are also written to and requested to use 
 their best efforts to find the delinquent. This pro- 
 cess is kept up until the company becomes satisfied 
 that every one within reach is notified. The result 
 is that when some one holding a suspended policy has 
 a loss and endeavors to collect on the policy, denying 
 the receipt of the notice, the company has the regis- 
 tered letter, and generally the agent ’s report in addi- 
 tion, constituting a perfectly good defense, and the 
 same evidence is sufficient to justify a verdict in case 
 the company brings suit to collect assessment. As 
 was above remarked, the extra collections more than 
 repay the cost of these proceedings, to say nothing 
 of setting at rest blackmailing suits on suspended 
 policies. 
 
 The same principles apply to all other notices. 
 Whenever a dispute is likely to arise, the company 
 should not only have proof that the letter was mailed 
 but that it reached its destination. In a case decided 
 not long since, an Insurance company employed a 
 man in a capacity something like a general agent, 
 paying him a fixed salary. After a time the presi- 
 dent of the company wrote him that his remuneration 
 in the future would depend on his commissions. At 
 a later date the president wrote him giving him 
 
164 
 
 A HAND BOOK 
 
 directions for his work. Finally the agent denied the 
 receipt of the letter changing his mode of remunera- 
 tion and brought suit for his salary for the entire 
 time he worked for the company. The court gave a 
 verdict in his favor. Had the president registered 
 his notice of the change in mode of remuneration, it 
 would have saved the company many hundred dollars. 
 In all such cases and where disputes are probable, 
 it is best to register the first letter. Ordinarily open 
 mail will answer, leaving those who do not respond 
 to be reached by register. It is advisable to act on 
 the supposition that whoever asserts that he gave 
 notice by mail shall be prepared to prove by the 
 registry receipt that the letter was actually received. 
 This receipt does away with all other proof, for it 
 shows who mailed the letter, when and where, and 
 who received it, when and where. It is full and con- 
 clusive evidence. 
 
 Summing up, modern courts and juries require 
 an official, whose duty it is to give notice, to use 
 reasonable diligence to see that the notice is duly re- 
 ceived by the party to whom it was sent. He must 
 in all cases comply with the statutes and, in addition, 
 make use of any means at hand, in short, he must 
 get the notice to the party and get a receipt for it or 
 show why he could not. The spirit of equity, which 
 is more and more asserting itself among men, will 
 not be satisfied with any thing short of this as legal 
 notice. 
 
OF MUTUAL INSURANCE 
 
 165 
 
 AVOID EXCESSIVE LEVIES. 
 
 Assessments should he so managed as to avoid 
 excessive levies, especially with new companies. It 
 takes time to educate people along these lines. Even 
 after years of experience, after a policy holder has 
 passed two or three years without an assessment, a 
 heavy loss will cause an expense which will frighten 
 away many, even though the average is exceedingly 
 low. Localities are reported where several Mutuals 
 are working in the same territory. A heavy loss in 
 one of them will cause a large number to change to 
 one of the others when the policy expires. They 
 stay there until another big levy comes along, and 
 then away they go again. Of course, this is foolish, 
 but it is done. Where it is possible, in case of very 
 light losses, a little should be raised in excess of actu- 
 al needs, and carried over to reduce the assessment 
 when the heavy loss does come, as it surely will some- 
 time. There are a large number of Mutuals which 
 assess in advance, and collect old line rates, return- 
 ing at the end of each year, the unexpended portion. 
 They are loud in the praises of that method. Most 
 of these write only one year risks. They claim that 
 they have no trouble at all, and some of them say 
 they have never failed to return a dividend. 
 
 But in this as in every other line of business, it 
 is necessary for people to use the sense that the Cre- 
 ator has given them. So long as people will refuse 
 to look at the facts, just so long will the smooth 
 tongued representative of the old line companies 
 persuade them that they are liable to be assessed for 
 
166 
 
 A HAND BOOK 
 
 all they are worth, so long will he select a single 
 heavy assessment, multiply it by five to compare 
 with his own five-year rate. Even in states where 
 Mutual Insurance companies have been successful 
 for half a century or more, there are still those who 
 bite at this unbaited hook. 
 
 HOW COLLECTED. 
 
 How and where assessments are to be collected 
 are matters of convenience. Some contend that it is 
 cheapest to collect for the whole term in advance, 
 that it costs, on the average, over ten cents each to 
 collect assessments, excluding postage, drafts, money 
 orders, etc., paid for by the policy holder, making at 
 least six cents more, all of which, and also the annoy- 
 ance and loss of the delinquents, is saved by the ad- 
 vance assessment plan. This is true with regard to 
 the large companies, whose losses number several 
 hundred each year. But in 1903, of the 199 Wiscon- 
 sin Town Mutuals, 93, or almost half, made no assess- 
 ment. The New Hampshire Town Mutual Compan- 
 ies, Dec. 31, 1902, report the date of last assessment 
 as follows : 1898, 1 ; 1899, 2 ; 1900, 5 ; 1901, 2 ; 1902, 6 ; 
 no date given, 3. That is, excluding the three not 
 dated, 6 had made an assessment in the current year, 
 2 a year previous, 5 two years previous, 2 three years 
 previous, and one four years previous. In New 
 Hampshire the companies report the date of the last 
 assessment. 
 
 Those companies, which do business in town- 
 ships and counties or in areas so limited that every 
 policy holder is probably known to one or more of 
 
OF MUTUAL INSURANCE 
 
 167 
 
 the directors, have developed their system until it 
 appears near perfection. It works admirably till 
 the number of risks and consequent increasing fre- 
 quency of losses, not only bring about assessment 
 too often, but afford opportunity for unworthy mem- 
 bers to smuggle themselves in and make trouble. 
 
 In localities where the township system is in 
 vogue, the township collector is sometimes employed 
 by Mutuals. This is the cheapest and most effective 
 method known. This township collector is a public 
 officer who receives the taxes in his township. Some- 
 times he is elected, sometimes he is appointed, but 
 very frequently the office is let to the lowest bidder. 
 Whoever gets it is allowed to carry on any other busi- 
 ness he pleases, and most of them are professional 
 collectors. They do the work excellently and cheap- 
 ly, visiting every locality in their township every 
 few days or weeks at the longest. 
 
 Of course these are not the only methods. Some 
 Mutuals collect through the banks and say that the 
 practice works well. Others, especially those confin- 
 ed to small territories, make personal inquiry. 
 
 RETURNED LETTERS MUST BE LOOKED AFTER. 
 
 A recent case will illustrate the necessity of look- 
 ing after returned letters very closely. A policy 
 holder changed his address from a city to a postoffice 
 nearer his farm. The postmaster, however, forgot 
 it and when the notice of assessment came, returned 
 it marked ‘ ‘ Unclaimed. ’ ’ Meanwhile the man, anx- 
 ious to keep up his policy, inquired of the agent about 
 
168 
 
 A HAND BOOK 
 
 his assessment. The agent told him to rest easy, he 
 would he notified in due time. The company, failing 
 to find him, suspended the policy. Then a loss oe- 
 cured, and the facts came out. The company paid 
 the loss. But this shows how easily trouble might 
 have occurred, and how close and careful should be 
 the investigation in all such cases. 
 
 In cases of death, assignment, apointment of 
 receivers, etc., it will be necessary to hunt up the 
 proper functionary. In these cases, continued in- 
 quiry will generally discover the facts and the notice 
 can finally be served. Never omit to register mail in 
 all such cases. Make sure of a receipt. 
 
 Some companies draw on delinquents through 
 banks. Those which have tried this method say it 
 works excellently. The draft is made on the delin- 
 quent at his last known residence, and the bank is 
 pretty sure to find him if he is within reach. 
 
 MUST SEE THAT THE INSURED READS HIS POLICY. 
 
 A ruling was made in the case of Medley vs. Ger- 
 man Alliance Insurance Co. (West Virginia) that 
 “Failure to read a policy of Insurance within a short 
 time after its delivery is not such neglect or laches 
 as will preclude the insured from having a reforma- 
 tion,’ ’ etc. In view of this and other decisions of 
 similar import, it is absolutely necessary that the 
 agent of each Mutual sees that every member reads 
 his policy. It is true that it is a presumption of law 
 that every member of a fraternal or Mutual is sup- 
 posed to know the rules and regulations of the order 
 to which he belongs. But juries do not always act 
 
OF MUTUAL INSURANCE 
 
 169 
 
 on that theory, hence the caution given above. If 
 the by-laws are printed in the policy, attention should 
 be called to them. If they are in the application, they 
 should he read before signing, and the same rule 
 should be observed if they are printed separately. 
 
 FAILURE TO PAY. 
 
 When the by-laws and regulations of a Mutual 
 fire company provide that failure of a member to 
 pay assessments within a certain time after notice 
 shall terminate his rights, and that the policy shall 
 be cancelled without further notice, failure to pay 
 an assessment within the time limited works a for- 
 feiture of the policy. 
 
 But an acceptance and retention by the company 
 of an overdue assessment after the destruction of the 
 insured property by fire, waives forfeiture and con- 
 tinues the policy in force. 
 
 The testimony of a collector of assessments was 
 that the president told him that when members offer- 
 ed to pay assessments after the time within which 
 they were to be paid had expired, he should accept 
 them, was insufficient to establish a custom to accept 
 payment of overdue assessments. The custom could 
 not be extended by implication to authority to accept 
 overdue assessments after the property had been 
 destroyed by fire. 
 
 The absurdity of the claim that a policy con- 
 tinues in force whether assessments are paid or not 
 is well illustrated in a case against a life Insurance 
 company brought at Des Moines, Iowa. Suit was 
 brought on the ground that when a company once 
 
170 
 
 A HAND BOOK 
 
 issues a policy it is bound to pay it whether prem- 
 iums are kept up or not, that it can only subtract un- 
 paid premiums or assessments. The idiocy of this 
 claim is easily demonstrated. Suppose that it were 
 established, the man who pays the premiums as they 
 fall due would have no advantage over the one who 
 did not. It is evident that all payments would cease 
 at once and that as soon as the funds on hand were 
 exhausted the company would pass out of existence. 
 
 DIFFICULTIES DISAPPEAR. 
 
 As the Mutuals become older and more thorough- 
 ly organized and the policy holders become more 
 familiar with the system, the difficulties connected 
 with the assessment system will disappear. There are 
 many companies which find an unpaid assessment a 
 rarity. The policy holders understand the matter 
 thoroughly and live up to the rules. There is one 
 objection to the method of making assessments by 
 mail, the cost. Allowing two cents for postage, two 
 cents for stationary, and four cents for clerk hire, 
 making out, mailing, entering on the books and postal 
 card reply, and three cents for draft for the remitter, 
 and two cents for postage and one cent for station- 
 ery, the total cost of each assessment to each policy 
 holder is fourteen cents. All this is saved by the 
 cash in advance plan. And this plan is growing in 
 favor. It has been in use for many years and is 
 cheap and safe where the business extends over a 
 large territory. Each locality, however, must be a 
 law unto itself, and with its decisions no one outside 
 should interfere. 
 
CHAPTER X. 
 
 ASSETS, RESERVES AND SURPLUS. 
 
 These are treated in the same chapter for the 
 reason that they are so often used as having the same 
 signification. Ordinarily assets include all that the 
 company has on hand, the reserve is what has been 
 set aside for future needs and the surplus is what re- 
 mains after all the demands have been provided for. 
 But in Insurance affairs, even in legislative enact- 
 ments, these words are frequently used for each oth- 
 er, and the result is a serious lack of precision in ex- 
 pression. 
 
 SHOULD A MUTUAL HAVE ASSETS. 
 
 The first question to be discussed is whether a 
 Mutual should have any assets beyond the contin- 
 gent liabilities of the members and a few dollars in 
 cash necessary to pay the running expenses. There 
 is a large class who hold the negative side of the 
 question and they go so far as to say that no prem- 
 ium notes should be taken, nor should any assess- 
 ments be made for an amount in the least exceeding 
 losses and expenses actually accrued. Those who 
 hold this view point to the hundreds of old estab- 
 lished and successful Mutuals which carry out the 
 theory to the letter and claim that they furnish com- 
 plete proof of the correctness of their position. 
 
 —171 
 
172 
 
 A HAND BOOK 
 
 LOCALITIES DIFFER. 
 
 Yet there are localities where this plan will not 
 succeed. It requires a high standard of education 
 and of business honor to successfully conduct such 
 Mutuals. The policy holders must be “selected 
 risks, ’ ’ must understand that indemnity, even though 
 invisible and intangible, is an actuality and has a 
 value, and they must he able to see that they have 
 had an indemnity even though they have had no loss. 
 They must also he able to understand that while in 
 the long run the cost of Insurance will be very close 
 to a certain average, it may vary very widely in any 
 particular period or from year to year. A Mutual 
 may run one, two or even more years without an as- 
 sessment and then have several large losses at once. 
 Such Mutuals as those which have been described 
 would have no trouble hut there are localities where 
 such an occurrence would probably wreck the com- 
 pany. 
 
 ERRONEOUS VIEWS. 
 
 There are men who regard insuring in the same 
 light as betting. They entirely fail to grasp the in- 
 demnity idea. Should such a man insure in a Mutual 
 which only assesses to pay liabilities for past losses, 
 and should an assessment be made at the end of the 
 year, he would say, “I do not owe the company any- 
 thing. I have had no loss, I have received nothing 
 from them and am not in any way obligated to 
 them. * ’ He would refuse to pay and it would take a 
 lawsuit to collect the assessment. 
 
OF MUTUAL INSURANCE 
 
 173 
 
 There are others who have equally erroneous 
 views in many ways. Time will educate these, but 
 at first they must be taken as they are. The only 
 way to do business with them is to demand an ad- 
 vance assessment, a membership fee, a policy fee, or 
 some other advance payment which shall be large 
 enough to make it to their interest to remain in the 
 company and pay the assessments as they fall due. 
 Wherever this plan is adopted, the company will 
 have assets on hand, and the companies which use 
 this method are loud in their praises, many claiming 
 that it is the only safe way to do business. 
 
 THE EASTERN STATES. 
 
 In the eastern states, and especially in New Eng- 
 land, public sentiment is strongly in favor of re- 
 serves and large reserves at that. There is statutory 
 provision for the accumulation of funds in many 
 other states. The Mutuals are conducted on almost 
 every imaginable plan. Some assess after a loss, 
 some in advance and others take premium notes. 
 Some collect no more than is actually needed, others 
 take old line rates and return the surplus over losses 
 and expenses in dividends. All are furnishing In- 
 surance very cheaply, all are successful, and they 
 have had a material influence in forcing down rates 
 in their localities. And every one of these Mutuals 
 thinks that its plan is the true one. 
 
 Out of all this conflict of evidence one thing ap- 
 pears clearly, that these companies are all furnish- 
 ing Insurance at low cost, are satisfactory to their 
 
174 
 
 A HAND BOOK 
 
 members and are gaining rapidly in business. Hence 
 it is not just nor reasonable to make the charge that 
 the use of a surplus or a reserve is drifting toward a 
 joint stock organization, nor can any company say 
 that its way is the only way. 
 
 There are other reasons why a reserve is desir- 
 able. The fire waste of the country, while tolerably 
 constant in long terms of years, varies considerably 
 from year to year. Conflagration periods occur and 
 these require burdensome assessments. During the 
 year 1904 there were terrible windstorms in many 
 states. In one locality a single company had sixty 
 losses in one county. This would have required a 
 very heavy assessment. Fortunately the company 
 had a reserve. The usual assessment was made, the 
 balance drawn from the reserve, the losses were paid 
 promptly and the reserve was made good shortly aft- 
 er. In this case the reserve was beneficial in two 
 ways, it prevented a burdensome assessment, and it 
 assisted in making prompt payment. 
 
 LOAN COMPANIES DEMAND RESERVES. 
 
 Many loan companies require that the Insurance 
 policy be assigned to them as further security be- 
 sides the mortgage. When the Insurance company 
 has no surplus or reserve, these loan companies 
 would be obliged before accepting the policy to 
 make a thorough investigation of the affairs 
 of the company, unless with a very old, large and 
 well estblished institution. This, of course, is not 
 practicable. Hence loan companies are obliged in 
 
OF MUTUAL INSURANCE 
 
 175 
 
 most instances to decline such policies, and borrow- 
 ers who would prefer Mutual Insurance are compell- 
 ed to accept some other. But if the Mutual has a 
 reserve, the case is different. There is something 
 visible and tangible and the policy is good security. 
 It is sometimes hinted that the loan companies are 
 against the Mutuals. This is not always correct. 
 Loan agents are after their fees and commission and 
 they will take any security which they can sell to in- 
 vestors. If a Mutual has established its reputation 
 and is well known to be reliable, they will take its 
 policies without hesitation. 
 
 From this it appears that reserves have a legiti- 
 mate place in the Mutual system. It is not claimed 
 that all companies should carry reserves, but that 
 those who find it advantageous may do so without 
 forfeiting their right to be considered Mutuals. 
 
 THE TRUE TEST. 
 
 The true test of a Mutual is not its method of 
 book keeping or collecting assessments or of manag- 
 ing its funds, but whether it furnishes insurance at 
 practically first cost. If it does so, it is a Mutual. 
 
 As Insurance breaks the force of the shock 
 which might prove disasterous to the individual by 
 dividing a loss among several persons, so when a 
 conflagration occurs or there is some unusually 
 heavy loss requiring an assessment which would 
 prove burdensome, the reserve gives relief by enab- 
 ling the company to divide up the load into several 
 smaller ones payable at different times. To illus- 
 
176 
 
 A HAND BOOK 
 
 trate, suppose a company in which the annual assess- 
 ment is 40 cents on each $100 at risk has a loss which 
 would require 75 cents on the $100. To call for this 
 at once might inconvenience many of the policy hold- 
 ers. But with a reserve the usual assessment can be 
 made and the balance taken from the funds on hand. 
 As one extreme usually follows another, there will be 
 a period of somewhat lighter losses and during that 
 time the reserve can be built up to its normal 
 amount. 
 
 The question is raised whether it is right to 
 take a portion of the premiums paid in to build up a 
 permanent reserve. There will be many who con- 
 tribute to the building of such a reserve who may 
 never derive any benefit. In answer to this it may be 
 replied that the whole progress of society is in just 
 that way. The roads, public buildings, bridges, etc., 
 which the public owns today were paid for by the 
 generation which preceeded. The total of these 
 foots up an enormous sum. It is stated that in Bos- 
 ton the public property is about four thousand dol- 
 lars to each inhabitant, so that the newly born Bos- 
 tonian is heir to four thousand dollars worth of 
 property which he can use and enjoy but which he 
 cannot dispose of nor take away. This was provided 
 by his predecessors and he in his turn will add some- 
 thing for those who come after him. The same is 
 true in churches, lodges, etc. The earlier members 
 provide for those who are to follow. Building up a 
 reserve, therefore, infringes upon no principle of 
 justice, but has the endorsement of society. 
 
ROGER F. UPHAM, WORCESTER, MASS. 
 
 Mr. Upham is a typical New Englander, careful, cautious 
 straightforward, thorough-going, good humored and genial. He 
 is secretary and treasurer of the Worcester Mutual Fire Insur- 
 ance Company which was chartered in 1823, and has grown to he 
 one of the largest and strongest companies in the State. But 
 the best idea of Mr. Upham can be gained from his splendid 
 article on ’‘Mutual Underwriting in Massachusetts,” published 
 elsewhere in this volume. 
 
ALEXANDER T. STRANGE, WALSHVILLE, ILL. 
 
 Mr. Strange was a native of Georgia. He came to Illinois in 
 1867 and Anally settled on a farm. He was active in the organi- 
 zation of the Hillsboro Township Mutual Fire and the Pana Dis- 
 trict Cyclone Insurance Companies, and has been secretary of 
 both since their formation. He is the author of the forms of 
 policy record and the card system of records, widely used by 
 the mutuals of the United States. He is a member of the Illi- 
 nois Association of Mutual Insurance Companies, holds an im- 
 portant position in the National Association and has been for 
 two years a delegate to the Farmers' National Congress. 
 
OF MUTUAL INSURANCE 
 
 177 
 
 HOW SHALL A RESERVE BE BUILT UP? 
 
 How shall this reserve be built up? Mainly by 
 setting aside a small percentage of the profits or 
 savings. This percentage is usually so small that the 
 policy holder scarcely knows whether he is paying 
 it or not. It is customary to charge a small percent- 
 age extra on short term risks and this may also be 
 used to increase the reserve. But in every case the 
 reserve is of very slow growth. 
 
 Some companies do not admit policy holders to 
 participation in profits till after a stated period. 
 One Mutual extends this term of probation to ten 
 years. Others give a portion only to policy holders 
 whose Insurance runs for less than five years, the 
 balance being turned into the surplus or reserve. 
 
 How large shall a reserve be ? This takes in the 
 whole question of assets, surplus, etc. Suppose the 
 case of a Mutual taking premium notes with an ad- 
 vance assessment and doing some short time busi- 
 ness, but generally issuing five-year policies. It will 
 have on hand a mass of notes of which something 
 less than one half will have been collected, less than 
 one half since premium notes are rarely paid in full, 
 a portion being generally returned to the policy hold- 
 er as profits. It will also have a fund on hand, an 
 amount of cash paid in on assessments and on short 
 time policies, of which only a portion has been 
 earned and becomes the property of the company, 
 all claims first having been paid. It may also have a 
 reserve and a surplus. But the first two items will 
 compose a large part of its holdings. 
 
178 
 
 A HAND BOOK 
 
 Computing the premiums and other expenses 
 on the unexpired Insurance, the aggregate would be 
 somewhere near the total of cash and uncollected 
 notes on hand. Should it fall short of this, the com- 
 pany is unsound and should either levy an assessment 
 or in some way provide for safety. But supposing 
 the company to be safe, the total of cash and uncol- 
 lected notes should more than equal the amount due 
 to policy holders on all outstanding risks and this 
 excess will constitute a surplus. A portion of this 
 surplus can be carried to the reserve and many com- 
 panies are in the habit of thus adding to the reserve 
 from time to time, their assessments depending upon 
 the good fortune of the company at the time. 
 
 THE ACTUAL RATIO. 
 
 The actual ratio of the reserve to the total 
 amount at risk is estimated differently in the east 
 and in the west. It is a matter of some importance 
 that the reserves of the Mutuals should be confined 
 by law to the lowest limit consistent with safety. 
 
 In Massachussetts the limit of the permanent 
 fund, as the reserve is called, is two percent on the 
 amount of the total amount at risk. In the west a 
 much smaller figure is deemed satisfactory, less than 
 one fifth of this amount. The eastern basis is made 
 to meet the competition of stock companies. The 
 western basis is the average annual loss and fire 
 waste which is over three dollars on a thousand, the 
 limit being placed at four dollars. Thus the eastern 
 company with ten millions at risk would require a 
 
OF MUTUAL INSURANCE 
 
 179 
 
 reserve of $200,000, while the western reserve for the 
 same risk would only be $40,000. 
 
 The total assets of the western company would 
 be its premium notes, its cash, etc. on hand and its 
 reserve of $40,000. Its liabilities would be the un- 
 earned portion of its notes and cash, and the unpaid 
 claims, if any. Its surplus would be the balance af- 
 ter its liabilities and its reserve were deducted from 
 its assets. If too large, a dividend should be made 
 to the policy holders or the assessments reduced. 
 
 It should be a maxim in all insurance enter- 
 prises to carry a safe amount of resources on hand, 
 but no more. Large accumulations of wealth tend 
 to extravagance, to say nothing worse. Hence the 
 reserve should be carefully adjusted to the actual 
 requirements and no useless balance should be toler- 
 ated. 
 
 HOW INVESTED. 
 
 The reserves of Mutuals should be invested in 
 first class loans on real estate security. This is the 
 best investment so far as safety in concerned and has 
 the additional advantage that it has no tendency to 
 entangle the Mutual with other corporations. The 
 holdings of the life Insurance companies of the Unit- 
 ed States are two billions of dollars. A large por- 
 tion of this is in railroad stocks and bonds. Who 
 can tell what influence this fact has had upon the 
 railroad legislation of the United States? For the 
 interest of these companies and of these policy 
 holders lies in the high dividend paying power of the 
 
180 
 
 A HAND BOOK 
 
 railroads. But the interest of the Mutual which has 
 loaned its reserve on farm mortgages lies with the 
 general public which maintains and supports it. 
 
 The reserve also helps to settle another question. 
 There has been much discussion over the liability of 
 members of Mutuals in case of loss. So long as all 
 losses are to be paid in full it is evident that assess- 
 ments must be unlimited. When assessments are lim- 
 ited, if they fall short, the losses must be pro rated. 
 Failure to recognize this principle has made no end 
 of trouble with companies which do not carry a re- 
 serve. Some of them stipulated in their policies that 
 the loss should be paid in full and the assessments 
 limited to a fixed amount. Heavy losses occured 
 and the courts held that the first stipulation was 
 binding and ordered assessments levied accordingly. 
 
 But with a reserve on hand the case is different 
 if only the payments and assessments are high 
 enough to cover the average fire waste for a term of 
 years. In case of an unusual loss, the reserve is 
 drawn upon, the policy holder gets his money at once 
 and the assessment is kept within the usual limits. 
 
 For a full account of the New England reserve 
 system, the reader is referred to Mr. Roger F. Up- 
 ham’s magnificent article on Mutual Underwriting 
 in Massachusetts, which appears in this volume. 
 
 The astonishing exposures of old line methods 
 among life Insurance companies of the east raise the 
 question whether the Mutual fire and storm Insur- 
 ance companies can be manipulated in the same way. 
 A comparison of the two will answer the question. 
 
OF MUTUAL INSURANCE 
 
 181 
 
 It may be affirmed that with all their crookedness 
 the great life companies are still solvent, death 
 claims will he paid in full and annuities will he kept 
 up. Where then does the loss come in? In the di- 
 minution of profits, which, according to the contract, 
 should go to the assured. This is true in all lines, 
 fire and life. 
 
 JUGGLING WITH FUNDS. 
 
 To understand this, it is necessary to have some 
 knowledge of the workings of the investment depart- 
 ments of these enormous institutions. Premiums 
 must be held till they are earned, and in order to 
 make the most of them for the policy holders they 
 must be invested where they will draw interest. The 
 usual rate has been four per cent on the average. A 
 combined capital and surplus of four hundred mil- 
 lions of dollars should return an annual interest of 
 sixteen millions of dollars. It is easy to see that a 
 very small fluctuation in the rate will make but little 
 difference to each member, but will make a very 
 large sum in the aggregate. It is upon this principle 
 that the grafters have acted. They have juggled 
 with stocks, they have bought and sold to their own 
 advantage, they have patronized their own institu- 
 tions to the detriment of the Insurance company and 
 have thus enriched themselves at the cost of the pol- 
 icy holders. And what chance has an individual 
 member to investigate? To look over the lists of 
 stocks, to investigate its values would be the work of 
 a year for him. The proposition is absurd. 
 
182 
 
 A HAND BOOK 
 
 Now take the Mutual figures. The accumula- 
 tions of a century and a half have, in the old Contri- 
 butionship only barely exceeded one per cent of the 
 enormous figures given above. Even millionaire 
 Mutual fire companies are exceedingly scarce, while 
 generally speaking a Mutual fire, which has on hand 
 a hundred thousand dollars, is looked upon as ex- 
 ceedingly prosperous. The opportunities for graft- 
 ing sink into comparative insignificance. They are 
 less than the “trace” in the weather report. 
 
 The modern grafter is shrewd. He steals indi- 
 rectly and in small amounts. He plunders large in- 
 stitutions and big cities, where his pilferings will not 
 be missed. The small incomes of the Mutuals do not 
 furnish fields large enough for him to operate in. 
 Very little grafting can be done where the total in- 
 come from investments is only a few thousand dol- 
 lars each year. 
 
 MUTUAL RESERVES ARE SAFE. 
 
 The modest resources of the Mutuals are entire- 
 ly different from the great accumulations of the joint 
 stock companies. They are working balances, small 
 amounts kept on hand to prevent the company from 
 running out of money in case of unexpected increase 
 of expenses, or of falling off of income. When a suf- 
 ficient amount is secured the accumulation ceases. 
 But the joint stock company has no limit, it goes on 
 forever. 
 
 Again, the small reserves of the Mutuals are 
 more easily invested and looked after. Some large 
 joint stock life companies have more than two hun- 
 
OF MUTUAL INSURANCE 
 
 183 
 
 dred and fifty lines of investment, stocks and bonds 
 of every imaginable kind and scattered all over the 
 world. How many men are there who can appraise 
 these anywhere near correctly. On the other hand, 
 there is scarcely a farmer who cannot, in a few 
 hours, examine and appraise the real estate mort- 
 gages in which the reserves of the Mutuals are in- 
 vested. There is no chance for fraud in these meth- 
 ods, the very figures themselves settle that question. 
 There is no room for the grafter, no place where he 
 can hide, and no member who is not able to detect 
 him. 
 
CHAPTER XI 
 
 ADJUSTERS AND ADJUSTMENTS. 
 
 The agent and the adjuster are field officers upon 
 whom the reputation and success of the company 
 largely depends. With them the people come in con- 
 tact and by what they do or leave undone the people 
 will form their judgments. 
 
 SPECIAL QUALIFICATIONS. 
 
 An adjuster has a difficult task and needs special 
 qualifications. He must above all be a man of integ- 
 rity, not merely honest as the world goes, excusing 
 wrong by pleading mercantile custom, but deter- 
 mined to do equal and exact justice everywhere and 
 on all occasions. Such integrity is not a manufac- 
 tured article gotten up for the occasion. It is the 
 outgrowth of a correct life. It is a habit as well as 
 a sentiment, a part of the personality, an element of 
 the character. 
 
 In his own line the adjuster will make practical 
 application of his principles by awarding everyone 
 who has suffered a loss the amount of indemnity due 
 him, no more, no less. The idea of taking advantage 
 of technicalities to enable the company to escape its 
 obligations in whole or in part, will receive no tolera- 
 tion from him. His very manner, his bearing, his 
 
 184 — 
 
OP MUTUAL INSURANCE 
 
 185 
 
 methods, should impress upon the loser the convic- 
 tion that justice will be done, that he will receive all 
 the indemnity for which he has paid. 
 
 In case of attempted fraud these characteristics 
 will be useful. The man who always does exactly 
 what is right is the man who generally avoids falling 
 into traps set by those who would take advantage of 
 him, and he is also the man whom dishonest persons 
 fear to approach. 
 
 The adjuster should also possess a good share of 
 common sense and it should not be an unused talent. 
 Pure integrity with no other good qualities is of little 
 value, it is too easily imposed upon. Zeal without 
 knowledge is a dangerous thing. The adjuster will 
 deal with many cases which call for good judgment 
 and careful discrimination. Without good sense and 
 sound discretion he may blunder most woefully. He 
 should also know how to be firm without being obsti- 
 nate and how to disagree without being contrary. 
 
 TRAINING REQUIRED. 
 
 These may be termed the mental qualifications, 
 the elements which go to make up his personal char- 
 acter. In addition he should have some training in 
 his own line. He should know something about In- 
 surance law and practice. He should understand 
 policies, and should possess information enough 
 about estoppel and waiver to avoid getting his com- 
 pany into trouble. 
 
 He should be able to think quickly and to see the 
 bearing and effect of every word of his own and of 
 the insured, and should never permit himself to be 
 
186 
 
 A HAND BOOK 
 
 provoked into using hasty utterances. He should 
 also understand modern business methods, in fact 
 he should he an all-around business man. 
 
 Among the special equipments for his position, 
 should be a thorough knowledge of the value of prop- 
 erty which he will be likely to be called on to ap- 
 praise. Should a loss occur in a line with which he 
 is not familiar, he should thoroughly inform himself 
 before undertaking the adjustment. This is the only 
 safe method. 
 
 SHOULD NEVER DO WRONG. 
 
 The adjuster should never lose sight of the fact 
 that he is in business for the purpose of carrying out 
 a fair and honorable contract, and that attempting 
 to evade any obligation imposed by that contract is 
 an attempt to defraud, is dishonest and disreputable. 
 No matter with whom he is dealing, no matter what 
 the provocation may be, the adjuster should never 
 resort to any course which is not in itself absolutely 
 free from wrong. It is true that there are some who 
 say that in dealing with a dishonest man he must be 
 met on his own ground, and that they must 4 4 fight the 
 devil with fire,” but all this is the cheapest kind of 
 sophistry. One man’s fraud does not excuse an- 
 other ’s, even if proven, much less when such fraud is 
 only suspected. And if such fraud on the part of 
 the adjuster be detected, it will only make his case 
 so much the worse. 
 
OF MUTUAL INSURANCE 
 
 187 
 
 A BAD CASE. 
 
 In the New York Independent of Sept. 29, 1904, 
 appears the following, among several similar state- 
 ments in other lines. The editor of the Independent 
 vouches for its truth, but for obvious reasons sup- 
 presses all names. Several business men were giv- 
 ing their experience. One of them said : 
 
 “I’m an Insurance adjuster, and you would not 
 think that I ever had to use money, but I do. On the 
 small losses and losses in the country there is never 
 any trouble, though we often have to pay far more 
 than the value of the goods burned. To these losses 
 I do not attend, but only see to the big ones in the 
 large cities where the loss will amount to hundreds 
 of thousands of dollars and occasionally millions. 
 They usually get one of those firms of adjusters— I 
 work for the companies— to manage their interests. 
 If I only had the principals to deal with, it would be 
 an easy matter. It would take time, because the 
 owners naturally think their property worth more 
 than it really is, but tact and management will usual- 
 ly pull the toughest matter through. But when one 
 of those infernal Jew or Yankee adjusters gets hold 
 of a big loss and ties up the owners with a contract 
 to do all the business through him, there is only one 
 thing to do, and that is to buy the adjuster. Why, 
 
 in that big fire of the hotel there was only 
 
 a partial loss and we hitched and pulled how much it 
 should be for three weary weeks. That adjuster 
 would not come into the open and say how much he 
 wanted. If he had, I would have gone straight to the 
 
188 
 
 A HAND BOOK 
 
 old man and then we would have had a row. I did 
 suggest to the owner one day that the adjuster was 
 crooked and found for my pains that the adjuster 
 had informed him that I wanted a bribe. Well, it 
 went on and on, and one day I said to that adjuster 
 that if he’d settle for $250,000— they wanted $350,000 
 —I’d leave an envelope for him at the hotel in the 
 morning. He was shrewd and replied: ‘You leave 
 the envelope and I’ll see.’ So next morning I left 
 an envelope with two thousand dollar bills in it. He 
 met me with a smile and said, ‘ Oh, why leave so small 
 an envelope; leave a larger one.’ I had to leave 
 three envelopes containing $15,000 before he came 
 down and I positively refused to leave any more and 
 said that it could go to the courts. Then we settled 
 for $260,000 and a few odd dollars. The amount 
 over $250,000 was put on to ‘save my friend’s face,’ 
 as the Chinese say. But this was really a saving to 
 the companies as they had planned to come up to 
 $300,000 if necessary. It always hurts an Insurance 
 company to let anything go into the courts. Some 
 months afterward I accidentally found out that the 
 adjuster had gotten over $10,000 from the old man 
 as a bribe on me. ’ ’ 
 
 THE EVIL RESULTS. 
 
 It would seem at first sight, as if the adjuster 
 who related the story had saved his company nearly 
 $40,000. But he has simply shown that there was 
 little or no attempt to arrive at an exact estimate of 
 the loss, hut on the contrary that the company only 
 
OF MUTUAL INSURANCE 
 
 189 
 
 cared to get oft as cheaply as it could, and he has 
 advertised himself as a blackmailer. It would have 
 been far better to have made a fair and reasonable 
 adjustment and then taken the matter to the courts 
 if necessary, than to have settled it by bribery. 
 
 It is said that it hurts a company to get into 
 courts. But the hurt comes from the reputation al- 
 ready gained by such transactions as the one above 
 quoted. Public sentiment never turns against a man 
 or a corporation for resisting a fraud. It is only 
 when the reputation becomes shady that a person is 
 liable to be suspected of using the courts to avoid 
 his just obligations. This whole affair and every 
 party to it reeks of dishonesty. 
 
 MUST NOT RESORT TO TRICKS. 
 
 Nor should the adjuster try to set traps for the 
 loser till it develops that there is a necessity for it. 
 He is entitled to a full and fair statement of the 
 amount of loss and to all explanations necessary to 
 enable him to arrive at the actual facts. But he has 
 no right to induce the loser to sign agreements which 
 he does' not understand, and then to take advantage 
 of him. What is wanted is fair dealing between man 
 and man. The adjuster can generally tell at once 
 what kind of a man he is dealing with. If he meets 
 with an honest man there will be no trouble. The 
 tricks of the incendiary or of the over insurer will 
 generally come to light. 
 
 There is, in Insurance circles, a general senti- 
 ment that losses are paid too high. On the outside, 
 the opinion is the other way. It is probably true that 
 
190 
 
 A HAND BOOK 
 
 the average sufferer usually over estimates his loss 
 and also that he sometimes puts a sentimental value 
 on property destroyed. But the cool, quiet and care- 
 ful adjuster can avoid trouble. He can very easily 
 get at the cash value of the loss, and when the loser 
 is a fair minded man he will not be long in making up 
 his mind that he is not entitled to more. 
 
 SOME PROBLEMS. 
 
 In the case of farm or town dwellings, churches, 
 school houses and similar buildings, there is not 
 much trouble in arriving at the amount of the loss. 
 Sometimes it requires effort to arrive at a fair ap- 
 praisal of the contents, but patience will generally 
 accomplish it. In the case of other farm buildings, 
 especially those which have been erected for some 
 years, there may be a wide difference between the 
 claimant and the adjuster and it will require skill 
 and tact to arrive at a satisfactory agreement. Pecul- 
 iar problems present themselves. A granary or corn 
 crib burns, the walls are gone and the grain or corn 
 has spread out over the ground. How shall it be 
 measured? How shall the adjuster estimate the 
 weight of the hay consumed in the barn which was 
 destroyed? But these problems are simple com- 
 pared with the questions which arise when stores or 
 large establishments burn. 
 
 COUNTRY STORES. 
 
 Generally when a country store burns the books 
 go with it and there is nothing to do but to start with 
 the amount of the last annual invoice which will 
 
OF MUTUAL INSURANCE 
 
 191 
 
 probably be remembered, then add the purchases as 
 they can be called to mind, compute the sales, using 
 the bank account, the remittances and expenses as 
 aids in the process, and reducing this amount by a 
 fair estimate for profits. The balance will be the 
 net sales which, taken from the sum of the invoice 
 and purchases, will leave the net stock. Due allow- 
 ance must also be made for freight on the one hand, 
 and depreciation on the other. The final result will 
 be somewhere near the true amount. 
 
 In the case of large establishments this process 
 becomes extremely complicated. As concurrent 
 Insurance is usually carried in such cases another 
 problem arises, how shall the loss be divided? Some- 
 times this is not easy to decide. 
 
 Where there is a desire for fair dealing on both 
 sides all these matters can finally be brought to an 
 acceptable conclusion. It is better that the adjuster 
 should yield a trifle than that the case should go to 
 appraisers or arbitrators. This course will make 
 friends for the company and in the long run will 
 pay best. 
 
 FAIR PLAY AND THOROUGH WORK. 
 
 The adjuster should avoid all prejudice and all 
 premature judgment. He should go out with two 
 objects in view, fair play and thorough examination 
 and with absolutely no bias in favor of either party. 
 His work should be thorough and in detail, every 
 item being carefully considered. Losses may be 
 honest and the policy holder may be sincere in his 
 claim, and yet thorough investigation may show to 
 
192 
 
 A HAND BOOK 
 
 the satisfaction of both parties that the damage is 
 really much less than it appeared at first sight. The 
 case of a large mill has been cited. The warehouse 
 attached was burned and the cotton stored there was 
 supposed to be a total loss. But digging down among 
 the debris of the fallen building it was discovered 
 that there was a large amount of unconsumed mater- 
 ial. The value of this was saved to the company. In 
 every large city there are men who make a business 
 of dealing with buildings which must be torn down, 
 the salvage from fires or wrecks, etc., and the amount 
 they save to the Insurance companies is very large. 
 
 A DISHONEST ADJUSTER. 
 
 The following case illustrates what an adjuster 
 should not do. A farmer lost a fine house by fire on 
 which there was an Insurance of $1,600, the actual 
 value of the house being about $1,800. The company 
 was notified, the adjuster arrived, called for the 
 policy, looked it over and with pitying smile turned 
 to the loser, “My friend, I am sorry to say that your 
 policy is worthless, but the company will be liberal, 
 they will donate you back your premiums and a lit- 
 tle more. They will give you a hundred dollars. 
 Now you just sign this receipt.’ ’ But the farmer 
 said he would wait till next day. 
 
 He consulted a friend who told him to demand 
 the full amount. He did so. Then the adjuster 
 wanted an arbitration. This he had waived, but they 
 figured with him a little and then told him he could 
 
OF MUTUAL INSURANCE 
 
 193 
 
 pay in full or go into court. The claim was allowed 
 and the $1,600 paid, but the company lost all its busi- 
 ness in that locality. 
 
 ACTUAL EXPERIENCE. 
 
 Mr. Bridgens, an Insurance adjuster of long ex- 
 perience, furnishes the following: “The greater 
 number of patrons of the company for which I work 
 are men who wish to do the fair thing, and with 
 whom it is a pleasure to do business. Now and then 
 I meet a man who seems to think that an Insurance 
 company exists for no other purpose than to be 
 robbed and he tries to do the robbing act to the best 
 of his ability. 
 
 “For example, a man owns a poorly built barn 
 on which he has succeeded in getting Insurance. The 
 wind loosens some of the braces or perhaps there 
 never were any and he reports some trifling damage 
 and is told to repair it. In doing so, he puts in 2x8 
 braces, when there were originally 1x4, or perhaps 
 none at all, and does all the other work in the same 
 manner and thus runs up a bill of $70 or $80 for re- 
 pairing damages for which the company, in strict 
 justice, should not be held. 
 
 ‘ ‘ Sometimes I get a notice that a roof has been 
 blown oft. Arriving at the place I find that a few 
 shingles have been stripped off. That house does 
 not get a new roof at the company’s expense. 
 
 “I remember another case where it was not the 
 roof but a foundation blown away. The building was 
 
 a school house, and damages were claimed for a 
 12 
 
194 
 
 A HAND BOOK 
 
 large hole in the foundation said to he caused by a 
 wind. I went to the place and rode out with a boy 
 about twelve years old to show me where his father, 
 one of the directors, was at work. On the way the 
 boy told me how the larger boys had taken the wall 
 out to catch rabbits. I asked him if the wind had not 
 done the damage and he said no, that the boys had 
 taken the wall out. This wall was twenty feet by 
 thirty and twelve inches high, sloping back to six 
 inches. They had presented a bill for $40. One man 
 would have laid it all in one day. I objected to pay- 
 ing $40 for damages done by the boys. They got 
 angry and said the other company had paid the $40 
 without ever coming to see it. This was the first I 
 knew of their having double Insurance. Of course 
 I expressed my opinion of them and told them they 
 ought to be behind the bars for such work. 
 
 “In another case a man in mercantile business 
 owned a farm and had insured a barn against fire 
 and wind. The barn blew down and I went to settle 
 with him. I could not reach any agreement as he 
 claimed he had paid a premium for fire Insurance as 
 well as windstorm and he wanted full pay for both. 
 I spent a whole day with him and finally had to take 
 him to a lawyer before I could convince him that we 
 were only liable for the wind loss. 
 
 ‘ 1 A kitchen addition was burned and the owner 
 had rebuilt it. The bricks in the chimney were new. 
 The husband was away and I remarked to the wife 
 that it was singular that the old brick had all burned 
 
OF MUTUAL INSURANCE 
 
 195 
 
 up without leaving a trace, when she blurted out ‘I 
 told Jim that the company would never pay for that 
 new chimney. ’ 
 
 “ These are some of the unpleasant matters an 
 adjuster meets but I am thankful that they are few 
 and far between. I always recommend that such 
 risks be settled and cancelled out. The company is 
 better off without them. 
 
 “Sometimes an adjuster sees queer things. I 
 was called on to adjust a small loss by windstorm. 
 Desiring to inspect the under side of the roof, I 
 climbed into the attic and there found a piece of 
 board and a lot of cobs piled against the stove pipe 
 which came up through the ceiling. I went down, 
 settled the loss, and then told the man, ‘Your policy 
 is cancelled and this business is over.’ He had evi- 
 dently intended to burn the house and had he not 
 claimed the windstorm loss his plot would not have 
 been discovered. ’ ’ 
 
 But usually the life of an adjuster is pleasant. 
 Our Mutual men are generally fair. Of course when 
 a man has a partial loss he is apt to over estimate it. 
 It generally looks worse than it is. But when he is 
 told to repair it, to make it as good as it was, and 
 bring in the bills, he is almost invariably well pleased 
 and he and the adjuster always part good friends. 
 
 A COMMON CASE. 
 
 Another actual case will illustrate a very com- 
 mon occurence. A gasoline stove took fire in a resi- 
 dence of a widow. That stove was thrown out and 
 the blaze extinguished but everything in the room 
 
196 
 
 A HAND BOOK 
 
 was smoked and scorched, the plaster was cracked, 
 the wainscoting blistered, a valuable hardwood ward- 
 robe badly injured by the blaze and sundry other 
 damages had occured. It was sometime after the 
 fire when the adjuster arrived, and meantime sympa- 
 thizing neighbors had worked up the good lady’s 
 ideas of her damage to a pretty high figure. The 
 adjuster talked with her a few moments in a sym- 
 pathizing way, assured her that the company would 
 replace everything as good as it was and that she 
 need have no fear of the outcome. He explained to 
 her that the company was a Mutual, that her neigh- 
 bors were paying part of the loss and that they were 
 all interested in fair play. 
 
 Still the woman was somewhat worried and anx- 
 ious. So the adjuster started at his work. He began 
 with the plastering. He measured the number of 
 yards, computed the cost of taking off the old and 
 putting on the new. Then he measured the wainscot 
 and computed the cost of replacing that. Next he 
 came to the wardrobe which was really a fine piece of 
 furniture and was highly prized as a family relic. 
 It was so scorched and blistered that it appeared al- 
 most worthless. But the adjuster soon saw that only 
 the surface was injured and he turned to the lady 
 and said, ‘ ‘ Madam, I am glad to tell you that this can 
 be made as good as new. It is really a beautiful and 
 expensive piece of furniture and you must esteem it 
 highly. We will pay for having the surface planed 
 and polished and for having it finished up so that 
 you cannot tell it from new. ’ ’ This was satisfactory. 
 
OF MUTUAL INSURANCE 
 
 197 
 
 Then he took up other matters. The gasoline 
 stove that caused all the trouble and was standing out 
 of doors came next. How much was it worth when 
 the fire took place? It had cost thirty-five dollars 
 and had been in use eight years. She thought she 
 ought to have somewhere near what it cost. The ad- 
 juster demurred and asked her if the stove was re- 
 paired, as good as it was before the fire, whether she 
 would use it again. She replied at once that she 
 would not have the thing in the house. The next 
 question was how much she was damaged by the loss 
 of a thing she would not use. She saw the point at 
 once. The adjuster then said, “The average life of 
 a gasoline stove is ten years. You paid thirty-five 
 dollars for this, that is three dollars and a half for 
 each year. You have used it eight years, leaving two 
 years in which it might answer. Now the cost of the 
 stove for these two years is seven dollars. Is that 
 not a fair allowance for the stove ? ’ ’ She was satis- 
 fied. 
 
 THE SQUARE DEAL WON. 
 
 A few other articles were disposed of in the 
 same way, two or three claims for blemishes on small 
 articles to which no real damage was done were with- 
 drawn and the sum footed up. The adjuster then 
 said, ‘ ‘ Madam, we will do this work for you and put 
 everything in good shape, or if you prefer to do the 
 work yourself we will pay you this amount in full . ’ 1 
 The lady hesitated a moment, then turned to her 
 sons who were standing by and said, “I think we 
 shall take the money. ’ 9 They agreed at once, saying 
 
198 
 
 A HAND BOOK 
 
 that they could do much of the work themselves. The 
 money was paid and the case settled to the full satis- 
 faction of the family for less than a third of the orig- 
 inal claim. 
 
 A stupid or an obstinate adjuster would have 
 found in this case a magnificent opportunity to make 
 trouble. He could have precipitated a quarrel at 
 once. Then there would have been a neighborhood 
 uproar, and in all probability, a lot of cancelled poli- 
 cies. But when the woman and her sons saw the loss 
 was to be made good they became easy to deal with 
 at once and the whole community also was satisfied 
 that the widow had been fairly dealt with. 
 
 THE COST OF BUILDINGS. 
 
 There are three methods of estimating the cost 
 of buildings. They are, at best, approximate, only 
 apply to the average building, and must be modified 
 to suit the surroundings in each locality. The first 
 method is by the number of rooms, the second by the 
 number of square feet in the floors and the third by 
 the number of cubic feet in the building. 
 
 The first rule is sometimes used by carpenters 
 who have erected a number of buildings and have 
 computed the cost of the work and material in their 
 line with the addition of the work of the plasterer, 
 the painter and the paper hanger, but with no allow- 
 ance for fine finish. In fact it covers nothing but a 
 plain frame dwelling with no very large rooms. The 
 figure usually given is $100 per room, counting the 
 cellar as one room. Where lumber is cheap and 
 
OF MUTUAL INSURANCE 
 
 199 
 
 labor cost not excessive it will barely cover the ex- 
 pense. Should porches or fine inside work be added 
 this estimate will be too low, as it will also be where 
 lumber and wages are high. 
 
 The floor area, found by multiplying the ground 
 area by the number of stories, is also used as a basis. 
 The cost of ordinary plain frame dwellings is esti- 
 mated at $1.00 per square foot of floor. More elabor- 
 ate structures are much higher. This method is defec- 
 tive, as it takes no account of the height of the 
 stories. It is even worse guess work than the first. 
 
 The third method, by the cubic foot, is more 
 satisfactory, than either of the others. It takes into 
 account the size of rooms and heights of ceilings, 
 which the others do not. Good authorities estimate 
 dwellings at 4% to 10 cents, according to finish. It 
 would be error to assume that an estimate can be 
 made in this manner for every locality. The average 
 cost per cubic foot for each locality must be arrived 
 at by deductions from the cost of buildings actually 
 erected in the several localities. This cost will vary 
 with the varying cost of lumber and materials, the 
 rise and fall of freights and of wages, etc. 
 
 THE BEST METHOD. 
 
 The best method for the adjuster is to procure 
 the actual bills for labor and material of as many 
 buildings as he can. From them he can make a table 
 which will be tolerably accurate for his locality. This 
 table he can adjust from time to time, as prices and 
 styles change. 
 
200 
 
 A HAND BOOK 
 
 There is much difference between dwellings 
 erected at different periods, especially in the west. 
 The earlier constructions are of the plainest char- 
 acter. Probably there are few new towns where the 
 average building is much more than a wind break. 
 But year after year the buildings improve until 
 finally the cost per cubic foot is doubled, perhaps 
 tripled. The adjuster must keep up with all this. 
 
 Barns and other out buildings are built much 
 more cheaply than houses. They have stronger tim- 
 bers but the other material may be cheaper, 2 to 2y 2 
 cents a cubic foot will be fair. 
 
 In computing the cost per cubic foot, different 
 adjusters do not use the same rules. Some find the 
 square feet in the ground area and then multiply by 
 the height of the stories plus one third of the slant 
 height of the roof. Additions containing a different 
 number of rooms must be computed separately. 
 Others take the actual number of cubic feet in the 
 rooms or in the square part of the barn. 
 
 WHAT IS A TOTAL LOSS? 
 
 This question is important, especially in states 
 which have valued policy laws. It has come before 
 the courts on different occasions as a matter of fact 
 for a jury to decide. The doctrine laid down is that 
 a building is a total loss when its indentity as such 
 building is entirely destroyed. Others say that a 
 building is a total loss when it must be rebuilt, and 
 not repaired and when no portion remaining can be 
 
OF MUTUAL INSURANCE 
 
 201 
 
 used to advantage in repairing it. When a building 
 is repaired, it is still the same building, when it is 
 rebuilt or reconstructed, it is a new one. 
 
 The fact that some portion of the building is 
 unconsumed does not prevent the loss from being 
 total, if that portion standing cannot he used to ad- 
 vantage in repairing it. In one instance, a flue and 
 a side wall were left intact. It was proven that these 
 could not be used to advantage in repairing the 
 building, the court held the loss total. In another 
 case, a basement wall and part of a cellar foundation 
 were left. They could not be utilized and the loss 
 was held to be total. Cellar and foundation walls 
 have been the subjects of many disputes. Instances 
 are reported where adjusters have tried to deduct 
 the whole cost of excavation, simply because a hole 
 in the ground did not burn. Most cellars are walled 
 in some way, but there are sections of country where 
 no walls are needed, if the water is kept out. When 
 a fire occurs where there is such a cellar, if the as- 
 sured does not know his rights, he is pretty sure to 
 be swindled. 
 
 AVOID TECHNICALITIES. 
 
 Mutuals should avoid all such tricks, and should 
 observe the spirit of the law as well as the letter. It 
 is an old maxim that the law is not concerned about 
 trifles. To attempt to evade an Insurance contract 
 because a few sticks and stones have not been re- 
 duced to ashes, is dishonest. If it can honestly be 
 said that what is left is of no practical use, that the 
 building cannot be repaired, the loss is total. 
 
202 
 
 A HAND BOOK 
 
 On the other hand, if what is left is in sufficiently 
 perfect condition to he used in repairing, then the 
 loss is not total. Suppose a fire takes place in a 
 barn, the timbers are scorched but not weakened, the 
 shingles and siding are burned off but the sheeting 
 on the roof is still good, then the loss is only partial. 
 
 There is a general tendency among a man’s 
 neighbors to exaggerate his loss when a fire occurs, 
 and this must be taken into account when deciding 
 the question under discussion. There will probably 
 be conflicting testimony. The adjuster needs to in- 
 spect for himself and decide for himself. 
 
 A good authority suggests that if an uninsured 
 person owning the building and desiring to replace 
 it as good as it was before, would take down what 
 remains as unfit to use with safety, then the loss is 
 total. Otherwise it is not. 
 
 SALVAGE. 
 
 In case of total loss, and the payment of the face 
 of the policy by the company, to whom does the sal- 
 vage, if any, belong? To the assured. Some com- 
 panies have gone so far as to claim deductions for 
 the rubbish and even for the “hole in the ground,” 
 that is sometimes used in place of a cellar by dwellers 
 on the western prairies. It is not uncommon for 
 companies to make claims for allowances on other 
 accounts equally frivolous. Something depends on 
 the wording of the policy, what the contract is, but 
 generally when the loss exceeds the face of the 
 policy, it is the same as if it were total. 
 
OF MUTUAL INSURANCE 
 
 203 
 
 Three fourths clauses, co-insurance agreements, 
 and other limitations of liability would influence the 
 award while the ordinary policy agreement insuring 
 against loss by fire up to a fixed amount would re- 
 quire that the company should pay all damages up 
 to the face of the policy. 
 
 Insurance practice would be materially simpli- 
 fied if the states would adopt a standard policy which 
 should state clearly the liability in all such cases. 
 
 RAILROAD FIRES. 
 
 Railroad fires are frequently a source of vexati- 
 ous disputes. Statutes generally hold railroad com- 
 panies responsible for the damage done by sparks 
 from their engines. These sparks could be prevent- 
 ed, but to do so would be expensive and inconvenient. 
 
 In these days when everything is subordinated 
 to speed, nothing is added to a locomotive which will 
 interfere with the draught of its furnace or will in- 
 crease its weight. It is considered cheaper to pay 
 for the losses than to suppress the sparks. As long 
 as this is the case, the railroads should pay the in- 
 jured party in full, and when the party is an Insur- 
 ance company, it should receive the amount of dam- 
 age it has been called on to pay up to the full amount 
 of the policy. Many states have statutes to this 
 effect and these have generally been upheld by the 
 courts. 
 
 Kansas, not long since, enacted a similar law. 
 A railroad company set fire to and destroyed insured 
 property. The Insurance company paid the loss and 
 then demanded to be subrogated. The railroad made 
 
204 
 
 A HAND BOOK 
 
 a vigorous fight but the Mutual won the case. It is 
 to the credit of the Mutuals that one of their number 
 was the first to take up this matter and to win a vic- 
 tory. 
 
 VACANT OR UNOCCUPIED. 
 
 The same principle should apply whenever des- 
 tructive fires are set out by any party whatever. 
 
 The New York form of standard policy provides 
 that, “if a building herein described, whether intend- 
 er for occupancy by owner or tenant, be or become 
 vacant and unoccupied and so remain for ten days, 
 the policy shall become void. ’ ’ Some other standard 
 forms make the time thirty days instead of ten. 
 Still another form uses the words, “Vacant, unoccu- 
 pied or uninhabited, other than temporary unoccu- 
 pancy, during absence of family or pending rental 
 or change of tenants.’ * This was construed by a 
 court as follows : 
 
 “A fire policy stipulated that is should be void 
 if the building insured should become vacant or un- 
 occupied, unless otherwise provided by agreement 
 endorsed thereon. At the time of the issuance of the 
 policy the building was, with the knowledge of the 
 insurer, occupied by tenant. The building continued 
 to be occupied by the tenant until 5 o ’clock P. M. on 
 the day the same was destroyed. The tenant, with- 
 out the knowledge of the assured, removed there- 
 from ; and four hours after the removal, and before 
 the assured had learned of it or had had opportunity 
 to procure another tenant, the building was de- 
 stroyed by fire. Held, that the building was vacant 
 
OF MUTUAL INSURANCE 
 
 205 
 
 or unoccupied, within the meaning of the policy, at 
 the time of the fire, and the policy was void.” Ohio 
 Farmers Ins. Co., vs. Vogel, 73 N. E. 
 
 This decision seems to consider the words “va- 
 cant” and “unoccupied” as having the same mean- 
 ing. 
 
 DOUBTFUL CASES. 
 
 The form using the words ‘ ‘ reasonable time ’ ’ is 
 objected to as being indefinite. There might be a 
 dispute as to what length of time is reasonable. 
 Under the form which gives no time whatever, dis- 
 putes might arise as to what constitutes a vacancy. 
 
 In the case of dwellings is it necessary that some 
 member of the family or some other person he con- 
 tinuously upon the premises? These technicalities 
 have been raised. Most Mutual policies give a speci- 
 fied time, after which the Insurance is void. This 
 plan is fair and has the advantage of being easily 
 understood. If a policy holder wishes to leave his 
 house for any length of time exceeding the limit, he 
 knows that he must either find some one to occupy it 
 or procure a vacancy permit. 
 
 The doctrine of waiver applies in vacancy cases 
 and as to tenants. The principle laid down in the 
 following case will apply : “A fire policy stipulated 
 that it should be void if the property insured was 
 then or should become occupied by a tenant. With 
 the knowledge of the insurer, the property was at 
 the time of the issuance of the policy occupied by a 
 tenant. Held, that the stipulation was waived by the 
 insurer.” Ohio Farmers Ins. Co., vs. Vogel, 73 N. E. 
 
206 
 
 A HAND BOOK 
 
 MUST KNOW THE FACTS ABOUT PROPERTY. 
 
 No agent or adjuster can do the work satisfac- 
 torily unless he has some knowledge as to how long 
 the property he deals with has been used, and how 
 much of its original value is lost. Under the head of 
 classification of risks will be found a table of depre- 
 ciations hut it is only averages. The careful man 
 will keep his house in good repair, and the yearly re- 
 duction of value will be very small. But the man 
 who pays no attention to his dwelling will let it run 
 down so that it may become uninsurable in a few 
 years. Machinery in the hands of careful men will 
 last for many years, hut the unskillful will destroy 
 it in a few months. 
 
 All these matters must he decided by observa- 
 tion. It is the only fair way. A fixed rule is unjust. 
 It offers a reward for carelessness and places a pen- 
 alty on thrift. The adjuster should in every in- 
 stance ascertain as nearly as possible the exact cash 
 value of the property at the time of loss. 
 
 A GOOD PRACTICE. 
 
 At the Chicago meeting of the National Associa- 
 tion, Mr. Lincoln R. Welch, of Fitchburg, Massa- 
 chusetts, read an able paper * 4 Classification of Farm 
 Risks. ’ ’ It was illustrated by photographic views of 
 many of the buildings. These views were of such 
 material service that it has since been suggested that 
 it would probably be well for every agent to carry a 
 kodak and to take one or two views of each building 
 and send them in with the application. They would 
 be of material service to the adjuster in case of loss. 
 
OF MUTUAL INSURANCE 
 
 207 
 
 SENTIMENT HAS NO MARKET VALUE. 
 
 Adjusters should bear in mind that sentiment 
 cannot he appraised at a cash value nor can it he in- 
 sured. Worn out articles of furniture, heirlooms 
 from ancestors, may be valued very highly owing to 
 associations but that value is purely sentimental. It 
 will bring nothing on the market. It is the cash 
 value which must be considered and nothing else. It 
 is said that adjusters occasionally have trouble in 
 settling with losers of family portraits. Sometimes 
 when musical instruments are burned the owners 
 seem to think that they have an especial worth far 
 above the average. In both cases the estimate is 
 sentimental. Only the actual value should be paid. 
 
 The true spirit of the adjuster should be that 
 of payer and loser both. If the loss was his, what 
 would he be willing to settle for. If he had it to pay, 
 what would he be willing to give to make it good. 
 Let the loser be given to understand that the adjuster 
 occupies that position. 
 
 When intricate legal questions arise neither 
 agent nor adjuster should attempt to settle them. 
 For instance, a loss occurs on mortgaged property 
 in which two or more parties are interested. Ex- 
 treme care should be taken that nothing is said or 
 done to commit the company to any opinion. Should 
 the loss be paid to the wrong party it might be neces- 
 sary to pay it again. So an official might very easily 
 waive some important matter, to the detriment of the 
 company. Eefer all complicated questions to the 
 home office. 
 
A HAND BOOK 
 
 ARBITRATION AND APPRAISAL. 
 
 These terms are used indifferently by writers on 
 Insurance. Nearly all policies of Insurance provide 
 that in cases of disagreement as to amount of loss or 
 damage, the company shall choose one arbitrator and 
 the assured another, and they two shall select an um- 
 pire, and that the matter shall be submitted to these 
 three for a decision. Some policies contain a provis- 
 ion that this decision shall be binding. But the com- 
 panies have no right to make any such positive pro- 
 vision. The established courts of the land are the 
 final resorts in cases of disagreement and they will 
 not permit any person or organization to usurp their 
 functions. The companies which print this clause 
 are perfectly aware that it is not legally binding. It 
 is not found in any standard policy form. The usual 
 wording of the standard policy clause is, ‘ 4 shall be 
 conclusive and final upon the parties as to the 
 amount of loss or damage, and such reference unless 
 waived by the parties shall be a condition precedent 
 to any right of action in law or equity to recover such 
 loss. ,, 
 
 The courts will not, however, disturb an award 
 unless some real fraud or injustice can be shown. If 
 there is fraud on the part of an appraiser, or if the 
 award is grossly unjust, the courts will set it right. 
 But as said above, the arbitration is a condition pre- 
 cedent to such suit. 
 
RICHARD F. BARRETT, CONCORD, MASS. 
 
 Mr. Barrett started as an office boy with the old Middlesex in 
 the historic town of Concord, Mass., under his father, the late 
 Capt. Richard Barrett, who was chosen to the position of sec- 
 retary and treasurer shortly after his return from service in the 
 late Civil war. The business of the company was so small that 
 they succeeded in doing the work for a number of years without 
 help, (the subject of our sketch has often stated that his father 
 did most of it). In 1887 he was chosen secretary and treasurer 
 to succeed his father; in 1896 president and treasurer, which po- 
 sition he still holds. 
 
 With the blood of several generations of fighters in his veins , 
 it is no wonder that Mr. Barrett is one of the aggressive and 
 successful Mutual Insurance men of the United States. 
 
C. F. MINGENBACK, McPHERSON, KANSAS. 
 
 Mr. Mingenback has been for several years the secretary of 
 the Farmers’ Alliance Insurance Company, of McPherson, Kan- 
 sas, one of the largest Mutuals in the United States. He has de- 
 voted himself to two objects, the building up of his own company 
 and the advancing the cause of fraternity as a means of aiding 
 human progress and of increasing human happiness. 
 
OF MUTUAL INSURANCE 
 
 2oy 
 
 SUNDRY CAUTIONS. 
 
 Arbitration is generally concerned with dam- 
 ages. When there is a proposition to arbitrate a 
 total loss, an agreement to do so might waive the 
 right to appeal to the courts. In such cases an attor- 
 ney should be consulted. 
 
 Arbitration is always resorted to as a defense, 
 by the company if it thinks that the loser demands 
 too much; by the policy holder if he is dissatisfied 
 with what the company offers him. 
 
 With the Mutuals the arbitration proceedings 
 are generally more of the nature of an adjustment 
 than anything else. There is rarely any trouble. 
 
 Sometimes, an adjuster or an agent, will tell the 
 loser that there is a flaw in the policy and that the 
 company is not liable. This waives all arbitration 
 on the part of the company. The matter can be 
 taken directly to the courts which will settle all ques- 
 tions. 
 
 This same principle will apply when it is claimed 
 that by some act the assured has voided the policy. 
 These are questions for courts and juries. They are 
 generally questions of law and fact, not estimates of 
 amounts of damage. 
 
 The honest policy holder, who has carefully ob- 
 served the contract will have little trouble in case of 
 loss. If the arbitration is wrong the courts will set 
 it right. 
 
 Though a policy requires the arbitration of the 
 amount of loss when requested as the condition pre- 
 cedent to liability, suit may be maintained both to set 
 
 13 
 
210 
 
 A HAND BOOK 
 
 aside an award and for a recovery on the policy. 
 But such an arbitration is a condition precedent to 
 suit. 
 
 Vincent vs. German Ins. Co., Freeport , III., 94, 
 N. E. Rep., Iowa. 
 
 In some states it is a statutory provision that no 
 person shall be chosen or act as referee, against the 
 objection of either party, who has acted in a like 
 capacity within four months and this clause is print- 
 ed in the standard policy. 
 
 LOSSES NOT OFTEN CONTESTED. 
 
 Insurance companies generally avoid collisions 
 with their policy holders whenever they can. The 
 amount of contested losses, as shown by the reports 
 to the state departments, is much smaller than is 
 usually supposed, and it is but trifling in the case of 
 mutuals. 
 
 The proportion of loss claims resisted in court 
 is also smaller than is generally supposed, and 
 would be still less if people would read their policies 
 and use a little care in keeping the contract. When 
 the conditions of the policy are violated, the contract 
 is broken and in case of loss it is plainly the duty of 
 the company to resist the payment. Incendiarism or 
 any form of fraud should be fought to the bitter end. 
 This of course refers to respectable companies, for 
 there are a few which have gained an unenviable 
 notoriety by refusing payment whenever they saw 
 an opportunity to bulldoze or cajole the loser out of 
 his money. These companies have found this course 
 profitable. They have encouraged over-insurance 
 
OF MUTUAL INSURANCE 
 
 211 
 
 with the view of resisting the loss if any should 
 occur, and they are largely responsible for the valued 
 policy laws and similar legislation. 
 
 THE POSITION Or MUTUALS. 
 
 Mutual companies are legally and morally 
 bound to pay all legitimate losses in full and the same 
 obligation rests upon them to contest all frauds. The 
 money which the stock company handles is its own ; 
 it pays or not as it sees fit. The money which the 
 Mutual handles is not its own, but is held in trust 
 for its policy holders. It has no right whatever to 
 pay out wrongfully, no more than it has to withhold 
 in case of genuine loss. 
 
 If the agents are faithful in doing their duty, if 
 they reject all doubtful and undesirable loss claims, 
 if they avoid over insurance and keep a sharp look- 
 out for frauds generally, if the policy holders would 
 lend their assistance, there would be but few resisted 
 loss claims among the Mutuals. 
 
 Statistics on this matter are not easy to obtain. 
 The reports are not full. But in the year 1903 there 
 were in the States of Connecticut and Massachusetts 
 sixty-three Mutuals, of which five show small losses 
 resisted. At the same time there were in the same 
 states, eleven joint stock companies, of which ten 
 show losses resisted, showing a proportion of eleven 
 to one in favor of the Mutuals. That is probably not 
 far from the average. This shows that the Mutuals 
 are fairly conducted and that their officers act their 
 part faithfully. They should have due credit. 
 
112 
 
 A HAND BOOK 
 
 The class Mutuals have the least trouble with 
 adjustments. Each has only one class of losses to 
 deal with, the line it insures, and all its officers are 
 experts. There is very little probability of working 
 through a fraudulent scheme, as any attempt at over 
 insurance would be detected at once. 
 
 Adjustments in cases of loss by hail and loss of 
 live stock by lightning are treated in the chapters re- 
 lating to those subjects, to which the reader is re- 
 ferred. 
 
 PECULIAR QUESTIONS. 
 
 Insurance men not unfrequently meet the ques- 
 tion whether certain fixtures, pieces of machinery, 
 etc., are parts of the building, and hence real estate, 
 or whether they are personal property. The prevail- 
 ing rule is that whatever is built in with the struc- 
 ture so that material changes will be required to per- 
 mit its removal is real estate. Engines, boilers, line 
 shafting, water wheels, and similar constructions 
 would be so considered. Shelving, counters, etc., if 
 permanently attached, are part of the building. 
 
 But machinery, simply set on the floor, fixtures 
 attached by nails, and all articles of that kind are 
 personal property. The distinction is sometimes 
 made by stating that whenever the removal of any 
 object injures a building, that object is real estate, 
 otherwise, it is personal property. Of course, the 
 injury must be visible as such, and must be enough 
 to be noticed. The mere withdrawing of a nail is an 
 injury, but it is trivial, and such as can not be avoid- 
 ed. Another test is what the tenant brings with him 
 
OF MUTUAL INSURANCE 
 
 218 
 
 with the expectation of removing at the expiration 
 of his lease is personal property. So machinery put 
 in by the owner of the building which may be 
 changed or removed from time to time, is personal 
 property, while the line shafting, which runs these 
 machines might be part of the building. Small port- 
 able engines and the accompanying shafting are per- 
 sonal property. 
 
 If each building is fully described in all its parts 
 and if machinery is specifically mentioned, there will 
 be no confusion on these matters. 
 
CHAPTER XII. 
 
 OVER INSURANCE. 
 
 DIFFERENT CLASSES. 
 
 This vexed question has been discussed from the 
 earliest days of underwriting down to the present. 
 And so long as old Virgil’s 4 ‘cursed thirst for gold” 
 shall survive, so long will the subject still remain to 
 perplex. It is by no means simple, on the contrary 
 it is many sided. Over insurance may arise from 
 criminal intent of the assured, the policy being se- 
 cured by misrepresentation, the insured having in 
 mind a deliberate plan to burn the property for the 
 sake of the money to he received. There are pro- 
 fessionals in this line. They generally deal in stocks 
 of goods. They open a store in some city, stock it 
 well, insure it heavily. They make a show of doing 
 an enormous business, but in reality goods sold are 
 not replaced, the valuable part of the stock is sur- 
 reptitiously shipped out, and in due time the fire 
 occurs. The loss is paid and the criminal goes to a 
 distant state to repeat the performance perhaps un- 
 der another name. 
 
 There is also the over insurance arising from the 
 greed of agents and the rapacity of the company. 
 Knowing by experience that only one man in forty 
 has a loss, companies wink at or even encourage the 
 
 214 — 
 
OF MUTUAL INSURANCE 
 
 215 
 
 agent in putting on the property all the Insurance 
 the owner can he induced to pay for. The company 
 gets a large premium and the agent a big commis- 
 sion. So long as no losses occur this fraud goes on 
 undetected, but when a fire does take place there is 
 generally an attempt on the part of the company to 
 resist payment, a refusal to deliver the indemnity 
 paid for, and very often a law suit. 
 
 There is a third class of over insurers, the happy 
 go-lucky people who always over estimate every- 
 thing of their own. Men of this kind are pretty sure 
 to be insured for all their property will bear. But 
 while they are generally happy they have fits of de- 
 spondency and then they lo se all interest and while 
 they would not think of purposely setting their prop- 
 erty on fire, would not care very much if in some 
 mysterious way it should go up in smoke, which it 
 often does. 
 
 There is also the big house built in the boom 
 days. It brings no rent, the tenant keeps up the two 
 or three rooms which he occupies and the rest go to 
 rack and ruin. There is a big bill of repairs looming 
 up in the near future and— well it burns and that 
 settles it. 
 
 This is on the same line as the conflagrations in 
 street car barns, so frequent among companies which 
 have just replaced their old rolling stock with new. 
 It is singular how rarely any but old cars happen 
 to be in the barns when they are burned. 
 
116 
 
 A HAND BOOK 
 
 REMEDIES— VALUED POLICY LAW. 
 
 Beyond and back of the company, its agents, and 
 the over insurance stands another party in interest— 
 the great mass of policy holders, honest active men 
 on whom the burden of supporting the company is 
 laid, and on whom falls as a matter of course the 
 great expense of all the frauds. What shall be done 
 for them and their protection? 
 
 The first answer to this question was the valued 
 policy law. The law provided that the amount stated 
 in the policy shall be the value of the property in 
 case of total loss, and the companies must pay it in 
 full. The object of this is to compel the companies 
 to be careful in the selection of their agents, and to 
 use caution in accepting risks. As has been said 
 above there are companies and agents whose prac- 
 tice is exceedingly loose, why should they not be held 
 up to their contracts and made to pay as they agreed 
 to? Located in distant states and chartered under 
 laws perhaps of still other states, these companies 
 are difficult to reach, the valued policy law is sup- 
 posed by many to be the best means of reaching 
 them. 
 
 A WRONG POSITION. 
 
 There are those who openly defend the loose 
 way of doing business which has just been described. 
 In the Underwriters Review, Feb. 10, 1904, occurs 
 the following paragraph : 
 
 4 ‘ The essence of fire underwriting is and always 
 has been everywhere to provide indemnity, i. e., to 
 replace the destroyed property or pay its equivalent 
 
OF MUTUAL INSURANCE 
 
 217 
 
 in money. The argument of the advocates of the so- 
 called valued policy law seems at first thought plausi- 
 ble, viz:— that if the companies insure property for 
 more than its actual value, it is their fault, it being 
 claimed that the agent or some representative of a 
 company should carefully appraise the value of the 
 risk taken. This supposes an impossible achieve- 
 ment, unless the companies are to increase the prem- 
 iums charged to a point which would simply be un- 
 endurable to the insured. The companies get their 
 business through their local agents, few of whom are 
 expert judges of the value of buildings, and some of 
 whom are more than willing to insure a patron for 
 any amount, for the larger the premium the greater 
 the agent’s commission. What would it mean to 
 have valued by a competent representative every 
 building insured V 9 
 
 This put into plain English means that the com- 
 panies shall not be responsible for the acts of their 
 agents. This is contrary to common law, common 
 custom and common honesty. No other class of busi- 
 ness men make that claim regarding their agents. 
 Some tried it about a score of years ago, and the re- 
 sult was a popular uprising all over the country and 
 a grist of savage laws, which while well intended, 
 were disastrous in their operation. Nor is the para- 
 graph true. There is a cubic foot rule with regard to 
 dwellings in use by most companies which is found 
 satisfactory. Any agent possessing good ordinary 
 sense can easily ascertain the value of business 
 
218 
 
 A HAND BOOK 
 
 blocks, etc., in bis own town or city. The difficulty 
 imagined in the paragraph does not exist. The best 
 old line text books do not admit it. 
 
 The valued policy laws of several states are giv- 
 en. It will be seen that they attack every position in 
 the quotation above. Some demand that the very 
 appraisal declared impossible to the agent shall be 
 made, some that the excess premium be returned, 
 some that the company shall pay in full and some 
 inflict a penalty for over insurance. 
 
 LAWS OF THE STATES. 
 
 The object of these laws is to prevent willful and 
 deliberate over insurance by the companies through 
 their agents with a view to extorting an excessive and 
 dishonest profit. This practice originated many 
 years ago and while it was not universal, there were 
 companies which made it the rule rather than the 
 exception. The evil increased rather than dimin- 
 ished until nearly twenty years ago an organized 
 effort was made to do away with it. The so-called 
 valued policy law was passed in Vermont and New 
 Hampshire. The uproar was immediate and tre- 
 mendous. The outside companies at once withdrew 
 from these states. But home companies were at 
 once organized to take their place and the bluster 
 amounted to naught. The companies finally gave up 
 their fight and returned to their former conditions. 
 Since that time several other states have passed simi- 
 lar laws, and the drift of opinion seems to have been 
 in their favor until lately, not as a complete remedy 
 
OF MUTUAL INSURANCE 
 
 219 
 
 for the evil but as doing something to suppress it 
 and as the only remedy they happened to think of. 
 
 Under the system of over insurance as it then 
 prevailed the agent increased his commissions and 
 the company their gains, both worked in harmony 
 to rob the policy holder. It is at this practice that 
 most of these laws are aimed. Of these quoted, Miss- 
 issippi and West Virginia make the amount of the 
 policy the measure of damage, Wisconsin and Ne- 
 braska follow the same line. Kentucky included live 
 stock, New Hampshire, excepts fraudulent over in- 
 surance. Delaware makes the valuation of the prop- 
 erty a part of the contract. Ohio and Minnesota re- 
 quire an actual examination by the insurer or his 
 agent, such agent to fix value, which is conclusive. 
 All these aim to destroy the profit of over insurance 
 by making the company pay the full amount of the 
 policy. Massachusetts takes an entirely different 
 line. That state aims to destroy all profit from over 
 insurance either to the company or to the policy 
 holder and punishes the company therefor. This is 
 an excellent law. 
 
 OPPOSING OPINIONS. 
 
 Of the effect of the valued policy law it is not 
 easy to speak in positive terms. There are men of 
 the opinion that it has had a tendency to make some 
 companies more careful in the acceptance of risks. 
 That is probably true. But if the incendiary can 
 effect his Insurance more easily, then the valued 
 policy law works to his advantage. And if the agent 
 be greedy and for the sake of commission overvalues 
 
220 
 
 A HAND BOOK 
 
 property, he makes matters worse than they were 
 before. Where this law exists with no provision for 
 punishing over insurance and with no fire marshal 
 system, the effect has been bad. That seems to be 
 the general opinion. Mr. C. S. Collins of the Arkan- 
 sas Mutual Fire Insurance Co. of Little Rock, Arkan- 
 sas, writes that the valued policy law in that state 
 “has not only not reduced but has increased losses 
 and incendiarism. Dishonest agents co-operate in 
 procuring over insurance. A loss follows and the 
 thief hires his attorney and hides behind his valued 
 policy.’ ’ Other Insurance men express the same 
 opinion. 
 
 The law is one sided ; it does not reach the agent 
 nor the policy holder. The Massachusetts law is 
 much better. But in order to reduce the evil there 
 should be a careful inspection of risks by the com- 
 pany and a cancelling out in cases of over insurance 
 and also an inspection of every suspicious fire by a 
 state officer and a prosecution for incendiarism 
 whenever the evidence warrants. 
 
 LAWS QUOTED. 
 
 Arkansas says: “A fire insurance policy in 
 case of total loss by fire of the property insured 
 shall be held and considered a liquidated demand 
 against the company taking such risk for the full 
 amount on which the company charges or collects a 
 premium; provided, the provision of this act shall 
 not apply to personal property.” 
 
OF MUTUAL INSURANCE 
 
 221 
 
 New Hampshire says: “If insured buildings 
 are totally destroyed, the sum insured shall be taken 
 to be the value of the insured’s interest therein, as 
 such interest is described in the policy, unless over 
 insurance therein was fraudulently obtained ; if they 
 are only partially destroyed the insured should be 
 entitled to his actual damages, not exceeding the sum 
 insured. ’ ’ 
 
 Kentucky says of fire and storm risks on real 
 property: “The company is liable for the full esti- 
 mated value as fixed in the policy. In case of partial 
 loss the liability shall not exceed actual loss. In case 
 of death of live stock, the liability is for full estimat- 
 ed value as fixed in the policy. Fraud in fixing the 
 value of property is criminal.” 
 
 Nebraska says: “Whenever any policy of In- 
 surance shall be written to insure any real estate 
 property in this state against loss by fire, tornado or 
 lightning and the property insured shall be wholly 
 destroyed without criminal fault on the part of the 
 assured or his assigns, the amount of Insurance writ- 
 ten in such policy shall be taken conclusively to be 
 the true value of the property insured and is the 
 amount of loss and measure of damage. ’ ’ 
 
 Wisconsin says: “Whenever any policy shall 
 be written to insure real property and the property 
 insured shall be wholly destroyed without criminal 
 fault on the part of assured or assigns, the amount 
 of the Insurance written in such policy shall be taken 
 conclusively to be the value of the property when 
 insured, and the true amount of loss and measure of 
 damage when destroyed. ’ ’ 
 
222 
 
 A HAND BOOK 
 
 Mississippi forbids knowingly issuing any fire 
 Insurance beyond a fair value of the property. In 
 case of total loss the damages shall be the amount for 
 which the property was insured; in case of partial 
 loss the measure of damage is an equal amount to the 
 damage done to the property not to exceed the 
 amount written in the policy. This does not apply to 
 personal property. 
 
 West Virginia says: “All fire Insurance com- 
 panies doing business in the state shall be liable, in 
 case of total loss by fire or otherwise, as stated in the 
 policy on any real estate insured, for the whole 
 amount of Insurance stated in the policy of Insur- 
 ance upon said real estate; and in case of partial 
 loss by fire or otherwise, as aforesaid, of the real 
 estate insured, the basis upon which said loss shall 
 be computed, shall be the amount stated in the policy 
 of Insurance effected upon said real estate and the 
 insured shall have the right to enforce his claim for 
 said loss in any court having jurisdiction.” 
 
 Delaware says: “ Every such policy, whether 
 hereafter issued or renewed, shall have endorsed 
 across the face of it the following: ‘It is agreed be- 
 tween insurer and insured that the value of the in- 
 sured property is of the sum of $ and this 
 
 estimate shall be binding on both parties as to value ; 
 provided, however, that nothing herein contained 
 shall in case of loss prevent the company insuring 
 from adjusting the loss by replacing the property 
 destroyed, and in case any owner shall effect any 
 subsequent Insurance upon any larger value than 
 so agreed upon, all Insurance, as well that then 
 
OF MUTUAL INSURANCE 
 
 223 
 
 existing as that subsequently obtained, shall become 
 void. ’ This act applies to all policies issued on real 
 property. ’ ’ 
 
 Ohio says: “Any person, company or associa- 
 tion hereafter insuring any building or structure 
 against loss or damage by fire or lightning, by a re- 
 newal of a policy heretofore issued or otherwise, 
 shall cause such building to be examined by an agent 
 of the insurer and a full description thereof to be 
 made and the insurable value thereof to be fixed by 
 such agent ; in the absence of any change increasing 
 the risk without the consent of the insurers, and also 
 of intentional fraud on the part of the insured, in a 
 case of total loss, the whole amount mentioned in the 
 policy or renewal upon which the insurer received a 
 premium, shall be paid ; and in case of a partial loss 
 the full amount of the partial loss shall be paid ; and 
 in case there are two or more policies on the prop- 
 erty each policy shall contribute to the payment of 
 the whole in proportion to the amount of Insurance 
 mentioned in such policy, but in no case shall the in- 
 surer be required to pay more than the amount men- 
 tioned in the policy. ’ ’ 
 
 Minnesota says: “Any person, company or as- 
 sociation hereafter insuring any building or struct- 
 ure against loss or damage by fire, lightning or other 
 hazard, by a renewal of a policy heretofore issued 
 or otherwise, shall cause said building to be exam- 
 ined by the insurer or his agent, and a full descrip- 
 tion thereof made, and the insurable value thereof 
 to be fixed by the insurer or his agent, the amount 
 of which shall be stated in the policy of Insurance. 
 
224 
 
 A HAND BOOK 
 
 In the absence of any change increasing the risk 
 without the consent of the insurer, and in the ab- 
 sence of intentional fraud on the part of the insured, 
 in case of total loss, the whole amount mentioned in 
 the policy or renewal shall be paid; and in case 
 there are two or more policies upon the property, 
 each policy shall contribute to the whole or partial 
 loss in proportion to the amount of Insurance men- 
 tioned in each policy, but in no case shall the insurer 
 be required to pay more than the amount mentioned 
 in the policy, provided that in the absence of fraud, 
 the burden of proof to show an increase of risk by 
 reason of any change in the ownership or condition 
 of the structure or building upon which Insurance 
 is effected, either before or after loss arises, shall 
 be upon the insurer, anything in the application or 
 policy of Insurance to the contrary notwithstanding. 
 And any person who solicits Insurance and procures 
 the application therefor shall be held to be the agent 
 of the party thereafter issuing the policy upon such 
 application, or renewal thereof, any thing in the ap- 
 plication or the policy to the contrary notwithstand- 
 ing. 
 
 “Whenever any company willfully insures prop- 
 erty for more than its real value it shall forfeit to the 
 state school fund double the premium collected on 
 such policy. ’ ’ 
 
 A GOOD LAW. 
 
 Massachusetts says: “No Insurance company 
 shall knowingly issue any fire Insurance policy upon 
 property within this commonwealth for an amount 
 which with any existing Insurance thereon exceeds a 
 
OF MUTUAL INSURANCE 
 
 225 
 
 fair value of the property nor for a longer term than 
 seven years. If buildings insured against loss by 
 fire and situated within this commonwealth are total- 
 ly destroyed by fire, the company shall not be liable 
 beyond the actual value of the insured property at 
 the time of loss or damage, and if it shall appear that 
 the insured has paid premiums on an amount in ex- 
 cess of said actual value, the insured shall be reim- 
 bursed the proportionate excess of premiums paid on 
 the difference between the amount named in the poli- 
 cy and said actual value with interest at six percent 
 from the date of issue ; and said excess of premiums 
 and interest thereon shall be allowed the insured 
 from the time any company or companies carrying 
 said Insurance at the time of the loss have continual- 
 ly carried the Insurance on the destroyed building 
 or buildings, whether under policies existing at the 
 time of the loss or under previous policies in the 
 same company or companies.” The penalty for viola- 
 tion is a fine of not more than $500. 
 
 OTHER PROVISIONS. 
 
 There are three-fourths value clauses issued by 
 some companies. These vary in form but the sub- 
 stance of all is that the company shall not be liable 
 in case of total loss for more than three-fourths of 
 the actual value of the property destroyed. This 
 makes the owner carry one-fourth of the risk him- 
 self and is an incentive to him to take good care of 
 his property. Many companies say it works well. 
 
 14 
 
226 
 
 A HAND BOOK 
 
 The valued policy law deals only with the com- 
 pany, it endeavors to suppress over insurance by 
 making it unprofitable to the insurer. Alone it is of 
 little or no efficiency. A state fire marshal is expect- 
 ed to render incendiarism dangerous by his diligence 
 in investigating all fires of doubtful origin and 
 bringing criminals to justice whenever possible. He 
 is generally required to inspect dangerous places 
 especially in the so-called congested districts of the 
 large cities. In every state where there have been 
 fire marshals, the result has been a material saving, 
 a great reduction of fire waste. It would seem easy 
 to set a building on fire and escape detection. As a 
 matter of fact it is difficult, especially in larger cities 
 where the fire department generally arrives a few 
 moments after the alarm is given. Firemen general- 
 ly form a pretty correct idea as to where the fire 
 started and how it originated, especially when the 
 blaze is extinguished before it has done much dam- 
 age. Incendiaries always plan for a total loss, if 
 this does not occur their arrangements are exposed. 
 
 AN INCENDIARY FIRE. 
 
 An illustration will best show this. Some years 
 since a merchant in a large city put in an enormous 
 stock of clothing, insuring it heavily. For about six 
 months everything went on apparently as in other 
 stores, but one night there was an explosion in the 
 store, flames shot out through cracks and crevices in 
 every direction. The fire department were on hand 
 and put out the fire at once and discovered a lighted 
 candle on the top of a small stove and a broken gas 
 
OF MUTUAL INSURANCE 
 
 227 
 
 pipe in the ceiling above. The owner had wrenched 
 off the pipe expecting the gas to fill the room, ex- 
 plode when it reached the candle and then set every- 
 thing on fire beyond the possibility of extinguishing 
 the blaze. It was a shrewd scheme but it failed, the 
 fire was put out. An inspection showed that most of 
 the stock had been surreptitiously removed. The 
 owner was never heard of. A warrant was issued 
 but the officers failed to find him. No Insurance was 
 ever paid. 
 
 FIRE MARSHALS WANTED. 
 
 In such cases the fire marshal can do good 
 service. He is an expert policeman in his line and 
 an expert is what is wanted. 
 
 North Carolina, Maryland, Ohio, Pennsylvania, 
 Rhode Island and some other states have fire mar- 
 shals with full powers. They must investigate all fires 
 and all fires must be reported to them. They may 
 enter buildings, summon witnesses, take testimony, 
 etc., and it is their duty to cause the arrest and trial 
 of suspected incendiaries. Reports from these 
 states show a large reduction in the number of fires 
 of incendiary origin. They have sent several incendi- 
 aries to the penitentiary. Alabama makes the sher- 
 iffs fire marshals with power to summon juries, etc. 
 
 Maine has inspectors of buildings in towns of 
 over 2,000. Municipal officers must inspect fires, 
 under the supervision of the Insurance commissioner 
 who has ample power. This system seems to work 
 well. New Hampshire has a similar system. 
 
228 
 
 A HAND BOOK 
 
 None of these makeshifts are as fully effective 
 as a fire marshal. The officers are not expert on the 
 line of fires and most of them are occupied about oth- 
 er matters. Insurance companies should urge the 
 establishment of this office in every state. The fire 
 marshal would far more than save his expenses. 
 
 The fire patrols in large cities must not be con- 
 fused with fire marshals, they are merely associa- 
 tions for the purpose of saving goods from burning 
 buildings. This subject is treated more fully else- 
 where. 
 
 EXAMINATION OF RISKS. 
 
 The valued policy laws and the action of the fire 
 marshal do not have effect till after the fire. There 
 is a growing custom among the Insurance companies 
 to inspect their risks occasionally and thus discover 
 cases of over insurance in advance and cancel the 
 policies. This is effective and one after another of 
 the companies is adopting it. 
 
 The result of these inspections has been to bring 
 to notice cases of over insurance and also to discover 
 dangerous exposures, bad constructions and liabili- 
 ties to fires, and cause them to be remedied. The 
 saving in these lines more than makes up for the cost 
 of the inspection. 
 
 RECORDS OF INCENDIARIES. 
 
 It is sometimes advantageous to know the record 
 of persons who wish to insure or who have had a 
 loss. These records can generally be obtained from 
 the great detective associations when their services 
 
OF MUTUAL INSURANCE 
 
 229 
 
 are needed. Their address can usually be obtained 
 from the banks. These companies do only a legiti- 
 mate business. They will find where the evidence is 
 and what is wanted and report it but they will do no 
 more. They will not manufacture evidence nor will 
 they go upon the stand to testify. The common de- 
 tective who swaggers around the loafing places in 
 small towns should be shunned. He is utterly unreli- 
 able and generally unprincipled besides. 
 
 REWARDS. 
 
 Offering rewards for incendiarism has proved 
 effective. The Lykens Valley Insurance Company 
 of Elizabethville, Penn., prints the following: 
 
 ‘ 4 Resolved, That the executive committee be and 
 is hereby authorized to offer, and the Board of Direc- 
 tors agrees to pay a reward for the detection and 
 conviction of any incendiary or incendiaries setting 
 fire to any property insured in this company, said 
 reward to range from ten to two hundred dollars at 
 the discretion of said company, and be based upon 
 the amount insured on the property so fired. ’ ’ 
 
 Mr. James Miller has been secretary of this com- 
 pany for thirty-four years and is therefore competent 
 authority. He says that “this notice goes out from 
 the office so that every insured person can read it.” 
 
 They also attach clauses limiting the liability 
 of the company and compelling the insured to carry 
 twenty or twenty-five percent of the risk himself. 
 Mr. Miller says, “This and the incendiary clause are 
 both good in their way and because we use both to 
 save the company we cannot tell which is most effec- 
 
220 
 
 A HAND BOOK 
 
 tive, but I believe both to be good things to keep the 
 insured as honest as possible. I know there are 
 knockers against these three-fourths and eighty per- 
 cent clauses and these are the very ones I do not 
 trust. People will make money out of an Insurance 
 company if they can and it cannot always be prevent- 
 ed even if these clauses are on the policies.” Mr. 
 Miller favors a state fire marshal. 
 
 SOME RECOMMENDATIONS. 
 
 The investigations of this subject seem to show 
 that there should be a penalty on the companies for 
 over insurance. The Massachusetts law seems ex- 
 cellent. It prevents payment of more than the actual 
 loss in case of fire and destroys the profit of over 
 insurance to the company, adding a penalty for the 
 guilty officials. But it is only effective when brought 
 to light by a fire. The great mass of over insurance 
 by greedy agents would still go undetected. An in- 
 spection of risks would reach most of this. The com- 
 missioner of insurance could deal with companies 
 habitually guilty by causing the fire marshal to look 
 after them. Honest companies wishing to do only a 
 legitimate business will employ their own inspectors 
 who will see that every policy holder carried a part 
 of his own risk. These measures with the rewards 
 spoken of above will reduce over-insurance and in- 
 cendiarism to a minimum. 
 
 Mutual companies have suffered but little in 
 comparison from over insurance. Their care in tak- 
 ing risks, and the general watchfulness of the mem- 
 bership have so guarded them that cases of over 
 
OF MUTUAL INSURANCE 
 
 281 
 
 insurance have been extremely rare, besides most 
 Mutuals adopt a plan of valuation for houses and 
 barns, so much per cubic foot, according to style, 
 age, etc., and this does away with nearly all oppor- 
 tunity for over insurance, whether intentional or 
 not. Most country dwellings will take a rate of six 
 cents per cubic foot. Those just built or finished 
 more elaborately than usual may be rated one or two 
 cents higher. This illustrates a plan which is equit- 
 able and satisfactory in nearly every case. But as 
 the companies increase in strength and in business, 
 evils will be sure to appear. Only the strictest vigil- 
 ance will suppress over insurance and incendiarism. 
 
 THE RIGHT KIND OF AGENT. 
 
 Last of all to be noticed, but of most importance 
 is the agent. If the agent is intelligent and consci- 
 entious he can do more than all state laws and state 
 officials put together. What kind of a man should 
 such an agent be? Subjoined is a letter received by 
 a Mutual Insurance company. From it the reader 
 will get a better idea of a model agent than any de- 
 scription could possibly give. Names and dates are 
 omitted : 
 
 4 1 Dear Sirs : 
 
 “Your favor of the is at hand with refer- 
 ence to renewing your policy. In reply 
 
 will say that this party called at our office some time 
 ago and inquired as to the largest Insurance that I 
 would let him have on his buildings. This kind of a 
 
232 
 
 A HAND BOOK 
 
 question aroused my suspicions a little bit and in 
 
 cross questioning Mr. , he stated that he had 
 
 been burned out three times, as I remember it, so that 
 I did not consider the moral hazard very good. He 
 advised me that he could get more Insurance on his 
 buildings than I offered him, which was in accord- 
 ance with your rules, and I supposed that he had got- 
 ten his Insurance elsewhere. Mr. may be 
 
 all right, but putting all the facts together I do not 
 believe the risk would be a very desirable one. 
 
 4 ‘Yours respectfully, 
 
 << >> 
 
 It seems settled that no one method is effective 
 alone. There is a unanimity of testimony in favor of 
 the state fire marshal, provided the office can be kept 
 out of politics. One official in Ohio has succeeded 
 in bringing to justice a gang of incendiaries who had 
 been operating for twenty years and who had cost 
 the Insurance companies $250,000. In other states 
 the reduction of losses has been immense. Probably 
 the Massachusetts over insurance law as given above 
 would also be desirable. In addition a thorough sys- 
 tem of inspection by the companies should be under- 
 taken. This should be the joint work of all the com- 
 panies occupying any given territory. The inspectors 
 should look for over valuation, and for dangerous 
 places also. It has been proposed that this work be 
 done by the states, but in dealing with corporations 
 the state is generally a grafter. Its charges are ex- 
 tortionate and its services poor, and as long as the 
 
OF MUTUAL INSURANCE 
 
 2S3 
 
 companies can be made to furnish revenues to needy 
 statesmen it may be confidently affirmed that they 
 will be allowed to make profit enough to pay their 
 taxes at least. 
 
 Nothing in the way of legislation can take the 
 place of the fair dealing and intelligent agent. He 
 and he only is the final solution of the whole problem. 
 
CHAPTER XIII. 
 
 CLASSIFICATION OF RISKS. 
 
 This is deciding upon the comparative probabil- 
 ity of loss in the different kinds of buildings, etc., 
 which companies are called on to insure. It is based 
 upon long experience and careful observation. In 
 each policy, or in the application therefor, is an ac- 
 curate description of the property insured. These 
 descriptions have been sorted over and classified and 
 a record of the losses in each class has been faith- 
 fully kept. The process has been going on for a cen- 
 tury or more. 
 
 The number of risks taken into account is enor- 
 mous, so great that according to the well known law 
 of averages the results may be considered certain 
 and positive. They furnish a reliable basis for busi- 
 ness computations. Insurance companies are per- 
 fectly safe in using them in calculating their table of 
 rates. Were there not some such law of average no 
 Insurance would be possible, any attempt to furnish 
 indemnity would be but the boldest gambling. What 
 this law actually is no one knows, nor how it works, 
 only that it actually exists. So the trees in the forest 
 seem to be placed purely by chance, yet every sur- 
 veyor has learned that they are located by some law, 
 he knows not what, and that the number of trees to 
 
 234 — 
 
OF MUTUAL INSURANCE 
 
 286 
 
 the acre practically limits the length of the straight 
 line he can see. In fact there seems to be no such 
 thing as chance in the universe, if only a sufficient 
 number of instances are taken, certainty will result. 
 This holds true in the case of fires. 
 
 ILLUSTRATIONS. 
 
 Now as to risks. A business block in the ordin- 
 ary small town will illustrate. The corner building, 
 a brick, is exposed on one side by the next building, 
 on the other is the open street. If that street is 
 eighty feet wide, there is very little probability that 
 a fire would cross it. The exposure would hardly 
 be considered. If the street is only fifty feet wide 
 there is a chance that a blaze on the other side might 
 set the corner building on fire and there would be an 
 extra risk which would be charged for. Again, if in 
 the side wall of the building under consideration 
 were several windows, in the lower and second 
 stories, the risk would be greater than if there were a 
 solid brick wall. If the building were frame the ex- 
 posure would be enormously increased, and a frame 
 block would make it still worse, so much so that the 
 annual cost of insuring such a structure with its con- 
 tents would go far towards paying the interest on 
 the cost of a brick or stone building. 
 
 Again in a brick block each building is exposed 
 to danger from the other. If the walls between the 
 buildings are only twelve inches thick, they will not 
 be safe, but if they are sixteen or twenty four inches 
 thick they will be effective. A wall three feet high 
 
236 
 
 A HAND BOOK 
 
 above the roof reduces the risk much below what it 
 would be without it. The roof itself is to be consid- 
 ered. If of shingles, it is much more likely to take 
 fire than if of metal or slate. The companies would 
 raise or lower the rate accordingly. The internal 
 structure of the block is to be considered. The thick- 
 ness of the walls has been alluded to, are these walls 
 solid or are there doors from one building to an- 
 other? Is there a stairway for each building or does 
 one stairway answer for two or three buildings. How 
 are the openings protected? If by common doors 
 the danger is materially increased, if the doors are 
 standard fire proof constructions, the increase is 
 very little. Then the heating system comes in, the 
 telephone wires and no end of complications beside, 
 before the risk on the building is fully and finally de- 
 cided so far as its own construction and exposure are 
 concerned. 
 
 FIRE DEPARTMENTS. 
 
 Then there is the probability of extinguishing 
 fire. The water supply must be taken into account. 
 If there are city water works, plenty of apparatus, 
 a paid fire department, the probability of a conflag- 
 ration is reduced. If one or more of these may be 
 absent, then the danger increases. In “unwatered” 
 towns the risk is much greater. 
 
 CONTENTS. 
 
 The contents of the buildings must also be looked 
 after. “Preferred stocks,’ ’ groceries, general mer- 
 chandise, etc., do not increase the rates, but most 
 
OF MUTUAL INSURANCE 
 
 237 
 
 manufacturing does. The number of tenants has an 
 influence on the risk as well as who they are. The 
 proprietor’s family would not generally be held to 
 increase a risk, but it may be otherwise with a tenant. 
 
 The contents of the building also have their 
 ratings. These depend on the probability of their 
 taking fire and also on the probability of being in- 
 jured by water. Then the probability of getting the 
 stock out in case of fire is an important factor. A 
 stock on the ground floor which is easily handled is 
 much less liable to be a total loss than the same 
 stock on the second or third floor or a stock of goods 
 on the ground floor, but too heavy to handle. 
 
 There is still another matter to be considered, 
 the probability of aid in case of fire. People often 
 wonder why the town dwelling house and contents 
 get more favor than the same style of building in the 
 country. The reason is that in case of fire in town 
 there is a large force ready to help put out the fire 
 and save the contents of the building, while the 
 country dwelling is generally at a distance from all 
 such help and is much more often a total loss. 
 
 The probabilities vary not only in different 
 towns and cities, but sometimes in different parts of 
 the same state. There have been cities and towns 
 where there was a law defying element which rend- 
 ered it unsafe to insure property and from such the 
 Insurance companies were obliged to withdraw en- 
 tirely. 
 
 The work just described is done by men who 
 make a specialty of it. They have cultivated their 
 powers of perception till they are able to see the 
 
238 
 
 A HAND BOOK 
 
 dangers which increase the risks and when they per- 
 suade people to remove the cause of dangers they do 
 a service to the public. This is often the case with 
 defective electric wiring. Ignorant or careless work- 
 men leave dangerous constructions. These the in- 
 spector discovers, and threatens to rate the building 
 accordingly if they are not made safe. Usually the 
 expense of this is trifling. So in the case of expos- 
 ures, a very small change in the protection may save 
 many dollars in Insurance. 
 
 The agent should study all these risks and the 
 ratings and should think out the reason for the dif- 
 ferences. He should be able to recommend changes 
 which will reduce the risk. Sometimes, a very little 
 thing may make a great difference. An agent in- 
 specting a building found electric wires crossing so 
 that the risk was extra hazardous. He was quick 
 witted and taking a piece of discarded rubber belt- 
 ing he invented arrangements which removed all 
 danger. This is an example for others to follow. 
 
 NO INCREASE OF RATES. 
 
 A mistaken idea has become current that these 
 men combine to increase the rates. This is incorrect. 
 They do not fix rates, they only carefully and accu- 
 rately describe the property and compute the prob- 
 abilities of loss and leave the fixing of the rates to 
 the various boards. 
 
 They have reduced rates instead of increasing 
 them. They are not in the employ of any company 
 but sell their information just as the mercantile com- 
 
OF MUTUAL INSURANCE 
 
 239 
 
 panies sell theirs. As they sell their descriptions 
 many times over they can afford to take a very low 
 price. If each company were obliged to get up the 
 description for itself the cost would he enormous. 
 The first list would cost in the average state any 
 where from ten to twenty thousand dollars and it 
 would cost from three to six thousand dollars a year 
 to keep them up. In the larger states the cost would 
 he increased in proportion. No small companies 
 could stand such an expense, they would all he driven 
 out of business or else would be obliged to resort to 
 the old practice of charging a survey fee as was done 
 before this system came into general use. 
 
 In either case the great companies would absorb 
 the business, and the result would be an immense fire 
 insurance trust. 
 
 As was said above, the classification of risks is 
 not setting prices on indemnity. That work is done 
 by the local boards composed of the agents of the 
 fire insurance companies. Occasionally companies 
 do not go into these boards but fix their own rates. 
 These are known as non-board companies. There 
 are such companies doing business in nearly every 
 vicinity. They generally use the same classification 
 as the others. 
 
 It is not possible to compile a list of rates which 
 will apply everywhere in the United States. While a 
 first class town or city is described in nearly the 
 same terms all over the country, and the same is true 
 of a first class building, and of the other classes of 
 buildings and stocks as well, the actual rates as 
 
240 
 
 A HAND BOOK 
 
 charged by the companies vary widely in different 
 states and sometimes within the same state, north- 
 ern Michigan and northern Wisconsin taking differ- 
 ent rates from the southern portion of the same 
 states. Some of these variations seem to be caused 
 by difference in climate, the longer winters in the 
 northern states causing greater risks from stoves 
 and furnaces and consequently requiring advanced 
 rates. In other regions the increased hazard from 
 prairie or forest fires has to he charged for, while in 
 some portions of the country an uneasy social condi- 
 tion causes hazards which must be taken into ac- 
 count. Nearly everywhere, however, the local rates 
 have become tolerably well known and it is safe to 
 follow them till experience shows where they can be 
 changed for the better. 
 
 THE MUTUAL PROBLEM. 
 
 With Mutuals the problem is to ascertain the 
 cost of each class in each company in order that 
 equitable rates may be charged. For example, tak- 
 ing a farm dwelling house as a basis what should be 
 the advance or deduction on other classes of prop- 
 erty. It will be found by experience that the books 
 of different companies will show very different fig- 
 ures even in the same states. The only way to do 
 exact justice in these matters is to keep a book ac- 
 count with each class of property insured and to ad- 
 just the rates accordingly. In this way it will be 
 possible to furnish Insurance at cost, which is the end 
 and object of every Mutual fire and storm Insurance 
 company. 
 
F. J. MARTIN, SEATTLE, WASH. 
 
 F. J. Martin is a yonng man of force and push. For a time 
 he was connected with the Oregon Fire Relief Association, 
 later he won distinction in the Mutual business at Seattle as the 
 “push" of the Northwestern Mutual Fire Association, now con- 
 nected with the National Association of Factory Mutual Insur- 
 ance Companies. The statistics furnished for the Manual will be 
 sufficient proof that Mr. Martin is one of the best informed men 
 in the country. 
 
L. R. WELCH, FITCHBURG, MASSACHUSETTS. 
 
 Mr. Welch is the secretary of the Fitchburg Mutual Fire In- 
 surance Company. In this position he has been pre-eminently 
 successful. He has an abundant supply of that Yankee shrewd- 
 ness, which recognizes a good thing when it sees it. and is at the 
 same time cautious enough not to disregard old methods simply 
 because they are old, or to adopt new methods just for the nov- 
 elty. 
 
OF MUTUAL INSURANCE 
 
 241 
 
 Every agent is occasionally obliged to measure 
 the distance between buildings. The most accurate 
 method is by chain or rod. These are seldom at hand. 
 ‘ ‘ Stepping off ’ ’ is the method usually adopted. The 
 natural step used in ordinary walking varies but 
 very little, and one can easily learn how many steps 
 are required for twenty, fifty or a hundred feet, 
 etc. After a little practice, a man should be able to 
 step off a hundred feet with an error of not more 
 than three or four inches. But if he tries to make 
 paces of three feet each the error will probably be 
 several times that amount. And when using the nat- 
 ural step no one will be able to see that measure- 
 ments are being made. 
 
 DEFECTIVE CHIMNEYS AND FLUES. 
 
 These are frequent causes of fires in buildings, 
 being outclassed only by ‘ ‘ accidental ’ 9 and “un- 
 known.” And yet all such fires could be prevented 
 by the exercise of a little care. If chimneys are 
 properly built they will remain safe indefinitely. 
 Whenever possible chimneys should rest on the 
 ground. If supported by a bracket or floor, the wall 
 to which the bracket is attached or the floor under 
 the chimney should be supported in such a way that 
 it cannot possibly settle. The chimney should have 
 no support whatever above its base. It must not rest 
 upon the floors or upon the roof or be in any way 
 fastened to them. If it is, it will be sure to draw 
 15 
 
242 
 
 A HAND BOOK 
 
 apart when the building settles as it assuredly will. 
 Nearly all defective chimneys are defective from 
 this cause. 
 
 Where the chimney goes through the roof the 
 opening should be large and the flashing should he of 
 soft tin. Then when the roof or the chimney settles, 
 the tin will bend and there will be no break in either 
 tin, chimney or roof. Chimneys are sometimes built 
 with a projecting brick at each floor and at the roof. 
 An extra rate should be charged for these. The 
 breaks in these chimneys occur where they cannot 
 be seen. The bricks rest upon the floor and the break 
 takes place just under them between the floor and the 
 ceiling below. 
 
 Holes for stovepipes should be made with thim- 
 bles and the flue stops should be so fastened that 
 they cannot be blown out. Sometimes the artist who 
 does the wall papering covers the stove pipe hole and 
 forgets to put back the flue stop and collar. Where 
 there is more than one hole in a chimney this needs 
 looking after. 
 
 Chimneys should be cleaned out frequently. Oth- 
 erwise soot will accumulate until some windy day 
 it will take fire and there will be a veritable volcano 
 of sparks and probably a fire in consequence. 
 
 If chimneys are smoothly plastered inside, so 
 much the better. They will draw better, are much 
 easier cleaned and are far safer as they are much 
 less liable to crack. 
 
OF MUTUAL INSURANCE 
 
 243 
 
 THE MATCH. 
 
 The modern parlor match is exceedingly danger- 
 ous, so much so that its sale has been prohibited in 
 New York City and perhaps elsewhere. It scatters 
 sparks, or worse yet, the whole head flies off, setting 
 fire to whatever it falls upon. As no others can he 
 had in most places, these must of necessity be used. 
 They should be kept out of the reach of children. By 
 no means allow them to be scattered all over the 
 house, if one is dropped upon the floor it should not 
 be left, but picked up. There is something in matches 
 which attracts mice and rats ; see that they are kept 
 out of reach of these animals. People who habitually 
 carry matches should use pocket match boxes. Tin 
 boxes are preferable for keeping matches, though 
 any box will answer if it is in a safe place and no box 
 is good in the hands of careless people. 
 
 STOVES, ETC. 
 
 Stoves should not be close to woodwork and the 
 floor should be protected with zinc or by some other 
 effectual method. The pipes should go directly into 
 the chimney if possible. If they pass through parti- 
 tions they should be enclosed in tubes giving good air 
 space around the pipe. A double tube (the pipe be- 
 ing the inner circle) will make them much safer. 
 These tubes should be well ventilated. The pipes 
 should also be well wired and fastened, so that there 
 will be no possibility of them coming apart or fall- 
 ing down. When the pipe is not too long it is well to 
 rivet the whole into one piece. Long pipes may be 
 riveted in sections. 
 
244 
 
 A HAND BOOK 
 
 The make of the stove is important. The doors 
 should have latches which will hold. Sometimes a 
 burning stick of wood or lump of coal in the stove 
 rolls over against the door. If the latch is imperfect, 
 it may let the door open and the fire may fall out 
 upon the floor. Sometimes such doors may be blown 
 open by an explosion of gas in the stove. The open- 
 ings for cleaning out the base of the stove should be 
 closed by a cover which can be latched or buttoned, 
 so that it cannot be blown out, and the pipe should 
 be securely fastened to the chimney for the same 
 purpose. 
 
 Ashes should be put in metal receptacles and al- 
 lowed to stand till they are thoroughly cool before 
 they are finally disposed of. Wood ashes are some- 
 times kept in the cellar. If so they should not be 
 kept in wooden boxes or bins. They occasionally re- 
 heat, especially when there is much unburned mater- 
 ial mixed with them. 
 
 A black substance like gas tar will condense in 
 pipes which are out of doors or at a distance from 
 the stove. It corrodes the iron and combines with it 
 very rapidly, and while the pipe retains its shape, it 
 becomes combustible and if the soot within takes fire 
 it will burn. To test stove pipes for this danger tap 
 them lightly with a small hammer. The sound will 
 indicate the condition of the pipe and if it is much 
 corroded the hammer will go through the iron. 
 Where there is a liability to this danger, the stove 
 pipes should be renewed at least once a year. 
 
OF MUTUAL INSURANCE 
 
 246 
 
 Especial attention is called to this matter. A 
 stovepipe may, on the outside, appear as good as 
 new but may be corroded on the inside till the orig- 
 inal metal is entirely gone. The only safe way is to 
 test all stovepipes frequently. 
 
 INSPECTION BY FIREMEN. 
 
 Inspection by firemen differs from Insurance 
 inspection in disregarding classification, a matter to 
 which the average fireman pays but little attention. 
 His efforts are directed to ascertaining where fires 
 are likely to break out, and to removing the causes 
 of danger. He looks first at the outside of the 
 building, is it neat and in good order ? How are the 
 surroundings? Where are the ashes kept? What 
 are the exposures ? Are the chimneys above the roof 
 in good order or is the smoke pouring out through 
 Cracks? How is the roof secured to the chimney? 
 If by flashing, is it in good condition? If there are 
 chimney caps, are they well secured? Are the chim- 
 neys high enough to keep the sparks clear of the 
 roof I How are the windows, and shutters or screens ? 
 Can a draft through the house be shut off if neces- 
 sary? Where is the water supply in case of fire? 
 How are the foundations constructed? 
 
 THE CELLAR. 
 
 Noting carefully all these, the fireman next goes 
 inside and beginning with the cellar, examines the 
 house, room by room. Is the cellar neat and clean 
 or is it a receptacle for old rubbish? Is the coal oil 
 
246 
 
 A HAND BOOK 
 
 kept there? The gasoline? Are there paints, oils, 
 turpentine, etc. ? Is there a pile of greasy rags liable 
 to cause spontaneous combustion? How is the cellar 
 lighted? If it is necessary to use lamps are there 
 shelves or brackets on which to put them, or must 
 they be carried around ? Do the chimneys run down 
 through the cellar, and if so are the openings proper- 
 ly secured? Are the chimneys sound and solid where 
 they pass through the floor? If there is a fireplace 
 is it so secured that burning soot, etc., falling down, 
 cannot roll out upon the floor and set things on fire? 
 
 TOE FIRST FLOOR. 
 
 Next comes the first floor. Are the stoves set 
 upon zinc or some other non-conductor to prevent 
 setting fire to the floor? How far are they from the 
 wall ? Have they dampers in the pipe ? Do the latch- 
 es on the doors hold them shut, or do they fly open 
 easily? Are they liable to blow open? Is the small 
 door for cleaning out the back part fastened proper- 
 ly or is it left loose? What kind of fuel is used? 
 Are the stoves kept clean, or are they full of soot? 
 Are the pipes properly fastened? Do the joints 
 match, or are there open places ? Are they wired to 
 the chimney, or are they loose and liable to fall 
 down? Do they fit closely into the hole in the chim- 
 ney? Do they go through floors and partitions? If 
 so, are they properly secured, and do they pass 
 through suitable metal constructions to make them 
 absolutely safe? Will they bear a blow from a small 
 hammer or are they rusted and rotten? How about 
 
OF MUTUAL INSURANCE 
 
 247 
 
 stove pipe holes, are they furnished with thimbles? 
 When not in use are they closed with flue stoppers 
 which cannot come to pieces and blow out? Is the 
 stove pipe hole in the parlor closed with a flue stop- 
 per, or has the wall paper been pasted over it and 
 left— and forgotten? How are the chimneys where 
 they pass through the floor ? Are there any cracks ? 
 Do they rest on the floor or are they sufficiently free 
 that unequal shrinkage will cause no damage? Are 
 those which rest on brackets solidly constructed^ 
 Where the pipes enter from below is there a plate of 
 iron or stone to make sure against cracking or other 
 accident? 
 
 What sort of lamps are used and where are they 
 kept? Are they bracket lamps and if so, are they 
 where the curtains can blow against them? Are the 
 larger coal oil lamps used ? The gasoline lamps ? Is 
 gas used, if so are the pipes solid and sound and ac- 
 cessible in case of leak? If electricity, are the wires 
 properly insulated ? Is there any place where water 
 running down in a storm can reach the wires and 
 make a short circuit? Is the telephone wire ground- 
 ed against lightning? Are there lightning rods on 
 the house and are they in good condition? Where are 
 the gasoline and coal oil kept? Is artificial light 
 kept away from them? What kind of matches are 
 used ? Are they out of reach of rats and mice ? Can 
 the children get at them? Do they use coal oil to 
 kindle fires? Where is the gasoline stove and what 
 condition is it in ? Are there inflammable substances 
 
248 
 
 A HAND BOOK 
 
 about? Are the cobwebs swept down? Are the eaves 
 troughs kept free of leaves and sparrows’ nests? 
 
 THE UPPER STORIES. 
 
 The inspection of the upper stories is like that 
 of the first floor as far as it goes. The chimneys 
 should be carefully examined for cracks, the stove- 
 pipe holes thoroughly inspected and the flue stops as 
 well. This is more important, if possible, than are 
 the lower floors, for in case a chimney burns out or 
 there is an explosion and the flue stops fail to confine 
 it, a fire might ensue which would probably get be- 
 yond control before it was discovered. 
 
 If there is a garret, what shape is it in? Look 
 around the edges and see what is stored away there, 
 is there a bundle of oil shades, a suit of greasy over- 
 alls, or anything else liable to set itself on fire ? What 
 is the condition of the chimney? Is it fastened to the 
 roof so that it rests upon it ? Is the mortar sound or 
 are there cracks ? 
 
 BAD CONSTRUCTIONS. 
 
 In some story and a half buildings the second 
 story is made by running scantling up a few feet 
 above the floor, then following the rafters and put- 
 ting in a ceiling overhead in the center. Sometimes 
 this ceiling has no opening. Where this is the case, 
 it should be insisted on that an opening be made so 
 that the chimney can be inspected where it passes 
 through the roof. In one story buildings there is 
 sometimes a worse construction. The chimney is 
 
OF MUTUAL INSURANCE 
 
 249 
 
 built on the joists overhead and at one end to have 
 better support. The stovepipe is then put in position 
 and the lathing and plastering completed so that the 
 pipe is actually built in and there is no way of getting 
 into the space above the ceiling to inspect the pipe or 
 chimney. Such a risk should be declined until the 
 defect is remedied. 
 
 This sketches an ordinary inspection. And in 
 the average of country dwellings in over fifty of 
 every hundred the firemen will find something to 
 remedy. If the owners of dwellings could be induced 
 to inspect their premises every spring and fall after 
 stoves are taken down or put up, there would be a 
 large reduction in fire waste and a corresponding 
 diminution in expense. 
 
 EXCEPTIONAL CASES. 
 
 People speak of the New York fire, the Boston, 
 Chicago and Baltimore fires as exceptional occur- 
 rences, as dangers to which they themselves are not 
 exposed. But those who suffered in these great dis- 
 asters talked in the same way before the conflagra- 
 tion came. Even when the fire broke out there was 
 at first but little alarm. Not till hours or days had 
 passed was the extent of the damage realized. 
 
 Nor are unusual and unexpected destructions 
 confined to fire waste. The sea is swept by gales and 
 the list of vessels wrecked and vessels never heard 
 from surpasses all previous records. A stream is 
 bridged. The structure is placed above the high- 
 water mark of the oldest inhabitant. But some day 
 the rains come and the bridge goes down the stream. 
 
250 
 
 A HAND BOOK 
 
 The hailstorm or tornado records show that 
 within the areas where these storms prevail, for 
 twenty, thirty or even forty years, certain tracts of 
 land have been exempt, and the average loss has 
 been below a certain percent. At great expense all 
 this has been tabulated and mapped, but the informa- 
 tion so gained is sooner or later set at naught by the 
 exceptional season. 
 
 These occurrences must be taken into account if 
 safe indemnity is to be furnished. Every one of the 
 great fires mentioned above bankrupted Insurance 
 companies which had unimpaired capital and good 
 reserves, and which were considered as out of reach 
 of all dangers. So with Insurance against storms. 
 The cases are parallel. 
 
 The inference from these facts is that the tables 
 which are accepted as a basis for rates in the confla- 
 gration and storm areas do not cover a sufficiently 
 long experience, that there is still an unknown and 
 contingent risk in addition to what has been consid- 
 ered the average loss. The question at once arises, 
 what shall be done to provide for this hazard, for it 
 is when these fearful devastations take place that in- 
 demnity is most urgently needed. In the case of 
 storms, as in other operations of nature, man can do 
 nothing to reduce the hazard. Those who have given 
 the matter the most consideration recommend the ac- 
 cumulation of a reserve. Hail companies generally 
 favor it, and the plan will probably be adopted. The 
 scattering of risks is also suggested and is evidently 
 
OF MUTUAL INSURANCE 
 
 261 
 
 a prudent measure. Time is needed to settle this 
 question. 
 
 CONFLAGRATION RISKS. 
 
 With conflagration risks the case is different. 
 Something can he done to improve the character of 
 the risk. Slow burning constructions can be adopted. 
 Fire proof buildings are beyond the means of ordi- 
 nary builders at present, but experiments now in 
 progress seem to indicate that material may be had 
 which, while not fire proof in the strict sense of the 
 word, will burn so slowly that fire can be put out be- 
 fore it gains much headway. The style of building 
 in vogue at present is apparently the result of a com- 
 petitive contest between architects as to which can 
 produce a structure which will burn up in the short- 
 est time, and in which all were entitled to the highest 
 prize. The Iroquois theater disaster in Chicago, 
 hotel holocausts in several cities and other similar 
 occurrences, are waking up the public to the necessity 
 of changing the methods of construction not only for 
 the purpose of reducing the loss of property, but for 
 the saving of human life. 
 
 NEW ENGLAND MILL MUTUALS. 
 
 The example of the mill mutuals of New Eng- 
 land, the pioneers in the work, should be followed in 
 all other lines. The fire waste is enormous. A time 
 of depression, after years of prosperity, is a time of 
 fires, a conflagration risk for the local organizations. 
 And to prevent this should be the study of every 
 
252 
 
 A HAND BOOK 
 
 Mutual officer and policy holder in the land. It is 
 much cheaper to guard against loss than it is to pay 
 for it after it has occured, and this should be the in- 
 spiration of those who are trying to reduce the con- 
 flagration risks. 
 
 Few people who have not given especial thought 
 to the matter have any idea of the useless fire waste 
 of the country. It is probable that this can be re- 
 duced, and it is not too much to say that if proper 
 means are taken a sum can be saved annually equal 
 to one dollar and twenty-five cents for every inhabi- 
 tant of the United States at the very lowest estimate. 
 
 SPECIAL CASES. 
 
 GASOLINE. 
 
 Gasoline is exceedingly inflammable, and when 
 mixed with air in the proper proportions is explosive. 
 The force of these explosions can be estimated from 
 the fact that a pint of gasoline properly exploded in 
 the cylinder of an engine will furnish one horse pow- 
 er for an hour, that is it will furnish a force sufficient 
 to lift 33,000 pounds 60 feet high in an hour. The 
 result of an explosion is generally the scattering of 
 burning gasoline in every direction and a destructive 
 fire generally ensues. 
 
 But danger from gasoline can easily be avoided. 
 First see that all the containers, pipes, faucets, etc. 
 are strong and air tight, and then keep a sharp look 
 out for leaks or breaks. 
 
 Second, keep your gasoline up high and out of 
 doors. The vapor of gasoline is heavy and will sink. 
 
OF MUTUAL INSURANCE 
 
 253 
 
 hence it should never be kept in a cellar. Gas engines 
 should not exhaust into a chimney but out of doors. 
 The best place to keep a gasoline can is in a box out 
 of doors, where the wind can blow away all the vapor. 
 Many keep their gasoline on a porch. This does very 
 well, in fact, it will do to keep it anywhere so that the 
 vapor can blow away. 
 
 Third, be careful about slops and running over. 
 Don’t fill your vessels or tanks too full. Sometimes 
 when a stove tank is filled up with cold gasoline the 
 fluid expands as it warms and then runs over. This 
 has caused a great number of fires. But if a slop or 
 such run-over occurs, put out all fires and lights at 
 once, wipe up the spilled gasoline with a dry cloth, 
 wipe it up clean, let the air circulate a few minutes 
 and all will be safe again. But whenever you are 
 drawing gasoline or filling a tank, have no fires or 
 lights about. Should the tank catch fire throw the 
 whole thing out of doors. You will have time to do 
 this if you work quickly. 
 
 Fourth, look out for the wind, especially when 
 you are using more than one burner or when there is 
 another fire or a light in the same room. A puff of 
 wind may extinguish a burner. It will cool off and 
 the flow of gasoline will soon form a pool beneath it. 
 As soon as this extends below the other burners an 
 explosion will take place. 
 
 With common sense and common carefulness 
 there need be very few accidents from gasoline. 
 
 If gasoline is spilled, wipe it up quickly with a 
 dry cloth and throw the cloth out of doors. This is 
 
254 
 
 A HAND BOOK 
 
 also the best method in dealing with a small blaze. 
 Flour or dry ashes thrown upon blazing gasoline will 
 do as much toward putting it out as anything else. 
 It may also he smothered out with a wet blanket 
 large enough to cover the whole blaze, hut water 
 thrown upon it only makes the matter worse. This 
 applies to kerosene also. 
 
 COAL OIL. 
 
 Coal oil, though not so explosive as gasoline, 
 needs careful handling, especially where there is no 
 efficient system of inspection. Much of the coal oil 
 sold in such localities is no better than gasoline. The 
 highest grade of coal oil is not inflammable at ordi- 
 nary temperature. It will extinguish a burning 
 match thrust into it almost as quickly as water. But 
 such oil is not generally obtainable. Unlike gasoline, 
 at common temperature, coal oil gives off no inflam- 
 mable vapor, or very little and when ignited, does not 
 blaze up very quickly. But when heated, it becomes 
 inflammable. While the great danger from gasoline 
 is not so much in using it as having it around, the 
 great danger from coal oil is in using it, there being 
 very little danger in having it on hand. 
 
 The danger arises from breaking or upsetting 
 of lamps, and the consequent flow of heated coal oil 
 which takes fire at once, and also from the liability 
 to overflow, and from the explosion of some kinds of 
 lamps and stoves. The German student lamp and 
 similar makes are perfectly safe with coal oil. The 
 ordinary single burner hand lamp is sometimes up- 
 
OF MUTUAL INSURANCE 
 
 255 
 
 set and broken, but it is rarely subject to any other 
 accident. If made of metal instead of glass it would 
 be safer. 
 
 LARGE LAMPS DANGEROUS. 
 
 But the large lamps, holding from a quart to a 
 gallon and with wicks of corresponding size generate 
 an enormous heat. Sometimes this causes the forma- 
 tion of gas inside the lamp and the consequent pres- 
 sure forces the oil up through the wick faster than 
 the blaze consumes it. This catches fire and runs 
 down over the body of the lamp and heats it till it 
 explodes. 
 
 All coal oil burners should be kept clean. The 
 drip cup of the student lamp should be emptied fre- 
 quently and the wick kept in good condition. No ac- 
 cumulations of gum or filth should be tolerated. 
 Lamps brought into a warm room from a cold one 
 should be watched till they get warm. The heat 
 sometimes expands the coal oil more rapidly than 
 the wick takes it out, and then it runs over and makes 
 trouble. Never set a lamp near a very hot stove. 
 When buying a large lamp make the dealer guar- 
 antee it not to heat. After it is taken home and it 
 has been burning for an hour or so, put a finger on 
 the bowl near the burner, if it is hot enough to be un- 
 comfortable, the lamp is unsafe, and should be re- 
 turned. 
 
 Should a lamp take fire, throw it out of doors 
 at once. Should coal oil be spilled and take fire, 
 smother it with cloths. Do not throw water on it. 
 Dry ashes, sand, earth or flour is splendid in putting 
 
156 
 
 A HAND BOOK 
 
 out all kinds of fires, from gasoline, coal oil, fats, 
 turpentine, varnish, etc., throw it on thick. Next to 
 this is a wet blanket, but as said above, do not throw 
 water on such a fire. 
 
 LAMPS, GAS, GAS MACHINES, ETC. 
 
 In all lamps and other devices for producing 
 light by combustion, a gas is burned. This is true of 
 the tallow candle. The heat of the flame slowly melts 
 the tallow, the wick draws this up close to the blaze 
 where the heat vaporizes it. It is then a gas and 
 burns as such. The main difference is in the com- 
 plexity of the process, the distance between the crude 
 material and the point of combustion and the tem- 
 perature at which the tallow, oil, or whatever it may 
 be becomes a gas. In the candle, and in the wick 
 using lamps the whole process is in contact with the 
 wick, while in gas machines and many so called lamps 
 and in gasoline stoves the gas is generated at one 
 point and burned at another. 
 
 In the ordinary lamp the gas is generated at the 
 point of combustion and the oil is supplied by the 
 wick. In lamps with a deep bowl, when the oil is 
 nearly exhausted the wick has to raise it so far that it 
 comes up slowly and the flame burns low, and the 
 upper portion of the bowl becomes dangerously hot. 
 To obviate this the student lamp was invented. The 
 burner is placed at one end of a tube a few inches 
 long and at the other is the oil in an inverted tank. 
 As it is consumed by the burner, bubbles of air travel 
 through the tube and into the tank, releasing a sup- 
 
OF MUTUAL INSURANCE 
 
 251 
 
 ply of oil as it is needed. Thus the oil is always cool 
 and there is no accumulation of hot gas in the burner. 
 Should the lamp be upset, the oil rarely runs out. 
 The burner exhausts itself and the flame dies out in 
 a few seconds. This is believed to he the safest lamp 
 made. The same principle has been adopted by the 
 makers of some styles of gasoline lamps but these are 
 not safe, as gasoline does not work like coal oil. 
 
 There are other methods of supplying the oil or 
 gasoline; one is by gravity, regulating the amount 
 by a stopcock, in another, air pressure is furnished 
 by a small pump. This pressure drives the flow up 
 to the point where it is wanted. Neither one is safe. 
 
 The use of the wick has already been explained. 
 The formation of the gas is now to be considered. 
 When coal oil or gasoline is used the gas is either 
 made by heat or is simply a mechanical mixture of 
 air and vapor. In gasoline lamps, stoves, etc., the 
 burner is heated to the proper point, the gasoline is 
 turned on and lighted and then the burner keeps it- 
 self hot. This gas must be used very close to where 
 it is generated. 
 
 When it is desired to burn gas at a distance from 
 where it is generated, as in lighting several rooms 
 from the same generator, conveying the gas by a sys- 
 tem of pipes, the proper mixture of gasoline and air 
 is secured by mechanical means. There are many 
 inventions for this purpose and the best method of 
 discovering the defects of any one is to ask the 
 agents of another make. The mixed air and gaso- 
 16 
 
258 
 
 A HAND BOOK 
 
 line which is used in this system sometimes con- 
 denses, but if the pipes are so arranged that they 
 drain back into the generator, this will make hut lit- 
 tle trouble. But the generator should he out of doors 
 and in a brick or stone structure not under ground 
 and not liable to freeze. The pipes and fixtures 
 should be carefully put up and kept in order. If 
 there is a leak it will betray itself by its odor. 
 
 ACETYLENE. 
 
 Acetylene is an entirely different affair. It is 
 made in practice by bringing water in contact with a 
 substance known in the market as carbide of calcium. 
 The gas is then given off. There are several patents 
 on machines for making acteylene but all machines 
 either pour the water on the carbide or put the car- 
 bide in the water. The gas when it comes off is caught 
 in the reservoir attached to the generating apparatus 
 and forces the water out. When the water level is 
 forced below the carbide, the production of gas 
 ceases till it is drawn off and the water rises and 
 again reaches the carbide. 
 
 This gas differs from gasoline vapor in many 
 respects. It is lighter. While gasoline vapor re- 
 mains on the floor, acetylene ascends to the ceiling. 
 It is much more explosive in mixture with air and a 
 much lower heat will ignite it. A glowing coal or 
 even a cigar will explode it. The generating appara- 
 tus of gasoline, if kept by itself, is not dangerous. 
 Acetylene gas machines give off heat and the appara- 
 tus may become hot enough to explode. Gasoline 
 
OF MUTUAL INSURANCE 
 
 259 
 
 will stand all kinds of shocks. Under pressure, a 
 heavy shock will explode some forms of acetylene. 
 The generating apparatus must be handled with 
 much more care. It is not permitted by many com- 
 panies. 
 
 The manufacturers of all lamps and gas ma- 
 chines advertise them as “ absolutely safe.” This is 
 generally an atrocious falsehood. There is no such 
 machine, no such lamp. Some are only reasonably 
 safe in the hands of experts, others can he managed 
 by ordinarily careful people, but not one is fire proof 
 or fool proof. 
 
 Agents who have had no experience with gas 
 machines or gasoline lamps should refer the ques- 
 tion of their use back to headquarters. 
 
 NATURAL GAS. 
 
 This gas should have a pressure regulator either 
 at the burner or at the mains. Otherwise it is dan- 
 gerous and should be uninsurable. The flame of an 
 unregulated burner may be three inches long at nine 
 o’clock in the evening. As the other lights are 
 turned off the pressure may increase till at one 
 o’clock in the morning the flame may be two feet 
 long. Insist on regulators. 
 
 Ordinary incubators are not insurable. 
 
 ELECTRIC LIGHTING. 
 
 Electricity is coming into use everywhere. It 
 is not a power in itself but a mode of transmitting 
 power and also heat. What it is, no one knows, and 
 
260 
 
 A HAND BOOK 
 
 while something is known about its manifestations it 
 is evident that there is much yet to learn. 
 
 The dangers from electricity arise from insuf- 
 ficient, defective, or worn out insulation, overloading 
 of wires, breaking, tearing loose, and consequent 
 crossing of wires, or contact where there should he 
 none. When a current is run over a wire too small 
 for it, the wire becomes red hot, perhaps burns and 
 sets fire to everything near it. When wires break 
 loose as when poles blow down in a storm the cur- 
 rents are liable to cause heat and consequent fire. 
 
 The efforts of builders to do work too cheaply 
 and their use of inferior material are the causes of 
 most of the accidents which happen. 
 
 Electric work should be inspected by an expert 
 and no inferior nor imperfect construction should be 
 accepted. 
 
 Properly put up it is as safe as any other, but the 
 ordinary agent should not undertake to decide that 
 question himself. 
 
 SPONTANEOUS COMBUSTION. 
 
 Combustion is the burning which takes place 
 when oxygen combines with some other substance. 
 The heat evolved appears to be the same in quantity 
 whether this burning be slow or fast, but the more 
 rapidly the oxygen is absorbed the higher will be the 
 temperature. Most substances at ordinary tempera- 
 tures absorb oxygen very slowly or not at all. WTien 
 heated, the absorption is often rapid enough to raise 
 the temperature so much that the process will go on 
 of itself. Wood and coal are illustrations. 
 
OF MUTUAL INSURANCE 
 
 261 
 
 There are substances which absorb oxygen with 
 sufficient rapidity to develop heat and as this heat 
 increases the absorption increases also till fire breaks 
 out. It is with this kind of spontaneous combustion 
 that insurance men are concerned. The most dan- 
 gerous substances are the oils and fats. In bulk they 
 are not liable to change but when a large surface is 
 exposed to the air, especially in warm weather, they 
 are sure to develop heat. This is the reason that 
 greasy rags, oily sawdust, etc. so frequently cause 
 fires. The drying of some oils is not evaporation at 
 all, but a chemical combination with the oxygen of 
 the air. If this combination takes place under favor- 
 able circumstances the final result will be a blaze. 
 Hence the necessity of care in regard to these mat- 
 ters. 
 
 A somewhat amusing account of a fire originat- 
 ing in a greasy wrapper taken from a ham and care- 
 lessly thrown into a waste barrel will be found in the 
 extracts from Mr. Atkinson’s article on Protection 
 Against Loss by Fire. It shows how small a quantity 
 of greasy substance is necessary to start a fire. 
 
 Oiled window shades are sometimes stowed 
 away in closets. This is never safe. If they are to 
 be preserved they should be hung up singly and 
 where the air can get to them. The safest plan is to 
 burn them. Sawdust is occasionally used to absorb 
 spilled liquids. It should be burned at once. 
 
 Hay stowed away when damp and, especially 
 alfalfa and clover, is sure to heat. These frequently 
 take fire, and if they do not they send up a column of 
 
862 
 
 A HAND BOOK 
 
 warm vapor which is an excellent conductor and at- 
 tracts lightning. 
 
 Heaps of wood ashes will frequently reheat. 
 They should not he kept in the cellar nor in wooden 
 receptacles. 
 
 Kerosene products have no affinity for oxygen 
 and are not liable to spontaneous combustion, at least 
 so authorities claim. 
 
 Axle grease is largely made of petroleum pro- 
 ducts. These have no affinity for oxygen and do not 
 develop heat. Lubricants composed wholly or in part 
 of animal oils are dangerous. Not long since a whole- 
 sale drug store was burned. Investigation showed 
 that the fire developed in a box of axle grease. It was 
 probably composed of animal oils. 
 
 THERE WERE NO FLAMES. 
 
 How far the liability of the company extends 
 has been decided by a court of the United States as 
 follows : 
 
 The United States court of appeals at St. Paul has handed 
 down an opinion rather novel but of vast importance to insur- 
 ance companies, and decides the question as to when an insur- 
 ance company is liable for fires resulting from spontaneous 
 combustion. 
 
 The court held that “fire is always caused by combustion, 
 but combustion does not always cause fire and while combustion 
 may be so rapid as to cause fire that combustion is not fire until 
 actual flames appear.’ ’ 
 
 This opinion was handed down in the case of the Western 
 Woolen Mill company of Topeka against the Northern Insurance 
 company of London which was appealed from the federal court 
 of Kansas which had rendered an opinion in favor of the insur- 
 ance company. 
 
OF MUTUAL INSURANCE 
 
 268 
 
 The Northern had two policies of $5,000 each on wool owned 
 by the Western Woolen mill which went through the flood of 
 two years ago. After the wool had been under water for eight 
 days it was taken out and spread out to dry. Spontaneous com- 
 bustion set in and while there was a strong odor of smoke and 
 burning wool, actual flames did not appear, but the wool was 
 ruined. 
 
 By this decision the Woolen Mill company cannot recover 
 under their policy. 
 
 In cases which were too small to be carried to the 
 Federal court the local courts decided the other way. 
 
 If that is established as the general rule, and 
 Insurance companies are not to be held liable when 
 the property is charred and there is no visible fire 
 there will be an additional reason for watchfulness. 
 
 The loss in cases like the above will fall upon the 
 owner who will have no recourse. 
 
 The whole subject is now under investigation 
 and much more will be known about it when the ex- 
 periments are concluded. 
 
 TENANT FARM RISKS. 
 
 On rates to be charged on property occupied by 
 tenant farmers there is no consensus of opinion, and 
 no rule of action. Some of the old line companies 
 are reported as adding fifty percent to the rate in 
 some localities, others a third and so on. Among 
 Mutuals there is a wide difference also, and an equal 
 lack of system. Many ignore the fact of the tenancy 
 and charge the usual rate. 
 
 The question is not simple. It is complicated 
 by several elements. There are two men to reckon 
 with instead of one. If either is careless, quarrel- 
 
264 
 
 A HAND BOOK 
 
 some or heavily incumbered, the hazard is increased. 
 If both are thus objectionable it should probably be 
 declined. 
 
 The character of the tenants is of importance, 
 and this varies with localities and surroundings. 
 When real estate is so high as to shut out the tenant 
 from all prospect of owning a farm, the renters will 
 not be first class risks as a rule. On the other hand, 
 when land can be had at reasonable prices many 
 young men start out as renters looking forward to 
 the time when they shall have accumulated means 
 enough to make the first payment on a home. Such 
 men are the best of citizens and are as good risks as 
 any. 
 
 RISKY PROPERTY. 
 
 The method of holding such property by the 
 owner should be considered also. If held as an in- 
 vestment it will probably be occupied by a first class 
 tenant on a five-year lease. But if held for specula- 
 tion only it will be held from year to year and first 
 class tenants will not touch it. If the landlord is 
 avaricious the risk is still worse, in fact the rented 
 property of a skinflint owner is a very bad risk. 
 
 Especially large and fine buildings are always 
 extra hazardous. Along in the eighties when the 
 craze for mortgages swept over the country there 
 were an immense number of costly buildings erected 
 on the western prairies. Many of the mortgages 
 were foreclosed and the property fell into the hands 
 of non-resident owners. It was rented, but the build- 
 
OF MUTUAL INSURANCE 
 
 265 
 
 in g was a source of expense instead of revenue. It 
 ran down, became dilapidated and a huge bill of re- 
 pairs loomed up in the future when one day it went 
 up in smoke and the Insurance company paid for it. 
 That such incendiary fires have been common, there 
 is strong suspicion. In all such cases, over-large or 
 unused buildings of any kind will prove dangerous 
 risks and should generally be declined. 
 
 A flat advance of fifty percent on the regular 
 rate does not seem just. There are probably locali- 
 ties where it is a fair average advance, but generally 
 it would be too heavy on the long leases to first class 
 tenants and too light on the class of careless or un- 
 principled landlords, whose property should be de- 
 clined. 
 
 Nor would the same rate fit any two localities. 
 Perhaps the best plan it to organize an inspection 
 division and then rate each risk on its merits invari- 
 ably insisting that the company should be notified in 
 case of a change of tenant. 
 
 Nowhere is the common sense and business abil- 
 ity of the agent of more value to the company than 
 in cases such as these. He can pass upon the merits 
 of each application far better than the home officer 
 and his judgment will be good on nearly every case. 
 
 Neither the tenant nor the owner of tenant prop- 
 erty must be deprived of the privileges of Mutual 
 Insurance, but it is generally conceded that the haz- 
 ard on the personal property of the tenant and the 
 
266 
 
 A HAND BOOK 
 
 buildings of the landlord would be less if the owner- 
 ship of both were the same, and some allowance 
 should be made for this difference. 
 
 CITIES AND TOWNS. 
 
 Cities and towns are classified according to their 
 exposures and to the means of extinguishing fire. 
 It is somewhat remarkable that though the prevail- 
 ing winds make a north and south exposure especial- 
 ly hazardous, people rarely build on east and west 
 streets, except when forced to by the crowding of 
 large cities. This adds somewhat to the conflagra- 
 tion risk, but it cannot be helped. 
 
 First class cities are those which have good light 
 and water systems, efficient police, paved streets at 
 least seventy-five feet wide in the business portions, 
 and a paid fire department. This means that there 
 are police to discover a fire, a fire department ready 
 to put it out, paved streets to make it easy to get the 
 engine to the fire and plenty of water to use when 
 the firemen get there. For any deficiency in these 
 respects a deduction is made. 
 
 The second class cities must have good water 
 supply with direct pressure, steam fire engines, paid 
 and volunteer fire departments, otherwise as in the 
 first class. 
 
 If the city has no water works and only hand or 
 chemical engines and no paid fire department it 
 drops to the third class but the business streets must 
 be eighty feet wide. 
 
OF MUTUAL INSURANCE 
 
 267 
 
 If there are no engines or fire department it 
 drops to the fourth class with a charge for extra ex- 
 posure if the streets are less than eighty feet wide. 
 
 The basis rate in the first class is usually in- 
 creased ten cents on the $100 for the second class, 
 twenty cents for the third class and thirty cents for 
 the fourth class. If the streets are wider than the 
 limit given above a small reduction is made, if nar- 
 rower, an extra charge is made. 
 
 Buildings are variously classified in different 
 cities. Class A, is generally a brick or stone building 
 with heavy fire walls, all openings closed with heavy 
 iron shutters, metal slate or other fire proof roof, 
 and absolutely no outside woodwork of any kind 
 whatever. Absence of iron doors and shutters re- 
 duces the building to the next class. 
 
 The ordinary brick building with shingle roof is 
 another class lower. 
 
 The next class is the ordinary wooden building. 
 This is rated the highest. 
 
 But if it is iron clad with metal roof, the rate 
 will be lower. 
 
 A lower rate will also be given if the building 
 is veneered with brick and has a metal or slate roof. 
 
 Then there is the exposure risk, the risk from 
 several tenants, the risk from contents and the risk 
 from business carried on, any of which must be con- 
 sidered. 
 
 HEATING BUILDINGS. 
 
 Three methods are used— hot air, steam and 
 hot water. Each has its advocates, but from an In- 
 surance standpoint there is but little choice. 
 
268 
 
 A HAND BOOK 
 
 Faulty constructions are frequent. The fur- 
 naces should be made so that they will not emit gas 
 or sparks, the doors and other openings should be 
 secure against accidental opening, the chimney 
 should be large enough and the draught good. Where 
 the furnace is built with the house the chimney is 
 generally properly constructed, but when a furnace 
 is put in a house built to use stoves, the chimney 
 may be too small. 
 
 The furnace itself may be too small. Competing 
 bidders, in their anxiety to get business, not unfre- 
 quently recommend too small plants. When a cold 
 snap comes, the furnaces are over driven and the 
 result is a fire ; cause , 4 1 overheated furnace . 9 9 
 
 There should be a clear space around the fur- 
 nace and in this no rubbish should be allowed to ac- 
 cumulate. The best constructions are enclosed in 
 brick built on a solid foundation, with as few open- 
 ings as possible. The thicker this brick wall is the 
 safer and more economical the furnace will be. 
 
 The chimney should rest on the ground, and the 
 connections with the chimney should be heavy and se- 
 curely fastened. They should be as far from the 
 joists overhead as space will permit, four or five 
 feet, if possible, and then the joists and flooring 
 should be protected by zinc. If it is necessary to 
 place the chimney connections nearer the floor there 
 should be a double protectiin of tin or zinc. 
 
 Many furnaces are placed in the smallest possi- 
 ble space, with no room around them and close to 
 the floor overhead. Such hazards are excessive. 
 
OF MUTUAL INSURANCE 
 
 269 
 
 The pipes, whether for hot air, hot water or 
 steam, should be at least six inches from any wood 
 work. The registers should rest upon some non- 
 combustible substance and not upon the wood. In all 
 cases where the pipes in the cellar are within a foot 
 of woodwork, there should be a sheet of metal inter- 
 posed. 
 
 It is difficult to convince the ordinary citizen 
 that hot air or steampipes can char wood and start 
 a conflagration but it is a well demonstrated fact. 
 Even blood heat will in time carbonize soft wood. 
 Charcoal has the peculiar power of absorbing gases. 
 It is upon this that much of its disinfecting powers 
 depend. When its pores are filled with gases it is 
 exceedingly inflammable, and steam heat has been 
 known to ignite it. 
 
 A RECENT CASE. 
 
 A recent case will illustrate the dangers. A 
 school house was built in a western town. No expense 
 was spared to make the building as complete as pos- 
 sible. A hot air furnace was put in. The joists were 
 2x12 and the tin hot air pipes were run between 
 them. The registers were placed in the wall and 
 rested on wooden supports. So confident were the 
 school board that their building was safe that they 
 only took out $2,000 Insurance on a cost of over 
 $4,800. Within three months they had a fire. It 
 was but small and the loss was settled. But an in- 
 spector for the company being in the neighborhood a 
 short time after the fire, made an examination of the 
 
270 
 
 A HAND BOOK 
 
 building. He at once discovered the hazardous con- 
 dition of the heating apparatus. On removing the 
 registers from their places in the side wall the sur- 
 rounding wood work was found to he badly charred. 
 The directors were given thirty days to change the 
 hazardous construction or to procure new Insurance. 
 Meanwhile the company only assumed liability for 
 fifty percent of the policy rates if a fire should occur. 
 There is not the slightest doubt that the school house 
 would have burned within a year, had not the 
 changes been made. 
 
 But always and everywhere Insurance men 
 should be on the lookout for wood in proximity to 
 heated objects. It will certainly char, and is sure to 
 take fire if given time. 
 
 PREVENTABLE FIRES. 
 
 The state Insurance superintendent of Maine 
 has issued a carefully classified list of fires for the 
 year 1903. Among them the following are found: 
 Ashes 28, burning out of chimney 95, children play- 
 ing with matches 38,. defective chimneys and flues 
 257, mice, rats and matches 6, sparks from chimneys 
 76, sparks from match 50, making 550 out of a total 
 of 1960. Other states present similar figures. 
 
 Nearly every one of these fires could have been 
 prevented by reasonable care. It is not difficult nor 
 expensive to provide receptacles enough to hold the 
 accumulations of ashes for twenty four hours. At 
 the end of that time they will be cooled clear through. 
 Coal ashes do not reheat and may be emptied any- 
 
OF MUTUAL INSURANCE 
 
 271 
 
 where. Wood ashes are still used in many house- 
 holds and are often kept in the cellar. If metal re- 
 ceptacles can be had there is very little danger in this 
 practice, if not, they should be emptied on the 
 ground, not in boxes or on a wooden floor. 
 
 Chimneys can be made safe. Some one should 
 stand over the builders and see that their work is 
 properly done. The chimneys should be inspected 
 frequently to see if cracks develop. The flue stops 
 should be so fastened that they cannot be blown out. 
 Stove pipes should be so fastened when they are put 
 up that they cannot get apart and fall down. If the 
 chimneys are kept reasonably clean there will be lit- 
 tle danger from sparks. 
 
 In fact, if common sense and a little care is 
 used the fire waste of the country might be reduced 
 by at least forty millions of dollars. 
 
 These figures are of interest to Mutuals, for it 
 is along the line of saving expenses and reducing fire 
 waste that the Mutuals will do their best work. 
 
 There is another cause of fires, incendiarism by 
 tramps and discharged workmen. The tramp goes 
 into a stable to light his pipe, or to have a smoke. 
 The match spark smolders for a while and then the 
 blaze breaks out. An employe is discharged. Thirst- 
 ing for revenge he lays a plan to burn his late em- 
 ployer ’s property and carries it out at the cost of the 
 Insurance company. There have been times when 
 farmers dared not refuse the demands of tramps for 
 
272 
 
 A HAND BOOK 
 
 food lest their buildings should be burned. The 
 tramp evil is much less than is was but there is still 
 too much of it. 
 
 rARM BUILDINGS. 
 
 In answering the question, ‘ ‘ What is it worth ?” 
 both agent and adjuster are frequently called on to 
 estimate depreciations. This estimate is often a 
 question of fact, instead of theory. The old fashion- 
 ed farm dwelling with slate roof, built with heavy 
 timbers used in days gone by, if taken proper care 
 of is as good for all practical purposes as it ever was. 
 Yet changes of style, relocations of market towns 
 and of country roads may have rendered it unsalable 
 and a bad risk at even half its cost. But otherwise, 
 it may be worth as much as ever for the depreciation 
 of such a building is almost nothing. 
 
 These dwellings are usually not as solidly built 
 as the houses of half a century ago, and are liable 
 to be racked by heavy winds. The foundation also 
 has much to do with the matter. A solid foundation 
 resting on rock or some stratum which does not give 
 will add much to the length of life of a building. In 
 some sections the surface is underlaid with a clay 
 subsoil which swells with every rain and never re- 
 sumes its former place. Unless the foundations go 
 below this the doors and windows will need adjust- 
 ing after nearly every rain. The twisting and wring- 
 ing consequent on the changes in this subsoil weaken 
 a building very rapidly. Taking all these matters 
 into consideration it is hardly possible to fix an exact 
 
s. g. mead, McPherson, Kansas. 
 
 Mr. Mead is a retired newspaper man, having been in the 
 business almost forty years. He made a specialty of sociological 
 studies, along the line of fraternal and co-operative organizations 
 and is an enthusiastic advocate of Mutual insurance, co-operative 
 stores and all similar enterprises. 
 
J. B. HERRIMAN, DES MOINES, IOWA. 
 
 J. B. Herriman, secretary of the Iowa Mutual Tornado Asso- 
 ciation, the largest concern of its kind in the world, is recognized 
 as one of the foremost figures in the field of Mutual Insurance. 
 He has been secretary of the Iowa Tornado Mutual from its in- 
 ception. and has done more than any other man to build it up to 
 its present proud position. Mr. Herriman enjoys the confidence 
 and affection of his associates and the respect of the public to a 
 remarkable degree. 
 
OF MUTUAL INSURANCE 
 
 173 
 
 figure for depreciations. The range is from one to 
 three percent annually and must be increased for the 
 cheaper class of buildings. Barns, unless very 
 strongly framed, will depreciate from three to four 
 percent. 
 
 If the buildings have been carefully looked after 
 by the owner, and have been kept in good condition, 
 the amount expended in repairs may be deducted 
 from the depreciation. 
 
 Buildings occupied by tenants are apt to run 
 down more rapidly than when used by the owners 
 alone. The tenants have not the interest in keeping 
 up the buildings and sometimes they are careless. 
 
 Public buildings are usually not as well cared 
 for as they should be, and ordinarily will decrease in 
 value from two to three percent a year. 
 
 HOW TO ASCERTAIN. 
 
 The agents and adjusters will have the best suc- 
 cess in ascertaining values if they make their own 
 tables of depreciations. Every new house in their 
 locality should be carefully noted, its dimensions 
 and cost taken down. From these notes a very use- 
 ful cubic foot table of cost may be computed. It will 
 also be possible in many cases to ascertain the orig- 
 inal cost of old buildings and also the date of con- 
 struction. A fair estimate of present value can often 
 be made and from these data the desired information 
 17 
 
274 
 
 A HAND BOOK 
 
 can be deducted. Such tables will be far more useful 
 than any to be found in the books usually considered 
 authorities on the subject. 
 
 OTHER BUILDINGS. 
 
 With the mercantile or manufacturing buildings 
 in cities and towns use has much to do. Heavy or 
 rapid running machinery will reduce the value of a 
 building very rapidly, especially if the building is a 
 light one. So will the storage of heavy goods. In fact 
 almost any use for which a building was not intended 
 causes extra wear and tear. Unoccupied buildings 
 depreciate rapidly. 
 
 But the cost is not always a safe basis to start 
 from. There are places where the first lumber was 
 hauled in on wagons and where the first workmen 
 received any wages they were pleased to ask. After- 
 ward, when railroads came in and wages resumed the 
 normal condition the same buildings could have been 
 put up at a fraction of their original cost. On the 
 other hand, the advance in the price of lumber, of 
 late years, may make an old building worth as much 
 as it was when newly built. 
 
 In cities and towns, buildings and lots are sold 
 together and without much regard to cost. Resi- 
 dences bring prices according to locality. The fash- 
 ionable part of town is a high priced region. Much 
 frequented corners are also held at high figures so 
 that very little indication of value of buildings is 
 furnished by sales. The whole question is one of 
 careful observation, good judgment, and good hard 
 sense. 
 
OF MUTUAL INSURANCE 
 
 275 
 
 DEPRECIATIONS. 
 
 Carpets will last ten years in bed rooms with a 
 careful family. In the parlor and living rooms they 
 will wear out in four years if the family is large and 
 if there is much company. Economical people save 
 some expense by changing carpets from room to 
 room as they become worn. Good furniture carefully 
 used will last ten years on the average. The parlor 
 set, if shut up in the dark, as it sometimes is, will 
 last much longer. But it gets out of style and that 
 reduces its value. 
 
 Country stores generally carry a mixed stock. 
 Hardware, groceries and staple goods depreciate 
 rather slowly. But millinery gets dirty and out of 
 style, clothing loses value owing to change of fash- 
 ion. Last year’s goods in any line are at least five 
 percent off, clothing should be discounted twenty-five 
 percent, millinery fifty, queensware and crockery 
 ten percent and notions twenty-five. 
 
 These deductions will not be too large. 
 
 FARM MACHINERY. 
 
 On the average, the life of farm machinery is 
 five years. Steam boilers, cookers, threshers, trac- 
 tion engines may all be counted in at that. The 
 cause of this rapid loss of value is, in the first place, 
 that much of this machinery is very shabbily made, 
 and secondly, that the people who use it are usually 
 not mechanics. Machinery is left out of doors ex- 
 posed to the weather. The ground beneath it is water 
 soaked, some wheels sink more than others, the 
 
S76 
 
 A HAND BOOK 
 
 whole thing may become twisted, the journals bind 
 and the wear is enormous. Of course there are some 
 who handle this machinery better but the average 
 as above stated will be found nearly correct. 
 
 But after all, the question is not one of rule or 
 theory but of actual fact, and to ascertain the fact is 
 the question for the agent and the adjuster. 
 
 NEW DISCOVERIES. 
 
 These have an important influence on classifica- 
 tion. An illustration is to be found in the use of coal 
 oil for fuel. It changes the risk materially, increas- 
 ing the hazard. Should a safe method of feeding the 
 oil to the furnace be introduced then the risk will 
 change and the charge for the extra hazard may be 
 dropped. New materials, new chemicals, all must 
 be examined, and if found dangerous must either be 
 charged for or made safe. The same is true of speed- 
 ing up machinery, it increases the hazard. 
 
 Changes in water supply must be looked after, 
 if there is better fire protection the risk is safer. 
 
 The introduction of new chemicals needs watch- 
 ing. Carbon di sulphide is being used for many pur- 
 poses. It is exceedingly dangerous, and should not 
 be allowed except in minute quantities. And as time 
 passes, new changes and new hazards appear. There 
 is only one safe plan, to be continually on the watch 
 and to test everything which is new. 
 
 It is not necessary that each company test every 
 article for itself. This would be very expensive. A 
 joint arrangement, such as is made by the New Eng- 
 land Mill Mutuals, would provide for this work at a 
 very small expense. 
 
CHAPTER XIV. 
 
 THE POLICY AS A CONTRACT. 
 
 In making and executing contracts, fairness 
 should be kept in view. It is possible to so entangle 
 an agreement with technicalities that it becomes un- 
 intelligible, and that contracts have been drawn up 
 with a view to binding one side and not the other, is a 
 well established fact. It is singular that so many 
 cases come up before the courts in which contracts 
 are to be construed, that is, courts are to say what 
 they mean. The same is true of the laws of the 
 land. It is very rarely that a legislature succeeds 
 in passing a law that means what it says, or says 
 what the legislature intended that it should. 
 
 Especially is that true with regard to restric- 
 tive laws and statutes for the prevention of crime. 
 The records show that it seems to he next to impossi- 
 ble to bring a case against an important criminal 
 without making some blunder which will cause it to 
 he thrown out of court. Then when the error is rec- 
 tified and the case finally comes to trial, the judge 
 or the attorney makes another mistake and the whole 
 process is gone over again and again till the wit- 
 nesses die or disappear and the matter is dropped. 
 
 —277 
 
278 
 
 A HAND BOOK 
 
 POLICIES MUST BE SIMPLE AND CLEAR. 
 
 The Mutuals should avoid all this. The policy 
 should be simple and clear. No doubtful hazards 
 should be accepted and only men of known good char- 
 acter should be received as members. This needs 
 emphasis. Experience of old companies shows that 
 the higher the standard is raised the cheaper the In- 
 surance. All descriptions in the application should be 
 clear and accurate. And then when a fire occurs all 
 mere technicalities should be ignored and the loss 
 should be paid promptly and in full. The character 
 of the insured should be recognized. Gross fraud or 
 palpable violation of the contract should invalidate 
 it, and such cases though possible, are exceedingly 
 rare. 
 
 As one company expressed it, ‘ 4 When an honest 
 man has paid for a thousand dollars 9 indemnity and 
 a thousand dollar loss occurs, we just pay ; that is all 
 there is to it. ’ ’ 
 
 UNILATERAL CONTRACTS. 
 
 Insurance contracts belong to the same class as 
 bills of lading, rail road tickets, etc. They are some- 
 times called unilateral contracts, as they are made by 
 one side only. The shipper on the railroads and the 
 policy holder in a joint stock Insurance company 
 have nothing to say about the contracts they sign. 
 The courts construe such contracts very strictly 
 against the companies. In Insurance cases the decis- 
 ions have been gradually growing more and more 
 rigid, until, at present, if a policy contains technical 
 
OF MUTUAL INSURANCE 
 
 279 
 
 provisions, the courts often require the company to 
 prove that the policy holder had notice thereof before 
 they will enforce them. 
 
 The policy is the written or printed contract be- 
 tween the insurer and the insured. It should set 
 forth that contract fully and in terms not liable to be 
 misunderstood. One of the great sources of trouble 
 between Insurance companies and their patrons is 
 the lack of precision in filling out the application. 
 In each contract should be set forth the name of the 
 contracting parties. The name of the insurer, that is 
 the name of the company, is usually printed, but the 
 name of the insured is written and care should be 
 taken to see that it is correct; no initials should be 
 left out and no names should be abbreviated. If 
 Thomas M. Smith is insured the policy should not 
 read ‘ ‘ Tom Smith. ” If it does, the chances are that 
 it contains other errors which will make trouble. It 
 must also set forth the rate of premium and the prop- 
 erty insured. In writing numbers they should be 
 spelled out, single figures are liable to be mistaken. 
 
 DESCRIPTIONS ACCURATE. 
 
 Descriptions of property should be accurate and 
 complete. Each description should include the thing 
 described and exclude everything else. The interest 
 of the insured should also appear and if he is not the 
 sole owner, his share or interest should be accurately 
 described. If the policy is made out to a mortgagee, 
 the fact should be plainly stated. All ambiguity must 
 be avoided. 
 
260 
 
 A HAND BOOK 
 
 The risk must be clearly stated, and also the 
 length of time for which the policy is to run. As to 
 the form of the policy there is much discussion. It 
 has been customary to issue policies containing num- 
 erous exceptions and restrictions printed in micro- 
 scopic type with the proviso that the violation of any 
 one would render the whole policy void. Courts have 
 looked upon these with disfavor, and have held that 
 these paragraphs were, at best, constructive notice, 
 and have required proof, in case of loss, that the as- 
 sured had actually read them or that they had been 
 pointed out to him. It has also been ruled that the 
 policy was a contract which the assured had no hand 
 in making, he was obliged to accept it as it was of- 
 fered to him or go without Insurance. In all such 
 cases the courts will do equity regardless of the pro- 
 visions of the contract. An effort has been made to 
 avoid these evils by formulating a standard policy 
 to be printed in type of not less than a given size. 
 
 THE STANDARD POLICY. 
 
 The following, taken from the laws of New York, 
 is an example : 
 
 INSURANCE COMPANY OF 
 
 In consideration of the stipulations herein named and of 
 
 dollars premium, does insure for the 
 
 term of , from the day of 190. ., 
 
 at noon, to the day of 190.., at noon, 
 
 against all direct loss or damage by fire except as hereinafter 
 provided, 
 
 To an amount not exceeding dollars, to the 
 
 following described property while located and contained at 
 described herein, and not elsewhere, to wit: 
 
OF MUTUAL INSURANCE 
 
 281 
 
 This company shall not be liable beyond the actual cash 
 value of the property at the time any loss or damage occurs* 
 and the loss or damage shall be ascertained or estimated accord- 
 ing to such actual cash value, with proper deduction for depre- 
 ciation however caused, and shall in no event exceed what it 
 would then cost the insured to repair or replace the same with 
 material of like kind and quality ; said ascertainment or estimate 
 shall be made by the insured and this company, or, if they differ, 
 then by appraisers, as hereinafter provided, and the amount of 
 loss or damage having thus been determined, the sum for which 
 this company is liable pursuant to this policy shall be payable 
 sixty days after due notice, ascertainment, estimate, and satis- 
 factory proof of the loss have been received by this company, in 
 accordance with the terms of this policy. It shall be optional, 
 however, with this company to take all, or any part, of the arti- 
 cles at such ascertained or appraised value, and also to repair, 
 rebuild or replace the property lost or damaged with other of 
 like kind and quality within a reasonable time on giving notice, 
 within thirty days after the receipt of the proof herein re- 
 quired, of its intention so to do; but there can be no abandon- 
 ment to this company of the property described. 
 
 This entire policy shall be void if the insured has concealed 
 or misrepresented, in writing or otherwise, any material fact or 
 circumstance concerning this insurance or the subject thereof; 
 or if the interest of the insured in the property be not truly 
 stated herein; or in case of any fraud or false swearing by the 
 insured touching any matter relating to this insurance or the 
 subject thereof, whether before or after a loss. 
 
 This entire policy, unless otherwise provided by agreement 
 indorsed 'hereon or added hereto, shall be void if the insured 
 now has or shall hereafter make or procure any other contract 
 of insurance, whether valid or not, on property covered in 
 whole or in part by this policy; or if the subject of insurance 
 be a manufacturing establishment and it be operated in whole 
 or in part at night later than ten o’clock, or if it cease to be 
 operated for more than ten consecutive days; or if the hazard 
 be increased by any means within the control or knowledge of 
 the insured; or if mechanics be employed in building, altering, 
 or repairing the within described premises for more than fifteen 
 days at any one time; or if the interest of the insured be other 
 than unconditional and sole ownership; or if the subject of in- 
 
282 
 
 A HAND BOOK 
 
 surance be a building on ground not owned by the insured in 
 fee-simple; or if the subject of insurance be personal property 
 and be or become incumbered by a chattel mortgage ; or if, with 
 the knowledge of the insured, foreclosure proceedings be com- 
 menced or notice given of sale of any property covered by this 
 policy by virtue of any mortgage or trust deed ; or if any change, 
 other than by the death of an insured, take place in the interest, 
 title, or possession of the subject of insurance (except change 
 of occupants without increase of hazard) whether by legal pro- 
 cess or judgment, or by voluntary act of the insured, or other- 
 wise; or if this policy be assigned before a loss; or if illuminat- 
 ing gas or vapor be generated in the described building (or 
 adjacent thereto) for use therein; or if (any usage or custom 
 of trade or manufacture to the contrary notwithstanding) there 
 be kept, used or allowed on the above described premises, ben- 
 zine, benzole, dynamite, ether, fireworks, gasoline, greek fire, 
 gun powder exceeding twenty-five pounds in quantity, naptha, 
 nitro-glycerine, or other explosives, phosphorus or petroleum or 
 any of its products of greater inflammability than kerosene oil 
 of the United States standard (which last may be used for 
 lights and kept for sale according to law, but in quantities not 
 exceeding five barrels, provided it be drawn and lamps filled by 
 daylight, or at a distance not less than ten feet from artificial 
 light) ; or if a building herein described, whether intended for 
 occupancy by owner or tenant, be or become vacant or unoccu- 
 pied, and so remain for ten days. 
 
 This company shall not be liable for loss caused directly or 
 indirectly by invasion, riot, civil war or commotion, or military 
 or usurped power, or by order of any civil authority; or by 
 theft; or by neglect of the insured to use all reasonable means 
 to save and preserve the property at and after a fire or when the 
 property is endangered by fire in neighboring premises; or (un- 
 less fire ensues, and, in that event, for the damage by fire only) 
 by explosion of any kind or lightning; but liability for direct 
 damage by lightning may be assumed by specific agreement here- 
 on. 
 
 If a building or any part thereof fall, except as the result 
 of fire, all insurance by this policy on such building or its con- 
 tents shall immediately cease. 
 
 This company shall not be liable for loss to accounts, bills, 
 currency, deeds, evidences of debt, money, notes or securities 
 
OF MUTUAL INSURANCE 
 
 283 
 
 nor, unless liability is specifically assumed thereon, for loss to 
 awnings, bullion, casts, curiosities, drawings, dies, implements, 
 jewels, manuscripts, medals, models, patterns, pictures, scientific 
 apparatus, signs, store or office furniture or fixtures, sculpture, 
 tools, or property held on storage or for repairs; nor beyond 
 the actual value destroyed by fire, for loss occasioned by ordi- 
 nance or law regulating construction or repair of buildings, or 
 by interruption of business, manufacturing processes, or other- 
 wise ; nor for any greater proportion of plate glass, frescoes, and 
 decorations than that which the policy shall bear to the whole 
 insurance on the building described. 
 
 If an application, survey, plan or description of property 
 be referred to in this policy it shall be a part of this contract 
 and a warranty by the insured. 
 
 In any matter relating to this insurance, no person unless 
 duly authorized in writing shall be deemed the agent of this 
 company. 
 
 This policy may by a renewal be continued under the orig- 
 inal stipulations, in consideration of premium for the renewed 
 term, provided that any increase of the hazard must be made 
 known to the company at the time of renewal or this policy 
 shall be void. 
 
 This policy shall be cancelled at any time at the request of 
 the insured; or by the company by giving five day’s notice of 
 such cancellation. If this policy shall be cancelled as herein- 
 before provided, or become void or cease, the premium having 
 been actually paid, the unearned portion shall be returned on 
 surrender of this policy or last renewal, this company retaining 
 the customary short rate; except that when this policy is can- 
 celled by this company by giving notice it shall retain only the 
 pro rata premium. 
 
 If, with the consent of this company, an interest under this 
 policy shall exist in favor of a mortgagee or of any person or 
 corporation having an interest in the subject of insurance other 
 than the interest of the insured as described herein, the condi- 
 tions hereinbefore contained shall apply in the manner expressed 
 in such provisions and conditions to such interest as shall be 
 written upon, attached or appended hereto. 
 
 If property covered by this policy is so endangered by fire 
 as to require removal to a place of safety, and is so removed, 
 that part of this policy in excess of its proportion of any loss 
 
284 
 
 A HAND BOOK 
 
 and of value of property remaining in the original location, 
 shall for the ensuing five days only, cover the property so re- 
 moved in the new location; if removed to more than one loca- 
 tion, such excess of this policy shall cover therein for such five 
 days in the proportion that the value in any one such new loca- 
 tion bears to the value in all such new locations; but this com- 
 pany shall not, in any case of removal, whether to one or more 
 locations, be liable beyond the proportion that the amount here- 
 by insured shall bear to the total insurance on the whole prop- 
 erty at the time of fire, whether same cover in new location or 
 not. 
 
 If fire occur the insured shall give immediate notice of any 
 loss thereby in writing to this company, protect the property 
 from further damage, forthwith separate the damaged and un- 
 damaged personal property, put it in the best possible order, 
 make a complete inventory of the same, stating the quantity 
 and cost of each article and the amount claimed thereon; and, 
 within sixty days after the fire, unless such time is extended in 
 writing by this company, shall render a statement to this com- 
 pany, signed and sworn to by said insured, stating the knowl- 
 edge and belief of the insured as to the time and origin of the 
 fire; the interest of the insured and of all others in the prop- 
 erty; the cash value of each item thereof and the amount of loss 
 thereon; all incumbrances thereon; all other insurance whether 
 valid or not, covering any of said property; and a copy of all 
 the descriptions and schedules in all policies ; any changes in the 
 title, use, occupation, location, possession, or exposure of said 
 property since the issuing of this policy; by whom and for 
 what purpose any building herein described and the several 
 parts thereof were occupied at the time of fire; and shall fur- 
 nish, if required, verified plans, specifications of any building, 
 fixtures, or machinery destroyed or damaged; and shall also, if 
 required, furnish a certificate of the magistrate or notary public 
 (not interested in the claim as creditor or otherwise, nor related 
 to the insured) living nearest the place of the fire, stating that 
 he has examined the circumstances and believes the insured has 
 honestly sustained loss to the amount that such magistrate or 
 notary public shall certify. 
 
 The insured, as often as required, shall exhibit to any person 
 designated by this company all that remains of any property 
 herein described, and submit to examinations under oath by any 
 
OF MUTUAL INSURANCE 
 
 285 
 
 person named by this company, and subscribe the same ; and, as 
 often as required, shall produce for examination all books of 
 account, bills, invoices, and other vouchers, or certified copies 
 thereof, if originals be lost, at such reasonable place as may be 
 designated by this company or its representative, and shall 
 permit extracts and copies thereof to be made. 
 
 In the event of disagreement as to the amount of loss the 
 same shall, as above provided, be ascertained by two competent 
 and disinterested appraisers, the insured and this company each 
 selecting one, and the two so chosen shall first select a competent 
 and disinterested umpire; the appraisers together shall then 
 estimate and appraise the loss, stating separately sound value 
 and damage, and failing to agree shall submit their differences 
 to the umpire ; and the award in writing of any two shall deter- 
 mine the amount of such loss; the parties thereto shall pay the 
 appraiser respectively selected by them and shall bear equally 
 the expenses of the appraisal and umpire. 
 
 This company shall not be held to have waived any pro- 
 vision or condition of this policy or any forfeiture thereof by 
 any requirement, act or proceeding on its part relating to the 
 appraisal or to any examination herein provided for; and the 
 loss shall not become payable until sixty days after the notice, 
 ascertainment, estimate and satisfactory proof of the loss herein 
 required have been received by this company, including an 
 award by appraisers when appraisal has been required. 
 
 This company shall not be liable under this policy for a 
 greater proportion of any loss on the described property, by fire, 
 or for loss by and expense of removal from premises endangered 
 by fire, than the amount thereby insured shall bear to the whole 
 insurance, whether valid or not, or by solvent or insolvent insur- 
 ers, covering such property, and the extent of the application of 
 the insurance under this policy or of the contribution to be made 
 by this company in case of loss, may be provided for by agree- 
 ment or condition written hereon or attached or appended here- 
 to. Liability for reinsurance shall be as specifically agreed here- 
 on. 
 
 If the company shall claim that the fire was caused by the 
 act or neglect of any person or corporation, private or muni- 
 cipal, this company shall, on payment of loss, be subrogated to 
 the extent of such payment to all right of recovery by the in- 
 
286 
 
 A HAND BOOK 
 
 sured for the loss resulting therefrom, and such right shall be 
 assigned to this company by the insured on receiving such pay- 
 ment. 
 
 No suit or action on this policy, for the recovery of any 
 claim, shall be sustainable in any court of law or equity until 
 after full compliance by the insured with all the foregoing re- 
 quirements, nor unless commenced within twelve months after 
 the fire. 
 
 Wherever in this policy the word “insured” occurs, it shall 
 be held to include the legal representative of the insured and 
 wherever the word “loss” occurs, it shall be deemed the equiv- 
 alent of “loss or damage.” 
 
 If this policy be made by a mutual or other company hav- 
 ing special regulations lawfully applicable to its organization, 
 membership, policies or contracts of insurance, such regulations 
 shall apply to and form a part of this policy as the same may be 
 written or printed upon, attached, or appended hereto. 
 
 This policy is made and accepted subject to the foregoing 
 stipulations and conditions, together with such other provisions, 
 agreements or conditions as may be endorsed hereon or added 
 hereto, and no officer, agent, or other representative of this 
 company shall have power to waive any provision or condition 
 of this policy except such as by the terms of this policy may be 
 the subject of agreement indorsed hereon or added hereto, and 
 as to such provisions and conditions no officer, agent or repre- 
 sentative shall have power or be deemed or held to have waived 
 such provisions or conditions unless such waiver, if any, shall 
 be written upon or attached hereto, nor shall any privilege or 
 permission affecting the insurance under this policy exist or be 
 claimed by the insured unless so written or attached. 
 
 This policy shall not be valid until countersigned by the 
 duly authorized agent of the company, at 
 
 In witness whereof, this company has executed and attested 
 
 these presents this day of 190 . . 
 
 THE INSURANCE COMPANY, by 
 
 Countersigned at this .... day of 
 
 190. .. 
 
 Agent. 
 
OF MUTUAL INSURANCE 
 
 287 
 
 GENERALLY USED. 
 
 This standard form is used in New York, Con- 
 necticut, Louisiana, Missouri, New Jersey, North 
 Dakota, South Dakota, North Carolina, Pennsyl- 
 vania and Rhode Island. Michigan, Wisconsin, 
 Maine, Massachusetts, Minnesota and New Hamp- 
 shire have forms of their own, but they differ but 
 little from the New York standard policy. These 
 forms are subject to the laws of the state in which 
 they are issued, and also where they are used. Thus 
 a New York form is subject to construction by the 
 courts of New York, but policies used by a New York 
 company in insuring property in Kansas become 
 subject to the laws of Kansas. 
 
 ADVANTAGES. 
 
 There is much advantage in a standard policy; 
 once construed it is construed for all companies, and 
 for all time and it is sure to be free from all techni- 
 calities. There are companies, however, which issue 
 policies containing but a very small portion of this 
 verbiage and they seem satisfied with them. Some 
 have special forms for different risks and these are 
 extremely simple. It is a question whether there is 
 not a great advantage in having a standard form 
 each for farm risks, town dwellings, and mercantile 
 buildings, leaving the full form for the larger estab- 
 lishments where the risks are extremely complicated. 
 
 It would be advantageous to the Mutuals to have 
 a standard policy for each class in every state. Many 
 Mutuals confine themselves to a single line of risks, 
 
288 
 
 A HAND BOOK 
 
 their policies may be simplified accordingly. A stand- 
 ard policy for all Mutuals of the country is not prac- 
 ticable, but in each state there should be progress 
 toward uniformity and toward simplicity, until, as 
 in the case of the old common law deed, the useless 
 verbiage is dispensed with. 
 
 WHAT TO PRINT IN THE POLICY. 
 
 There is a division of opinion among Mutuals 
 as to what should be printed in the policy, especially 
 whether the by-laws should be part of it. It is true 
 that courts hold that every member of a Mutual In- 
 surance company is presumed to know what the by- 
 laws are, but some states provide that the whole 
 contract must be printed in the policy. In these 
 states the by-laws must be so printed, elsewhere while 
 it is not legally necessary, whatever is part of the 
 contract should be in the contract if possible. Courts 
 are holding to this principle in recent decisions. 
 
 Some experienced and successful companies 
 print the by-laws in the application and in the policy 
 both, and some make the descriptive part of the 
 policy and of the application exactly the same. When 
 the policy is filled out it contains a duplicate of the 
 application. Companies which have tried this plan 
 speak very strongly in its favor. The cost is trifling. 
 
 NATURE OF POLICIES. 
 
 In summing up it must be emphasized that In- 
 surance is a contract for indemnity and as a contract 
 the policy should be self explaining, care should be 
 taken to see that it is true in fact as well as in theory. 
 
OF MUTUAL INSURANCE 
 
 289 
 
 And if any additional restriction or privilege is at- 
 tached to the policy, let it he done in writing and be 
 fnlly understood by both parties. 
 
 Stripped of all verbiage, a policy is the written 
 contract which insures a certain described interest in 
 a certain described property existing under certain 
 described conditions. As long as these all remain the 
 same, the company is bound ; in case of fire, the con- 
 tract stands; but if, without the knowledge or con- 
 sent of the company, the interest in the property or 
 the conditions are changed, the contract is at an end. 
 To illustrate : The owner mortgages it without the 
 consent of the company. He has broken the contract. 
 So if he vacates it or changes its use to manufactur- 
 ing or makes additions or repairs which increase 
 the risk, the contract is broken. As to whether re- 
 moving the mortgage, re-occupying the building as a 
 dwelling, etc., would again restore the policy, there 
 is some dispute. The policy usually uses the word 
 “void,” but in many instances this is in the sense of 
 “voidable.” The New Hampshire fire Insurance 
 laws contain the following : 
 
 “A change in the property insured, or its use or 
 occupation, or a breach of any of the terms of the 
 policy by the insured, shall not affect the policy ex- 
 cept while the change or breach continues. ’ ’ 
 
 Courts and juries will probably follow this prin- 
 ciple whenever possible. 
 
 18 
 
290 
 
 A HAND BOOK 
 
 INSURABLE INTEREST. 
 
 Almost any kind of property in the thing in- 
 sured, any reasonable expectations of profit or ad- 
 vantage to be derived therefrom, will constitute an 
 interest which may be insured. But it must be found- 
 ed on some legal or equitable title, a vague expect- 
 ancy of profit from some other person’s dealings 
 would not constitute an Insurance interest. An ex- 
 ecutor or executrix, heirs at law, common carriers, 
 bailees, trustees, tenants, or any person having cus- 
 tody of property for himself or another, and respon- 
 sible for its safe keeping, has an insurable interest 
 therein. In general, any one can insure when he can 
 show that he will suffer loss if the property is de- 
 stroyed. 
 
 With regard to joint interests already alluded 
 to, the custom is not settled. If one member sells 
 to an outsider, notice must be given to the Insurance 
 company and the name of the new member endorsed 
 on the policy. If one member sells out to another 
 the case is doubtful, but if the insurer is notified and 
 the proper endorsement is made on the policy there 
 can be no possibility of trouble. Those who are too 
 stupid or too stubborn to take such a simple pre- 
 caution deserve to sutler from their idiocy. 
 
 This is but a brief sketch, but it is not possible 
 to cover the subject. Two such volumes as this would 
 not suffice to give a full discussion of the subject. 
 Should any emergency arise, or any complicated case 
 occur, an attorney should be consulted. 
 
OF MUTUAL INSURANCE 
 
 291 
 
 DECISIONS. 
 
 A few legal discussions are appended, not as an 
 exhaustive list, but to show the necessity of care in 
 making out a policy on the part of the company and 
 also of diligence on the part of the insured to see that 
 the contract is kept : 
 
 4 ‘When a policy on a tenement house provided 
 against the keeping of gasoline on the premises, the 
 fact that gasoline was so kept by the tenant without 
 the knowledge of the landlord, did not relieve the lat- 
 ter from a breach of the condition.’ ’ Norway vs. 
 Thuringea Ins. Co., 68 N. E., 111. 1. 
 
 “In the same case the court also held that where 
 a policy on a tenement house provided that it should 
 be void if gasoline should be kept on the premises 
 and such condition was broken, the insurer was not 
 bound, in order to relieve itself from liability, to 
 show that the loss resulted from such breach. ’ ’ 
 
 ‘ ‘ The depositing of a policy by the insurer in the 
 post office addressed to the Insurance applicant with 
 postage prepaid is a good delivery of the policy.’ ’ 
 Armstrong vs. Mutual Life Ins. Co. of New York ., 
 96 N. W., Iowa. 
 
 “Policies and contracts of Insurance must be 
 construed like other contracts, according to the ordi- 
 nary popular sense of the terms they contain. This 
 is the general rule.” 
 
 NEW METHODS. 
 
 People are so accustomed to transacting busi- 
 ness with persons, firms, or corporations in which 
 they have no financial interest and over whose ac- 
 
202 
 
 A HAND BOOK 
 
 tions they have no control that they find the duties 
 and rights of co-operators difficult to recognize and 
 comprehend. Going from one establishment to an- 
 other, paying the prices demanded without question, 
 the fraternal methods are novel and perplexing. 
 The customer goes into the ordinary store with the 
 crowd, who they are he neither knows nor cares, he 
 deals with those whose every interest is their own 
 welfare and over whose actions he has no possible 
 influence, and goes away not caring whether or not 
 he ever enters the place again. 
 
 In the co-operative establishment all is changed. 
 He is one of the owners, one of the employers of 
 those officials, but he has no interest in making a 
 profit on anything. He no longer looks upon the 
 crowd of customers as strangers, they are now his 
 friends and associates, and all have a common inter- 
 est in the business, and a common voice in the man- 
 agement. He looks at everything through a differ- 
 ent atmosphere. 
 
 There are many who fail to realize the full force 
 of this. They have taken out a policy in a Mutual, 
 they are insured, what more do they need? New 
 ideas gradually develop and it dawns upon them that 
 if they would take better care of their property and 
 the others would do the same, the cost of Insurance 
 would be less. 
 
 They also see that if the company were warned 
 against dangerous hazards there would be a material 
 saving. Then comes the conviction that it would be 
 well to look up the other policy holders to see who 
 
OF MUTUAL INSURANCE 
 
 293 
 
 and what they are and how they can benefit the com- 
 pany by their joint action. The growth of the fra- 
 ternal spirit follows, then work for fraternalism, and 
 last of all the full sense of duty. This is generally a 
 slow growth, often very slow. 
 
 Wherever this growth has matured, is found the 
 highest and best development of Mutualism and the 
 greatest prosperity among co-operative enterprises. 
 
 The working out of this sense of duty among 
 Mutuals, results in watching and safely guarding 
 each other’s interests. This is not as a mere matter 
 of profit or of personal advantage, but as something 
 which each man owes to his fellow man. The result 
 is the improvement of the service and the reduction 
 of expense. 
 
 The more fully this idea of duty is developed, 
 not as a mere sentiment, but as a growing principle, 
 the more efficient the Mutuals will become. The more 
 the members will help each other, the higher the 
 standard of the community will be raised, and the 
 more will be the material recompense in the shape of 
 diminished cost. 
 
 VALID CONTRACT. 
 
 In order to make a valid contract, the two con- 
 tracting parties must agree, or as the phrase goes, 
 ‘ ‘ the two minds must meet. ” If it can be shown that 
 what the parties agreed upon and what they intended 
 to put in the contract is not expressed, the courts 
 will change the contract. By this it is not meant that 
 they will make a new contract between the parties, 
 
294 
 
 A HAND BOOK 
 
 they will do no such thing, they will merely make the 
 contract say what it was intended to say in the first 
 place, provided the intention of the parties can he 
 made clear. 
 
 CONFLICT BETWEEN POLICY AND APPLICATION. 
 
 In the case under consideration the best evidence 
 is furnished by the application itself. The policy 
 holder has signed it; presumably, therefore, he has 
 made himself acquainted with its contents. It is 
 satisfactory to him. He had no hand in making out 
 the policy, but as his risk was accepted and accepted 
 on the facts stated in the application and before the 
 policy was made out, it may safely be affirmed that 
 it was the intention that it should conform to the ap- 
 plication. The application, therefore, should govern 
 and not the policy. This applies to the policies made 
 out at the main office of the company and issued by 
 its principal officers. 
 
 If an agent in assisting in making out that appli- 
 cation has made material changes in the facts in ord- 
 er to secure the risk and make sure of his commis- 
 sion, the company would still be bound by the appli- 
 cation, although it did not accord with the actual 
 facts. By suppressing facts within his knowledge, the 
 agent waived the right of using those facts in case of 
 loss. 
 
 When an agent has the right to issue policies 
 himself, and changes the facts set forth in the appli 
 cation, that policy holds the company in case of loss. 
 This is on the old principle that a man cannot take 
 advantage of his own wrong. 
 
OF MUTUAL INSURANCE 
 
 296 
 
 With reasonable care on the part of managers 
 of companies neither of these questions need ever 
 arise. 
 
 HOW DOES A POLICY BECOME DELINQUENT? 
 
 This question is discussed incidentally in the 
 chapter on assessments. What is said there is from 
 the standpoint of the company and is intended to 
 aid in enabling the company to show its exact legal 
 status in case of disputes and thus avoid the payment 
 of unjust claims. In general, a policy becomes de- 
 linquent when assessments or dues are not paid with- 
 in the time stipulated in the policy or the by-laws. A 
 few states have laws on this matter but in the greater 
 number it is left to the courts to settle disputed cases. 
 
 While the most of the responsibility is thrown 
 upon the company, the policy holder must also use 
 some effort to keep his policy paid up. In case of 
 removal or change of post office it is absolutely neces- 
 sary that he notifies the company. In the case cited 
 elsewhere, the policy holder who changed his post 
 office address left a forwarding order at the post 
 office and also inquired of the company ’s agent when 
 the assessment notice was coming. There is no ex- 
 cuse for the post master’s neglect, but he could not be 
 held responsible. It would have been better if the 
 agent had written to the company that the assess- 
 ment notice was overdue. That would have called 
 attention to the matter at headquarters and the of- 
 ficers would have taken steps to rectify the matter. 
 It is in attending to such apparently trifling affairs 
 that the good agent shows his superiority. 
 
296 
 
 A HAND BOOK 
 
 Cases such as the one referred to are extremely 
 rare. Ordinarily, the first notice reaches the policy 
 holder and is attended to at once, or at least within 
 the specified time. If by accident it fails to reach its 
 destination the second notice, especially if registered, 
 will be received. In short, the man who wishes to 
 keep his Insurance policy in force, will have very lit- 
 tle trouble in doing so. Letters miscarry from mis- 
 direction, destruction or loss in the mails, being taken 
 from the post office by some person other than the 
 one to whom they are directed, and being lost before 
 they are delivered. It is scarcely possible that two 
 letters in succession should be subject to accident. 
 If the policy holder has not changed his address, he 
 may be sure that he will get his assessment notice. 
 If he has changed his address he should notify the 
 company. The company will of course make all pos- 
 sible effort to find him but that does not relieve him 
 from responsibility. In case of loss, if the company 
 could show that they had made reasonable effort to 
 find him before suspending his policy, and he was 
 obliged to admit that he had taken no pains to notify 
 them of the change of address, he could not recover. 
 
 In case of absence from home, the policy holder 
 must have some one to attend to his business. If he 
 does not, he must take the consequences. 
 
 It is safest for each party in interest to act as if 
 the responsibility rested on him alone. The chapter 
 on assessments discusses the duty of the company. 
 The duty of the policy holder is very simple: To 
 watch for his assessment notice, to notify the com- 
 
OF MUTUAL INSURANCE 
 
 297 
 
 pany of all changes of address and to remit promptly 
 when notice is received. If a mistake occurs, he 
 should use reasonable diligence to see that it is cor- 
 rected. 
 
 The company should promptly note all cases of 
 failure to remit and of consequent suspension, other- 
 wise a neglect to do so may waive the right. 
 
 HOW MAY A COMPANY WAIVE ITS RIGHTS? 
 
 The general answer is by neglect or by doing 
 something inconsistent with the contract, which it 
 has made. A few court decisions are given as illus- 
 trating how the principle applies : 
 
 “A. policy of Insurance, issued and delivered to 
 the assured, with a full knowledge, on the part of the 
 insurer, of facts making it inoperative at its incep- 
 tion, is a waiver of all conditions of the policy in- 
 consistent with the facts known to the insurer. ’ ’ 
 
 In general, whenever a company issues a policy, 
 having full knowledge of facts which are contrary to 
 certain provisions of that policy, it waives those pro- 
 visions. For example, if the policy that requires that 
 the building should have solid brick or stone founda- 
 tion, is issued upon a building set upon blocks with 
 the full knowledge of the company, that provision 
 would he waived so far as that policy was concerned. 
 
 When the agent has full knowledge of the true 
 conditions surrounding insured property, and the 
 company issues a policy in which these conditions 
 are restricted or prohibited, the same are presumed 
 to have been waived. For example : The agent knew 
 
298 
 
 A HAND BOOK 
 
 that gasoline had been used and would be used for 
 cooking and yet issued a policy without a permit to 
 use gasoline, attached thereto; he waived objection 
 to gasoline. 
 
 When an agent had every opportunity to inspect 
 before insuring, the company is estopped from deny- 
 ing the valuation as stated in the policy. Ritchie vs. 
 Home Ins. Co., 78 S. W., (Mo. Apl.) 
 
 It would be going too far to say that whenever 
 an agent neglected a duty he waived a right, and yet 
 it is often true. An agent fails to report a certain 
 condition of insured property, barred by stipulation 
 of the policy. Courts hold that he waived that stipu- 
 lation. When at the time an Insurance agent issued 
 a policy of fire Insurance, he knew that the property 
 insured belonged to a partnership of which the ap- 
 plicant was a member, his act in issuing the policy, 
 describing the applicant as the owner, was a waiver 
 of the clause of warranty of sole ownership. Conti- 
 nental Ins. Co. vs. Cummings, et al., 81 S. W. (Tex.) 
 
 The Secretary or President has knowledge of 
 the infraction of a contract and fails to take notice 
 of it. They waive advantage of that knowledge. An 
 assessment falls due, the notice is not properly sent. 
 The right to suspend for non-payment is waived. 
 Or the notice is duly sent and received, but the assess- 
 ment is not paid. The company neglects to suspend 
 the delinquent as its rules require. Another assess- 
 ment occurs, and before the time in which to pay it 
 has expired, there is a loss. Most courts will hold that 
 the right to suspend on the first delinquency has been 
 
OF MUTUAL INSURANCE 
 
 299 
 
 waived, the loss must be paid. Where the by-laws 
 require suspension without action, the case would be 
 different. 
 
 LIVE UP TO THE LAW. 
 
 The only safe way is to live up to the law and 
 regulations carefully and exactly. Read the laws 
 and by-laws frequently, study them thoroughly, ob- 
 serve them carefully, following their wording when 
 possible. Settle all doubtful questions at once, post- 
 pone nothing, but do everything in its time and place, 
 and keep full and accurate records and there will be 
 very little trouble about waiving of rights. Of course 
 it is supposed that in cases of doubt the company will 
 take the advice of its attorney before acting. This 
 question is also discussed in the chapter on assess- 
 ments. 
 
 A GOOD RULE. 
 
 An eminent authority lays down the following 
 rules : Most things that come to the knowledge of an 
 agent in soliciting the risk, before 'policy is written , 
 are considered within knowledge of the company. 
 
 Few things coming to the knowledge of an agent 
 after policy is issued in anyway affect the company. 
 
 HOW FAR MAY AN OFFICER WAIVE THE RIGHT 
 OF THE COMPANY? 
 
 No fixed line can be laid down. Every agent can 
 bind his principals to some extent, but how far is 
 often a subject of dispute. Generally, the rule is 
 that what the agent knows the employer knows, and 
 what the agent does is the act of the employer also. 
 
300 
 
 A HAND BOOK 
 
 The courts have of late construed these more and 
 more strictly, especially in the case of corporations. 
 To hold otherwise, would be to permit companies to 
 make contracts which the other party could be com- 
 pelled to keep but which they could repudiate at their 
 pleasure. The iniquity of that doctrine is apparent 
 on its face. 
 
 Whatever an agent or other employee acting for 
 the company says or does regarding an Insurance 
 contract while he is acting along the line of his duty 
 will generally be binding. Examples will show how 
 this applies. 
 
 An adjuster said to a man who had a loss: “It 
 • will he a long time before you get a cent out of that.” 
 The court held that the adjuster had waived the com- 
 pany’s right to arbitration, proof of loss, etc., and 
 that the loser could take the case into court as it was. 
 Siegle et al vs. Phoenix Ins. Co. of Brooklyn , 81 S. 
 W., (Mo. App.) 
 
 In a number of cases in which officials denied 
 the liability for losses, the courts held that they 
 waived the rights of the company in a similar man- 
 ner. The reason for this ruling is that the question 
 brought before the court was whether or not the com- 
 pany was liable at all. If it was decided in the nega- 
 tive, the matter would be ended ; if in the affirmative, 
 the court would finish up the case and fix the amount. 
 
 A CARELESS PRACTICE. 
 
 Agents often say in a careless sort of manner, 
 “Oh, that’s all right.” Not unfrequently the com- 
 pany will be bound by this remark. Such expressions 
 
OF MUTUAL INSURANCE 
 
 301 
 
 should not be used, in fact, nothing should be prom- 
 ised which is not put in writing. 
 
 The agent can waive a right by ignoring it. As 
 in the case where a policy issued without a gasoline 
 permit, although the agent knew that it was to be 
 used. 
 
 In the collection of assessments the same waiver 
 of rights is liable to occur. An assessment becomes 
 delinquent, the holder meets the agent and pays him 
 the assessment. Whatever might be the strict con- 
 struction of law, the jury would probably hold that 
 the act of the agent waived the right of the company 
 to suspend the policy. Policies which have been sus- 
 pended are sometimes reinstated in a like careless 
 manner. Many companies nominally require all as- 
 sessments to be paid at the home office. But a policy 
 holder falls into arrears, the agent looks him up and 
 persuades him to pay, receives the money, gives a 
 receipt, and remits it to the company, which rein- 
 states the delinquent. If it can be proven that this 
 practice was customary it might make trouble for the 
 company, in case the payment was accepted after a 
 loss had occurred. 
 
 When an agent fills out an application, recording 
 the answers of the applicant, if he makes changes, 
 additions, or omissions, the company will be held to 
 have waived all objections to the matter which was 
 so changed by the agent. 
 
 These are merely illustrations, the doctrine of 
 waiver covers too large a field for full discussion in 
 this work. 
 
302 
 
 A HAND BOOK 
 
 If several proceedings are to occur in a given 
 order, the performance of any one might be held as 
 a waiver of those preceding. For instance, if an 
 adjuster should deny all liability for a loss, he should 
 stop right there. If he goes on to ascertain the values 
 and amount of loss, a jury might hold that that was 
 an appraisement, and consequently a waiver of the 
 denial of liability. 
 
 An official who does his duty exactly and pre- 
 cisely when making contracts and dealing with the 
 policy holder will waive no rights whatever. He will 
 not only care for the interests of the company but the 
 interests of the policy holder also. In case of loss, 
 satisfactory settlements will be practicable, and dis- 
 agreements almost unheard of. 
 
 An ideal official is the one who keeps close watch 
 upon the business of the company and the insured 
 also and does his best to see that the contracts are 
 fully and faithfully carried out on both sides, and 
 who always keeps his books and his business up to 
 date. 
 
 IN CASE OF LOSS. 
 
 The customary notice must be given. Many 
 companies enclose with the policies which they issue 
 a blank form to be filled out in case of fire as an aid 
 to the loser. The notice must be given immediately. 
 
 While “ immediately’ ’ is not ‘ ‘ instantly , 9 9 there 
 must be but little delay unless from some causes 
 which can be explained, such as absence of owner, 
 etc. A delay of ten days or two weeks would be a 
 suspicious circumstance. Notice should be sent to 
 
OF MUTUAL INSURANCE 
 
 303 
 
 the home office. It is well enough to notify the local 
 agent, but it must be borne in mind that notice to the 
 agent is not notice to the company. 
 
 Notice sent by mail should be registered. De- 
 positing a letter in open mail raises a presumption 
 that it has been received but this may be denied. The 
 receipt for a registered letter is proof conclusive. 
 
 If notice of loss is unreasonably delayed, the 
 company should object as soon as it is received, oth- 
 erwise it may be held that they waived the right to do 
 so. Sometimes a proof of loss is sent instead of 
 notice. This will answer as notice if it is sent at 
 once. When blanks for notice and proof of loss ac- 
 company the policy they should be used. 
 
 DUTY OF ASSURED. 
 
 If the damage is partial, it is the duty of the as- 
 sured to do what he can to save the property from 
 further loss, and in case of personal property, to 
 separate the undamaged from the damaged and to 
 put it all in best condition possible. An inventory 
 should be made out separately from the notice of loss. 
 This rule is statutory in many states, and must be 
 substantially complied with except in cases where 
 damage is trifling and nothing would be gained by 
 separating the property. 
 
 This inventory is not required when there is 
 only one article damaged, nor when there is a total 
 loss, or when the goods are so badly damaged as to 
 render it impracticable. 
 
304 
 
 A HAND BOOK 
 
 If the policy has been assigned as security, the 
 company should be extremely cautious, as it acts at 
 its own risk. 
 
 After these preliminaries the company usually 
 sends an adjuster, who is its agent in ascertaining 
 and settling the amount of loss, and here is where 
 trouble usually begins. Respectable companies em- 
 ploy fair adjusters. It is to their interest to do so. 
 A company which habitually fails to pay its losses 
 justly would be like a merchant who habitually gives 
 short weight, both would be set down as frauds, and 
 both would lose business. But there are companies 
 which do not seem to care for reputation and there 
 are adjusters who act as if their only remuneration 
 consisted in a percentage on the sums they saved to 
 their employers. These have brought the whole busi- 
 ness into disrepute. 
 
 It is generally the fact that when a man has a 
 loss, he is apt to over estimate it. It looks badly and 
 there is generally a meddlesome person to make mat- 
 ters worse, and the Mutual adjuster, wishing to deal 
 fairly, is often handicapped at the outset. But if 
 the loser is willing to be fair, a little tact combined 
 with some forbearance on the part of the adjuster 
 will soon make an agreement possible. 
 
 But now and then there is strong evidence of 
 fraud. All such cases should be most carefully in- 
 vestigated, for a Mutual has no more right to permit 
 itself to be swindled that it has to swindle some one 
 else. 
 
S. R. VAN METRE, MARIETTA, OHIO. 
 
 S. R. Van Metre is a descendant of Jan Gysbesten Van Metre 
 who came from Holland in 1663 and obtained a grant of 40,000 
 acres of land in the Valley of Virginia. S. R. Van Metre was 
 raised on a farm, and in early manhood was elected president of 
 the Washington County Farmers' Mutual Insurance Association, 
 organized in 1897. was re-elected to the office from time to time, 
 the last occasion being Jan. 17, 1905. He is vice president of the 
 Federation of Mutual Insurance Associations of Ohio, and di- 
 rector in the Ohio Windstorm Association and state vice presi- 
 dent of the National Insurance Companies. 
 
H. F. HITCHCOCK, LINCOLN, NEBRASKA. 
 
 Harvey Fletcher Hitchcock, son of Col. Nichola Fletcher 
 and Jermima Hitchcock, was born Nov. 16, 1866. at Maxville. 
 Ohio. He moved to Nebraska in February, 1880. He graduated 
 from the public schools, York College and Mallalieu Uni- 
 versity. He married Miss Mamie Mason, at Denver, Colorado. 
 He founded the Mutual Insurance Journal in October, 1894. This 
 paper has a wide circulation and has a large and flourishing job 
 office attached. The editorial work and the supervision of the 
 publication and job office departments take the whole of his 
 time. 
 
OF MUTUAL INSURANCE 
 
 305 
 
 SHOULD AGENTS ADJUST? 
 
 The question is asked, should the agent act as 
 adjuster? Mutual Insurance men usually answer 
 this question in the negative. They say that the 
 agent is liable to be drawn into quarrels with his 
 neighbors which permanently injure his efficiency. 
 It is cheaper and better to employ the regular ad- 
 juster. 
 
 19 
 
CHAPTER XV. 
 
 CANCELLATION OF POLICIES. 
 
 The laws of many states are silent on this sub- 
 ject, and the provisions of the statutes in other states 
 are very brief. 
 
 Either party has the right to cancel. If the com- 
 pany cancels the policy it must give due notice and 
 return the unearned portion of the premium, if any 
 there be. This process must be complete. The notice 
 must be given and the unearned premium must be ac- 
 tually returned or at least tendered in order to re- 
 lease the company. The case in which assessments 
 are due and unpaid is discussed in the chapter on as- 
 sessments. 
 
 If the policy is cancelled by the insured, he must 
 pay up all arrearages and liabilities. If a loss has 
 occurred, he must pay his proportion thereof before 
 he can be released. This applies to all companies 
 which assess after a loss. Those which assess in ad- 
 vance or which receive cash payments for a term of 
 years, will be owing the policy holder and must re- 
 turn the surplus. But they have the right to charge 
 what are called short time rates which are somewhat 
 in excess of the term rates. Several tables of short 
 time rates are used. The following, computed by the 
 Iowa Insurance Department, is generally approved. 
 
 306 — 
 
OF MUTUAL INSURANCE 
 
 307 
 
 These apply when the policy holder cancels out. If 
 the company cancels, it must return the full propor- 
 tion of the premium it has on hand after deducting 
 the policy holder’s share of all losses and expenses 
 which have occurred. 
 
 SHORT RATE TABLE TO GOVERN IN THE CANCELLATION 
 OF FIRE INSURANCE POLICIES. 
 
 [Prepared by the Auditor of State of the State of Iowa, in 
 accordance with the provisions of Section 1729, the Code.] 
 Take the percentage indicated in scale opposite the number 
 of days or months policy is to run on the premium at given rate, 
 and the result will be the premium earned in case of cancella- 
 tion. Periods exceeding 20 days, and not exceeding 25 days, to 
 be charged at the rate of 25 days, and so on up to one year. 
 
 1 day 2 per cent of annual premium 
 
 2 days 4 “ “ “ 
 
 3 “ 5 “ “ “ 
 
 4 “ 6 “ “ “ 
 
 5 n rj (( a a 
 
 6 “ 8 “ “ “ 
 
 7 (( g u u u 
 
 8 “ 9 “ “ “ 
 
 9 “ 10 “ “ “ 
 
 10 “ 10 “ “ “ 
 
 11 “ 11 “ “ “ 
 
 12 “ 12 “ “ “ 
 
 13 “ 13 “ “ “ 
 
 14 “ 13 “ “ “ 
 
 15 “ 14 “ “ “ 
 
 16 “ 14 “ “ “ 
 
 17 “ 15 “ “ “ 
 
 18 “ 16 “ “ “ 
 
 19 “ 16 “ “ “ 
 
 20 11 17 11 (t il 
 
 25 “ 19 “ “ “ 
 
 30 “ 20 “ “ “ 
 
 35 “ 23 “ “ “ 
 
308 
 
 A HAND BOOK 
 
 40 days 26 per cent of annual premium 
 
 45 
 
 it 
 
 
 . . 27 
 
 a 
 
 a 
 
 tt 
 
 50 
 
 1 1 
 
 
 . . 28 
 
 1 1 
 
 1 1 
 
 tt 
 
 55 
 
 tt 
 
 
 . . 29 
 
 1 1 
 
 tt 
 
 tt 
 
 60 
 
 tt 
 
 
 . . 30 
 
 1 1 
 
 tt 
 
 tt 
 
 65 
 
 tt 
 
 
 .. 33 
 
 1 1 
 
 tt 
 
 tt 
 
 70 
 
 tt 
 
 
 .. 36 
 
 1 1 
 
 tt 
 
 tt 
 
 75 
 
 tt 
 
 
 .. 37 
 
 tt 
 
 tt 
 
 1 1 
 
 80 
 
 tt 
 
 
 .. 38 
 
 a 
 
 a 
 
 tt 
 
 85 
 
 a 
 
 
 , . 39 
 
 tt 
 
 < t 
 
 a 
 
 90 
 
 tt 
 
 or three months . . 
 
 . . 40 
 
 1 1 
 
 tt 
 
 1 1 
 
 105 
 
 tt 
 
 
 . . 45 
 
 1 1 
 
 n 
 
 tt 
 
 120 
 
 tt 
 
 or four months . . . 
 
 . . 50 
 
 1 1 
 
 tt 
 
 tt 
 
 135 
 
 a 
 
 
 .. 55 
 
 tt 
 
 tt 
 
 1 1 
 
 150 
 
 tt 
 
 or five months .... 
 
 . . 60 
 
 tt 
 
 tt 
 
 a 
 
 165 
 
 a 
 
 
 . . 65 
 
 tt 
 
 1 1 
 
 a 
 
 180 
 
 tt 
 
 or six months .... 
 
 . . 70 
 
 1 1 
 
 1 1 
 
 a 
 
 195 
 
 tt 
 
 
 . . 73 
 
 1 1 
 
 a 
 
 a 
 
 210 
 
 tt 
 
 or seven months . . 
 
 . . 75 
 
 tt 
 
 tt 
 
 tt 
 
 225 
 
 tt 
 
 
 .. 78 
 
 tt 
 
 a 
 
 tt 
 
 240 
 
 1 1 
 
 or eight months . . . 
 
 . . 80 
 
 ft 
 
 tt 
 
 a 
 
 255 
 
 a 
 
 
 .. 83 
 
 tt 
 
 it 
 
 tt 
 
 270 
 
 1 1 
 
 or nine months . . . 
 
 . . 85 
 
 tt 
 
 tt 
 
 tt 
 
 285 
 
 tt 
 
 
 .. 88 
 
 tt 
 
 tt 
 
 tt 
 
 300 
 
 tt 
 
 or ten months .... 
 
 . . 90 
 
 tt 
 
 tt 
 
 tt 
 
 315 
 
 tt 
 
 
 .. 93 
 
 1 1 
 
 a 
 
 it 
 
 330 
 
 1 1 
 
 or eleven months . 
 
 . . 95 
 
 it 
 
 a 
 
 a 
 
 360 
 
 tt 
 
 or twelve months . 
 
 ..100 
 
 1 1 
 
 tt 
 
 a 
 
 
 
 TWO 
 
 YEARS. 
 
 
 
 
 For 2 months or less 
 
 
 Over 2 and not exceeding 4 months 30 
 
 tt 
 
 1 1 
 
 1 1 
 
 n 
 
 4 
 
 “ “ 6 
 
 “ 40 
 
 it 
 
 1 1 
 
 1 1 
 
 t t 
 
 6 
 
 “ “ 8 
 
 “ 50 
 
 a 
 
 1 1 
 
 tt 
 
 it 
 
 8 
 
 “ “ 10 
 
 “ 60 
 
 tt 
 
 tt 
 
 tt 
 
 1 1 
 
 10 
 
 “ “ 12 
 
 “ 70 
 
 tt 
 
 it 
 
 n 
 
 1 1 
 
 12 
 
 “ “ 14 
 
 “ 75 
 
 tt 
 
 it 
 
 tt 
 
 a 
 
 14 
 
 “ “ 16 
 
 “ 80 
 
 1 1 
 
 tt 
 
 tt 
 
 tt 
 
 16 
 
 “ “ 18 
 
 “ 85 
 
 1 1 
 
 tt 
 
 tt 
 
 1 1 
 
 18 
 
 “ “ 20 
 
 “ 90 
 
 it 
 
 it 
 
 a 
 
 1 1 
 
 20 
 
 “ “ 22 
 
 “ 95 
 
 tt 
 
 a 
 
 a 
 
 tt 
 
 22 . 
 
 
 ,...100 
 
 tt 
 
 a 
 
 a 
 
OF MUTUAL INSURANCE 
 
 309 
 
 THREE YEARS. 
 
 For 3 months or less 25 per cent of term premium 
 
 Over 3 and not exceeding 6 months 30 
 “ 6 “ “ 9 “ 40 
 
 a 
 
 tt 
 
 it 
 
 tt 
 
 it 
 
 tt 
 
 “ 9 
 
 it 
 
 tt 
 
 12 
 
 a 
 
 50 
 
 tt 
 
 tt 
 
 tt 
 
 “ 12 
 
 it 
 
 1 1 
 
 15 
 
 a 
 
 60 
 
 n 
 
 tt 
 
 tt 
 
 “ 15 
 
 tt 
 
 it 
 
 18 
 
 tt 
 
 70 
 
 tt 
 
 tt 
 
 tt 
 
 “ 18 
 
 tt 
 
 tt 
 
 21 
 
 tt 
 
 75 
 
 tt 
 
 tt 
 
 tt 
 
 “ 21 
 
 1 1 
 
 1 1 
 
 24 
 
 tt 
 
 80 
 
 tt 
 
 tt 
 
 tt 
 
 “ 24 
 
 tt 
 
 it 
 
 27 
 
 tt 
 
 85 
 
 tt 
 
 tt 
 
 tt 
 
 “ 27 
 
 tt 
 
 it 
 
 30 
 
 tt 
 
 90 
 
 1 1 
 
 tt 
 
 tt 
 
 “ 30 
 
 a 
 
 1 1 
 
 33 
 
 tt 
 
 95 
 
 tt 
 
 tt 
 
 it 
 
 “ 33 
 
 months . 
 
 
 
 
 .100 
 
 n 
 
 tt 
 
 tt 
 
 FOUR YEARS. 
 
 For 4 months or less 25 per cent of term premium 
 
 Over 4 and not exceeding 8 months 30 11 11 u 
 
 tt g tt tt 12 11 40 1 1 il 11 
 
 “ 12 
 
 a 
 
 tt 
 
 16 
 
 tt 
 
 50 
 
 tt 
 
 tt 
 
 tt 
 
 “ 16 
 
 tt 
 
 it 
 
 20 
 
 tt 
 
 60 
 
 a 
 
 tt 
 
 tt 
 
 “ 20 
 
 tt 
 
 it 
 
 24 
 
 tt 
 
 70 
 
 1 1 
 
 tt 
 
 it 
 
 “ 24 
 
 a 
 
 tt 
 
 28 
 
 1 1 
 
 75 
 
 n 
 
 tt 
 
 tt 
 
 “ 28 
 
 tt 
 
 tt 
 
 32 
 
 1 1 
 
 80 
 
 tt 
 
 tt 
 
 tt 
 
 “ 32 
 
 tt 
 
 1 1 
 
 36 
 
 tt 
 
 85 
 
 a 
 
 tt 
 
 tt 
 
 “ 36 
 
 tt 
 
 a 
 
 40 
 
 1 1 
 
 90 
 
 1 1 
 
 tt 
 
 tt 
 
 “ 40 
 
 tt 
 
 it 
 
 44 
 
 tt 
 
 95 
 
 tt 
 
 tt 
 
 tt 
 
 11 44 months . 
 
 
 
 
 .100 
 
 tt 
 
 tt 
 
 tt 
 
 FIVE YEARS. 
 
 For 5 months or less 25 per cent of term premium 
 
 Over 5 and not exceeding 10 mo 's . 30 11 11 11 
 
 t 
 
 10 
 
 n 
 
 tt 
 
 15 
 
 tt 
 
 40 
 
 tt 
 
 tt 
 
 tt 
 
 t 
 
 15 
 
 tt 
 
 n 
 
 20 
 
 tt 
 
 50 
 
 a 
 
 tt 
 
 tt 
 
 t 
 
 20 
 
 tt 
 
 tt 
 
 25 
 
 tt 
 
 60 
 
 tt 
 
 tt 
 
 tt 
 
 t 
 
 25 
 
 tt 
 
 tt 
 
 30 
 
 tt 
 
 70 
 
 tt 
 
 tt 
 
 tt 
 
 t 
 
 30 
 
 tt 
 
 tt 
 
 35 
 
 tt 
 
 75 
 
 n 
 
 tt 
 
 tt 
 
 t 
 
 35 
 
 tt 
 
 tt 
 
 40 
 
 tt 
 
 80 
 
 1 1 
 
 tt 
 
 tt 
 
 t 
 
 40 
 
 tt 
 
 a 
 
 45 
 
 it 
 
 85 
 
 a 
 
 tt 
 
 tt 
 
 t 
 
 45 
 
 tt 
 
 a 
 
 50 
 
 tt 
 
 90 
 
 it 
 
 tt 
 
 tt 
 
 t 
 
 50 
 
 n 
 
 tt 
 
 55 
 
 tt 
 
 95 
 
 tt 
 
 tt 
 
 tt 
 
 t 
 
 55 months . 
 
 
 
 
 .100 
 
 tt 
 
 tt 
 
 tt 
 
 SIX YEARS. 
 
 For six months or less 25 per cent of term premium 
 
310 A HAND BOOK 
 
 Over 6 and not exceeding 12 mo ’s . 30 
 
 it 
 
 12 
 
 a 
 
 tt 
 
 18 
 
 it 
 
 40 
 
 tt 
 
 it 
 
 18 
 
 a 
 
 tt 
 
 24 
 
 it 
 
 50 
 
 a 
 
 it 
 
 24 
 
 a 
 
 tt 
 
 30 
 
 tt 
 
 60 
 
 tt 
 
 it 
 
 30 
 
 tt 
 
 tt 
 
 36 
 
 tt 
 
 70 
 
 a 
 
 it 
 
 36 
 
 tt 
 
 tt 
 
 42 
 
 tt 
 
 75 
 
 tt 
 
 it 
 
 42 
 
 a 
 
 tt 
 
 48 
 
 tt 
 
 80 
 
 tt 
 
 it 
 
 48 
 
 ft 
 
 tt 
 
 54 
 
 tt 
 
 85 
 
 tt 
 
 (t 
 
 54 
 
 tt 
 
 tt 
 
 60 
 
 tt 
 
 90 
 
 tt 
 
 it 
 
 60 
 
 tt 
 
 tt 
 
 66 
 
 tt 
 
 95 
 
 tt 
 
 it 
 
 66 
 
 
 
 
 
 .100 
 
 tt 
 
CHAPTER XVI. 
 
 CLASS MUTUALS. 
 
 Class Mutuals insure a single line only. New 
 England furnishes a striking example of success in 
 her mill owner’s Mutuals. Originally, the annual 
 rate on these great manufacturing establishments 
 was $2.25 per one hundred dollars. A mill owner 
 who had made some improvements and applied for a 
 reduction of rates was refused with the remark that 
 “ A mill is a mill anyhow. ” He at once made efforts 
 to interest other manufacturers in the formation of a 
 Mutual. He succeeded in organizing a company and 
 in calling attention to the necessity of taking more 
 precautions against fire than were customary at the 
 time. The result was that inspectors were appointed, 
 new methods adopted and finally the risks were so 
 improved that the annual cost is less than ten cents 
 on the one hundred dollars. Most of this is for pre- 
 vention of fire, the inspection system being still kept 
 up. 
 
 ADVANTAGES. 
 
 Class Mutuals have two peculiar advantages. 
 One is that every one connected with a class Mutual 
 understands thoroughly all the risks. In the case 
 quoted above every one is an expert, knowing all 
 
 —311 
 
312 
 
 A HAND BOOK 
 
 about a mill, understanding its value, able to see 
 dangerous constructions, and to point out remedies, 
 in short, the whole company is united in measures 
 to reduce the fire waste. The moral hazard is elimin- 
 ated. 
 
 Another advantage is that the risks are very 
 rarely contiguous. There is absolutely no such thing 
 as a conflagration loss. It is impossible. In the 
 smaller towns, most class Mutuals would carry but a 
 single risk. Hence losses which wreck the company 
 are not heard of among these Mutuals. These ad- 
 vantages are giving the class Mutuals a good lead but 
 they are hampered by some restrictions. 
 
 Most of them are confined to single states, and 
 find that there is not as much business for them as 
 they should have. This is a matter which will prob- 
 ably be remedied in the future. Some companies are 
 already doing an underground business. The United 
 States supreme court has affirmed the right to every 
 man to buy his indemnity where he pleases without 
 regard to state lines. This does not give agents the 
 right to solicit business in states where the companies 
 have not been regularly admitted. Nor does it give 
 the company itself any legal status, it cannot sue or 
 be sued. Many class Mutuals do business only 
 through the state or national associations and will 
 not insure property unless the owner is a member of 
 one of these bodies. Sometimes the association itself 
 owns the Mutual and in such a case the Insurance 
 company would be entirely without legal status any- 
 where. While this does not appear to be a desirable 
 
OF MUTUAL INSURANCE 
 
 313 
 
 state of affairs, there are many companies, without 
 legal organization, run entirely “upon honor,’ ’ and 
 it is only fair to say that their members are well sat- 
 isfied with their workings, no complaint about them 
 has been heard. Hence it would probably be better if 
 some plan could be adopted whereby all companies 
 could be put upon the same footing and all, able to 
 prove their solvency, be admitted to do business in 
 whatever states they desired. 
 
 Class Mutuals open the way by which the city 
 merchant can take advantage of the co-operative sys- 
 tem. There is a strong tendency everywhere toward 
 Mutualism, but until lately the way has not been 
 clear. But the magnificent success of the Mill Own- 
 ers’ Mutual of the east, reducing the cost of Insur- 
 ance over ninety per cent, and the economics of other 
 Mutuals organized by associations of dealers, have 
 set people to thinking and it is probable that the next 
 few years will witness a great advance along this 
 line, with the consequent elevation in the standard 
 and in the influence of the local dealers. 
 
 SUCCESSFUL MUTUALS. 
 
 The following letters from successful Mutuals 
 will give full information on the subject. Mr. J. H. 
 Tinvoorde, of the Retail Merchants Mutual Fire In- 
 surance Company of Minneapolis, Minnesota, writes : 
 
 FROM MINNEAPOLIS RETAIL LUMBER. 
 
 4 ‘In regard to the expense of conducting busi- 
 ness, will state that the average expense ratio to net 
 premiums received has been 26 per cent. That, you 
 
314 
 
 A HAND BOOK 
 
 will readily see, is about 14 per cent less than what 
 tLe old line companies’ expense ratio is. In regard 
 to soliciting business, we do a great deal of our solic- 
 iting by mail and have one special on the road at the 
 present time, who makes it a business to solicit and 
 inspect what business we have on our books. 
 
 “Our company was organized and started to do 
 business in 1900. At the present time we have a little 
 over $3,000,000 at risk and about two thousand policy 
 holders. Now, as to how many policy holders should 
 a company have before starting. Our state law pro- 
 vides that we shall have $750,000 in insurance ap- 
 plied for in no less than 350 separate risks. We com- 
 plied with that provision of the law and began writ- 
 ing business just as soon as we secured the requisite 
 amount, which amount was secured through the 
 mails in less than two months. You will also notice 
 in our by-laws that our policies on mercantile stocks 
 are to be written for one year, no longer ; on house- 
 hold goods and dwellings we write them for three 
 years. 
 
 “That in brief is the history of our company 
 since its organization. The Retail Lumbermen’s In- 
 surance Company, which has been operating in this 
 state for the last eight years, has made a great deal 
 better showing than we have. The same can be said 
 of the Hardware Dealers’ Mutual Insurance Com- 
 pany, which began business about the same time we 
 did. It has a great deal less at risk than our com- 
 pany but confines itself to hardware stocks and build- 
 ings containing the same, and then will not write any 
 
OF MUTUAL INSURANCE 
 
 815 
 
 hardware dealer unless he is a member of the State 
 Hardware Dealers ’ Association. They have no man 
 on the road and the secretary’s salary and office rent 
 is paid jointly by the Insurance company and the 
 state association so that their expense ratio since 
 they have been in business has been but 14 per cent. 
 Their loss ratio during the same period has been but 
 17 per cent. There is no question in the writer’s 
 mind but what Mutuals conducted on business prin- 
 ciples are a decided success, speaking for Minne- 
 sota.” 
 
 He enclosed the policy, by-laws and blanks. The 
 policy contains the constitution and by-laws, the pol- 
 icy proper being very nearly of the standard form. 
 
 The constitution states the object as follows: 
 1 ‘The sole object and purpose of this company shall 
 be to indemnify its members against actual loss or 
 damage by fire or lightning, upon the mutual plan, 
 to and upon their stocks of merchandise, tools and 
 fixtures, and upon buildings containing the same, or 
 either of them, and upon household furniture and 
 dwelling houses, or either thereof.” 
 
 Policies on stocks of merchandise and fixtures 
 shall be for a term not exceeding one year, on dwell- 
 ing houses, etc., not exceeding three years. The pol- 
 icy limit is $3,000. The rates of insurance are fixed 
 from time to time by the board of directors. 
 
 “The contingent mutual liability of each mem- 
 ber of this company for the payment of losses and 
 expense, not provided for by its cash fund, shall be 
 
316 
 
 A HAND BOOK 
 
 a sum equal to and in addition to the premium paid 
 on his policy. ’ ’ 
 
 The By-laws concerning the reserve are as fol- 
 lows: 
 
 “Section 1. The Board of Directors may, at 
 the end of each year, set aside such sums as they 
 deem reasonable and proper, in no event to exceed 
 twenty-five (25) per cent of the gross profits of the 
 company, for the purpose of creating a special re- 
 serve fund. 
 
 “Section 2. Such special reserve fund shall be- 
 long to the company, shall not be divided among the 
 members thereof, nor shall any member ever be en- 
 titled to demand or receive any portion thereof, ex- 
 cept in payment of losses. Nor shall any person after 
 ceasing to be a policy holder of the company be en- 
 titled to have or receive any portion of said special 
 reserve fund, as dividend or otherwise.’ ’ 
 
 Their statement shows that the company is in 
 good condition. This company has successfully at- 
 tacked one of the most difficult problems in Mutual 
 Insurance, doing a general business in cities. While 
 the actual figures may not show up with as much 
 brilliancy as those of some others, they are fully as 
 creditable to its management when the character of 
 the work it has undertaken is considered. 
 
 ANOTHER COMPANY. 
 
 E. G. Fahnestock, of the Retail Lumbermen’s 
 Insurance Association, Minneapolis, Minnesota, 
 says : 
 
OF MUTUAL INSURANCE 
 
 317 
 
 “We belong to the few insurance associations 
 that adhere strictly to writing policies only on one 
 line, that of retail lumber yards. We have been 
 organized almost eleven years, refusing during that 
 entire period to add to our policies other merchan- 
 dise which some retail lumber dealers wish to have 
 covered. 
 
 “We limited the amount of insurance carried by 
 us at the time we started to $3,000 on any one risk or 
 exposure. The board rate for a detached, unfenced 
 yard at that period was $1.50; a fenced yard, de- 
 tached, $1.25. We took that as a basis, requiring 
 them to deposit with us as security, both for the se- 
 curity to policy holders and as a guarantee that the 
 assured will promptly pay any assessments that are 
 levied for the payment of losses and expenses, the 
 deposit to be returned at any time upon the cancella- 
 tion of the policy, or upon its expiration, less only 
 such unpaid assessments that remain charged against 
 the policy. Each six months we collect what we deem 
 sufficient for the purpose of paying losses and ex- 
 penses and incidentally to create a surplus fund. We 
 collected for several years forty-eight per cent of 
 this deposit, which left us a surplus each year. After 
 a few years on that basis, we gradually reduced that 
 rate of assessment and about four years ago we were 
 collecting only thirty per cent of the deposit per year, 
 which was sufficient until the year 1903. By that 
 time we had accumulated a surplus of $33,000, more 
 than was necessary for the payment of losses and ex- 
 penses. During that year, the floods in Kansas and 
 
318 
 
 A HAND BOOK 
 
 Iowa caused us extraordinary losses in the slac kin g 
 of lime by the rising of water which fired the lumber 
 sheds and stocks of lumber so that we had losses 
 averaging fifty per cent loss ratio for that year. Our 
 losses for the first nine years averaged us twenty 
 per cent of the deposits. The losses in 1903 made 
 our average twenty-five per cent for ten years. We, 
 therefore, on the first of this year resumed the forty- 
 eight per cent rate of assessment and as a conse- 
 quence we have added about $27,000 to our surplus 
 and have now in excess of forty thousand dollars un- 
 used assessments. This indicates that the cost to our 
 policy holders is from one-third to one-half what the 
 old line companies charged at the time of our organ- 
 ization. These companies, seeing the business drift 
 away from them, commenced reducing their rates. 
 They first reduced to one dollar for fenced yards and 
 one dollar and a quarter for unfenced and then down 
 until they were willing to write insurance at fifty 
 cents to prevent us from getting it. This, however, 
 did not accomplish what they expected, because our 
 policy holders know well that if they drove us out 
 of existence they would very soon restore the origin- 
 al rates. With the reduced rates they lost money and 
 within a year or so have commenced going back to 
 old rates. They now charge 75 cents and $1.00 for 
 the risks they were carrying at fifty cents and on 
 which they originally charged $1.25 and $1.50. 
 
 4 ‘ The Class Mutuals undoubtedly meet with bet- 
 ter success than the State Mutuals, which cover all 
 
OF MUTUAL INSURANCE 
 
 319 
 
 lines. They can make a better average and are finan- 
 cially stronger . 9 9 
 
 THE GENERAL PLAN. 
 
 From its circular the following extracts are 
 taken : 
 
 “The Eetail Lumbermen’s Insurance Associa- 
 tion is just what its name indicates, to wit : a Mutual 
 association of retail lumber dealers. Each policy 
 holder is charged each month a fixed percentage 
 upon the amount of his original deposit, sufficient to 
 pay his equitable proportion of all losses and ex- 
 penses and create a suitable reserve fund for safety 
 in years of extraordinary losses. 
 
 “These monthly charges are aggregated semi- 
 annually and put in the form of an assessment, notice 
 of which is sent to the policy holder and in accord- 
 ance with the articles of the association and by-laws, 
 twenty days is given in which to pay the same. 
 Agreement is made on the part of the policy holder 
 to pay assessments promptly and in the event of fail- 
 ure to do so, to forfeit to the association the entire 
 original deposit. This makes the collection of as- 
 sessments absolutely sure, and in an experience cov- 
 ering eight years we have had but one deposit thus 
 forfeited. 
 
 “The amount of the original deposit on each 
 policy is determined by the old rates formerly paid 
 to reliable stock companies on the same risk. This 
 deposit is placed in the original deposit fund and is 
 returnable to the policy holder upon surrender of 
 
320 
 
 A HAND BOOK 
 
 Ms policy for cancellation, less any unpaid charges 
 against the policy. The object of the plan is to keep 
 the original deposit fund constantly intact and our 
 by-laws explicitly provide that it shall at no time be 
 impaired more than twenty-five per cent; hence the 
 absolute safety of the proposition. 
 
 “The maximum amount of insurance which we 
 can write upon any one risk is $6,000. This is written 
 in two policies of $3,000. Please note that ‘ Series 
 A’ is the old series and ‘ Series B’ the new. The lat- 
 ter series was started to accommodate those who 
 desired more than $3,000 on one risk, and as will be 
 seen by reference to the articles of association and 
 by-laws it is entirely separate and distinct from 
 ‘Series A’ the same as if it were in fact in another 
 company. 
 
 “ ‘Series B,’ inaugurated at the eighth annual 
 meeting in January 1902, started out with half a mil- 
 lion of insurance to be written the first day its books 
 were opened and with applications in the hands of 
 the secretary for two millions to be written during 
 the year. No prospective policy holder need hesitate 
 about ‘Series B’ as its success is assured from the 
 start. The volume of business which is sure to come 
 to it is bound to reduce the cost to very nearly that 
 already attained in ‘ Series A. ’ 
 
 “Policy No. 26, for $3,000, written by us March 
 8, 1894, had been carried for eight years in a stock 
 company. The amount paid to the old line company 
 in eight years for same amount at 1% per cent rate 
 
OF MUTUAL INSURANCE 
 
 821 
 
 was $ 360.00 
 
 From March 8, 1904 to March 1902, with 
 us it has cost : 
 
 First year $ 21.60 
 
 Second year 21.60 
 
 Third year 21.60 
 
 Fourth year 20.70 
 
 Fifth year 16.20 
 
 Sixth year 16.20 
 
 Seventh year 15.76 
 
 Eighth year 13.56 
 
 Total 
 
 $ 147.22 
 
 Amount saved $ 212.78 
 
 “The assessments collected on this policy, the 
 aggregate of which is represented by the amount 
 named, were sufficient to not only pay its propor- 
 tionate share of all losses and expenses, but contri- 
 buted its share toward the reserve fund which is a 
 bulwark of strength to the organization and of safety 
 to the policy holders. ’ ’ 
 
 “No person or corporation shall be eligible to 
 membership in this association who is not a member 
 of the Northwestern Lumbermen’s Association, or 
 of some other association of retail lumber dealers 
 with which the said Northwestern Lumbermen’s As- 
 sociation may be in co-operation, unless by consent 
 of the board of directors.” 
 
 RETAIL HARDWARE. 
 
 A. R. Sale, of the Mason City, Iowa, Retail 
 Hardware Dealers’ Mutual Insurance Association, 
 writes : 
 
 20 
 
322 
 
 A HAND BOOK 
 
 “ Would say that our Association was organized 
 in 1903, following the same lines of organization as 
 the Minnesota Hardware Mutual Company, so far as 
 the legislation in the two states would permit. We 
 collect a full premium in advance and return the un- 
 used premium at the expiration of the policy. We 
 have written considerably more than half a million 
 dollars of business since we began, securing most of 
 this by means of correspondence. Our first dividend 
 to policy holders was 20 per cent. The dividend on 
 the second year policies will be declared early in 
 January, and will be considerably more than this. 
 
 “With regard to your question, should we have 
 a law authorizing the inter state class or single line 
 Mutuals, we certainly should have a law broad 
 enough to meet the rulings of the highest courts. As 
 a matter of fact, the state laws do not permit us to 
 write outside of our own state. 
 
 “We think this is the law in most of the states, 
 but we are protected in so doing, by a ruling of the 
 United States Supreme Court, which permits the in- 
 surer to buy his protection where he pleases, in spite 
 of the petty legislation enacted by the influence of the 
 insurance trust.’ ’ 
 
 ANOTHER. 
 
 The following letter from M. S. Mathews, of the 
 Retail Hardware Dealers’ Mutual Insurance Com- 
 pany, of Minneapolis, Minnesota, is to the point. The 
 accompanying statement is excellent, showing low 
 expenses, abundant assets and increasing business. 
 
OF MUTUAL INSURANCE 
 
 323 
 
 “Yours of the 22nd, received Thursday. I held 
 it over as we were to have a quarterly meeting and 
 it occurred to the writer that something might come 
 up at that time which would be of interest to you. 
 Nothing occurred except fixing the amount of rebate 
 or ‘ Return Premium ’ as we call it. 
 
 “This year we are paying 30 per cent but com- 
 mencing J anuary 1st, we pay 35 per cent for the year 
 1905. Our method is slightly different from that of 
 the Retail Lumbermen’s Company. We write for one 
 year, except when on homes and household goods of 
 our members, when it may be either one, three or 
 five years. We collect the regular or board rate as 
 closely as possible, rebating at the expiration of the 
 policy, as mentioned above. We have been making 
 rapid gains and are making a very good showing. 
 This is getting pretty well along in the year, and we 
 have not been printing any new matter lately. How- 
 ever, we will send along what we have and hope it 
 may prove of interest to you. Where we shine is on 
 the extremely low expense account— 10 per cent as 
 you will notice. On examination of the figures you 
 will notice we could pay much larger rebates if it had 
 been deemed advisable. Our management believes 
 in a moderate surplus, hence the small rebate as com- 
 pared with the earnings . 9 ’ 
 
 AN EDITORIAL EXPLANATION. 
 
 “During the past year Trade has been asked by 
 subscribers engaged in the hardware business, 
 whether or not there is any hardware dealers’ Mu- 
 
324 
 
 A HAND BOOK 
 
 tual fire insurance company, which writes business 
 amongst the dealers of this state, and what condi- 
 tions must be complied with in order that applica- 
 tions for insurance be accepted. 
 
 ‘ ‘ For the benefit of those hardware dealers who 
 are interested in this subject, we would say that the 
 Minnesota company has been established several 
 years, and it has been the means of saving thousands 
 of dollars for its policy holders since its incorpora- 
 tion. The insurance laws of Michigan have prevented 
 this company from carrying on any extensive cam- 
 paign for business in this state, but there is nothing 
 in the insurance laws which prevents them from ac- 
 cepting business when the application is made un- 
 solicited. 
 
 “ There is one condition, however, which is a 
 very important one, with which this company insists 
 that applicants for insurance must comply. This con- 
 dition is that applicant be a member of the State 
 Retail Hardware Dealers’ Association. This com- 
 pany having been founded through the efforts of 
 organized hardware men, it is only reasonable that 
 it should insist that none but members who support 
 these organizations should participate in the benefits. 
 President Bogardus of the National Retail Hardware 
 Association, says: 4 The insurance feature of the 
 hardware associations is one of the things to foster. 
 Its value as the companies grow in years and 
 strength, will be more marked every year, and it was 
 a wise move on the part of the hardware men to in- 
 sure themselves.’ One thing the dealer should re- 
 
OF MUTUAL INSURANCE 
 
 386 
 
 member, however, is that the first step to be taken 
 in securing a policy is to become a member of the 
 State Hardware Dealers’ Association. We believe 
 it is worth while for dealers to look into this propo- 
 sition. If there are any hardware men in this state 
 who are interested in this question, we would refer 
 them for further particulars to Secretary M. S. 
 Mathews, of Minneapolis, Minnesota.”— From 
 “ Trade.” 
 
 THE LIST GIVEN BY THE " IRON AGE.” 
 
 At the present time there are eight Mutual fire 
 insurance companies which are being conducted in- 
 directly by hardware associations, and are especially 
 intended for insuring hardware stocks, as follows : 
 
 The Retail Hardware Dealers’ Mutual Fire In- 
 surance Company, of Minnesota, M. S. Mathews, sec- 
 retary, Boston Block, Minneapolis. 
 
 The Ohio Hardware Dealers’ Mutual Fire In- 
 surance Company, Geo. M. Gray, secretary; Coshoc- 
 ton, Ohio. 
 
 The National Hardware Mutual Fire Insurance 
 Company of Pennsylvania, W. B. Simpson, sec- 
 retary; Huntington, Pa. 
 
 The Hardware Dealers’ Mutual Fire Associa- 
 tion of Pennsylvania, W. B. Simpson, secretary; 
 Huntington, Penn. 
 
 The Iowa Hardware Dealers’ Mutual Insurance 
 Association, A. R. Sale, secretary ; Mason City, Iowa. 
 
 The Hardware Dealers’ Mutual Fire Insurance 
 Company of Wisconsin, C. A. Peck, secretary ; Ber- 
 lin, Wis. 
 
326 
 
 A HAND BOOK 
 
 The Missouri Retail Hardware Dealers’ Mutual 
 Fire Insurance Company, Fred Neudorff, secretary; 
 St. Joseph, Mo. 
 
 Nebraska Hardware Mutual Fire Insurance 
 Company, (organized June 16), F. T. Shepard, sec- 
 retary; Lincoln, Nebraska. 
 
 Several other state associations have companies 
 in process of formation, and the list will probably 
 be enlarged in the course of a few months. 
 
 It may interest hardware merchants who are 
 canvassing the question as to placing insurance with 
 Mutual companies, especially dealers who are affili- 
 ated with state hardware associations, for only one 
 or two of the above companies accept insurance from 
 non-affiliated merchants, to know something about 
 them, their method of insurance, amount of risk, etc. 
 
 Of these companies, the oldest and by far the 
 largest, is that of Minnesota, which is now complet- 
 ing its fifth year of existence. The plan of this com- 
 pany, which is practically the one followed by the 
 others, is to write policies for one year only, at the 
 expiration of which the insured knows to a certainty 
 just the amount of money the Mutual plan has saved 
 him and what his insurance has cost. Each year’s 
 business takes care of itself, the premiums being 
 based upon the losses and expenses incurred during 
 that year. At the expiration of a policy the premium 
 to which the insured is entitled is returned to him if 
 he does not desire to continue another year, or is 
 credited to him on renewal of policy. The rate 
 charged for insurance is the established board rate 
 
OF MUTUAL INSURANCE 
 
 327 
 
 for the town in which the merchant is located, or if 
 there is none so established, the applicant for insur- 
 ance is charged the rate any reliable company would 
 ask on the risk. In this way, the insured pays no 
 more than he would pay elsewhere, while the return 
 premium at the end of the year puts him that much 
 ahead. The return premium of the Minnesota asso- 
 ciation, for policies expiring during the present year, 
 is thirty per cent ; this also permitting a substantial 
 addition to the surplus. The company expects to 
 furnish insurance at an actual cost of less than 50 
 per cent of old line rates. 
 
 The other companies, which have all been organ- 
 ized within a year or so, some of them since the be- 
 ginning of 1904, all follow the same general plan as 
 already stated. Officered as they are by representa- 
 tive merchants of high standing, there is every 
 reason to suppose that they will duplicate the suc- 
 cess of the Minnesota company in furnishing safe 
 insurance at a substantial concession from the usual 
 rate. 
 
 The Minnesota company accepts insurance from 
 merchants in any state who are members of their 
 state association (and who, of course, are a “good 
 risk”), nearly fifty per cent of their business being 
 with dealers outside of Minnesota. 
 
 The Ohio company is not prepared to extend the 
 privilege of insurance to hardware merchants in oth- 
 er states, but it does insure hardware merchants who 
 are not members of the Ohio State Association. 
 
 The National company as the name implies, in- 
 
828 
 
 A HAND BOOK 
 
 sures dealers anywhere who are affiliated with a 
 state association, this company having been organ- 
 ized for this purpose, under the special auspices of 
 the National Hardware Dealers’ Association. The 
 limit of insurance is $3,000. 
 
 The Pennsylvania company accepts risks in any 
 of the states contiguous to the Keystone state. It has 
 no absolute rule limiting insurance to members of as- 
 sociations, and has accepted a few policies from par- 
 ties in states where there is no association. The in- 
 surance limit is $3,000. 
 
 The Iowa company accepts insurance from deal- 
 ers in adjoining states, and is not yet ready to extend 
 the privilege to others. The limit on a single risk at 
 the present time is $2,000. Where the policy is writ- 
 ten for a larger amount the same is covered by rein- 
 surance. It does not carry more than $3,000 in any 
 one block, but this is a matter which again is cared 
 for by reinsurance, where it is necessary to accept 
 the insurance for the convenience of dealers. Divi- 
 dend No. 1 of this company entitles holders of poli- 
 cies written up to February 15, 1904, to a cash rebate 
 of 20 per cent. 
 
 The Wisconsin company insures hardware deal- 
 ers anywhere, provided they are identified with an 
 association. The limit on a single exposure is $3,000 
 on either building or stock, or divided between the 
 two. 
 
 The Missouri company has not yet commenced 
 taking insurance outside the state, except on ap- 
 proval of the executive committee. It insures only 
 members of associations and limits the risk to $2,000. 
 
OF MUTUAL INSURANCE 
 
 329 
 
 RETAIL DRUGGISTS. 
 
 John Weyer, Secretary of the Eetail Druggists 
 Mutual Fire Insurance Company of Cincinnati, Ohio, 
 writes as follows : 
 
 “This Company has been in operation fifteen 
 and a half years, first as an association on the assess- 
 ment plan, but in 1902, we reincorporated, or ad- 
 vanced to our present form, namely a regular Mutual 
 Fire Insurance Company in which we charge full 
 premiums and return the profits in dividends, after 
 setting a reasonable sum (not to exceed 25 per cent 
 of the net profits) to a permanent reserve fund. 
 
 “Our risks are nearly all one class; viz., retail 
 drug stores, a class considered and rated as extra 
 hazardous in the smaller cities and towns, nearly al- 
 ways situated in the congested business districts and 
 therefore subject to conflagration hazard, and in 
 which territory it is well known that rates are sel- 
 dom, if ever, above the hazard. 
 
 “We believed that a drug store was not more 
 hazardous than other mercantile risks, and hoped to 
 save twenty to twenty-five per cent from that source. 
 Second, we expected to save twenty-five per cent at 
 least, by not placing our business in the hands of local 
 agents, but by securing and inspecting our risks our- 
 selves. 
 
 “We make our dividends uniform— based on the 
 experience of a series of years— so that the surplus 
 of favorable years pays the losses of the less favor- 
 able. We have returned to our members a profit, 
 under the association form of 30 per cent and under 
 
330 
 
 A HAND BOOK 
 
 our present form 35 per cent besides adding 10 per 
 cent to 12 per cent to our permanent reserve and a 
 small amount to general surplus. Our average losses 
 for the past ten years have been 27 per cent of the 
 premiums, and our premiums are at least 25 per cent 
 less than the present tariff rates. 
 
 “Drug stores are generally subject to a sur- 
 rounding hazard, over which we have no control, but 
 by personal inspection, giving information regarding 
 the handling of inflammables and avoiding the moral 
 hazard as much as possible, we are able to make this 
 company very profitable to its members. ’ 9 
 
 PLATE GLASS. 
 
 These companies insure all kinds of plate glass 
 against breakage from all causes not covered by the 
 ordinary fire policies. There is an enormous busi- 
 ness done in that line and the class Mutuals are be- 
 ginning to look after it. To show the liability to ac- 
 cident of plate glass, the following report of an east- 
 ern company of losses adjusted during 1903 is given. 
 
 Number 
 
 Causes. of Losses. 
 
 Stones or other missiles 1445 
 
 Wind 538 
 
 Pistol shots 106 
 
 Burglars 187 
 
 Settling of building 66 
 
 Runaway horses 71 
 
 Explosions 82 
 
 Drunken persons 177 
 
OF MUTUAL INSURANCE 
 
 331 
 
 Articles falling against glass 446 
 
 Imperfect setting 8 
 
 Transoms falling 24 
 
 Unknown 2454 
 
 Cleaning windows 55 
 
 Doors slamming 263 
 
 Warping of frames 19 
 
 Automobiles 3 
 
 This list is not complete. Irregular expansions 
 from the heat of the sun, heavy hail, earthquakes 
 and other causes come in for their share of break- 
 ages. 
 
 “The Iowa Plate Glass Mutual Ins. Co. was or- 
 ganized and commenced issuing policies Oct. 20, 
 1902, with $104,000 of applications for insurance. 
 Organized under Chapter 5. We collect one half 
 board rates in advance, write the insurance for one 
 year. The amount collected has been sufficient to 
 carry the business for one year, we make one assess- 
 ment a year. The assured renews his insurance by 
 paying the assessments made on him. In the case of 
 the first payment being sufficient to carry the in- 
 surance the first year, the second payment carried it 
 another year. 
 
 “We anticipate that we shall not be obliged to 
 raise the rate, but if necessary, we can assess for 
 more money to pay losses and expenses. Unless 
 some calamity should befall us we do not expect any 
 member to ever owe the association anything.— Jas. 
 A. Swallow.” 
 
332 
 
 A HAND BOOK 
 
 The use of a state or national association as a 
 filter to strain out extra hazardous risks produces 
 excellent results. The moral hazard is practically 
 eliminated. New ideas are exchanged, new methods 
 adopted and the rate of insurance is continually be- 
 ing driven down toward a minimum. So far, how- 
 ever, it has not been possible to induce all the busi- 
 ness establishments in any one line to join the state 
 or national associations. Many of those who re- 
 main outside are excellent risks and would insure in 
 a Mutual if they could. 
 
 THESE MUTUALS SHOULD BE ENCOURAGED. 
 
 There are good reasons why class Mutuals 
 should be encouraged. They carry risks cheaply, 
 and they stimulate thrift, but the most important 
 reason of all is that they improve the risks and re- 
 duce the dangers of losses by fire. Where only one 
 risk in a block is insured in a Mutual it is likely to be 
 exposed to danger, owing to careless occupants on 
 either side. Should these be insured, each in his own 
 line, the hazard would be greatly reduced. 
 
CHAPTER XVII. 
 
 STATE FIRE MARSHAL. 
 
 R. M. SCOTT, PILLSBURY, KANSAS. 
 
 One of the most intricate and important ques- 
 tions that confronts advancing civilization is : How 
 to control the fire loss. The annual annihilation of 
 wealth, the accumulation of ages, the products of 
 labor, skill and genius, is a constant drain upon the 
 resources of our people. Homes, churches, stores, 
 manufacturing establishments and much other public 
 and private property are carried away by the fire 
 fiend. By it homes are desolated, business interests 
 and enterprises are delayed or destroyed and many 
 people are left without employment. 
 
 ANOTHER OPINION. 
 
 The state fire marshal of Ohio in discussing this 
 subject says this loss aggregates in a series of years, 
 a sum which is almost beyond comprehension. Neith- 
 er the public nor those we term the insured, seem to 
 have any adequate conception of this loss, nor is the 
 fact generally realized that it is the result largely of 
 ignorance, carelessness and incendiarism. It should 
 not he disregarded or passed over lightly, but the 
 means by which it may be reduced should receive our 
 best consideration. 
 
 —333 
 
834 
 
 A HAND BOOK 
 
 TREMENDOUS LOSSES. 
 
 Such extravagant public losses from any other 
 source would be the principal subject of investiga- 
 tion and legislation. The fire losses of the United 
 States will average at least $150,000,000 per annum, 
 while it will exceed that amount for the past few 
 years. According to a report in the St. Louis Globe 
 Democrat, this loss in 1904 amounted to $252,000,000. 
 
 One of the most important questions that stirs 
 the blood and troubles the waters of the American 
 people in each succeeding political campaign,' is the 
 tariff question, yet the government has usually only 
 collected about $150,000,000 on imports per year, and 
 all this money is scattered among the people again. 
 The people of this country are losing about the same 
 amount by fire every year, which is a total loss, yet 
 there is practically but little interest taken in this 
 subject and few efforts are made to discover the 
 causes and remedy the evils which produce this enor- 
 mous loss. 
 
 UNACCOUNTABLE INDIFFERENCE. 
 
 It is difficult to account for such stupidity and 
 indifference on the part of an intelligent and pro- 
 gressive people. It cannot be credited to ignorance 
 among a reading people, for every paper they scan 
 contains a record of one or more destructive fires, 
 with their attendant misery and frequent loss of life. 
 !We can only attribute this indifference to a few 
 causes, chief among which is the fact that familiarity 
 breeds indifference and contempt. 
 
OF MUTUAL INSURANCE 
 
 335 
 
 Fire losses are as old as human history and some 
 such losses seem to he a kind of necessity of fate aris- 
 ing from the unavoidable contingencies of life. Men 
 are disposed to travel along in the old beaten paths 
 of custom, instead of making the effort and taking 
 the pains necessary to straighten these paths or to 
 climb the hills to the higher planes of enterprise, 
 progress and prosperity. 
 
 Another reason for this indifference may he 
 found in the inability of the average mind to grasp 
 the real import of the figures which represent this 
 loss for even a single year. To elucidate this point 
 let us make a few comparisons. The fire loss in this 
 country for 1904 amounted to $252,000,000 or a daily 
 average of $690,410, that makes a loss of $28,767 
 every hour during the entire year. Perhaps more 
 than one half of the homes occupied by the laboring 
 class of the American people would not cost more 
 than $1,000. This fire loss would therefore equal the 
 destruction of six hundred and ninety such homes a 
 day. If these losses were confined to such homes, 
 they would render homeless two thousand seven hun- 
 dred and sixty people every day in the year or in 
 other words, it would be equivalent to the daily de- 
 struction of all the residence property in a city of two 
 thousand seven hundred and sixty inhabitants. 
 
 This fire loss in 1904 is equal to more than the 
 estimated cost of constructing the Panama Canal by 
 $20,000,000. It would equal in five years $1,260,000,- 
 000 or an amount equivalent to our entire national 
 debt. 
 
836 
 
 A HAND BOOK 
 
 A KANSAS PROTEST. 
 
 Hon. W. V. Church, while state superintendent 
 of insurance of Kansas, in an address on this sub- 
 ject, made the following statement: 
 
 “If fire disasters were a new evil in the world, 
 humanity would become absolutely horrified in the 
 presence of so great a calamity, and if terror did not 
 rob us of our reason, it is certain that heroic meas- 
 ures would be adopted to stop the ravages of that 
 element which is daily annihilating enormous prop- 
 erty values and literally wiping out of existence the 
 best products of human ingenuity and skill. But long 
 association with dangerous conditions as with evil 
 surroundings brings corrupting results, and it seems 
 to me that intelligent men are guilty of criminal 
 negligence in practically refusing to adopt some 
 means for more effectual protection against the rav- 
 ages of fire. 
 
 “From a financial standpoint, the state should 
 be greatly interested in suppressing fire ravages for 
 the reason that our state treasury is yearly robbed 
 of legitimate revenues as the result of the annihila- 
 tion of taxable property by fire. ,, 
 
 To prescribe a remedy for so great an evil neces- 
 sarily implies that we must have an intelligent under- 
 standing of the causes which produce this evil and 
 the laws which control their operation. 
 
 It is an admitted fact that much more than one- 
 half of this enormous fire loss is the result of ignor- 
 ance, carelessness and crime. Our imperfect statis- 
 tics show that one-third of it or more is caused by 
 
C. S. COLLINS, LITTLE ROCK, ARK. 
 
 He served in the Confederate army. Has a liberal education 
 and has practiced law for years at Little Rock, Arkansas. He 
 was incidentally a legislator, editor, leader in the Bryan move- 
 ment, on the railroad commission, and recently interested and 
 prominent as an advocate of Mutualism in insurance. He is 
 the father of eight grown children, five sons and three daughters. 
 A “Patriarch" and a wide awake, successful insurance man. 
 
I. F. TALBOTT, McPHERSON, KANSAS. 
 
 Mr. Talbott is a native of Ohio, but has been in Kansas for 
 many years. He has always been a farmer and enjoys country 
 life. He is a strong advocate of co-operation in all its forms. 
 For some years he has been president of the Farmers Alliance 
 Insurance Company, of McPherson, and putting forth the best 
 efforts of his life in its behalf — and successfully, too. 
 
OF MUTUAL INSURANCE 
 
 337 
 
 the deliberate purposes of vicious men. Originally 
 envy and maliciousness were principally the causes 
 of incendiarism, but since fire insurance has become 
 a prevalent practice, a new motive has been devel- 
 oped and now incendiarism is practiced very largely 
 as a speculation, or as a means of personal gain. 
 
 A careful analysis of the causes that produce 
 fire losses indicates that they are of but two general 
 classes, which we designate as the material, and the 
 moral hazard. In the first class we would include all 
 such losses as result from ignorance, carelessness 
 and accidents, while the second class or moral haz- 
 ard, includes only fires intentionally caused by men. 
 When we stop to reflect upon the extent of these 
 losses and the causes which produce them, we can 
 readily see the importance of having some author- 
 ized officer or agent appointed for the specific pur- 
 pose of discovering these elements of danger and re- 
 moving as far as possible such elements and condi- 
 tions. 
 
 Such an officer is termed a fire marshal. 
 
 A state fire marshal is the official representative 
 of a department of the state administration, estab- 
 lished for the purpose of making a thorough investi- 
 gation as to the origin and causes of all fires through- 
 out the state; to establish a system of local official 
 inspection that will investigate all classes of property 
 and regulate or remove all dangerous substances and 
 conditions; to suggest and enforce such regulations 
 as will effectually prevent or curtail the destruction 
 of property by fire. If in conducting an examination 
 21 
 
338 
 
 A HAND BOOK 
 
 as to the origin and cause of any fire, he shall become 
 satisfied that it is of a doubtful and suspicious char- 
 acter, it becomes his duty to make a judicial investi- 
 gation of the case, to summon and examine wit- 
 nesses relative to the case, and if he finds that the 
 fire was of incendiary origin and the evidence war- 
 rants it, it becomes his duty to prosecute the crim- 
 inal. 
 
 It is his duty to educate the public along the line 
 of dangerous elements and conditions, enforce the 
 laws already existing and suggest other necessary 
 laws for the protection of society from the fire haz- 
 ard. 
 
 EFFECT OF CHANGES. 
 
 The great changes that have taken place in our 
 economic system in recent years, the introduction of 
 new and dangerous substances, such as petroleum, 
 gasoline, natural gas and electricity, and their adop- 
 tion and use by the public for lighting and heating 
 purposes as well as for motive power, all present 
 new and intricate problems to the public for their 
 solution. The laws that govern these substances 
 and the methods that should be adopted in handling 
 and utilizing them are not fully understood by those 
 most familiar with them, and while experts on these 
 subjects have much to learn about them, it is not sur- 
 prising that they are dangerous elements in the un- 
 tutored hands of the public at large. 
 
 The changed conditions added to the introduc- 
 tion of the parlor match, together with the long 
 standing carelessness of many people, who often 
 
OF MUTUAL INSURANCE 
 
 339 
 
 allow a vast amount of rubbish and inflammable ma- 
 terial to accumulate, all suggest the imperative need 
 for a state officer, whose business it shall be to gain 
 and disseminate all needed information on these 
 subjects ; one who shall have a complete supervision 
 of the work of inspection and correction throughout 
 the state. He is, in fact, a kind of a property health 
 officer, with a representative in every town and town- 
 ship, whose work is to discover and remove the ma- 
 terial for, and causes of fires before they have 
 wrought their work of destruction. 
 
 Fire insurance has become one of the most im- 
 portant departments of our great commercial sys- 
 tem. If it was destroyed, many of our large busi- 
 ness enterprises would be paralyzed and all commer- 
 cial interests would be seriously affected. Its pur- 
 pose is to gather a tax from the many property own- 
 ers and distribute the fund thus accumulated, to the 
 few unfortunates who have sustained loss by fire. It 
 is in fact a great philanthropic institution, based on 
 the divine principle that 4 ‘We are our brothers’ 
 keepers.” 
 
 Avarice and cupidity have largely perverted 
 this great humane principle, and vicious characters 
 have become so base as to use this benevolent enter- 
 prise as a means of direct personal gain; not hesi- 
 tating to over insure their property and then burn 
 it for the insurance. In many instances they destroy 
 a vast amount of property for their neighbors and 
 the community. 
 
340 
 
 A HAND BOOK 
 
 As we have shown above, this class of losses has 
 become a menace to the public safety, so that the 
 changed conditions of our times make the presence 
 of such an officer imperative. 
 
 GOOD MEN REQUIRED. 
 
 From the nature and importance of the work to 
 be accomplished, it is apparent that it cannot be per- 
 formed by any of our ordinary official forces, as it 
 will require all the time of one or more men. It will 
 require a man of rare talent and technical education 
 to conduct the affairs of this office. He will need all 
 the tact and skill of a detective, the courage and per- 
 sistency of a policeman, the legal knowledge of an 
 attorney and the technical knowledge of the scien- 
 tist, with the practical knowledge and experience of 
 an architect. He could materially and permanently 
 reduce the fire hazard by laying down the rules for 
 the construction and repairing of various classes of 
 buildings by directing as to what kind of material 
 should be used and the methods to be employed for 
 ventilation, lighting and heating purposes. 
 
 It will require all the time and energy of this 
 officer to organize and conduct the business of this 
 department of the state administration, and he will 
 need the assistance of one or more deputies and 
 stenographers for the work of this office. He must 
 direct the efforts and receive and chronicle the re- 
 ports of the fire chiefs and other officers of this de- 
 partment throughout the state. He will need com- 
 plete facilities and equipments for his office and 
 work. 
 
OF MUTUAL INSURANCE 
 
 341 
 
 The best and most satisfactory teacher is obser- 
 vation and experience ; therefore we will give a few 
 extracts from the official reports of the state fire 
 marshals of several states which have tested the fire 
 marshal law. The quotations will explain the nature 
 and importance of the work of this office. 
 
 FROM OHIO. 
 
 The state fire marshal of Ohio in his report for 
 1903 under the head of ‘ ‘ Inspection ’ ’ says: “It is 
 evident from the nature of various causes we have 
 discussed that carelessness either directly or indi- 
 rectly in its many forms is the most prolific of all 
 causes of fires. This being the case, there is no doubt 
 that careful and thorough inspection and the dis- 
 covery and remedy of those conditions most liable 
 to cause fires will bring a marked decrease in the 
 number of fires and the consequent damage. During 
 the latter part of the year, we have been giving some 
 attention to inspection in our large cities. Two 
 thousand seven hundred and thirty buildings have 
 been examined and many dangerous conditions have 
 been discovered and ordered remedied. ’ ’ 
 
 In discussing the various causes of fires under 
 the class he terms “unknown causes,” the fire 
 marshal says : 4 ‘ During the past year 999 fires have 
 occurred, the causes of which were unknown, this 
 number shows a decrease when compared with the 
 year 1901 or 1902. As the closer investigation of 
 fires progresses, the number of ‘unknown causes’ 
 will decrease, although it may never be possible to 
 
342 
 
 A HAND BOOK 
 
 ascertain the cause of every fire ; especially will this 
 he true of fires where the property concerned has 
 been entirely consumed. In my report of last year 
 it is estimated that of the number of fires reported 
 as ‘unknown’ at least fifty per cent should be con- 
 sidered as incendiary and I am still of the same 
 opinion. ’ ’ 
 
 In discussing the subject of gas, he says : “Dur- 
 ing the past year 206 fires have resulted from care- 
 lessness in the use of gas. Twenty-five per cent of 
 this number were caused by the use of rubber tub- 
 ing for conveying gas from the permanent piping 
 to stoves, grates and burners. Gas soon destroys 
 rubber, especially the poor quality, thus causing 
 leaks, many deaths from asphyxiation and explosion 
 have resulted, often followed by a heavy loss of 
 property from this pernicious practice. ’ ’ 
 
 We give below a few quotations from the Ohio 
 fire marshal’s report for 1904. “This (report) shows 
 the number of fires during the first calendar year 
 after the creation of the office of fire marshal to have 
 been more than 1,000 greater than the average num- 
 ber in the subsequent three years. 
 
 “The parlor match has attained the perfection 
 of utility and, at the same time has become respon- 
 sible for a greater loss of property than any other 
 single invention of man. In Ohio the burning of 
 buildings by carelessness with these matches is a 
 continuous performance, the attending light is never 
 allowed entirely to go out, because a new fire i3 
 started for each sixteen hours. 
 
OF MUTUAL INSURANCE 
 
 343 
 
 1 1 Of the 446 fires in 1904 from carelessness with 
 matches, 122 were from children, 298 from those of 
 mature years and 22 from rats or mice. The Spec- 
 tator says that a parlor match was responsible for 
 the Sioux City fire, which resulted in the heaviest 
 loss in the west during 1904. A man stepped on the 
 match and the blazing head flew into a pile of cotton 
 batting near by. ’ ’ 
 
 Under the head of defective flues, he says: 
 “The cost of fire departments added to the $6,850,- 
 000 of direct annual loss from fires equals fifteen per 
 cent of the total year’s product of all the industries 
 of the state. That is to say, every producer gives 
 one and one-half hours out of each ten-hour day to 
 making good the state’s fire loss. This loss is dis- 
 tributed through insurance. 
 
 “Each of the 729 fires in Ohio last year from 
 defective flues, could have been prevented easily. 
 If the public can be persuaded to form the habit of 
 examining occasionally their flues, etc., the annual 
 contribution to negligence will be lessened by half a 
 million dollars. 
 
 “The 729 fires are all from faulty construction 
 or deterioration of chimneys or stove pipes. This 
 figure does not include the 125 fires from soot burn- 
 ing out, 14 from cupolas, nor 5 from open stove-pipe 
 holes, neither does it include any of the 666 fires 
 chargable to sparks from chimneys.” 
 
 Under the head of “Rats as Fire Bugs,” he 
 says: “Rats cause many fires and the majority of 
 them go to swell that always embarrassing figure to 
 the fire marshal, the footings of the fires reported 
 
344 
 
 A HAND BOOK 
 
 ‘ Origin Unknown During last year Ohio rats were 
 convicted as incendiaries in twenty-six cases, and 
 suspected in several hundred. Eats and matches 
 are known to have caused 136 fires in Massachusetts 
 during last year, with a loss of $133,577 as reported 
 by the fire marshal of that state. A recent fire was 
 extinguished in its incipiency, and in a paste-board 
 box, were found several rats and some charred 
 matches. 
 
 ‘ ‘ This cost to insurance companies is cost to the 
 whole people, for the companies are but public serv- 
 ants whose only function is the distributing of the 
 fire loss among property owners. The tenant’s share 
 has been collected in advance as part of his rent. In 
 Ohio last year 91 buildings were fired by hot ashes 
 being put in wooden boxes or thrown against the sid- 
 ing of houses or sheds. This figure does not include 
 the fires from tobacco pipe ashes nor those caused 
 by hot ashes falling from stoves or grates.” 
 
 We have only been able to give a few brief ex- 
 tracts from these reports, but want to add a few 
 sentences extracted from only a few important head- 
 ings. 
 
 4 ‘Tobacco smokers cost the state $122,321 in 
 1904. The great conflagration at Baltimore and 
 at Knoxville both started with a smoke explosion.” 
 
 “Natural gas secretes more terrible possibilities 
 than any other combustible used as a domestic fuel. 
 Asphyxiation, which is so common from flueless nat- 
 ural gas stoves burning in the bed room, results from 
 the breathing of this poisonous carbon monoxide, 
 produced by heating the stove red hot and not from 
 
OF MUTUAL INSURANCE 
 
 845 
 
 breathing natural gas. The carbonic oxides are the 
 suffocating element in the smoke from all combus- 
 tion. ’ * 
 
 “The number of buildings fired by carelessness 
 with gas jets during the year in Ohio was 98. The 
 fixture which causes the most earnest criticism from 
 fire marshals while making inspection is the swing- 
 ing jet. A jet should not be within two and one 
 half feet of the ceiling.” 
 
 “The number of fatalities from the leaking of 
 illuminating gas is not only large but increasing. 
 Flying sparks cost Ohio $2,000,000 a year.” 
 
 The work of the fire marshal in removing those 
 elements of danger which we have designated as 
 material hazard is clearly indicated in the report of 
 the state fire marshal of Connecticut for 1903, which 
 is as follows: “There were 1472 fires reported, 87 
 were either incendiary, suspicious or mysterious, 
 (clearly incendiary 51), unknown 318. 
 
 “Moral:— It is most difficult to obtain suffici- 
 ent evidence to secure conviction in a case of arson, 
 but I feel warranted in the statement from the ex- 
 perience in investigating fires of incendiary origin ; 
 that the investigation has its good effect, although 
 the incendiary is not apprehended. The moral effect 
 is good and may deter others from an attempt at in- 
 cendiarism. 
 
 NECESSITY OF INSPECTION. 
 
 “In order to illustrate the necessity of inspec- 
 tions and show the danger from accumulation of in- 
 flammable material, etc. : while this office was inspect- 
 
346 
 
 A HAND BOOK 
 
 ing a store in the business center of one of our larger 
 cities, in descending the cellar stairs, which were cov- 
 ered with paper and rubbish, a match was ignited 
 by being stepped upon, starting a blaze and only 
 speedy action averted what might have been a seri- 
 ous fire, as the stairs and floor of the cellar were cov- 
 ered to the depth of fully six inches with paper and 
 rubbish. In my opinion the value of inspections, 
 that have been carried on by this office for correcting 
 conditions, as stated above, is one of the important 
 branches of the work of this department. ’ ’ 
 
 FROM MARYLAND. 
 
 The state fire marshal of Maryland in his report 
 for 1901 said: “I have ample testimony to lead me 
 to believe that the prompt work of this department, 
 supplemented by that of the Baltimore city detective 
 force, has greatly reduced the number of incendiary 
 fires in Maryland. Besides the practical good that 
 has been accomplished the moral effect of these in- 
 vestigations, I am assured, has been felt throughout 
 the state.” 
 
 The state fire marshal of Maryland in his report 
 for 1901, in discussing the subject of investigation, 
 says : 1 1 The entire cost of maintaining the office of 
 fire marshal for Maryland is $5,500, a mere pittance 
 when compared with the good that has been and may 
 be done through this agency, without mentioning 
 further the moral effect of a perpetual maintain- 
 ance of such a department of inquest. I have saved 
 more than the amount mentioned to the insurance 
 
OF MUTUAL INSURANCE 
 
 347 
 
 companies this year in the blocking of several fire 
 loss claims on the part of persons against whom 
 there was not sufficient evidence to convict of incen- 
 diarism, but who when the facts were laid before 
 them by this office, very discreetly decided not to 
 claim anything like the amount they had originally 
 fixed as the total loss.” 
 
 Men guilty of crime are not always convicted, 
 but by precaution and vigilance, the fire marshal 
 may be able as in the case cited, to prevent the crime 
 of extortion being added to that of arson. 
 
 The state fire marshal of Ohio in his annual 
 report for 1903 says: “ Crime of whatever kind as 
 a public hazard can only be reduced to a minimum 
 by extreme vigilance on the part of the public offic- 
 ials, followed by a rigid and certain execution of the 
 laws, and this applies aptly to the crime of incen- 
 diarism. The object of the prosecution of arson, 
 however, is not simply to convict the guilty, but 
 rather to protect the community by making conspic- 
 ious the result of wrong doing, thereby deterring 
 others from committing like crimes. 
 
 “This office has investigated during the last 
 year 1,664 fires. In each case a statement of the 
 facts, together with the findings of the deputy or as- 
 sistant making the investigation, is now on file and 
 a part of the records of this office. Ninety-one per- 
 sons have been arrested charged with arson, five 
 fled from the state before arrest, forty-six were 
 bound over to grand juries, seventy-six were indict- 
 ed (many cases having been taken directly to grand 
 juries), twelve were acquitted, thirty-six were con- 
 
348 
 
 A HAND BOOK 
 
 victed, nine committed to insane asylums and twen- 
 ty-seven cases are pending trial at this time. 
 
 “The motives prompting those who have com- 
 mitted arson during the last year have been varied, 
 but as shown by table No. 9 the desire to defraud 
 insurance companies has prompted the commission 
 of arson in more than two-thirds of the cases where 
 convictions have been secured ; and this is due to the 
 fact that this class of arsonists are largely in the 
 majority and not because it has been less difficult to 
 convict where such a motive exists. The utter dis- 
 regard of this class of offenders for the property 
 and lives of their neighbors, makes them the most 
 dangerous and culpable of criminals; and yet the 
 examination of the prison statistics of this state 
 shows that up to the time the fire marshal law went 
 into effect, there was not an average of two convic- 
 tions each year for burning property with intent to 
 defraud insurance companies. 
 
 “There were more successful prosecutions for 
 this crime during last year than were had in Ohio 
 during the fifteen years preceding the establishment 
 of this office, and there were more successful prosecu- 
 tions in the three and one-half years of its existence 
 than there were in fifty years preceding. This suc- 
 cess is gratifying. The number of convictions dur- 
 ing 1903, as shown by the above, has far exceeded 
 that of any former year, and there has been a steady 
 increase from the beginning. The results obtained 
 during the last year are in my judgment due to the 
 efficiency which experience has made possible. The 
 barriers which invariably surround the ferreting out 
 
OF MUTUAL INSURANCE 
 
 349 
 
 of a mysterious fire can only be surmounted by men 
 who have natural tact for the work, combined with 
 knowledge of human nature and experience in deal- 
 ing with arson cases. The fact of an increased num- 
 ber of convictions for arson during the past does not 
 imply that incendiarism is increasing, for a number 
 of those convicted were charged with having com- 
 mitted the crime several years before this office was 
 established. 
 
 ‘ ‘ It necessarily follows that the more effectually 
 incendiarism is suppressed, the greater the possibil- 
 ity of lowering insurance rates. The interests of the 
 people and of the insurance companies are identical. 
 The companies are the agents of the public, charged 
 with the distribution of trust funds. Whenever a 
 company is swindled, the loss is eventually paid by 
 the public, each member of the community bearing 
 directly or indirectly a share of the burden. There 
 is no crime in the category of felonies which is com- 
 mitted more often than that of arson. Being so pre- 
 valent, it is difficult in many instances to secure a 
 verdict supported and demanded by the evidence. 
 
 MAWKISH SENTIMENT. 
 
 “ Unwarranted and perverted public sentiment 
 for the incendiary who destroys his property for the 
 insurance, frequently carries acquittal to the hearts 
 of the jurors, although the facts and circumstances 
 prove guilt quite beyond a reasonable doubt. To de- 
 fraud an insurance company is argued to be justifi- 
 able, if not really believed, thereby creating a senti- 
 
350 
 
 A HAND BOOK 
 
 ment which influences the commission of this partic- 
 ular crime, increases the moral hazard and moulds 
 false verdicts, a condition deplored by every honor- 
 able and law-abiding citizen. ’ ’ 
 
 The fire marshal of Ohio in his report for 1904 
 says: 4 ‘One of the important duties of this office is 
 to make universal the impression that the incendiary 
 will be swiftly prosecuted and inevitably punished. 
 That it has a powerful deterrent effect upon those 
 prompted to arson is shown by the fact that the an- 
 nual number of fires has been reduced by 129. The 
 number of incendiary fires in the state has regularly 
 decreased since the creation of the office of fire mar- 
 shal, while owing to the natural increase in the num- 
 ber of buildings in the state, fires from accidental 
 causes show no such marked diminution in number. ’ r 
 
 FROM MASSACHUSETTS. 
 
 The state fire marshal of Massachusetts in his 
 report for 1903, says : “Of the total number of fires 
 209, or 4.28 per cent were of incendiary origin. The 
 total sound valuation of property damaged by incen- 
 diary fires was $1,111,615, total insurance covering 
 same $906,462, total loss on same $323,683. 
 
 “Two hundred and fifty-eight fires were of un- 
 known origin. The total sound valuation of prop- 
 erty damaged by such fires, was $8,731,532, loss on 
 same $1,412,560. 
 
 “The total number of arrests for burning and 
 arson for 1903 was ninety-seven. Of this number, 
 five cases under indictment have been continued to 
 
OF MUTUAL INSURANCE 
 
 351 
 
 future terms of court. There have been fifty-seven 
 convictions. Percentage of convictions to arrests, 
 sixty-two. 
 
 “In reviewing the work of the past year, it is 
 gratifying to find, that the number of incendiary 
 fires has been less than in any other year since the 
 organization of this department. I am also pleased 
 to report a reduction in the number of fires of un- 
 known origin. The total for the past year being 
 two hundred and fifty-eight, as against three hun- 
 dred and sixty-five for the previous year.” 
 
 The total per cent of the incendiary fire loss, 
 when the fire marshal department was established, 
 amounted to thirty-three per cent of the annual fire 
 loss. 
 
 In his report for 1904, the fire marshal says: 
 ‘ 4 The total number of arrests for arson in 1904 was 
 seventy-nine, there have been fifty-four convictions. 
 Percentage of convictions to arrests, seventy. Ten 
 persons in addition have been indicted and held for 
 trial. 
 
 “By an act of the legislature the fire marshal 
 department was abolished and its powers and duties 
 transfered to the detective department of the dis- 
 trict police, and placed in charge of the able and 
 efficient officer Geo. C. Neal, deputy chief of the de- 
 tective and fire inspection department. Said act be- 
 came a law June 8th, 1904, giving to the members 
 of the fire inspection department all of the powers 
 and duties of a detective officer as well as that of fire 
 inspector. 
 
352 
 
 A HAND BOOK 
 
 “ This was a move in the right direction, as it em- 
 powered them with authority to serve subpoenas and 
 precepts of the court, investigate fires, and perform 
 such other detective duties as might be assigned to 
 them by the executive officer. It also provides that 
 the chief of the department may detail detective of- 
 ficers for the investigation of fires. It is somewhat 
 surprising to learn of the carelessness of the public 
 generally as to the cause of fires. It seems to be the 
 inclination of the average person who is insured to 
 depend entirely upon his insurance to cover any loss 
 that may happen as the result of fire upon the prem- 
 ises insured. I have so many examples of careless- 
 ness regarding fire, that I feel it is my duty to call 
 attention of the public generally to their negligence 
 in this direction ; and if the advice were heeded many 
 accidental fires would be prevented. For instance the 
 use of swinging gas brackets near lace curtains, with 
 the window open to the breeze; the use of wooden 
 cuspidors ; the careless use of matches and kerosene ; 
 and various other means by which accidental fires 
 occur. 
 
 “I would recommend that in every household, 
 some means of subduing an incipient fire be provid- 
 ed, such as a fire extinguisher or hand grenade. This 
 oftentimes would prevent a serious conflagration, 
 the expense is trifling compared with the annual 
 loss.” 
 
 The state fire marshal of Ohio, in his report for 
 1901, says: “The fire marshal law has proved effi- 
 cient in a large number of cases in bringing about the 
 
OF MUTUAL INSURANCE 
 
 353 
 
 prosecution and conviction of criminals, and has 
 been of great benefit to local authorities in their ef- 
 forts to remedy the inflammable condition of build- 
 ings, and remove combustible material, especially in 
 the larger towns and cities. 
 
 ARSON. 
 
 ‘ ‘ It seems very difficult to impress upon the minds 
 of the people that the man who commits arson, jeo- 
 pardizes life as well as property. It is a crime 
 against the public at large. When public opinion is 
 awakened to the fact that the enormous fire loss of 
 the state is as directly a tax upon the property of its 
 citizens paid to the insurance companies, in pre- 
 miums and assessments, to be equalized and distri- 
 buted as is the school tax or road tax paid to the 
 county treasurer ; and whenever the public learns to 
 appreciate the fact that arson is a greater crime and 
 deserves more severe punishment than that of burg- 
 lary and equal felonies ; juries will be guided in their 
 findings by good law and common sense. The burg- 
 lar takes from the owner his money and diamonds 
 which is a change of possession, the money is still in 
 circulation, and the value of the diamonds is not de- 
 stroyed, but the fire-bug turns property into smoke 
 and ashes, destroys values, which is a total loss. 
 
 “Because of the investigations, arrests and con- 
 victions made by this department many of our citi- 
 zens are giving better attention to the fundamental 
 principles of insurance as well as to the different 
 causes for the great fire waste in the state and the 
 motives of criminals in the cases of arson. 
 
 22 
 
354 
 
 A HAND BOOK 
 
 “It is invariably true that in localities where in- 
 cendiaries have been vigorously prosecuted, whether 
 convicted or not, a more wholesome condition exists. 
 In several sections of the state incendiary fires had 
 been so frequent that the insurance companies were 
 driven out, the loss being larger than the premium 
 received, and the people were unable to secure in- 
 demnity at reasonable rates, and in some cases no 
 protection at all. There were 1,267 fires of unknown 
 and incendiary origin, the value of property lost 
 was $2,009,175. From the evidence taken and from 
 the light of facts developed in the examination of 
 fires of this character, we believe that more than one- 
 half of these fires were of incendiary origin. We 
 therefore estimate that during the last year the in- 
 cendiary caused a loss to the state of Ohio of not 
 less than $1,500,000, or nearly 25 per cent of total 
 loss of $7,232,010.” 
 
 While the motives for committing the crime of 
 arson are varied there can be no doubt that the pre- 
 valent one is the desire for pecuniary profit. 
 
 The same officer in his report for 1902 says: 
 “The incendiary who was actuated to set fire to de- 
 fraud an insurance company is observed to comprise 
 the largest class. He intelligently and carefully lays 
 his plans in some cases beginning months before the 
 intended fire by padding the inventory, by disposing 
 of as much of his stock as possible, etc. Having pro- 
 cured all the insurance possible and carefully laid 
 his plans for the fire, etc.— the fire occurs.” 
 
 In an address before the Ohio legislature, 
 Charles W. Whitcomb, state fire marshal of Massa- 
 
OF MUTUAL INSURANCE 
 
 355 
 
 chusetts, said among other things : ‘ 4 The moral effect 
 of the past work of the office has had a great deter- 
 rent effect in preventing crime, thereby saving lives 
 and property, by convincing those that would other- 
 wise apply the torch that a policeman was on the 
 beat and that there was therefore a much greater 
 risk of being criminally punished than under the 
 present system, and also by holding up before them 
 the experience of many others, who have found that 
 there was no profit in trying to defraud insurance 
 companies, and the people who honestly support 
 them in the state of Massachusetts. 
 
 It would seem as though statistics would prove 
 conclusively and to the satisfaction of every sister 
 state that a proper protection to property and life, 
 which the people have a right to expect of their state 
 government would demand universal establish- 
 ment of similar systems, (fire marshals), throughout 
 the states. According to statistics given in the 
 Chronicle Fire Tables for 1893 and covering the 
 whole United States, in ten states the percentage of 
 incendiary fires to the whole number reported was 
 forty to eighty, and in nineteen states the percentage 
 was from twenty to forty. 
 
 It has a tendency to deter those who have a de- 
 sire to commit the crime of arson. The superinten- 
 dent of insurance of Ohio, after explaining the bene- 
 fit of investigating all suspicious fires, says: “Of 
 the total number of convictions for arson the motive 
 of the majority was to secure insurance. Our inves- 
 tigations have materially reduced the number of fires 
 from this source. We note that these repeating fire- 
 
356 
 
 A HAND BOOK 
 
 bugs have been driven from Ohio to states where 
 there is no fire marshal, to continue their detestable 
 crimes . 9 9 
 
 It seems to us that the evidence of the necessities 
 for, and the advantages of a state fire marshal are 
 overwhelming; especially as they do not rest on a 
 mere theory of public economy, but are fully verified 
 by the ample testimony of a number of persons in 
 various states, who speak from their own actual ex- 
 perience in this line of work. 
 
 Their testimony is especially valuable, as they 
 all agree in their evidence upon every important 
 point and with the judgment and experience of all 
 capable officers who have investigated the subject. 
 
 It is in line with universal experience and com- 
 mon sense. This office, therefore, is an imperative 
 necessity in every civilized state. 
 
 BETTER CONSTRUCTION. 
 
 The average frame dwelling house is a fire trap. 
 The wonder is not that so many burn, but that so 
 many escape being reduced to ashes. Insurance com- 
 panies are beginning to see that the loss rate might 
 be materially reduced and are commencing a series 
 of investigations which will in due time furnish valu- 
 able information. The problem to be solved is how to 
 change the present method of construction so that 
 buildings may be made safer without any appreciable 
 increase of cost for labor or material. It is evident 
 that great changes in the style of work are almost in- 
 variably accompanied by increase of cost. This must 
 be avoided. 
 
OF MUTUAL INSURANCE, 
 
 357 
 
 Inspecting in cases of fire, observing the prog- 
 ress of conflagrations, following the course of the 
 blaze from the beginning to the end, all this work will 
 give valuable information as to where and how fires 
 start and how they spread, what styles of construc- 
 tions permit the easy extinguishment of flames, and 
 how present constructions often make it impossible 
 to save a building if the flames once get started. 
 
 Beginning with the foundation, it should be solid 
 and vermin proof. The material should be laid in 
 cement or plaster, and the whole should rest upon a 
 footing course below frost, wider than the foundation 
 wall, and projecting out beyond it nearly a foot. 
 Vermin will dig under an ordinary straight wall, but 
 when they go down and come to what appears to be a 
 flat rock they will give up the effort. Most founda- 
 tions are now made in this manner. When the super- 
 structure is erected the spaces above the foundation 
 and between the joists should be solidly filled with 
 brick, cement blocks, or other solid material. This 
 will prevent vermin getting through from the cellar 
 to the upper part of the house. And if a fire occurs 
 in the cellar it will prevent it from running up be- 
 tween the plastering and the siding. The extra ex- 
 pense of doing all this work thoroughly is a mere 
 trifle, the resulting comfort, safety, saving in fuel, 
 freedom from danger of freezing in the cellar, and 
 the riddance from vermin will pay for it many times 
 over every year. The house will stand firmer, there 
 will be no trouble with windows and doors and the 
 building will last many years longer. 
 
358 
 
 A HAND BOOK 
 
 DANGEROUS PLACES. 
 
 In erecting the building, it is usual to put on 
 sheeting and siding and to leave air spaces between 
 these and the lathing and plastering on the inside. 
 These air spaces not infrequently run from the 
 ground to the roof. If a fire gets into one of these, 
 the draft is strong, and no water can he made to 
 reach the blaze even if it could be located. There is 
 nothing to do but to let it burn through one side or 
 the other. There is especial danger from collections 
 of trash, dead leaves, etc., against the sides of houses 
 in dry weather. A spark falling in one of these piles 
 smolders a while, the draft up the air space fans it 
 into a fire and then there is trouble. The firemen 
 arrive and to find the fire they rip off siding and 
 sheeting on the outside, cut holes through the plaster- 
 ing on the inside and thus no end of damage occurs. 
 If the style of construction described above had been 
 adopted, and in addition the air spaces between the 
 plastering and siding had been shut off by a layer of 
 grout, cement, brick or anything which a rat could 
 not dig through, the danger of all such fires would 
 have been avoided. 
 
 At each floor, care should be taken to shut off the 
 air spaces in the same manner. No places for fire 
 should be left between the walls. The question may 
 be asked, Why is so much emphasis placed upon 
 keeping out rats? For several reasons. The holes 
 which they gnaw through the walls let fire through in 
 case it breaks out, they gnaw matches and thus start 
 fires, and they accumulate rags and grease in their 
 
OF MUTUAL INSURANCE 
 
 859 
 
 nests and thus prepare the necessary conditions for 
 spontaneous combustion. In addition to these dis- 
 agreeable characteristics the rat is dirty, destructive, 
 and carries contagious diseases. 
 
 The construction of chimneys is discussed else- 
 where. It is only necessary to repeat here that they 
 should be on a solid support, should be smooth out- 
 side and inside and well constructed. They should be 
 high enough to have good draft and to throw all 
 sparks clear of the building. 
 
 The inside woodwork should be hardwood where 
 the cost is not prohibitive. If of pine, it should be 
 finished with some slow-burning paint or varnish. 
 The common materials used for such purposes are 
 dangerous in the extreme. 
 
 Ornamental cornices and all such work should 
 be of metal. Roofs should be of slate or metal wher- 
 ever practicable. If of shingles they should be dip- 
 ped in some slow-burning paint before being laid on. 
 The nature of the paint should be ascertained by 
 actual experiment, testing a few shingles prepared 
 with it in comparison with an equal number in their 
 natural state. Shingles which wrinkle up and catch 
 dirt should be removed. They make good lodging 
 places for sparks. 
 
 This is simply a description of a well built house. 
 The difference between it and a poorly built house 
 in comfort, durabilty and fire risk is enormous, while 
 the cost is almost the same. The materials in both 
 are the same in cost for the most part. A trifle extra 
 is expended on the foundation, a little on the shutting 
 of the air spaces. There should be no other extra 
 
360 
 
 A HAND BOOK 
 
 expense, as finishing and painting should cost no 
 more in one style than in the other. 
 
 This style of building recommends itself. It sim- 
 ply needs explaining to the public. Mutual agents 
 can do a great service to the public in their inspec- 
 tions if they call the attention of property owners to 
 the defects and dangerous exposures in their build- 
 ings. While the best time to rectify all these mat- 
 ters is when the building is being erected, there are 
 many errors which can he corrected afterwards. All 
 that the agent can do to reduce the loss will help the 
 company, help his neighbors, and help himself. If 
 the fire loss can he reduced it will of course follow 
 that the fire premiums will be reduced also. 
 
 The means of preventing or extinguishing fires 
 should be looked after. What is the water supply? 
 Is there a well close at hand, with a good pump and 
 a tank always full of water, or is it at a distance, and 
 provided only with a rope and bucket ? 
 
 Wliat kind of protective apparatus is at hand? 
 Hand extinguishers are sold and many are recom- 
 mended. But in the ordinary dwelling house they 
 are rarely seen. Many people make it a custom to fill 
 two or three buckets with water every evening and 
 leave them where they will be handy should fire 
 break out in the night. This is commendable, one or 
 two buckets of water might be kept on the upper 
 floors. 
 
 HOW TO FIGHT FIRE. 
 
 A few hints on how to fight fire will be useful. 
 The first necessity is self control. It is well to be 
 energetic but not well to exert so much force as to 
 
OF MUTUAL INSURANCE 
 
 361 
 
 break the pump handle at the very first stroke. It 
 is well also to know what kind of a fire is to be put 
 out, and then to use the right means. Oil, varnish, 
 turpentine, gasoline, and similar materials can be 
 smothered out with blankets, or absorbed by fine 
 dust, ashes, sand, flour, etc. The blaze once smoth- 
 ered, the trouble is over, the rest of the work is easy. 
 But water thrown upon such a fire will scatter it. 
 Woolen blankets are best to use for such purposes, 
 and if there is time, they should be wet. Should one ’s 
 clothing take fire, smother it out with blankets, rugs, 
 carpets or anything handy and do it quick. In all 
 these cases use water to extinguish the embers after 
 the blaze has been put out. 
 
 If fire breaks out in anything which can be han- 
 dled, in a box or barrel, if a lamp or gasoline stove 
 takes fire it should be thrown out of doors. If a 
 lamp upsets and breaks, smother the blaze with a 
 cloth. In most cases it is best not to open the doors 
 and windows and let in the air. 
 
 When fire occurs in a closet, or the floor, or in the 
 side wall, water is the thing. Women often mop out 
 fires in such places, and one cool headed woman with 
 a mop is worth a dozen excited men and boys. People 
 who have helped put out prairie fires know the effici- 
 ency of a wet gunny sack in slapping out a blaze. 
 These methods are available where the water supply 
 is limited. There should be a ladder at every resi- 
 dence long enough to reach the roof. It may be use- 
 ful in saving life or property if the stairs should 
 catch fire. 
 
362 
 
 A HAND BOOK 
 
 Barns, stables, and similar buildings are gener- 
 ally a total loss if the fire gets a good start. A fire 
 in a haymow is generally uncontrollable as there is 
 usually nothing at hand to fight it with. If the fire 
 is confined to a small space it may be smothered with 
 blankets, wagon sheets and other hay, but water must 
 follow at once. The tramp and his pipe are the 
 cause of many haymow fires and the vagrant never 
 gives an alarm but sneaks off, leaving the property 
 to burn. Similar conditions sometimes exist when 
 boys engage in forbidden sports. 
 
 Coolness and self possession are absolutely 
 necessary. An excited man will do more harm than 
 good. He will open the doors and windows to give 
 a fire draft, he will throw water anywhere but on the 
 fire, and he will destroy nearly everything he tries 
 to remove from the house. Old firemen know that 
 this picture is not in the least exaggerated. In fact, 
 at a fire it is often necessary to make a detail to 
 keep those excited people out of mischief. But cool, 
 prompt action will often save a building when the 
 case at first appears hopeless. 
 
 The state fire marshal of Ohio has made some 
 figures. After showing that the fire losses distribute 
 themselves all over the community, he says: 4 4 The 
 annual fire loss plus the cost of fire departments is 
 equal to fifteen per cent of the total year’s product 
 of all the industries of the state. So each producer 
 gives one and a half hours out of each ten hour day 
 to make good the fire loss.” 
 
CHAPTER XVIII. 
 
 LIVE STOCK INSURANCE. 
 
 There is much disagreement on this question, 
 not only among companies widely separated, but 
 among those operating in the same territory. No 
 plan has been evolved, adapted to all companies, as 
 risks vary in different localities. A herd on the 
 Colorado range and cattle in a well fenced Ohio pas- 
 ture are very different risks, while on the Pacific 
 coast there is no danger whatever from lightning. 
 
 Perhaps the oldest plan is the go-as-you-please 
 method of permitting each policy holder to place 
 what insurance he pleases upon his cattle, without 
 regard to number or value, and when a loss occurs 
 pay him for what has been killed up to the full 
 amount of his policy. This plan certainly has the 
 merit of simplicity. Occasionally, a company is 
 found which still adheres to it and claims that it is 
 satisfactory, but most companies say that experience 
 has taught them that it is not equitable, that an 
 undue proportion of the income of the company is 
 required to pay for losses on live stock. 
 
 VARIOUS PLANS 
 
 Various modifications have been tried. Some 
 limit the amount to be paid on each animal to a spe- 
 cific sum, or to a certain proportion of its value; 
 
 —363 
 
364 
 
 A HAND BOOK 
 
 others insist that a certain proportion of the herd 
 shall be insured; others still combine both these 
 methods. Companies were driven to adopt these 
 plans by the complaint about assessments by those 
 who had no live stock. At the outset a cattle man 
 with a hundred head would insure ten, but when one 
 was killed by lightning, it was always one of the ten. 
 Owners of buildings and personal property com- 
 plained that the cattle man could protect his herd 
 by insuring a small part of it, while they had to in- 
 sure the whole of their property. But the real 
 trouble, after all, was, as above stated, the fact that 
 the live stock did not pay its losses. 
 
 Meanwhile, many companies began a careful 
 investigation of their books. They found exactly 
 what this class of risks costs, and were then prepared 
 to act intelligently. Of course the matter was not 
 easily arranged. Occasionally a company cut the 
 knot it could not untie and erected the live stock 
 insurance into a department by itself, paying its 
 own losses from its own assessments. Generally the 
 changes were along other lines. At first the propor- 
 tion of the cattle to be insured was increased to half 
 or three-fourths. Finally many companies adopted 
 the plan of paying pro rata for losses. If a hundred 
 cattle were insured for a thousand dollars, in case of 
 loss the owner would receive ten dollars each. In 
 case he added to the herd he increased the points of 
 risk and the sum in his policy would still be divided 
 by the number of his herd to ascertain the amount to 
 be paid for each animal in case of loss. The same 
 principle would apply if he reduced his herd. He 
 
OF MUTUAL INSURANCE 
 
 365 
 
 would get a larger sum for each animal up to a cer- 
 tain amount named in the policy. Prudent policy 
 holders generally notify the company of changes 
 and have them entered on the policy and thus save 
 all trouble. Under these circumstances, live stock 
 pays its proportion and each policy holder knows just 
 what he is doing. Another change from early meth- 
 ods is in dealing with valuable animals, stallions, 
 pedigreed stock, etc. Formerly they were appraised 
 and paid for along with the others. Then the limit 
 was put on which reduced them to the level of or- 
 dinary stock. This was equally unsatisfactory. 
 There seems to he no better method than insuring 
 such animals by themselves, by name, number or 
 description, and placing a value upon each. 
 
 PROOF OF LOSS. 
 
 Direct proof is not to be had under ordinary cir- 
 cumstances. Rarely does anyone see an animal 
 knocked down by lightning. Usually the owner, 
 looking over his field, finds it dead. What killed it? 
 There are no indications. There was a storm a few 
 days ago, it must have been the lightning. So a 
 couple of neighbors are summoned, they agree with 
 the owner and the necessary affidavits are made out 
 and sent in and the company pays. That is all. True, 
 there are occasionally other indications, as when 
 dead animals are found along a wire fence or under 
 a splintered tree, but usually it is as above stated. 
 
 All indications for ascertaining whether or not 
 the animal has been killed by lightning, such as loose 
 teeth, black tongue, etc., have so far proved totally 
 
366 
 
 A HAND BOOK 
 
 useless. Possibly dissection by a competent veterin- 
 ary surgeon might sometimes show that lightning 
 was not the cause of death, but to make such examin- 
 ations would generally cost more than to pay the 
 claim. 
 
 No exclusive method can be laid down. Local 
 conditions, old customs, etc., will require companies 
 to adopt different methods in different places and 
 live stock insurance is no exception to the general 
 rule. 
 
 RATES. 
 
 The rate for insurance against loss by lightning 
 will vary with the climatic conditions of the locality, 
 thunder storms being more prevalent in some re- 
 gions than in others. But in all cases where there 
 are wire fences a reduction should be made when the 
 wires are properly grounded. This can be done by 
 attaching wire, preferably a size larger than the 
 fence wire, and burying the ends in the ground. 
 Care should be taken that ground wires come into 
 actual contact with the fence wires. They should 
 be twisted tightly two or three times around them. 
 Where one wire is used, as for telephone purposes, it 
 must remain insulated, but the others should be 
 grounded. Telegraph companies use a lightning ar- 
 rester, something like a comb with sharp teeth almost 
 in contact with the wire. It draws off the electri- 
 city. Something like this will probably be made for 
 use on fence wires and telephones. A wire fence, 
 properly grounded, is a protection to cattle in a 
 field ; if not grounded, it is an element of danger. 
 
OF MUTUAL INSURANCE 
 
 367 
 
 FROM AN OLD ADJUSTER. 
 
 The following article is by V. Goodsheller of 
 McPherson, Kansas. It covers the ground and fur- 
 nishes much valuable information. 
 
 In six and one-half years as adjuster for the 
 Farmers’ Alliance Insurance Company of McPher- 
 son, Kansas, I have had some little experience in 
 adjusting live stock losses. 
 
 When we first commenced insuring live stock, 
 we issued a blanket clause on all live stock owned by 
 the assured and the contract read that the assured 
 carry not less than one-half on all live stock owned 
 and in case of loss the company should pay market 
 value of animals killed. 
 
 The first difficulty encountered under this clause 
 was that assured would increase his herd in some 
 cases to ten times the number and value of insur- 
 ance carried and still expect and insist on the com- 
 pany paying him market value in case of loss. This 
 we did for awhile, hut found that live stock insurance 
 under such a contract did not pay its way. Of 
 course the deficiency had to be met from premiums 
 and assessments received from insuring other prop- 
 erty, which was burdensome to those of our patrons 
 who did not increase their herd or who carried in- 
 surance only on other property. So we evolved 
 the plan of prorating the man who had increased his 
 herd by making him furnish a statement of the 
 value of his live stock at time of loss. If he carried 
 $500 insurance, the company would pay him market 
 value provided the market value of all his stock at 
 
868 
 
 A HAND BOOK 
 
 the time when the loss occurred did not exceed 
 $1,000, but if his stock invoiced $2,000, he would 
 only get one-half. But even this plan did not equal- 
 ize the premiums, so we tried the three-fourths plan, 
 making the assured carry or pay premium on three- 
 fourths value of live stock in order to obtain market 
 value, allowing him to increase his herd twenty per 
 cent before we would pro rate him on a loss. This 
 plan we also found inefficient and complicated, for 
 the average farmer gets confused when you talk to 
 him of percentages and prorating. At last, however, 
 we hit upon the plan of always paying according to 
 insurance carried. The assured may carry $10, $15 
 or $30 a head on his cattle, and in case of loss the 
 amount he carries is always divided by the number 
 of head he owns at the time of loss, with a proviso, 
 however, that the company shall in no case he liable 
 for more than double the amount placed on each head 
 by assured. 
 
 Under this plan the assured receives just exactly 
 what he pays premium on and no more. We have 
 had this plan in operation over six years and find it 
 gives satisfaction to both the company and its pat- 
 rons. There is no haggling over the price or value 
 of the animal killed; when proof is made the loss 
 adjusts itself. 
 
 PARTICULARS REQUIRED. 
 
 But the proof is where the rub comes in. We 
 require a sworn statement, substantiated by sworn 
 statements of at least two witnesses, living contig- 
 uous to claimant, both being land owners. 
 
R. M. SCOTT, PITTSBURG, KANSAS. 
 
 Mr. Scott is the president of the National Mutual Insurance 
 Association of Pittsburg, a go ahead institution which is growing 
 rapidly. Mr. Scott is energetic, active, and is a thoroughgoing co- 
 operator. He never loses an opportunity to advocate the cause 
 he has espoused. 
 
c. m. McMillan, carthage, mo. 
 
 Mr. McMillan is president of the Carthage District Mutual 
 Cyclone Insurance Company, is state vice president of the 
 National Association of Mutual Association of Mutual Fire In- 
 surance Companies, has filled the position of vice president and 
 acted on several important committees. He farms on an 
 extensive scale, is a thorough business man, and a strong ad- 
 vocate of Mutualism, especially of Mutual Fire Insurance. 
 
OF MUTUAL INSURANCE 
 
 369 
 
 1st.— Giving date and hour as near as possible 
 when animal was killed. 
 
 2nd.— That there was an electrical storm at that 
 time. 
 
 3rd.— How long before the storm the animal was 
 seen. 
 
 4th.— What marks were found on animal to indi- 
 cate lightning. 
 
 5th.— How long after the storm the animal was 
 found. 
 
 6th.— Give position of body when found. 
 
 7th.— Give distance from wire fence, trees or 
 buildings where body was found. 
 
 8th— Were there any marks of lightning on 
 these ? 
 
 9th.— State where such animal was when killed, 
 or injured, whether in barn, on prairie or on public 
 highway. 
 
 10th.— Did you have any other insurance on 
 such animal when killed, if so, give name of company 
 and for what amount. 
 
 11th.— Was such animal perfectly healthy pre- 
 ceding the storm, if not, state in what respect. 
 
 12th.— Had such animal ever been sick or 
 diseased? If so, state particularly when and what 
 the nature was. 
 
 13th.— By whom was the dead animal first dis- 
 covered 1 
 
 14th— That the said deponent further states that 
 nothing has been done, or by his privity or consent 
 
 23 
 
370 
 
 A HAND BOOK 
 
 to violate the conditions of his policy or render it 
 void. 
 
 15th.— We require a complete invoice of all 
 stock owned of the class in which loss occurred, also 
 sworn to. 
 
 And a number of other questions of minor im- 
 portance relating to ownership and different kinds 
 of stock. 
 
 ILLEGITIMATE LOSSES. 
 
 And yet, in spite of these precautions, we pay 
 for a number of illegitimate losses in the course of 
 each year. 
 
 A great many report stock killed by lightning 
 that is found in such a state of decomposition that no 
 one can tell whether it was killed by lightning or 
 died from disease and we are often compelled to 
 send the proof hack for more explicit evidence or 
 send an adjuster for personal investigation. 
 
 I remember in one case where notice of loss was 
 sent to the company, proof blanks were sent the 
 party, but he refused to make any sworn statement. 
 On personal investigation I found that the animal 
 killed was owned by son of assured who was of age 
 but carried no insurance and I told the assured he 
 had no claim as the insurance contract covered only 
 his own property, so he withdrew his claim. 
 
 In another case, a report of loss was sent to the 
 company. I investigated the claim and found that 
 a straw stack undermined by cattle eating during the 
 winter had toppled over onto a heifer, smothering 
 her to death, and succeeded in having the claim with- 
 drawn. 
 
OF MUTUAL INSURANCE 
 
 371 
 
 In another case a man reported a horse killed 
 by lightning, standing in a stall in the barn. I in- 
 vestigated the same personally, found no evidence 
 of lightning on the barn nor on any of the surround- 
 ings, so this claim was rejected. 
 
 Another case. A steer was reported killed by 
 lightning in a wood pasture, which was also used for 
 a hog pasture. On personal investigation I found 
 that the animal had been eaten up by hogs and when 
 found nothing but the bones remained to tell the 
 story, and what kind of proof could be furnished in 
 such a case, when immediate surroundings of the 
 place where bones were found showed no evidence of 
 lightning? Of course this claim was rejected. 
 
 And thus I could go on indefinitely, citing case 
 after case where proofs were insufficient on which 
 to base a legitimate claim. 
 
 ANOTHER DIFFICULTY. 
 
 Then there is another difficulty that sometimes 
 confronts us. In our application and policy are 
 three clauses, for horses, mules and colts, viz. : 
 
 On work horses, not exceeding $ on any one. 
 
 On mules, not exceeding - $ on any one. 
 
 On colts, not exceeding - - $ on any one. 
 
 A man places insurance on work horses only, 
 has a colt killed, sends in a report of loss— colt was 
 killed by lightning. We write back to him that he 
 has no insurance on colts, and consequently no claim 
 against the company. In the majority of cases he 
 comes back to us rough-shod, says when the agent 
 wrote him he understood the insurance would cover 
 
372 
 
 A HAND BOOK 
 
 colts also, and if the company refused to pay their 
 legitimate (?) losses, he was done with them, and 
 they should at once send him back his premium and 
 cancel him out. But, on the other hand, if he loses a 
 work horse he is very careful to call the attention of 
 the company to the fact that while he has three colts, 
 they were not insured and his insurance applies to 
 work horses only and must be so computed. 
 
 The same applies to cattle. The assured in mak- 
 ing out proof of loss sometimes claims that calves 
 were or were not insured, as the case may be. 
 
 So the adjuster and executive board are quite 
 frequently up against it; however, we try to do our 
 duty and treat all our patrons alike, for every dollar 
 paid out for illegitimate losses in a Mutual company 
 is an unjust tax on all honest policy holders, and the 
 adjuster, with the executive board, must act as a 
 check to all such grafting and dishonesty. 
 
CHAPTER XIX. 
 
 HAIL INSURANCE. 
 
 Insurance against the elements, hail, wind and 
 electricity, differs from fire indemnity in the fact 
 that no human agency is concerned in the causes of 
 loss. Care cannot avoid disaster, nor does negli- 
 gence invite harm, from hail or wind. There is and 
 can be nothing corresponding to incendiarism or 
 arson. 
 
 The coming of a destructive storm cannot be 
 foretold. Weather prophets have attempted it from 
 time immemorial but beyond the indications for a 
 few hours in advance, their predictions have all 
 proved failures and the theorists have followed each 
 other, in unbroken procession, into the shades of 
 oblivion, and the weatherwise of today will soon be 
 forgotten, even as their predecessors were. 
 
 The available statistics have not furnished in- 
 formation of much value. Hail companies have kept 
 careful records, they have mapped every storm re- 
 ported to them, they have compiled the results, and 
 have arrived at conclusions only to discover that 
 circumstances may change at any time and this in- 
 formation, gathered at so much cost, may at once 
 become useless. 
 
 —373 
 
374 
 
 A HAND BOOK 
 
 AN UNFOUNDED THEORY. 
 
 For some years the theory prevailed that storm 
 regions of the Mississippi valley and the plains were 
 permanently located, that there were areas where 
 there were frequent hail storms and others where 
 they were unknown. Experienced hail insurance 
 men have given up this idea. They cite instances 
 of long exemption, in one case forty years, only to be 
 followed by terrible destruction. 
 
 Different ratings are made for different states 
 by some companies but it is doubtful if the regions in 
 which the risks are not the same are bounded by 
 state lines, and these boundaries are by no means 
 permanent, but change with the seasons. 
 
 That the climate and the rainfall of vast tracts 
 of land may become permanently modified is a the- 
 ory often advanced but the weather: records of many 
 years past do not give it support. The storm regions 
 of the country have been mapped. But how and why 
 the storms within these areas take their courses is 
 not known, nor is it possible to make any accurate 
 predictions as to what the weather will be in any 
 particular year or series of years. 
 
 Local hail companies have learned this lesson. 
 They have discovered that they may operate smooth- 
 ly and prosperously for three or four years and then 
 matters may change and they may have as many 
 years of disaster. To fit the rates to these conditions 
 is one of the problems which has caused the hail com- 
 panies much anxious thought. 
 
OF MUTUAL INSURANCE 
 
 375 
 
 PECULIAR CONDITIONS. 
 
 In fire insurance the hazard is continual. Ad- 
 vance premiums are not fully earned till the lapse 
 of an entire year. Hence the necessity of a fund 
 large enough not only to pay current losses and ex- 
 penses but to re-insure all risks. With the hail com- 
 pany the hazard begins when the policy is taken out 
 in the spring and closes when the crop should be 
 harvested, anywhere from July 15, to October 15, 
 according to the grain insured. The rest of the year 
 there is no risk. For this reason most companies 
 which insure for only one year settle up everything 
 in the fall and hibernate till the next spring. If such 
 companies would always levy assessments or collect 
 cash sufficient to pay losses in the very worst years 
 they would need no reserve. Those which do so and 
 which have never been obliged to pro rate are by no 
 means numerous. 
 
 The extreme variation of the seasons renders it 
 impossible to avoid an occasional heavy assessment. 
 Then there is dissatisfaction. Generally there are 
 many who leave the assessments unpaid. Owners of 
 farms can be reached, tenants with long leases are 
 generally prompt in paying, but many of the migrat- 
 ing class change their location and leave their assess- 
 ments unpaid. It is evident that much depends on 
 the character of the community in which the com- 
 pany does business. If the members are mostly farm 
 owners, and the few rented farms are looked after 
 by their proprietors, there will be but little loss of 
 assessments, and the method under discussion can be 
 
376 
 
 A HAND BOOK 
 
 safely adopted. In some states, however, the total 
 assessment is limited and in these, there mnst he an 
 occasional pro rating of losses. 
 
 Several companies doing business on this plan 
 have reported to the committee. As to whether it is 
 a success or not, they are about evenly divided. They 
 all favor a reserve. How large this reserve should 
 be is a question which would be answered according 
 to the locality. Some companies have paid in full 
 under a limit of 3 y 2 per cent assessments, while oth- 
 ers require from 4% to 7. 
 
 Much also depends on the amount of risk accept- 
 ed by the company. Some take all that is offered, 
 while others will insure only 160 acres in a section, 
 or $1,000 in value. Usage varies with regard to the 
 amount at risk per acre, some limiting risk to the 
 cost of preparing the land and seeding, others in- 
 suring to full value of the crop. 
 
 Ordinarily, hail storms do not cover very large 
 areas, but in some seasons the reverse is true. Then 
 the conditions become somewhat like those of the fire 
 companies which have conflagration risks. The ab- 
 normal losses cripple companies which carry no re- 
 serve. In 1904 a storm swept over six counties in 
 Kansas, an area of over 5,000 square miles. Within 
 this territory were strips devasted by hail utterly 
 destroying the crops and these strips covered nearly 
 the entire area. A single company gives its losses 
 as in excess of $160,000. 
 
 The state reports give forty-three Mutual hail 
 insurance companies in Wisconsin, Iowa, the Dako- 
 
OF MUTUAL INSURANCE 
 
 377 
 
 tas, Nebraska, Kansas, Oklahoma and Colorado. 
 Their methods of business vary so much that an ac- 
 curate classification would require a separate class 
 for each company. 
 
 ANOTHER PLAN. 
 
 There are some among these which assess annu- 
 ally after the losses of the season have been ascer- 
 tained. They claim that this plan is successful and 
 satisfactory. There still remains the vexed question 
 how to pay losses in full and keep down the assess- 
 ments. An examination of the reports shows that 
 as long as assessments are sufficient to pay losses in 
 full every thing goes smoothly but if the limit is 
 reached and pro rating is resorted to, there is dis- 
 satisfaction and loss of business. As an illustration, 
 the following report is given, round numbers being 
 used for convenience. In 1901 a Hail Company had 
 $350,000 at risk, losses $16,000, all paid with a small 
 surplus. Next year the risks were $500,000, losses 
 and expenses $36,000, of which only $25,000 was 
 paid. In 1903, the next year, the risks fell to $370,- 
 000. The losses were paid in full and the next year 
 the risks increased to $934,000. The losses were 
 again paid in full and a good surplus left. 
 
 Similar facts are shown by other reports, and 
 the same state of affairs occurs among the fire Mu- 
 tuals. A heavy assessment or a pro rating of losses 
 will drive away business. If companies were al- 
 lowed to accumulate a small reserve to be used in 
 abnormal seasons, this difficulty would be obviated. 
 
378 
 
 A HAND BOOK 
 
 Such a reserve need not be very large. Nearly all 
 companies conducted on the plan above described 
 have had experience in bad seasons. They have a 
 record of these years and a reserve sufficient to pay 
 the extra losses for, say two years, would be suffici- 
 ent. In the case of the company above quoted $11,- 
 000 would have enabled the company to have paid 
 its obligations in full. It is evident that if the good 
 years can be made to pay for the bad ones the burden 
 of assessments would not be heavy in any year. 
 
 FROM MINNESOTA. 
 
 The following letter from a Minnesota hail com- 
 pany director will be interesting as it is a statement 
 of actual experience along the lines under discus- 
 sion. He says: 
 
 “We organized our company with the idea of 
 meeting our losses on the assessment plan the 
 same as in the fire companies, but in 1902 we met 
 with losses amounting to over $140,000 and could 
 pay only 70 per cent of the losses and this caused us 
 the loss of many members, and again in 1903 we met 
 with another disaster and paid only 35 per cent. The 
 state law was such that we could pro rate and make 
 full settlement, which we did and then reorganized on 
 the note plan. Last year we wrote at 3 per cent or 
 15 cents per acre and limited the risks to 160 acres 
 on a section and 3,200 acres in a township and for- 
 tune favored us so that we have a start on which we 
 believe to be a safe plan. Had we done this when 
 the company was organized we would have been able 
 
OF MUTUAL INSURANCE 
 
 379 
 
 to carry liail insurance in this state for an average 
 cost of 3 per cent and yet have a small surplus in the 
 treasury. ’ ’ 
 
 This company is exceedingly cautious about 
 bunching risks. It will not take more than one-fourth 
 of the risk on any one square mile, nor more than 
 one-sixth in any one township. This reduces the 
 danger of loss from sweeping storms. 
 
 Another letter from an experienced hail man 
 says : 
 
 “We began business in 1899 and the first years 
 we were issuing policies on the five year term with 
 the limited liability and then only calling for such 
 an amount at the end of the year as was necessary 
 to pay the losses that year. But for two years out 
 of the five the losses exceeded the limit of liability 
 and we were compelled to pro rate the losses. At 
 our meeting in J anuary, 1904, we readjusted the rate 
 according to the hazard in the different parts of the 
 state and we are now collecting a fiat rate payable 
 on June 15th or September 15. If the premium is 
 paid June 15, it is one-half of one per cent less than 
 if not paid until September 15, and we are now issu- 
 ing the perpetual policy. We find after a year’s 
 experience under this new plan that we are much bet- 
 ter pleased with it. We have had a smaller per cent 
 of cancellations than ever before and a better per- 
 centage of collections. It is a little harder to write 
 business but when they once understand what they 
 are to pay they are much better satisfied than under 
 the assessment plan. Under this plan we were able 
 
880 
 
 A HAND BOOK 
 
 to pay our losses sixty days before they were due 
 and at the end of the year we had over $6,000 in cash 
 reserve and over $5,000 in premiums collectable. 
 
 4 ‘We try to educate our members thoroughly to 
 understand just what their insurance is and we en- 
 close you a copy of a personal letter we sent to all 
 of our members. ” 
 
 It should be noticed that the perpetual policies 
 of the eastern and the western companies are not the 
 same. In the eastern companies there is a large de- 
 posit. The western perpetual policy is one which is 
 in force as long as the assessments are kept up. 
 
 In the personal letter above alluded to the state- 
 ment is made that the payments for hail have aver- 
 aged $30 on the $1,000 at risk since the company has 
 been in existence. This is below the average. 
 
 FROM IOWA. 
 
 This letter is from Iowa. 
 
 “I think that the farther northwest, the more 
 hail we get, but as to any one county being extra haz- 
 ardous I do not think that it is. The more that you 
 can get on a quarter section the better for the com- 
 pany, for you have more to assess on. Take all you 
 can get on a section, as one section is no more liable 
 to be hit than another. 
 
 “Grain blown down is not broken down, and 
 grain hit by hail is broken about three to six inches 
 from the head. 
 
OF MUTUAL INSURANCE 
 
 381 
 
 “I think you had better issue policies for five 
 years. Premiums could be paid in advance where 
 you have a limit to the assessment and where the as- 
 sured agrees to take his share of what is left after 
 the officers and expenses are paid, but if your policies 
 are written so you have to pay in full then you will 
 have to make assessment after the losses occur.’ ’ 
 
 Another, a Minnesota company, the Park 
 Region, has had the following experience. 
 
 4 ‘In reply we have to say that we have had ten 
 years’ experience in this business and so far as the 
 Mutual plan upon a credit basis is concerned we 
 have come to the conclusion that it is a failure. 
 
 “We collect $2 membership fee at the time of 
 taking the application, and limit the liability of the 
 applicant to an assessment of not to exceed five per 
 cent of the amount of his policy and which becomes 
 due October 1, each year. Our policies are written 
 for a term of from one to five years. The chief ad- 
 vantage of the five year business is found in the re- 
 duction of the expense of writing the business, as the 
 cost is the same in writing one year business as it is 
 in writing five. Of course there is a liberal percent- 
 age of the long term business cancelled Jong before 
 the contract expires, either at the request of the as- 
 sured or through his failure to pay his assessments. 
 
 “The latter we find to be the chief objection to 
 the long term policy, as we are usually unable to col- 
 lect more than 50 per cent of the premium after the 
 first year, while the liability existing against us is 
 always 100 per cent upon such policies in force. 
 
382 
 
 A HAND BOOK 
 
 “We have stated that in our opinion, the credit 
 system of insurance is a failure. Our reasons for 
 this are owing to the inability to collect assessments. 
 They are among the hardest of collections. To ask 
 a man to pay an insurance premium after a hazard 
 has passed is a good deal like asking him to pay for 
 a dead horse. In fact it is worse. Many of them 
 imagine that because they have had no hail or dam- 
 age, that they therefore have had no benefit and they 
 feel under less obligations to pay such a debt than 
 almost any other. 
 
 1 ‘ At any rate, after exercising the greatest care 
 of which we have been able in the selection of insur- 
 ance, and using the greatest diligence in the effort to 
 collect, we have been obliged to charge off as worth- 
 less, on an average, of not less than 25 per cent of 
 our premiums— sometimes more and sometimes less. 
 To this loss must be added the large expense inci- 
 dental to effecting the collection we do make. 
 
 ‘ ‘ Our rates of assessment have run from Sy 2 to 5 
 per cent, and while each year we have succeeded in 
 the payment of our losses in full, yet there have 
 been some seasons in which we have been obliged to 
 borrow part of the money in order to do so, and 
 there have been several seasons when the manage- 
 ment (aside from the secretary) have received noth- 
 ing for their services. We believe that a cash prem- 
 ium should be collected at the time of writing the 
 insurance, and in case this premium produces an 
 amount in excess of the needs of the business, this 
 excess is rebated back to the policy holder. Such a 
 
OF MUTUAL INSURANCE 
 
 383 
 
 plan would largely reduce the expense of conducting 
 the business and at the same time obviate a loss of 
 at least 25 per cent of the premiums, which under our 
 present plan and the plan of all Mutual companies 
 of which we have knowledge, is now worthless. In 
 the making of this saving the rate of premium and 
 cost of insurance to the insured would be much re- 
 duced and the payment of losses could be made at a 
 much earlier date and, we believe, would be much 
 more satisfactory all around. 
 
 “We believe there should be different rates of 
 premium upon different classes of crops and in dif- 
 ferent localities. There are some localities where 
 hail of more or less severity seems to make its an- 
 nual visit and cause more or less destruction, while 
 in the same region, and only a short distance re- 
 moved, other localities appear to be almost immune. 
 Fruit, both small and large, and tobacco, are the 
 most hazardous crops to insure. The rate on fruit 
 should be twice that on ordinary crops. Oats, corn 
 and flax are among the least hazardous. We at- 
 tempt to distribute our risks over as large a terri- 
 tory as possible and aim to insure only 160 acres in a 
 section. In practice we sometimes exceed this a 
 trifle, it depending upon thq locality.” 
 
 FROM NEBRASKA. 
 
 This is from Nebraska. 
 
 “ It is quite true that different crops take differ- 
 ent rates. Our experience has proven that there is 
 not much difference in the risk on oats, corn and 
 
384 
 
 A HAND BOOK 
 
 wheat, though the risk on oats is possibly the small- 
 est risk. But we do not think there is enough differ- 
 ence in these crops to warrant a difference in rates. 
 It is possible that the risk on corn is less than on 
 wheat. This is no doubt true, especially in Kansas, 
 as your storms there occur as a rule earlier in the 
 season and the wheat being farther along the risk 
 would no doubt be greater than on the corn crop. 
 The risk on barley, spelts and rye is just about 
 twice as great as on any other crop. We believe that 
 the rates should be twice as high. We have never 
 made any difference here because there is so little 
 of the above crops raised in this state. 
 
 4 ‘ It is no doubt true there are small areas more 
 subject to hail than other territories. Still, my ex- 
 perience in writing insurance in several different 
 states has shown me localities where farmers have 
 told me that they had lived in the same neighbor- 
 hood for twenty or twenty-five years, without losing 
 any crops to speak of, and then were hailed out as 
 many as three years in succession. We find, how- 
 ever, that there are localities in this state that have 
 proven more hazardous than others. For instance 
 we believe that the territory adjoining rivers is 
 more subject to hail than farther away. 
 
 “We do not think any company could write all 
 the insurance that is offered. We believe that 250 
 to 300 acres on a section is all the insurance that 
 should be written; and do not think that too much 
 should be placed on one acre of crop. Our plan is to 
 insure for about what the expense of farming and 
 
DR. JOSEPH SAUNDERS, ANDERSON, IND. 
 
 Dr. Saunders was born at Troy, Ohio, June 1, 1849, grew up 
 on the farm, moved to Madison county, Indiana, in 1871, and 
 graduated at the Indiana Medical College, Indianapolis, in 1874. 
 He has been in continuous practice since that date. 
 
 For the last twelve years he has succeeded himself as presi- 
 dent of the Madison County Farmers’ Mutual Insurance Com- 
 pany, which was organized in 1885, and is in a dourishing condi- 
 tion. 
 
ROBERT A. KIRKMAN, ANDERSON, INDIANA. 
 
 Robert A. Kirkman was born at Greensborough, N. C., Nov. 
 23, 1852. He emigrated with his parents to Missouri in 1858, and 
 with them in 1873 located in California. For many years he was 
 here interested in the business of fire insurance, having acted as 
 agent for many of the best companies. After retiring from this 
 business he purchased a farm in Madison county, Indiana, where 
 he now resides. Mr. Kirkman at once identified himself with the 
 “Farmers Mutual Insurance Company”, of Madison county, and 
 for three years was chosen as its treasurer, and for the past five 
 years has been its secretary. He is an active member and 
 worker in the ranks of the Mutual Insurance Companies 
 Union of Indiana, and also of the National Association of Co-op- 
 erative Mutual Insurance Companies of the United States. 
 
OF MUTUAL INSURANCE 
 
 385 
 
 rent of land would be worth. For instance, we in- 
 sure at one rate, namely $6 per acre. Of course the 
 risk would be all right to insure at a lower rate. But 
 our experience has proven that a great deal of dis- 
 satisfaction has been caused in neighborhoods where 
 losses occurred and they were insured at different 
 rates per acre. 
 
 “It is sometimes a little difficult to tell whether 
 the grain has been blown over by the wind or 
 knocked down by the hail. In most cases where hail 
 accompanies wind you will find the straws shredded 
 to a certain extent or broken more than when blown 
 down by the wind. It is not often that the wind alone 
 blows down crops so badly that a good portion of 
 them do not rise again, at least in some part of the 
 field. But when blown down by a twister it is then 
 quite easy to tell whether it is done by the wind or 
 the hail. Losses of this kind are hardest of all to 
 adjust, especially where the farmers try to take ad- 
 vantage of the company. 
 
 “We believe that it is best to issue policies for 
 a longer period than one year for this reason, the 
 hail risk being so much greater than fire risk, busi- 
 ness should be obtained at a smaller expense in order 
 to have as much of the premiums to pay losses with 
 as it is possible. It is therefore best to write busi- 
 ness for a longer period in order to save commis- 
 sions and other expenses. Provision can be made 
 in the policy for change or transfer. The business 
 could no doubt be conducted more satisfactorily if 
 
 24 
 
386 
 
 A HAND BOOK 
 
 premiums were paid at the beginning than at the end, 
 before the losses occur. Then, of course, so much 
 business could not be written by the companies be- 
 cause it is the time of the year when a great many 
 farmers do not have ready money with which to pay 
 Insurance. We make a slight difference in rates if 
 premiums are paid before the season begins. We 
 charge them y 2 of 1 per cent more when they are 
 paid in the fall; we also have provision in our by- 
 laws that no member shall have a claim for loss 
 against the company until his premium is paid. If it 
 is not paid before the loss was reported, remittance 
 must accompany his notice of loss. We find this plan 
 works very satisfactorily, keeping a great many 
 from reporting slight losses when the loss is nothing 
 to speak of.” 
 
 FROM COMMISSIONER DEARTH. 
 
 Hon. Elmer H. Dearth, insurance commissioner 
 of Minnesota, says in his report issued February 24, 
 1904: 
 
 ‘ ‘ Those companies authorized to transact the 
 business of hail and cyclone insurance upon the Mu- 
 tual plan in the state of Minnesota have, in common 
 with the preceeding two years, had a sad experience 
 during 1903— their losses being very excessive. 
 While a majority of said companies paid their losses 
 in full as adjusted, still there were three or four that 
 were not so fortunate, on account of the failure on 
 the part of a large percentage of the policy holders 
 to promptly pay their assessments. One company 
 could not even have paid 50 per cent of the losses as 
 
OF MUTUAL INSURANCE 
 
 387 
 
 adjusted, had the entire assessments been collected 
 in full. The adjusted losses of this particular com- 
 pany exceeded $100,000, while the proceeds of its as- 
 sessment, which was levied for the full limit permit- 
 ted under the statute, if fully collected, would not 
 have exceeded $53,000. This unusual experience is 
 evidently due to the fact that its risks were not prop- 
 erly scattered or distributed, the losses amounting 
 in one county alone to practically $45,000. 
 
 “One other company— The German American 
 Mutual Hail of Wadena— was unable to pay any per 
 centage whatever, consequently, proceedings were 
 duly instituted for the appointment of a receiver to 
 wind up its business and financial affairs. 
 
 “As regards the matter of expenses during the 
 past year, none of the companies appear to be sub- 
 ject to criticism; in other words, there has been no 
 evidence of extravagance in this direction, practical- 
 ly all of the companies having kept within their one 
 per cent limit, as provided under the statute. Practi- 
 cally all losses as sustained by the companies on ac- 
 count of cyclones and windstorms were paid in full, 
 as adjusted. 
 
 “It is clearly evident, in view of the failure on 
 the part of a large percentage of the members to pay 
 their assessments, that the only practical method to 
 be pursued in conducting this class of business is to 
 require the payment of a full premium in cash or 
 secure bankable notes upon delivery of the policies ; 
 in other words, no company should assume a dollar 
 of liability, on account of losses through hail, 
 
388 
 
 A HAND BOOK 
 
 cyclones, or any other contingency, until the cash 
 funds with which to pay the same have been actually 
 collected from the member or policy holder. The 
 system which has been universally followed in the 
 past, namely : not requiring the members to pay even 
 a single dollar until after all liability for losses has 
 accrued, including management expenses, is respon- 
 sible for practically all the financial ills and troubles 
 of these companies. No enterprise, regardless of its 
 character, could be successful if conducted on such 
 an unbusinesslike basis. Experience proves that a 
 very large percentage of the membership, or policy 
 holders, in event of not sustaining any loss, refuse to 
 pay their assessments when levied at the close of the 
 year, consequently, if the losses have been excessive, 
 in the absence of a substantial reserve fund, the com- 
 panies are unable to promptly liquidate their liabili- 
 ties, the alternative being settlement upon a pro rata 
 basis, and then, in many cases, only for a small per- 
 centage of the total liabilities accrued. When the 
 claims for losses become due, instead of having the 
 funds in hand with which to pay the same, the same 
 are in the pockets of hundreds or thousands of policy 
 holders, scattered all over the country, many of 
 whom refuse to let go of it, other than at the end of a 
 law suit. Insurance companies certainly cannot pay 
 losses, or other liabilities, until they have received 
 the money from their policy holders, and the time to 
 get it is upon delivery of the policy, or at time of 
 securing application. 
 
OF MUTUAL INSURANCE 
 
 389 
 
 THE MINNESOTA LAWS. 
 
 The Minnesota statutes provide that: 
 
 4 4 All companies organized under the provisions 
 of this act shall charge and collect on their policies 
 at the time of delivery thereof a full mutual premium 
 in cash, or notes absolutely payable, at a rate which 
 shall not be less, in the hail department, than two and 
 one half per cent per annum of the face amount of 
 the risk. 
 
 ‘ 4 Each policy holder, in addition to the premium 
 paid or contracted to be paid, shall be liable to an as- 
 sessment, to pay his proportional part of all losses 
 and expenses sustained and incurred while a member 
 of such company, not exceeding, however, in addition 
 to the premium named in his policy and contract, a 
 sum equal to such premium, provided such assess- 
 ment, in addition to the premium heretofore paid or 
 contracted to be paid, shall not exceed, in any one 
 year, the sum of five per cent ; provided, he is notified 
 of such assessment within ninety (90) days after the 
 expiration of his policy and if his policy is for not 
 more than one (1) year, within ninety (90) days 
 after the expiration of his annual insurance there- 
 under. The mailing of such notice to the last known 
 address of the member shall be deemed sufficient 
 notice of such assessment. 
 
 4 ‘ The total amount of liability to which a mem- 
 ber is liable shall be plainly, legibly and correctly 
 stated both in the application, policy and note, if a 
 note be given.” 
 
390 
 
 A HAND BOOK 
 
 The expenses of any liail company must not 
 exceed one per cent on the total amount at risk. 
 
 The following address was delivered by John F. 
 Zimmer, secretary of the United Mutual Hail Associ- 
 ation at the state meeting of the Nebraska Mutuals. 
 It covers the ground very thoroughly. 
 
 ‘ ‘ Mutual hail insurance undertakes to do practi- 
 cally the same thing that any other form of Mutual 
 insurance does, that is, to give to its members insur- 
 ance at actual cost. And while it should be the fixed 
 determination of all hail insurance organizations al- 
 ways to strive by legitimate means to make the cur- 
 rent cost as little as possible, they should, however, 
 never lose sight of the fact that insurance of any 
 kind which is not secure is not worth paying for. 
 But they should be certain to make it cost enough to 
 keep it permanently secure against all unforseen dis- 
 asters and pitfalls. In 1897 the legislature of Nebras- 
 ka passed a special act providing for the organiza- 
 tion of Mutual hail insurance companies. This law 
 provides that hail companies may write a limited 
 liability policy, provided, that if losses for any one 
 year should exceed the limit of all the liabilities of 
 its members, as provided by its by-laws, then the 
 sufferers must accept their pro rata share of all 
 funds available in full satisfaction of their loss. 
 
 ‘ ‘ During the course of time several hail insurance 
 companies were organized. Some were organized 
 with good intentions. Others, seeing that the legis- 
 lators had forgotten to place any restriction on the 
 officers having charge of the funds, were organized 
 
OF MUTUAL INSURANCE 
 
 391 
 
 for no other purpose than for personal gain. This 
 kept up each year until 1903, when the legislature 
 amended the laws, providing for a restriction on the 
 officers in the form of a $50,000 guarantee bond, run- 
 ning to the State of Nebraska. This law has had 
 the desired effect and has put an end to the wild cat 
 hail insurance business in Nebraska. 
 
 “But let us go back to the by-laws adopted by 
 all the companies that were striving to do a legiti- 
 mate business. The universal custom of farm fire 
 companies to collect each year what was needed for 
 losses for that year caused the hail companies to 
 adopt similar plans, and as time went on this plan 
 has practically proven a failure, and some of our 
 companies who were striving to do a legitimate busi- 
 ness have given up the struggle and quit business, 
 so that out of some dozen organizations only five 
 were in operation during the past season. The reas- 
 on of the failure of so many companies was due to 
 the fact that about every other year, or at least two 
 years out of five, the losses would exceed the limit 
 of their collectable premiums, and the losers for the 
 bad years would have to accept their pro rata share 
 of the funds realized for their losses. 
 
 AN INJUSTICE. 
 
 “The injustice of a limited liability and then 
 collecting only such an amount as was necessary to 
 pay the losses, in years when the losses were less 
 than the limit, can readily be seen from the fact that 
 those who lost their crops during the years that it 
 
392 
 
 A HAND BOOK 
 
 did not require the full amount were fortunate 
 enough to get their losses paid in full, while those 
 who lost during the years that the losses exceeded 
 the limit were compelled to accept their pro rata 
 share of the funds realized. Though they all paid 
 alike for a five-year period, they were not all treated 
 alike in the payment of losses. If, however, they had 
 all paid the limit for the full five years and what was 
 not needed in the years when the losses were less 
 than the premium had been held as a surplus to meet 
 the unforseen disaster when the losses exceeded the 
 premium collectable for that year, they could have 
 had surplus enough on hand to pay all losses each 
 year, and in that way treat all members alike, and all 
 receive 100 per cent on the dollar for losses. 
 
 AN EXPERIENCE. 
 
 “The United Mutual Hail Insurance Associa- 
 tion, of Lincoln, has during its six years of existence 
 carried $7,194,000 of risks, upon which it has paid 
 $214,994.70, an average of 3 percent on every dollar 
 of risks carried, or $30 for every $1,000 of insurance 
 carried. This association one year ago adopted the 
 level premium basis and during the past season has 
 been able to pay all losses in full, and set aside a 
 surplus of over $6,000 cash, besides having upwards 
 of $5,000 in collectable premiums, to meet future 
 losses, providing the losses should exceed the total 
 amount that could be collected in any year. This 
 puts the association on what we believe to he a reas- 
 onably secure basis. 
 
OF MUTUAL INSURANCE 
 
 393 
 
 MEAGER STATISTICS. 
 
 i ‘ State reports give very little help in the way 
 of statistics. Iowa reports the average cost of hail 
 insurance as $31.30 per $1,000. This figure is ob- 
 tained by adding up the average of the Iowa com- 
 panies and dividing by thirteen, the number of the 
 companies. This is the method generally employed. 
 But Iowa had $7,655,103 at risk in Mutual companies 
 and the total losses were $327,265.33. And this gives 
 an average cost of $42.75 per $1,000. The highest 
 cost per $1,000 given in the report is $59.47. 
 
 “Wisconsin reports but one company doing an 
 exclusive hail business. Its average cost was $37.63 
 per $1,000. But this did not pay the losses in full 
 and is, therefore, too low. 
 
 “Nebraska reports give an average cost of 
 $46.06 per $1,000. Special reports give from $30 to 
 $50 per $1,000. 
 
 4 ‘ Minnesota, in 1903, had $8,364,942 at risk. The 
 losses were $278,090.64. This is $33.35 on the $1,000. 
 The total assessments levied were for both hail and 
 cyclone insurance $448,386.42 ; amount collected 
 $283,951.27. The expenses for the hail insurance 
 cannot be ascertained as they are not separated from 
 the cyclone business except in the case of a few com- 
 panies which did a hail business only. They average 
 nearly one per cent or $10 per $1,000, which added 
 to the $33.35 would have made the cost approximate- 
 ly $44 per $1,000 had the losses been paid. 
 
 “It is evident that hail insurance is not yet on 
 a scientific basis. Statistics are meager and unsatis- 
 
394 
 
 A HAND BOOK 
 
 factory. But some facts seem to be established. It 
 may be stated that the hail risk will average over ten 
 times as great as the ordinary fire risks. Different 
 localities as well as different crops should take dif- 
 ferent rates. The bunching of risks, or failing prop- 
 erly to scatter them, is more dangerous to hail com- 
 panies than is the conflagration risk to fire com- 
 panies. Hence the necessity of larger territories in 
 which to operate. 
 
 ‘ ‘ There has been some progress toward weeding 
 out irresponsible companies. Occasionally com- 
 panies are organized entirely in the interest of the 
 officers. They make the expenses what they please 
 and they are by no means small. Minnesota limits 
 the total expenses to one per cent of the total risks. 
 Nebraska requires a bond of $50,000 to the state. In 
 the one case there is no chance for the grafters to 
 steal, in the other they cannot give the bond. But 
 in most states they can organize companies, pay 
 themselves in full and pro rate the losses. This state 
 of affairs needs remedying. In Kansas a law has 
 been passed limiting the expenses of running the 
 company to fifty per cent of the income. This is too 
 large. The Minnesota one per cent of the risk is 
 much better. 
 
 “Local conditions must govern in many re- 
 spects, such as rates, time and manner of levying 
 assessments, policies, etc., whether or not notes shall 
 be used, etc. But there appears to be a steady drift 
 towards long terms, greater cash payments and reas- 
 onable reserves. 
 
OF MUTUAL INSURANCE 
 
 395 
 
 “Of all the hail companies which have been 
 started in the United States only about forty-three 
 are reported as in business to-day. Some retired of 
 their own accord, some were closed up by the state 
 authorities. Of the total number there are but few 
 which have not at some time been obliged to pro 
 rate a loss. The companies now in existence are 
 working toward a better basis. They will probably 
 all survive. 
 
 The committee adds the criticism of some old 
 officers of Hail Mutuals. One says : 
 
 HOW TO WRITE BUSINESS. 
 
 “I believe that the business should be written on 
 a level rate and the rate could be arrived at from 
 past experience in the different states showing the 
 amount that has been necessary to collect each year 
 to pay losses in full. Of course, even then the loss 
 might be so heavy all over the territory that the com- 
 pany could not then pay in full, but it is more than 
 likely with a level rate and creating a reserve fund 
 that after the fund was established all companies 
 would be making payment in full. I do not believe 
 that the reserve fund can be too large as it is more 
 than likely that within a five-year period at least, 
 losses would be heavy enough so it would require 
 part of the reserve fund to make payment for losses 
 for some year during that period. Of course, if the 
 reserve fund should get larger than a full year’s 
 premium on all the business in force by any com- 
 pany, and the board of directors felt it was getting 
 
396 
 
 A HAND BOOK 
 
 larger than necessary, a credit could he given on the 
 next year’s insurance on all policies remaining in 
 force with the company. That would he an incentive 
 for policy holders to retain their insurance with the 
 company and would of course, have a tendency to 
 strengthen the company in that way. I believe that 
 business should be written for as long a period as 
 possible in order to keep the expense at a minimum. 
 
 4 ‘ Hail companies should not try to pay the same 
 percentage for commission to their agents that the 
 fire companies pay because the difference in the risks 
 is so much greater. 
 
 “By writing the business on a five-year period 
 or a continuous policy, all expense of getting busi- 
 ness can be saved after the first year’s insurance is 
 written. I find that the greatest reason why policy 
 holders have been cancelling their insurance after 
 the first year has been on account of the assessment 
 plan, for the reason that agents in soliciting the in- 
 surance naturally tell the prospective applicant that 
 the assessment will be very low and that it will not 
 cost him very much to carry the insurance. When 
 assessment is made at the end of the season, after the 
 applicant has not had a loss and he finds that the 
 assessment is much greater than the agent led him to 
 believe it would be, the applicant gets sore. For this 
 reason a great many of them who are able to pay and 
 would pay if the amount asked for was what they 
 expected it to be, refuse to pay and then if collection 
 is enforced they have their policies cancelled. A 
 good way to avoid this dissatisfaction and loss in 
 
OF MUTUAL INSURANCE 
 
 397 
 
 membership is to have the time of payment set at 
 that time of the year when losses are most likely to 
 occur and they feel the need of insurance, and have 
 the rate a trifle lower than the rate would be if pay- 
 ment were made in the fall. Have the policy show 
 exactly what they are to pay either at that time or 
 for the fall payment. I find that on this plan our 
 company has a very small per centage of cancella- 
 tions and a much smaller per centage of loss in col- 
 lections than formerly under the assessment plan. 
 
 VALUATION OF CROPS. 
 
 1 ‘ In the fourth paragraph we note what you say 
 about the valuation of crop insured at the time of 
 adjustment. I believe that market prices of pro- 
 ducts should not be considered at any time. The in- 
 surance should be written at a certain rate per acre 
 and as the insured pays on that rate, adjustment 
 should be made on that basis. Of course, provision 
 should be made in the by-laws that not more than 
 the actual amount of loss sustained should be paid 
 at any time so in case of a poor crop being hailed 
 out, the insured would not get more than the value 
 of the crop. ,, 
 
 ANOTHER OPINION. 
 
 Another of wide experience says : 
 
 ‘ ‘ In consideration of plans and methods of writ- 
 ing hail insurance, there is no general rule that ap- 
 plies to fire and wind storms that is applicable to 
 hail insurance. There is no similarity of conditions 
 
898 
 
 A HAND BOOK 
 
 as regards hazards or liability. While there is no 
 moral hazard in writing hail insurance, yet there is 
 a moral hazard in the adjustment of losses, or in 
 the determining of the valuation of said crops, and 
 I might add that there is a physical hazard with a 
 purely assessment company where assessments are 
 to he made after the loss has occurred. 
 
 “The moral hazard as applied to buildings in 
 fire insurance consists in part in the condition of the 
 building and the overrating of the value thereof, 
 while the moral hazard in the adjustment of hail 
 losses consists in the over-estimating of the average 
 value of the crops and as to conditions as to how 
 the farming has been done, etc. This will be readily 
 understood by those who have been adjusters in hail 
 companies. 
 
 ‘ ‘ The physical hazard might be determined to be 
 the delinquent assessments which are always greater 
 when the assessment is high, and this also is regulat- 
 ed by other conditions such as sale of farms and re- 
 moving from one farm to another or from the state 
 in which the assured has lived. 
 
 “There is another serious condition following 
 this same class of insurance, altogether unavoidable 
 but at the same time either increasing or decreasing 
 the liability of the company. I refer to the valuation 
 of the crops insured at the time of adjustment of 
 losses, which varies according to the markets and the 
 prices of such products. Not so with buildings, 
 there can be no increase in valuation from the face 
 of the policy, but often a decrease, which lessens 
 
OF MUTUAL INSURANCE 
 
 399 
 
 instead of increases the liability of the company in 
 case of loss. 
 
 “Our experience so far leads us to the conclus- 
 ion that this class of insurance is the most hazardous 
 and intricate in its management, and, consequently, 
 some methods should he adopted to eliminate at least 
 the large delinquency attending the management of 
 the business under the almost universal system as 
 adopted and used by a majority of our hail com- 
 panies. 
 
 “We further conclude that the popularity of 
 hail insurance, notwithstanding the seeming neces- 
 sity for such protection, will have to demonstrate by 
 plans and methods which have not yet been intro- 
 duced in a general way. 
 
 AN UNFAIR METHOD. 
 
 ‘ 4 The prevailing idea now seems to be a limited 
 assessment. This is unfair, and in many respects 
 altogether unsatisfactory, especially to those having 
 losses in case of excessive storms, and with an un- 
 limited assessment with severe storms making a 
 higher assessment. This is also unsatisfactory to 
 those having no losses, so there is at the present time, 
 as we see it, no absolute relief from these contin- 
 gencies over which we can have no control and upon 
 which there has not been a general understanding. 
 And as before stated, we believe in order to bring 
 about the correct conclusions of the most satisfactory 
 character, that an average basis rate payable in ad- 
 vance is the only correct theory upon which this 
 knotty problem may or will be solved.’ ’ 
 
CHAPTER XX. 
 
 WINDSTORMS, CYCLONES, ELEC- 
 TRICITY. 
 
 Wind or air in motion takes different names, ac- 
 cording to the speed with which it moves. The hur- 
 ricane and the gale which occur on the sea-coast and 
 on the ocean are similar to the cyclone and the wind- 
 storm of the west. Both are strong enough to dam- 
 age property. The windstorm acts by direct pres- 
 sure and breaks off or overturns whatever is in its 
 way. The cyclone moves in a circle in a direction 
 opposite to the hands of a clock. It is a whirlwind, 
 and the whole storm advances eastwardly sometimes 
 at a speed as great as thirty miles an hour. 
 
 The cause of these storms is said to be the heat- 
 ing of the air in one area more than in another. The 
 air in the heated area rises, cold air follows in to take 
 its place, that is wind. Sometimes a stratum of cold 
 air which is heavy, is forced over a stratum of light- 
 er heated air. The latter forces its way up through 
 the colder layer and then there is a whirl as there is 
 when water runs through a hole in the bottom of a 
 tank. 
 
 The force exhibited in some of these storms is 
 terrific, and there has been much speculation as to 
 its origin. When the difference in barometrical pres- 
 sure is taken into account there will be no need of 
 
 400 — 
 
OF MUTUAL INSURANCE 
 
 401 
 
 calling in any other element. If there is a difference 
 of barometrical height of one half inch between two 
 areas each a hundred miles square, the total force 
 developed will be many millions of tons, enough to 
 account for the effects of any windstorm. The force 
 of a cyclone can also be accounted for but no one 
 understands how that force acts. A cyclone will 
 destroy a well built house and leave a frail structure 
 unharmed, it will demolish the walls of a house but 
 leave undisturbed a kitchen table with a lamp stand- 
 ing on it, it will blow over strong trees but leave a 
 pile of shingles between them. Thus far, no one has 
 offered a satisfactory theory concerning these mat- 
 ters. 
 
 Electric forces usually act very powerfully dur- 
 ing cyclones, and occasionally when a gale is blow- 
 ing. As electricity of the same kind is strongly self 
 repellant, there will be two forces, the one attacking 
 objects from the outside, pushing over buildings, 
 breaking off trees, etc., the other a repellant force 
 from the inside, tending to split and rend. The in- 
 terplay of these two forces produces results which 
 are destructive and against which there seems to be 
 no defense. 
 
 The damages done by gales or heavy winds are 
 usually wide-spread but slight in each case. On the 
 contrary, the cyclone follows a narrow path, and not 
 unfrequently utterly destroys whatever it strikes. 
 As one man who had lost a house and barn expressed 
 it, there was not a board left which he could identify. 
 
 26 
 
402 
 
 A HAND BOOK 
 
 In all such cases the adjustment is simple, the 
 loss is total, and the loser is always innocent so far 
 as the destruction is concerned. 
 
 When the damages are caused by a strong gale, 
 they are generally not heavy. Glass is broken, chim- 
 neys blown off, siding torn loose and perhaps the 
 building is pushed off from the foundation. All these 
 damages are easily repaired, and the best way to 
 settle the loss, will be for the company to make the 
 repairs itself. 
 
 Old shanties and dilapidated buildings should 
 not be insured. They are very liable to loss, and 
 their owners are not easy men to settle with. 
 
 What is electricity? No one knows. So far all 
 the answers given only raise other questions, and no 
 advance is made. For nearly two thousand five hun- 
 dred years, the manifestations of this mysterious 
 agent were studied with a total of results which could 
 be recorded in less than ten pages of this Manual. 
 Finally, Benjamin Franklin, by means of his famous 
 kite experiment, demonstrated the fact that the elec- 
 tricity of the clouds, and static electricity as pro- 
 duced by the frictional machine then in use were 
 identical. Stimulated by that discovery, the scient- 
 ists began the study of the phenomena of thunder 
 storms and soon arrived at a practical knowledge of 
 great value. 
 
 Electricity exists as positive and negative. With- 
 out discussing the theories on the subject, it may be 
 said that when these two forms or conditions are in 
 equilibrium, no electrical action is apparent, but 
 
OF MUTUAL INSURANCE 
 
 403 
 
 when either predominates, there will be a tendency 
 to restore the lost balance. 
 
 It is well known that electricity will be conveyed 
 by some substances much more freely than by others, 
 and also that it always takes the path of least resist- 
 ance. When passing over a good conductor of suf- 
 ficient size, the current travels quietly, but if the con- 
 ductor is too small or is not a good one, heat is gener- 
 ated, and if the conductor is a very poor one, such as 
 air, it jumps or discharges, and its path is marked 
 by a flash of light usually called the electric spark. 
 And lightning is only an enormous spark from cloud 
 to cloud, or between the earth and a cloud. 
 
 Attraction exists between positive and negative 
 electricity, but each is self repellant. Gases charged 
 with electricity expand, solid bodies are sometimes 
 torn into fragments. 
 
 Induction is the action of electric fluids upon 
 each other in adjacent but separated bodies. Objects 
 electrified alike repel each other and the electricity 
 of the one influences the electricity of the other, and 
 with objects electrified differently, the conditions are 
 reversed. This induction takes place between the 
 electricity of the earth and of the atmosphere, the 
 former generally being negative and the latter posi- 
 tive. 
 
 HOW THE THUNDER CLOUDS ACT. 
 
 On a clear warm day, with an atmosphere con- 
 taining a large amount of water, the air near the 
 ground becomes heated, and consequently lighter 
 than that immediately above it, and, as a matter of 
 
404 
 
 A HAND BOOK 
 
 course, it rises, carrying with it the positive electric- 
 ity, which it contains, till it meets and mingles with a 
 stratum of air cool enough to condense the moisture 
 which it contains. A cloud now forms, the cumulus 
 or thunder head, as it is usually called, and this 
 cloud is separated from the earth and is positively 
 electrified. As the process goes on, the warm air 
 rising and giving up to the cloud its positive elec- 
 tricity, at the moment of condensation, there is an 
 accumulation of vapor and of electrical force. The 
 lower portion of the cloud remains positive, owing to 
 the action of the earth, while the upper surface tends 
 to become negative. Discharges take place between 
 the two and finally from the cloud to the earth and 
 occasionally from the earth to the cloud. 
 
 The repelling force of the electricity causes the 
 cloud to spread out, the rain falls from the center 
 carrying a downward rush of air while the warm air 
 at the edges of the storm still continues to rise and 
 supply electricity and vapor. Thus the cloud drifts 
 along continually renewing itself, and also discharg- 
 ing its accumulated electricity as well as the rain up- 
 on the earth. 
 
 The course of the lightning is visible in the flash. 
 It zigzags through the air and generally strikes the 
 best conductor near by. In case there is a good con- 
 ductor beneath the surface of the ground, water, 
 moist earth, metal etc., the lightning will be apt to 
 strike there. If a highly electrified cloud reaches 
 over any point, any object on this point will become 
 abnormally negative and in case of a discharge from 
 
OF MUTUAL INSURANCE 
 
 405 
 
 the other end of the cloud, the shock from the re- 
 storation of the equilibrium will he strong enough 
 to produce fatal results upon persons or animals 
 standing there. 
 
 TO AVOID DANGER. 
 
 To avoid danger from lightning some means 
 must be found to conduct the discharge away, in oth- 
 er words, to provide a conductor which is better than 
 the object to be protected. Such conductors are usu- 
 ally called lightning rods. These are usually made 
 of iron or copper, the former is the cheaper, but cop- 
 per is by far the better. If made of iron, the rod 
 should not be less than three-fourths of an inch in 
 diameter and an inch would be better. It should be 
 welded into one solid piece and should be pointed at 
 the top and kept sharp. Copper is much better, a 
 half inch copper rod being preferable to the iron 
 rod described above. But it must not be too small, 
 as a heavy discharge might melt it and set the struc- 
 ture on fire besides leaving the building unprotected. 
 Platinum points are best, only one on each rod 
 should be used. In putting up the rods they should 
 be firmly fastened to the building, and connections 
 should be made with tin roofs, valleys, water pipes 
 or other masses of metal about the building. The 
 rod should, if possible, be near the chimney which is 
 most in use. The lower end of the rod should run 
 away from the house and into moist earth. Some- 
 times it may terminate in a well but never in a cist- 
 ern. This is a matter which should be carefully 
 
406 
 
 A HAND BOOK 
 
 looked after, as a rod which does not lead to a good 
 conductor below the surface is worse than none. It 
 may be necessary to dig trenches or holes to be filled 
 up with some conducting material in which to bury 
 the lower end of the rod. If so they should be forty 
 or fifty feet from the building. No sharp angles 
 should be allowed. Lightning will not turn short 
 corners. If the building is large, several rods should 
 be used. It is stated that a rod will protect a circle 
 whose radius is twice its height, but in case of many 
 buildings, especially those with several chimneys, it 
 will be safer to use more than this rule requires. 
 
 As to the form of the rod, a round one is as good 
 as any. Excellent copper rods are now made as sin- 
 gle rods or in strands like a cable. Properly put up, 
 these should furnish absolute security. 
 
 Much attention should be paid to the point. It 
 should be examined after every heavy shower and re- 
 placed if damaged. The reason for this is that elec- 
 tricity will run to or from a point when it will not to 
 a surface, and the points should be kept in good or- 
 der. 
 
 When a positive cloud passes over a strongly 
 negatively electrified rod the fluid passes off from 
 the rod without a flash if the rod is large enough to 
 take it all. This is occasionally accompanied with a 
 hissing sound which can be heard at a distance of 
 several yards. In all such cases the spark is either 
 prevented or greatly reduced in force and no damage 
 results. 
 
OF MUTUAL INSURANCE 
 
 407 
 
 TELEGRAPH AND TELEPHONE WIRES. 
 
 Telephone and telegraph wires entering a build- 
 ing should be made safe. Lightning arresters can be 
 had which will answer every purpose. A ground 
 wire on a post on each side of the house is advisable. 
 It should be sharp at the top and project a few inches 
 above the post and be well imbedded in the ground 
 at the bottom. 
 
 Fence wires should be grounded every five or six 
 rods. Let the wire project an inch or two above the 
 top of the post and be twisted around each of the 
 fence wires so that a good contact is secured and 
 then run into the ground three or four feet and there 
 will be little damage from lightning. 
 
 To use language which is extremely unscientific, 
 but which conveys the desired idea, electricity, as 
 artificially produced, is used to transmit light, heat, 
 sound and power. 
 
 In doing this, electricity is conveyed over wires 
 or through the air. With wireless telegraph insur- 
 ance men are not yet largely concerned. Telephones, 
 telegraph and power wires are very common, and 
 there are several dangers. They may be struck by 
 lightning, one wire may fall across another, the in- 
 sulation may wear out, or some one of many other 
 things may happen and a fire ensue. 
 
 INSULATION. 
 
 Insulation must be complete. Out of door wires 
 running from one pole to another are frequently 
 bare. Such wires may break loose, one may fall 
 
408 
 
 A HAND BOOK 
 
 across another, a pole may break off and tangle up 
 a large number of wires. If these wires, or any one 
 of them, carry powerful currents, there will be dam- 
 ages unless such accidents have been carefully guard- 
 ed against. Covered or insulated wires are used in 
 buildings and in the streets of many towns and cities. 
 The covering of these wires should consist of two 
 parts, an insulating layer next the wire and a cover- 
 ing of hard material which will endure wear. Such 
 wires should be put up so that they will not come in 
 contact with anything which will rub against them, 
 for example, the swaying limbs of trees. When they 
 run into buildings they should be carried through 
 the walls in insulating tubes of some waterproof 
 material. Glass or porcelain is best, rubber is not 
 accepted by many companies. The reason for these 
 requirements is that in case of insulation becoming 
 broken a new circuit is formed which is generally 
 imperfect and at the point where the imperfection 
 exists heat is developed. Two insulated or coated 
 wires cross each other, they touch occasionally, final- 
 ly a small hole is worn in the covering of each, they 
 come in contact, a blaze ensues at once, and also a 
 fire, if there is anything combustible at hand. The 
 most common cause of trouble is water which is a 
 good conductor. It soaks through coverings, destroy- 
 ing the insulation. If the tubes through which wires 
 enter a building are not properly put in, they may 
 become filled with water. They should slope upward 
 from the outside. Wires near windows should be so 
 placed that moisture condensing cannot reach them. 
 
OF MUTUAL INSURANCE 
 
 409 
 
 When speaking tubes are used, a thick insulation 
 should be placed between them and the electric wires. 
 A wire should not he allowed to carry more electric- 
 ity than its normal load. Provision should be made 
 for the discharge of any accidental overload. 
 
 The danger from contact with highly charged 
 wires has been considered, as has the risk from 
 lightning. There is another source of danger. When 
 one wire carries electricity to several different ma- 
 chines, if one after another is shut off without a cor- 
 responding reduction of the force generated, the ac- 
 cumulation might be so great as to cause a fire. There 
 are automatic contrivances for avoiding all these 
 dangers and they are excellent if they only work. 
 But just to put them in and leave them will not do. 
 They must be inspected occasionally to make sure 
 they are working. 
 
 No rules can be given which will last forever. 
 New uses for electricity are discovered almost daily. 
 But if care is exercised in putting in only approved 
 constructions and common sense is used in inspecting 
 them, and keeping them in order, the risks will be 
 very small. But inexperienced persons should have 
 electrical work inspected by some competent person 
 before accepting it. 
 
CHAPTER XXL 
 
 INSURANCE FUNDS. 
 
 All insurance companies must have resources 
 of some kind with which to pay their losses, and there 
 are sharp discussions regarding the character and 
 management of these resources. One side says that 
 the true method is to collect for each fire policy in 
 advance and on each life policy annually at the be- 
 ginning of the policy year. But the safety of the in- 
 sured requires that these payments should he held 
 by the company till they are earned. Premiums do 
 not become the property of the company the day they 
 are paid in, but slowly as time passes by. Under 
 these conditions there will he a large fund on hand 
 in nearly every company. What is to be done with 
 it! To let it lie idle would be both dangerous and 
 wasteful. It must be invested, but in what? Stocks 
 and bonds are usually selected. Real estate mort- 
 gages are taken by some companies. Government 
 bonds are safe and so are most state bonds, but the 
 amounts of such securities available are only a drop 
 in the bucket compared with the sum needed and the 
 companies invest in stocks and bonds. The concen- 
 tration of such a mass of wealth in the hands of a few 
 men united by the ties of a common interest, is dan- 
 gerous. It is in the power of the Life Insurance 
 
 410 — 
 
OF MUTUAL INSURANCE 
 
 411 
 
 Companies of the United States to manipulate the 
 stock market at their pleasure. 
 
 The dangers pictured are not imaginary they 
 are real as is shown by the recent developments. 
 There is another possibility, that sometime one of 
 these great companies may not meet its obligations, 
 may fail. The result would be a panic which few of 
 the bonds and stocks would survive. Not that they 
 are absolutely worthless, but their dividend power 
 would be gone for many years, and the unfortunate 
 patrons of the company which owned them would, 
 in case of death, or loss, receive but a small percent- 
 age of their claim. 
 
 THE MUTUAL SYSTEM DIFFERENT. 
 
 On the other hand, the assessment system of the 
 Mutuals, contemplates no such accumulation of 
 money. The assessment life companies, on their 
 feet at last, carry no funds. The A. 0. U. W. the 
 largest of all, paid out last year in benefits and death 
 losses over ten millions of dollars and yet it carries 
 scarcely any funds on hand. Its assessments are 
 promptly paid and are only made as occasion re- 
 quires. Joint stock companies paying that amount 
 of losses have any where from fifty to a hundred 
 millions of assets, most of it invested in stocks and 
 bonds. The fact is that the enormous amounts of 
 money to be invested by the insurance companies 
 are a constant temptation to schemers. And where 
 an insurance company invests a million or two in a 
 trust company and loans it as much more, it looks 
 as if some one was on the eve of yielding to that 
 temptation. 
 
412 
 
 A HAND BOOK • 
 
 In the cash Mutual as it is called, the premiums 
 are collected in money and a dividend is made, re- 
 turning from time to time to the policy holder the 
 surplus which he has paid above the cost of carrying 
 his risk. In both fire and life this plan cuts down 
 very largely the great accumulations alluded to. But 
 in both lines it is necessary to carry on hand the un- 
 earned premiums and a small reserve. 
 
 The other class of Mutuals, the assessment or- 
 ganizations, carry no large accumulations. In the 
 life companies they carry nothing except a few dol- 
 lars working balance, in the fire line, there are some 
 policy holders who, for the sake of convenience, de- 
 posit with the company the full amount of the prem- 
 ium. Most companies assess once a year. Of course 
 a portion of this fund must be on hand in all those 
 which assess in advance, and adding to this a modest 
 reserve the whole sum would be far below the accu- 
 mulations of the joint stock companies. Then there 
 is another consideration, all the Mutuals look to a 
 limit of their reserve, a time when it shall reach a 
 maximum, while the other companies expect to go on 
 increasing indefinitely. 
 
 It is no wonder that one State Superintendent 
 has proposed that all life insurance companies be 
 compelled to transform themselves into Mutuals. 
 
 Were the Mutual system as generally adopted 
 as it should be, more than two billions of dollars 
 would be returned to policy holders of the country. 
 This vast sum is now invested in stocks and bonds, 
 
OF MUTUAL INSURANCE 
 
 413 
 
 that is, it is practically loaned to the corporations 
 and between these and the joint stock insurance com- 
 panies there is, of course, the closest sympathy. 
 
 MUTUAL SAVINGS TO POLICY HOLDERS IMMENSE. 
 
 The savings of the Mutual fire insurance com- 
 panies to their members are not on so grand a scale, 
 yet State Superintendents and others talk about mil- 
 lions to-day and the sum is ever increasing. 
 
 There is still another consideration. The re- 
 serves of the Mutuals belong to the members and the 
 interest helps to pay expenses, while accumulations 
 of the joint stock companies belong to the stock hold- 
 ers and the interest goes to swell the dividends. 
 
 The reserves of the Mutuals, though small, yet 
 have their place. They are generally loaned at low 
 interest and on long time, on good farm mortgages. 
 They add to the sum of loanable money, and thus 
 have a tendency to lower interest rates. These re- 
 serves are never large enough to be considered in 
 legislation. On the other hand the great army of 
 policy holders in the old line institutions are interest- 
 ed in stocks and bonds, the value of their policies 
 depending on them to a great extent. And that is 
 one of the reasons why it is so difficult to regulate 
 the large corporations. There are too many men 
 interested in having things as they are. 
 
 A TRUSTWORTHY AUTHORITY. 
 
 In an interview with Paul Morton published in 
 the Chicago Record-Herald November 1, 1905, he is 
 quoted as follows : 
 
414 
 
 A HAND BOOK 
 
 Asked how he liked the insurance business, Mr. 
 Morton declared that it was fine, because it included 
 so much railroad business. 
 
 “I am still in the railroad business,’ ’ he said, 
 laughing. “You see the Equitable has $175,000,000 
 worth of railroad securities. We hold $8,000,000 
 worth of Santa Fe securities, are interested heavily 
 in the Northwestern, own securities of the Union 
 Pacific and of several others of the big railway sys- 
 tems. Handling these securities keeps my hand in 
 the railroad business. ’ 9 
 
 This is quoted not to reflect on Mr. Morton, but 
 to give authority for our figures. 
 
CHAPTER XXII 
 
 NEW ENGLAND FACTORY MUTUALS. 
 
 (For the data from which this chapter is written, the com- 
 mittee are indebted to the Hon. Edward Atkinson, president of 
 the Boston Manufacturers Mutual Fire Insurance Company. He 
 has been in the service of that Company since 1865. His 
 pamphlet, “The Prevention of Loss by Fire,” and the report 
 of the company for 1904 are not exceeded in value by any other 
 insurance document. It would be a good investment for the 
 Mutual fire insurance companies of this country to put a copy 
 of that pamphlet into the hands of every official and every 
 policy holder in the United States.) 
 
 The system of factory Mutual insurance was established 
 by Zachariah Allen, of Providence, Rhode Island, when he and 
 his associates organized the Providence Manufacturers Mutual 
 Fire Insurance Company. This system is unique. It is the only 
 known instance of coupling the prime motive of prevention of 
 loss by fire with payment of indemnity in money for such losses 
 as cannot be avoided. This is ideal mutualism, not only to share 
 one another’s burdens but also to unite all efforts to make both 
 the burden and the contribution as light as possible. While 
 other Mutuals are following along the same line, they are still 
 afar off. The indemnity feature is still in the foreground, while 
 the saving of fire waste is merely an incidental. 
 
 A GENERAL RULE. 
 
 / 
 
 In this pamphlet, Mr. Atkinson develops the following rule : 
 “After the insurance company has done its duty by careful 
 selection of risks and thorough inspection, all that it can do is 
 to pay indemnity for loss which, if large, is in nine cases out of 
 
 —415 
 
416 
 
 54 HAND BOOK 
 
 ten due either to the lack of apparatus for preventing such loss, 
 or to lack of care and order in the conduct of the work. The 
 only persons who can prevent loss by fire are the owners ox- 
 occupants of the insured premises. Upon them rests the re- 
 sponsibility for heavy loss, if any occurs, in nearly every fire.” 
 
 It has always been the practice of the Mutual companies to 
 instruct occupants and owners upon their duties to their own 
 property and to keep them up to the mark by constant super- 
 vision and by refusing contracts of indemnity to those who 
 neglect their own duty. To demonstrate, the identity of interest 
 between the underwriter and the owner was not always an easy 
 task. 
 
 The Mutuals were successful from the start. They fur- 
 nished indemnity during the first decade, 1850-1859, at 34.42 
 cents per $100 of risk. During the next decade, 1860-1869, the 
 cost per $100 was reduced to 30.92 cents; fi-om 1870-1879 the 
 cost was 26 cents. In 1878 Mr. Atkinson was elected president 
 and devoted his whole time to the perfection of the plan upon 
 which the Mutuals wei’e organized. 
 
 Before 1878 no regular meetings of the directors had been 
 held. Inspections had been made by the presidents or secre- 
 taries about once a year, usually a few weeks before the expira- 
 tion of the policy. Modern safeguards had not been investi- 
 gated. There were no experience tables, no classifications of 
 risks, and no real comprehension of the relative hazard on dif- 
 ferent risks; everything depended upon the extraordinary mem- 
 ories of Messrs. Manton and Whiting. It had become evident to 
 Mr. Atkinson and other directors that a very complete change 
 must be made in the conduct of the whole system, and that new 
 safeguards must be found in order to meet the increasing hazard 
 of lai-ger floor areas, mills of many stoi-ies in height, higher 
 speed, new dye stuffs, and to anticipate the new hazard of 
 mineral oil, then being gradually introduced as a lubricant, of 
 electricity, etc., etc. 
 
 In 1878, the president began the elimination of poor risks, 
 and in the ensuing two years a large amount was cancelled. Its 
 
EDWARD ATKINSON. 
 
 Mr. Atkinson was a noted economist who always wrote and 
 acted from a philanthropic standpoint. 
 
 He was a leader among the Mutual Insurance men of New 
 England, and his advice and opinions were often called for from 
 other sections. 
 
 His death removes a man to whom the whole country is 
 greatly indebted. 
 
J. SOMERS SMITH, JR., PHILADELPHIA. 
 
 Mr. Smith is secretary of the Philadelphia Contributionship 
 for the insurance of houses from loss by fire. He has been sec- 
 retary and treasurer for the past twelve years, was a clerk 
 in the office for seven years preceeding. He succeeded his 
 father who was secretary and treasurer for thirty-five years or 
 from 1859, and who succeeded his father, grandfather, who 
 served seventeen years or from 1842. One clerk is serving his 
 thirty-ninth year. Mr. Thomas E. Moorhead, assistant secretary 
 for several years, was with this company fifty years, and Caleb 
 Carnalt forty-two years. 
 
OF MUTUAL INSURANCE 
 
 417 
 
 place was soon supplied by safer hazards. Measures were taken 
 to establish a quarterly inspection. 
 
 In 1880, the science of preventing loss by fire was fairly 
 entered on. Mr. Atkinson had become convinced that unless 
 the hazard of larger and larger factories, higher speed, etc. 
 could be met, the Mutual system would break down. He in- 
 sisted that automatic sprinklers be made a condition. It took 
 years to enforce it. As an illustration of the pertinacity with 
 which the improvement was resisted, Mr. Atkinson says that a 
 “possibly useful and somewhat personal suggestion was made 
 to myself by a member who had become a little irritated through 
 my persistent nagging for sprinkler protection. He remarked 
 that ‘when I passed on to some other life I had better take a 
 sprinkler with me for my own protection . 1 11 
 
 REDUCING FIRE WASTE. 
 
 In 1879 a careful compilation was begun by which the com- 
 bined experience of all the companies could be registered from 
 year to year. This afforded much valuable information. The 
 whole energy of the companies was turned in the direction of 
 reducing fire waste and with such success that the cost of insur- 
 ance per $100 at risk during the decade 1880-1889 fell to 22.62 
 cents. 
 
 The work continued, new method of protection was intro- 
 duced, roof hydrants were constructed, new buildings carefully 
 inspected and dangers guarded against. As all mills are pro- 
 vided with power which can be used in case of fire, close proxi- 
 mity, instead of increasing the risk, really diminished it, owing 
 to the assistance which mills could render each other by furnish- 
 ing a deluge of water in case of fire. If these plans were adopt- 
 ed in other lines the conflagration hazard in large cities could 
 be well nigh eliminated. 
 
 The records of fires had been tabulated and the causes were 
 examined. Among the first disclosures was the large number of 
 fires and the large amount of losses from broken lanterns. This 
 26 
 
418 
 
 A HAND BOOK 
 
 led to an examination and not a single safe lantern was found 
 in mill use. A new manufacturing firm was called on and a new, 
 safe and cheap lantern invented, but it took five years to per- 
 fect it. 
 
 Spontaneous combustion had caused serious losses. Mineral 
 oils were substituted for animal oils or mixed with them and the 
 loss from this cause was much reduced. 
 
 At this time several fires occured in roofs which were so 
 constructed that there was a hollow place at the eaves. At 
 length a partly burned roof revealed the secret. The rats had 
 carried oily waste to the vacant space to build their nests and 
 spontaneous combustion had ensued. The style of roof was 
 changed, the eaves were left open and fires from that cause 
 ceased. 
 
 Hot bearings made trouble. The oils were examined and 
 found unsatisfactory, with one exception. The dangerous oils 
 were condemned. This led to the threat of suit for damages 
 from the manufacturers but there was no backing down. The 
 manufacturers changed their methods of distillation, better and 
 cheaper oils were made and fire loss from that source was 
 greatly reduced, as well as the expense of running the machin- 
 ery. 
 
 Varnished surfaces, fire proof paints etc. received attention 
 and with good results. 
 
 A GOOD STORY. 
 
 Sawdust, greasy rags, etc. were condemned as extremely 
 hazardous. Mr. Atkinson tells the following good story upon 
 himself. 
 
 “I have myself been subject to one alarm from fire in a 
 shed attached to my own house. The watchman on the street 
 five hundred feet away smelled smoke, passed over two or three 
 estates of my neighbors and finally traced the smoke to a barrel 
 containing rubbish in the shed of my own house. It was but a 
 short distance to the fire alarm, which he sounded, bringing the 
 chemical fire engine. I was awakened by the noise of the firemen 
 
OF MUTUAL INSURANCE 
 
 419 
 
 putting out the fire, which in the interval had suddenly burst 
 out with considerable virulence in the shed in which my tank 
 of kerosene oil was kept. The origin of the fire was traced to 
 a greasy ham bag in the bottom of a barrel, over which a lot' 
 of excelsior and other rubbish which had been used as a packing 
 in the barrel had been thrown back. Great care had been taken 
 by myself in regard to the ash barrels and receptacle for rub- 
 bish. All in the cellar were of metal, but, in this exceptional 
 case, the barrel from which goods had been unpacked had been 
 temporarily put in the shed, with this greasy ham rag at the 
 bottom. Carrying a policy of insurance on my library in order 
 to make me a member of the company of which I am president, 
 I was obliged to report this fire in the monthly report, to which 
 I added that “this member had been warned by the president 
 that if he permitted combustible material to be put away in 
 wooden barrels, his policy would be immediately caneelled. ,, 
 
 And so the work went on. Every fire was thoroughly in- 
 vestigated and all materials examined. Experts were employed 
 in all lines and the expense to the insured is steadily decreasing. 
 The cost per $100 at risk from 1890 to 1899 was 15.64 cents and 
 for the five years following only 7.85 cents. 
 
 The companies now own a laboratory in which all new inven- 
 tions are tested and their merits reported. The great value of 
 the service of this laboratory in preventing large conflagrations 
 can hardly be estimated. That danger still exists in many cities 
 and when a conflagration does come there is danger that it will 
 bankrupt companies which have large lines in such cities. The 
 only method of preventing such destructive fires is to proceed 
 along the lines already followed by these companies. 
 
 The pamphlet utters some timely warning concerning the 
 condition of public buildings. School houses, hospitals, theaters, 
 etc. are often veritable fire traps. The United States burns 
 11.36 churches per week, which induces Mr. Atkinson to say that 
 by combination for Mutual insurance the church members might 
 be assured against cremation in this world if not in the next. 
 
 These companies have what they call “Missionary Litera- 
 ture, ” consisting of plans for constructing buildings, lists of 
 
420 
 
 A HAND BOOK 
 
 approved fire apparatus, etc. This embodies the result of care- 
 ful and long continued observation as well as of actual experi- 
 ment and test. It has proved of great service. 
 
 It is hoped that this brief review of a most valuable pamph- 
 let will set Mutual insurance men to thinking and to renewed 
 efforts toward reducing the fearful fire waste of the country. 
 
 ADDRESS AT ATLANTA. 
 
 The following is a paper by Mr. Atkinson, printed in the 
 proceedings of the Tenth Annual Convention of the National 
 Association of Manufacturers, at Atlanta, Georgia, in May, 1905. 
 It shows what can be done in reducing fire waste, and if so 
 much can be accomplished in the factory lines, where risks have 
 been considered excessive, what may be expected in other lines 
 if proper efforts are put forth. The paper follows: 
 
 “I have been honored by your executive committee with 
 the request that I would attend your convention and give you 
 an address on methods of reducing the cost of fire insurance. 
 I regret that advancing age makes it indiscreet for me to under- 
 take long journeys by rail, and I am therefore obliged to com- 
 municate with you through your secretary, and will submit to 
 you the conclusions to which I have been led in the course of 
 forty years ’ practice, first as director, and for twenty-six years 
 as the administrator of the largest of the Factory Mutual Fire 
 Insurance Companies of New England. 
 
 “My conclusions may be justified by the fact that during 
 the twelve months ending April 30, the company of which I am 
 president has insured factories and workshops against loss by 
 fire and loss from the breakage or leakage of sprinklers to the 
 value of two hundred and six million dollars, with a total loss 
 by fire and water in twelve months of less than thirty-four 
 thousand dollars paid on more than three hundred and forty 
 claims for single losses. That is the rate of one cent and sixty- 
 five hundredths upon each hundred dollars insured twelve 
 months, of which during the last extremely cold and fluctuating 
 winter the losses by the leakage of sprinklers account sub- 
 
OF MUTUAL INSURANCE 
 
 421 
 
 stantially for forty hundredths of a cent, leaving the loss by 
 fire one cent and a quarter per hundred dollars of property 
 insured. 
 
 “The companies associated with ours, not in administra- 
 tion but in the executive work of inspection, making plans, 
 laying out pump, hydrant and sprinkler service, and other simi- 
 lar services rendered to our members, have with this company 
 carried for the twelve months past insurance on property to the 
 value of about fourteen hundred million dollars with almost 
 identical and corresponding results, varying but a trifle from 
 our own, on some cases even a little better. 
 
 “This insured property, in my own and in the most con- 
 servative of the older companies, consists of certain classes of 
 textile factories, paper mills, machine shops with some wood 
 working, metal working, dye works, printeries and bleacheries, 
 and a small miscellaneous class in which the fire hazard is of 
 like kind to that with which we have become familiar in deal- 
 ing with our principal classes. There are many risks of as good 
 quality in other classes, but we do not expand for the reason 
 that our members are not seeking profit. They appoint the offic- 
 ers as their agents to save them from loss, and as the amount 
 and diversity of the work is about all that the executive officers 
 and inspectors can suitably cover and control, we refuse all out- 
 side hazards that are not of an analogous kind, no matter how 
 safe they may have been or might be made. We have nothing 
 to sell. Our expenses are very small, less than four cents on a 
 hundred dollars insured, and fully half of that is expended in 
 the service of engineers and experts, making inspections, lay- 
 outs and plans, and in executing plans which are of the greatest 
 service to our members, irrespective of the contract of insur- 
 ance. 
 
 “It is a great satisfaction to add as a matter of personal 
 experience that while in the period antecedent to my becoming 
 the administrator and executive officer of the company, there 
 had been many lives lost in calamitous fires, in the twenty-six 
 years of my own administration not one single life has been 
 lost by fire in any risk that has come under my supervision. 
 
422 
 
 A HAND BOOK 
 
 A LOW COST. 
 
 “The losses by fire in the senior Mutual companies for the 
 past ten years have averaged less than six cents a year per 
 hundred dollars, or less than sixty cents for the whole period of 
 ten years. Their expenses are less than four cents a year. Now, 
 when it is remarked that the losses outside our range are sixty 
 cents a year and expenses, which cannot be readily diminished, 
 are nearly forty cents a year, it is not to be wondered at that 
 many of your members are eager to secure the benefit of this 
 very low cost. 
 
 “How, then can you do it? There is but one way. The 
 owner, builder and occupant of property are the only persons 
 that can prevent loss by fire on their premises. All that the 
 factory Mutual underwriters can do is to give owners and 
 agents information and instruction how to prevent loss, and all 
 that the Mutual companies or the stock companies can do in 
 case of loss is to pay a certain sum of money for indemnity so 
 far as money may compensate for the loss. The executive 
 officers of the factory Mutual companies have only been primary 
 school masters, teaching the alphabet of construction, protection 
 and prevention. Had not the pupils been apt and ready to com- 
 prehend their own interest in the matter, the work of the saving 
 which I have disclosed to you could never have been accom- 
 plished. It, therefore, rests with you, the members of this asso- 
 ciation, to reduce the cost of insurance on your property, and 
 you only can do it. 
 
 “If you undertake to organize a Mutual, even in risks that 
 are qualified to become Mutual risks, merely for the purpose of 
 getting the lower rate of premium, you will utterly fail. There 
 is no virtue in the name of Mutual. All underwriting is Mutual. 
 You contribute a premium to the funds of a stock insurance 
 company and your losses and expenses are paid out of your own 
 premiums. The capital is nothing but a guarantee, if the capital 
 is impaired by losses and expenses, it must either be made up 
 by the stock holders or the company will be enjoined and put 
 into bankruptcy. And precisely, the same way, the sum depos- 
 
OF MUTUAL INSURANCE 
 
 423 
 
 ited with the Mutual companies under the name of premium is 
 the only source from which losses and expenses are paid. 
 
 “What, then, is the first condition precedent to reducing 
 the premiums on fire insurance which are not yet high enough? 
 It is this: Let every man answer to himself, ‘Is my building 
 constructed as safely as I would construct it were I to insure 
 it myself? Is it protected with apparatus such as I would put 
 in if I were insuring it myself? Is it kept as clean, as free of 
 hazard in occupancy? Is it watched and inspected as it would 
 be by any one of common sense who insured himself V 
 
 “Now, unless each one of you representing a large factory 
 or workshop, can answer these questions ‘Yes’, you are not yet 
 qualified to become members of a safe Mutual company. That 
 is a very extreme statement of a fact subject to very slight 
 variation. There are mills and workshops on which the con- 
 struction is not quite up to the standard, but in safe guards and 
 in occupancy these risks are up to the present standard. More- 
 over, a risk slightly defective in construction, owned and oper- 
 ated by a man whose whole fortune is in it, who lives near it or 
 in it, and is about it all the time, is in some measure a better 
 risk than a large factory building belonging to a distant cor- 
 poration supervised by an agent who has not that personal 
 interest in it to compel him to exercise the utmost care. 
 
 DO NOT EXPECT PROFIT. 
 
 “I, therefore, counsel you not to expect gain, and I counsel 
 you to go slowly in any effort to organize Mutual insurance 
 companies to cover works that are not now qualified to be in- 
 sured in the junior Mutuals which are extending their services 
 over risks that the seniors would not take, and I caution you 
 against any effort to establish a Mutual system over risks that 
 are in the congested districts of cities or that are in any con- 
 siderable measure subject to what is known as the conflagration 
 hazard. 
 
 “Yet, there is an immense field open to you all, by occupy- 
 ing which you may greatly reduce the cost of your insurance 
 
424 
 
 A HAND BOOK 
 
 and induce the underwriters to grant you lower charges of prem- 
 iums in recognition of your own duty fulfilled to your own 
 property. 
 
 “ Without any effort to make exact analyses of the losses 
 by fire in the United States, which now average one hundred and 
 fifty million dollars a year, with an occasional increase from a 
 conflagration, I am satisfied that more than half this loss occurs 
 in large establishments, either for the manufacture or sale of 
 products, in which losses range from fifty thousand to a million 
 dollars each. I think that less than half the cost of the annual 
 ash heap occurs in the much greater number of small claims. 
 That fact brings the responsibility for this loss more upon the 
 members of this association than upon any other single body of 
 men in the United States. 
 
 “Now, when you add to the average loss of one hundred 
 and fifty million dollars, the cost of sustaining insurance com- 
 panies, the excessive cost of water supplies due to the unfit con- 
 struction and protection of city buildings, and the excessive 
 cost of fire departments due to the same causes, you reach a 
 sum, the cost of fire to the people of this country, annually, 
 of two hundred and fifty to three hundred million dollars, which 
 is equal to ten per cent to fifteen per cent of the annual profit 
 or saving of the nation that is possible in any normal year. In 
 other words, if the annual product of this country is two hun- 
 dred and twenty-five dollars per head of the population, at which 
 I compute it, reaching the sum of a fraction under nineteen 
 thousand million dollars, or what is commonly called nineteen 
 billions, a larger estimate of the value of our annual product 
 than has ever been put forward by any other economist or sta- 
 tistician, we may set aside, as the profit or increase of capital 
 ten per cent of this sum, or nine hundred million dollars a year 
 saved for the addition to or maintainance of the capital of the 
 nation, ninety per cent being consumed in the process of pro- 
 duction. In that event the ash heap and the other expenses or 
 cost of fires comes to fifteen per cent of the normal profit of 
 the whole nation, and a very large part of that occurs in risks 
 for which the members of this association are responsible. 
 
OF MUTUAL INSURANCE 
 
 425 
 
 WHAT WILL YOU DO? 
 
 “What are you going to do about it? Limit yourselves to 
 charging the managers of the stock fire insurance companies 
 with extortion, when for the past ten years or more there has 
 been no profit in fire insurance ? On the contrary, a heavy loss, 
 made up only by the banking department of these companies. 
 All the dividends that they have made and their whole existence 
 have depended on the income from the investment of their capi- 
 tal, their surplus and their annual premiums. In this way they 
 have been enabled to continue to insure your risks and others 
 at a loss. 
 
 “Again, I ask you will you limit yourselves to denouncing 
 the managers of insurance companies, without knowledge of 
 the facts, or with only a limited knowledge of the limited part 
 of each of your own occupations; or will you endeavor to re- 
 duce the cost of insurance by attending to your own duties, to 
 your own property, and by removing the outrageous causes of 
 loss which you tolerate because you have been trusting to a 
 policy of insurance for your protection and neglecting in a vast 
 number of cases to protect yourselves? 
 
 * 1 1 know there are conspicuous exceptions even among those 
 who are not yet insured under Mutual principle and subject to 
 the inspections of the Mutual underwriters. I know that here 
 and there is a large establishment which is as thoroughly guard- 
 ed and as well inspected as any factory Mutual risk; but how 
 many such are there? Do they number one in a hundred in 
 proportion to the risks that are written in the factory Mutuals? 
 I think not. I should be very glad to have it proved that I am 
 in error. 
 
 “What then would you do about it, if I told you that it 
 is not yet safe for you to attempt to organize a general Mutual 
 system for the general protection of your factories and work- 
 shops? You can do the one thing that lies at the foundation 
 of the Mutual system : Establish a well-organized and complete 
 system of monthly or quarterly inspections, to be made by 
 trained inspectors, reporting to yourselves in order that you 
 
426 
 
 A HAND BOOK 
 
 may immediately remove the causes of hazard which you now 
 tolerate simply from ignorance; and then supplement that in- 
 spection by experts by establishing blanks and putting in force 
 a system of self-inspection of your own premises, as more than 
 one-half the factory Mutual members now conduct that work, 
 rapidly increasing in number until all will establish that prac- 
 tice. You may do this by agreement of the owners of insured 
 property in a single block of a city, in a single ward, in a whole 
 city, a whole county, or a whole state, or you may organize a 
 system in your national association under the supervision of 
 your officers, by which you may slowly but surely establish a 
 quarterly inspection of every establishment belonging to every 
 member in the United States. 
 
 “I know not how many you number; I suppose there may 
 be five thousand separate risks represented by your members. 
 What of that? There are more than three thousand separate 
 risks or buildings standing on the premises of the thousand 
 members (a few more or less) whose property is insured in the 
 -senior Mutual companies, with a considerable number of the 
 junior risks added — a total valuation to-day of about fourteen 
 hundred million dollars, and that great line of risks, covering 
 a wide area as far as the Mississippi river into Alabama, is 
 inspected three times a year on our behalf, with frequent special 
 inspections, on request, by experts under our supervision, and 
 the cost of the service is assessed at one hundred and thirty- 
 three dollars per million on the amount of risks outstanding 
 December 31, 1904, making the sum appropriated for the serv- 
 ice of the present year $170,792.95. Out of this sum will be 
 defrayed the salaries of all men employed in the bureau of 
 inspections, in outside and inside service. It will cover the cost 
 of all plans (the best insurance ever made of which I send you 
 an example), each edition being printed in sufficient numbers 
 to supply all the insurance companies, the owners and the agents 
 with such copies as they may require; and the sum will cover 
 all the engineering service, civil, hydraulic, electrical and chemi- 
 cal, which we render to our members on request. 
 
OF MUTUAL INSURANCE 
 
 ill 
 
 “Now, if by this system, mainly of inspection and of in- 
 struction following inspections, we have been enabled to reduce 
 the losses by fire for ten years to an average of six cents per 
 hundred dollars and for the last year to an average of less than 
 two cents per hundred dollars, what will you do about it? How 
 much will you reduce the waste of fire in your own factories and 
 workshops during the next five years by doing likewise? How 
 much will you save yourselves in the interruption of your busi- 
 ness, often the worse loss that ensues after a fire? By the way, 
 we not only give you our policies for indemnity against the 
 actual loss by fire, but we also issue policies under the name of 
 ‘use and occupancy,’ insuring the fixed charges during the period 
 in which works may be stopped for repairs, and we insure 
 against the leakage of sprinklers — all that is within the six 
 cents and the two cents a year.” 
 
 Mr. Atkinson’s public life has been very largely devoted 
 to discovering and teaching methods of reducing or avoiding 
 expenses. His forty years’ record as an insurance officer is 
 practically summed up in the essays given in the preceeding 
 pages. 
 
 In addition to this he has made several valuable inventions 
 which he has dedicated to the public, in no case taking out a 
 patent. Such a life gives a man authority ; he has a right to call 
 on people to listen. 
 
 A GOOD SUGGESTION. 
 
 It is suggested that the Mutuals in other lines take up this 
 same work, the reduction of expenses, and do something to re- 
 duce the fire waste, which is such an intolerable burden upon 
 the industries of the country. A system of inspection might be 
 organized, extending all over the country, not necessarily on 
 the same plan as that of the factory Mutuals, but still efficient. 
 
 No honest man desires that his home or stock shall burn. 
 He is willing to do what he can to increase the safety of his 
 property, the same is true of the owners of shops and factories, 
 of the lodges, churches or other bodies which own property, 
 and of the public also. As Mr. Atkinson rather more than 
 
428 
 
 A HAND BOOK 
 
 hints, there are two necessary preliminaries, to interest the 
 insured in the matter and to educate him up to the proper 
 standard. While it would seem that every man should be inter- 
 ested in measures designated to add to the safety of his prop- 
 erty, it is a fact that it is a difficult task to overcome prejudices 
 and to awaken people from apathy. 
 
 Every one who has served as inspector for the fire depart- 
 ment of a city will bear witness to the fact that while he was 
 on his rounds trying to show people how to keep their property 
 from burning, doors have often been shut in his face and when 
 he persisted in performing the duties allotted to him, he was 
 made the recipient of abundant profanity. And when dangerous 
 constructions, or hazardous defects have been discovered, he 
 knows how difficult it was to have them remedied. Time and 
 perseverance will generally overcome this trouble, and when 
 owners of property become satisfied that they are really benefit- 
 ed by the inspections, they will fall in and help. 
 
 Having accomplished this, there remains the task of induc- 
 ing the Mutual policy holders to consider themselves as active 
 members instead of sleeping partners. It requires intelligence, 
 integrity and public spirit to be a useful member of a co- 
 operative body, and this truth is not by any means appreciated 
 as it should be. 
 
 The time will come when Mutuals will join in a system of 
 inspection which will reduce fire losses to a minimum, a time 
 when the fire waste shall be but the smallest part of the ex- 
 penses of Mutuals, the heaviest outlay being for fire prevention, 
 while the total cost of the policy holder will be far below what 
 it is to-day. 
 
 Mr. Atkinson has opened up a new line and to him not 
 only the Mutuals but the whole country should return their 
 hearty thanks. 
 
 (Since the foregoing was written, Mr. Atkinson has passed 
 away. He died December 11, 1905, at a very advanced age. 
 His whole life was but a long series of services to humanity. 
 His name will ever be a household word among the Mutuals of 
 the country.) 
 
CHAPTER XXIII. 
 
 THE PHILADELPHIA CONTRIBUTION- 
 
 SHIP. 
 
 (The history of the first hundred years of the life of this 
 organization is condensed from the address of Horace Binney 
 at the Centennial meeting in 1852.) 
 
 At the beginning of the year 1752 not an inhabitant of 
 Philadelphia possessed a single dollar of indemnity against the 
 loss of his dwelling by fire. On the 18th of February 1752 a 
 notice appeared in the Pennsylvania Gazette inviting subscrip- 
 tions generally. The charter, or as it was then called, the 
 deed of settlement, had already been drawn up and the notice 
 read as follows: “All persons inclined to subscribe to the 
 articles of insurance of houses from fire, in and near the city, 
 are desired to appear at the court house, where attendance will 
 be given to take in their subscriptions every seventh day of the 
 week, in the afternoon, until the 13th of April next, being the 
 day appointed by the said articles for electing twelve directors 
 and a treasurer.” Accordingly, on the 13th of April 1752 the 
 subscribers convened at the court house and elected the direc- 
 tors and treasurer for the current year. 
 
 The members were called contributors. The first name 
 subscribed was that of James Hamilton, the lieutenant gov- 
 ernor of the Province under the Proprietaries. The first name 
 of a private citizen is that of Benjamin Franklin, who was also 
 at the head of the directors chosen, at the first election. John 
 Smith was the first treasurer and also the first person to insure. 
 He took out two policies. The directors met monthly, absentees 
 were fined two shillings; tardy ones, half that sum. The funds 
 thus raised by fines were expended first in placing milestones 
 
 —429 
 
430 
 
 A HAND BOOK 
 
 along the road from Philadelphia to Trenton and later from 
 Philadelphia southward toward New Castle, Delaware. These 
 were the first milestones in that portion of the country. 
 
 The company did not incorporate at the beginning, in fact, 
 not till 1768, but at their first meeting after the first election, 
 the directors adopted a seal, the four clasped hands. This 
 device was also placed upon buildings insured by the company. 
 Hence came the common synonym for the company the “Hand 
 in Hand.” Through this title was not mentioned in the deed 
 of settlement, in the policies nor in the minute books, the 
 thought of the name seems to have been in the minds of the 
 directors, and the device was a very appropriate symbol of the 
 Mutual sentiment which prompted the organization of the 
 society. It is still the seal of the corporation. 
 
 EARLY METHODS. 
 
 Of the policy of the company, Mr. Binney says : 
 
 “The policy of insurance was for seven years. The prem- 
 ium was neither a rate payable annually, nor for the entire term 
 of seven years, but was the deposit of a sum, the use or interest 
 of which during the policy belonged to the company and so it 
 continues to this day. 
 
 “The risk of all fires was assumed without any exception 
 of public enemies, military or usurped power, rebellion, civil 
 commotion or riot; and so it continues. 
 
 “The property insured was protected during the term 
 against any number of losses not total, without reducing the 
 amount insured on the premises, or imparing the deposit. In 
 ease of destruction from the first floor upwards at any time, the 
 company had an option to pay the whole insurance and so end 
 the policy ; or to rebuild, the policy continuing in force ; and how 
 often soever the destruction of fire, and the rebuilding might 
 take place during the term the policy continued in force. And 
 so it continues. 
 
 “The payment of the deposit, the acceptance of the policy,. 
 
OF MUTUAL INSURANCE 
 
 431 
 
 and the signature of the deed of settlement, made the assured 
 a member of the company, and a party to all the articles in the 
 deed. And so it is to this day, the signature of the deed being 
 sometimes neglected, as the acts are of equal efficacy. 
 
 “The personal liability of the members for losses, beyond 
 their own deposits, was half as much more, in case a single fire, 
 beginning in one house and damaging one or more houses, should 
 sweep away all the funds of the company. 
 
 “The concern was managed for the profit and loss of the 
 members, interest being allowed to them on their deposits, in 
 proportion to the whole amount received by the company, and a 
 proportion of the losses and expenses charged to them, and the 
 balance settled at the expiration of the policy. 
 
 “Executors, administrators, and assigns were included as 
 members, there being a provision for notice of transfer and as- 
 signment within a limited time, and the approbation of the 
 directors. It is so this day. 
 
 MODIFICATIONS. 
 
 “The modifications since made of some of these principle* 
 are these: 
 
 “The policy is now perpetual, with liberty to determine it 
 on either side, on certain terms. 
 
 “The feature of personal liability in any event beyond the 
 deposit money is obliterated. 
 
 “The profit and loss principle was expunged at an early 
 day; and it will interest you to learn the effect of this principle 
 while it operated, and the development of business that instantly 
 followed the resolution of the company abolishing it. 
 
 “While the principle was in force, the company was in 
 effect a dividend-paying company, the dividend being appor- 
 tioned and paid periodically and there being no capital nor 
 security for losses beyond the actual deposits and the interest 
 not divided, except the guaranty in one event of a further 
 payment of fifty per cent of each member’s deposit. It was a 
 cardinal defect in the scheme. Under such a principle I do not 
 *ee how the company could have become extensively useful. 
 
432 
 
 A HAND BOOK 
 
 “The effect of it in the first ten years of the company was 
 this: The amount of their policies at the end of the first year, 
 namely 25th of March, 1753, was $108,360; and the amount of 
 their deposits $1,261.93. At the expiration of ten years, namely, 
 in March, 1763, the sum insured for that year was $67,773; and 
 the deposits $982.25. There was a falling off of nearly two- 
 fifths at the end of ten years. Many did not renew their poli- 
 cies at the end of the term. The minutes show the fact and the 
 efforts of the directors to counteract it. New business did not 
 come in. Reflecting men must have seen the defect, and de- 
 clined the security. Others, perhaps, thought the whole affair 
 a small one. With an almost entire ignorance of the average 
 risks of fire in the city, and of the proper rates of premium to 
 be charged for insuring against them, it seems to be remarkable 
 that they did not perceive at the outset both the benefit and the 
 necessity of accumulation, to give the company anything like 
 stability — anything deserving the name of security against the 
 variations of loss from time to time, which all perceive, though 
 the general ratio is even now for the most part unobserved, or 
 but partially known. I am inclined to think that the company 
 at first was mislead by a foreign example, perhaps not perfectly 
 understood, perhaps successful against all previous probabilities. 
 It is quite remarkable, indeed, that the company should have 
 gone on for even these ten years without an admonition, that the 
 profit on the deposits could not be divided at any time, without 
 a large reservation for undetermined contingencies. It seems 
 as if a loss of a few thousand dollars could not have occirrsd 
 in the whole period, without sweeping away the deposit furd, 
 and breaking up the company. It is nevertheless true, that the 
 interest upon the deposits did pay the losses and expenses, and 
 leave a dividend to the depositors whose policies from time to 
 time expired. 
 
 “The facts say something perhaps in favor of the general 
 carefulness, sobriety, and good order of our city at that early 
 time, and for the then common union of all the able-bodied 
 inhabitants at fires, guided by men of known energy and char- 
 acter, at a day, when such men took the lead with general con- 
 
OF MUTUAL INSURANCE 
 
 433 
 
 sent, and compensated for many defects both in the apparatus 
 and supply of water. But all subsequent experience seems to be 
 against fire insurance companies upon such a principle, as it is 
 also against such companies as approach it in practice, while 
 they have a better principle in their constitutions. 
 
 ANOTHER CHANGE. 
 
 “At a general meeting in April, 1763, the members unani- 
 mously expunged this provision from their deed of settlement, 
 and substituted two cardinal provisions in its place: 1. That 
 the interest arising from the stock, should be carried to one com- 
 mon account, to answer the contingent charges of the company, 
 and all losses and damages that might happen to the same. 2. 
 That no part of the deposit money should be expended in repair- 
 ing or paying for any damage done by fire, until the balance of 
 the interest money, as shall accrue to the time of such fire, shall 
 be first expended. 
 
 “This change seems to have been recommended by the 
 directors, upon the ground mainly of convenience, to avoid the 
 necessity of troublesome calculations of dividends of profit upon 
 the expiring policies ; a sufficient reason, perhaps to be assigned 
 at the general meeting. But it is impossible to believe that the 
 members of the board of directors did not perceive by the con- 
 dition of the company, as well as by the consideration of general 
 principles, a far weightier reason in the necessity of giving tone 
 to a languishing body, so as finally to endow it with strength to 
 meet all probable hazards in reserve for it. I have no doubt 
 that the last was a ruling motive and object, and I desire to 
 give them credit for it. It was a great thought. So far as I 
 can discover from the constitution of a primitive Mutual assur- 
 ance fire company elsewhere, it was an original thought, and it 
 was undoubtedly a thought as full of good-will towards the dis- 
 tant future, as it was of precaution for the time at hand — for 
 those who might at any subsequent day seek the security, as 
 27 
 
434 
 
 A HAND BOOK 
 
 well as for those who had then availed themselves of it. It has 
 been the building up of the company to its present adult strength 
 and solidity.’ ’ 
 
 As a result of the changes, the company grew stronger both 
 in reserve and in business. In those days the subject of insur- 
 ance had been studied but little. The hazards were guessed at. 
 The building up of a reserve was commenced none too soon. 
 Concerning this Mr. Binney says: 
 
 “And in this state of our knowledge, the thing that was the 
 best for them to do, was what they did and what we do at pres- 
 ent, and it is still the best than can be done by us, namely, to 
 regard our premiums of insurance as including no profit at all, 
 but as requiring constant accumulation to meet the unknown 
 hazards of the time to come, and which I fear are increasing 
 among us from day to day. We may be wrong, and if we are, 
 we are wrong on the right side. Those who have already de- 
 clared their profits, their estimated profits, and paid them away 
 without large reservations for the future, may be, and in<*ted 
 some of them have already been, wrong on the wrong side. I 
 do not say that there is one rule for them and another for us. 
 I think there is not. But I know from observation in this com- 
 pany, of which I became a director in 1817, and have constantly 
 been so for the last twenty-one years, that is the rule for us, 
 which for a long time to come will be the only rule for us, that 
 is to say, the accumulation without dividends. 
 
 “The analogous rule in companies that insure for profit 
 at the present rates, would be the rule of very small dividends 
 of profit, and large reservations for the unknown future, until 
 the true rule shall be better known. For there are great calam- 
 ities by fire, rarely occurring, as well as less calamities frequent- 
 ly occurring. There are years that may be called in life risks, 
 years of plague and cholera, as well as years of usual or ordin- 
 ary death; and such devastations or mortal years, concern the 
 insurers against loss by fire even more than they appear to con- 
 cern insurers of life, who rarely assume the risk of life in the 
 class particularly exposed to plague and cholera. ‘Tie l < ws 
 no distinction of subjects and houses can not move away from 
 
OF MUTUAL INSURANCE 
 
 435 
 
 it. Such calamities come, it is true, at more distant interval i; 
 but still they come. A century, and even a shorter period, is 
 the witness of them ; and the duty of those who insure and mean 
 to keep insuring to all future time, is in some mannei to provide 
 for them; and with no knowledge at present that enables us to 
 say with demonstrable probability, what these disasters will be, 
 or when they may be expected, the law of our institution does 
 the best that can be done, by separating our concern from the 
 hope of gain, and from its one-sided speculations and estimates, 
 and by enlarging our security to the utmost against the worst 
 that may happen. If our successors shall at the end of another 
 century find they have too much, it will prove that the premiums, 
 assisted by the accumulations which the deed of settlement re- 
 quires, have been unnecessarily high, and the strength of the 
 company will then become a public benefaction to the whole 
 city and its neighborhood, in the reduction of rates of premium 
 upon brick and stone buildings. 
 
 STRIKING FACTS. 
 
 “But let me state very striking facts in our history, to illus- 
 trate the degree of caution with which we should receive calcu- 
 lations as to the future, with our present knowledge. One of 
 them is that at the end of this present fiscal year of our com- 
 pany 1852, we have, with a very inconsiderable fraction of ex- 
 cess, the same proportion of funds to the whole mass of insur- 
 ances that we had at the end of the fiscal 1842, ten years ago, 
 notwithstanding the intermediate accumulation. And the other 
 is that, if the great fire of 1850 had occurred in the year 1808, 
 it would have swept away the whole amount of our funds, 
 deposits and accumulations for half a century. Our insurances 
 in the quarter where the fire occurred, are supposed to have been 
 of the same amount or nearly so in 1808, as in the year 1850. 
 The two Mutual assurance companies of this city, who covered 
 at an early date that quarter, as I may call it, bore the brunt 
 of that storm; and as it was to come, it was well for us that 
 it did not come sooner. 
 
436 
 
 A HAND BOOK 
 
 “The progress of the company has been from that time 
 onward, with occasional exceptions of disastrous years; and 
 after examination of our books, we do not concur in opinion with 
 a very estimable and respectable annalist of our city, that there 
 ever was a period when a loss of any extent disturbed the fin- 
 ances of the company. In the war of the Revolution, and in the 
 latter days of paper money, when the investments were upon 
 mortgage, as they still are for the most part, and when to exact 
 immediate payment, was to get paper worth one in fifty, or less, 
 the company may have had to proceed cautiously, to avoid pay- 
 ing a loss in the same paper; but except in such cases, the 
 prompt payment of a loss cannot have disturbed them even in 
 their infancy. Their advance was immediate after the rule of 
 1763; and the insurance continued to increase from year to yea* 
 afterwards, to the present time. The public appear to have 
 understood the value of the change.” 
 
 (The paper money above referred to was that of the Revolu- 
 tion.) 
 
 During the first century, the company gave excellent satis- 
 faction. There was but one suit at law, and in that the company 
 was successful. On one other occasion the directors consulted a 
 lawyer, but no suit was commenced. 
 
 Thus passed the first century and for many years after 
 there was no trouble. 
 
 The company did business only in Philadelphia and its 
 suburbs, only selected risks were taken and the company was 
 never engaged in litigation. Losses were paid in full as soon 
 as adjudged and everything appeared to be satisfactory. But 
 in 1894 there was an outbreak. No commissions had been 
 paid to agents till 1888. From that time until recently small 
 commissions were paid and a number of small but perfectly 
 good risks were accepted. 
 
 From these new and small contributors just referred to, 
 the whole trouble of 1894 sprang. 
 
OF MUTUAL INSURANCE 
 
 437 
 
 Prior to 1894, any contributor who felt so disposed attended 
 the annual election on the second Monday in April and voted. 
 
 Proxies, the legality of which was then for the first time 
 questioned, had been voted for upwards of fifty years, and 
 probably much longer. 
 
 That so few, (generally about seventy-five) voted, probably 
 arose from the fact that the contributors were entirely satisfied 
 with the management of the company. 
 
 Be this as it may, however, up to the day of election in 
 1894 not a single complaint from any contributor had ever 
 reached the ears of the board against the policy pursued by it, 
 nor a single suggestion or intimation that a change was desir- 
 able. 
 
 On the second Monday of April, at 2 p. m., the annual 
 election was held ; a great crowd of persons appeared at the office 
 of the company to carry out the plan of electing a new board. 
 
 For such an attack the management was wholly unprepared. 
 The new ticket submitted did not contain the name of a single 
 individual who had been a contributor more than two years, save 
 two of the old directors, whose names were used without their 
 consent, and, with a few exceptions, was composed of those who 
 had, through brokers, effected insurance in small amounts. 
 
 It was not possible that in the two hours allotted to the 
 election on that day to attempt to defeat his project. A number 
 of contributors in the neighborhood, hearing of the contest, 
 came in and voted, and at 4 o’clock the election was adjourned 
 until the next day under the express provisions of the deed of 
 settlement. The actual result of this first day election, in view 
 of what subsequently happened, is not important, but it is in- 
 structive. 
 
 While it is not stated in so many words, it is clear from 
 this account that there was an attempt to get control of the 
 company. The opposition went into court and a new election 
 was ordered and resulted in an overwhelming victory for the 
 old management. To prevent all such troubles in the future, 
 the by-laws were so changed that instead cf electing the entire 
 
438 
 
 A HAND BOOK 
 
 twelve directors each year, but three were chosen to serve for 
 four years, the new ones being elected each year. 
 
 It was also provided that the present assets of the company 
 should remain intact but the directors might distribute such 
 proportion of the profit as they deemed prudent. The com- 
 pany has gone on since that time in its usual course. 
 
 The following is the resolution referred to. 
 
 “Resolved: That the present assets of the company shall 
 remain intact, and that the directors be and they are hereby 
 authorized, from time to time, at their discretion, to distribute 
 among the policy holders of the corporation, in proportion to 
 their deposits held by the company on policies in force respec- 
 tively, such proportion of the net income from invested funds 
 as they deem safe and prudent, after providing for losses and 
 depreciation of assets and making such additions to the assets 
 as they deem expedient : Provided, that all deposits made after 
 this date shall remain at least ten years before the holder of 
 policies issued thereon shall receive any benefit under this reso- 
 lution: Provided, further, that all deposits received shall be 
 added to the assets of the company. February 18th, 1895.” 
 
 The great element of success in this company seems to 
 have been its remarkable ability in getting good men and keep- 
 ing them. During the first century there were only 106 different 
 directors. One served for fifty years, twenty-eight for twenty 
 years or more. The office of secretary and treasurer were con- 
 solidated in 1817. Since that time but four persons have held 
 the office, the present incumbent having been elected in 1859. 
 The following letter from him will be of interest: 
 
 “In answer to your request of the 24th ult. we are mailing 
 you today copies of the Centennial History of this company 
 issued in 1852, an address to the members at the time of the 
 disputed election, issued in 1894, and a copy of the charter as 
 it stands at present. 
 
 “We are not only the oldest insurance company in America, 
 but I believe the oldest corporation. 
 
 “We write only 1 Perpetual’ insurance on selected risks of 
 brick and stone buildings in Philadelphia and surrounding coun- 
 ties, being limited by charter to Pennsylvania. 
 
OF MUTUAL INSURANCE 
 
 439 
 
 “We originally credited each depositor’s (or contributor’s) 
 account with any profits, but the personal liability of each, over 
 and above their deposits, was not attractive, so the liability 
 feature was removed and also the profit sharing. 
 
 “In 1895, the surplus funds being sufficient, profit sharing 
 was resumed, and dividends out of the net income from the 
 surplus, have been paid on policies in force (according to the 
 accompanying notice) at the rate of 10 per cent a year on the 
 amount of the deposit. 
 
 1 1 On December 31, 1904, we had at risk $15,087,224, deposits 
 $528, 582.55 (which latter less 5 per cent practically our only 
 liabilities). Our assets were $5,131,210, and we had a surplus 
 therefore of over 4*/2 millions. Our losses incurred during the 
 year were $20,127, while we paid as dividend in distribution of 
 our net income money to members, double that. During the 
 year, we took $646,825 new risks for which we received $27,064 
 
 deposit. 
 
 December 30, 1905, the assets were $ 5,364,109.42 
 
 Insurance $ 15,294,690.66 
 
 A ten per cent cash dividend was declared, making 110 per 
 cent since 1845. 
 
 There is absolutely no assessment liability. 
 
 The present secretary of the Contributionship is J. Somers 
 Smith, Jr., to whom the Manual Committee are indebted for the 
 above information and for many other courtesies. 
 
CHAPTER XXIV. 
 
 MISCELLANEOUS MATTERS. 
 
 CO-INSURANCE. 
 
 Some policies are so worded that they make the companies 
 responsible for all damages up to their face. Under such policies, 
 if a house is insured for $1,000, the company will pay a partial 
 loss in full up to $1,000. Other policies agree to pay only three- 
 fourths or some other part of the value of the property and the 
 same proportion of a partial loss. In this case, if a house is 
 insured for $1,000, and is appraised at $1,000, the company 
 would pay, in case of loss, $750, in case of partial loss, say, of 
 $400, they would pay $300. 
 
 Again, there are companies which insist that the insured 
 shall carry a certain amount of insurance, say seventy-five per 
 cent, in companies which shall be jointly responsible for all 
 losses. Failing to do so, in case of loss he only gets an amount 
 bearing the same proportion to the total loss that the insurance 
 he carried does to the amount of the policy. 
 
 Policies are frequently written “ concurrent insur- 
 
 ance permitted.’ ’ In the event of concurrent insurance all the 
 companies should be notified of whatever insurance is placed 
 upon the property. 
 
 In re-insurance, there is but one company and one adjuster 
 to deal with and if the company is sound there is no trouble. 
 But the insured does not see the re-insurance policy and does 
 not know its provisions, and if the first company fails he may 
 find himself unprotected. This matter is now before the courts, 
 and the legislatures will probably establish a rule. 
 
 Insurers may complicate matters by their own carelessness 
 or ignorance. A man may insure his property in good faith 
 
 440— 
 
OF MUTUAL INSURANCE, 
 
 441 
 
 for a reasonable amount. Some one may persuade him that his 
 company is unsound or he may forget when his policy expires 
 and effect another insurance and may have two or three policies 
 in force at the same time. Such a complication would in all 
 probability get into court and the verdict would probably be 
 that the policy holder would lose his case. 
 
 The policy holder should always carry a portion of the 
 risk. Good companies instruct their agents to limit their policies 
 to two-thirds or three-fourths of the actual value of the prop- 
 erty and to take a premium only on the sum they intend to pay 
 in case of loss. It is argued that when one of these clauses is 
 inserted in a policy that the temptation to over insure will be 
 removed and that the policy holder will place a fair value on his 
 property. 
 
 As a weak point of the valued policy law is that it places no 
 restraint upon the policy holder who over insured, so the weak 
 point of these clauses is that they do not reach the companies. 
 Nor does either one reach the agent without whose connivance 
 no over insurance can be effected. 
 
 The underlying thought of the anti co-insurance laws is the 
 same as in the case of the valued policy laws, an endeavor to 
 compel the companies to stand up to their bargains and thus 
 compel fair dealings by making it to the interest of the com- 
 panies to avoid over insurance. 
 
 REINSURANCE. 
 
 Whenever a policy holder insists on dealing with only one 
 company, as many do, if the risk is a large one, the company 
 must either decline it and lose the business, or reduce its liabil- 
 ity by re-insuring so much of it as is above the limit which the 
 company has fixed for itself. 
 
 There is no reason why insurers should not prefer to deal 
 on that plan. In cases of loss, settlement is much easier, there 
 is only one policy, only one contract with one set of provisions,, 
 instead of several, each with its own set of technicalities, not 
 only different, but sometimes contradictory, and most important 
 of all, there is only one adjustment. 
 
442 
 
 A HAND BOOK 
 
 Now is there any reason why Mutuals should refuse such 
 risks. They are profitable. The hazard is generally low for 
 such business, it usually comes from careful men, and when 
 such a customer is once secured he becomes a source of profit. 
 
 Another reason for re-insurance is that if the policy holder 
 divides his own insurance he may put some of it in unfriendly 
 stock companies, and thereby cause no end of trouble. But if 
 the Mutuals re-insure in other Mutuals all trouble of this kind 
 will be avoided. 
 
 Two cautions are pertinent. The first is to see that the 
 policy expresses exactly what i® to be done. If the company 
 merely insures a certain amount with the understanding that 
 the policy holder places the rest where he chooses the policy 
 
 should be written for that amount, and the words “ 
 
 concurrent insurance permitted,” or others to the same effect 
 should be inserted. 
 
 The second is that in case of re-insurance the policy should 
 not be in force till the re-insurance took effect. An illustration 
 will show the reason for this. A Mutual takes a risk of $25,000 
 expecting to re-insure $23,000 in twelve other companies, but 
 before it is done the property burns. The whole loss falls on 
 the Mutual. This difficulty is easily avoided. 
 
 SUBROGATION. 
 
 Subrogation, in law, is the substitution of one person in 
 place of another, giving him the right of the person whose place 
 he takes. The subject is of importance to insurance companies 
 as their policies are often assigned as security for debts and 
 especially for mortgage loans. This requires the consent of the 
 company and the fact of the assignment as well as the consent 
 of the company must be endorsed on the policy. A common 
 
 form is “Loss, if any under this policy, payable to as 
 
 their interests may appear.” Under this, or any similar con- 
 tract, in case of loss by fire, the insurance money would be paid 
 to the mortgagee or the creditor so far as covered by his claim, 
 the balance, if any, going to the debtor. 
 
OF MUTUAL INSURANCE 
 
 443 
 
 Many loan companies use special forms, containing several 
 provisions which should be submitted to an attorney. 
 
 The right of subrogation exists by statutory enactment, in 
 many states, it being provided that where the insurance com- 
 pany claims that the fire was caused by act or neglect of any 
 person or corporation on payment of such loss the insured 
 shall assign to the company his right to recovery from said per- 
 son or corporation and this whether stipulated in the policy or 
 not. 
 
 Generally, when an insurance company pays a loss caused 
 by negligence of a railroad company, or other common carrier, 
 it becomes subrogated to the rights of the insured against the 
 railroad company. 
 
 The Western Underwriter has the following: 
 
 “The railway subrogation waiver clause creates an endless 
 amount of correspondence. There is only one form permissible, 
 yet agents are constantly attempting to improve upon it. Stick 
 to the text which is as follows : ‘ Notice is hereby acknowledged 
 that the assured has waived the right of recovery from the .... 
 
 Railroad Company, for any damage by fire occuring to 
 
 the property described herein, or affected thereby . 1 ” 
 
 The whole subject is too difficult and too complex for a 
 work of this kind. Should a case arise the services of a good 
 attorney should be secured. 
 
 LIABILITIES OF MEMBERS OF MUTUALS. 
 
 This question has been settled years ago but circulars are 
 still issued stating that each member of a Mutual is liable for 
 all he is worth in case of loss, if a Company fails to pay. They 
 make this assertion without any regard to any state law, or 
 stipulation or condition in the policy. 
 
 The circulars alluded to bear neither date, signature or 
 even imprint, a circumstance which is sufficient proof that they 
 were not issued with honest intents. They may be dismissed 
 without further notice. 
 
 While the laws in most of the several states differ very 
 greatly, the statutes concerning insurance companies, or which 
 
444 
 
 A HAND BOOK 
 
 affect their business, generally provide for three classes. First 
 is the old line stock company, in which the whole affair is owned 
 by stock holders. Of course the laws of the state granting the 
 charter control in each particular case. 
 
 The second class corresponds very nearly with the ordinary 
 co-partnership. Many of the smaller mutuals the township and 
 especially the fraternal and denominational mutuals are so 
 organized and purposely. They deal only with those they know 
 personally, take no extra hazardous or disporportionately large 
 risks and pay all losses in full. 
 
 There is still a third class which, in most states comes under 
 a special law. The liability is limited to the face of the note by 
 statutory enactment. Massachusetts provides two methods, 
 cash payments, with a liability of an equal additional amount, 
 the total liability being “ plainly and legibly stated on the back 
 of the policy” and deposit notes which constitute the entire 
 liability of their members. New Hampshire, Connecticut and 
 others limit the liability to the face of the premium note. The 
 same is true in Kansas. These laws have been in force many 
 years. 
 
 There are the Mutuals which carry no funds, take no notes 
 and assess to pay losses and expenses. These generally stipu- 
 late that losses shall be paid in full. Provision is made against 
 burdensome assessment by providing that such companies shall 
 have a certain number of policy holders and a certain amount at 
 risk before they can begin business, and this is large enough to 
 do away with the danger of a burdensome assessment. If they 
 should fall below this at any time they would be compelled to 
 quit business, till they had secured enough more policy holders 
 and risks to bring them up to the standard. 
 
 There is still another class, those mutuals which are work- 
 ing without charter, and practically without legal organization. 
 They can neither sue nor be sued. Among these will be found 
 church insurance companies, fraternals, etc. These companies 
 work very cheaply and depend upon honor for the enforcement 
 of contracts, having no legal liability whatever. To do them 
 justice, it must be said they are doing excellent work. 
 
OF MUTUAL INSURANCE 
 
 445 
 
 There is some of the same spirit in all mutuals. It is a 
 matter of honor, to do a safe business, and to meet their obliga- 
 tions, and they do so quite as well as any other business organi- 
 zations. 
 
 THE SAFETY LIMIT. 
 
 How large a policy may a Mutual issue? 
 
 This is a question frequently asked. Thus far there has 
 been no answer of general application. Several states have 
 statutory provisions; they differ widely. Maine prohibits in 
 any one risk “an amount exceeding twenty-five per cent of its 
 gross assets, including the amount due at any one time on its 
 premium notes.” Massachusetts and New Jersey limit the 
 amount to one tenth of the net assets; Connecticut to one tenth 
 of paid up capital and surplus; Idaho, Wyoming and Indiana 
 to ten per cent of paid up capital; Colorado to five per cent of 
 paid up capital; Washington limits the risk to $1,000 on each 
 $750,000 insured. Other states have different provisions and 
 many ignore the matter. These enactments are evidently the 
 wildest guess work with no scientific basis whatever. All state 
 enactments are apt to err on the danger side. They get the 
 bank reserve too small and the policy limit too large. There is 
 a rule current among insurers that the largest risk in a single 
 policy should never exceed ten per cent of the annual premium 
 receipts for one year. This is much smaller than the lowest 
 statutory limit quoted, except in Colorado, but is still higher 
 than the usage of insurance companies in general. 
 
 There seems to be no definite rule, at least none can be 
 discovered from reports. Many answer the question by saying 
 “no limit,” others give figures evidently taken from the by- 
 laws but an inspection of their assessments shows that they 
 have never had any losses of such magnitude, and their average 
 of risks is so far below it as to preclude the idea of such large 
 policies. It is more probable that the officials in taking risks 
 keep in view, the size of the assessment in case of loss. In 
 Wisconsin for example, where the Mutuals have been wonder- 
 fully successful, the limits of risks are large. But very many 
 of the Mutuals made no assessment at all last year and scarcely 
 
446 
 
 A HAND BOOK 
 
 any made a levy which would have paid a large loss. It is evi- 
 dent that there is no unity of opinion on the matter. 
 
 DUTIES OF THE STATE. 
 
 All chartered bodies are creatures of the State, and though 
 modern philosophers and interested parties may protest most 
 vigorously, it will remain true that in the universe and in the 
 state the creator is greater than the creature. It may be said 
 in addition that no chartered company can hold a vested right 
 against public policy. As a legitimate deduction from this, it 
 may be stated that all corporations are subject to the state 
 laws and every kind of chartered insurance company is included. 
 Without entering into a discussion of this much debated matter, 
 it may be said in the case of insurance companies the state 
 should go far enough to protect the individual insurer against 
 fraud or mismanagement, to compel the companies either to 
 prove their ability to fulfil their contracts or to close up busi- 
 ness while it is possible to do so, without material loss to the 
 policy holders. 
 
 To faithfully perform this duty the state should periodi- 
 cally make complete and thorough examinations of all insur- 
 ance companies. The facts to be established are that the com- 
 pany is able to meet its engagements, is fairly and honorably 
 conducted and is fully complying with the laws of the State. 
 The cost of this to the policy holder is trifling. 
 
 There will be no concord of opinion as to what legislation 
 is advisable. The varying conditions of the several states pre- 
 clude any general laws, applicable alike in every state. Statutes 
 providing for good management, security and fair dealing exist 
 is nearly all the states. 
 
 As a general rule, after safety and good management have 
 been provided for, the less meddling by the state, the better. 
 Details often depend on local conditions and should be left to 
 the local companies. 
 
 TAXATION OF MUTUALS. 
 
 Mutual insurance companies are not organized for profit 
 and therefore should not be compelled to pay a percentage on 
 
OF MUTUAL INSURANCE 
 
 447 
 
 their receipts. Such taxes are not levied upon property but 
 upon income, and are, in their nature, licenses to do business, 
 and are usually intended to reach foreign corporations and joint 
 stock companies. 
 
 An inquiry concerning this matter made by the committee 
 resulted in developing the fact that there is no uniformity of 
 procedure. Some companies reported that they never had paid 
 a tax, others complained that they were compelled to pay too 
 heavily. Generally the Mutuals which assessed after a loss were 
 exempt from taxation. They had nothing to tax. Others which 
 made advance assessments paid on what they happened to 
 have on hand, in other words they paid on the property in their 
 possession. There is no general rule. 
 
 LEGAL. 
 
 In discussing legal questions it has not been the intention 
 of the compilers of this Manual to make it a law book, or to 
 supersede attorneys and courts, but only to give such general 
 information as is usually current among business men, leaving 
 particular eases and technical points to the attorneys of the com- 
 panies. As a ship in mid ocean, managed by her own captain 
 who only knows enough of hidden dangers to keep at a dis- 
 tance, pursues her course in safety, but when she comes to in- 
 tricate channels and narrow passages, secures the services of 
 an expert pilot, so, in general, these directions will answer, but 
 when special cases arise and complicated questions are to be 
 decided, the services of an attorney will be needed. 
 
 The man who always “stands on his rights ’ ’ is generally 
 in trouble with his neighbors, and so the official or clerk who is 
 always consulting law books and attorneys to see how little he 
 is obliged to do by the statutes in the case made and provided, is 
 one whose services should be dispensed with at once. The 
 average man does not wish to be annoyed with technicalities, and 
 legal discussions. Courts and juries are disregarding them 
 more and more. In fact adhering to technicalities is looked 
 upon as evidence of intention to take advantage, while doing 
 all that can be done, even though one doe& more than is called 
 for, is evidence of good faith and goes a long way with a jury. 
 Insurance officers should act upon this principle and in cases 
 of doubt, always take the safe side. 
 
CHAPTER XXV. 
 
 LAWS — COURT DECISIONS. 
 
 IOWA DECISIONS-Relating to Co-operative Mutual Insurance. 
 
 The Supreme Court of Iowa has held that where the articles 
 of incorporation show that an insurance company is organized 
 to do a mutual insurance business and to insure only the prop- 
 erty of its members, that the company could not insure the 
 property of any one not a member and the issuance of policies 
 of insurance on the stock plan was invalid. Corey vs. Sherman, 
 96 Iowa, 114. 
 
 A mutual fire insurance company cannot issue a policy to 
 one not a member, nor for a stated and definite amount of insur- 
 ance, nor for a stipulated premium. 
 
 One who insures his property in a mutual company in a 
 stated amount for a specified premium, does not become a mem- 
 ber and acquires no rights. 
 
 The creation of a guaranty fund held not to deprive the cor- 
 poration of the character of a mutual company. 
 
 Where the statute provides that a copy of the application 
 shall be printed or written upon the insurance policy, such re- 
 quirements are applicable to mutual companies. 
 
 Although in general, a money judgment cannot be rendered 
 against an assessment company, yet, if the company has issued 
 a policy in which it agrees to pay a fixed sum in case of loss, 
 such action may be maintained. Byrnes vs. American Mutual 
 Fire Insurance Company, 114, Iowa, 738. 
 
 Where it is not required by the articles and by-laws, notice 
 of assessment need not be given before the assessment is made. 
 Corey vs. Sherman, 96 Iowa, 114. 
 
 The members of mutual insurance companies are presumed 
 to have knowledge of the articles of incorporation and by-laws. 
 Corey vs. Sherman, 96 Iowa, 114. 
 
 Even in purely mutual benefit associations, as between the 
 assured and the company, the latter stands in something of an 
 independent attitude, and may be held bound, sometimes with- 
 out such intention. This intent or purpose will not always be 
 held as a matter of law, to be known to the insured, because of 
 his membership. 
 
 Matthes vs. Imperial Accident Association, 110 Iowa, 122. 
 
 448 — 
 
R. J. YOUNG, OELWEIN, IOWA. 
 
 Mr. Young is one of the veterans. He has been an active 
 and efficient worker in Mutual Insurance lines for more than 
 thirty years. He served as director, treasurer and secretary 
 of the Fayette County Mutual, acting in the latter capacity for 
 nine years. He is also a director of the Farmers’ Mutual and 
 Grain Growers Hail Insurance Company and has served on the 
 executive board for nine years. He assisted in organizing the 
 Town Dwelling Mutual Fire Insurance Company of Des Moines, 
 Iowa, thirteen years ago, still being on the directory. He has 
 been a member of the Iowa Mutual Tornado Insurance Company 
 since its organization. 
 
PETER F. ZIMMER, LINCOLN, NEBRASKA. 
 
 Mr. Zimmer, a native of Michigan, has devoted all his life to 
 insurance of different classes in the States of Nebraska. Colo- 
 rado, Minnesota and the Dakotas. In 1899 his brother and himself 
 organized the United Hail Insurance Association, of which they 
 are still the managers. For four years they fought the wild cat 
 companies of Nebraska, finally securing the law requiring a 
 $50,000 guarantee on the part of the officers of hail insurance 
 companies for the faithful accounting of the funds of such com- 
 panies. Their company is the only hail company in the state 
 which has made a continuous success of the business from the 
 very first. 
 
OF MUTUAL INSURANCE 
 
 449 
 
 The mutual benefit life association may waive the provis- 
 ions of its policies as to medical examination. 
 
 Watts vs. Equitable Mutual Life Association, 111 Iowa, 90. 
 
 While each policy holder is a member of a mutual company 
 during the life of his policy, he does not become a member until 
 the policy is issued and in the negotiations for it, he stands in 
 the relation of a stranger to the company. 
 
 Even as to renewal of a policy, already in existence, the 
 parties are dealing at arms length. 
 
 Parno vs. The Iowa Merchant’s Mutual Insurance Company, 
 114 Iowa, 132. 
 
 The creation of an indebtedness incident to the organiza- 
 tion and the conduct of the business of a mutual association, 
 may be authorized by the articles of an association, and the re- 
 payment of such indebtedness may be enforced. 
 
 Ainley vs. American Mutual F?re Insurance Company, 113 Iowa, 
 709. 
 
 While members of a mutual company may be bound by by- 
 laws adopted after they became members, nevertheless, the 
 terms of a policy of insurance will be presumed to be covered 
 by the by-laws in force when it was issued, and not to be affected 
 by those subsequently adopted. 
 
 Farmer’s Mutual Hail Association vs. Slattery, 115 Iowa, 410. 
 
 THE IOWA ANTI-COMPACT LAW. 
 
 This law reads as follows: 
 
 Section 1754. “It shall be unlawful for two or more fire 
 insurance companies doing business in this state, or for the of- 
 ficers, agents or employees of such companies, to make or enter 
 into any combination or agreement relating to the rates to be 
 charged for insurance, the amount of commission to be allowed 
 agents for procuring the same, or the manner of transacting the 
 fire insurance business within this state ; and any such company, 
 officer or employee violating this provision shall be guilty of a 
 misdemeanor and a fine is imposed for each offense.” 
 
 It has been held constitutional by the United States Su- 
 preme Court. 
 
 MINNESOTA LAWS AND DECISIONS. 
 
 The following extracts from the laws of Minnesota and 
 from the court decisions will be of general interest. 
 
 “In a Mutual fire insurance company, organized under 
 Laws 1881, c 91, the capital is made up of cash premiums and 
 premium notes.” 
 
 Taylor vs. North Star Mut. Ins. Co., 46 Minn., 198 N. W. 772. 
 
 “One insuring in a Mutual Company becomes a member 
 28 
 
450 
 
 A HAND BOOK 
 
 thereof.’ ’ Taylor vs. North Star Mut. Ins. Co., 46 Minn., 198 
 N. W. 772. 
 
 “General Laws 1881, c. 180, authorizes certain mutual com- 
 panies which have attained a certain capital to assume to a 
 limited amount risks ‘on the all cash plan, and issue policies,’ 
 etc. Held, that the holder of an all cash policy did not thereby 
 become a member of the company.” In re Minneapolis Mut. 
 Tire Ins. Co., 49 Minn. 291, 51 N. W. 921. 
 
 Non-participating policy holders are customers, not mem- 
 bers. 
 
 “Gen. Laws 1881, c. 91, authorizing the formation of Mil- 
 lers and Manufacturers’ mutual insurance companies, author- 
 ized persons engaged in such business to form themselves into 
 a corporation for the purpose of insuring ‘upon the plan of 
 Mutual Insurance,’ mills, etc. Section 12 provided that every 
 person insured by the corporation should pay at the time of 
 receiving his policy such sum in money, and give his premium 
 note for such further sum, as might be required, and that all 
 persons effecting insurance in such corporation should thereby 
 become members thereof, and should be bound to pay losses 
 and expenses in proportion to the amount of their premium 
 notes. 
 
 Gen. Laws 1885, c. 180, provided that whenever the 
 capital of any company organized under the act of 1881 should 
 amount to a certain sum, of which not less than a certain 
 amount should be actual funds, such company might “assume 
 risks on the all cash plan and issue policies against loss or dam- 
 age by fire or lightning on any property real or personal, to an 
 amount not exceeding 5 per centum of its capital stock. ’ ’ Held, 
 that the law of 1885 authorized such companies to enter into 
 contracts of simple “all cash” (not mutual) insurance to the 
 limited extent specified, and a policy in the ordinary form of 
 such contracts is a contract of simple (not mutual) insurance. 
 In re Minneapolis Mut. Fire Ins. Co., 49 Minn. 291, 51 N. W. 
 921, Powell vs. Wyman, Id. 
 
 A Mutual insurance company, organized under Gen. St. 
 1878 c. 34, articles 338-347, authorizing it to insure “detached 
 dwellings and their contents, and farm buildings and their con- 
 tents, and live stock and hay and grain in bin or stack,” has 
 no power to insure growing grain of its members against loss 
 by hail. Delaware Farmers’ Mut. Fire Ins. Co. vs. Wagner, 56 
 Minn. 240, 57 N. W. 656; Same vs. Knuppel, 56 Minn. 243, 57 
 N. W. 656. 
 
OF MUTUAL INSURANCE 
 
 451 
 
 It is a good defense to a note given in payment of the insur- 
 ance premium that the company had no power to issue the policy 
 for which such note was given. Rochester Ins. Co. vs. Martin, 
 13 Minn. 59, (Gil. 54). 
 
 In a Mutual fire insurance company organized under Laws 
 1881, c. 91, premium notes, together with cash premiums, con- 
 stitute the capital, and are assessable in proportion to the 
 amount of losses sustained. Taylor vs. North Star Mut. Ins. 
 Co., 46 Minn. 198, 48 N. W. 772. 
 
 A member of a mutual insurance company cannot be asses- 
 sed for losses sustained before he became a member of the Com- 
 pany. Swing vs. North Star Mut. Ins. Co., 62 Minn. 169, 64 N. 
 W. 97. 
 
 Where an assessment on the premium note of a member of 
 a mutual insurance company is rendered of a larger amount as 
 to him, through the knowing omission of other member liable 
 to assessment, it is voidable. Swing vs. H. C. Akeley Lumber 
 Co., 62 Minn. 169, 64 N. W. 97. 
 
 Rev. St. Ohio, Sec. 3650, providing that in making the 
 assessment on members of a Mutual insurance company, the 
 board of directors shall determine the sum to be paid by the 
 several members, and publish the same in such manner as they 
 choose or as the by-laws prescribe, and that the amount so as- 
 sessed shall be paid within 30 days next after publication of 
 such notice, contemplates a publication of the whole assessment 
 list, and not a mere notification of a member by mail of the 
 amount of his own assessment. Swing vs. Wurst, 67 Minn. 198, 
 79 N. W. 94. 
 
 A misrepresentation or concealment, to effect the policy, 
 must be material to the risk. Aetna Ins. Co. vs. Grube, 6 Minn. 
 82, (Gil. 34). 
 
 Where a policy of fire insurance provides that the same 
 shall become void in case the insured mortgages the same with- 
 out notifying the company, a mortgage of a portion only, with- 
 out giving the prescribed notice, will vitiate the whole policy. 
 Plath vs. Minnesota Farmers’ Mut. Fire Ass’n., 23 Minn. 479, 
 23 Am. Rep. 
 
 Where an insurance agent, authorized to procure and for- 
 ward applications, makes out an application incorrectly after 
 having received correct information, the agent does not become 
 the agent of the assured because of a stipulation in the policy 
 subsequently issued that the acts of the agent in making out 
 the application shall be deemed the acts of the insured. Kansel 
 vs. Minnesota Farmers’ Mut. Fire Ins. Ass’n., 31 Minn. 17, 16 
 N. W. 430. 
 
452 
 
 A HAND BOOK 
 
 An insurance company is responsible for its agents mistakes 
 in wrongly stating facts correctly given him by the assured. 
 Kansel vs. Minn. Farmers’ Mut. Fire Ins. Ass’n., 31 Minn. 17, 
 16 N. W. 430. 
 
 A policy of insurance was issued on certain farm property, 
 including stables and ‘ ‘ hay therein or in stack, ’ ’ and designated 
 as being in the possession of the assured, who was referred to 
 as residing on a farm particularly described. The assured owned 
 some hay in stack, not on the land described, and two miles 
 distant from his residence. The agent of the company who 
 effected the insurance, and made out the description of the prop- 
 erty inserted in the policy, knew of this hay, and, as between 
 him and the assured, it was understood that it was to be covered 
 by the policy. Held, that such hay was covered by the policy, 
 although the company’s articles of incorporation declared that 
 property under the immediate control of the assured, only, 
 should be insured. Soli vs. Farmers’ Mut. Ins. Co., 51 Minn. 
 24, 52 N. W. 979; Berhstron vs. Same, 51 Minn. 29, 52 N. W. 
 980. 
 
 The acceptance of premiums and assessments on a policy 
 after a loss will not bind the insurer, as a waiver of non-pay- 
 ment of the premium or assessment, if the insurer was ignorant 
 of the fact of loss. McMartin vs. Continental Ins. Co., 41 Minn. 
 198, 42 N. W. 934. 
 
 A valued policy is one in which the value of the property 
 insured is fixed and agreed upon by both parties to the contract, 
 and, in case of total loss, it it not necessary that proof should 
 be made of the market value at the time and place of ship- 
 ment. Williams vs. Continental Ins. Co., 24 F. 767. 
 
 Failure to give notice of loss for nearly 60 days after the 
 fire, constituted, as a matter of law, a breach of condition re- 
 quiring the giving of “immediate notice.” Armentrout vs. 
 Girard Fire & Marine Ins. Co., 63 Minn. 305, 65 N. W. 635, 30 
 L. R. A. 346. 
 
 Where an insurance company, upon information that prop- 
 erty covered by one of its policies had been damaged by fire, 
 makes investigation into the cause of the fire, obtaining infor- 
 mation sufficient to determine its liability, expressly recognizes 
 such liability, and prepares proof of loss from the information 
 thus obtained, which it presents to the insured for signature, 
 but which he refuses to sign because of the stipulation of settle- 
 ment therein contained, the failure on the part of the insured 
 to make and serve formal proof of loss is waived. Larkin vs. 
 Glens Falls Ins. Co., 80 Minn. 527, 82 N. W. 409. 
 
 A provision for arbitration is waived by the company’s 
 denying liability after loss, and telling insured that he will 
 
OF MUTUAL INSURANCE 
 
 453 
 
 have to resort to the courts. Hamberg vs. St. Paul Fire & 
 Marine Ins. Co., 68 Minn. 335, 71 N. W. 388. 
 
 The description of the property insured was a two story 
 frame, brick veneered building and additions attached, includ- 
 ing the foundation and all permanent fixtures situated therein. 
 The building and additions were totally destroyed by fire. Held, 
 that it being conceded that the loss by fire exclusive of the 
 foundation included in the policy, was greater than the amount 
 for which the property was insured, it was not error for the 
 trial court to direct a verdict for the plaintiff. Ohage vs. Union. 
 Ins. Co. of Philadelphia, 85, N. W. 212. 
 
 NEBRASKA LAWS AND DECISIONS. 
 
 BRIEF OF INSURANCE DECISIONS BY HON E. M. COFFIN. 
 
 Mutual Insurance in Nebraska is affected by the following 
 decisions : 
 
 Refusal of Auditor to grant certificate, no defense is> an 
 action for assessment. Burmood vs. Insurance Co., 42 Neb., 598. 
 
 Cannot recover for loss while assessment is delinquent. 
 Farmers Mutual vs. Kinney, 64 Neb., 808. 
 
 Mutual Hog Co. cannot limit assessment. Morgan vs. Insur- 
 ance Co., 62 Neb., 446. This applies also to Fire companies 
 organized under 1897 law. 
 
 Mutual Live Stock Association held to be an Insurance 
 Co. State vs. Live Stock Ass’n., 16 Neb., 549. 
 
 Valued policy law valid and applies to mutual insurance 
 companies. Farmers Mutual vs. Cole, 93 N. W., 730. 
 
 Act allowing Attorneys’ fee valid and applies to Mutual 
 Insurance Companies. Farmers Mutual vs. Cole, 93 N. W., 730. 
 
 Act of 1891 for organization of Farmers Mutual companies 
 valid. State vs. Moore, 48 Neb., 870. 
 
 Mutual Company organized under act of 1891, cannot take 
 notes for premium. State vs. Moore, 48 Neb., 870. 
 
 That building was burned by third party is no defense. 
 Union Insurance Co. vs. McCullough, 96 N. W., 79. 
 
 Policy not invalidated by change of tenants. Union Insur- 
 ance Co. vs. McCullough, 96 N. W., 79. 
 
 Application signed by a husband and wife on wife’s prop- 
 erty does not effect rights. Union Ins. Co. vs. McCullough, 96 
 N. W., 79. 
 
 Agreement in application to be bound by subsequently 
 passed by-laws is binding on member. Hale vs. Western Trav- 
 elers Ass’n., 96 N. W., 170; Farmers Mutual vs. Kinney, 64 Neb., 
 808. 
 
454 
 
 A HAND BOOK 
 
 If company has actual knowledge of loss, it waives proof 
 of notice. Western, etc., Ass hi. vs. Tomson, 103 N. W., 695. 
 
 If company denies liability, it waives proof of notice. West- 
 ern, etc., Ass’n. vs. Tomson, 103 N. W., 695. 
 
 Where a blanket policy is issued and only part of property 
 is destroyed, cannot claim total loss. Johnson vs. Phelps Co. 
 Mutual Ins. Co., 102 N. W., 72. 
 
 Misrepresentation of material matters in application voids 
 policy. Royal Neighbors vs. Wallace, 102 N. W., 1020. 
 
 Demanding proof after knowledge of breach waives same. 
 Fidelity Mutuals vs. Murphy, 95 N. W., 702. 
 
 Restrictions on agent’s authority in policy not binding on 
 assured as to acts in taking application. Fidelity Mutual vs. 
 Lowe, 93 N. W., 749. 
 
 Agent of mutual company in taking applications stands on 
 same basis as agent of stock company. Fidelity Co. vs. Lowe, 
 
 93 N. W., 749. 
 
 Organic act, articles of incorporation, by-laws, application 
 and certificate, constitute the contract of insurance. Farmers 
 Mutual vs. Kinney, 64 Neb., 808. 
 
 Liability of member of mutual company continuing one. 
 Morgan vs. Hog Raisers Ins. Co., 62 Neb., 446. 
 
 Assessment not invalid because Board of Directors assisted 
 in making assessment although secretary is authorized to make 
 same. Phelps Co. Farmers Mut. vs. Johnson, 66 Neb., 590. 
 
 When a policy is deemed cancelled at request of insured. 
 Farmers Mut. Ins. Co. vs. Phoenix Ins. Co., 65 Neb., 14. 
 
 Company must cancel policy at request of insured. State 
 Ins. Co. vs. Farmers Mutual, 65 Neb., 34. 
 
 Cancellation at request of insured takes effect from time of 
 receipt of policy by Company. Farmers Mutual vs. Phoenix 
 Ins. Co., 65 Neb., 14. 
 
 After request for cancellation, claim for unearned premium 
 may be assigned. State Ins. Co. vs. Farmers Mutual, 65 Neb., 
 34. 
 
 Method of computing unearned premium. State Ins. Co. 
 vs. Farmers Mutual, 65 Neb., 34. 
 
 Misrepresentations to void a policy must be untrue and 
 known to be so by applicant. Aetna Ins. Co. vs. Rehlaender, 
 
 94 N. W., 129; Royal Neighbors vs. Wallace, 99 N. W., 256; 
 Farmers Mut. vs. Cole, 93 N. W., 730. 
 
 Vacancy does not of itself work forfeiture but is ground 
 for declaring same. Hunt vs. Ins. Co., 66 Neb., 121. 
 
 Conveyance absolute in form as security for contingent lia- 
 bility, which never occurs, does not forfeit policy. Henton vs. 
 Ins. Co., 95 N. W., 670. 
 
OF MUTUAL INSURANCE 
 
 455 
 
 Attempted waiver by local agent in violation of policy not 
 binding on company. Hunt vs. Ins. Co., 66 Neb., 121. 
 
 Notice to local agent is notice to company. Hunt vs. Ins. 
 Co., 66 Neb., 121. 
 
 Act of agent in taking application binding on company. 
 Fidelity Mut. vs. Lowe, 93 N. W., 749. 
 
 Waiver of forfeiture need not be in writing. Hartford 
 Ins. Co. vs. Landfare, 63 Neb., 559. 
 
 Secretary may waive forfeiture. Nebraska Mercantile 
 Mut. vs. Sasek, 64 Neb., 17; Johnston vs. Phelps Co. Mut., 63 
 Neb., 21. 
 
 When only part of insured property is destroyed while 
 assessment is delinquent, subsequent acceptance of assessment 
 is not a waiver of default. Farmers Mut. vs. Kinney, 64 Neb., 
 808; Johnston vs. Phelps Co. Mut., 63 Neb., 21. 
 
 Loss by wind on single corn crib not covered by policy. 
 Farmers Mut. vs. Tighe, 91 N. W., 520. 
 
 Where proofs are waived, interest should be computed from 
 date of loss. Hartford Ins. Co. vs. Landfare, 63 Neb., 559. 
 
 Where action may be brought on domestic Ins. Co. Western 
 etc., Association vs. Taylor, 62 Neb., 783; Grand Lodge vs. 
 Bartes, 64 Neb., 800. 
 
 When liability is denied, action may be brought before 
 sixty days has expired. Modern Brotherhood vs. Cummings., 
 94 N. W., 144; Anders vs. Ins. Co., 62 Neb., 585. 
 
 Proofs of loss are admissible in evidence. M. W. A. vs. 
 Kozak, 63 Neb., 146. 
 
 Foreign Ins. Co., without certificate of Auditor to do busi- 
 ness in Nebraska, cannot enforce contracts in our courts. 
 Conn. Mut. Ins. Co. vs. Hayden, 60 Neb., 636; Barber vs. 
 Boehen, 21 Neb., 450. 
 
 Occupation tax on Ins. Co. valid. German Ins. Co. vc. City 
 of Minden, 51 Neb., 870. 
 
 Service of summons on agent good. Bankers Ins. Co. vs. 
 Robbins, 55 Neb., 117. 
 
 Person taking application is agent of company. State Ins. 
 Co. vs. Jordan, 29 Neb., 514. 
 
 Local agent may consent to additional insurance or to 
 mortgage of property. German Ins. Co. vs. Rounds, 35 Neb., 
 752; German Ins. Co. vs. Penrod, 35 Neb., 273. 
 
 Agreement of soliciting agent to procure insurance, not 
 binding until policy is issued. Farmers Mut. Ins. Co. vs. Gra- 
 ham, 50 Neb., 818. 
 
 Knowledge of soliciting agent obtained while taking applica- 
 tion is knowledge of company. Home Ins. Co. vs. Gurney, 56 
 Neb., 306; Phoenix Ins. Co. vs. Holcombe, 57 Neb., 622. 
 
466 
 
 A HAND BOOK 
 
 Knowledge of recording agent is knowledge of company. 
 Home Ins. Co. vs. Bermstein, 55 Neb., 260; Eagle Ins. Co. vs. 
 Globe Co., 44 Neb., 380. 
 
 Contract of insurance should be construed strongly against 
 company. Conn. Ins. Co. vs. Waugh, 60 Neb., 353. 
 
 Premium note sufficient consideration for policy. F. & 
 M. Ins. Co. vs. Wyard, 59 Neb., 451. 
 
 Act of unauthorized person in taking application ratified 
 by Company by accepting same. F. & M. Ins. Co. vs. Wyard, 
 59 Neb., 451. 
 
 Where policy is ambiguous, parol evidence is admissible. 
 M. W. A. vs. Kline, 50 Neb., 345. 
 
 Recitals not contractual not binding. Conn. Mut. vs. Hay- 
 den, 60 Neb., 636. 
 
 In absence of fraud or mistake, written contract of insur- 
 ance cannot be varied by parol. McLaughlin vs. Ins. Co., 38 
 Neb., 725. 
 
 Parol contract of insurance may bind Company. Neb. & 
 Iowa Ins. Co. vs. Seiver, 27 Neb., 541. 
 
 Policy may be reformed in equity. Cook vs. Ins. Co., 60 
 Neb., 127; Slobodisky vs. Ins. Co., 52 Neb., 395; Home Ins. Co. 
 vs. Gurney, 56 Neb., 306; Home Ins. Co. vs. Wood, 50 Neb., 381; 
 Pacific Ins. Co. vs. Frank, 44 Neb., 320. 
 
 Misdescription of property in policy not fatal, and reforma- 
 tion not necessary to recover. Omaha Ins. Co. vs. Dufek, 44 
 Neb., 241; Phoenix Ins. Co. vs. Gebhardt, 32 Neb., 144. 
 
 Mutual Ins. Co. may recover judgment for full amount of 
 premium note. Farmers Ins. Co. vs. Wilder, 35 Neb., 572. 
 
 Where there is breach causing forfeiture, no unearned 
 premium can be recovered by assured. Home Ins. Co. vs. Kuhl- 
 man, 58 Neb., 488; Farmers Mut. vs. Home Ins. Co., 54 Neb., 
 740. 
 
 Assignment of policy without consent of Company, voids 
 same. New England Co. vs. Kneally, 38 Neb., 895. 
 
 In order to cancel policy, Company must notify assured 
 and return unearned premium. German Ins. Co. vs. Rounds, 
 35 Neb., 752. 
 
 Member of Mutual Ins. Co. must pay assessments in order 
 to have his policy canceled. Burmood vs. Ins. Co., 42 Neb., 598. 
 
 Material misrepresentation voids policy. Seal vs. F. & M. 
 Ins. Co., 59 Neb., 253. 
 
 May prove correct statements to agent by parol, though 
 false statements were placed in written application by agent. 
 German Ins. Co. vs. Hart, 43 Neb., 441; German Ins. Co. vs. 
 Frederick, 57 Neb., 538; Omaha Ins. Co. vs. Crighton, 50 Neb., 
 
OF MUTUAL INSURANCE 
 
 457 
 
 314; Home Ins. Co. vs. Fallon, 45 Neb., 554; State Ins. Co. vs. 
 Jordan, 29 Neb., 514. 
 
 The difference between warranty and representation stated. 
 Aetna Ins. Co. vs. Simmons, 49 Neb., 811. 
 
 Statements construed as representations and not war- 
 ranties. M. W. A. vs. Shryock, 54 Neb., 250; Omaha Ass’n. vs. 
 Kettenback, 49 Neb., 842, and 55 Neb., 330. 
 
 False statement as to title voids policy. Ehrsam vs. Ins. 
 Co., 43 Neb. 554; F. & M. Ins. Co. vs. Hahn, 96 N. W., 225. 
 
 Encumbrance without consent of Company voids policy. 
 Seal vs. Ins. Company, 59 Neb., 253; Johansen vs. Home Ins. 
 Co., 54 Neb., 548. 
 
 Forfeitures not favored by court. Phoenix Ins. Co. vs. 
 Holcombe, 57 Neb., 622; Conn. Ins. Co. vs. Jeary, 60 Neb., 338; 
 F. & M. Ins. Co. vs. Newman, 58 Neb., 504; Springfield Ins. Co. 
 vs. McLimons, 28 Neb., 846. 
 
 Provision that policy shall lapse if premium not paid when 
 due is reasonable and valid. Home Ins. Co. vs. Garbacz, 48 
 Neb., 827; Phoenix Ins. Co. vs. Bachelder, 32 Neb., 490; 39 
 Neb., 95; F. & M. Ins. Co. vs. Wyard, 59 Neb., 451; Farmers 
 Mut. Ins. Co. vs. Kinney, 64 Neb., 808. 
 
 Removal of insured property without consent of Company 
 voids policy. Burlington Ins. Co. vs. Cambpell, 42 Neb., 208. 
 
 Additional insurance without consent of Company voids 
 policy, but breach may be waived. Home Ins. Co. vs. Wood, 
 50 Neb., 381; German Ins. Co. vs. Heiduck, 30 Neb. 288; Slobo- 
 disky vs. Ins. Co. 53 Neb., 816. 
 
 Mortgaging chattels without consent of Company voids 
 policy, but if paid before loss, insured may recover. Johansen 
 vs. Home Ins. Co., 54 Neb., 548, and 59 Neb., 349; State Ins. 
 Co. vs. Schreck, 27 Neb., 527; Omaha Ins. Co. vs. Dierks, 43 
 Neb., 473. 
 
 Transfer of title without consent of Company voids policy. 
 F. & M. Ins. Co. vs. Jensen, 56 Neb., 284; 58 Neb., 522. 
 
 Contract of sale does not void policy. Grable vs. German 
 Ins. Co., 32 Neb., 645. 
 
 Transfer of property if reconveyed before loss does not void 
 policy. German Mut. vs. Fox, 96 N. W., 652. 
 
 Transfer by one partner or joint owner to the other, does 
 not void policy. German Mutual vs. Fox, 96 N. W., 652 ; Phoenix 
 Ins. Co. vs. Holcombe, 57 Neb., 622. 
 
 False statements in proofs of loss do not prevent recov- 
 ery. Springfield Ins. Co. vs. Winn, 27 Neb., 649. 
 
 Waiver of breach of condition need not rest on estoppel or 
 new consideration. Billings vs. German Ins. Co., 34 Neb., 502;, 
 Home Ins. Co. vs. Kuhlman, 58 Neb., 488. 
 
458 
 
 A HAND BOOK 
 
 Demanding proof waives breach of condition. Home Ins. 
 Co. vs. Phelps, 51 Neb., 623. 
 
 Waiver must be pleaded and proved. Phoenix Ins. Co. vs. 
 Bachelder, 32 Neb., 490; German Ins. Co. vs. Shader, 96 N. 
 
 604. 
 
 Receiving and retaining premium after knowledge of loss, 
 waives default. Phoenix Ins. Co. vs. Dungan, 37 Neb., 468; 
 Phoenix Ins. Co. vs. Lansing, 15 Neb., 494; Farmers Mut. Ins. 
 Co. vs. Wilder, 35 Neb., 572. 
 
 Additional insurance will not void policy if agent knew of 
 it when policy was written. Home Ins. Co. vs. Hamang, 44 
 Neb., 566; Hughes vs. Ins. Co., 40 Neb., 626; Phoenix Ins. Co. 
 vs. Holcombe, 57 Neb., 622 ; Phoenix Ins. Co. vs. Covey, 41 Neb., 
 724. 
 
 Mutual Insurance Co. is liable on its note for loss on horse 
 by accident although it has no power to insure against accidents. 
 Farmers Mutual vs. Meese, 49 Neb., 861. 
 
 Owner of property may testify as to its value. Ins. Co. vs. 
 Bachler, 44 Neb., 549. 
 
 Meaning of ‘ * totally destroyed by fire. ’ * Ins. Co. vs. Bach- 
 ler, 44 Neb., 549; Eddy vs. German Ins. Co., 51 Neb., 291. 
 
 Denial of liability waives notice of loss. Omaha Ins. Co. 
 vs. Dierks, 43 Neb., 473; St. Paul F. & M. Ins. Co. vs. Gotthelf, 
 35 Neb., 351. 
 
 Provision in policy that notice of proof must be given 
 within 60 days, is valid and must be pleaded and proven, or 
 that same was waived. German Ins. Co. vs. Davis, 40 Neb., 700 ; 
 Western Ins. Co. vs. Richardson, 40 Neb., 1; German Ins. Co. 
 vs. Fairbank, 32 Neb., 750. 
 
 Recovery may be had on parol contract of insurance. 
 McCann vs. Aetna Ins. Co., 3 Neb., 198; Neb. & Iowa Ins. Co. vs. 
 Seiver, 27 Neb., 541; B. & M. Relief Dept. vs. White, 41 Neb., 
 547. 
 
 Validity of provision requiring certificate of character in 
 proof of loss doubted. Home Ins. Co. vs. Hamang, 44 Neb., 566. 
 
 Provision for examination of insured construed. Aetna 
 Ins. Co. vs. Simmons, 49 Neb., 811. 
 
 If Company claims proofs are defective, it must return 
 same with specific statement of objections. Union Ins. Co. vs. 
 Barwick, 36 Neb., 223; Home Ins. Co. vs. Hamang, 44 Neb., 
 566; National Ins. Co. vs. Day, 55 Neb., 127. 
 
 By denying all liability, Company waives proofs of loss. 
 Phoenix Ins. Co. vs. Meier, 28 Neb., 124; Dwelling House Ins. 
 Co. vs. Brewster, 43 Neb., 528; German Ins. Co. vs. Kline, 44 
 Neb., 395; Phoenix Ins. Co. vs. Bachelder, 32 Neb., 490, 39 Neb., 
 
OF MUTUAL INSURANCE 
 
 469 
 
 95; Omaha Ins. Co. vs. Hildebrand, 54 Neb., 306; Western Ins. 
 Co. vs. Richardson, 40 Neb., 1; Aetna Ins. Co. vs. Simmons, 49 
 Neb., 811; Home Ins. Co. vs. Hamang, 44 Neb., 566; Lansing vs. 
 Ins. Co., 93 N. W., 756. 
 
 Provision for arbitration is void. German Ins. Co. vs. 
 Etherton, 25 Neb., 505; Home Ins. Co. vs. Bean, 42 Neb., 537. 
 
 Limitation of time to sue different from statute is void. 
 Omaha Ins. Co. vs. Drennan, 56 Neb., 623. 
 
 Insurance Company that has paid loss, is subrogated to 
 rights of insured against person who caused fire. Omaha etc. 
 Railroad Co. vs. Ins. Co., 53 Neb., 514. 
 
 May sue where cause of action arose, although Company 
 has no agent in said county. Ins. Co. vs. McLimans, 28 Neb., 
 653; Bankers Ins. Co. vs. Robbins, 53 Neb., 44. 
 
 Breach of condition must be pleaded and proved. F. & 
 M. Ins. Co. vs. Wyard, 59 Neb., 451; F. & M. Ins. Co. vs. Peter- 
 son, 47 Neb., 747. 
 
 Defenses of no proofs of loss and that assured burned build- 
 ing, are not inconsistent. Home Ins. Co. vs. Decker, 55 Neb., 
 346. 
 
 (For other laws and decisions, see States, Chapter XXVI.) 
 
CHAPTER XXVI. 
 
 THE STATE AND THE MUTUALS. 
 
 The following sketches of the conditions of the Mutuals m 
 the several states should be full of encouragement to the friend 
 of co-operation. 
 
 The variety of methods, the multiplicity of plans and the 
 procedures in the several states will be surprising. That uni- 
 formity, which is the dream of idealists, is far off yet, though 
 the underlying principle, to furnish insurance at cost, is the same 
 in all. 
 
 The facts show that success is possible with any one of the 
 methods mentioned. 
 
 It has been remarked by foreigners that the American 
 people can work under any kind of a constitution and any kind 
 of a charter. The Mutuals seem to be endowed with a similar 
 power. They have vitality enough to survive the very worst 
 legislation. 
 
 No attempt is made in these sketches to give a full account 
 of the mutuals of any state, but only to bring out points of 
 special interest. 
 
 NO MUTUALS. 
 
 The officers of Arizona, Montana, Nevada, Utah, New Mex- 
 ico and Wyoming say that there are no Mutual Fire Insurance 
 Companies within their respective jurisdictions. No informa- 
 tion whatever can be obtained from Louisiana. 
 
 THE SOUTH EASTERN STATES. 
 
 Mr. M. G. L. Roberts, of Chattanooga, Tennessee, as a re- 
 sult of much effort, has obtained the following information con- 
 cerning Mutuals in the south eastern states. 
 
 There are three Mutual companies in Kentucky, carrying 
 $10,000,000 insurance and having more than $500,000 admitted 
 
 460— 
 
OF MUTUAL INSURANCE 
 
 461 
 
 assets. There are seventeen assessment companies carrying 
 $25,000,000 in risks, and having more than $250,000 in admitted 
 assets. The Mutuals in that state do not seem to be satisfied 
 with the laws. There apears to be over taxation and restrictions 
 of territory. 
 
 Tennessee has two state Mutuals, the German, of Memphis, 
 and the United States, of Chattanooga, with $25,000 assets and 
 about $2,500,000 insurance. There are also six assessment insur- 
 ance companies, with $10,000 assets and $2,500,000 insurance. 
 The Mutual Insurance laws of Tennessee are not satisfactory to 
 the companies which are limited in territory and in risks. A 
 state association has been formed of which over half of the 
 companies in the state are members and the outlook for im- 
 proved laws in the near future is very hopeful. 
 
 Alabama has no Mutual Companies and no laws permitting 
 the organization of such companies. 
 
 Georgia has some ten or fifteen Mutual companies but 
 as they are not required to report to the insurance department 
 no statistics are at hand. All these companies seem to use a 
 mixture of methods, the style of business being somewhat along 
 the joint stock line with a profit sharing feature. They are 
 furnishing a large amount of insurance at cost, thus attaining 
 the object of the Mutuals by a somewhat roundabout process. 
 Doubtless the time will come when the conditions will be more 
 favorable. 
 
 Florida, like Alabama, has no Mutual companies, and no law 
 permitting the organization of any. 
 
 Mississippi seems to have two or three, possibly more, 
 Mutual companies, but I have never been able to get hold of any 
 satisfactory reports from that state, either as to the companies, 
 or the Mutual laws. 
 
 Virginia has several Mutual companies, one or two old, 
 well established, very strong companies. The Insurance Depart- 
 ment of that state does not issue any report so that statistics 
 are not available. 
 
 West Virginia has a few Mutuals, but they obtain their 
 authority to do business from some county official, County or 
 Probate Judge, and the Insurance Department can give no in- 
 formation about them. 
 
 North Carolina has several Mutuals, and some mixed, that 
 is, stock or guaranty fund Mutuals. The companies in that 
 state seem to have done fairly well but I have been unable to 
 gather definite information about them. 
 
 South Carolina has two or three companies, but I cannot 
 get statistics. Since this was written several localities have 
 
462 
 
 A HAND BOOK 
 
 taken steps to organize mutuals but only two or three have 
 begun business and of these no particulars can be learned. 
 
 ARKANSAS. 
 
 Arkansas reports several Mutuals which seem to be doing 
 a very good business. Their assets and risks are as follows : 
 
 Premiums notes $ 162,307.88 
 
 Cash and other assets 91,257.66 
 
 Total assets 253,565.54 
 
 Total risks 11,482,372.00 
 
 or, $2.20 on the $100. 
 
 A new Mutual is reported, the Dixie Mutual Fire, at Helena. 
 There are also five Farmers’ Mutual Aid Societies with total 
 risks of $339,759.00. These are said to be giving good satisfac- 
 tion. The total Mutual risks amount to $11,822,131.00. In all 
 there have been two failures in the state. 
 
 The laws of Arkansas have some peculiarities, and the 
 Mutuals of the state hope for changes. At present they are' 
 hampered by troublesome restrictions and compelled to follow 
 too closely in the footsteps of the old line companies. 
 
 C. S. Collins of Little Rock furnishes the following: 
 
 When the Anti-Trust Law passed the Legislature last 
 spring, after determined opposition lasting through years, not 
 only on the part of the Trust Magnates, but especially in the 
 face of the active opposition of the Old Line Insurance Com- 
 panies; those companies as usual taking the lead as the repre- 
 sentatives of all other trusts, resorted to their usual tactics and 
 through their retained attorneys sought to defeat the law in the 
 courts. Having failed they withdrew from the state and have 
 been constructing subterfuges whereby they can hold on to the 
 business by organizing dummy Stock Companies in the state, 
 and reinsure their work out of the state and thus, by indirec- 
 tion, do the business. In this procedure, as might be expected, 
 the same old methods of slander and opposition have been re- 
 sorted to in almost every conceivable form in order to destroy 
 the credit not only of the Mutual Companies but every form of 
 local organization, for these gentlemen deny the right of any 
 people to do business except by their permission, and thereby 
 prove conclusively their adherence to the spirit of monoply. 
 In the meantime, another enactment (procured largely by the 
 stealthy influence of local representatives of the Old Lines) 
 has prevented the multiplication of Local Mutuals by making 
 it too burdensome on individuals. The old companies have 
 pushed business and have largely increased in volume, while 
 
OF MUTUAL INSURANCE 
 
 463 
 
 quite a number of Local Stocks have been formed and between 
 them the business demand is being quite as well taken care of 
 without the down East and European jumbos as it was with 
 them. Rates have been somewhat lowered all over the state. 
 It is a singular fact, observable not only in Arkansas but in 
 every other state where effective legislation has been attempted 
 to curb the rapacity of Commercial combinations, the Insurance 
 question has been used through the Jumbo Companies as a club 
 to terrorize the people and prevent them from doing anything 
 that means anything but some 1 1 make believe ”. As a matter of 
 fact the insurance question is not the leading question in the 
 law. It only attracts attention and produces that impression 
 by the roar set up by the pigeon stools. 
 
 As a matter of fact the Arkansas Anti-Trust Law, while 
 awkwardly drawn, means something; and, if made 'a model and 
 improved upon by all other states, would put an end to Trusts, 
 or land a few thousand big thieves in the penitentiary instead 
 of pretending to execute law against crime by sending Cuffy 
 to the rock pile for stealing a pig when hungry. The section in 
 it making it a crime for any corporation or person to use money 
 criminally to break down competition by selling under cost, 
 suggests the Standard Oil and beef trusts and is worth its 
 weight in gold and worthy of emulation in every state where 
 the people hate such cruel and disreputable methods. 
 
 CALIFORNIA. 
 
 California has ten Mutuals which at the date of the last 
 attainable report, had at risk $6,619,588, an enormous gain over 
 the previous figures, and under the circumstances, remarkably 
 encouraging. 
 
 The Mutuals in California are hampered by adverse legisla- 
 tion and annoyed by unfriendly officials. Nevertheless they are 
 growing in business at a rapid rate and there are movements 
 which will result in the forming of new companies. There is a 
 complaint of high rate charged by other companies. A law, 
 somewhat friendly to the Mutuals, was passed at a session of 
 the legislature sometime since, but was promptly vetoed by the 
 Governor. That state of affairs will not last long. 
 
 The Mutuals are rapidly increasing in strength and will 
 soon overpower the opposition. 
 
 COLORADO. 
 
 The Superintendent’s report for 1904 gives the following 
 figures : 
 
 There are seven Mutual Fire Insurance Companies with a 
 total risk of $8,466,776. The average premium rate for all 
 
464 
 
 A HAND BOOK 
 
 companies was $1.49, for Mutuals $1.20, showing a decided 
 advantage in economy for the Mutuals. 
 
 Conditions are not yet favorable in all parts of the state. 
 There is but one purely Farm Mutual, and it is doing but a 
 moderate business. Many of the counties of Colorado are rather 
 sparsely settled and while the best farms have good buildings 
 there are regions where many structures are makeshifts to be 
 replaced by substantial structures in the future, that is, if the 
 mine holds out. Year by year, the conditions in Colorado are 
 improving. The Mutuals are increasing their business, and 
 while county mutuals are yet in the future, the State Mutuals 
 are answering the purpose perfectly well. 
 
 Insurance companies must not take any one risk exceeding 
 five per cent of their paid up capital. The superintendent recom- 
 mends the carrying of reserves by all companies. The legisla- 
 tion relating to Mutuals consists of two or three paragraphs. 
 The workings seem to be controlled by the general corporation 
 laws of the state. 
 
 CONNECTICUT. 
 
 This state has at the present time, sixteen mutual com- 
 panies. One of the number, the Middlesex Mutual of Middle- 
 town is licensed to do business in the state of Massachusetts. 
 There are only four that write outside of their own immediate 
 locality, as follows: 
 
 Assets Surplus 
 
 Hartford County Mutual $932,901.00 $834,157.06 
 
 Litchfield Mutual 110,504.42 48,224.63 
 
 Middlesex of Middletown 907,282.06 681,295.89 
 
 New London County Mutual 222,876.40 149,948.42 
 
 Others have been fairly successful in their limited territory. 
 
 The total amount at risk in Mutual Companies in this state 
 is $106,037,079. The total assets are $2,283,318. All of these 
 companies write on a cash premium basis but do not pay divi- 
 dends to the policy holders as do Massachusetts Companies. In 
 most cases their rates are the same as stock companies, although 
 in a few localities there is a slight differential rate in their 
 favor, by agreement with the stock companies. These com- 
 panies confine their underwriting to the following classes: 
 Dwellings, private stables and farms, with the exception of the 
 Middlesex and New London, which occasionally write small 
 lines on mercantile buildings. 
 
 The Mutual Assurance Company of the city of Norwich was 
 chartered in 1795 and is still doing business, and it is stated 
 that its first policy is still in force. The laws of Connecticut 
 
OF MUTUAL INSURANCE 
 
 465 
 
 are fair and reasonable, being the result of many years experi- 
 ence. 
 
 As all Companies are chartered by the General Assembly 
 and each is governed by the peculiar provisions of its own 
 charter, there is very little in the statutes especially relating 
 to Mutuals. 
 
 These organizations seem to be doing a steady and success- 
 ful business. 
 
 DELAWARE. 
 
 Delaware is one of the banner Mutual states. The follow- 
 ing are the statistics. 
 
 5 Mutuals, one of which operates in another state, all old 
 established. 
 
 4 Joint Stock companies, three only reported, one a new 
 
 organization. 
 
 5 Mutuals, total assets $ 2,754,669.36 
 
 5 Mutuals, total risks 26,805,490.08 
 
 3 Stock, total assets 404,208.77 
 
 3 Stock, total risks 5,847,997.00 
 
 Assets per $100, Mutuals, $10.68; Joint Stock, $5.85. 
 
 Oldest Joint Stock 1870. 
 
 Youngest Mutual 1877. 
 
 From this it will be seen that the Mutuals are far in the 
 lead. They appear to have been chartered for periods of years 
 by the legislature. These charters have been renewed from time 
 to time as they expired. The insurance laws are fair. They are 
 very few restrictions on the Mutuals. 
 
 The Farmers’ Fire Mutual of Wilmington gets all its busi- 
 ness through its directors and the plan works well. They take 
 deposit notes, five per cent of which is annual premium. They 
 appear to have all the business they care to handle. They have 
 never assessed a deposit note beyond the annual premium. 
 
 The New Castle Mutual Insurance Company does business 
 along the same line and is fully as successful. They do not 
 solicit business, they get all they want without. They say 
 “Mutual Insurance has been very successful in this state. We 
 have two companies' in this city. Both have been in business 
 fifty-five years. They have the cream of the business, their 
 annual profits average about twenty-five perecent to the policy 
 holder. There never has been a failure of a Mutual in the 
 state . 9 1 
 
 These companies use their charters as constitutions and by- 
 laws, what is lacking is supplied by the general corporation laws 
 of the state. 
 
 29 
 
466 
 
 A HAND BOOK 
 
 There are three other Mutuals, one of which is under con- 
 trol of the Patrons of Husbandry. Their statements all show a 
 good business. 
 
 Delaware has a valued policy law but it does not seem to 
 produce the desired results. One correspondent calls it a nuis- 
 ance. 
 
 IDAHO. 
 
 Idaho has three Mutuals. The Bingham County Farmers ’ 
 Mutual of Idaho Falls, total risks about $50,000, the Farmers ’ 
 Mutual Fire Ins. Co., of Lalah County, of Troy Idaho, risks 
 about the same. Both of these are county Mutuals, and have 
 increased their risks since this was written. 
 
 There is also the Idaho Mutual Co-operative Insurance 
 Company of Boise, Idaho. This has over a million at risk. 
 
 W. R. Hyatt, the Secretary, writes as follows: 
 
 “Our Company, which was organized on the 10th day of 
 May, 1903, has proven a decided success. We have now over 
 one million at risk and have paid in the neighborhood of $5,000 
 losses since the first of January and met all of our expenses 
 promptly, all of which we have done on 50 per cent of the 
 board rate which we collect at the time the insurance is written. 
 We have not levied an assessment and do not anticipate that we 
 will have to in the near future. 
 
 “We have organized under a special law passed two years 
 ago by our state legislature which permitted our organization, 
 which law, by the way, is one that was formed by a committee 
 of your National Association and which was brought here from 
 the office of the Farmers’ Mutual Insurance Company of Lin- 
 coln, Nebraska. 
 
 “We have just been successful in the Supreme Court in a 
 suit which we brought to establish our position in regard to the 
 payment of 2 per cent tax on the gross receipts of the com- 
 pany, less the losses and returned premium, which is imposed 
 upon all other insurance companies under the general insurance 
 laws of the state. We, however, were successful in the case 
 and the Supreme Court held that we did not have to pay the 
 tax . 9 9 
 
 THE NEW LAW. 
 
 An act to authorize the organization of Mutual Co-operative 
 Insurance Companies to insure both personal and real property 
 against loss by fire, lightning, tornado, cyclone, windstorm, hail 
 and the fidelity of persons and to regulate their conduct. 
 
 Be it enacted by the legislature of the state of Idaho. 
 
 Section 1. Organization. Any number of persons residing 
 in this state who own personal or real property of not less than 
 
OF MUTUAL INSURANCE 
 
 467 
 
 $100,000, in value which they desire to have insured may asso- 
 ciate themselves together for the purpose of mutual co-operative 
 insurance against loss by fire, lightning, tornado, cyclone, wind- 
 storm and the fidelity of persons, and form an incorporated 
 company for such purposes and issue policies. Such companies 
 shall embody the words “ Mutual Co-operative ’ ’ in its name. 
 
 Section 2. Recording. The articles of incorporation of 
 such company shall be filed with the Insurance Commissioner 
 for examination. If by him found to be in accordance with the 
 provisions of this act, and the name of such company is not 
 similar to the name of any other insurance company organized 
 in this state, he shall thereupon deliver to such company a certi- 
 fied copy of the articles of incorporation, which on being record- 
 ed in the office of the Recorder of the County where the prin- 
 cipal office of such company shall be located, and a copy thereof, 
 certified by the County Recorder, filed with the Secretary of 
 State. The Secretary of State must then issue to the corpora- 
 tion, over his official seal, a certificate that a copy of the articles 
 containing the required statement of facts has been filed in his 
 office; and thereupon the persons executing the articles, and 
 their associates and successors, shall be entitled to transact 
 business and issue policies of insurance under the corporate 
 name stated in the articles, and for the term of fifty years, un- 
 less it is in the articles of incorporation otherwise stated, or 
 by law otherwise specially provided. 
 
 A copy of any articles of incorporation filed in pursuance 
 of this act and certified by the Secretary of State must be re- 
 ceived in all courts and elsewhere as prima facia evidence of 
 the facts therein stated. 
 
 Section 3. Members. All persons and corporations, muni- 
 cipal or otherwise, who effect insurance in any company organ- 
 ized under the provisions of this act shall thereby become mem- 
 bers of such company and continue to be during the period 
 their insurance is in force and no longer. All persons so insured 
 shall give their obligation to such company in an application 
 binding themselves, their heirs, executors, administrators, suc- 
 cessors or assigns to pay all legal assessments made upon them 
 by such company. They shall also at the time of effecting 
 insurance pay such an amount in cash as is provided for in the 
 by-laws, but no Company shall organize or transact business 
 that does not provide for a reasonable amount of cash to be 
 paid down at the time the insurance is taken in proportion to 
 the risk that is to be carried. The application of any corpora- 
 tion or municipality for insurance in any company shall be 
 signed by the officer or officers authorized to sign ordinary con- 
 tracts of such corporations or municipalites. 
 
A HAND BOOK 
 
 468 
 
 Section 4. Meetings. An annual meeting of such Company 
 for the purpose of electing directors as provided in the articles 
 of incorporation, shall be held in each year at the principal 
 office of such Company of which all members shall be notified 
 in such manner and form as the by-laws shall provide. Special 
 meetings may be held by order of the president upon the written 
 request of a majority of all directors with a like notice. Each 
 member may vote by ballot for as many persons as there are 
 directors to be elected. 
 
 Section 5. Directors. The Number of Directors shall not 
 be less than six or more than twelve. Of those elected at the 
 time of the organization of such Company, one-third shall be 
 elected for one year, one-third for two years and one-third for 
 three years. At each annual meeting thereafter a number equal 
 to one-third of the whole number of directors shall be elected, 
 for three years or until their successors are elected and qualified. 
 Such directors are to manage the affiairs of the Company. 
 Vacancies in the Board of Directors may be filled by the remain- 
 ing directors, and such Board of Directors, or a majority of 
 them, when legally convened at the principal office of the Com- 
 pany shall be competent to exercise all of the powers created by 
 this act. 
 
 Section 6. Officers. Immediately after their election the 
 Directors must organize by electing a President, who shall be 
 one of their number, a Secretary and a Treasurer. They shall 
 perform the duties enjoined upon them by law and the by-laws 
 of the corporation. 
 
 Such officers shall receive such compensation and give such 
 bonds as the by-laws provide or the Board of Directors deter- 
 mine. 
 
 The Board of Directors shall have power, by two-thirds 
 vote, to remove any officer for just cause. They shall also fill 
 any vacancies that may occur from any cause. 
 
 Section 7. Agents and Employees. The Directors of such 
 Company may appoint agents, clerks, adjustors and other em- 
 ployees, allowing them such compensation and exacting from 
 them such bonds as the Directors may deem proper. The Board 
 of Directors may appoint an Executive Committee to whom they 
 may delegate the minor powers and authority vested in such 
 Board. 
 
 Section 8. By-Laws. The members of such Company or 
 the Board of Directors, as may be provided in the Articles of 
 Incorporation, shall make such by-laws not inconsistent with 
 this act as they may deem necessary for the management of 
 such Company. All amendments of the by-laws shall be fur- 
 
OF MUTUAL INSURANCE 
 
 469 
 
 nished to the members in such manner, form and time as the 
 by-laws shall provide. 
 
 Section 9. Suits At Law. If any member of such Company 
 for a space of thirty days after the written or printed notice of 
 assessment has been mailed to him or her, post-paid, and direct- 
 ed to the post-office as stated in the application for insurance, 
 or as the same may have been thereafter changed to and record- 
 ed with the Company, shall neglect to pay the sum assessed, 
 such Company may sue for and recover such amount and costs. 
 Suits at Law may be brought against such company by a, mem- 
 ber or members thereof for loss sustained if payment is with- 
 held after such loss becomes due. The officer or officers of such 
 Company who shall willfully neglect or refuse to perform the 
 duties imposed upon them by the provisions of this act, shall 
 be liable in their individual capacity to the persons sustaining 
 such loss. 
 
 Section 10. Territory. It shall be lawful for such Com- 
 panies to insure property only within this state until such time 
 as such Company shall have at least $5,000,000.00 at risk, and 
 then the Board of Directors may determine in what state or 
 states, other than the State of Idaho it shall do business and 
 apply for admittance to such other state or states. Any Mutual 
 Co-operative Insurance Company organized under the 
 law of any other state similar in form and in 
 substance to this act may be admitted to do busi- 
 ness in this State by the Insurance Department 
 of the State upon making a showing that they are legally incor- 
 porated under the laws of their own state and have complied 
 with the conditions of such law, have at least $5,000,000.00 of 
 insurance in force, and the proper Insurance Commissioner of 
 such state shall certify that he believes such Company solvent, 
 doing a good business, officered by men of integrity and stand- 
 ing, and he believes they are entitled to the confidence of the 
 public, and upon such Company procuring a request and applica- 
 tion for membership of one hundred persons, citizens of this 
 state having property that they desire to have insured, and 
 paying a fee of $25.00 to the Insurance Commissioner of this 
 state. 
 
 Provided always that the Insurance Commissioner and the 
 laws of the state, where such company applying for admission 
 is domiciled, shall grant to the Mutual Co-operative Insurance 
 Companies of this state, organized under this or similar laws, 
 like rights and privileges under in substance the same rules and 
 restrictions. 
 
 Section 11. Policies. Such Companies may issue policies 
 on all kind of insurable real and personal property as herein 
 
470 
 
 A HAND BOOK 
 
 provided against loss or damage by fire, lightning, tornado, 
 cyclone and windstorm and the fidelity of persons for any length 
 of time as may be determined upon by such Company in its by- 
 laws. It shall not issue policies on any one risk or hazard to 
 exceed $1,000.00 until there is $300,000.00 insurance in force, 
 when policies of $2,000.00 may be issued; or issue policies for 
 more than $2,000.00 on any one risk until there is $1,000,000.00 
 insurance in force, when policies of $3,000.00 may be issued; 
 or issue policies for more than $3,000.00 on any one risk until 
 there is $2,000,000.00 insurance in force, when policies may be 
 issued in the discretion of the Company. Provided no real 
 property shall be insured for more than three-fourths its value. 
 
 Should the amount of insurance decrease below any of the 
 figures above enumerated, the amount of the policy must be 
 correspondingly reduced upon its renewal or within three 
 months from the time that the amount of insurance falls below 
 the foregoing figures. 
 
 All policies shall be signed by the president and secretary, 
 and each policy holder shall be furnished with the by-laws of 
 the Company. Should the amount of insurance of any Com- 
 pany created under this act decrease below $100,000.00, the 
 president of such Company shall at once call a meeting of the 
 members to consider the matter of disorganizing. 
 
 Section 12. Assessments. All assessments shall be deter- 
 mined by a proper classification and rating of the property 
 insured, so that each member will be assessed according to the 
 greater or less risk of the property insured to the hazard in- 
 sured against. 
 
 An assessment may be made on the members due and pay- 
 able within thirty days thereafter to enable the Company to 
 provide for loss and expenses necessary in the conducting of its 
 business whenever the Board of Directors so determine. No 
 assessment shall be made on a member for liabilities incurred 
 prior to his or her membership. Any member may be excluded 
 from the benefits of insurance during all the time in which he 
 or she may be in default of payment of an assessment, and the 
 acceptance of such assessment after the same has once become 
 delinquent shall not in any manner make the Company liable 
 for any loss or damage that may have occured during the period 
 that such policy was suspended. Any member shall not be 
 liable directly to any other member for such other member’s 
 loss or damage, but the liability of a member shall be solely and 
 exclusively through the channel and process of an assessment 
 and the amount of such assessment shall be only his pro-rata 
 share in proportion to the amount of insurance carried and the 
 rate on the same of all losses and expenses, making reasonable 
 
OF MUTUAL INSURANCE 
 
 471 
 
 allowance and deduction for uncollectible and unpaid assess- 
 ments. 
 
 Section 13. Payment of Losses. Losses shall become due 
 and payable in sixty days after their adjustment. Said adjust- 
 ment shall be made within sixty days after losses occur. 
 
 Section 14. Arbitrators. In the event of a dispute between 
 the Company and a member respecting whether there has been a 
 loss, and the adjustment of the same, the matter shall, at the 
 request of the Company, or such member, be submitted to arbi- 
 trators, one of whom shall be selected by the Company and one 
 by the member, and such two so chosen shall select a third, all 
 of whom shall be disinterested and shall take and subscribe to 
 an oath to that effect. A decision of a majority shall be final 
 and binding on all parties. 
 
 Section 15. Cancellation. Any member of such Company 
 may withdraw therefrom at any time by giving the Company 
 
 notice thereof in writing and paying his or her share of all 
 
 claims or liabilities for losses or expenses then existing against 
 the Company, surrendering his or her policy and paying such 
 cancellation fee as may be provided, not exceeding $1.00; and 
 the Board of Directors may provide, in case the sum collected 
 at the time the member takes out insurance is such as to justify 
 for a reasonable short rate return premium, and the action of the 
 Board of Directors in that respect shall be final ; but no member, 
 his or her heirs, executors, administrators or assigns, can avoid 
 liability to such Company for their pro rata share of the unpaid 
 claims against the Company accuring while a member. Such 
 
 Company may for good and sufficient reasons apparent to it, 
 
 cancel any policy by giving the member notice to that effect and 
 releasing him or her from further assessments and thereupon 
 such member shall send in his or her policy to the Company. 
 
 Section 16. Bodies Corporate. Such Companies shall be 
 deemed bodies corporate with succession and shall possess the 
 usual powers and privileges and be subject to the usual duties 
 of corporations within the liminations of this act, and such 
 corporations may purchase, own, hold, lease, encumber, and 
 convey such real estate severally or jointly with others as may 
 be necessary for its present and prospective use as offices and 
 place of business. 
 
 Section 17. Annual Statement. It shall be the duty of the 
 president and secretary to prepare annually, under oath, a 
 full and complete statement of the condition of the Company 
 on the 31st day of December each year, and present the same at 
 the annual meeting of the members. 
 
 Section 18. Certificates. It shall be the duty of such Com- 
 pany to file an annual statement with the proper insurance 
 
472 
 
 A HAND BOOK 
 
 department of this state not later than the 31st day of January 
 of each year, on blank furnished by said insurance department. 
 Such department, if it thinks necessary, or one deputized by it, 
 having no interest in an insurance company and unprejudiced, 
 may make an examination into the affairs of such company and 
 for such purposes shall have access to all the books and files 
 of the company, and may examine the officers and other wit- 
 nesses under oath. If such Company is doing business in 
 accordance with and under the provisions of this act, is solvent 
 and properly managed, the insurance department shall furnish 
 such company and its authorized agents a certificate stating 
 that such Company has complied with the provisions of this act 
 and is authorized to do business for the ensuing year unless 
 certificate is sooner revoked. If upon such examination it shall 
 appear to such department that the condition of such Company 
 does not justify its continuing in business, it may apply to the 
 District Court of the County where the principal office of such 
 Company is located for an order requiring such Company to 
 show cause why it should not be closed. For examining the 
 Company’s annual report and issuing certificate it shall be paid 
 $ and for each agent’s certificate $ 
 
 Section 19. Penalties. It shall not be lawful for any com- 
 pany or agent to do business without authority given them by 
 the Insurance Department. Any person who shall act or at- 
 tempt to act for or on behalf of any company in any capacity 
 as agent, officer or otherwise, in the procuring or attempting to 
 procure or solicit business without said Company having first 
 complied with the provisions of this act, (except soliciting the 
 original signatures to the articles of incorporation and applica- 
 tions for membership necessary to organize a company), shall, 
 on conviction thereof, be found guilty of a misdemeanor and be 
 fined in any sum not exceeding $500.00 or committed to the 
 county jail not exceeding six months, or both such fine and 
 imprisonment. 
 
 Section 20. Accepting this Act. Any mutual company now 
 doing business in this state under any of the provisions of the 
 law thereof, with the written consent of a majority of the mem- 
 bers, may accept the conditions of this act and thereupon be 
 governed by it. Before such company shall be entitled to the 
 benefits of this act, it shall file with the Insurance Department 
 its articles of incorporation and by-laws and record a certified 
 copy thereof as provided in Section 2 of this act. 
 
 Section 21. All acts and parts of acts in conflict with the 
 provisions of this act are hereby repealed in so far as they effect 
 any Company or Companies hereafter organized under or taking 
 advantage of this act. 
 
OF MUTUAL INSURANCE 
 
 473 
 
 Section 22. Whereas an emergency exists this act shall 
 take effect and be in force from and after its passage and ap- 
 proval. 
 
 F. L. Armstrong, State Agent, writes as follows: 
 
 In regard to the matter of getting our law through, will 
 say that while the present management of our company were 
 the only ones who worked on the bill in the Lobby of the Sev- 
 enth Legislature, nevertheless, Judge Coffin deserves great 
 credit both for his service in drafting the law, and also for his 
 assistance in securing the signature of the Governor for the 
 same. The Judge rendered us every possible assistance in his 
 power and would have done more, had it been necessary. He 
 very thoughtfully telegraphed the Governor requesting his 
 signature to the bill, which fact, I think, was of very great 
 assistance to us. He is ever ready to advise us and assist us in 
 every way possible since our organization and that we feel very 
 grateful to him for the same. 
 
 At the National Convention of Mutual Insurance Companies 
 held in Indianapolis the Legislative Committee who had in 
 charge the drafting of a law which it was proposed to pass in 
 the various states reported fully. And thereafter the State of 
 Idaho during the session in 1903 passed a statute which is 
 nearly identical with the law proposed by the National Conven- 
 tion. 
 
 ILLINOIS. 
 
 The report of the State Superintendent for 1904 gives the 
 
 following statistics of the Mutuals. 
 
 12 District Fire Companies, total at risk $ 24,361,468.44 
 
 53 County Fire Companies, total at risk 58,163,410.54 
 
 144 Township Fire Companies, total at risk 92,475,710.32 
 
 Total $175,000,589.30 
 
 4 County Windstorm Companies $ 779,894.00 
 
 7 District Windstorm Companies 9,439,623.00 
 
 Total $185,220,106.20 
 
 There are also 11 State Mutuals with risks of $91,655,343.60 
 
 Total $276,875,449.60 
 
 THE ILLINOIS MUTUAL SYSTEM. 
 
 Illinois has no distinctive mode of operating different from 
 that of most of the central western states, so that while I speak 
 more directly of Illinois, yet what is said of our great prairie 
 state, will apply to a large proportion of the companies of the 
 middle west. 
 
474 
 
 A HAND BOOK 
 
 In Illinois we have at present 214 Farmers’ Mutual Com- 
 panies, besides some eight or ten Mutuals whose business is 
 limited to some special industry. Of the Farmers’ Mutuals 
 some ten or twelve are organized under special charters granted 
 directly by the Legislature. All the others are operating under 
 some one of the special acts of the Legislature. 
 
 To understand the peculiarities of these statutes, it must be 
 remembered that every act or amendment thereto, has been 
 secured by the Farmers in a contest with the lobby of the old 
 line companies. And it has been only an occasional session 
 that would grant us anything, and even then it would be in a 
 compromise or trade. 
 
 The line of attack of the Old Line Lobby, when they saw 
 that we were to be favored with favorable legislation, would be 
 to so restrict our territory or the functions of the company, as 
 to make them failures, or of little consequence. 
 
 In spite of this organized opposition, we have secured 
 a fairly good code of laws, and our growth and present standing 
 in public esteem, under such unfavorable circumstances is really 
 phenomenal. 
 
 The very limitations and restrictions placed on the farmers 
 Mutuals, has made them more purely mutual than can easily 
 be found under any other system that I know of. 
 
 The form of law most usually used is what is known as 
 the “ Township Mutual Insurance Act.” Under this act any 
 number of persons not less than twenty-five, and having prop- 
 erty aggregating not less than $50,000 which they desire insured, 
 and located in not exceeding twelve townships, may organize 
 and conduct an insurance company on the assessment plan. 
 
 Such company must confine its business to farm property, 
 farm churches, school houses and town halls. The term of 
 insurance cannot exceed five years. Power is given the direc- 
 tors to levy assessments, prorata, on their members for actual 
 losses and legitimate expenses only. And it is made obligatory 
 on them to do so. No provision is made for the creation of a 
 permanent fund, and under its operation no fund of any magni- 
 tude can be accumulated. The whole capital stock of such 
 companies consists of their power to levy assessments on their 
 members for actual expenses and losses. A sworn report is re- 
 quired to be made once a year to the Superintendent of Insur- 
 ance as a condition for the renewal of license to do business. 
 
 These are the distinguishing features of the “Illinois 
 Plan,” and while the plan has its disadvantages, it also has 
 much that may be said in its praise. It would be hard to con- 
 ceive of a more purely mutual plan. Its management is along 
 simple democratic lines, its members all have a vote in propor- 
 
OF MUTUAL INSURANCE 
 
 475 
 
 tion to their insurance. There is no temptation for treasurers 
 to abscond, or officers to conspire to defraud. Every member 
 may know where every cent collected goes to, both from the 
 Secretary’s annual report to the Company, and from sworn 
 report to the Superintendent of Insurance, which is published 
 for general circulation. 
 
 A. T. STRANGE, 
 Walsh ville, Illinois. 
 
 INDIANA. 
 
 The progress of Mutual Insurance in Indiana is retarded 
 by restrictive laws. Laws will probably be passed allowing the 
 Mutuals to cover more territory and also requiring them to re- 
 port to the State Department of Insurance. Then the disadvant- 
 ages of the present chaotic condition will be done away with. 
 The companies are all doing good work but their sphere of use- 
 fulness should be extended. 
 
 The Indiana Mutuals have a wide awake and effective state 
 organization. Its membership is not what it should be. This 
 Is to be accounted for by the fact that many of the Indiana 
 Mutuals are old established and successful. They cover their 
 field, do all the business they wish and give excellent satisfac- 
 tion. They have very little need for outside help and do not 
 care to trouble themselves about state conventions and such 
 matters. While this is true, if all the Indiana Mutuals were 
 allied the working force of the state would be materially 
 strengthened and the influence in favor of co-operation would 
 be greatly increased, and their combined force would enable 
 them to procure almost any legislation they desired. 
 
 Some of the companies have a novel feature, and one that 
 is evidently useful. They issue to members a short time insur- 
 ance on harvested crops. Some companies have a special policy 
 and others use slips to be attached to the policy already in force. 
 In either case, they run as long as needed and then a settlement 
 is made with the company. 
 
 Many companies are not even incorporated and cannot sue 
 and be sued, but all seem to be successful and no failures among 
 them have been heard of for several years. 
 
 A number of the Farm Mutuals of Indiana are old organiza- 
 tions and are still working under their original charters. There 
 seems to be very little uniformity. Mr. H. L. Nowlin, of Law- 
 renceburgh, the Secretary of the Farmers’ Mutual Insurance 
 Companies Union of Indiana says: 
 
 “I send you by this mail a report of the last annual meet- 
 ing of our State Ins. Union and also a list of all the companies 
 
476 
 
 A HAND BOOK 
 
 in the state who do not belong to the Union so far as I have been 
 able to ascertain. No reports are made to any authority of the 
 state and I know there are fully twice as many Mutual Com- 
 panies in Indiana as I have on this list. I have exhausted every 
 means that I know of to secure names of companies but have 
 failed in part. Companies are organized in so many different 
 ways and have so many methods that I can give you but little 
 information. ’ ’ 
 
 The report contains statistics of twenty-five companies hav- 
 ing a total risk of nearly forty-eight millions. It is an inside 
 estimate that this is only a fourth of the Farm Mutuals insur- 
 ance of the state. The Class Mutuals have over thirteen millions 
 at risk. 
 
 IOWA. 
 
 Iowa is another state in which the Mutuals are steadily 
 absorbing the fire insurance business at a rate which will soon 
 bring them to the front rank. 
 
 The Mutuals of Iowa have made a stubborn fight and have 
 made good progress. They have been annoyed by misrepre- 
 sentation from the opposition and by the odium arising from 
 counterfeit mutuals at home. But their tribulations are past, 
 and the Mutuals now have the confidence of the people and are 
 getting their business. 
 
 The following from the address of the Hon. J. A. Swallow, 
 before the State Association of Mutual Insurance Companies, 
 November 1904, is an excellent account of conditions in Iowa. 
 
 At the present time there are 154 county mutuals, 19 
 state mutuals doing a fire business, three state mutuals doing 
 a tornado business, thirteen mutual hail associations, and one 
 association insuring plate glass against accidental breakage 
 other than fire ; thus we see that we have in this state 190 incor- 
 porated mutual insurance associations operating under Chapter 
 Five of the Code. 
 
 From President Brook’s address which he delivered before 
 this association last year we are permitted to quote that in 1888 
 the insurance in force in mutual associations in this state 
 amounted to $49,735,098, and that in that year there were 105 
 associations in the state. When we compare this with the 190 
 associations in the field this year we wonder whether this great 
 increase of associations is able to carry the amount of insur- 
 ance in proportion. We find by the last auditor’s report that 
 the amount of insurance in force in strictly mutual associations 
 
OF MUTUAL INSURANCE 
 
 477 
 
 had increased from $49,735,098 in 1888 to $392,698,481 and that 
 the average amount carried in 1888 by each association was 
 $474,384, while on January 1, 1904 the average amount carried 
 by each association was $2,082,624. This was a phenomenal 
 growth and one that every mutual man in the state may feel 
 proud of. 
 
 Taking our auditor’s report as our authority and elimin- 
 ating the county associations that write Tornado and those that 
 write Hail business and we find that the average cost of county 
 associations writing nothing but a fire and lightning business 
 has been a little less than two dollars per thousand of insurance 
 each year. Taking this as a basis it is safe for us to estimate 
 that the members of the county associations have saved $525,000 
 each year and as the state associations have cost but 75 per cent 
 of board or stock company rates the members of mercantile 
 mutuals have saved $117,000 making a saving to members in one 
 year of $642,000. 
 
 Mr. Swallow also writes that twenty companies have organ- 
 ized as stock mutuals in this state; At the present time five of 
 them are still doing business under that law; four have re- 
 organized as Capital Stock Companies, and eleven have failed; 
 Three companies organized under Chapter Five but did a Chap- 
 ter Four business and these have also failed ; two of the mutuals 
 that were organized under Chapter Four and that are still 
 doing business under that chapter are making strenuous efforts 
 to change to stock companies; There have been twenty-five 
 Capital Stock Companies organized in this state with capital 
 to the amount of $2,800,000 ; of these twelve are still in business 
 while thirteen have failed and quit business, those that failed 
 represented a capital stock of $1,600,000. As we noticed before 
 three Companies organized under Chapter Five but did a 
 chapter four business, these companies were The Iowa Mutual 
 Fire of Des Moines; Mutual Fire of Des Moines; Millers and 
 Manufacturers Mutual of Des Moines. 
 
 The Fremont County Mutual with headquarters at Ander- 
 son commenced an organization and issued policies before they 
 had sufficient insurance in force and were compelled to quit 
 business. The Montgomery Mutual of Red Oak also commenced 
 business in the same way and had the same ending. The case 
 of Weiderman vs. The Montgomery County Mutual was an out- 
 growth of this association. 
 
 There have been organized (aside from those enumerated 
 above) 154 County mutuals, 19 state mutuals doing a fire busi- 
 ness, three state mutuals doing a tornado business, thirteen 
 mutual hail associations, and one association insuring plate 
 
478 
 
 A HAND BOOK 
 
 glass against accident. All these associations are still in the 
 field and doing a good healthy business. We have often made 
 the statement (and it has never been contradicted), that there 
 has never been a failure of a strictly mutual association in this 
 state, organized and operated strictly under the law of Chapter 
 Five of the Code. 
 
 With such a record we can see no good reason why other 
 states should bar mutual associations from doing business. 
 
 KANSAS. 
 
 16 Mutual Fire, Lightning and Tornado Insurance 
 
 Companies, risks $ 60,268,230 
 
 13 Mutual Hail Companies, risks 4,114,287 
 
 Total risks $64,382,517 
 
 The early days of Kansas were days of storm and of war. 
 It may be said that she succeeded in advertising herself in every 
 civilized country in the world. Those who took up claims or 
 went into merchandising were generally too busy to pay much 
 attention to outside matters, and so the schemers had full sway, 
 checked only by an occasional dose of frontier justice, admin- 
 istered when conditions became intolerable. Charters were 
 issued by the thousand. Some of these institutions were well 
 planned, many were theoretical ventures, and some were pure 
 frauds. The early history of insurance in Kansas, is colored 
 with the same tint. Nearly every kind of insurance has been 
 tried at sometime or another, and like the companies in other 
 lines some have been successful and others have failed or re- 
 tired. Sixteen Mutuals and two joint stock companies, one of 
 which was organized last year, still survive. The record of 
 insurance, is, however, no worse than that of organizations in 
 other lines. 
 
 The Guarantee Fund, as originally provided, was not ac- 
 ceptable to the Mutuals. It was practically a joint stock annex. 
 At the session of 1905 this law was amended as follows: 
 
 Section 1. “Section 1 of Chapter 130 of the Laws of 1885 
 is hereby amended so as to read as follows: Section 1. Any 
 Mutual fire and tornado insurance company organized under 
 the laws of this state, having done business not less than two 
 years and having at least one million dollars at risk, and prem- 
 ium notes amounting to not less than twenty-five thousand 
 dollars, may for the better protection of its policy holders 
 create a guarantee fund, with the privilege of increasing it 
 from time to time.” 
 
OF MUTUAL INSURANCE 
 
 479 
 
 Section 2. “Section 2 of Chapter No. 30 of the Laws of 
 1885 is hereby amended to read as follows: Section 2. Any 
 such insurance company may create such a guarantee fund by 
 setting apart not more than fifty per cent of the excess of its 
 funds over and above the ten percentum reserve required by 
 law and the amount of all current liabilities for losses and ex- 
 penses, and such funds shall be invested in mortgages on real 
 estate worth at least double the amount loaned thereon, or in 
 the bonds of any county, school district, or incorporated city 
 issued under the laws of this state at their market value, or in 
 United States or state bonds at their market value. The guar- 
 antee fund of mutual companies shall be liable for the claims 
 against the company only after all other resources have been 
 exhausted. 
 
 Section 3. “Section 4 of chapter 130 of the Laws of 1885 
 is hereby amended so as to read as follows: Sec. 4. Mutual 
 fire and tornado insurance companies having a guarantee fund 
 as provided in this act to the amount of twenty-five thousand 
 dollars may issue policies of insurance against loss or damage 
 by fire, lightning, tornadoes, and cyclones, on dwellings, barns, 
 sheds, outbuildings, hay, grain, wool, and other products, cribs 
 and their contents, live stock, wagons, carriages, harness, farm 
 implements, machinery, furniture, household goods, wearing 
 apparel, provisions, musical instruments, and libraries, being 
 upon farms as farm property, or in dwellings, or in accom- 
 panying outbuildings, that constitute detached risks in towns 
 and villages; but shall issue no policy to exceed three thousand 
 dollars on and in any one building, or buildings that are exposed 
 one by the other, and situated in the state of Kansas. A de- 
 tached dwelling as understood in this section shall be construed 
 to be a dwelling not nearer that five feet to any other building. 
 Mutual companies having a guarantee fund of one hundred 
 thousand dollars or more may issue policies of insurance on the 
 above described kinds of property situated in or out of the 
 state of Kansas. ’ ’ 
 
 Section 4. “Section 5 chapter 130 of the Laws of 1885 
 is hereby amended so as to read as follows: Sec. 5. Mutual 
 fire and tornado insurance companies having a guarantee fund 
 of not less than twenty-five thousand dollars may accept in 
 payment of premiums on their policies cash or time notes pay- 
 able at such time and place as provided in said note or notes, 
 payable in assessments, but the members of said companies 
 shall not be liable to the companies or any other person to ex- 
 ceed the amount of their premiums or premium notes and inter- 
 est due thereon.’ ’ 
 
480 
 
 A HAND BOOK 
 
 Mutual Live Stock Companies are also provided for. 
 
 Hail companies pro rate when the premiums are not suffic- 
 ient to pay the losses. 
 
 The state has a valued policy law. 
 
 MAINE. 
 
 The conditions of Mutual insurance in the State of Maine 
 are the most peculiar of any state in New England, inasmuch 
 as it has practically no insurance companies that are writing a 
 general business- such as the Mutuals in the other New England 
 States are doing at present. 
 
 December 31st, last, there were 49 mutual companies 
 organized or incorporated under the laws of the state of Maine, 
 transacting business in that state. The history of domestic 
 mutual fire insurance companies in Maine has been that when 
 they confined their business to a limited area, usually one or 
 two towns, or sometimes part of several towns, and the business 
 has been under the supervision of a Board of Directors scat- 
 tered over this territory, the companies have been successful 
 and prosperous, while disaster has overtaken practically every 
 company that has attempted to do a general business by 
 agencies. 
 
 Three of the 49 companies mentioned are what is commonly 
 known in Maine as “Grange” companies, for the reason that 
 their membership is confined to the members of the Order of 
 the Patrons of Husbandry. Two of these companies are doing 
 a general business throughout the state, while the third and the 
 new company, I think, confines its operations practically to 
 Aroostook County. 
 
 They are all doing a successful and prosperous business. 
 
 The Mutual Fire Insurance Company of Saco has a surplus 
 of about $90,000, and does business on substantially the same 
 rates as the stock companies. I have the impression, however, 
 that its business is confined exclusively to real estate, and that 
 no personal property is, under any circumstances, insured. 
 
 The Dirigo Mutual of Gorham is writing a portion of its 
 business upon what is called the cash plan, charging substanti- 
 ally the same rate as the stock companies, and taking a premium 
 note for an equal amount. This company has been in operation 
 but a few years and has written a large volume of business, 
 practically all of which, until within the past year, has been 
 upon the note plan. Under the Maine law a company must take 
 a premium of at least 5 per cent, and such part of it as the 
 directors may determine must be immediately paid and endorsed 
 thereon, unless the company elects to charge a stock rate and 
 
CHAS. S. GRISSEN, McMINNVILLE, OREGON. 
 
 Mr. Grissen is the President of the Oregon Fire Relief Asso- 
 ciation. It has been in existence long enough to be thoroughly 
 tested and has now the confidence of the people of Oregon. It 
 is Mr. Grissen’s pride and to it he is devoting the energies of his 
 life. 
 
J. Y. M. SWIGART, LINCOLN, NEBR. 
 
 Mr. Swigart first engaged in Insurance work in Iowa. In 1891 
 he organized the Lancaster County Mutual, in Nebraska and la- 
 ter the Nebraska Mutual and became the secretary of both. In 
 1897 the town law was passed and the Dwelling House Mutual 
 was launched with Mr Swigart for secretary, he having retired 
 from the County Company after six years of faithful service. 
 Mr. Swigart is now retired, but has not lost his interest in Mutual 
 Insurance. 
 
OF MUTUAL INSURANCE 
 
 481 
 
 take a premium note for an equal amount, in which case it is 
 required to maintain as reserve 50 per cent of the cash prem- 
 iums on its policies in force. The bulk of the business trans- 
 acted by these companies in the state of Maine is therefore 
 upon what is known as the premium note plan. These notes 
 vary in amount from 5 per cent to 15 per cent, seldom, however, 
 running over 10 per cent. The principal source of revenue of 
 these companies is their policy fees, the cash premiums or per- 
 centage of the premium note which is paid at the time the 
 policy is issued, and their assessments upon the notes of such 
 amounts as are necessary to pay the losses and expenses. 
 
 Patrons of these corporations are securing their insurance 
 at surprisingly low rates, and, as indicated in the opening of 
 this communication, the business has usually been success- 
 fully conducted. Some of the companies transacting business 
 on the note plan have not made an assessment upon the policy- 
 holders for more than fifteen years. 
 
 These companies, December 31, 1904, had at risk, $9,381,880. 
 They collected during the year in cash premiums, $35,680.38 
 and for policy fees, $3,370.30. They assessed their policy 
 holders, $59,668.64, and losses paid were $79,277.62. 
 
 MARYLAND. 
 
 Corporations, in Maryland, are organized under a general 
 law, subject only to such rules and regulations as may be neces- 
 sary for the public safety. They are subject to strict super- 
 vision, but so long as they are safely managed they arrange 
 business details to suit themselves. 
 
 December 31, 1903, the Commissioner of Insurance reported 
 fifteen Maryland Insurance Companies, eight joint stock and 
 seven Mutual. During 1904, one small joint stock company 
 retired for reasons not given, four other joint stock companies 
 and two Mutuals were put out of business by the Baltimore 
 Fire. 
 
 That is the disasters among the old line companies were 
 more than twice as many as those among the Mutuals. 
 
 One Mutual, the old Baltimore Equitable, paid conflagra- 
 tion losses to the amount of $1,915,517, and this without inter- 
 rupting its business in the least. It still has a surplus of $489,- 
 230. The two Mutuals which failed were doing a large business 
 in Baltimore. Statistics of their condition are not given by 
 the Commissioner as their reports on file were burned in the 
 great fire. The four joint stock companies would have been 
 pronounced absolutely safe before the fire. Their capitals 
 30 
 
482 
 
 A HAND BOOK 
 
 were sound and they had each a good surplus. But they went 
 under. The score at Baltimore is two to one in favor of the 
 Mutuals, so far as Maryland companies are concerned. With 
 regard to outside companies there were several wrecks among 
 the joint stock companies. This is mentioned not so much as a 
 matter of comparison with Mutuals, as to show that among the 
 old line companies doing a general business no policy holder 
 can be sure of safety unless he knows that the insurance is so 
 scattered that conflagration losses are not possible. 
 
 When this fire occurred, one old line journal remarked that 
 the Mutuals were gone for good and this statement was copied 
 all over the country. It was uncalled for and untrue. 
 
 MASSACHUSETTS. 
 
 BRIEF HISTORY OF MUTUAL UNDERWRITING, BY ROGER F. UPHAM. 
 
 The circumstances out of which the mutual fire insurance 
 companies of Massachusetts emerged may be stated as follows: 
 
 The frame character of the towns and small cities, which 
 then was characteristic of Massachusetts, made the ravages of 
 fire unavoidable. No hydrant or other protective system existed 
 save the hand-bucket brigades, which were organized in many 
 towns, notably in Worcester, and which provided their mem- 
 bers with a leather bucket, a cloth bag, a bed-wrench, and a 
 screw-driver. Whenever a fire was discovered the summons 
 brought out the members, each equipped for fire service, the 
 cloth bag serving to carry out breakable articles. These brigades 
 were, moreover, something of the nature of a social club, at 
 certain meetings, and as the necessity of providing something 
 beyond the opening of public-spirited purses and the lending of 
 strong, willing arms for rebuilding, became apparent, the logical 
 sequence was to mass the hazards in a mutual agreement to bear, 
 upon a certain consideration, the misfortunes of a community. 
 Besides, mortgages required some form of insurance to serve as 
 protection to the collateral, and this probably finally crystallized 
 the Worcester Mutual Fire Insurance Company, the first outside 
 of Boston. 
 
 At the beginning some mutuals charged a certain percent- 
 age, taking therefrom, say 5 per cent in cash and assessing on 
 the balance as losses required, while others charged a cash 
 premium upon agreed rate per cent, and to have the insured 
 recognize, by note of hand, or by-law and policy agreement, an 
 obligation for the same amount, or more, as the company's by- 
 law might be, to be assessed in event of loss necessity. The 
 term of insurance was 1-3-5-7 years, usually seven years upon 
 
OF MUTUAL INSURANCE 
 
 483 
 
 dwellings, at a maximum, shortened finally to five years, the 
 maximum of today, and a term limited almost absolutely to 
 residential property. The hazards were limited to fire and light- 
 ning; no wind, cyclone, or hail insurance being issued. The 
 rates then as now were some higher than the stock rates. As an 
 illustration, the rate on protected dwellings in stock companies 
 being on an average $7.50 on the thousand dollars for five years 
 while the mutual rate is $12.50 for five years per one thousand 
 dollars, and on rated risks a differential rate is established over 
 the stock rate, which will be mentioned later in this paper. 
 The Massachusetts laws and state inspections have made no 
 discrimination against the mutual system, but a spirit of fair- 
 ness and impartiality has existed which has tended to far better 
 results for the entire community than would otherwise have 
 been possible. 
 
 The early practical history of mutual insurance had to do 
 largely, if not mainly, with farming interests, and in the various 
 counties mutual companies were formed (in all 30). With 
 scarcely an exception they continue to the present, having been 
 of immense benefit to the state, money savers to the policy 
 holders, and a bulwark between the policy holder and what 
 might prove otherwise an opportunity for extortion by other 
 classes of companies. 
 
 The first forty or fifty years the field was almost entirely 
 clear of competitors, and the pathway comparatively smooth. 
 Farming was successful and town and city insurance grew 
 apace, the mode of heating and lighting simple and safe-guarded 
 by rigid care. Fires were rare and the underwriting margin 
 therefore excellent. The Boston fire of 1872, following on the 
 heel of the Portland conflagration, was the first warning of 
 danger from congested lines of insurance in New England. 
 The Massachusetts mutual companies had been great favorites 
 in Boston — the area covered by the fire waste of large extent — • 
 the losses unparalleled, but the managers of the companies inter- 
 ested bravely battled with the exceedingly difficult circumstances 
 and won out. 
 
 But at this point the history of mutual fire insurance in 
 Massachusetts assumes a different cast. The possibility of an 
 assessment was wrung in infinite changes to frighten policy hold- 
 ers from mutual ranks, and it took years before the people were 
 really educated to see that the assessment bug-bear is one of the 
 strongest supports of a mutual company, as it in reality makes 
 a mutual fire insurance company perennial, the wiping of its 
 funds, which in the case of a stock company closes its history, 
 in a mutual company furnishes a fund to reinstate it. 
 
484 
 
 A HAND BOOK 
 
 The four dominant factors which contribute to the suc- 
 cess of Mutual Underwriting in Massachusetts are: 
 
 First: The formation of the Massachusetts Mutual Fire 
 Insurance Union. 
 
 In 1879 the managers of two or three insurance companies 
 conceived the idea of forming an organization which should 
 bring together all mutual companies writing dwelling house and 
 mercantile risks for the purpose, as stated in the preamble, “of 
 considering all matter affecting mutual companies and adopting 
 such measures as would work for the benefit of that system of 
 insurance — for social and fraternal purpose, to the end that 
 peace, harmony, and good-fellowship may hereafter prevail.” 
 
 Successive meetings proved so profitable that it was only 
 a few years before all the prominent mutuals (except the mill 
 mutuals who had an organization of their own) were enrolled 
 as members, taking part in its work and deliberations. Rates 
 were made, agreements entered into, and a more systematic 
 method of doing business adopted, which has universally com- 
 mended itself to the executive officers and policy holders. This 
 was called the “Massachusetts Mutual Fire Insurance Union.” 
 
 At first quarterly meetings only were held. Later it was 
 found advantageous to meet weekly. 
 
 Committees on luminants, rates, inspections, special con- 
 ference, towns, and fire protection were appointed. Books of 
 mutual rates and instructions with special slips of changes 
 maintained and concerted efforts toward securing wise and in- 
 telligent legislative action arranged for, with recommendations 
 unifying to a great extent rules, permits 1 , and practices through- 
 out the field. In fact this state organization of Massachusetts 
 mutuals has been singularly advantageous and serviceable, as 
 will be seen by the growth of the business of the companies 
 forming the union in comparative figures for the twenty- three 
 years*jof existence to this year prepared by the secretary as fol- 
 lows: 
 
 1879 1904 
 
 At risk $181,029,381 $451,486,355 
 
 Assets 4,531,863 7,545,838 
 
 Liabilities (re-insurance fund) 2,143,053 3,658,563 
 
 Income 1,257,167 2,358,177 
 
 Premiums received annually about . . 1,014,126 2,008,795 
 
 Dividends paid 468,156 867,944 
 
 Losses paid 381,885 639,209 
 
 The making of rates, based upon careful classification, the 
 combining of experience from field work, the noting and advising 
 protection, water supply, and increased fire-fighting facilities 
 of towns under a collective management advanced the interests 
 
OF MUTUAL INSURANCE 
 
 485 
 
 of the companies. Each company being loyal to the basis of 
 rate gave stability to prices for insurance and won the respect 
 of the insuring public. The same forms, privileges, permits, 
 and endorsements gave also opportunity for large insurers to 
 place heavy, current lines, with practically one insurer to deal 
 with, the whole union taking the burden but sharing the re- 
 sponsibility by separate policies, the negotiation of the line and 
 settlement of loss being thus brought to a minimum. 
 
 Each year has noted more excellence and more thoughtful- 
 ness in the service of the mutual union to the various com- 
 panies. 
 
 Second: The Dividend Record. 
 
 The excellent, steady dividend payments which have been 
 maintained have been a great source of benefit to mutual insur- 
 ance. 
 
 The Massachusetts mutuals, outside of the mill mutuals, 
 pay what is sometimes styled a set or stated dividend, or what is, 
 in fact, a return of part of the premium. That is, instead of 
 changing the scale of dividends each month according to the 
 loss and income, they establish and pay a dividend which their 
 experience has shown they will, on an average loss ratio, be 
 able to pay year in and year out, and so continue for a series 
 of years. The standard mutual dividend, as it exists to-day, is 
 20 per cent of the premium on one-year policies, 40 per cent 
 three year and 60 per cent five year policies; and this has been 
 the rule for years, so new insurers know practically what the 
 net cost will be, and can compare their chances to insure in the 
 market and decide which to buy, whether a stock or mutual 
 policy. 
 
 This has worked excellently, and while a specially heavy 
 drain of losses may temporarily compel a reduction, generally 
 speaking the dividends are very stable. 
 
 A differential rate is made over stock companies’ tariff by 
 agreement with the New England Insurance Exchange to act in 
 harmony with them, thus avoiding all unnecessary friction, of 
 20 per cent on three year terms and 30 per cent on five year 
 terms, so far as rated risks are concerned, which helps out the 
 dividend account just so much. 
 
 Most of the business in Massachusetts mutuals is brought 
 to them by agrents and brokers on a 15 per cent commission 
 basis, and in New England this has become so generally the 
 practice that any other method would seem to be suicidal. The 
 Massachusetts state legislature makes $10 the license fee for 
 brokers, and declares that all veterans of the civil war can have 
 a broker’s license free, and it looks as though the Cuban war 
 
486 
 
 A HAND BOOK 
 
 veterans would have the same chance. This makes it easy for 
 numbers to go into the insurance field as solicitors, and their 
 constant hunt for risks heads off insurers who would otherwise 
 quite likely prefer to deal directly over the counter with some 
 official of the company. 
 
 Third: The Permanent Fund Feature. 
 
 Another feature of Massachusetts mutuals which has been 
 of unquestionable service in their growth is the permanent-fund 
 so-called, established by act of legislature. This act corrected 
 two important elements of weakness in mutuals: first, it pro- 
 vided a chance of a strong financial basis, meeting the opposi- 
 tion to mutuals on the ground that they were financially weak 
 as compared with stock companies with large capital; secondly, 
 it did away with the danger which menaced the companies — that 
 policy holders could petition court for the dispersion of any 
 undivided surplus which happened to occur over the re-insur- 
 ance fund and so practically close doors. 
 
 The legislature declared that the surpluses or net assets 
 held by the Massachusetts mutuals as of 1890 should be held 
 by them as a permanent fund and that thereafter 20 per cent 
 of the net profits of each year could be added to the permanent 
 fund until the aggregate amounted to 2 per cent of the total 
 amount at risk. For instance, if a company was carrying 
 $40,000,000 at risk, they could accumulate under this privilege 
 of law and hold $800,000 as a permanent fund. The balance 
 over and above the 20 per cent was to be divided in extra divi- 
 dends in five year periods. This latter clause, however, was 
 amended, so instead of 20 per cent, such amount as the directors 
 deem fit may be added until said limit is reached. 
 
 This permanent fund can be used for the payment of losses 
 and expenses when the funds of the company are not sufficient, 
 so that the permanent fund is a strong tower of security to the 
 policy holder. 
 
 The permanent funds of the Massachusetts mutuals run 
 from less than one hundred thousand dollars to nearly half a 
 million. No policy holder has expressed other than satisfaction 
 that thus a certain moiety of his premium has added strength 
 to the company against his own or future policy holder's needs. 
 
 Fourth : The Standard Form of Policy. 
 
 The standard form of policy which was adopted by the 
 Massachusetts legislature to be used uniformly by both stock 
 and mutual companies some twenty-five years ago has been an 
 excellent basis for an insurance contract. A mutual officer, one 
 of the present members of the mutual union, with a director of 
 the same company, each men of broad and long continued ex- 
 
OF MUTUAL INSURANCE 
 
 487 
 
 perience were in the main apparently responsible for its excel- 
 lent conditions and for its final adoption — its fairness toward 
 policy holders, its arbitration clause which has obviated law- 
 suits, its protection of mortgages has contributed very largely 
 to the harmony, satisfaction, and stability of the conduct of the 
 business. Through over twenty years of struggle, often under 
 trying and exasperating conditions, although occasionally as- 
 sailed by some legislators, the good sense and admirable work- 
 ing of the contract have permitted hardly a change since its 
 adoption. 
 
 Fifth : The Outlook. 
 
 These four elements therefore account largely for the suc- 
 cess of the mutual principle in Massachusetts, always coupled 
 with the effort to keep heart and brain active for the best ser- 
 vice of the policy holder. The future of the business is un- 
 known, save as the hundred past years make its own phrophecy. 
 We may, however, say that mutual men most foster correct 
 underwriting principles and encourage such inventive skill ap- 
 plicable to insurance methods as shall be beneficial to the frater- 
 nity. We are in a progressive age, the age which finds the 
 ultimate at present in the Marconi’s system of wireless telegra- 
 phy, the practical realization of a dream of years agone. 
 
 No practical science in this day remains at a deadlock, and 
 it will require the bestir of brains in the insurance field to keep 
 our chosen profession where it belongs as the handmaid of com- 
 mercial activity, not in the rear-guard, but in the vanguard, the 
 front rank of the foremost column. John Graham, said that 
 only three things were required of the successful solicitor for a 
 continuous business: first, orders; second, more orders; third, 
 more and larger orders. But three things seem to be required 
 to keep the mutual system to the front: first, excellent service 
 to policy holders; second, more excellent service; third, most 
 excellent service. This is the high standard at which the Mass- 
 achusetts mutual men are aiming and this principle wisely ad- 
 vocated and zealously adhered to will not only continue the 
 mutuals in historical pre-eminence, but in the truest sense, still 
 on the summit of the insurance heights. 
 
 MICHIGAN. 
 
 This state has 97 Mutuals, of these seven appear to do a 
 state business, the rest being local. Three of the state com- 
 panies take only tornado and wind storm risks. One is a class 
 Mutual, insuring mill property. The total at risk December 31, 
 1903 was $388,196,182. This was an increase of over twenty 
 per cent on the previous year. The assessments were low and 
 
488 
 
 A HAND BOOK 
 
 seventeen companies made no assessment during the year. The 
 net increase in members was 12,499. These are gratifying fig- 
 ures. 
 
 The following extract from a letter by a leading mutual 
 insurance man gives a good idea of the situation. 
 
 “You would be surprised to visit out state and hear the 
 different views. Several efforts have been made for uniform 
 policy. To attempt this would raise war. Everyone thinks his 
 method best, and from the uniform success of all companies I 
 would not attempt to say which is best. Personally I regard 
 the best condition of things as existing where two or more com- 
 panies cover the same territory with principal offices in adjoin- 
 ing counties. It creates rivalry to excel, is profitable in ex- 
 perience and in case of large properties and large risks, joint 
 insurance helps both companies in case of fire. ’ ’ 
 
 Meddling in this case would only be productive of evil. 
 
 In Michigan, the old New England system of township tax 
 collectors is used and some companies employ these collectors 
 to gather in the assessments. The plan is said to work very 
 well. It is certainly very economical as these collectors take 
 side lines at very low rates. 
 
 MINNESOTA. 
 
 Minnesota is one of the banner states in Mutual Insurance. 
 At the close of the year 1903 there were in business in Minne- 
 
 sota Mutuals as follows: 
 
 141 Township Mutuals, total risks $163,113,327 
 
 10 Mutual Fire Asso. (state) 16,624,358 
 
 13 Hail and Cyclone, total hail risks 8,364,942 
 
 Total Cyclone risks 9,276,729 
 
 Total 197,379,356 
 
 4 Joint Stock, total risks 41,750,436 
 
 SUPT. DEARTH’S ADDRESS. 
 
 The history of Mutual Insurance in Minnesota is given 
 in the admirable address of State Commissioner Dearth before 
 the National Association of Co-operative Mutual Insurance Com- 
 panies at St. Paul, Minn., March 4, 1902, from which the follow- 
 ing extracts are taken. 
 
 Speaking of Farm Mutuals, he says: 
 
 After quoting the dismal predictions of the Commissioner 
 alluded to, Mr. Dearth goes on to say that they represented the 
 general sentiment of the day and were interesting in view of 
 
OF MUTUAL INSURANCE 
 
 489 
 
 the wonderful success which all of the companies, organized 
 in the State of Minnesota since the enactment of the law in 1875, 
 have enjoyed. With but one or two exceptions not a single far- 
 mer’s township mutual, out of a total of 130 odd which have 
 been incorporated, have retired from the field, and the one or 
 two exceptions did not fail on account of heavy losses, their 
 charters having been surrendered before any business was 
 transacted. 
 
 The records of the Insurance Department indicate that dur- 
 ing the entire period of twenty-five years, or, in other words, 
 since 1876, that these companies have been operating in Minne- 
 sota, the average premium rate per $100 of insurance has 
 amounted to the small sum of 17 cents. Of this amount 13 
 cents covered all losses incurred, while 4 cents only, on each 
 $100 of insurance, represented the entire expense of manage- 
 ment. It thus appears that it has only cost the members or 
 policy holders of these companies about one fifth of the average 
 amount that would have been paid to the regular old line stock 
 companies, or a saving, in round numbers, during the year 1901, 
 of $1,069,000. The farmers of this State have, therefore, 
 through these local township mutual insurance companies, since 
 the enactment of the law in 1875, saved in the way of insurance 
 premiums a gross sum of not less than twelve millions of dollars, 
 and during each year in the future there will be an average sav- 
 ing of over one million dollars. 
 
 In his report for the year 1903 he says of the Township 
 Mutuals : 1 1 1 have no hesitancy in stating, and without fear of 
 contradiction, that no other class of business, whether that of 
 insurance of any other line, is conducted so eminently success- 
 ful at such a very small cost, and further more, if the policy 
 holders of the various other classes of insurance companies 
 were so well satisfied with the indemnity or protection enjoyed 
 under their policy contracts as is evidently true of the Town- 
 ship Mutual membership, there would appear to be but very 
 little reason for fault finding on the part of any one. ’ ’ 
 
 The insurance laws of Minnesota are issued in convenient 
 form. They are well indexed. They also contain the full text 
 of the Supreme Court, opinions construing the laws and a digest 
 of opinions in insurance cases, both State and Federal. 
 
 Minnesota makes provision for several classes of Mutuals, 
 State Mutuals, Creamery and Cheese factory Mutuals, Mutual 
 Hardware Dealers Insurance Companies, Publishers Association 
 Mutuals, Mutual Dwelling House Insurance Companies and 
 hail, tornado, plate glass, etc., and the town insurance com- 
 panies and Farmers’ Mutuals. 
 
490 
 
 A HAND BOOK 
 
 FROM SUPT. O’BRIEN. 
 
 State Superintendent Thomas D. 0 ’Brien of Minnesota 
 kindly furnishes the following: 
 
 I do not intend to discuss the relative merits of the stock 
 or mutual plan with reference to fire insurance. Each has its 
 advantages and disadvantages, and I prefer at the outset, as 
 this article is to be confined to mutual companies, to have it 
 understood that I am not attempting to express any preference 
 for the mutual over the stock fire insurance company. 
 
 The stockholders in a stock fire insurance company first 
 contribute the amount of the capital stock and, secondly, in 
 most of the states, assume a liability to an equal amount in 
 ease of necessity and are, therefore, entitled to the profits made 
 by the company. These profits should, of course, be reasonable, 
 but with this limitation they are the absolute property of the 
 stockholders. When such a company issues a policy it is an 
 ordinary business transaction wherein the policy holder is will- 
 ing to and does pay a definite sum for the protection afforded 
 him, entirely irrespective of the general gains and losses of the 
 company. 
 
 A mutual company, however, is organized upon the theory 
 of mutual co-operation and generally that the policy holders 
 become underwriters pro rata for the risks taken by the com- 
 pany, and if, as a result of the business transacted, a profit is 
 declared, it is the property of the policy holders and should be 
 returned to them pro rata. 
 
 If by these means full protection is secured, as well as a 
 cheaper rate, the result must be satisfactory to the policy hold- 
 ers, but these two conditions bear no proportion in importance 
 to each other, complete protection being the first and important 
 consideration to be taken into account, and no economy in 
 premium should be considered unless the protection is complete. 
 
 My experience has convinced me that where the policy 
 holders in a mutual fire insurance company are all engaged in a 
 particular line of business, or belong to a particular class of the 
 community, and where they have occasion, because of their 
 common calling, to come together at stated intervals for the 
 purpose of mutual advancement, that a fire insurance company 
 owned and controlled by them, officered by some of their mem- 
 bers who do not depend upon such offices for a livelihood, affords 
 complete protection through the mutual underwriting of the 
 members or, as we call it, the contingent liability of the policy 
 holders, and at the same time the insurance can be furnished 
 for comparatively small premiums ; and I should certainly favor 
 an extension by the laws of this State of such a system to those 
 
OF MUTUAL INSURANCE 
 
 491 
 
 engaged in various lines of business. 
 
 The mutual company which is organized by a few individ- 
 uals and exclusively managed by them, and regarded more or 
 less as a proprietary company, is in a somewhat different posit- 
 ion. The policy holders do not have the same opportunity for 
 becoming acquainted with each other, nor do they take the same 
 interest in the management of the company. They usually re- 
 gard the management as the company and they, themselves, as 
 outsiders dealing with the company. Where these policy hold- 
 ers pay what is represented to them as a full premium, they 
 consider they have fully performed their part of the contract, 
 and when called upon to meet an assessment, it generally marks 
 the extinction of the company. I realize that this is not the 
 case where w T hat is known as a full mutual premium is not col- 
 lected in advance, and where all the payments are made under 
 assessments levied by the company, as is the practice in some 
 companies. My judgment is that mutual companies when oper- 
 ated upon sound principles are of great benefit, not only to the 
 policy holders but to the public at large, and undoubtedly help 
 to keep the rates within reasonable limits, but I am just as 
 strongly of the opinion that they are only beneficial when they 
 can offer absolute security to the policy holder. I believe, there- 
 fore, that the class of mutuals which I have described as those 
 organized and managed exclusively by a few individuals and en- 
 gaged in a general fire insurance business, should at all times 
 carry their reinsurance reserve in available cash assets, and 
 that the contingent liability of the policy holders should not be 
 considered a cash asset or an asset to be resorted to except in 
 the most extreme cases. 
 
 In order that such mutual companies might be able to do 
 this, I believe the law should permit the sale by the company 
 of some form of certificates of indebtedness to an amount equal 
 to its reinsurance reserve. The law and the certificates them- 
 selves should provide that the company should be only liable 
 upon such certificates after all of its other obligations had been 
 extinguished. They should further provide the rate of interest 
 which might be paid upon such certificates and, further, that 
 where a company did accumulate and maintain a reserve of 
 this character, that it might waive the contingent liability of 
 its policy holders, thus enabling the company to compete on 
 equal terms with stock companies in which the policy holders 
 are not contingently liable. 
 
 MISSOURI. 
 
 Mutual Insurance is making good progress in Missouri. 
 Accurate statistics are unattainable as the Farm Mutuals do not 
 
492 
 
 A HAND BOOK 
 
 make reports. There is a partial list of these in the report of 
 the State Agricultural Society for the year 1900, sent by Mr. 
 Shiels, which, however, includes only the business of 1899. This 
 list includes 81 companies their total risks foot up $56,912,770. 
 Later estimates put the number at one hundred, the average 
 membership at a thousand, and the total risks at a hundred 
 millions of dollars. Statistics of the growth of a few companies 
 have been obtained and they show that the estimate given above 
 is too low rather than too high. These companies are all pros- 
 perous, in fact, it is the general testimony from Missouri, as 
 from every other state, that Farm Mutuals managed by farmers 
 all do well. It is stated that no Mutuals of any kind have 
 failed in Missouri for several years. 
 
 There are also nine State Mutuals, seven of these are in St. 
 Louis and are doing a large and satisfactory business. There 
 are also ten Town Mutuals and three or four Cyclone and Wind- 
 storm Companies, making in all something over one hundred 
 and twenty companies with risk amounting to over two hundred 
 millions of dollars. The following by Mr. J. C. McManima of 
 Springfield, describes the various plans of organization: 
 
 “In Missouri we have three distinct systems of Mutual 
 fire insurance, operated under three distinct laws, and these 
 laws are very nearly models in their respective fields. The first 
 law to be considered is the one governing what are known as 
 ‘state’ or ‘six year’ companies, of which there are a number 
 that have been in successful operation for a good many years, 
 and possess to a high degree the confidence of the insuring 
 public. This law provides that such companies may be organ- 
 ized with a guaranty fund of not less than $50,000 in cash or 
 approved securities, which must be assigned to and deposited 
 with the superintendent of insurance of the state; or the com- 
 pany may be organized without the guaranty fund with not less 
 than two hundred persons making bona fide applications for 
 insurance, the premiums on which shall amount to not less than 
 $100,000 of which sum at least 30 per cent shall be paid in 
 cash and until notes of solvent parties, founded on actual and 
 bona fide applications for insurance, shall have been received 
 for the remainder. No premium note may be for more than 
 $500.00, and such risks shall be for not less than six years. 
 In case of a company being organized with a guaranty fund, it 
 is provided that such sum shall be contributed by not less than 
 ten persons, and no part of it can be withdrawn until the com- 
 pany holds at least two hundred thousand dollars in premium 
 notes. This law hedges the company about as to fully protect 
 the public and is elaborate and carefully worded. No trouble 
 
OF MUTUAL INSURANCE 
 
 493 
 
 has been experienced with companies operating under this law, 
 and one company is now operating under it with a guaranty 
 fund of $150,000. These state mutuals are under the operation 
 of the general insurance laws of the state. 
 
 ‘ ‘ The town mutuals may do business in town or country and 
 in all parts of the state. They are not subject to the general 
 insurance laws of the state, nor to the valued policy law, but 
 must make annual reports and are subject to examination by 
 the insurance department of the state. Like the state companies, 
 they may do a fire, lightning and windstorm business. These 
 companies are required to set aside a reserve fund of not less 
 than two nor more than ten per cent of the gross cash premium 
 receipts as a surplus fund, and that cannot be used for any 
 purpose except payment of losses. These companies may be 
 authorized to commence business when bona fide contracts of 
 insurance to aggregate $1,000 in premiums have been received, 
 and I may add here that this is the only weak spot in the law, 
 though this weakness is offset by other provisions and safe- 
 guards. A provision is also made that a town mutual may 
 deposit a guaranty fund with the state insurance department for 
 the protection of its policy holders, and one company has 
 strengthened its position by making such a deposit. 
 
 “ Under the present Farm or “County Mutual ’ ’ law, such 
 companies are restricted to a single county, and are exempt 
 from the general insurance laws of the state, but there were a 
 few that were organized under an old law that are authorized 
 to do business in more than one county, and in such cases the 
 counties are designated in the charter, and I know of no case 
 in which a farm mutual has done business in more than four 
 counties. There are also a few companies that are not chartered, 
 but are operated as a partnership. In Missouri we have farm 
 or county Mutuals that have been in business more than thirty 
 years, and there has never been a failure, though we now have 
 about one hundred companies, carrying nearly one hundred 
 million dollars of insurance. One company doing business in a 
 single county reports a membership of 4,073 with $2,789,222.78 
 insurance in force. This company was organized in 1875. 
 
 * 1 Co-operation in the various counties has been so successful, 
 that our mutual insurance men have been getting closer together, 
 from all over the state. We now have in Missouri a state asso- 
 ciation of farm mutual insurance companies, with a full set of 
 officers, and most of the county mutuals are members of the 
 association. We have inaugurated a regular system of reports 
 that are made by the various county mutuals to the secretary 
 of the state association, the reports being almost as complete 
 
494 
 
 A HAND BOOK 
 
 as those made by the stock companies to the insurance depart- 
 ment of the state. We have our annual conventions when we 
 get together for the purpose of spending two or three days in 
 comparing notes, discussing plans and methods and getting 
 acquainted with each other. These conventions are both valu- 
 able and pleasant, though usually full of business from start to 
 finish. In our state association we also have a permanent legis- 
 lative committee, and during a legislative session this committee 
 keeps an eye on insurance legislation, and if a dangerous meas- 
 ure comes up, the word is passed along the line and notice goes 
 out that it would displease 100,000 farmers to have the measure 
 become a law, and hundreds of these farmers write to or see 
 their legislative representative and the result is that the danger- 
 ous bill is killed, even when it is backed by all the wealth and 
 power of the combine of the joint stock companies. When it 
 comes to legislation, such an organization as we have in Missouri 
 is sure to control the situation, and its position is almost invul- 
 nerable. With such an organization as to farm insurance, is 
 it any wonder that the stock companies have virtually aband- 
 oned the field? In addition to these points it must never be 
 forgotten that the 100,000 farmers of Missouri who are now 
 protected by their own mutuals, are saving about half a mil- 
 lion dollars a year at the lowest estimate, and this is certainly 
 worth figuring on. In addition to the direct saving through 
 mutual insurance companies, there is a large indirect saving by 
 forcing the stock companies to reduce rates all along the line.” 
 
 No state has been exempt from the raids of fraudulent 
 organizers. Mr. A. Shiel of Burlington Junction gives us a 
 brief history of the experience of Missouri as follows: 
 
 1 1 The law permitting the organization and incorporation of 
 the Mutuals was passed in the year 1889. Then again 
 there was another law passed permitting the incorporation of 
 town mutuals at a more recent date; this I think was six or 
 seven years ago. These companies were manipulated by the 
 emissaries of Old Line Companies apparently, for out of about 
 fifty-six only one or two remain in business. Their method 
 was to take the rating of the old line company, collect one-half 
 cash, give time on the balance, then proceed to collect the bal- 
 ance by assessment soon thereafter, then go out of business; 
 some of them made two assessments or more, but they were 
 short lived, they having the name of Mutual injured the county 
 Mutuals of which we have 96 in the state, none of which have 
 failed. There was a town Mutual organized at Marysville. It 
 went under, leaving an indebtness. Another was organized at 
 Rockport. Another of the town Mutuals was organized at 
 
OF MUTUAL INSURANCE 
 
 495 
 
 Stanberry, Mo. Both failed. I hardly know how you can get 
 the vital statistics of these miserable concerns. I speak rather 
 bitterly of them because, owing to their failures, the finger of 
 scorn was pointed at all the Mutuals, and caused numberless 
 cancellations in all County Mutuals. The ignorance and pre- 
 judice told against us, but we have outlived the harm they were 
 capable of doing, and maybe the experience is a benefit in the 
 end. ’ ’ 
 
 Mr. Jesse D. Mohler of Warrensburg, says that in the 
 history of Farmers Mutuals in Missouri, not one has ever re- 
 tired without “ first paying all its indebtedness. Town Mutuals 
 have done so and some farm Mutuals have been absorbed by 
 stock companies, but no straight Farm Mutual has ever gone 
 back on the people.” 
 
 Mr. E. S. Osgood, of Mendon, estimates the annual saving 
 to the people of Missouri at a million of dollars. 
 
 Speaking of the Agricultural Reports, Mr. A. Shiel, of Burl- 
 ington Junction, says: 
 
 “This is voluntary as the law does not require us to do so. 
 But I believe it would be better if we had state supervision and 
 had to certify. It would have a tendency to make Secretaries 
 more careful in their reports. I find many who think differently. 
 I think about half of the County Mutuals are reported.’ ’ 
 
 Recently there is an apparent tendency to organize more 
 companies under town Mutual law, and there is unquestionably 
 a good field for them. The success of the Farmers in co-opera- 
 tion as to insurance has caused the people of the towns to do a 
 great deal of thinking and the result will be more successful 
 town Mutuals. The people have also learned some valuable 
 lessons from former mistakes of Town Mutuals and these mis- 
 takes will never be repeated. On the whole, Missouri may be 
 said to be in fine shape as to Mutual Insurance Laws, Mutual 
 Insurance Operators, and Mutual Insurance Sentiment. 
 
 NEBRASKA. 
 
 Nebraska is one of the States in which Mutual Insurance 
 has made good progress. The State has three general Mutuals 
 
 doing a good business, with risks of $ 15,186,369 
 
 Eight city and village Mutuals with risks of 12,286,856 
 
 Sixty-five Farmers’ Mutual Fire and Tornado com- 
 panies with risks of 113,322,192 
 
 Total $140,795,417 
 
 There are four miscellaneous Mutuals with risks of. 986,365 
 Six Hail companies with risks of 1,992,141 
 
 Eighty-six companies, Grand Total 
 
 $143,773,923 
 
496 
 
 A HAND BOOK 
 
 The early experience of Nebraska witnessed not a few at- 
 tempts at fraud but the State soon passed safeguards against 
 these, and of late the Mutuals have made continual and uninter- 
 rupted progress. The State has been fortunate in possessing a 
 large number of men of great abilities, and earnest devotion to 
 the cause of Mutual Insurance. Their influence has been felt 
 not only at home, but in other States, and they are entitled to 
 credit for much good work especially in the new States. 
 
 KIND OF COMPANIES. 
 
 First. What is known as the 1873 law companies. This is 
 a joint law providing for the organization of stock companies 
 and of mutuals. Under the mutual part of it a company may be 
 organized by having insurance premium contracts for $25,000.00 
 on which $5,000.00 must have been paid in cash and $20,000.00 
 in notes, which must remain up as security for losses until the 
 company has accumulated resources equal to that required of 
 a stock company. This class of companies can limit the liability 
 of their policy holders. In March 2, 1905, an amendment was 
 made to section 17 of that act providing for the establishing of 
 a guaranty fund for the writing of premiums for cash and stipu- 
 lated terms. 
 
 Second. The law of 1891 under which the exclusively farm 
 mutual companies of Nebraska are incorporated both those 
 doing a state business and county. 
 
 To organize required the signature of 20 residents of the 
 State who own property of not less than $20,000.00 which they 
 desire to have insured. Regular articles of incorporation must 
 be adopted and filed. Farm companies are very successful, one 
 carrying over $50,000,000.00 of risks. 
 
 Third. What is known as the law of 1897 provides for the 
 organization of city and village mutuals. Not less than 100 
 persons owning not less than $100,000.00 of property which they 
 desire to have insured may incorporate and proceed to do busi- 
 ness. This law took effect April 6, 1897. Companies organized 
 under this can only insure property in cities and villages and 
 business properties outside. Not exceeding 9 directors may be 
 elected. They shall embody the name Mutual in their name, and 
 may issue policies in the regular form. The act provides for a 
 reserve fund of not less than ten per cent of the amount collect- 
 ed in cash at the time of issuing the policy. Several companies 
 are organized under this act and are doing a successful city 
 business. There is provision also for unincorporated Mutuals. 
 
 That is, nothing in the various acts shall be so construed 
 as to prevent any number of persons from making mutual obli- 
 
OF MUTUAL INSURANCE 
 
 497 
 
 gations and giving the valid obligations to each other for their 
 own insurance. Such associations or companies shall receive no 
 premiums, make no dividends, or pay in any case more than 
 $2.00 per day to any of their officers for compensation. And 
 they can only collect assessments for losses and expenses aa 
 provided. 
 
 I do not think there are any companies operating under 
 that act, not more than one or two small ones at least. 
 
 Fourth. In 1903 there was also passed a law for the 
 mutual insuring of domestic animals and a company can be 
 organized by not less than 100 persons residing in not less than 
 100 different counties who collectively shall own domestic ani- 
 mals, except swine, of not less than $50,000.00 in value. They 
 may be insured against loss by fire, lightning, tornado, disease 
 or accident. If any company has been organized under it much 
 has not been heard concerning it. 
 
 Fifth. There is a statute providing for hail insurance 
 which took effect April 3, 1897, and under which not less than 
 100 persons residing in this state who collectively own not less 
 than 5,000 acres of grain which they desire to have insured may 
 be organized for the purpose of mutually insuring their growing 
 crops from loss or damage by hail. Such incorporators must 
 reside in not less than 10 different counties. This law was 
 amended in 1905 with many good conditions and provisions. 
 
 Sixth. There are also statutes providing for the organiza- 
 tion of mutual plate glass companies under which any number 
 of persons, not less than 15, residing in this state, who are the 
 owners of plate glass windows, in mercantile or other build- 
 ings, which they desire to have insured against accident or other 
 breakage, may organize. 
 
 Some work is done by companies under that statute. 
 
 Seventh. There is a statute in Nebraska providing for the 
 cancellation of policies. 
 
 NEW HAMPSHIRE. 
 
 New Hampshire has always been an excellent state for 
 Mutual insurance. In 1885 in consequence of the passage of the 
 Valued Policy Law, and the departure of the foreign companies, 
 there were quite a number of cash mutuals incorporated to fill 
 the breach. On the return of the companies all of those grad- 
 ually dropped out so that now there are but two in existence— 
 the Manufacturers & Merchants, and the Concord Mutual, both 
 located in Concord, N. H. 
 
 31 
 
498 
 
 A HAND BOOK 
 
 1890 1904 
 
 At risk $4,892,201 $6,268,862 
 
 Assets 97,401 188,091 
 
 Surplus 47,511 134,102 
 
 The number of assessment mutuals which includes twenty 
 town mutuals, two county and the Grange, in 1890 was 23. The 
 town mutuals confine their business to their own towns. The 
 two counties ’ to their respective counties, and that of the 
 Grange extends all over the State but is confined to members 
 of the Order. The amount in force of these 23 on December 
 31st, 1890, was $9,254,529. Since that time, two of the town 
 mutuals dropped out, leaving the number December 31st, 1904, 
 including the Grange and County Mutuals, 21. 
 
 The amount in force of these 21 on December 31st, 1904, 
 was $16,007,810. 
 
 The two town mutuals that retired did not fail. They 
 wound up their business and paid their claims in full. 
 
 The following laws apply to the Mutuals. Chapter 168, 
 sec. 1. “Members of Mutual insurance companies shall not be 
 individually liable to pay any debts of their respective com- 
 panies beyond their ability to assessments for losses occurring 
 therein, not to such assessments beyond the amount of their 
 deposit notes .’ 1 
 
 Sections 2 and 5 apply to cash mutuals: 
 
 Sec. 2. “Any such company organized under the laws of 
 this state which charges a full cash premium, may limit the 
 liability of policy holders to assessment by a stipulation in the 
 policy, which shall have the same effect as a deposit note signed 
 by the assured.” 
 
 See. 5. “No such company which charges a full cash 
 premium shall make a dividend to its policy holders that will 
 reduce its cash assets below seventy per cent of the gross prem- 
 iums received upon all risks then in force.” 
 
 The standard form of policy is used and all insurance com- 
 panies are held to a strict account. 
 
 There are several Massachusetts Mutual Insurance Com- 
 panies which do business in this state, five Massachusetts and 
 one from Rhode Island. During 1904 these companies wrote 
 
 $3,750,804. 
 
 Premiums received $52,629.44 
 
 Losses 22,612.08 
 
 showing a loss ratio for these companies of 42.9 per cent. 
 
 NEW JERSEY. 
 
 New Jersey has been described as being situated between 
 two great cities with none of her own. The competition for 
 
OF MUTUAL INSURANCE 
 
 499 
 
 business between is exceedingly keen. Her eleven stock com- 
 panies have to fight for their lives. The state has twenty-two 
 mutuals which are making fair progress. They show a total of 
 risk of $57,062,270, with contingent assets $2,240,409, and cash 
 assets of $401,911, a fair increase over previous years. 
 
 Peculiarly liable to invasion by sharpers from the cities of 
 other states, New Jersey has found it necessary to enforce the 
 criminal laws vigorously. Her statutes protect her citizens 
 against insurance frauds. 
 
 The details of the business, mutuals manage as they see 
 fit. But they must be financially sound or they will be closed 
 up. 
 
 No statistics of lightning or tornado insurance are given. 
 The local fire mutuals probably care for lightning risks. 
 
 NEW YORK. 
 
 It has been remarked that it is fortunate that New York is 
 a large State or there would not be room for the enormous 
 variety of schemes and theories which exist within its borders. 
 Including one of the great cities of the world, the literary and 
 political sewer of the Union, it is the home of the extremely 
 good and bad in every imaginable line. Insurance furnishes its 
 full share of the contents of this witches ’ caldron. The joint 
 stock, the Lloyd and the Mutual are all there, and it is said that 
 among these a man can be insured against any imaginable 
 calamity, in any kind of a company he desires. It goes without 
 saying that between the co-operative and joint stock systems 
 there is war to the knife. The Mutuals do not report to the 
 State Superintendent of Insurance but file their statements 
 with the Secretary of State, but nothing is ever done with them 
 by way of making them public. 
 
 A letter to the Superintendent of Insurance brought no 
 information. 
 
 A letter from a prominent Mutual Insurance man explains 
 the situation exactly. He says: 
 
 “I think that the statistics given you by the Superintend- 
 ent of Insurance are rather misleading, but there may be some 
 excuse for this as I should judge that it refers to an entirely 
 organized under a special law. So far as I know the business 
 of these co-operative companies has been very satisfactory and 
 there has been no failure that I am aware of. There are over 
 one hundred and twenty of these companies in this state which 
 send representatives to the Central Organization of co-operative 
 insurance companies. It is true that we do not report to the 
 Superintendent of Insurance and he has, apparently, a grievance 
 
500 
 
 A HAND BOOK 
 
 against us and the Secretary of State don’t like to have us re- 
 port to him, so he is not with us, but we keep right on doing 
 business just the same and saving our patrons thousands upon 
 thousands of dollars every year.” 
 
 The Patrons of Husbandry, otherwise known as the Grange, 
 have a large number of Mutual Fire Insurance Companies in 
 New York and other States. These insure none but members, 
 are all well managed and save large sums for their members. 
 The following, clipped from the annual report for the Jefferson 
 County Patrons’ Fire Relief Association, is a fair example. 
 Total amount of insurance in force Oct. 1, 1903. . .$10,975,463.00 
 Total assessment on policies in force Oct. 1, 1903. . 10,975.75 
 
 The cost of our insurance as compared with rates of Stock 
 Companies, show a saving in favor of the P. F. R. A. of $3.75 
 per $1,000, a total saving to the members in 1903 of $41,795.15. 
 
 W. H. VARY, Secretary. 
 
 NORTH DAKOTA. 
 
 This state has sixteen county Mutuals, reporting totals at 
 
 risk (3 estimated) $8,516,623.00 
 
 Eight State Mutuals do not report totals at risk, but wrote 
 
 during 1893 $6,308,382.05 
 
 Two Hail Mutuals wrote $1,679,691.00 
 
 North Dakota has excellent provisions against spurious com- 
 panies. If the people would only assist in carrying them out 
 the citizens would be well protected against swindling insur- 
 ance. It is within the power of any person to cause the arrest 
 of any agent acting without authority or for an unauthorized 
 company. 
 
 In 1903 a law was passed requiring any hail companies 
 organized under the laws of any county or state to deposit 
 with the state treasurer the sum of $25,000 before being author- 
 ized to transact business. This had a good effect. 
 
 The laws provide for the safe management of insurance 
 companies. The arrangement and annotation of the laws art 
 very much like those of South Dakota and are in a very con- 
 venient form. 
 
 OHIO. 
 
 Ohio has 22 Mutuals with risks of $338,883,223.00 
 
 114 assessment fire and miscellaneous companies, 
 
 having at risk 202,249,066.00 
 
 Total at risk $540,132,309.00 
 
 These statistics include class mutuals as well as the ordin- 
 ary risks. Some new companies have been chartered since the 
 report was issued. 
 
OF MUTUAL INSURANCE 
 
 601 
 
 Mutual companies must file bond of $10,000, must have not 
 less than $500,000 on insurance in not less than 300 shares. The 
 premium for one year amounting to not less than $10,000 must 
 have been paid in cash and each subscriber must assume a 
 liability, not less than three nor more than five annual prem- 
 iums. Each subsequent applicant for insurance must agree to 
 the same liability. Such companies may collect an annual 
 premium in advance. 
 
 Fire insurance companies may insure against lightning, 
 explosions and tornado. 
 
 Sec. 3691 reads: The cellar and foundation walls shall not 
 be included or considered a part of the building or structure in 
 settling losses, anything in the application or policy to the con- 
 trary notwithstanding. 
 
 The Ohio Laws have been revised and some companies are 
 working under the old laws and some under the new. There 
 is a rigid system of inspection and companies must keep within 
 safe limits. The Mutuals come under this Statute. 
 
 Ohio has a good fire marshal law and the results have been 
 very satisfactory. 
 
 OKLAHOMA. 
 
 Mutual Insurance affairs in Oklahoma are in rather a cha- 
 otic condition. The laws are not satisfactory, and efforts to 
 secure more favorable legislation have thus far failed. 
 
 There are three Mutuals in Oklahoma. One is an exclusive 
 hail company, one issues hail and fire policies, the third does 
 business in hail, fire and tornado lines. 
 
 One company assesses to meet losses and settles in full every 
 year, the others carry over a surplus to protect policy holders. 
 All three seem to be in good shape. 
 
 They have been fortunate in being able to carry hail insur- 
 ance for several years at less than three per cent. 
 
 The companies are increasing their business very rapidly, 
 the total at risk being now over ten millions of dollars. This is 
 a very good start and with better legislation the Oklahoma 
 Mutuals may expect to do most of the fire, hail and tornado busi- 
 ness of the state. 
 
 A recent decision forbids farm mutuals from insuring any 
 property inside of corporate limits. 
 
 OREGON. 
 
 A brief study of the Insurance Commissioner’s report for 
 1904 (giving the figures for 1903 business) discloses some inter- 
 esting facts, which should be encouraging to the friends of the 
 mutual insurance cause. 
 
502 
 
 A HAND BOOK 
 
 In 1899 the stock companies wrote $64,155,205.49, while in 
 1903 they wrote $95,531,484.84, or an increase of about 49 per 
 cent. 
 
 In 1899 the mutual companies wrote $2,761,453.00, while in 
 1903 they wrote $8,083,072.00, or an increase of about 192 per 
 cent. 
 
 On Dec. 31, 1903, the mutual companies had in force 
 $18,513,893.00 insurance, divided among the five companies as 
 follows : 
 
 Oregon Fire Relief Ass hi. (of McMinnville) $15,692,707.00 
 
 Farmers Fire Relief Ass hi. (of Butte ville) 1,425,990.00 
 
 Hop Growers Fire Relief Association 926,839.00 
 
 German Fire Insurance Company 385,804.00 
 
 Farmers Fire Relief Ass hi. (of Sublimity) 82,553.00 
 
 Total $18,513,893.00 
 
 The commissioners report does not give the amount of insur- 
 ance in force in stock companies on Dec. 31, 1903, but estimat- 
 ing the insurance in force at 25 per cent more than the amount 
 written, (In the state of New York the amount of insurance in 
 force at the close of 1903, was a little less than 18 per cent 
 more than the amount written during the year) would give the 
 stock companies about $119,500,000.00 as compared with 
 $18,500,000.00, in round numbers, in the mutuals. This will 
 then give us this interesting fact; in a state where mutual fire 
 insurance was practically unknown ten years ago, mutual com- 
 panies now carrying about 13% per cent or more than % of its 
 entire fire insurance business. 
 
 There is no uniformity of rates or policy forms among 
 the mutual companies in the state. 
 
 The O. F. R. A. the largest of the mutuals in the state, 
 bases its rates upon the tariff rates of the stock sampanies, 
 and its policy forms, aside from the provisions necessarily 
 embodied in a mutual contract, are very similar to the New York 
 standard form of policy. 
 
 There is no hail or tornado insurance in the state, and losses 
 and damages from lightning are very rare occurrences, the O. 
 F. R. A. in its ten years experience having had but two slight 
 damages resulting from lightning. 
 
 The O. F. R. A. only insures against loss or damage by 
 fire; and it insures dwellings, barns, boarding and lodging 
 houses, brick buildings, warehouses, hop houses and hop dryers 
 and growing grain. 
 
 Private dwellings and barns are written, either for 5 years 
 on the assessable plan, or on the paid up plan for 3 years. 
 Other classes of risks are written for one year or less on the 
 
OF MUTUAL INSURANCE 
 
 508 
 
 paid up plan. Hops and growing grain are usually written for 
 from 30 to 60 days. Under the paid up plan the assessments 
 are collected in advance instead of being called during the term 
 of the certificate. 
 
 There is one company, The Lower Columbia Fire Relief 
 Association which is operated in connection with the State 
 Grange and which does a fire insurance business among mem- 
 bers of the Grange only, and which on account of the provisions 
 of Sec. 3748 of the insurance laws is not required to make a 
 report of its business to the insurance commissioner. In con- 
 sequence of this no statistics or figures of this company’s busi- 
 ness are available. 
 
 The Oregon Fire Relief Association, of McMinnville, which 
 was organized Sept. 10, 1894, is the only mutual fire insurance 
 company doing a general business throughout the state. 
 
 The Hopgrowers Fire Relief Association of Butteville was 
 organized in 1890, and the Farmers Fire Relief Association of 
 Butteville, under the same management, was organized in 1896. 
 They confine their business to the counties constituting the 
 Williamette valley. 
 
 The six stock companies organized under the laws of this 
 state have all retired from business, so that there are now no 
 Oregon stock fire insurance companies. 
 
 • One mutual retired from business in 1902, a considerable 
 part of its business having been rewritten in the O. F. R. A. 
 
 There are two distinct climates in Oregon; the great section 
 in Eastern Oregon, east of the Cascade Mountains is very dry 
 and hot during the summer months and there is no moss to con- 
 tend with, but the settlements, towns and cities are, owing to 
 the strong prevailing winds, liable to general conflagrations. 
 In Western Oregon, west of the Cascade Mountains, the climate 
 is influenced by the ocean currents, the mean temperature being 
 about 60 degrees with much more rain, and roofs that are not 
 painted become covered with moss, which during the dry 
 season of the year becomes a menace to the buildings and the 
 records show a large per cent of losses caused from sparks on 
 the roof igniting the moss. 
 
 The conditions in Oregon are very different from those in 
 the central portion of the United States. In the wheat growing 
 portion there is no rain from the time the grain begins to ripen 
 until fall, nor do hail storms or cyclones occur. Hence the wheat 
 can be left standing till the farmer is ready to harvest it. Dur- 
 ing this period the country becomes exceedingly dry and sweep- 
 ing fires are frequent. It is these which the farmers insure 
 against while hail and tornado insurance are unknown. Light- 
 
604 
 
 A HAND BOOK 
 
 ning is very rare. On the coast during the wet season the moss 
 grows everywhere. This is the green moss occasionally found 
 in single patches in damp shady places in the interior of the 
 country ; it covers the roof and in the summer becomes very dry. 
 In these respects and in several others insurance conditions in 
 Oregon and Washington differ from those in other states. 
 
 The 0. F. R. A. ratio of losses to stock company annual 
 premiums for 1903 was 22.8 per cent. 
 
 The 0. F. R. A. paid to its members in losses from its 
 organization up to Dec. 31, 1903 $151,287.35. 
 
 The laws of the state relating to mutual fire insurance com- 
 panies are very brief. 
 
 different line of insurance from ours, or the one I am interested 
 in, and that is a co-operative insurance company which was 
 
 PENNSYLVANIA. 
 
 Pennsylvania boasts of the oldest Mutual Fire Insurance 
 Company in the United States and one of the oldest in the 
 World. An account of this is given elsewhere. 
 
 The state has at last report, 236 Mutuals with total assets 
 $795,774,348. There are also some live stock Mutuals whose 
 total risks are not given. 
 
 The Mutuals of Pennsylvania are generally old and well 
 established institutions. Some are working under old charters 
 and some have been organized but lately. All however, are 
 under the strictest supervision and are safely conducted. 
 
 The New York Standard policy has been adopted and there 
 are also standard two-third, three-fourths, co-insurance and 
 lightning forms to attach to policies. Nearly all the laws have 
 been construed by the courts and insurance practice is well 
 settled. 
 
 All the Mutuals have abundant assets and all furnish insur- 
 ance at very low cost. There is a great diversity of methods. 
 
 Mr. James Miller, the veteran Secretary of the Lykens 
 Valley Mutual Fire Insurance Company, gives some very inter- 
 esting information. His company has been in business over 
 fifty years. It has made only nineteen assessments during this 
 period. The total average of cost to the assured was less than 
 eighteen cents a year. 
 
 Concerning the premiums and assessments, he says: 
 
 “In the early days of the company, losses were not so 
 numerous, and the Company had a habit of borrowing money, 
 until the load became too heavy, and then the Board laid an 
 assessment. But, they did not provide for future losses, con- 
 suming all premiums paid in, and in sight, and the result was 
 
OF MUTUAL INSURANCE 
 
 505 
 
 that the next year found them short of funds, and an assess- 
 ment had to come again. 
 
 I hold that the premiums coming in this year on policies 
 running 3 to 5 years, should be considered as reserved to pay 
 losses on those policies and not use them to pay losses on 
 policies issued 1, 2 or more years ago. “Let the dead past, bury 
 their dead,” or in other words, let the past policies pay their 
 own losses; as future policies theirs. 
 
 If Mutual companies would keep a reserve fund, say of $500 
 for every $500,000 insurance on the books, they would be as 
 strong to meet losses as stock companies, but if money is 
 drawn from the reserve fund, it should be replaced out of the 
 next assessment; or if present premiums are used to pay losses 
 on past policies (issued in the past), this money should be re- 
 placed out of the next assessment. 
 
 If a man takes a policy to day and pays his premium there- 
 on, what right has the company to pay out that premium on 
 losses of a policy issued four years ago, unless it is restored 
 again out of the next assessment.” 
 
 There has been some trouble from over-insurance and con- 
 sequent incendiarism. A State Fire Marshal Law is needed. 
 
 The plan of offering rewards for the conviction of incen- 
 diaries is in use in Pennsylvania. It has prevented the crime 
 to a considerable extent. 
 
 The following resolution was passed by the Board of Direc- 
 tors of Mr. Miller’s Company, June 5, 1897, and ordered to be 
 printed with the Annual Reports: 
 
 “Resolved. That the Executive Committee be and hereby 
 is authorized to offer, and the Board of Directors agree to pay 
 a reward for the detection and conviction of any incendiary or 
 incendiaries for setting fire to any property insured in this 
 company, said reward to range from ten to two hundred dollars, 
 at the discretion of the said committee, and to be based upon 
 the amount insured on the property so fired.” 
 
 “The reward for the detection of incediaries is printed on 
 every Annual Report, and on every assessment notice that goes 
 out from this office, so that every insured person can read it, — 
 since June 5-97. We also attach clauses (see copies) on every 
 policy issued limiting the liability of the company, compelling 
 the assured to carry 75 or 80 per cent of the risk himself. This 
 and the incendiary clause are both good in their way, and be- 
 cause we use both to save the company we cannot tell which is 
 most effective; but I believe both to be a good thing to keep 
 insurers as honest as possible. I know there are kickers against 
 the 94 and 80 per cent clauses, and these are the very ones I 
 
606 
 
 A HAND BOOK 
 
 do not trust. People will make money out of an insurance com- 
 pany, if they can, and it can not always be prevented even with 
 those clauses on the policies.” These clauses are printed in the 
 article on over insurance. 
 
 In one case the reward was offered, the man was arrested 
 but the case was lost. 
 
 But, it had a good effect in all that country ’round, for no 
 suspicious fires occured there since, so far as I know. It acts 
 as a scare and in that way does some work. But it will not 
 avail in all cases. 
 
 Sometimes I get a man of the neighborhood of the loss to 
 hunt up evidence to use at the trial, and the one who had the loss 
 does not know it ; and to the spy I offer $10 or $20 if he can find 
 evidence to save the company from paying part or all of the loss, 
 because of over-insurance. 
 
 In one such case, the man had offered his property (land 
 included) for $150 less than he had insured on the house. I 
 produced a witness who held the assured’s letter offering him 
 the house for $300, when he had it insured for $450. The jury 
 found against the company for $300, and the interest from the 
 time the loss should have been paid. It did not cost me $150 
 to run the case through court and therefore I saved the com- 
 pany some money. In other cases I have compromised the loss 
 for less than the insurance.” 
 
 RHODE ISLAND. 
 
 In Rhode Island all insurance companies, mutual as well 
 as joint stock, are created only by the General Assembly on 
 petition thereto. All such companies work under the general 
 corporation laws of the state, and the provisions of their char- 
 ters. 
 
 The only special provision relative to Mutuals is Section 
 16 of Chapter 181, as follows: “ Every Mutual Fire Insurance 
 Company organized under the laws of this state may decline to 
 take premium notes in part payment for insurance: Provided, 
 there be inserted in the body of the policy issued, a provision 
 making the assured, his or their executors, administrators or 
 assigns liable to such assessment as may be provided in such 
 policy, and as shall become necessary in order to pay all losses 
 and expenses not exceeding twenty times the amount of the cash 
 premium paid.” 
 
 Mutuals are under the control of the Commissioner of 
 Insurance and report to him as do the others. There are two 
 joint stock fire insurance companies in this state, one of which, 
 dates back to 1799, and there are two others in liquidation. 
 
OF MUTUAL INSURANCE 
 
 507 
 
 The Rhode Island mutuals are divided into two kinds, the 
 so-called Mill Mutuals, fifteen in number and the Dwelling 
 House Mutuals, seven in number, one of the latter, the Provi- 
 dence Mutual, having been organized in 1800. There are also 
 eight Massachusetts Manufacturer’s Mutual Fire Insurance 
 Companies and eight of the so called Massachusetts dwelling 
 house mutuals doing business in this state. The Manufacturer’s 
 mutuals should be treated under a head by themselves, and you 
 will find a description of these in the article on Massachusetts. 
 
 I have for the sake of convenience divided the amount at 
 risk and the assets of the two different kinds of mutuals. 
 
 Dwelling House. Manufacturer’s. 
 
 Amount at risk $14,776,665 $528,409,241 
 
 Cash assets 1,440,972 7,197,342 
 
 With perhaps the exception of one or two of the dwelling 
 house companies in this state, a flat premium is charged and a 
 dividend paid at expiration of the policy. 
 
 The dwelling house mutuals in this state confine themselves 
 in their underwriting to dwellings, private stables, churches, 
 school houses, and mercantile buildings; there are, however, two 
 that write on Stocks of Goods; none, however, write on manu- 
 facturing property, or so called special hazards. 
 
 Both kinds of Mutuals have, however, been very successful. 
 
 SOUTH DAKOTA. 
 
 South Dakota has 19 mutuals, having at risk $18,168,862.07. 
 The Insurance Laws have been carefully compiled and anno- 
 tated. 
 
 State organizations for Mutual fire, lightning, hail and 
 tornado insurance may be formed by not less than twenty-five 
 persons owning not less than $50,000 worth of property. County 
 and township organizations require the same number to organ- 
 ize, but only property to the amount of $25,000. Township 
 organizations are limited to twenty-five townships. 
 
 County and township organizations may not insure prop- 
 erty outside of their limits, and they are excluded from incor- 
 porated cities or villages, except as to land actually used in 
 farming. They may insure detached dwellings, farm buildings, 
 school houses, churches with the contents, and furniture in each 
 case, hay or grain in bin or stack. County Mutuals may insure 
 “Live stock only on the premises, against fire and against light- 
 ning anywhere in the County or in the adjoining county.” 
 Township organizations may insure live stock only on the 
 premises or running at large. 
 
 The state has a valued policy law, and an anti compact law. 
 
508 
 
 A HAND BOOK 
 
 TEXAS. 
 
 Mutual Insurance is making good progress in Texas. Some 
 years ago the State was invaded by a veritable army of insur- 
 ance frauds and every line was worked energetically and indus- 
 triously. Many fraudulent companies were organized and the 
 business fell into disrepute. Among the wild cats were quite a 
 number of Mutuals. Their life was short, for laws were soon 
 passed which protected the people from further imposition, and 
 the criminals either fled the country or were punished. Fortu- 
 nately, most of the frauds were on a small scale. 
 
 Mutual insurance is in its infancy in Texas. It is safe to 
 say that it will develop many fold within the next few years. 
 
 The Insurance Commissioner of Texas wrote as follows in 
 1904: 
 
 “We had no law in this State regulating and supervising 
 mutual fire insurance companies until September 1, 1903. 
 
 “ Prior to this time we had a great many irresponsible 
 fake concerns which operated in the State under the name 
 ‘ mutual ’ but the only mutuality was among those who got con- 
 trol and management of the concerns, they putting the money 
 in their own pockets, and as soon as they were filled they quietly 
 closed up and went in search of fresh fields. 
 
 “Since the taking effect of the mutual law, passed by the 
 28th Legislature, we have authorized about 15 mutual com- 
 panies. Seven of these are doing a general business, and seven 
 are strictly local County affairs. One of these companies soon 
 found it unprofitable and has gone into liquidation. Three 
 others, as I understand it, are endeavoring to do a general busi- 
 ness over the State, and three more, while licensed to do a gen- 
 eral business over the State, confine their operations to their own 
 people — one among the Germans, and another among the Bohe- 
 mians. 9 1 
 
 Glen Walker, secretary of The Millers Mutual Fire Insur- 
 ance Company of Texas, writes from Fort Worth as follows: 
 
 “Your letter of the 19th inst. has been received, and I take 
 pleasure in writing you that in Texas there is now no practical 
 law for the incorporation of Mutual Fire Insurance Companies, 
 the present law having been so drawn that while apparently pro- 
 moting Mutual^ insurance and safeguarding the insured, it prac- 
 tically makes prohibitive such insurance. 
 
 “Seven companies organized before the passage of the law 
 are transacting business, and from their last reports to the Com- 
 missioner, it is shown that the receipts for 1904 were approxi- 
 
OF MUTUAL INSURANCE 
 
 509 
 
 mately $120,000, of which $85,000 is collected by one company, 
 viz : the Millers Mutual. 
 
 “It might be added that before the passage of this law the 
 State was covered with some forty or fifty so-called Mutual 
 companies, nearly all of which were Mutual only in name, be- 
 ing wild-catters of the worst type. The requirement to report 
 to the Insurance Commissioner wiped out thirty-five to forty. 
 
 “Besides the above referred to Mutuals, there are fourteen 
 County Mutuals organized under still another law. These it is 
 reported collected $12,000 in 1904, and are said to be doing a 
 small but good business.” 
 
 VERMONT. 
 
 Vermont has only three local companies, i. e. the Vermont 
 Mutual, the Union Mutual (both of Montpelier,) and the State 
 Mutual of Rutland, the last one, being quite new and small but 
 on the same general principle and plan. All three companies 
 insure all kinds of insurable property in this state; all do busi- 
 ness on the premium note plan. The Vermont Mutual, the 
 largest of the three companies, has had remarkable success a* 
 the statistics will show. Its business lies principally in Ver- 
 mont, writing but occasionally on risks in bordering states. It 
 has a local agent in every town, and is familiar and in touch 
 with each of its risks, and this is one of the causes of the com- 
 pany’s great success. Another reason is, the area is so small 
 that the officers of the Company, if need be, can personally 
 visit each locality where losses are frequent or fluctuations in 
 the value of property may demand it. 
 
 The ratings of the various classes of hazardous properties 
 were first made on personal judgment and in the course of the 
 Company’s experience it has been proven that the original 
 ratings were nearly correct. Village or city residences were 
 rated at 4 per cent, farm risks at 6 per cent, mercantile risks 
 at 25 per cent, the smaller shops and factories at 40 per cent, 
 grist mills, creameries and like hazards at 50 per cent, water- 
 power saw mills and wood working plants at 75 per cent and 
 steam mills and wood working plants at 150 per cent — these 
 give practically the range of rates. 
 
 There have been two farm mutuals and six other mutuals 
 organized under the laws of this state, and have transacted 
 business at various times. Both the Farm Mutuals and three 
 of the others have retired, leaving only three Mutual Fire 
 Insurance Companies incorporated under the laws of Vermont. 
 
510 
 
 A HAND BOOK 
 
 The Mutual Companies which started in this state and then 
 ceased to do business confined themselves to too small areas, 
 and under the larger growth and business of the Vermont 
 Mutual the smaller companies have been unable to succeed. 
 
 Assets of Vt. Companies. Surplus. 
 
 State $ 43,839.04 $ 5,384.67 
 
 Vermont 243,845.14 171,707.27 
 
 Union 77,148.18 7,518.84 
 
 $364,832.30 $184,610.78 
 
 There are ten mutual companies from Massachusetts and 
 Rhode Island doing business in this state and in 1904, the 
 amount at risk written was $3,609,899 for which they received 
 in premiums $67,206.07, paying out in losses $26,589.59 at a 
 loss ratio of 33.28 per cent. 
 
 WASHINGTON. 
 
 Washington is one of the newer states, but she has a good 
 mutual system. 
 
 She has 11 mutuals with $16,798,693 at risk, and a total of 
 assets of $756,620.30. This shows a material advance during 
 the year. 
 
 The laws of the state are fair. 
 
 Any ten or more persons, residents of this state, who may 
 desire to form a company or association for the purpose of 
 mutual protection of the members thereof against loss by fire, 
 may do so. 
 
 Mutual Marine and Fire Companies are provided for and 
 also live stock mutuals. 
 
 If the Insurance Commissioner of Washington does his 
 duty in making examinations there will be no bankrupt insur- 
 ance companies in that state. Weak companies will be forced 
 to close up before their losses become so great that they cannot 
 pay them. 
 
 Washington has an excellent Fire Marshal Law. 
 
 THE FACTORY MUTUALS. 
 
 F. J. Martin, of Seattle, writes as follows: 
 
 “In answer to your inquiry concerning the National Asso- 
 ciation of Factory Mutual Insurance Companies will state, that 
 this is an association of mutual companies, the association be- 
 ing formed during the early part of 1905 at the solicitation of 
 
OF MUTUAL INSURANCE 
 
 511 
 
 D. M. Parry, President of the National Association of Manufac- 
 turers and other manufacturers closely allied with that organi- 
 zation. 
 
 1 1 The Association has an Inspection Department in charge of 
 S. M. Timberlake, an experienced insurance engineer and locat- 
 ed at Indianapolis, Ind. The object of the Association is to 
 insurefthe better class of equipped manufacturing risks, but yet 
 those that are not quite up to the high standard required by the 
 Senior Factory Mutuals of New England. 
 
 “The companies selected for the organization were The 
 Indiana Millers Mutual Fire Insurance Co., Indianapolis, Ind.; 
 The American Manufacturers Mutual Fire Insurance Co., In- 
 dianapolis, Ind.; The American Guaranty Fund Mutual Fire 
 Insurance Co., St. Louis, Mo.; The Central Manufacturers 
 Mutual Insurance Co., Van Wert, Ohio; The Western Millers 
 Mutual Fire Insurance Co., Kansas City, Mo., and our own com- 
 pany. 
 
 “During 1905 these companies paid their policy holders a 
 dividend of 25 per cent, but on February 1st, 1906, it was in- 
 creased to 30 per cent.” 
 
 WISCONSIN. 
 
 No better account of the Mutuals of Wisconsin can be 
 given than the following, taken from the report of Insurance 
 Commissioner Host, for 1904. 
 
 The number of companies doing business in this state, and 
 
 reporting to this department, was as follows: 
 
 Mutual town insurance companies 199 
 
 City and village Mutual companies 37 
 
 Mutual Church Insurance Companies 4 
 
 Mutual Hail Insurance Companies 7 
 
 Retail Lumber Dealers Mutuals 1 
 
 The following table is an abstract from the reports of these 
 companies showing the amount at risk December 31, 1903: 
 
 City and Village Mutuals $ 32,471,068 
 
 Town Mutuals 246,902,622 
 
 Church Mutuals 4,210,152 
 
 Lumber Dealers Mutual 494,125 
 
 Mutual Hail and Cyclone 4,081,678 
 
 Total $293,159,645 
 
 In no form of insurance do we find the old fashioned the- 
 ory of mutuality so faithfully adhered to, and in no class of 
 
612 
 
 A HAND BOOK 
 
 insurance do the members receive more complete and fuller 
 returns for the share of the responsibility which each assumes 
 than they do in a Mutual Fire Insurance Company. 
 
 The successful Mutual company must confine itself, either 
 to a certain class of risks, or to a restricted locality, so that the 
 most important factor — moral hazard — may be eliminated. 
 
 Forty-four years of experience with local Mutual fire insur- 
 ance has proven the wisdom of the restrictions and limitations 
 which the law has placed upon these companies. 
 
 The limitations as to the character of the risk and exposure, 
 the amount of insurance, and assessment liability of the mem- 
 ber, together with the restriction as to territory — eliminating 
 the moral hazard which makes up so large a percentage of the 
 cost of stock companies — have made possible the success of this 
 class of companies. 
 
 Kept within the meaning and purpose of Mutuality, and the 
 well tried limitations and restrictions adhered to, with the 
 economy and care which has characterized the management of 
 these companies, there never need be a failure, and the protec- 
 tion afforded will always be the best. 
 
 Press of Daily Republican, McPherson.