LECTURES — ON — FIRE INSURANCE Being the Substance of Lectures given before the Evening Classes in Fire Insurance conducted by The Insur- ance Library Association of Boston during the Fall and Winter of Nineteen Hun- dred and Eleven and Twelve. PRICE, $3.5a.NET 1912 The Insurance Library Association of Boston Boston, Massachusetts U. S. A. p -0 Copyright, 191 2 The Insurance Library Association of Boston Boston, Massachusetts P'kank Wood, Printer Boston, Mass. PREFACE CONTENTS. Parti FIRE HAZARDS 1-122 H 1. Electrical Fire Hazards. Ralph Sweetland, Engineer, The New England Fire Insurance Exchange . . . 3-35 IT 2. Common Fire Hazards. J. Albert Robinson, Editor of Fire Records, National Fire Protection Association . . 36-94 113. Boot and Shoe Factories: Processes and Fire Hazards. Benjamin Richards, Inspector, Underwriters' Bureau of New England . 95-122 Part II NOTES ON RATES AND RATE MAKING. Gayle T. For- bush. General Agent, The Royal Exchange Assurance . 123-153 Part III FIRE PROTECTION: Public and Private 155-272 1. Theory of Fire Protection and Chemistry of Fire. Gorham Dana, Manager, Underwriters' Bureau of New England 157-166 2. Pails and Chemical Extinguishers. Mr. Dana . . 166-180 3. Standpipes and Hose — Meters. Mr. Dana . . . 180-188 4. Watchmen's Service— Self-Inspection — Private Fire Brigades. Mr. Dana 189-201 5. Automatic Alarms. Mr. Dana ..... 202-214 6. Fire Departments. Mr. Dana 215-226 7. Pumps. Benjamin Richards ...... 227-247 8. Waterworks. Mr. Richards 248-260 9. Municipal Fire Alarms. Ralph Sweetland . . . 261-271 Part IV FIRE INSURANCE POLICY FORMS AND CLAUSES. W. B. Medlicott, General Agent, Atlas Assurance Com- pany, Ltd., Lecturer on Fire Insurance, Graduate School of Business Administration, Harvard University . . . 273-385 PartV LOCAL AGENCY ORGANIZATION AND MANAGEMENT 387-460 1. Common Law of Agency and Massachusetts Statute Law of Agency. Frank M. Forbush, Attorney-at-Law 389-432 2. Local Agency Office Systems and Accounts. E. W. Beardsley, Ex-President, The National Association of Local Fire Insurance Agents ...... 433-441 3. Notes on Local Agency Compensation. Gayle T. For- bush 442-453 4. Office Organization and Management. Frank H.Bat- tilana. Assistant Manager New England Department of the Pennsylvania Fire Insurance Company . . . 454-460 INDEX 461-475 265501 PREFACE In offering to readers this volume of lectures on Fire Insurance the trustees of The Insurance Library Association are actuated solely by a desire to be helpful in the movement for the better training of young men, which seems now to be gen- eral throughout the country. The lectures themselves were delivered before students in evening classes formed to aid men in their preparation for the examinations of the Insurance Institute of America. It is not supposed that they possess in all cases either excep- tional originality of thought or exhaustiveness of treatment. The lecturers are men engaged as managers, inspectors, engineers or attorneys at law, in the suc- cessful performance of exacting duties. Lack of time alone, from the insufficient hours of days already filled with labor, rendered impossible the extended research and comprehensive comparison indispensable to works of pure scholarship. The aim has been to combine theory with practice and to present problems from the standpoint of the beginner. If the reader has been made to see the inherent difficulties of many of these problems it is felt that he will have been helped more than if offered easy solutions which seem simple but do not solve. The Association is greatly indebted to the lecturers all of whom have offered their services freely. Especially is it indebted to Frank M. Forbush, Esq., attorney-at-law, who, although not a member, contributed the chapters on local agency law, which "may be confidently claimed constitute the most comprehen- sive monograph on this subject, as it applies in Massachusetts, which has ever been written. Also mention should be made of those individuals and firms through whose courtesy most of the illustrations used in these pages were made available. They include Messrs. Knight 6c Thomas, American District Telegraph Company, Eco Magneto Clock Company, American La France Fire Engine Company, A. J. Morse & Son, Boston Auto Fire Alarm Company, Badger Fire Extin- guishing Company, Hersey Manufacturing Company, United Shoe Machinery Company, New England Bureau of United Inspection, and the National Fire Protection Association of Boston; C. T. Ham Manufacturing Company, Min- imax Company, Newman Clock Company, Pyrene Manufacturing Company, Safety Fire Extinguisher Company, and the Gamewell Fire Alarm Company of New York ; the Robinson Fire Apparatus Manufacturing Company of Saint Louis ; Builders Iron Foundry Company of Providence ; The Insurance Field of Louisville, Ky. ; H. J. M. Howard Manufacturing Company of Washington, Buffalo Steam Pump Company, Buffalo ; Rodney Hunt Machine Company, Orange, Mass., and the Waggoner Sanatory Fire Bucket Company of Chicago. D. N. Hanov, Librarian. Boston, Massachusetts, May 31, 1912. PART 1. FIRE HAZARDS ELECTRICAL FIRE HAZARDS LECTURE I Of all forms of energy available for man's use, electricity is at Introduction. the present time the most convenient, and is the one most widely used. Its applications are increasing at a tremendous rate, and one does not dare to prophesy what may be expected even within the next few years. As an example of how readily electricity may be converted into light, heat or power, I might cite what may be obtained from the same fixture in the average home. This fixture may supply an incandescent light, — we may connect a flatiron or a chafing dish, or we may connect an electric fan or sewing machine motor; i. e., we may use the electricity connected with the fixture for light, heat or power, by simply connecting the ordinary attachment plugs. While gas offers the advantages of being readily converted into light, and more economically into heat, it can only be converted into power with the aid of a complicated machine not at all suitable where a small amount is needed, neither can it be used in many of the locations available for electric power. While electricity may be used for light in all locations under suitable restrictions, gas mav onlv be used where an open flame is permissible. At the outset there is one point which should be made clear. Object of and that is, the fire protection engineer or inspector examines an Electrical installation of electric light, heat or power solely to ascertain nspection. whether it is safe from a liability to cause fires or be dangerous to life. He has nothing to do, however, as to whether or not such an installation is suitable for the uses intended. While an installation may be entirely satisfactory from a fire or life point of view, it may not be at all suitable for the convenience of the owner or occvipant. ■LECTURES ON FIRE INSURANCE The fire protection engineer or inspector cannot pretend to do the electrical engineering necessary for even a moderate sized installa- tion, but shoidd be capable of passing on plans and the execution of the work that property and life may be properly safeguarded. How Fires by As we are more closely interested in safeguarding installations Electricity that tliev may not pro\ e a menace to property by causing fires, we are Caused. ^^.j|] ^.,„lfi,lt> ourselves to the fire hazard. The question of life will only be mentioned incidentally. Fires may be caused by electricity by one or both of two general ways : — By First. — By the overheating of conductors, switches or other Overheating. de\ices, which may cause the insulation to ignite or the device to overheat and set fire to surrounding objects. It is, therefore, nec- essary to provide protection so that the current on the conductors and devices may be limited to their safe carrying capacity. Fuses and circuit breakers are therefore installed so as to prevent ah abnormal flow of current. These protective devices themselves may also heat, so that it is necessary to provide for their proper location. Examples of fire caused bv overheating of conductors or devices. A circuit is properly protected by fuses when it is installed. Later the number of lamps is increased or the motor is replaced by a larger one. When the increased load is started the fuses blow and open the circuit. (Just what they were designed to do.) An irresponsil)le party then increases the size of the fuses, or worse yet, he substitutes a copper wire or a hairpin. The lights burn appar- ently all right, or the motor runs satisfactorily and the man or boy believes he is as good an electrician as the average one. Later, however, the wires overheat and the insulation is ignited, thus set- ting fire to the surrounding objects. As another example take a poor joint in a wire. When a small amount of current flows the heat is not appreciable, but as the current increases, owing to the poor contact, the joint heats and the insulation is ignited. Again, we may have this overheating with- out overloading the circuit, simply by poor connections. For example, a binding post which makes connection with a conductor in a fitting is set up securely, but owing to the vibration of the building this contact becomes loose. Heating takes place, and the insulation is ignited. Second, — By the forming of an "arc." An arc is always accompanied by heal, and if it is of sufficient capacity may not ELECTRICAL FIRE HAZARDS only ignite combustible material, but may melt metals. Arcs may By Forma- be formed between two wires of a circuit, between a wire and any tion of an grounded metal, or between a metal and another grounded metal, the '^'■'^* former being in contact with a wire of a circuit. On this account, all wires are considered as "bare," and are to be so supported that even if bare they cannot come in contact with anything other than their designed supports. One or two examples may bring out my meaning clearer. As an example of an arc between wires, I might cite what may happen behind the canopy of a fixture where the wires of the fixture are joined to the circuit wires. The wireman through carelessness may fail to properly tape or cover the joints, and as some canopies have very little space at the rear when the canopy is pushed back the wires come in contact. When the cur- rent is turned on an arc is established between the conductors which before the fuses open may set fire to the insulation and thus to the building. As a somewhat different example of an arc I might cite the fire in a department store in New Haven some years ago. The elevator controller was operated by a wheel in the car. The boy who ran the elevator threw the wheel around sharply, which caused the lever arm of the controller to come in contact with the wire grill work about the ele\ator. This grill work was not grounded in the basement, as it rested on dry cement. It was in contact with the metal of the main roof, the top of the elevator extending above this main roof. The metal of the roof was grounded through the roof leaders, and an "arc" was established between the grill work of the elevator and the metal of the roof, setting the roof on fire. This arc was five or six stories above where the original contact was made. vStill another example was a case that occurred in the Back Bay a few years ago. The house where the fire happened did not have any electric light wires in it. In the basement a gas pipe rested on a water pipe making a slight contact. Either in the ground or in another adjacent building a wire was brought in contact with a gas- pipe. Probably due to the resistance of the joints the water pipe was a better ground than the gas mains. An " arc " was established lietween the gas and the water pipe, which melted a hole in the gas pipe, set the gas on fire, and ignited the woodwork in the basement ceiling. The chief requisites for a safe installation are, — the use of approved "material." By this I mean material that has been LECTURES ON FIRE INSURANCE Requisites for examined and is known to be suitable for the uses intended, with Safe ;^ reasonable margin of safety. Installation. ^ design which will permit of easy inspection and repair. The choice of a type of installation which will afford the greatest protection to the wires, switches, cut-outs and devices. Last, and possibly the most important of all, good mechanical workmanship. Electrical Terms Electrical ^ wish now to take up certain electrical terms, a proper under- Terms standing of which is necessary in order that the rules for safe wiring Defined. niay be clearly understood. Direct Current. — Direct current is current of such a char- acter that what is usually called the "direction" of the current is always the same, or, more exactly, the magnetic effects of the cur- rent are not reversed. Alternating Ctirrent. — Alternating current is current of such a character that what is called the " direction" is rapidly reversed. This reversing is made by means of the generator. The number of changes per second is called the frequency, and the frequencies most commonly used at the present time are 25 and 60, Some of the older installations use 120 or 135, however. Both direct and alternating current are in common use for lighting and power, although, except in the metropolitan cities, alter- nating current is more frequently used than direct. As a general thing, all of our private plants in city blocks, such as the plant in the block in which we are, use the direct current. Direct current is also used almost exclusively for street railway power, except on some of the railways where high tension alternating current is used, such as the electrification of the New York-Stamford line of the New York, New Haven and Hartford Rail Road. Incandescent lamps and heating devices are the same whether alternating or direct currents are used, and are interchangeable on different circuits. The construction for alternating current motors is different from that where direct current is used. Arc lamps are also somewhat different for alternating current than for direct current. However, as far as our purposes are concerned we need not concern ourselves with the difference between these two types. The same strength of current will heat a conductor the same whether it is direct or alternating current. A direct current arc, however, is somewhat more severe than an alternating current one. ELECTRICAL FIRE HAZARDS Current. — Current is measured in amperes. It may be com- Electrical pared to the number of gallons per minute carried by a water pipe. Terms More current, other things being equal, will always do more work, D«"ncO' and will always cause more heat in the conducting wires, cables, appliances, etc. I may say, at this time, that the heating of dif- ferent amounts of current increase as the square of these different amounts. Voltage. — Voltage, potential or pressure are measured in volts. Volts measure the propulsive force which causes a "current" to flow through a conductor. You may think of it as the electric pressure produced by the dynamo or battery. Given a circuit, if the pressure is increased the amount of current will increase. Since it is the voltage or pressure which will cause electricity to stray from the path prepared, the higher the voltage or pressure more care must be taken to see that the path is maintained. Difference of Pote/it/'al. — Two points on conductors or he- tween a conductor and the ground are said to be at different poten- tials. Where this difference does exist current tends to pass between them. When the current passes along a conductor it pro- duces heat. When it jumps between conductors or between con- ductors and the ground it produces an "arc." Resistance. — Resistance is measured in ohms. All sul:)stances offer resistance, and this is true of metals, liquids and gases. A good conductor offers little resistance, while a poor conductor may , offer considerable resistance and thus be a good insulatcjr. Copper is one of the best conductors, and thus has little resist- ance. Iron is about one-seventh as good a conductor as copper, and thus the same size and length of iron wire would have about seven times the resistance of the same size of copper. Wood, when dry, is a poor conductor, but a good insulator. Now, as all conductors have some resistance, to cause a current to flow in a conductor or device requires a certain voltage or pres- sure. This brings us to what is known as (3hm's law. Ohm'' s Lazv. — This relation between voltage current and resist- ance may be stated as follows : ^ R when C ^Current in amperes E = Voltage or pressure in volts R ^Resistance in ohms. Please note that C varies directly as E and in\ ersely as R. Defined. 8 LECTURES ON FIRE INSURANCE Electrical This law is absolutely true for direct currents, but is not wholly Terms^ true for alternating currents. Poxver. — Power is measured in watts. A watt equals 1 ampere X 1 volt. Usually we speak of kilowatts (1000 watts). A horse power equals 746 watts, so that a kilowatt equals ^^^^ HP 1^ HP Take an incandescent lamp example. K 16 c. p, carbon fila- ment lamp consumes ^ ampere at 110 volts. The watts are therefore J X 110 ^55. \Vith the alternating current this product of the volts and amperes does not give the power consumed, as there is another factor known as the power factor. With direct current, if the cur- rent, as read by a current meter known as an ammeter, is 100 and the volts are 10(1 then the watts are 10,000 or 10 kilowatts. With alternating current this power factor may be as low as .60, so that the power instead of being 10,000 watts may be only 6000. or 6 kilowatts. Multiple Connection. — When devices are so connected that the current has a path through each separately from one supply wire to another they are connected in " multiple." Series Connection. — When the devices are so connected that they come one after the other and the current which flows through one flows through all they are said to be connected in series. Shunt. — A shunt is a by-path between two points so connected that part of the current will traverse it. The amount of current that the shunt takes depends upon the relation of the resistance of the shunt to the resistance of the main path. Cut-out. — A cut-out is a device for automatically breaking a circuit when the current reaches a predetermined amount. A 30 ampere fuse is a cut-out designed to open when the current reaches slightly in excess of that amount. A circuit breaker is an automatic switch and is also called a cut-out. A fuse when it opens is de- stroyed, while a circuit breaker may be reset and be as good as new. A switch, fuse or circuit breaker is single pole when it opens one wire of a circuit, double pole when it opens two poles, triple pole when it opens three poles. Ground. — A ground is a connection either intentional or acci- dental between a path of a circuit and the earth or any metal or conducting substances which are in electrical connection with the earth, such as water or gas J^ipes, metal work of buildings, etc. ELECTRICAL FIRE HAZARDS Short Circtiit. — A short circuit is a shunt with practically no Electrical resistance. It usually results in a very considerable rush of current, Terms forming an arc which may cause a fire. Defined. Constant Potential Systems. — A constant potential system is one in which the pressure or potential between the different wires of the circuit are approximately the same. With such a system, as the load on the circuit increases the current increases. Constant Current System. — A constant current system is one in which the current is maintained approximately constant, regard- less of the character or the power consuming devices on the circuit. The arc and incandescent street lamps are usually operated on a constant current circuit, principally for convenience of control and low cost of installation. T-wo-zvire System. — A two-wire system is one having a single pair of distributing wires. Thrce-'ivire System. — A three-wire system is a special form usually employing two generators. Transformer. — A transformer is a device for reducing a high potential alternating current to a low potential. By this means we may generate at a high potential transmit to the location where we wish to use the power and then reduce to a potential or voltage economically and safe to use. Now let us go back to power, which we said was the product of the volts and amperes. While for alternating current with a motor load, there are other factors with a lighting load. Ohm's law is true enough for our purposes. Watts =Volts X Amperes. If we raise volts we can reduce amperes, and still furnish the same watts or power. Suppose we wish to transmit 10,000 watts or 10 kw. a certain distance. If a pressure of 200 volts is used the current^ '>aa "^'^^ amp. , AAA , 1 1*>^00 . it we use z,000 volts then current = > ^ . =ii. l!000 Again if C = -- then C R =E. rv Now watts =C X E, then watts ^C- R. Now the power lost in transmitting a current is equal to the square of the current times the resistance. As the resistance of a given wire is a constant, the energy lost varies directly as the square of the current. JO LECTURES ON FIRE INSURANCE Electrical Assume that the resistance of the circuit over which we wish Terms to transmit 10 kw. is 1 ohm, with the voltage of 200, then Defined. the power lost in transmission is 50 amp. x 50 amp. x 1 ohm =2,500 watts. Now this is ^ or 25*/^ of the power, and this has been lost in the heating of the conducting wires. If the voltage is 2,000, then the power lost is In other words, this latter is 100 times as economical as the first, or by increasing the voltage 10 times we improved conditions 100 times. Without going into the theory, it is enough to say that a trans- former can be used on alternating current but cannot be used on direct current. Also that we may only reduce direct current by means of apparatus having moving parts, thus requiring attendance. Alternating current may be reduced by apparatus without moving parts, and thus without attendance. Again, direct current requires the use of a commutator or rec- tifiyer, the current generated being alternating. Above 600 volts commutation becomes difficult. If it is necessary to use direct cur- rent some distance from where our generators are located, it is pre- ferable to generate alternating current, transmit to the place where it is to be used, step down to a low potential and then rectify to direct current by apparatus having moving parts. LECTURE II Early Recog- The hazards of electricity were early recognized, and on nition of October 19, 1881, the New York Board of Fire Underwriters rlazards ot {gg^ed a resolution which is so short I will quote : — " Resolved : That the Committee on Police and Origin of Fires are hereby directed to notify the owners and occupants of all buildings in which uncovered electric light wires, or in which arc lights with open bottoms or without globes are found, that the wires must be covered, and the lamps altered to conform to the rules of this Board within ten days from date of notice, and request that the lights shall not be used until the alterations are made : and in case the alterations are not made within said time, the Committee are hereby directed to notify the members of the Board of said failure, and the com- panies insuring said property are hereby recommended to give notice to the owners and occupants of such buildings that unless the request is complied with, and the alterations made within a reasonable time, that the insurance on said property will be cancelled." Electricity. ELECTRICAL FIRE HAZARDS H On October 20, 1881, or one day later than this resokition which I have just quoted was issued, a circular was sent out by the Boston Manufacturers' Mutual Fire Insurance Company, which called attention to about the same points as mentioned in the New York Board's Resolution. In January, 1882, the New York Board of Fire Underwriters issued a vei'y brief circular containing rules for the installation of electric lights, and about the same time the Boston Manufacturers' Mutual Fire Insurance Company issued circulars on this same subject. I would call your special attention to the fact that these rules pertain entirely to arc light installations. In May, 1882, the National Board of Fire Underwriters issued Electrical their first set of rules, which were later adopted by the Boston R^l^s. Board of Fire Underwriters. The first rules of the New England Insurance Exchange were issued in August, 1885. Previous to that time they used the rules of the Boston Board, From this time to the early part of 1892 rules were issued by various rating organizations and differed considerabl}'. In the early part of 1892, through the initiative of C. M. Goddard, Secretary of the New England Insurance Exchange, rules were prepared by representatives from various Underwriting Boards in New England, Middle, South Atlantic and the Gulf States. Out of this grew the Electrical Committee of the Under- writers' National Electrical Association. In 1S97 there was held the first National Conference of delegates from the American Institute of Architects, the American Institute of Electrical Engi- neers, the American Society of Mechanical Engineers, the American Street Railway Association, the Factory Mutual Fire Insurance Companies, National Electric Light Association, National Association of Fire Engineers, National Board of Fire Under- writers and Underwriters' National Electric Association, and in that year the first edition of the National Electrical Code was issued. The preparation of these rules, however, devolved upon represen- tatives of underwriting organizations. From that time until 1911 the Electrical Committee of the Underwriters' National Electrical Association prepared the rules, which were issued in odd years, viz., 1899, 1901, 1903, etc. At the meetings when the rules were considered the Elec- Representa- trical Committee always invited representatives of national asso- **'^^ Char- ciations, engineers, inspectors and others, and allowed these ^*i " ° . 11- . -r r , , Electrical representatives to take part in the discussions. It was felt, how- p j ever, by Secretary Goddard of the Electrical Committee of the 12 LECTURES ON FIRE INSURANCE Underwriters' National Electric Association, that as the National Fire Protection Association had for its active members National Associations other than Underwriting Organizations, and as the National Fire Protection Association prepared other standards as regards tire protection and fire prevention, this was the Association which should take over the work of the Under- writers' National Electric Association. Upon his initiative this was accomplished early in 1911, and the edition of the Code is- sued in that year was prepared by a committee from the National Fire Protection Association. While most of the members of the old Electrical Committee are now members of the Electrical Committee of the N. F. P. A., the membership of that committee has been enlarged, so that it now inchides representatives from the American Institute of Electrical Engineers, the American Electric Railway Associa- tion, National Electrical Contractors' Association, National Asso- ciation of Electrical Inspectors, National Electric Light Association, Electric Jobbers, and in addition the Chief Electrical Inspector of the citv of Chicago and the Electrical Engineer of the city of New York. So you will see that all Associations in any way inter- ested in electric wiring, that it may not prove a menace to life and property, have a voice in the framing of the Code. I now propose to consider some of the more important features covered by the Code. Class A. Dynamo Rooms. Class A. Dynamo Rooms. As will be noted, this section covers not only dynamo rooms, but all power stations, sub-stations and storage battery stations. To-day the average electric light and power station is usually con- structed of fireproof material ; /. e., with brick or concrete walls, concrete floors and concrete roof, so that the amount of combus- tible material is small, although there is always some present. The tendency is for a concentration into large stations, with numerous sub-stations handling the light and power in more or less congested communities. For example, the Edison Electric Illumi- nating Company of Boston handles practically everything in Boston and to the west as far as Hopkinton. Current is sent out from the station in South Boston at 13,000 volts, and then is stepped down at sub-stations located in Needham, Newton, Natick, Hop- kinton, Waltham, Somer\ille, Woburn, Chelsea, and distributed to these \arious municii^alities. ELECTRICAL FIRE HAZARDS J3 The capacities of the single units are constantly growing Class A. larger, and apparently we have not as yet reached the limit oi size. Dynamo I well remember while in Lynn with the Thompson-Houston Rooms. Electric Company, in 1S90, that when a '200 kw. (267 H. P.) machine was constructed it was considered a wonder by all em- ployees in the factory. To-day the Chicago Ellison Electric Illumi- nating Company is installing machines of 20,000 kw,, or one hundred times as large as this machine. The electrical equipments of the largest stations are yerv complex, but the tendency seems to be to simplify them as much as practicable, and to so subdivide the station that in case of trouble the extent of the damage will be as small as possible. As you can well imagine, to have 25,000 h. p. converted into heat from a short-circuit is bound to cause serious damage, however carefully the apparatus may be isolated. In order that only a limited part of the station might be put out of commission in case of any derangement in one of its parts, one of the stations of the Interborough Railway Company of New York was designed so as to be in five parts, each part consisting of a boiler room, dynamo room and switchboard room, the current from the several parts of the station not coming together until after it left the switchboard. With such an arrangement, should any accident occur in one of these divisions of the station, it could not extend to the other sections. With these thoughts in mind, you can well understand that it is impossible in a pamphlet the size of the National Electrical Code to cover all of the details of these larger stations. Probably the trouble which has been experienced in most of our stations has been through overcrowding, this due largely to the fact that it has been necessary to increase the capacity of the station beyond that for which the building was originally designed, thus resulting in crowding the apparatus and more or less temporary work always conducive to trouble. Generally speaking, the generators, trans- formers and motors in a station do not present the hazard that the switchboard and the mass of wiring leading from the same does, although, as we shall note later, the transformers with their large amount of combustible oil should be separated from the balance of the station. It is, of course, extremely essential that the rules for safe wiring should be follow ed in these stations, and, in fact, we shoidd go further than the rules in order that every precaution may be taken to avoid interruption of service, often as serious with public service corporations as the ilestruction of the station itself. 14 LECTURES ON FIRE INSURANCE Generators. It will be noted that generators should be located in dry places. Moisture is apt to injure machines, and in certain cases may cause short circuits or grounds, Xo combustible material should be per- mitted near a machine, and it should be so located as to provide for ample ventilation, since the cooler a machine can run, the greater the load that it can carry. In fact, the capacit\ of a machine is dependent upon the temperature. High potential machine frames should preferablv be grounded, since it is not practicable with the-e larger machines to attempt to insulate them, and either one of the two courses should be followed : /. e.^ we should either permanently ground or effectively insulate. You will recall that a constant-potential machine is one where the pressure or voltage remains fairly constant, the current increas- ing with the load. It is, therefore, necessarv for some form of protective device to he. provided so that these machines may not be overloaded. Conductors. In the previous lecture it was pointed out that one of the important requisites of a safe installation was ease of examination and repair, — this is especiallv true with conductors in a central station or dynamo room ; /. t risks of their class. Most shoe shops are fully equipped with automatic sprinklers. Raw Stock. ihe materials used in manufacturing shoes are sole leather, upper leather (of calf, sheep or goat skins), cotton cloth for linings, leatherboard or other leather substitutes, light leather for facings and trimmings, linen thread, and shoe findings, such as eyelets, hooks, straps, rands, shanks, etc. Some shops purchase their box toes, insoles, outsoles, counters, heels, rands and shanks from manufacturers who make a specialty of such parts. Lasts are the wooden forms, turned to the shape of the feet, upon which the shoe is built. The last gives the shoe its size, shape and style. In shops j^roducing many sizes and styles a large quantity of lasts will be found. Lasts are practically worthless after a certain style shoe for which they ha\e been prepared has been withdrawn from the market. They are usualh stored in large racks inside the main factory, where the several sizes and styles may be readily accessible in executing the orders. Patterns are pastelioard forms ha^ ing the edges bound in metal. They are used to cut out the pieces of leather which are to form the upper part of the shoe. Paper boxes in which the shoes are packed are sometimes inanufactured in shoe shops. Sometimes the wooden cases are made, but generally the shooks are purchased and the cases nailed up as needed. A case of shoes consists of twenty-four pairs. Shoe shops are quite uniform in the arrangement of their pro- cesses, the preparation of the uppers being usually on the top floor, the sole, heel and counter work being on the lower floor, and the finishing work bet^veen. This brings the cutting out and stitching at the top of the shop where the light is good and enables the heavier sole department machinery to be kept near the grountl. This general arrangement of course is not found where a s\u)p has been built in a rambling manner. In the manufacture of men's shoes the cutting departinent will occupy approximately twent\- per cent of the area, stitching about twenty per cent and the making or assembling about forty per cent. The storage in the factor\ \\ ill consist of u]:)per leather, sole leather and lasts. A large \alue of upper leather can l)e stored in a comparatively small space. It is ahvavs of interest to note just where this leather is stored and to learn its approximate value. Finished shoes are usualh- shipped from the shops promptly. Occupancy. SHOE FACTORIES : PROCESSES AND HAZARDS 97 but in some cases larj^e \alues of these are kept on hand. vShoes should preferalily lie stored in a separate storehouse outside the main shop. Most shops have boilers and an engine in a one story brick Power, building- adjoining the main shop. The engine is usually belted directly to the shafting. Leather waste and factory sweepings are usually burned at the boiler. Some of the newer shops have electric power either from outside or from their own plant. Motors are located in the differ- ent departments, so belts through floors can usually be avoided. This is a desirable feature. Some small shops are driven by gas or gasolene engines. Most of the power is consumed in the making departments. But little power is required in the cutting and stitching rooms. A moderate amount is used in the sole departments. The shops are usually heated by steam, with the pipes at the Heating, sides. There are a few using hot air systems, which are consid- ered safer. There are no side aisles in shoe shops, it being cus- tomary to place the benches and machines close up to the walls. This makes it hard to keep the steam pipes clean, and many fires start from materials collecting in and around the steam pipes. A scrutiny of the steam coils as they pass behind the machines and under the benches is a necessary part of a shoe shop in- spection. Shoe shops are mostly equipped with electric lights, as they Lighting, should be in all cases. Many city and tenant shops have gas lights. Open lights are dangerous in shoe shops because of the necessary presence of naphtha fumes. The fire record very posi- tively points out the relatively few fires from electrically lighted as against gas lighted shoe shops. The risk is sometimes lessened in gas lighted shops by installing electric lamps in the stitching rooms and in other portions where naphtha is used, leaving the greater part of the shop lighted by gas. If gas must be used, the burners should be located high, at least three feet above the benches. Naphtha fumes are heavy, and so trouble may be avoided by keeping the open lights high up in the room. No gas lighted shop can be considered as good a risk as one with a standard electric equipment, other features being equal. As a rule shoes are about three weeks in process; that is, the Processes, finished shoe is shipped about three weeks after the order is started through the shop. Of course the various shops may vary 98 LECTURES ON FIRE INSURANCE some in this as well as in the manner of operation which is to be described. The shoe manufacturer acquaints himself with the tendencies of his trade and tries to anticipate its demands. He calls in the last designer and the pattern makers, explaining his desires and suggesting changes. He must purchase his leather or arrange for its delivery at the proper time, the kind, color, etc., needed depending on the demands of his customers. When an order is received it is entered on the records in every detail, so that the style and kind of each separate part may be definitely fixed and executed. These details include the kind No. 1. A last; No. 2. An upper; No. 8. An insole; No. 4. Shoe lasted and ready to have welt sewed on ; No. 5. Welt partially sewed on ; No. G. Welt entirely sewed on and shoe ready to have out- sole laid; No. 7. An oiitsole ; No. 8. Shoe with outsole laid and round- ed. Channel lip turned up ready to be stitclied ; No. 9. Shoe with sole stitched on; No. 10. Shoe with heel in place; No. 11. Heel trimmed and slioe ready for finishing. SHOE FACTORIES: PROCESSES AND- HAZARDS 99 of upper leather, styles of patterns used in cutting- the uppers, kinds of stays, facings, eyelets, linings, etc., style of last, soles, insoles, heels, toes, counters, etc. A tag is prepared, giving all the necessary details for making the shoes. One tag accompanies each lot of shoes which pass through the shop on a rack or truck from one operation to another until the completion of the shoes. There are three methods of shoe making, the names indica- ting the manner in which the soles are stitched to the uppers. Turn sJioes are made on the last wrong side out, the shoes being turned after the soles are stitched on. Of necessity this system is used for soft soled shoes, mostly women's and chil- dren's. McKay shoes are those having the soles stitched on from the outside to the inside of the shoe. The long arm shown in the picture of the McKay stitcher reaches up inside the shoe, making it possible to place the stitching in its proper location. The Goodyear welt process is used in making the better Processes, grade of shoes. It requires more machinery and many more operations than do the other methods. In this process a narrow leather strip, called a welt, is stitched to the upper and then the sole is attached by stitching it to the welt. All the stitching is done outside the shoe, leaving the inside smooth. As the Good- year welt process includes all the work done in shoe shops, it will be briefly described. The lasts and patterns having been prepared, the work is started in the upper preparing and the sole departments, so as to be ready for assembling on the lasts in the assembling or making department. The processes in their sequence are as follows 1. Cutting uppers, linings, trimmings, etc. 2. Stitching uppers, fitting eyelets, buttons, etc. o. Cutting, trimming and preparing soles. 4. Cutting, pasting, pressing and drying heels. •3. Cutting, stiffening, pressing and drying counters and box toes. 6. Tacking insole, box toe, counter and uppers to the last. 7. Lasting. (Pulling leather tightly over last.) 8. Trimming off surplus leather at bottom of uppers. P. Sewing on welts. (A narrow strip of leather extending out- ward all around the shoe.) 10. Trimming and hardening welt into position. too LECTURES ON HRE INSURANCE Cutting Room. Fitting or Stitching Room, Sole Depart- ment. 11. Filling up the space between welt on bottom of shoe with cement and cork, leatherboard or some other filler. 12. Cementing the outsoles in position. 13. Trimming edges and forming channel in the sole to receive the stitching. 14. Stitching the outsole to the welt. 15. Cementing channel lip down to cover stitches. 16. Leveling. (Pressing sole into shape.) 17. Heel nailed on. 18. Trimming heels, edges of sole and buffing off the leather. 19. Finishing. (Waxing, buffing and polishing. ) 20. Treeing. (Ironing with hot iron, removing stains and filling defects. ) 21. Lasts removed, cleaning, laces inserted, packing, shipping. The parts of the upper cut in this room are vamps, tops, tips or caps, tongues or fly linings, linings, backing, eyelet or button stays and back stays. Some of these parts may be pur- chased, but they usually are cut out by hand. The leather is spread out on a board, the pattern is laid on the leather and a sharp knife passed around the pattern to cut out the leather. In some shops "clicking" machines are used. These, by means of dies, do the same work as is done by hand, The leather is selected in the cutting room and the cut parts properly marked and stored ready for use. Here, sewing and similar machines are used to stitch the cut parts together, to attach the linings, facings, hooks, eyelets, ]iox toes, buttons, straps, stays, labels and ornamental stitching. Before stitching, the edges of some of the pieces are shaved or skived off, and cemented together. Facings are also cemented. Rubber cement, made of rubber dissolved in naphtha, is used for this work. It is the principal hazard of shoe shops, and will be later described. Simultaneously with the cutting and stitching, the soles are prepared. Dies are used to cut out the soles from the leather, large presses furnishing the power. The soles are afterward "rounded out" to proper size. They are sometimes pressed by passing them between rollers. Splitting to the proper thickness is also done. Insoles are cut and a channel formed to receive the stitches in the Goodyear welt process. Heels may be made of solid leather, pasted pieces of leather or of leatherboard. The top lift, or outer layer, is always of a < \02 LECTURES ON FIRE INSURANCE high grade leather. Heel stock is cut out by dies, the pieces being pasted together in a form, put under high pressure and dried by hot air. Cou7iters a7id box toes may be made of solid leather, leather waste or leatherhoard. Canvas is sometimes used for boxed toes. It is stiffened with shellac. Counters are waxed. These parts are cut, formed, pressed and dried. Shanks are used to support the sole at the instep. They are small strips of steel or wood, sometimes backed with leatherboard. Heels, counters, shanks, etc., are often purchased outside. Bottoming ^h& box toes and counters are inserted in the uppers either Department, in the fitting room or the making room. The uppers are then placed on the lasts and laced up into their proper form. In this room the insoles are tacked to the lasts on which the upper has been placed. If not previously done, the box toes and counters are inserted. The upper is then carefully "centered," tacks being placed at the toe and heel to keep it in place. The pulling over and lasting machines pull the upper tightly over the last, fastening it in place by tacks. The surplus part of the upper beyond the tacks is cut off. The welt is then sewed on. The method of attaching the welt and stitching the soles to the welt is shown in the cut. The stitcher does this work by a curved needle, which makes it possible to make the peculiarly difficult stitch through the insole, welt and outsole all from out- side the shoe while the latter is still on the last. The fact that the last can be kept in the shoe during all the processes gives the shoes the superior form and finish only possible with the Good- year system. There are machines for doing other minor opera- tions in the making room, as shown by the list of operations previously given. The filling up of the channel or space formed between the inner and outer soles deserves our attention, as the fillings used may be compounds of hazardous materials. Cork and rubber cement is generally used. Sometimes a preparation called "Besto" is used which, although inflammable, contains no naphtha. When the top lift of the heel is put on it is usually cemented, as it is forced on over the nails, which do not show from the outside. The manner in which the soles of turn shoes are stitched to the uppers is shown and also the McKay stitch where the stitching passes from the inside of the shoe to the outside. 104 LECTURES ON FIRE INSURANCE There is no deep space or channel to lie filled in this shoe. The extra stitching on the outer edge, called the ''fair" stitch, is used in imitating the Goodyear welt. Finishing The welt, edge of sole and heels are rounded off anri trimmed Department, in the bottoming department. These machines produce leather waste, which is removed by a blower exhaust system. The finishing comprises trimming and hardening the edges of the soils and heels, buffing off the leather, removing signs of imperfections, and polishing. The buffing is done on rollers revolving at about seven thou- sand revolutions per minute, which are covered with sanded paper. Blow tubes exhaust the dust from these machines. These machines usually have air coole'd bearings. Edge hardeners or setters have a rapidly operating die or hammer which delivers thousands of blows j^er minute to the edge of the sole. The hammer is heated by gas or gasolene flame so as to soften the wax which the process forces into the leather. The shoes are blacked, stained and polished thoroughly, rapidly revolving bristle and cloth wheels being used for this purpose. After stamping the name or trade mark the lasts are removed. Treeing is a final finishing process where all defects, spots and wrinkles are elimi- nated. The machine consists of devices for holding the shoe in form so as to be convenient for the workman. Hot irons are used in this work. They may be heated by oil stoves, gas stoves or by electricitv. After treeing, the laces are inserted and the shoes packed in paper boxes and wooden cases. SPECIAL HAZARDS* The presence of benzine or naphtha and rubber cement consti- tutes the important special hazard of shoe shops. This hazard is less in boot factories than in shoe shops and less in the shops pro- ducing women's, children's antl the cheaper men's shoes than it is in shops manufacturing the Goodyear welt anil high grade shoes. Carelessness and general contempt f(jr the dangerous qualities of naphtha, obtaining on account of the daily use of it, cause a great main' fires. 0]ien lights or other open flames should not be j^resent where na])htha or cement is used. It is not possible to do away entirelv with open flames in shoe shops but where they exist they * Taken in part from " Shoe Factories, Their Processes and Hazards,'" bv Winthrop P. Tenney, National Fire Protection Association, Special Hazard Bulletin No. ID, Page 3. J06 LECTURES ON FIRE INSURANCE Special Hazards. should be kept well above and away from the naphtha. Naphtha fumes are hea\ ier than air, and if open flames are near the floor the danger is increased. Rubber cement has proved to be of the utmost ^ alue to shoe manufacturers. It has powerful adhesi\ e and waterproof qualities and bends easily without cracking. It is made by dissolving small pieces of rvdiber in naphtha and thoroughlv mixing. In this condi- tion it forms a viscous fluid, from which the naphtha rapidly evap- orates. Rubber cement is never manufactured in shoe factories but the continuous evaporation necessitates the addition of more naphtha from time to time for thinning purposes, so that more or less free naphtha is always in use and the fumes are always present. Rubber cement is delivered at the factory in amounts varving from one to ten barrels. These are usuallv left outside or placed in a detached cement house. Everv factorv (except some citv tenant risks which recei\'e supplies dailv) has a cement house or some enclosure for the storage of rubber cement, naphtha, alcohol and the like. It is usually sit- uated ten, twenty or thirtv feet from the main factory, but some- times adjoining or even connecting ; generallv a cheap one-storv frame building (in rare cases brick) in a better or worse state of preservation. Some excellent modern fireproof houses have been l^uilt. The volatiles are stored in metal tanks and handled by measuring pumps. This makes the safest method vet devised for storing naphtha and cement. Cement houses should properlv be of fireproof construction at least thirtv feet from the factorv. Underwriters luiderstand so Avell the dangerous nature of rubber cement and naphtha that almost all policies contain a clause limit- ing the amount in the factorv to a dav's supplv and declaring the policv void if cement is stored in buildings covered by the policy. It is certainly a most reasonable restriction. Many fires start at the cement house which, were the\ inside, would at once prove serious. The cement house should be kept locked at all times when not in use. Some respozisible man should be delegated to obtain whatever naphtha or cement is needed. Young boys often ha\ e this work in charge, and think it is a good chance to enjoy a cigarette, or in case the cement runs slowly, thoughtlcsslv light a match in order to find tlie trouble. Needless to sa\- that thev find it in short order. The cement should be drawn in strong cans and brought to the se\eral rooms where needed. At the close of work for the day, what remains should be remo\ed to the cement house. The cans should SHOE FACTORIES: PROCESSES AND HAZARDS 107 not 1ie tilletl at night and no lights shoiikl be allowed in the cement house. Rubber cement is used in almost all shops for sticking the Special edges of uppers, linings and facings. It is usually spread on with Hazards, a brush. The cans from which it is used are of sheet iron or pre- ferably of heavy cast iron. The cans are designed to expose a minimum amount of cement to the air, so that the evaporation will be as little as possible. Sometimes, but not often, a gravity feed system for supplying cement is found. It consists of a sheet iron reservoir holding about nine gallons connected by a series of piping to several cast iron saucers, the supply to these being controlled by vahes imder the bench. The reservoir is supplied by 15-gallon cans, which are brought into the building during the day and remo\ed at night. The arrangement does not appear to be particu- larly hazardous, but certainh", from a tire point of view, it is not an impro\ ement on the method of using cement from open saucers ; nor can it be considered as satisfactory as to use heavy cast iron safety pots, owing principally to the larger amount of cement neces- sarily kept in the building. The \al\es controlling the supply might be left open and also cause trouble. Cc?}ienting of soles or taps is done in the sole cutting room. Formerly this ^vas all hand work, but now most of the factories use a regular sole cementing machine, consisting of two rollers, the lower one of which is corrugated and fits into a covered cement pot holding from one to two gallons. The sole is passed rapidly be- tween the rollers and is coated with cement. Where both sides are to be coated, as with taps or middle soles, an additional cement pot is attached al)o\e the top roller and the ceinent is alhnxetl to flow onto both rollers. In manufactm'ing the ''Gem insole," rubber cement is cjuite generalh' used. The outfit consists of a special cement pot for coating strips of can\as or cotton duck, which is then attached to a specially prepared insole. The strip of canxas passes down into the cement and over to a bench some tlistance away. The e\apor- ation of naphtha from so much exposed cloth diffuses fumes in great quantities, creating a \qx\ great danger of an open light starting a fire. The cloth should pass o\ erheatl through a drier connected with the outer air, so that most of the fumes will pass outside. Naphtha black or dip blacky which is used in upper cutting or sometimes stitching rooms, is a mixture of lampblack and naphtha. With this licjuid the edges of the uppers are dipped or }08 LECTURES ON FIRE INSURANCE lirushcd to color tht'iii. Open liojhts should iKJt be allowed in the \ icinity and the dip should be used from safety pots or vessels with covers. The vessel containintj the dip black should have a cover. Oiiproof is put on the inner part of the outer sole to prevent the natin-al oil in the u])))ers frcnn staining; the sole. It is made of gelatine and carbolic acid and other ingredients dissolved in naphtha. It is generally found only in high grade shoe factories. No open lights should be alhnved near, and it should be used from safetv cans or covered \ essels. Waterproofing mixtures are apt to contain naphtha. This is especially true of " \'iscol." Some of the compounds in use, how- ever, contain no naphtha and cannot be considered anv more hazardous than ordinary oils. At ordinarv temperature thev are solid, and before using it is necessarv to heat them, which is usually accomplished by means of a steam coil. The temjierature is not great. When naphtha is used at all as a soh ent the work of w ater- proofing should be done outside the building and the utmost care used in conductintr the w ork. rtVye"*-?^! Ilia's Method of stitclnng the welt, upper, insole and outer sole together in the Goodyear Welt PrcK-ess. SHOE FACTORIES: PROCESSES AND HAZARDS 109 I}i tJie iiiakiug room the lM)tt()iii of the inner sole is usualh given a coat of cement before g'oini«-r so»e ttT«T S o ' < -Cai-r sti%U "n-«eT So \^ NV Method of stitcliing McKay shoes; showing' imitation welt. Cutting De- A great many fires occur in the cutting room, and may partment. usually be ascrilied to cutting board scrapings which are produced in dressing off the boards from time to time. These thin shav- ings of wood mixed with linseed oil dressing form a specially dangerous coml)ination and under certain circumstances can be relied on to take fire. Indeed, where the conditions are favorable, this not infrequently happens in an hour or two. W^orkmen should be made to appreciate the seriousness of this hazard and SHOE FACTORIES : PROCESSES AND HAZARDS HI strict rules should be enforced by the room foreman respecting the disposal of such refuse. The best way is to put them outside at once or provide standard metal waste cans and have it under- stood that scrapings are to be deposited in them as soon as made. The cans should be emptied every night, either taken to the boiler and their contents burned or taken outside and emptied in a safe place. If it is customary to throw scrapings out the win- dows they do not always go outside; some may land behind the bench and lie there unnoticed. Sometimes when care of hazards is poor, they are thrown into wooden boxes, swept up with the rest of the waste or left in a small bundle and forgotten entirely. Too much stress cannot be laid on the disposal of cutting board scrapings, for they are without doubt the cause of many fires now attributed to strange or unknown causes. It is only fair to state that this hazard is well recognized and properly cared for in most shoe factories. The machinery in this room consists of sewing machines and Fitting or other light machinery, so the hot bearing or loose pulley danger Stitching De- is not great. The uses of cement, oilproof and edge stain have partmcnt. already been described which comprise the principal and serious hazards of the department. Alcohol, or some compound of alcohol, is often used to clean linings. Crimping is folding or forming the upper leather which is moistened to aid the work. The moisture must afterward be dried out. It is not a hazardous process unless the driers are heated by kerosene oil lamps or gas. Steam is, of course, the proper means of heating, and when used all pipes should be properly bushed to prevent the woodwork from charring. The singeing of toe tips to remove the roughness of the edges is fre- quently dangerous, for as these parts have first been dipped in naphtha black, the singeing fiame may ignite the fumes. An average sized stitching room should contain not over the following amounts of inflammable liquids: One gallon naphtha for thinning cement or cleaning; one gallon alcoline for cleaning grease from the parts to which cement is to be applied; five gal- lons, or a day's supply, of rubber cement. Linings are sometimes smoothed out by being ironed. The hazard here is simply due to the method of heating the irons. In the bottoming or making department the use of rubber Bottoming cement in laying channels, cementing shoe bottoms, mixing cork Department. filling, and sole and heel laying, have been before mentioned. Model K Goodyear Welter SHOE FACTORIES: PROCESSES AND HAZARDS U3 The other especially hazardous work is found at the edge setters and the stitchers, which are the large sewing machines used to stitch the soles to the uppers. The cotton or linen thread used for sewing is run through hot pitch or wax before being used. This is obtained in a solid form and is placed in pots attached to the machines. It must necessarily be heated. This is accomplished in various ways. Most of the old machines use alcohol or oil lamps placed directly under the pot, which method is found to have caused a great many fires, due to the wax boiling over and coming in contact with the flame. Carelessness in filling these lamps has caused not a few fires. The later methods of heating utilize gas, gaso- lene or steam. Workmen sometimes forget to turn out the light, and a fire ensues from this cause. Then also boiling over is just as likely to occur as where heating is done by alcohol or oil flame. The best method makes use of steam either directly or indirectly. Wax pots will be found on Goodyear welters, stitchers, McKay sewers, and also on the Goodyear rapid stitcher bobbin winders. The customary uncleanness under sitching machines aggravates considerably any fire which may start. The floors underneath these machines should always be covered with sheet metal and cleaned frequently, as they are necessarily very dirty. Edge setters are heated either by retort gas or gasolene gas. There is very little danger from the former, and the same may be said of gasolene gas, if an approved carbureter is used and filled outside the building. Such a carbureter consists of a small power pump with pressure regulator delivering air to a mixing chamber having a capacity of one gallon of gasolene. The car- buretted air is thence conveyed to the edge setters through flexible rubber tubing. The carbureter should never be filled in the building or at night, and the main supply of gasolene should be kept in the cement house. It is necessary that especial care be observed by the foreman of this room in seeing that all lights in use are extinguished on leaving for the night. The principal hazards in this room, other than the use of Finishing De- naphtha, are due to the buffing machines and the methods of partment. heating the shoe tools used in ironing and smoothing the shoe upper. Since the introduction of blower systems to remove buffing dust, quite a number of small fires have originated. lylower systems as a means of disposing of buffing dust have come to be an imporant accessory for shoe machinery in the fin- Hi LECTURES ON FIRE INSURANCE Blower Systems. ishing room. Every well appointed shoe factory equips such machines as edge trimmers, heel shavers, rough rounders, naum- keags, bottom, tip and tap scourers and brushes with a hooded metal pipe, into which the leather dust and buffings are drawn as soon as made. On the old style devices the pipes from the machine discharge directly outdoors, while in the newer systems the buffings are drawn through a fan and deposited in a small dust box adjoining the factory. The buffings and dust are not specially hazardous themselves, but possibly were they allowed to accumulate and absorb oil, spontaneous combustion would in time take place. Then again some trouble might be caused were the dust to come in contact with open lights. Whatever promotes the general cleanliness is of value in lessening the chance of fire. The inside and outlet of the tube must necessarily be more or less covered with the dust, or the tube may be pretty well filled with dust which can easily be ignited either from sparks or spon- taneous combustion. A tube is also a good thing to quickly get a cigarette butt out of sight of the foreman, and doubtless many of these fires have originated from smoking. There need be little speculation about these fires, however, as with buffing wheels running from one to six thousand revolutions per minute, as they do, friction alone will raise particles of leather, dust or oil to a temperature where combustion can take place. The method of heating shoe tools causes not a few fires. Where kerosene oil lamps are used the bench should be tinned and the lamps made stationary. A good arrangement is to place the lamp inside a metal box above the level of the naphtha cup which is quite generally used around these benches. Gas or electricity, which is now being employed in the newer factories, is certainly the better method of heating, and the room foreman should see that every light is extinguished before leaving for the night. A red pilot lamp should he provided on all electric heater circuits to indicate whether or not the circuit is on or off. Heater fires can thus be avoided. Only a sxnall amount of naphtha is used in the finishing room. The blackings, dressings and waxes mostly contain ammonia, turpentine, borax, aniline colors, castile soap, shellac, etc., but no naphtha, as with it a polish could not readily be obtained. The "treers" use a small quantity for cleaning, as do the repairers. Many fires occur at the repairing benches, but they are mostly of minor importance and due wholly to careless- SHOE FACTORIES : PROCESSES AND HAZARDS US ness. Fires are sometimes caused by the gasolene heated machine used in stamping the name and trade mark on the shoe bottom. It is equally true of shoe factories, as of any factory of what- Cleanliness ever kind, that, considering the special hazards equal, the better and General the cleanliness, management and fire protection methods, the Manage- better the fire risk. Other things being equal, cleanliness is a ™^" * reliable index upon which to base our estimate of a risk. In the clean risks we generally find the best care of fire appliances, the careful safeguarding of hazards, the system and order which help make it a good business proposition as well as a good fire risk. The disposal of "Maste is one then which alike interests the insur- ance companies and the careful manager. Shoe factories, when running at anywhere near full capacity, in the course of several hours always produce more or less waste, such as small leather scrap, cuttings, trimmings and rubbish of various kinds. These, while not in many cases hazardous, if allowed to remain for days at a time might develop into something serious. No well ordered shoe factory will allow this rubbish to accumulate. A man should be employed to sweep up the material twice a day, at noons and after closing at night, and it should be removed at once from the factory. It is often collected in wooden or metal bar- rels ; swept through trap doors or down some style of waste chute. Many fires originate at the bottom of this chute, if the waste is allowed to accumulate. Some of the chutes are con- structed of wood, perhaps tin lined, and poorly shut off from each floor. These, therefore, often serve to spread a fire. Other chutes are constructed of brick built into the walls of the build- ing. A style of waste chute now being installed in some of the newer factories is made entirely of metal and placed outside of building connecting, though shut off from each floor by heavy metal doors. It is a very neat way of disposing of all such sweepings. A waste chute, if inside the building, should be of brick, with heavy metal doors at the floor openings, the top of the chute being left open above the roof. Waste should be removed each night from the bottom of the chute, so that there shall never be a large accumulation. Fires have been mostly in making and finishing rooms. Location of The latter has the most special hazard fires, those in the making Fires, room being more from the common hazards. The many finish- ing room fires are due to the benzine, buffing, heating tools, etc. Twenty-eight per cent started in these rooms, 14^^ i^i each. Model K (ioodyear Stitcher; showing steam generator heated by gas SHOE FACTORIES: PROCESSES AND HAZARDS Ul Twelve per cent started in the cutting room. These were mostly due to the common hazards of steam pipes, lights, etc. Four per cent were due to the special hazards of this room, viz., cutting board scrapings. Eleven per cent started in the fitting room, mostly due to lamps and naphtha. Open lights are mostly to blame for this high percentage of special hazard fires. Eleven per cent started in the boiler room, mostly due to Location of rubbish and fuel kept too near the fire. There should be a clear Fires, space of 10 feet between all fuel and the fire. There were but 4% due to the waste chute. Few fires start in the leather and packing departments. Although naphtha is used so much in shoe shops, it does not cause the greater portion of losses. The available records show that the number of fires is just about equally divided between those caused by special and those caused by common hazards. This is also borne out by the record of day and night fires, 47% being in working hours, and 53% in the night. If we investigate the losses, aside from the number of fires, we find that the common hazards have caused the greater losses. This is due to the few large fires overbalancing the many special hazard fires, and simply indicates that the fire protection engineering has risen to meet the special hazards in the large majority of shoe shops so as to create a balance between the two. The risks may be judged by their exposure, construction and general protection to estimate the possible losses rather than the special hazards, unless the latter are in some way unusual for the class. Coming to the details of the common hazards the old familiar untidiness causes 2o% ; poor care of power, bearings, etc., 9%; lighting 4%. These last were mostly in gas lighted shops. Of the special hazard fires, naphtha and cement caused 23% ; wax pots, 6% ; scrapings, 4% ; shoe tools, 4% ; waste chute, 4%. The naphtha and cement fires are mostly due to the presence of open flames where these materials are used. Poor locations, which includes exposure, have caused greater losses on shoe shops than all the naphtha fires combined. Forty per cent of all the large losses on shoe shops are from exposure fires. For this reason, other things being equal, the isolated shops are probably better risks than those in congested districts. It is therefore as important to inspect the neighbors as the partic- ular shop in question. Model B McKay Stitcher SHOE FACTORIES : PROCESSES AND HAZARDS 119 Poor location, poor construction and the neglect of the simplest forms of protection have combined to create a greater fire loss on shoe shops than that of the sum total of all special hazard fires. Standard shoe shops burn down very rarely. QUESTIONS 1. State in general the relative importance of the shoe industrv in New England ; name the more important shoe centers and the class of shoe most common to each. 2. Describe the construction of the two principal t\pes of shoe shop; (1) the citv shop, (2) the tvpical comitry shop. 3. Name the principal materials and supplies used bv shoe shops. 4. Describe the general occupancy of shoe shops ; the four principal processes and tlie usual location of each in tlie building. 5. Name the thi^ee methods of shoe manufacturing which are based on the method of stitching the soles to the uppers and point out their distincti^•e feature. 6. Name as many of the processes in the manufacture of Goodyear welt shoes as vou can, gi\ing them in their order of sequence. 7. Give the principal hazard of shoe shops, stating in ^\•hich rooms or processes it is found and the proper methods of safe- guarding it. 8. Name all the lesser hazards of shoe manufacturing that vou can, describing in detail the use and proper protection of the more important ones. 9. State the relative merits as a risk of a shoe shop lighted bv gas and one electrically lighted, giving in detail whv one is to be preferred. 10. Give briefly your conclusions as to the shoe shop as a risk, based on the fire record. 120 LECTURES ON FIRE INSURANCE BIBLIOGRAPHY American Exchange and Review: A survey of the boot and shoe fire hazard. American Exchange and Review, 37:144. Breed, S. O. : Hazards of shoe factories. Quarterly Bulletin of Special Hazards, issued by the National Fire Protection As- sociation, Boston. No. 7, pp. 27. Gemmer, \\\ F. : Boot and shoe factories. Norwich Insurance Institute. Norwich, Eng., 1898-99:6-5. Green, John P. : Boot and shoe factories. Journal Insurance Institute of Great Britain and Ireland, 2:.301. National Fire Protection Association: Fire record of shoe fac- tories. Quarterly Bulletin of Special Hazards, No. 11. pp. 12-17. Rascn, M. B., and Hadawav, I. B. : Modern shoe manufacture. Journal American Society jSIechanical Engineers. March, 1911. Tenney, W. P. : Shoe factories. Quarterlv Bulletin of Special Hazards, National Fire Protection Association, No. 10, p. 3. Also Report, Underwriters' Bureau of New England, Boston, Mass., No. 98. PART 11. FIRE INSURANCE RATES AND RATE MAKING NOTES ON RATES AND RATE MAKING INTRODUCTION As iiKlicated elsewhere and as will he e\ ident froni perusal this discussion is elementary and is intended for the benefit of students who ha\ e made little or no preparatory investigation of the suhject. Study of the accompanying bibliography w'ill show that there Scope of has been no attempt to e\'ohe new theories, but that the lectures Inquiry. are merely a compilation and a setting forth in simple form of the literature and accepted facts and propositions relative to the subject. Acknowledgment is made with gratitude to the many authorities whose works have been used, and with especial appreciation of the writings of A. F, Dean, Esc]. Where mention is made of actual practice it is limited by the method and systems now in use in New England. Treatment of the subject diAides naturally into ; I. Preliminary Explanations and Definitions. II. History. III. The Problem. IV. Schedule Rating. I. PRELIMINARY EXPLANATIONS AND DEFINITIONS 1. Rate. The percentage representing the ratio of the pre- Definitions mium (for a term of one year unless specified otherwise) to the andExplana- sum insured. tions. Example : Sum insured . . . $1000.00 One year premium . . .18.60 Rate 1.86 2. Term Rate. The rate for insm^ance for a term longer than one year. 126 LECTURES ON FIRE INSURANCE Definitions Xote : It is customary to insure dwelling houses and their and Explana- contents and a few other classes of risks for 3 year or 5 year terms ions. ,^j ^ reduction ; for example Annual rate, say , . . .25 Term rate, 3 year . . . .50 Term rate, 5 year . , . .75 3. Short Rate. The rate for a term shorter than that speci- fied for the published rate. Note : Uniform short rate tables are used, based on percentage of the annual or term rate. Example : Annual rate .... 1.00 Short rate, o mcjntlis . . . .40 Short rates are most often used in computing return premiums on policies cancelled by the insured. The uniform percentage tables coyer all terms from 1 day to 59 months. The short rate for 1 day being two percent of the annual premium, and for 59 months being ninety-nine per cent of the 5 year premium. 4. Specijic Rate. The rate for an indi\ idual risk specified by location and description. 5. Mniinnim Rate. The rate for any and all risks (not rated specifically) of a class of the same general description as to physical hazards. Note : Dwelling houses constitute the largest and most impor- tant class of risks insured at minimum rates. 6. Blanket Rate. The rate for a blanket form of policy ; /'. e., one which coyers and includes in one item two or more sep- arate risks. Note : It is customary to insure buildings and their contents separately, so that a form of insurance which includes in one item a building and its contents requires a blanket rate, as does insurance coyering two or more buildings and [or] their contents. 7. Average Rate. A single rate for a form of insurance which coyers two or more risks by separate items. Note : Property of cities and towns and of public seryice cor- porations is often insured under policy forms which group a num- ber of risks with specific amounts of insurance applying to each, at a single rate based on the ayerage of the specific rates of all. S. Flat Rate (local usage). The rate for a polic\- whose conditions as to contriinition in the e\ent of loss are not modified 1)\' conditions of co-insurance. NOTES ON RATES AND RATE MAKING t27 9. Judgment Rate or Committee Rates (local usage). Rates which are recorded and [or] published without any notation of or reference to items considered in compiling them. 10. Schedule Rates. Rates which are recorded and [or] published ivlth notation of or reference to systematic compilation by items, usually specific charges for deficiencies and hazards, and credits for good featiu'es, protection, etc. 11. Key or Base Rate. The uniform rate used as a basis on which to compute schedule rates for a number of risks of a given class or locality, as the '■'■ base rate for Metal Worker schedule," the " key rate for Boston." Note : A key rate may be itself the result of a sub-schedule application, which compares the physical characteristics of cities and towns, considering the fire and loss hazard of each en masse. B. Rates are made by fire insurance companies, or by independent By Whom offices or individuals for sale to and use by the companies. Rates May r> .7 r' 1 • be Made. JJy the Lojnpanies. 1. Directly by company officers or by surveyors under their immediate supervision. Example : Factory Insurance Association. 2. By company field men (general or special agents) or by surveyors under their supervision. Example : New England Insurance Exchange. 3. By company local agents or by surveyors under their super- vision. Examples : Boston Board of Fire Underwriters. Insurance Association of Providence. Independently. By individuals or '■'bureaus" who prepare and publish " ad- visory " or " recommended " rates or estimates. Rates so furnished are purchased and used extensively by companies in states whose laws prohibit the companies from combining to make rates them- selves. c. Rates are pul^lished in book form or on indexed cards, and the Tariffs. complete table of rates for a locality, county, city or town, is called the " tariff." " Tariff Companies " are those which underwrite only at the rates regularly established or described in the foregoing. ''Non- J28 LECTURES ON FIRE INSURANCE tariff Companies" or '• Xoii-Board Companies" do not participate in the computation or pul)lication (^f rates nor in their obser\ance when made. QUESTIONS 1. How would \i)u tlesi<4nate a I'ate for a policy to run five years ? '2. Explain the difference between an average rate and a blanket rate. 3. Explain the difference between specific and minimum rates. 4. Explain the difference between committee rates and sched- ule rates. 5. Compute the average rate for the following group of three risks, viz. Risk A. Value $10,000. rate . . . .35 Risk B. Value 18,000. rate . . . 1.25 Risk C. Value 2,500. rate . . . l.HO II. HISTORY Foreign. There is no available information as to the details of earliest insurance schemes, although there were doubtless many local enterprises in Europe and the East. 1609 A municipal fire insurance plan was proposed to a Count Von Oldenberg, which included a contribution or assess- ment of £1 per €100 of valuation, or a rate of 1%. Nothing came of it, for the Count was both religious and sensitive, and said he was afraid such a scheme would be a temptation to Providence, and furthermore, that he would be accused of taxing his people for his own benefit. 1667 After the Great Fire of London in 1(566 the city was rebuilt very slowly. One of the liveliest real estate operators of the period was Dr. Nicholas Barbon, who was originally a phy- sician, the son of Praise-God Barebones of Cromwell's Par- liament. His two uncles were named respectively Christ- came-into-the-world-to-save Barebones (known as "Saved Barebones" for short), and If-Christ-had-not-died-thou- hadst-l)een-damned Barebones (known as "Damned Bare- bones.")! NOTES ON RATES AND RATE MAKING J29 1681 Dr. Barbon set up an office for insuring property against Foreign loss by fire, and the first record which we have of his rates, dated 1681, provides for policies for terms of 7, 11, 21 and 31 years, probalilv conforming to the leasehold periods of that day. Rates were determined by the annual rental value; /. e., if the rental value was £1 the premium was 2s. fid. for 7 years, 5s. or twice the 7 year rate for 21 years, for £10 insurance. These were for brick or stone buildings. For wooden buildings these rates were doubled. The amount insured was to be paid as often as the buildings described or those which replaced them were destroyed by fire within the term of the insurance. 1690 The method of determining the rate was changed to a basis of building valuation, and tallies of rales were pub- lished for 1, 2, 3, 4 and 7 years. The rate for 4 years was 3i times the 1 year rate, 5 annual rates for 7 years. For a building valued at £100 the annual rate was 6s. 1708 The insurance of goods and chattels was attempted for the first time, rates being same as for Iniildings. 1710 Proposals of the Sun Fire Oflice quoted rates as follows, per £100: 1st quarter. Is. stamp duty; 2s. fid. premium, which included subscription to the British ^fercury. Afterward, per quarter 2>;. 6d. with, or 2s. without British ^Icrcury. This refers to the quarters of the calendar year, and pay- ments were due on ''Quarter Day" and were called Quarterage. Soon after, the Sun published what corresponds in a way to a short rate table for those \\ho took out insurance in the second or third month of a quarter. 1720 The Sun quoted rates for insurance not exceeding £500: 2s. 6d. per quarter with a book entitled the "Historical Register;" £1,000 at 5s. per quarter; £300 at 2s. per quarter. There was no classification. The same year the Royal Exchange Assurance proposals quoted for buildings of all classes and for contents with certain exceptions: — "For policies of not over £1,500, brick, 5s. per annum for £250 ; wood, 8s. per annum for £250. 130 LECTURES ON HRE INSURANCE For policies exceeding £1,.")00 the rates were 7s. 6d. for each £1-30 on or in brick or stone l)uildings, 12s. per £150 on or in wooden buildings. Extra hazardous occupancy such as breweries, distilleries, bakeries, etc., to pay the highest of the foregoing rates." From the middle of the eighteenth century the develop- ment of rating in Great Britain and other foreign countries was not unlike that in the United States, which will be described more fully. United States. 17.") 2 The Philadelphia Contri])utionship, or "Hand-in-Hand" was organized to insure buildings only. A deposit only was required, the expectation being that the interest earnings would pay losses and expenses. For a minimum term of 7 years the deposit for a brick liuilding was 20s. per £100, or 1%, and for a frame building GOs. per £100, or 3%. Additional to the deposit there was paid to the ''Com- mon Fund" Is. Bd. for brick; 2s. 6d. for frame. 1^95 FROM POLICY OF THE MASSACHUSETTS FIRE INSURANCE COMPANY RATES OF ANNUAL PREMIUMS I. Houses or stores with brick or stone walls, and slate, tile, lead, copper or composition roofs, standing separate from other buildings, 70 cents on 100 dollars. 11. Houses or stores with In-ick or stone walls, and slate, tile, lead, copper or composition roofs, connected with other buildings, having brick partition walls of one or more feet above the roof 75 cents. III. Houses or stores with lirick or stone walls and wooden roofs, that stand separate from, or connected with other buildings with brick partition walls of one or more feet above the roof, + Na.,S04 + 2H,.0 H2SO4 is sulphuric acid, ^HNaCOg is bicarbonate of soda, CO2 is carbonic acid gas and NaavSOi is sulphate of soda, some- times known as Glaubers ,Salts. The latter remains dissolved in the solution and is supposed to be of some value in extinguishing a fire. While wood coated \\ix\\ this salt does not burn as readily as un- coated wood, it is not pro]:)able that it has much effect ^^ hen applied as is done in case of a chemical extinguisher. The principal cause of deterioration in chemical extinguishers E^terioration. using sulphuric acid is the absorption of water by the acid. The bicarbonate of soda, if thoroughly dissolved in the water, should last almost indefinitely if the acid is not allowed to get into it. Sul- phuric acid is hydroscopic, that is, it tends to absorb moisture from the air. If not tightly corked a bottle of this acid will in course of time absorb enough moisture to overflow. For this reason it was thought necessary to seal up the acid in most of the older types of machines. No method that is entirely safe and satisfactory has, however, been found for doing this, and the extinguishers now ap- proved practically all use a bottle with a loose stopper. For this reason an extinguisher will deteriorate slowly, and the rules require that it be recharged once a year and the date of re- charge placed on a tag attached to the handle. As a matter of fact, it would probably take five or six years under ordinary conditions for an acid bottle half full of acid to o\erfiow, but the limit of one year is on the safe side and should be strictly li\ed up to. J74 LECTURES ON FIRE INSURANCE Another very important reastjn for recharginor every year is that when sulphuric acid becomes dihited a certain amount, so that its density is about 63 degrees ]5eaume, it will freeze at the high temperature of 46 degrees F. Such an extinguisher is liable to be crippled by freezing of the acid when not expected. How Before charging, the extinguisher should be carefully rinsed Charged. out, as any free acid might cause corrosion. It is well to use warm water for the solution as the soda will dissolve in this much more readily. Care should be taken to stir the contents until all the soda is dissolved. There are about 25 extinguishers of the 2^'^ gallon loose stopper type now approved by the National Board of Fire Under- writers and these will be found in the list of approved fire appliances issued semi-annually. Principal '^^^^ Underwriter is one of the oldest upset extinguishers of the Makes. apprcn-ed loose stopper type. It is made in Boston by Knight & Thomas, who did a great deal to de\elop extinguishers along ap- proved lines. The acid is fed slowh' into the solution by means of a patented cup shaped stopper. Acid Bottle in the " Uiuiervvriter " Chemical Extinguisher. Fig. i shows Bottle in Cage attached to Cap. C is the Porcelain Stopper. Fig. 2 shows Bottle in the inverted position. The acid then feeds slowly into solution through the cup-shaped Stopper. Fig. 3 shows the Stopper. nRE PROTECTION J75 There are se\eral makes of extinguishers that are not appro\ ed, but which are still found in use to considerable extent and which may warrant a short description, Babcock. The older txtinguishers of this make were of the break-bottle type, and this type is still being made for fire depart- ment use. The acid is contained in a small bottle tightly corked with a rubber cork. There is a ring near the lower part of the bottle that is not as strong as the other parts of the glass. To operate, a spindle is screwed down onto the top of the bottle, thus breaking it and liberating the acid. Any machine of this type is undesirable, for the following rea- sons : It is uncertain in action, as the bottle does not always break easily ; it liberates the acid suddenly, thus creating a heavy pressure for a short time ; the broken glass is apt to clog the outlet ; it is too complicated for anyone to operate easily unless they have been pre- viously instructed. Most of the explosions of chemical extinguishers have occurred in the break-liottle type. The later types of Babcock extinguishers are mostly of the gravity stopper upset type. Buffalo. A gravity stopper upset machine using no hose. Carr. A glass-lined extinguisher with the acid in a small hermeticallv sealed bulb cemented into the upper part oi the ma- chine. This bulb is broken by a blow on a piston which extends through the cap. Edviands. The acid is placed in a four-ounce bottle so bal- anced that it tends to upset when released. A glass and rubber stopper is inserted in the bottle and held by a rod passing through the cap. When the rod is turned the stopper is withdrawn and the bottle upsets, Harnden. A gra\itv stopper upset machine made in three and five gallon sizes. Hero. An upset machine having a bottle w ith a lead stopper that works on a hinge. HoUo~vay. A break-bottle machine. PhcEnix. An upset machine with a hard rubber stopper pressed against the top of the acid bottle by means of a rod extend- ing through the cap. When the rod is given a quarter turn the stopper is released and the extinguisher is then inverted. Rex. This is an upset machine with the acid in a specially designed bottle. The bottle has a long neck in which is placed a rubber co\ered lead ball of somewhat less diameter. The ball is 176 LECTURES ON FIRE INSURANCE prevented frt)m falliiiL;- into the acid by a contraction in the base of the neck and the top of the neck is sealed with a thin piece of mica held in place by a hollow cap. This seals the acid and prevents it from absorbing moisture. When the extinguisher is inverted the lead ball breaks the mica cap and releases the acid. Steinpcl. An upset machine containing a large flat bottle and a heavy ball. When it is inverted the ball is supposed to fall onto the bottle and break it. Star. Machine containing an in\crted bottle with a glass stopper. The stopper is attached to a rod extending through the cap and is removed from the bottle by turning the rod. There are two other modern extinguishers which should be mentioned. The Arctic made by the American La France Co. This con- tains a non-freezing solution of chloride of calcium and a large capsule filled with liquefied carbonic acid gas. The capsule, which is placed in the top of the device, has a soft metal seal which can be punctured by pushing down a sharp pointed piston. This liberates the carbonic acid gas and furnishes power to propel the stream. It is not approved by the Laboratories. ^liuimax. A conical shaped ex- tinguisher of the break-bottle type. It has no hose, but the stream comes out of the pointed end and can be casilv directed. The acid is in a sealed glass tube which is broken bv a plunger. It is approved by the Underwriters' Laboratories. Ext guishers. Value and I'^ general, approxed extinguishers Limitations can be considered a \ery desirable form of Chemical Qf flj-g protection in places where there are people who know how to use them. This is not always the case in mills having low grade help, and for this reason it is always desirable to ha\e some water pails in addition to the extinguishers. Simple as they are, few people can handle them to ''ood a(l\anta<''e the first time Minimax Extinguisher FIRE PROTECTION J77 they try, and it is very desirable to ha\e the persons who are Hable to use them drilled occasionally in their use. For dwelling houses they are an ideal form of protection if this precaution is taken. Recharge them once a year and let your wife, child or maid discharge them so as to gain the confidence necessary for good re- sults. The great value of this ft)rm of extinguisher is that it will give a good stream of liquid lasting for about a minute that can be used readily upon ceilings, curtains and hollow walls where pails would be hard to use. The chemical action is not usually important im- less the fire is in a concealed space where the carbonic acid gas wdll be confined or in a can of burning oil where the gas will settle on the surface. It is the stream of liquid rather than anv chemical properties it may possess that is of greatest importance. Great care should be taken to prevent a chemical extinguisher Care of from freezing. A machine may be weakened in this way without Chemical Ex- the defect being noticed. Under these conditions they are liable to tinguishers. explode when used. A number of persons have been killed in this way and in nearly all cases it is probable that the extinguisher had been previously weakened by freezing or hard usage. There is no way to inspect a chemical extinguisher thoroughly Inspection, without discharging it and seeing that it is properlv recharged. However, a fairly good idea of its condition may be had by un- screwing the cap and seeing that the acid and bottle are in good condition and that the soda has been properlv dissolved in the water. Large Chemicals. Chemical tanks of from 25-60 gallons Large mounted on wheels are being used to a limited extent. They are Chemicals. mostly of the upset type containing a solution of bi-carbonate of soda and with acid bottle somewdiat similar to the 2^4 gallon size. The only type approved by the National Board is of the 33 gallon size. It is a hea^'y cylinder mounted on two wheels and equipped with 100 feet of ^" hose. A desirable form of large extinguisher is the double cylinder type, where one cylinder can be recharged while the other is being used. The larger sizes mounted on four wdieels are very exten- sively used by fire departments, and will be described under that heading. Stationary Chemical Extinguishers. These are but little Stationary- used in this part of the country, although there are Laboratory Chemicals. rules for their construction. In a general way they consist of J78 LECTURES OiN FIRE INSURANCE Upset 33-Gal. Chemical Extinguisher large tanks of from 250 to 500 gallons capacity, permanently lo- cated in the lower part of the building. A permanent 1}( or I14" standpipe runs from the tank to hose connections on each floor. The tank contains a solution of bi-carbonate of soda and a lead re- ceptacle for sulphuric acid. In some types the tank is turned over on a horizontal axis by a releasing device operated from each floor. In other types the acid receptacle is upset by a similar device. This releasing device is usually in the form of a flexible cord. In one of the recent types the cylinder is immo\ able, but the acid receptacle is inverted by change in pressure. This is accomplished bv pump- ing an excess pressure into the standpipe, which is released when a hose valve is opened. Non-freezing N^on-frcezing coiiipon/ids. There are several compounds Compounds, that have been used to pre\ ent freezing of chemical extinguishers, the more important ones being as follows : — FIRE PROTECTION J79 Common salt^ or sodium chloride, can be used either in pails or chemical extinguishers, but will only lower the freezing point to 0° F. under the most fa\"orable conditions. A 10% solution lowers the freezing point to 19°, and a 20^^ solution to 7° F. Glycerine can be used in chemical extinguishers or pails. A. mixture of 3^/2 lbs. per gallon lowers the freezing point to 10° F. and hy^ lbs. per gallon to — 10° F. It is expensive and not entirely satisfactory. Denatured alcohol is suitable for automobile radiators, but should not be used to any extent for fire protection on account of its combustible nature. Calcium chloride is cheap and well suited for use in pails and casks, but cannot be used in chemical extinguishers on account of its chemical action. The following table gives the amount neces- sarv to withstand certain temperatures : 1 lb. per gallon 27° F. 18° F. 1° F. -18° F. -40° F. 4 " " " 5 ^' '' " Probably the best method of caring for chemical extinguishers in cold places is to build frostproof closets for them. These can be built of double boards with dead air space between so as to give ver}' good protection. QUESTIONS 1. Describe a standard tire pail. 2. What are the five principal classes of chemical extinguishers on the market? 3. In what class of fires is the Fyrene Extinguisher especially desirable, and why? 4. Describe an approved 2^4 gallon upset chemical extin- guisher. 6. \Vhat is the chemical action in extinguishers of this class? 6. Describe the method of chai'ging a 2^/^ gallon upset chemi- cal extinguisher. 7. How shovdd such a de\ice be cared for and used? 8. How often should extinguishers of this class be recharged, and whv? 9. Describe briefly a stationarv chemical extinguisher. 10. What can be used to prevent freezing in fire pails? (80 LECTURES ON FIRE INSURANCE Size and Location of Standpipe. BIBLIOGRAPHY 1. Rules of the National Board of Fire Underwriters for pails and chemical extinguishers. •2. Crosby-Fiske Handbook, Ed. 1909, p. 188. 3. Freeman, John R. The Safeguarding of Life in Theatres. 4. Robinson, J. A. Freezing preventatives for water pails and chemical extinguishers, N. F. P. A. Quarterly, January, 1912. 5. N. Y. Fire Insurance Exchange Rules for Chemical Ex- tinguishers, Insurance Engineering, June, 1905, p. 594. 6. C. A. Hexamer, Nat. Fire Protec. Assoc. Proceedings, Vol. 2, p. 31. 7. Committee Report Nat. Fire Protec. Assoc. Proceedings, Vol. 6, p. 214. S. Committee Report Nat. Fire Protec. Assoc. Proceedings, Vol. 10, p. 232. 9. Committee Report Nat. Fire Protec. Assoc. Proceedings, Vol. 11, p. 407. 3-STANDPIPES AND HOSE: METERS Standpipe and Hose Standpipe and hose is a very valuable form of tire protection if properly installed and cared for. The installation includes the proper size of hose and standpipe, the correct location, and a water supply of adequate volume and pressure. Maintenance includes the proper care of hose and equipment, the upkeep of the water supply and the proper instruction of persons as to the use of the apparatus. The standpipe should be of suificient size to give a good stream from more than one outlet at once without too much friction loss. It is seldom desirable to use pipes less than 2" or more than 4" in diameter. Larger sizes are apt to waste too much water if they are broken, as frequently happens during a fire, and smaller sizes cause too much friction loss. They should be located in conspicuous places and near enough together so that 100 feet lengths of hose will reach e\ ery point in the building. They should not, therefore, be located much nxcr 200 feet apart, and somewhat closer where partitions interfere. .Shorter lengths of hose, namely, 50 to 75 feet, are desirable, as they are easier to handle and less liable to kink. If these are used the stand- pipes should be placed at a corresponding distance apart. FIRE PROTECTION m Where public water is available this is usually the best supply. Water If not, tanks or reservoirs can be used. The pressure on the top Supply, floor should be at least 25 lbs. for good protection. A pressure tank giving 75 lbs. pressure at the top of the building and con- taining at least 3,000 gallons of water constitutes a very good sup- ply. It is not usually convenient to place a gravity tank at a high enough elevation to give an adequate pressure. Note. — 25 lbs. on top floor requires an elevation of about 40 feet above the roof. Howard Hose Rack. Top \ ie\v showing part of Hose on pins and remaining pins swung to one side Howard Hose Rack. Hose Suspended on Swinging Pins. Pumps can also be used as a standpipe supply, but to give first class protection the pumps should be automatic, that is, should maintain a constant pressure on the system. A good quality linen hose — preferably labelled by the Under- Hose. writers' Laboratories — is the best for standpipe use. Rubber or rub- ber lined hose deteriorates much more rapidly and does not coil up J82 LECTURES ON FIRE INSURANCE into as small a space. Linen hose, when not frequently used, lasts a long time. Hose should be neatly folded on a suitable rack and arranged so that it can be quickly pulled down without kinking. There are many desirable hose racks on the market, some of which have been passed by the Laboratories. Hose should usually be 1)4", though 1" and 2" hose are some- times used. 1}(" is a common size and can be used to advantage if the water pressure is good. The disadvantage of larger hose is that it is harder to handle and will waste more water should it have to be abandoned in a fire and later possibly burn off. Nozzle should be brass, with outlet ^ to ^" in size. Mainten- ^^ ^•'' ^'^^7 essential that the standpipe be kept in commission at ance. all times with water right up to the hose valves. There is no time to open valves in the cellar or at some distant point after the fire starts. Where a building is not heated it is possible to put the stand- pipe on a dry system with an automatic dry valve such as is used in sprinkler systems. This requires very careful supervision. Large Stand- Occasionally a 6" standpipe with 2^" hose is desirable. Their pipe. vise should, however, be limited to fireproof buildings or to stair towers that are cut off from the building by a standard fire wall. In high fireproof buildings they are desirable, as the firemen can use them instead of dragging hose up many flights of stairs. It is generally desirable to have steamer connections at the base of such standpipes where the fire department can couple on their hose and pump in with a fire engine. Indeed such a standpipe without any water supply except the steamer connection is desirable in high buildings of this type, where for any reason it is not convenient or practical to have water in the pipe under constant pressure. Brass Nozzle for Standpipe Use Steamer Connection The old fashioned plan of placing standpipe on the outside of buildings with a gallery at each floor level has now gone almost entirely out of use, as the inside pipes when properly located are much easier to use and maintain. FIRE PROTECTION 183 One of the principal troubles experienced in standpipe ec|uip- Hose Valves, ments is the leaky hose valve. This allows water to leak into the hose, drop by drop, and rot it. A valve with a soft metal disc should be used for this purpose, as it is more likely to be tight. Several methods have been suggested for preventing this trouble, and some of them are quite satisfactory. Roof hydrants can often be installed to advantage in connection r^qJ ^y- with large standpipes. These are particularly valuable on flat drants. roofs with parapetted walls in heavily exposed locations. The roof hydrant should be of approved type, and monitor nozzles can often be used to advantage. Invincible Monitor Nozzle Morse Monitor Nozzle Meters for Fire Service The problem of metering water for fire service is one of quite Need of recent origin but of growing importance. So long as fire service Meters, pipes are used for fire purposes only, there would seem to be no more reason for metering them than for metering connections to public hydrants. Of late years, however, the number of fire service pipes has increased very rapidly, and there have been cases wdiere water was taken from such pipes for other purposes. Again, many of the large mills have extensive systems of underground pipes, and it is not infrequent that leaks of considerable size will develop in such systems which may exist for some little time before being dis- covered. The water companies or departments have naturally objected to water being lost in these ways, and in several localities have passed rules that all fire pipes be metered. This custom will prob- ably grow, especially in cities where water is scarce or is pumped at considerable expense. It has been conclusively proven that most of the old types of meters in use for domestic service are detrimental to fire protection, and it is only recently that new devices have been put upon the market that are suitable for this purpose. J84 LECTURES ON FIRE INSURANCE There are five principal types of meters in coniiiion use : — Types of (1) Disc Type. This depends on the oscillation of a disc. Meters. usually of hard ruhber shaped like the segment of a hollow sphere. This is a positive displacement meter and is perhaps the most accurate type, but the friction loss is large, ranging from 13 to 25 lbs. under normal flows. (2) Rotary Piston Type. This depends on the rotation of a piston, usually made of hard rubber. In some makes there are two revolving pistons fitting together as do the buckets in a rotary pump. In other makes an irregular shaped piston rotates in a cylinder of similar shape but larger size. This is a positive displacement meter of about the same accuracy as the disc type. The friction loss varies from 6 to 48 lbs. under normal flows. (3) Reciprocating Piston Type. This is built somewhat on the principle of the steam end of a steam pump. There are but few meters of this type made and, as might be supposed, the friction loss is very great. (4) Current Type. This is built somewhat on the principle of a water wheel, the wheel usually being of hard rubber and re- volving on a vertical axis. This type is somewhat less sensitive than any of those pre\iousl3' mentioned and the friction loss is decidedly less, being only 3 to 8 lbs. under normal flows. (5) Ventiiri Type. This depends on the principle that when water passes through a contraction in a pipe or a throat the velocity is increased but the pressure is reduced. The meter con- sists simplv of a casting similar to a pipe casting, rapidly decreasing in diameter until the throat is reached and then more gradually en- larging to normal size. The difference in pressure at the throat and in front of the meter is taken and is used to actuate the reg- istering device. The registering de\'ice is, howe\er, very compli- cated and expensive and has to be kept in a dustproof case under frequent inspection. The registering de\ ice alone costs about $400 for the smallest size. The meter is maile in sizes from 2 inches to 17 feet in diameter, but the sizes less than 6 inches are generally not economical as compared with other types of meters. Each size is designed with different diameters at the throat to care for different conditions, and is cpiite accurate iox the range for what it is designed. Friction loss is smaller than that of most any other type, except the Hersey Detector and some of the current types. It is particularly adapted for low velocities and large volumes. Also for measuring hot water, sewerage, etc., which would clog or FIRE PROTECTION 185 corrode most types of meters. Under a flow of 4,000 *;allons a minute, a 12-inch meter with a 6-inch throat has a loss of about 1.5 lbs., and with a 5-inch throat a loss of about 4 lbs. It will be seen that for normal flows tlie old types of meters Objcctionsto caused a friction loss of 3 to 48 lbs., which of course is a serious OldTypcsof detriment to fire protection. Furthermore, the Disc, Rotary Piston ^ ^'"^* and Reciprocating- Piston types are subject to clogging by sticks and sediment, and if wedged in place may prevent the passage of nearly all water through them. The current type is not very accin-ate for small flows. Practically all these meters, except the Venturi type, require strainers and fish traps. Dirt, leaves, etc., may become lodged in these strainers, especially in case of heavy draft, and seriously interfere with the flow of water. As the Venturi meter is not suitable for small flows, and needs careful su- per\ision, it is quite evident that all of these tyjDes of meters are unsuitable for pri\ate fire ser\ice pipes. A niunber of methods for overcoming these objections have Methods of been suggested and tried with more or less success. Amongst Overcoming these might be mentioned installing a meter of larger size, such as Objections, a 6-inch meter in a 4-inch pipe in order to reduce the friction loss ; installing several meters in parallel ; using a proportional meter in which the meter is located in a by-pass aliout a check vahe or baflle plate and measures the proportion of the water that flows through the by-pass. The failure of these de^ ices to gi\ e the results desired led to Detector the invention of the so-called detector meters. The first of these. Meters, known as the Ilersey Detector Meter type, D. M., consisted of a by-pass containing an ordinary meter, gate, and check valve around a main check \ahe with a grooved seat. The by-pass was about half the diameter of the main pipe. There was a small pipe lead- ing from the grooxe in the seat of the main check ^•al\ e to the atmosphere. This contained a small meter arranged to register time instead of quantities of water. This would register the length of time that the check valve was open and water was flowing. The main check valve, being weighted, remains closed except when a large amount of water is flowing. Under normal conditions any water that flows passes through the by-pass and is accurately metei-ed. When draft becomes heavy, due to fire, the main check valve opens and the small meter is brought into action to register the length of time the check remains open. The idea is to charge for water used under normal conditions, but to make no charge for the large flows that would open the main check \ ahe. 186 LECTURES ON FIRE INSURANCE The Factory Mutual Insurance Companies also ^vorked out a type of detector meter quite different from the above. It consisted briefly of a check \alve with a by-pass arranged to accurately meter all the water, whether it passed through the by-pass or the main pipe. This was accomplished by ha\ ing a meter in the by- pass arranged to register in two different ways, l^efore the main check opened the meter was acted upon directly by the water flow- ing through the by-pass. When, howe\ er, the check opened, owing to increase in draft, a \e\cr was made to operate a mechanism that changed the registration of the meter and it then became a proportional meter and registered proportionally the amount of water that passed through the main pipe. f=|p Hersey Detector Meter — F. M. Type. (Main pipe in section. By-pass containing meter at rear) Hersey De- The Hersey Manfg. Co., of Boston, has lately de\ eloped this tector Meter meter, and it is now built as shown in the cut, and is known as the F. M. Type. Y. M. type. Thei-e is one meter in the by-pass and an entirely separate meter in the main pipe in front of a baffle plate located close to the weighted check \ ahe. This latter is a proportional meter and is permanently set to register the amount of water passing by the baffle plate as a certain proportion of this flow is deflected through the meter. Therefore, in order to And the total flow the reading of the meter in the by-pass is taken and added to the reading of the proportional meter in the main pipe. The action of the meter is as follows : — For small flows the weighted check \al\e remains closeil and the water all passes through the b\-pass and is metered in the usual way by a (hsc meter. When the flow becomes too great to FIRE PROTECTION 187 be cared for by the by-pass the main check valve will open owing to the reduction in pressure. In the 6-inch meter this occurs where a flow of about 130 gallons per minute is reached. The water passing through the main pipe is then registered on the propor- tional meter located in a casting at the top of the main pipe on the up stream side of the check valve as shown at the right hand side of the cut. In case the flow falls below 130 gallons per minute the weighted check will close and the water ^^ ill all flow through the by-pass as before. Before the check vah e opens the friction loss in a 6-inch meter runs from lbs. with no water flowing up to about 3 lbs. with 130 gallons per minute flowing. When the check opens the friction loss drops to less than 1 lb. and then increases with the flow until with 1,000 gallons flowing it is just a pound. With "2,000 gallons flow- ing the loss is about 3^ lbs. but 1,000 gallons is considered normal for this size of pipe. The accuracy is practically 100% for flows of o^•er 500 gallons and under no rate of flow does it drop below 95%. This type of meter is now being almost universally used where meters are required in fire service pipes, and may be considered very satisfactorv both from the standpoint of the waterworks offi- cials and the fire insurance interests. It is, howe\er, expensive and its use is not recommended ex- cept in cases where no other safeguard seems adequate. QUESTIONS 1. Describe size and location of standpipes desirable in a building of ordinary (not fireproof) construction. 2. What size and kind of hose is desirable for standpipe use? 3. Under what conditions are large standpipes of 4 inches to 6 inches diameter desirable ? 4. Why are the ordinary types of domestic ser^•ice meters not desirable for fire service ? 5. Describe a Hersey Detector Meter, type F. M. 6. What is the friction loss under normal flows for this type of meter? 7. What is it necessary to do in order to find the correct read- ing of a meter of this type ? J88 LECTURES ON RRE INSURANCE BIBLIOGRAPHY Crosby-Fiske Handbook. Ed. 1909, P. 341. Insurance Engineering, May 1905. Article on Meters. Xat. Fire Protec. Ass'n, April 1912. Article on meters. Journal of N. E. Waterworks Ass'n. Vol. XII, No. 2. Vol. XIX, No. 3. " " " " Vol. XVI, No. 4. Vol. XVII, No. 4. " " " " Vol. XXII. No. 3. -WATCHMAN^S SERVICE. SELF-INSPECTION —PRIVATE BRIGADES Alarm Service in General There are three principal forms of alarm service: — Forms of 1. Watchmen. Alarm 2. Automatic Alarm. * ^' 3. Sprinkler Alarm Valve. Sprinkler alarm valves when connected to suitable outside points and properly supervised give very good alarm service, but as they are adjuncts of sprinkler systems they will not be con- sidered in this course. Watchmen and automatic alarms each have their good points Watchmen and their defects. There are local conditions in which each is vs. Auto- more suitable than the other. In general it may be said that a "^f "^ „, , ,.,,,. , Alarms, nrst class watchman properly instructed and making rounds at frequent intervals is better than any automatic system, largely because he is human. On the other hand it is probably true that a good automatic alarm properly maintained is more efticient than the average watchman. A watchman can often extinguish a fire before it gets any headway, while an automatic alarm can do noth- ing but transmit the signal. An automatic alarm, however, if properly installed covers all parts of the property at all times, while a watchman cannot be expected to cover any one point more than once an hour. Watchmen have frequently caused fires by carelessness, such as smoking or dropping their lantern. Only recently there was a case where a watchman in a woodworking plant was using a dip tank for varnishing some fishing rods. His lantern set fire to the naphtha fumes in the dip tank and a bad fire resulted. Automatic alarms also have been known to cause fires, but not as often as watchmen. A few months ago a risk equipped with thermostats suffered a slight loss through the outside thermostat wires becom- ing crossed with a lighting circuit, thus allowing the higher voltage current to enter the building and burn out the test clock. J90 LECTURES ON FIRE INSURANCE Watchman vs. Auto- matic Alarms. Qualifica- tions of a Watchman. Watchmen through ignorance or carelessness often add greatly to the fire loss through errors of judgment. Many large losses have been due to the fact that the watchman tried to put out a fire that was beyond his control instead of calling at once for help. In a Worcester, Mass., bleaching establishment recently a fire occurred in a dryroom upstairs and opened some sprinklers. The watchman, on a floor below, heard the water running and assumed that a sprinkler had broken away from corrosion, as this had occasionally happened before. He thereforeran and closed the controlling valve without first investigating. Later when he found there was a fire he opened the valve but it was then too late, for the fire was beyond sprinkler control. A loss of nearly $100,000 resulted. A thermostat system never errs in judgment. In certain places automatic alarms are not practical on account of local conditions. Under this heading might be in- cluded tanneries, bleacheries, carbonizing plants and various chemical works where the corrosive action is severe. In isolated risks where there is no fire department or central station to which the system can be connected, automatic alarms are of very doubt- ful value for two reasons. 1. The maintenance is very apt to be poor. 2. There is liable to be no one to hear the alarm if it comes in. They are, however, of very great value in city buildings where they can be connected to a central station and properly supervised. There are many city buildings where the insurance involved does not warrant the expense of maintaining a watch- man, but where an automatic alarm is a paying investment. So far as rating goes, approved watchman's service and au- tomatic alarm are usually given about equal credit. It is an important duty of the inspection departments, however, to see that the watchmen are capable men, properly instructed, and making their rounds regularly on an approved recording device. It is no less important to see that thermostat systems are properly main- tained and kept in good working order at all times. Watchmen Too many valuable plants are left for nearly half the time in the charge of a watchman whose only qualification is that he will work for small pay. Old employees who have long passed their years of usefulness, cripples who are not able to do any hard WATCHMAN'S SERVICE 191 work, and ignorant foreigners who have not been in the country lono- enough to learn English, are too often employed for this responsible work. A good watchman should be between the age of twenty-five and sixty-five years, strong and active, of good judgment and capable of quick action in case of emergency. He should not only know what to do in case of fire but should also know how to handle a gang of mischievous boys or a professional thief. The very best judgment is often required to know when to stop and fight a fire and when to run and give an alarm. Watchman should make rounds hourly nights and also bi- Duties of a hourly or oftener on Sundays, holidays or other days when plant Watchman. is not in operation. It is not usually considered necessary to have rounds made as often during the day as during the night, as thei-e is a better chance of a fire being discovered by outside parties. The first round at night is the most important of all, and should be made as soon as possible after shut down. On this round he should see that all lights are extinguished, all windows closed, all fire doors shut, all oily waste properly cared for and all fires or lights used in manufacturing processes are extin- guished or properly safeguarded. Stations should be located to properly cover all parts of the plant except that occasionally it may be found desirable to omit certain rooms such as those where volatile oils are kept and some non-hazardous storage sections. The watchman should be instructed to make his rounds care- fully and slowly, stopping to investigate any suspicious noise or smell. In plants of any considerable size the watchman or watch- men should devote their whole time to watching, and should not be required to do sweeping or other work. The watchman should be familiar with the location of the nearest fire alarm box and know how to operate the steam whistle or other forms of alarm that may be available in the plant. He should be thoroughly instructed as to the use of all fire appliances such as pails, chemicals and standpipes, and should know where these are located. He should also know how to start the fire pump if there be one. In plants equipped with automatic sprinklers he should know the location of shut-off valves and have a general knowledge of the whole system. He should be instructed to close the sprinkler valve after the fire is entirely out and drain the system by opening 192 LECTURES ON FIRE INSURANCE Duties of a the draw-off valve. He should then replace any sprinklers that "Watchman, may have fused and immediately open the controlling valve, thus putting the system again in commission. Several serious fires have resulted from the neglect of this simple precaution. The destruction of the Phelps Publishing Co. in Springfield in 1907, resulting in a loss of over half a million dollars, was due to the watchman shutting off the sprinklers after a small fire had oc- curred and then stopping to telephone the superintendent. Mean- while the fire started up again and destroyed the plant. Watchmen's Lanterns. Approved Watchman's Lantern These qualifications and duties may seem a good deal to expect from a man occupying the humble position of watchman, but it should be borne in mind that in most plants thousands of dollars worth of property are in this man's sole charge for a large proportion of the time, and it is false economy to try and save a few dollars by hiring cheap and inefficient men for such service. Watchmen should carry a lantern that is safe and reliable. A cheap lantern is often supplied for this purpose with no WATCHMAN'S SERVICE J93 thought as to its possible dangers as a fire breeder. The quali- "Watchmen's fications of a good watchman's lantern are as follows: — Lanterns. 1. Strong and durable, so that it will not readily be broken. 2. Non-removable oil font which cannot under any condi- tions faU out or be removed. 3. Heavy wire guard around the globe to prevent breaking if it should be struck. 4. Large enough oil font to bui'n all night without need of refilling. A good standard is one that will burn fifteen hours. 5. A lamp that will go out in case it is tipped over. This is perhaps a refinement that need not always be insisted on, but there are good lanterns on the market that fulfill this requirement, and they are not expensive. It was formerly considered desirable to use lanterns burning sperm or lard oil, but the kerosene used to-day may be consid- ered entirely safe for this purpose and is much more convenient to use. It is needless to say that lanterns should be filled only by daylight, should be well cared for, and kept clean. Electric lamps are sold as watchmen's lanterns and are usu- ally satisfactory though somewhat expensive to maintain. Too much confidence should not be placed in their safety, however. There is a case on record where a watchman in a furniture ware- house dropped his electric lantern and it went out. In order to find it he lighted a match and thus set fire to the packing material around the furniture and burned the plant. Watchmen^s Recording Devices A reliable recording device is necessary in order to make sure that the watchman is making his rounds as directed. These are of three classes : — 1. Portable clocks or watches. 2. Stationary clocks. 3. Cental station systems. Portable clocks are the oldest and simplest form of recording Portable device. A clock of ordinary design is used except that it has a Clocks, special case and is arranged so that a paper dial can be attached to a metal plate and arranged to revolve with the clock at the speed of the hour, hand. The dial therefore makes a complete revolution every twelve hours. The dial is marked with radial lines, each representing one hour, with intermediallines generally at the ten-minute intervals. The clocks are usually arranged J94 LECTURES ON FIRE INSURANCE Portable Qocks. for twelve stations, though a greater number is sometimes found. There is a key for each station and the keys are so made that each one will register on a different part of the dial. The key is inserted into a slot in the case of the clock and turned. This motion punctures a hole or stamps a number on the paper dial at a point which shows the hour and approximately the minute at which the key is used. These keys are permanently attached to the wall at points throughout the building which are thought to be suitable for watchman's stations and hung on chains about twelve inches long. Approved Portable Watchman's Clock In Leather Case These chains are a type that cannot be broken and mended with- out clearly showing the fact. They are also sealed in place so that they cannot be removed and replaced without the fact being easily detected. The reason for this is of course to prevent the watchman from removing the keys to his headquarters at the beginning of his rounds and replacing them before he finishes. In the earlier types of clocks the keys were of simple con- struction and could be easily duplicated. It was no uncommon thing for a dishonest watchman to have a duplicate set of keys made with which he could make all his records without leaving WATCHMAN'S SERVICE J95 his comfortable seat in the boiler or engine room. The modern approved clocks have elaborate safeguards to prevent ''beating the clock." The kevs are very difficult to duplicate and they are huno- from iron boxes carefully sealed in place. Stationary Clocks. These have been in use for some fifty Stationary years and were designed to do away with the possibility of key Clocks, duplication. The earlier types used electric batteries, but most of the modern clocks use magnetos. Stationary Watchman's Clock. Interior of Clock Showing Revolving Cylindrical Dial and Electro-Magnets One of the earliest types was the Howard peg clock in which a pencil was pushed against a revolving paper dial and when each station was punched the pencil dropped a peg on the dial. In later types there were electro-magnets in the clock, the arms carrying a puncturing point or a number. A circuit was run from each magnet to a push button at the station. When the button was pressed the circuit was closed and the electro-magnet pulled the armature, thus puncturing or printing a number on the dial. Such a clock could be easily "beaten" by short circuiting the different circuits at some point near the clock, thus giving the proper records without visiting the stations. In the older clocks, too. there was nothing to prevent a watchman from opening the clock and puncturing the dial by hand. In later types this is i% LECTURES ON FIRE INSURANCE Stationary Clocks. Central Station Systems. safeguarded by putting on an attachment that punctured the edge of the dial every time the clock is opened. In the modern magneto clock there is no battery, but the current is generated by a small magneto placed at each station. These magnetos have less electrical resistance than the electro- magnets at the clock, so that if an attempt is made to "beat" the clock by tapping the wires and using a portable magneto there v^'ill not usually be enough current flow through the electro- magnets to operate the puncturing device. The modern magneto clock is almost impossible to "beat." Some clocks are fitted with a device by which outside parties can be notified in case the watchman drops dead or is otherwise prevented from continuing his rounds. An electric bell is located in the house of the superintendent or other respon- sible party, connected to the watchman's clock in such a way that if the watchman neglects to push a lever on the clock every hour this bell will be thrown into circuit and ring after a certain interval. Some of the modern clocks are being arranged to give a twenty-four or thirty-six hour record. This is done to prevent the record becoming confused when it is left in the clock for three intervals such as Saturday night, vSunday and Sunday night. In some cases it is done by a twenty-four hour dial and in others by having the whole dial slide along a certain distance each twelve hours. Central Station Systems. These were designed to give ad- ditional protection by making each watchman's station a fire alarm box and by having all rounds recorded at a central station where if a round did not come in on scheduled time a man could be sent to the plant to find the reason therefor. There is no clock at the risk but a closed circuit loop runs from a central station and connects to a certain number of boxes. The wiring is under constant test, and if a break occurs immediate notification is given. Each box is a transmitter which is arranged to send in the box number to the central station by breaking the circuit at proper intervals. There are men on duty at all times at the central station to receive the signals which are recorded on report blanks giving the hour and minute that the signal is received. A duplicate copy of this is sent to the assured the next day. The ordinary signal is made by inserting a key in the box and turning it. This partially winds the transmitter and gives WATCHMAN'S SERVICE 197 one round of the box number. The fire signal can be given from Central any box by breaking the ghiss in the door, opening the door, and Station pulling the lever way down. This fully winds the transmitter Systems, and gives the box number several times with the Morse signal for the letter /"between each round. The wiring is installed with a grounded system so arranged that in case of a break in the line a switch can be thrown which will put the system in working order until repairs can be made. (See sketch, p. 198.) Central Station Watchman's Box Door open showing lever which is pulled way down for fire signal At the central station there are runners on duty, and in case System of the signal is not received from any box within a specified time, "Wiring, usually fifteen minutes, a runner is sent to find the reason there- for. If the watchman is found to be incapacitated, tht operating company sends a man to watch the plant for the rest of the night. The National Board rules for signaling systems give detailed rules for the construction and installation of the necessary appar- atus. Each circuit is limited to five watchmen and to forty boxes. The fire signals are non-interfering and can be sent from two boxes at the same time without mixing the signals. J98 LECTURES ON HRE INSURANCE 5\NlTCh Outaiae une — G round Wiring for Central Station Watchman's System Explanation. Heavy lines indicate main circuit. Light lines indicate secondary or relay circuits. A' B' and C represent watchman's boxes. They are arrana;ed to transmit signal eitlier through complete outside line or through part of outside circuit and ground. Xormally the switch at central station is set as shown. The current then starting from the grounded battery passes through Relay i, outside line, Relay 2, binding post B and switch to A, hence to ground. When a watchman's box is ojierated as at A' the circuit is broken by the revolving of the transmitter and the box number is registered on tape machine through Relays i and 2. The ground at the box is not used in this case. If the outside line should break as at X, the switch is thrown into position shown by dotted lines. Signal from box A' would then be received through Relay i and ground at box. Signal from Box C would be received through Relay 2, switch points B and C to battery returning through ground from box. Central station systems are of course only practical in cities where there are a large number of risks within a comparatively small radius. The cost of maintenance is heavy and it will not pay to establish a station iniless there is a large amount of busi- ness for it. The same station can, however, be used for thermo- stat and supervisory service. It gives very superior service if properly maintained and is recommended as being the very high- est development of watchman's recording apparatus. It is usu- ally given more credit in the insurance rate than ordinary clock service. WATCHMAN'S SERVICE J99 Self-Inspection No fire protection is of permanent value unless it is properly NcedofScIf- maintained. Too many people install costly devices for discover- Inspection, ing or extinguishing fires, solely for the reduction in insurance rate which results, and then proceed to neglect it. No machine will run without care and therefore those devices are pretty sure to deteriorate under such conditions. It is largely this weakness of human nature that makes it necessary for the insurance com- panies to maintain the costly systems of inspection that are found all over the country. Without this frequent reminder a large number of assured would soon let their fire appliances get into a condition where they would be practically useless. But an insur- ance inspector can visit a plant only three or four times a year and for the other three hundred and sixty days more or less there is often no one looking after this very important part of the plant's equipment. It is therefore quite evident that for good protection the assured should maintain a system of self-inspection of fire appliances. Many of the larger plants have already adopted such a system and the results are very gratifying. For best results some responsible person like the master mechanic or engineer should be given full charge of all fire appliances. In a few of the largest plants men, sometimes known as fire marshals, have been appointed to do nothing else and their time is fully occupied if they do their work conscientiously. In any case the man in charge should be given authority to make repairs when found necessary and should be held fully responsible for anything found out of order. A thorough inspection of all appliances should be made every week and it is desirable to have this done by someone other than the man in charge. Otherwise there is a temptation not to report certain defects for which he himself is held responsible. A report should be made in writing, using a blank prepared for the pur- pose. The blank should be carefully filled out, dated, and signed and then presented to the manager. He should look through it carefully noting any defects so that they can be remedied at once and then file it away. The Fire Underwriters' Uniformity Association has recently Report adopted a blank for this purpose. It was designed to cover all Blank, probable conditions and should be modified to suit any particular 200 LECTURES ON nRE INSURANCE Report Blank. risk. Such a blank should cover in a general way the following topics: — Condition of sprinkler gate valves. Condition of sprinkler alarm or dry valves with their electric attachments. Condition of gravity and pressure tanks. Condition of pumps. Condition of automatic sprinklers. Condition of pails, standpipes and chemical extinguishers. Condition of fire doors, shutters and wired glass windows. Condition of hydrants and hydrant house equipments. Condition of stairway and elevator doors and traps. General cleanliness. Private Fire Brig-ades Need for Private Brigade. Another very important organization in large plants, es- pecially if isolated and without public protection, is the private fire brigade. Without such an organization much valuable time is lost in case of fire, and the apparatus will not be handled to best advantage. As previously stated, few men can properly handle such a simple device as an upset chemical extinguisher without some previous experience. Larger devices like pumps and two and one-half inch hose require even more skill and practice. A "green" man can soon cripple the best steam pump if he does not know how to handle it. A large hose stream is not an easy thing to handle especially under heavy pressure. There is a strong back pressure, or pull toward the source of supply and unless properly held the hose will pull back and kink. In- experienced men will often find it impossible to hold such a stream and will either drop it or allow it to throw them over. A number of serious accidents have occurred in this way. Speed in running hose and coupling the lengths together can only be gained by practice. National The National Fire Protection Association has issued a pam- Board Rules, phlet on private fire brigades which gives full data for organizing and drilling them and these rules should be followed as closely as possible. In general it is desirable to call out the men at least once a month by giving the fire signal. They should then go through the operations of laying hose and operating streams just as if there was a fire in progress. WATCHMAN'S SERVICE 201 The same principle can be carried into large city risks like City Risks, department stores to great advantage. In such places the chance for loss of life is even more important than the loss by fire, and no detail is of too little importance to be considered. Many de- partment stores have a very elaborate system of fire drill and fire brigades. In this case the organization and eiuties are somewhat different than in an isolated plant, as the use of large hose and hydrants should be left to the public fire department. The same general principles apply, however, and the details can easily be worked out for any particular case. QUESTIONS 1. State the desirable and undesirable features of watch- man's service and thermostat systems. 2. What are the qualifications of a good watchman? 3. What are the duties of a watchman .'' 4. What are the requisites of a good watchman's lantern. 5. What are the principal forms of watchman's recording apparatus ? G. What are the main features of a magneto clock system? 7. Describe a central station watchman's system. 8. Why is self-inspection of fire appliances desirable? 9. What features should a self-inspection system cover? 10. What are the functions of a private fire brigade? BIBLIOGRAPHY Crosby, Fiske: Handbook, Ed. 1909, p. 188. National Board of Fire Underwriters: Rules for Private Fire Brigades. National Board of Fire Underwriters: Rules for Signalling Systems. 5— AUTOMATIC ALARMS. Definitions. Historical Sketch. A Thermostat is a de^•ice for gi\ing a signal when sulKciently heated. Thermostats are generally used for giving a fire alarm, but occasionally for other purposes. The devices that are used for keeping the temperature of a room at a given point are thermostats, and they are generally arranged so that when the desired tempera- ture is reached an electrical circuit is completed, and this, through an electro-magnet, closes or partially closes a steam valve. Ther- mostats are also occasionally used to give an alarm when the tem- perature in a dry room becomes higher than is desired. It is, however, onlv thermostats that are used for gi^•ing a fire alarm that will be considered here. Historical. The first patent on a thermostat was apparently taken out by Alexander Ross in 1863. It covered a de\ ice operating upon the principle that two strips of different metals brazed together will tend to bend when heated on account of fact that they expand un- equall}'. This is the basis of the modern Watkins thermostat. The two metals used were steel and brass and these are still used in the Watkins device. The first device of this kind installed is said to have been in the H. B. Claflin building in New York about 1873. In 1877 the Watkins Company extended its business to Bos- ton under the name of the Automatic Fire Alarm and Extin- guisher Co., and installed the first equipment in the store of C. F, Hovey & Co. on Summer Street. About 1876 the Buell system was invented. This was a closed circuit system, and the thermostat consisted of two small diamond shaped brass plates soldered to- gether with soft solder melting at about 165°. These were attached to a system of wares that ran through the building, so that when a thermostat fused the circuit was broken and an alarm gi\-en. A few equipments were installed in Boston. The Martin thermostat, installed by the Martin-Wilson Fire Alarm Co., was invented in 1882. It was a closed circuit device, operating on the principle of the expansion of a volatile liquid in a closed receiver. It was wired on a single circuit and the thermo- stat in operating first broke and then closed the circuit. This was AUTOMATIC ALARMS 203 installed in the Jordan Marsh Co. store and a few other buildings in Historical l^oston. In 1889 Mr. Edwin Shcafe and the late Benj. Wells Sketch. bought out the Martin-Wilson Co. and formed the United States Electric Fire .Signal Co. In 1890 the U. S. solder release thermo- stat was approved bv the Boston Board of Fire Underwriters, and was then installed by this company. In 1894 the company consoli- dated with the Automatic Fire Alarm and Extinguisher Co. of New York under the name of the Boston Automatic Fire Alarm Co. In 1883 J. A. Tilden and F. H. Prentiss patented a mercury thermostat which was assigned to the American Fire Alarm Asso- ciation of Boston. A few of these were installed, but in 1885 the same company, afterwards known as the American Fire Alarm Co., put out the ether tube American thermostat. This was installed very extensi\'elv in New England until 1900, when it was replaced by the Woodman thermostat. The American Fire Alarm Co. was afterwards known as the National Fire Appliance Co. The Heat Alarm Co. started in business in New England about 189(t, installing the Heat Alarm mercurv thermostat imtil 1898, when the Hersey solder release thermostat was substituted. This company went out of business about 1900. The White Thermostat Co. installed some equipments in Provi- dence about 1893 and put out improved de\ices in 1894 and 1898. About 1899 the Wall thermostat replaced the White, and the late Geo. A. Wall started a company which installed a large number of equipments. About 1906 the Consolidated Fire Alarm Co. of New York bought out the Wall Thermostat Co. and National Fire Appliance C(j. and operated under the latter name for a short time with Geo. A. Wall as manager. A little later the American District Telegraph Co. entered the thermostat field and made an agreement with the Consolidated Co. by which the latter withdrew from the thermostat business 'n New England outside of Boston. The American District Telegraph Co. took over all apparatus of the National Fire Appliance Co., in- cluding the Woodman and Wall thermostats, and thus got control of the thermostat business of this territory. About this time the New England Insurance Exchange made a rule that no credit would be given to new equipments unless con- nected with an appro\ed central station. This made it more diffi- cult to get contracts and since then the American District Telegraph Co. has installed \ery few equipments, devoting their energies largely to sprinkler supervisory work. This company began in- 204 LECTURES ON FIRE INSURANCE stalling the Aero system in 19U9, but only three or four equipments have as yet been installed in Xew England. Such in brief is the history of the thermostat business in Xew England. Devices Used. A thermostat system consists of three main parts. 1. The thermostat. 2. The system of wiving. 3. The electric bells and other alarm giving devices. When a closed circuit system is used a transmitter is generally needed in addition to the above. In a general way the arrangement is as follows : The thermo- stats are placed througliout the plant located on or near the ceiling and spaced from 8 to 10 feet apart. In the older equipments the spacing was 12 to 15 feet apart and sometimes more, and this was satisfactory in plants where there were no sprinklers. Where there were automatic sprinklers, however, it was found that the thermo- stats should be located near the sprinkler heads, for otherwise the heat from a small fire might strike a sprinkler first and cause it to open — thus cooling the thermostat and preventing it from operating. So the rules were finally changed, requiring the same spacing as for sprinklers. The thermostats are connected by a double loop system of wiring, there being a separate pair of loops for each floor. The loops run to a test box or to a transmitter and also connect to an annunciator. In an outside open circuit system the bells are located at outside points, such as a fire department house or a dwelling, and connect to the inside circuit through relays. In the older equipments no relays were used, but the outside liells were placed on the main circuit. In a closed outside circuit, the tapper or tape machine is placed at an engine house or central station and the box number is sent in through a transmitter. Thermostats. Types of ]SIany more or less successful thermostats have been put upon Thermostats. []^g market but they practically all depend upon one of the following principles : — 1. Expansion of a volatile liipiid in a closed container. 2. Release of air pressure or a \ acuum in a system of pipes by melting of solder. 3. L'nequal expansion of two metals. 4. Expansion of mercury. AUTOMATIC ALARMS 205 5. Expansion of a diaphragm. 6. Making or breaking an electric circuit by the melting of soft solder. 7. Expansion of air. ]Witkins. The first thermostat of this type consisted of a 'W'atkin? spiral spring composed of steel and brass brazed together. One end was fastened securely to the base and the other end was free. When heated the spring tended to coil up and the motion was taken advantage of to make an electrical contact and thus close a circuit. Watkins Thermostat, I'^xtcrior Mew This device has undergone many developments and in its latest form it consists of a spring in the shape of the arc of a circle inside a perforated metal case. The spring is slotted to make it more sensitive to heat. United States. This is a solder release closed circuit '-l^'^'ice. United States. It consists of a small brass ring with a wire soldered to opposite sides by soft solder. When the solder melts, the ring drops out and opens the circuit. It is a very simple and reliable device and has undergone but little change since first put on the market. It is still United States Thcnnostat used to considerable extent in Boston, some of the new equipments being of this type and some of the Watkins open circuit type. These thermostats are always installed in pairs, and when one 206 LECTURES ON FIRE INSURANCE operates a troulile signal is given. The same signal would be given if any wire liecame broken. When both operate, the fire signal is sent in. American. American. The first American thermostat consisted of a U- shape tube with a long closed end and a short open end. The lower part of the tube was filled with mercury and the upper part of the closed end with a \olatile liquid. When this was heated the volatile liquid expanded, causing the mercury to overflow tlie open end and make an electrical connection between two terminals in a cup below. This de\ ice was easily broken and was subject to false alarms when shaken. It had to be carefully placed in an upright position. For these reasons it was quite unreliable. The next type was the ether tube, which consisted of a hollow curved tube of brass partially filled with ether. It operated much like the Watkins, as when it was heated the tube tended to straighten out and thus close a circuit. In the first tvpe a brass case was used, but in later types fibre and porcelain were substituted. Tliis device was subject to clogging from dust and corrosion. When it became old the ether was very likely to leak out and thus make the thermostat entirely inoperative. It was usuallv set to operate at about 150° but grew more sensitive with age. It was made till about 1900, when it was replaced by the Woodman solder release thermostat. A great manv equipments of ether tube thermostats have been installed in New England and thev ha\e given fairly good service. While many of these still remain, they are now considered defective and are being graduallv replaced. Woodman. Woodtfian. This consists of a cup-shaped piece of soft solder set in a porcelain base in such away as to hold two contact jDoints apart. When heated the solder cup fuses and a spring forces the contact points together. A few of these thermostats have given trouble, owing to the fact that they were not carefullv made, and in course of time the solder cup was forced out of its support, thus giving a false alarm. As a whole, however, this thermostat has given good results, and while not approved by the National Board of Fire Underwriters it may be considered a fairly reliable device. Heat Alarm. Heat Alarm. This thermostat was built upon the principle of a thermometer. There was a metal cup containing mercurv and two small brass tubes extending from this. When heated the mercury rose in the tubes and completed an electrical circuit. It did not prove a reliable device, largely on account of j^oor design, uneven adjustments and clogging of mercury bv corrosion. AUTOMATIC ALARMS 207 It was also somewhat subject to false alarms. Nearly all of these devices have now been replaced. Hersey. This was a solder release device consisting of a Hersey. small metal piston soldered into a hole in the metal case. When the solder melted a spring forced the piston down and closed a circuit between two contact points. The first type gave trouble from false alarms, as there was not a large enough soldered surface to withstand the strain of the spring. Soft solder is subject to cold flowing when under tension, and in the course of a few years a soldered joint if not properly designed is liable to break. In a later type the piston fitted too closely to the hole and gave trouble from sticking. In general it may be said that this device though good in principle, was not well designed. It is now con- sidered defective, and most thermostats of this type have been replaced. White. This was a solder release device consisting of a ■^j^^ite. coiled spring with one end fixed and the other soldered to the case. When the solder joint melted the spring recoiled and made contact between two triangular shaped points. The first type was not sensitive enough, and it was later improved by insulating the soldered joint, anil also by replacing the wooden case with porcelain. It might be said here that the solder used in all these devices is practically the same as that used in automatic sprink- lers.* Great care is needed in designing a device of this kind in order that it will operate well ahead of a sprinkler. If the sprink- ler should operate first it might throw water onto the thermostat and thus cause it to fail. Wall. This is also a solder release device that superseded Wall. the White about 1S99. It consists of a thin gold plated cap on the under side of which is soldered a hook. This is attached to a spring which holds \.\yo contact points apart. When the solder melts the hook is pulled off and the circuit closed. This was designed to be proof against dust and corrosion. No moving or soldered parts are exposed, but the heat is transmitted through the thin metal cap. Later it was made more sensitive by insulating the gold plated cap from the porcelain case by means of a fibre ring. This device was quite extensively used and has proved very *Sprinkler solder consists approximately of the following: bismuth 4 parts, lead 2 parts, cadmium 1 pari, tin 1 part. White Com- 208 LECTURES ON FIRE INSURANCE satisfactory. It may be considered to l)e about on a par with the Woodman. The White Combination sprinkler and thermostat was in- vented about 189-4 and used to a limited extent. It was at first attached to the Grinnell sprinkler only but a few were made attached to the International head. In the Grinnell combination a coiled spring is used of a similar form to that used in the White thermostat. One end is fastened to the frame of the sprinkler and the other end to the sprinkler strut. The thermostat is supposed to fuse before the sprinkler and usually does so on account of the small amount of metal that has to be heated up. If, however, it should not fuse for any reason it is sure to operate when the sprinkler opens on account of the fact that one end of the spring is released by the opening of the head. This was an expensive system to install and gave consider- able trouble from false alarms, owing to the fact that the device was grounded on the sprinkler piping and grounds were liable to occur between the wiring and the pipes. Only a few equipments were ever installed. This covers briefly the principal devices that have been used in New England and only brief mention will be made of the other types. Other Types. IVestern. A closed circuit solder release device built for a double circuit with a separate fusible element for each circuit. Used considerably in the West. B7-azIeton and loxva both operate on the principle of a cir- cular diaphragm moving in the center when heated. Ludloxv utilizes a chamlier filled with bi-sulphite of carbon, which when heated expands. Morse depends upon the movement of a coiled spring which when heated expands. This is the same principle that is used in the so-called .Standard thermometer. A few of these devices were installed in New England. Pneumatic^ a solder release device. When solder fuses a spring acts on a piston and compresses the air in a system of piping to which the thermostat is connected. This pressure acts on a diaphragm which is arranged to give an alarm. Eco Magneto consisted of a lead pipe with small holes at frequent intervals plugged with soft solder. Air was exhausted from the pipes and when a plug melted the pressure was equalized and acted on a diaphragm. Now obsolete. AUTOMATIC ALARMS 209 American Glass B7ilb. This consisted of ;i small glass bulb mounted on a porcelain base. Inside the glass was a thin pellet of soft solder attached to a hook which held two contact points apart. When heated the solder was fused by heat radiated through the glass and the hook then pulled away from the solder. This device was never put on the market, although it seems to have possibilities. CopeuJiag'cn. This depended upon the expansion of am- monia in a small copper vessel. It was never used in this country so far as is known. ^loiitaiik. This was a thermostatic cable, afterwards made in the form of isolated thermostats. It consisted of fine copper wires insulated from and surrounding a core consisting of a larger copper wire surrounded by a layer of soft solder. When heated the solder fused and small globules of solder were pushed through the insulation, thus short circuiting between the core wire and the fine wires. May Oatzvay. This is an English device which is being used to some extent in Canada and perhaps certain parts of this country. It consists of a long copper wire supported on a steel frame. Near the center of the wire is a weight which can make contact in a cup-shaped receptacle. When heated the wire ex- pands more rapidly than the frame and allows the weight to drop in the cup and close the circuit. This is a compensating device, that is, it operates only on a sudden rise in temperature and does not require any definite point of temperature to give an alarm. It is, however, subject to being clogged by dust and corrosion. The Underwriters' Laboratories have laid down certain require- Laboratory ments that a thermostat system should fulfill. These include : — Rules. 1. Must be set to operate between 140° and 164° F. for low test devices. 2. Must operate at a temperature not over 200° F. when tested in a hot air oven with a temperature rise of 50° a minute. 3. Must be of a permanent contruction that will not dete- riorate. 4. Must be bug proof and dust proof. 5. Must not be readily affected by moisture and corrosion. 6. Must not be liable to short circuiting due to moisture. 7. Must not have adjustments that can be readily tampered with. 210 LECTURES ON FIRE INSURANCE 8. jMust ha\e a good wiping or scraping contact when alarm is given by electric contact. 9. Must not be injured by successi\e heating and cooling below normal. 10. Must be strong and not easily susceptil)le to mechanical injur}-. None of the older types of thermostats entirely fulfilled these reciuirements although the Montauk, American glass bulb, United States, Woodman, Wall and Watkins could probably be developed to meet them. The New England Insurance Exchange had approved the Woodman, Wall and Watkins, at the time the Underwriters' Laboratories began testing these devices. The first system to be approved by the Laboratories was the Aero, submitted b}- Fred Thomas of Denver in 1908. In 1910 the "compensating" system m k flESSSmi ^L.^ IL^- A /i r s • 9 1 1 Aero. Aero or Compensating Thermostat A — Copper Tubinif. B — Wirinsj fi'oni Di:ipliratfni. C — Diaphragm. submitted bv the American District Telegraph Company was ap- proved, and in 1911 the " Air alarm " submitted by the Interna- tional Electric Protection Co. passed the Laboratory approval. Both of these systems are similar to the Aero and will be described under that name. Aero. This consists of a small copper tulie which is strung along the ceiling so as to conform with the rules for thermostat AUTOMATIC ALARMS 2U spacini^. Each loop is made as near the same lenglh as possible, and one end is attached to a diaphragm. The other end contains a small hole or " leak " which can be adjusted in size, the adjustment being very delicate. When heated, the air in the tube expands and creates a pressure on the diaphragm, thus making an electric circuit. The "leak" is adjusted so that a gradual rise in temperature will not give an alarm, as the air will slowly escape through this opening. Any sudden rise of temperature, however, will create enough pres- sure in the tube to operate the diaphragm. The details are some- what complicated and will not be described here. The device is very sensitive if properly adjusted, as it does not require any fixed point of temperature to operate it but depends upon a sudden rise whether the room be cold or hot at the start. It fulfills the requirements of the Laboratox'ies, but in practice has not, up to the present in this territory, proved as successful as was antici- pated on account of the diflicidty of getting satisfactory tubing and of keeping it in proper adjustment. One single adjustment affects a whole floor circuit instead of one separate thermostat, as in most systems. Systems of Wiring There are three distinct methods of wiring a system. 1. Open inside and open outside circuit. 2. Open inside and closed outside circuit. 3. Closed inside and closed outside circuit. The inside circuit when open is usually installed on a double inside Cir- loop so that the electric current will have two paths from any cuits. thermostat. This is done so that an alarm will be given even if one wire is broken. In fact there can be two breaks under certain conditions without crippling the system. Each loop is brought down to the test clock and arranged so that it can be tested separ- ately. The testing device automatically throws each loop succes- sively into the circuit and sends a current through it. In case it is intact a record is made by puncturing a dial. If any particular loop is broken no puncture will be recorded for that loop. The details are rather complicated and will not be described. The floor loops are also connected to annunciator usually placed on the front of a building, and when a short circuit occurs by the operation of a thermostat the annunciator drop for that floor is operated. In making a test all inside wiring, bells, and annunciator are tested except that where outside circuit is closed the transmitter is cut out during test. 212 LECTURES ON FIRE INSURANCE Outside Open In an outside open circuit system the outside bells were for- Circuit. merh placed in the main circuit, one bell beino^ a vibrator and the other bells single stroke, vibrated by the first mentioned " master" bell. The disadvantage of this method was that if one bell got out of order the whole system was crippled. The vibrator was frequently placed on the outside of a building, where exposed to dust and cor- rosion and was frequently found out of order on this accoimt. Bells of this tvpe are very easily clogged at the contact points. A few systems were installed where the outside bells were in AUTOMATIC ALARMS 2t3 multiple, and while this was a somewhat preferable arrangement in some ways it took a stronger current to operate the bells and was not entirely satisfactor}'. In the newer systems the bells were all put on relays and the condition of each bell was shown on test by punctures on the dial. If any bell became crippled it did not in any way affect the other bells." A few systems with grounded outside circuits ^vere installed in the early days, but they were extremely subject to trouble fi-om grounding of the wire, and all of them haye probably now been changed to all metallic circuits. When the outside circuit is closed, a transmitter is generally Outside used. This is a device that is wound up and runs by clockwork. Closed There is a releasing deyice operated by an electro-magnet. When Circuit, released, a wheel revolves ^yhich makes and Incaks the outside circuit either Iw notches on the circumference of the wheels or pins located on its face. The cnitside circuit comes up to the wheel and the inside circuit up to the electro-magnet in the transmitter. The outside circuit which controls several equipments runs to a fire department house or central station and connects with a '•' striker" bell or tape machine. When a transmitter operates, the box number for that particular risk is recorded on the bell or tape machine. The outside circuit requires constant care, for the batteries have to be frequently renewed. A break in the line will cripple a number of equipments, so that it has to be carefully watched and repairs made without delay. The rules require that this line be tested daily and that a small bell be placed at the central station arranged to give a continuous alarm in case the line breaks. The outside closed circuit system, if under proper maintenance gives better results than an open circuit, and is, of course, quite necessary in cities where there are a large number of systems connected to one station. In testinof a system with outside closed circuit it is customary _ . . , , , i csting. to cut out the transmitter during test so that the alarm will not be sent Into the station. In the old American test clock this is done by an attachment on the door of the case. This was, of course, a very bad arrangement, as the door might easily be left open by mistake and thus cripple the whole outside connection. In the later type of boxes this was done automatically by the testing mechanism when it started to revohe, and restored to normal con- dition when the test was completed. 2J4 LECTURES ON FIRE INSURANCE Systems with outside and inside closed circuit are never used except where there are central stations. Practically all wires are under constant test, and a separate signal is given for a break than for fire. The details are complicated and will not be con- sidered here. The rules for all t\ pes of svstems which are approved will be found in the pamphlet on Signalling Svstems, issued bv the National Board of Fire Underwriters. Systems in There are many thermostats svstems in New England, especially New Eng- in Boston, Lynn, Brockton and Haverhill. In Boston they are land. practically all of the Watkins or United States types. The wonder- ful success of the Boston systems is due to the unusually high grade of construction and maintenance furnished bv the Boston Automatic Fire Alarm Co. Outside of Boston, the majority of equipments are the American eth^r tube or solder release type. As a general rule they have given good results, although the ether tube devices are now considered defective. Practically no new equipments are being installed in this territory, outside of Boston, as the American District Telegraph Co., which controls all the approved devices, find it dii^cult to get new business under the present requirements for a central station con- nection, and prefer to put in sprinkler svipervisory and central station watchman's serxice. It is believed, however, that a good thermostat s\stem properly installed and maintained is a very desirable form of fire protection, and it is hoped that the day will come when this form of protection will again become popular. QUESTIONS. 1. What are the three principal parts of a thermostat system.? 2. State the more important principles upon which the operation of different tvpes of thermostats are based. 3. Give the qualifications for a good thermostat. 4. Describe briefly an open circuit system of wiring. 5. Describe the Aero system. BIBLIOGRAPHY. Crosby, Fiske : Handbook of Fire Protection. Ed. 1909. P. 192. U. S. Patent Records. Rules of the National Board of Fire Underwriters on Signalling Systems. 6— FIRE DEPARTMENTS, Historical Sketch. Modern public fire departments and the apparatus they use are the result of a development extending over many centuries. There were firemen called matricularii and crude pumps in the time of Pliny in the first century. Pumping engines seem to have been forgotten during the dark ages and squirts or portable syringes were the only devices, excepting of course buckets, which were used until about the sixteenth century. The great London fire of 1666 probably did more to stimulate improvements in public fire protec- tion than any other single event. Flexible hose was invented by Von der Heide in Holland about 1700, but was not extensively used until about 50 years later. The early pumping engines wxre similar in design to the Early Hand modern hand tub, except that they had no suction or discharge Engines, hose. There were two cylinders, each with its piston. The pis- tons were attached to a horizontal bar pivoted in the middle so that when the bar was moved up and down the pistons moved up and down in the cylinders and forced the water into a discharge reser- voir. Water had to be supplied to a reservoir in the engine with buckets and was discharged from a nozzle attached to the discharge reservoir. The earlv fire brigades in London were maintained entirely by Fire the insurance companies, each prominent company having its own Brigades. brigade. The companies placed a plate or sign on the outside of each building they insured, and in case a fire occurred, the fire brigade of the company insuring the building was notified. This method finally gave way to public fire departments, and these are now almost universally found throughout the world. The first fire engine operated by steam was built by George Early Steam Braithwaite of London in 1829. He later buik several others, but Engines. 2J6 LECTURES ON FIRE INSURANCE Early Steam there was a strong prejudice against thciii for a long time and they Engines. (jjj ^ot come into general use till about 1S52. The first American steam fire engine was built by Paul R. Hodge, an English engineer, Braithwaite Steam Fire Engine, 1S29. Hodge Steam Fire Engine, 1S41. Silsbj Steam Fire Engine, 1S56. in New York in 1841. This also was not popular and there was great difticulty in getting any fire company to use it. In 1851 N. L. Dav of Philadelphia invented the first self-propelled engine, and in 1852 Moses Latta of Cincinnati built probably the first really suc- cessful engine. These early types of engines had horizontal pumps and vertical boilers. About 1856 the firm of Silsby, Mynders & Company, of Seneca Falls, N. Y., put out the first engine of the rotary type. This was built along the same general lines as a ro- tary pump for mill use, but had a rotary steam as well as water end. This type of engine was popular for some time, but has now largely gone out of use. In 1859 the first Amoskeag engine was built, and this was apparently the first make to use the vertical pum)>. FIRE DEPARTMENTS 217 Modern Steam Fife Engines, The fire engine of to-day has gone through a wonderful de- velopment since the crude device of Braithwaite in 1829. The horizontal type of pump has been practically discarded and the rotary type is but little used. The modern pump is double acting, of the vertical type, usually with a fly wheel. The stroke is 1" to 9" and the revolutions 270 to 400 a minute. The boilers have also been greatly improved both as to efHciency and simplicity of main- tenance. There are seven principal sizes being made; Size. Rated Capacity. Double extra first size 1 ,300 gals. per minute. Extra first size 1 ,100 First size 900 Second size . 700 Third size 600 Fourth size 500 Fifth size 400 The fifth size is too small for good protection and is not recommended. The great majority of those in use are of the first, second and third sizes, and the second size is probably the most generally useful, as it is fairly powerful without being too heavy for average conditions. Sizes. Metropolitan Steam Fire Engine Made by American La France Co. 2t8 LECTURES ON FIRE INSURANCE Boilers. Horseless Engines. There are two distinct types of boilers, the fire or smoke tube and the water tube. In the first type, the tubes are phiced inside a boiler containing water and the flame and heat from the fire passes through the tubes. In the second type the water is circulated through a system of pipes around which the heat from the fire is conducted. The boilers are from 30 to 40 inches in diameter and from 60 to 70 inches high, depending upon the capacity of the engine. A few horseless engines have been built in the larger sizes in which the steam from the boiler is utilized to propel the engine. These are of necessity slow in starting unless steam is kept up all the time, and are therefore used mostly for second or third alarms. The first successful one was built about 1870, and they ha^ e been used in Boston, Hartford. Portland and Pittsburg. •' Champion " Chemical Tank, Sectional Mew. (Acid relciised bj' revolving- the tank) Chemical Eng^ines. Probably nearly half the fires responded to by most cit}' fire departments are extinguished with chemical engines. These are constructed on the same principle as hand chemicals. There is a tank containing a solution of bicarbonate of soda in water and a receptacle for sulphuric acid. In some of the smaller sizes the acid is in a bottle and the whole tank is revolved on a vertical axis, thus emptying the acid into the solution. In the larger sizes the tank is usually fixed in place and the acid receptacle is upset by some mechanical device. They arc built in various sizes from 35 to 60 gallons capacity and with single and double tanks. They are usually equipped with agitators consisting of a rod extending FIRE DEPARTMENTS. 219 through the centre of the tank on which are several paddles. This is used to stir the solution in order to thoroughly dissolve the soda. These engines are usually equipped with about 200 feet of y^' or V special rubber hose. Champion Babcock Chemical Tank, Sectional View. (Acid released by unscrewing stopper of bottle) Combination Wagons. Chemical engines ha\ e been combined in almost endless va- riety with hose wagons and ladder trucks. These combinations form a desirable type of apparatus, provided the chemical tanks are of large enough capacity, and are especiallv popular in small cities where the apparatus must be somewhat limited in amount. Fire Boats. In the larger cities having an extensive water front, tire boats Specially are a very important part of the fire fighting equipment. At first Designed, scows or old tug boats were used for this purpose, but to-dav the boats are carefully designed for the purpose. They are from 80 to 130 feet in lengths of light drafts and preferablv with twin screws. They are fitted with large pumps, having a total capacity of from 3,000 to 13,000 gallons per minute. The pumps are usu- ally of the vertical type, though horizontal and rotary pumps have been used. Of late centrifugal pumps have come into use for this purpose. The water is discharged through hose streams and also 220 LECTURES ON FIRE INSURANCE. through monitor nozzles or deck turret nozzles, some of which are as large as 5^4 " in diameter. Hose Wagons Reels. The old form of hose wagon consisted oV a- large reel mounted on an axis and upon which a large number of hose lengths coupled together could be wound. These ha\e now lieen almost entirelv replaced by hose wagons where the hose is not coupled together but laid in folds or coils. This latter method has been found much more convenient under average conditions and has the added ad- vantage that the wagon can be used for carrving hand chemicals and other minor equipment. It might seem at first glance that the hose would wear better when placed on a reel, but as a matter of fact this is not so. In the central part of a reel the hose is under considerable pressure from the coils above it and the couplings are apt to seriously indent it. When placed in folds, there are of course sharp bends, but if the hose is used occasionallv it is not likely that the bend will come twice in exactlv the same position. Most of the modern hose wagons are of the combination tvpc con- taining hand chemicals, ladders, and frequentlv large, chemical engines. Hose Sizes The best hose for fire department use is generallv conceded to Desirable. be of the 2i4" rubber-lined cotton jacket type. An all rubber hose is heavier and does not last anv longer, if as long. It is most often used in the down town districts of large cities where the fires are so frequent that there is not time between fires to properlv drv cotton rubber-lined hose. Unlined linen hose has too much friction loss. Larger sizes of hose, namely, 3" and oj^", are occasionallv used, es- pecially for fire-boat work, and are recommended in large cities, as the friction loss is much less than in 2 ^4'' hose. Aline of S^'^" hose is about equivalent in carrying capacitv to two lines of 2}^" hose, and therefore gives a great sa\ ing where long lines have to be used. It is, however, too large and heavv to be used inside of buildings, and should be limited to out-of-doors runs. It is very desirable to use the standard 2^4" couplings on both 8" and 3)4" hose, so that they can be readily attached to the smaller hose when necessary. The extra friction loss in these cou])lings is verv slight. FIRE DEPARTMENTS 22J Play Pipes The standartl playpipe is of brass, with a smooth tapered interior, wountl with conl. and with swivel handles. The best size of out- let for general use is Iji". Fire departments frequently use smaller nozzles of from ^" to J" diameter, especially where water pressure is weak, but they give much less poweiful streams. Larger nozzles are used in the large cities especially in connection with deck guns and deluge sets. Shut off nozzles are desirable in small fires for use of buildings, but the}' cause an increased friction loss and do not give as solid a stream. vSpray and other special nozzles have a limited lield for use. Underwriter" Plaj Pipe Hose Coupling, Sectional \'iew Couplings. The screw form of coupling is now almost universallv used. Standard although several forms of snap or clasp couplings were formerly Couplings, popular. There is unfortunately a great variety of screw threads used for this purpose and this has caused much delay and serious consequences many times when apparatus has been called from other cities in case of a large tire. About ten years ago the National Fire Protection Association appointed a committee to in\ estigate this matter, and after a very careful study thev recommended a standard coupling to consist of 7j4 threads to the inch and an outside diam- eter of 3J^". It was found that this would tit the largest number of couplings then in use, as almost any coupling having between 7 and 8 threads to the inch can easily be made to conform to it by a little tiling. This was adopted as a National standard, and is being gradually introduced into all large cities of the country. The introduction has been slower than it should have been, however, as the cost and trouble of making the change is in most cases very small. 222 LECTURES ON FIRE INSURANCE Ladder Trucks Types of There are many types of ladder trucks on the market, ranging Trucks. from the seventh size, carrying 85 feet extension ladders, to the first size, carrying 65 feet extension ladders. The larger trucks are quite complicated and usually require a special device for steering the rear wheels so that the apparatus can take short corners. In the larger cities aerial trucks are necessary, and these run in size from 50 to 85 feet when extended. The larger ones are raised mechani- callv either bv heavy springs or by pneumatic power. Water Towers These consist of extension standpipes with an adjustable nozzle on the top, and which can be raised vertically to a height of from 55 to 65 feet. Hose streams are connected to the base of the tower, supplied bv steamers. The nozzle can be controlled from below and a powerful stream at any desired elevation thus maintained. Miscellaneous Apparatus. The following apparatus which is found in the larger depart- ments will not be described : — Searchlight wagons. Fuel wagons. Wrecking wagons. Battery wagons. Chief's wagons. Automobile Apparatus piy-j, Nearly all kinds of fire departments apparatus is now being made Squadrons, of the automobile style. Springfield, Mass.. was one of the first cities to adopt a combination automobile truck, generally known as a flving squadron. This usually consists of a small chemical en- gine, a few ladders and accommodations for six to ten men. Fre- quentlv a supply of 21^" hose is also added. The idea is to transport a good force of men with the necessary apparatus to fight a small fire to the scene of trouble as quickly as possible. The dy- ing squadron has already become very popular and is being exten- sively used, especially in sparcely settled districts. During the last few vears rapid strides have been made in the development of automobile engines and ladder trucks. One company is building gasolene engines of the rotary type in three sizes, namely, 400, 600 and 800 gallons per minute. The two HRE DEPARTMENTS 223 z 3 w u I— I u a: u z -< z o o < w O X z 3 z w w O H z o z o 224 LECTURES ON FIRE INSURANCE Automobile latter are six cylinder machines of 96 and 110 h.p. respective!}'. iingmes. They are also building gasolene piston engines in larger sizes, namely, (SOO, 1000 and 1200 gallons per minute. These are six cylinder machines ranging in horse power from 110 to 150. At present these pumps have not been developed to a point where they can be considered entirely satisfactory. The capacity of many of them are overrated and most of them have defects which develop during long or hard service. Horse drawn engines are now being converted into automobile apparatus by removing the front wheels, seat, etc., and replacing with a two wheel automobile truck. It is probable that automobile apparatus will come into more and more general use and finally supplant all horse drawn apparatus. It has a tremendous advantage in the matter of speed and is probably cheaper to maintain, although the first cost is at present much higher. With this type of apparatus in general use it seems likely there will be important changes in the organization of fire departments and the distribution of apparatus, for with an engine that can traA el 50 miles an hour, much greater distances can be covered than at present. It is possible that the heavy snows of our northern cities may interfere somewhat with automobile apparatus, but it is probably only a matter of time when this problem will be success- fully solved. Greater skill is required to keep automobile apparatus in good order than is required for horse drawn appa- ratus, and it is believed that it has not yet reached that state of perfection where it can be recommended in all cases to the exclusion of the older and simpler aj^paratus. Department Organizations. Types. Fire departments ha\e been developed in different cities to meet local needs. New York with its department of over 4,00(1 men naturally has a different form of organization than smaller cities. There are three radically different forms of organization. 1. Volunteer men. 2. Part paid men. 3. Fully paid men. While the greater proportion of the firemen in the country are probably volunteers, still this type is not desirable in the large cities. \ olunteers can never be properly drilled and therefore cannot handle the apparatus to best advantage. It is difticult to keep them all interested in their work, and there is no way of making them go to a fire if they do not want to. While they may FIRE DEPARTMENTS 225 be necessary in the smaller towns it is always desirable to replace them with paid or partly paid men when possible. Call or part paid men were formerly considered desirable for a portion of the force in the larger cities. To-day, however, the tendency is to haxe all fully paid men, as it is believed that a moderate number of such men thoroughly trained are superior to a much larger number of less efhcient call men. The modern automobile apparatus also tends to eliminate call men, as it allows for much more concentra- tion of apparatus than was formerly possible. Departments are generally organized with a chief, one or more Organization, deputy chiefs, depending upon the size of the city, district chiefs, and company officers. In the larger departments there are medical officers, supervising engineers, chaplains, etc. There should always be enough men in a company to give a good fighting force, even at the times when the greatest number are away at meals. In towns of less than 1000 inhabitants nothing but a volunteer department is usually practical. In towns of from 1000 to 10,000 there should be a paid chief, a number of paid or part paid men. It is desirable to pay all the men a little, even though it is onlv 50 cents each time they are called out. In this way they can be induced to drill more frequentlv and in general the}' feel more responsible. In cities of 100,000 population and o^ er only fullv paid departments are recommended. Supervision* In the larger cities the fire departments are generally supervised In Cities by a commission of three or a single commissioner. The latter ^"" towns, seems to be the more successful except in places where politics get into the department and first class men are not appointed for the position. In smaller cities and towns the department is often supervised by a committee from the board of aldermen or the board of select- men. Cost of Departments. Boston has one of the most expensive departments in the country, costing considerably over $'2 a head for every citizen. In New York and Chicago the cost is between $1 and $2 per capita and in most of the smaller cities it is less. A majority of the towns of 10,000 inhabitants spend less than 50 cents per capita to support the fire department. The recent conflagrations in some of the smaller towns show the shortsightedness of such a policy. 226 LECTURES ON FIRE INSURANCE QUESTIONS. 1. Describe briefly a modern steam fire engine. 2. What are the three types of pumjDs that ha\e been used in steam fire engines ? 3. What are the sizes of steam fire engines now being made? 4. Describe a cliemical engine. 5. State the essential features of a fire boat. 6. How is hose usually carried? 7. What kind and size of hose is mostly used by fire depart- ments ? 8. What is the National Standard hose coupling and what couplings can be made to fit it? 9. What is a " flying squadron?" 10. What is your opinion of automobile fire engines ? 11. Do volunteers usually make good firemen? If not why? 12. Describe briefl}' the organization of a fire department in a large city ? BIBLIOGRAPHY. Crosby-Fiske : Handbook of Fire Protection. Seepages 125, 495, 1899. Insurance Field Co., Louisville, Ky. Curtis, Greely S. : Municipal Fire Departments. National Fire Protection Association Qltarterlv, January, 1906 : 293. -Ec[uipment of Fire Departments. Insurance Engineer- ing, January, 1906. P. 38. Jenness, H. T. : Bucket Brigade to Flying Squadron. 147 p. Boston, 1906 (Geo. H. Ellis Co.). Johnson, W. H. : Town Fire Departments. Inszirance En- gineering, August, 1909 : 98. King, Wm. T. : History of American Steam Fire Engine : 150 p., 1896. Published by the author. Lindback. A. : The Fire Commissioner's Oftice. National Fire Protection Association (^itakterly, April, 1910 : 414. , Engineering Alag'azine, February, 1912. New England Water Works Association Journal, December, 1894 : 93. Tryon, Jas. E. : What a Water Supply Engineer can do in the Fire Department. New England Water Works Association Journal, December, 1894: 93. Young, Chas. F. T. : Fires, Fire Engines and Fire Brigades. 534 p. London, 1866 (Lock wood & Co.). PUMPS Fire pumps are used in tire protection to supply water for hose Uses of Fire streams, for inside hose and for sprinklers. They are particularly Pumps, desirable in country risks or other places where there is weak or no public water supply. A pump arranged in a standard manner with ample power available, safely located and with an ample water supply behind it, is the best fire fighting machine we have to-day. In one or two minutes time the water from a pond or river may be projected onto a lire at a pressure of 100 lbs. or more. Of course some judgment must be used as to where tire pumps are recom- mended, as they must be under the care of trained mechanics to be thoroughly efficient for fire fighting purposes. Gi^en a reliable and well located water wheel or boiler plant, a large pond or river and two or three good engineers or mechanics, a risk can in no way be better pro\ided with fire streams than by the installation of a National Standard fire pump of proper capacity. The streams are directly under the control of the assured's men who, being familiar with the plant will usuall}- utilize them wdiere most needed. Nor can the pri\ate protection be impaired by fires outside the plant as can a public water supply under the con- trol of the fire tlepartment. A standard fire stream delivers as much water as is used bv a population of 5,000 people for their average uses, exclusive of water for fire purposes. A 4 stream or 1,000 gallon pump (the size most common) therefore represents a \vaterworks supply designed for a delivery sufficient for the domestic consumption of a town of 20,000 people. Places are few, even in a city with a good water supply, where w^e could build a mill and make certain that the public water supply could furnish us with 1,000 gallons a minute at 100 lbs. pressure for fire purposes. Yet this is the ordinar^• and expected work of the Underwriter fire pump. Fire departments often use ^^ , ^ or 1 inch nozzles and we thereby get a wrong impression of the capacity of say a 6 inch street main, as it appears to be furnishing a large number of streams. But a standard 1^-^-inch stream discharges over twice as much water as 228 LECTURES ON HRE INSURANCE a ^-inch stream under the same conditions, and if the fire depart- ment should use the standard streams they would have to greatly reduce their number. A new 1,000 gallon Underwriter pump can deliver 8 or 10 ^-inch streams such as are used by the average fire department in a town or small city. These remarks are not so much to disparage public water service as to point out the value of a good pump. Pumps are not good for primary supplies to sprinklers in private risks, as they are uneconomical to run continually and if so run are apt to become worn, continually needing repairs. A fire might occur when making repairs with disastrous results. Pumps are best held in reserve in operative condition so they may be started at full speed at once. A tank or, if available, public water should be used for a primary supply, which, although weak, can at least hold the fire from spreading for a few minutes until the pump can be started. Night watchmen and others in charge should he trained to start the pump at the first sign of fire and with the pump maintain 80 to 100 lbs. on all the fire apparatus to which the pump may be connected. _ , There are three general types which are standartl. 1 ypes oi . . Standard Fire Stea???. Directly driven by steam acting on reciprocating pis- Pumps, tons on the opposite end of which are plungers or pistons which displace water at each stroke, the direction of the water being governed by self-acting valves. Rotary. Revolving and intermeshing cams forming buckets or cavities, which by displacement, give a moi'e or less positive dis- charge with a fairly high velocity. Driven by water power usually. Engines and motors are also used. The pump is connected to its source of power by shafts, clutch or friction wheels. Centrifugal. High speeded revolving impellers create high A'elocity in the water, which velocity, bv means of properly designed passages, is then reduced, appearing as pressure. Driven usually by directly connected motors. Pozvcr Pumps. (No Underwriter pattern) . Two or more plungers operated by gearing through a suitable crank shaft. HISTORICAL Steam Steam fire pumps of the direct piston type were first built in Pumps. 1840. The first pumps were of the single piston type. The duplex type, first made in 1850 or 1860 was patented by Henry R. PUMPS 229 VVorthington. It was generally copied upon the expiration of the Steam patent. Pumps. The Underwriter steam pump design was first developed by John R. Freeman, at that time engineer for the Factory Mutuals, the work being started about 1890. The steam pumps in use as fire pumps up to that time were very unreliable. Through com- petition the duplex pumps had become so cheaply built as to fail by breakage at fires and when tested. Their designs were mostly on the lines of the regular trade pumps, with slight alterations made in the patterns and parts to enable the pumps to be run at higher speeds for fire purposes. Little attention was given to rust-proof- ing. Suction inlets, valves, water passages, etc., were restricted in size, so that the pumps were more or less inefficient as pumping engines. A common suggestion of the old days which the inspec- tors found necessary was one requiring a crow-bar to be kept near the steam pump to start it in case of fire. The pump, not being rust-pi'oofed, corroded in its moving parts so as to need the bar to keep it moving for the first few revolutions. The rotary fire pumps were more reliable than the steam pumps Rotary and gave fairly good ser\ice. It was not until 1906 that the Pumps. National Standard rotary pump was designed, and except for desir- able accessory fittings and more thorough rust-proofing, this style of pump remains about as originally designed. Rotarv pumps were probably the first ones used in this vicinity for fire protection, as in the early days the only available power was usuallv water power. The undesirable features of these old rotary pumps were their poor location and the poor arrangement of their power drives. The pumps were usually located near the water wheels under the mill, a place more or less inaccessible and a place where freezing, rust- ing and neglect of oiling would all tend to impair the value of the pump as a fire fighting machine. Often there was not power enough to run both the mill shafting and the pump, and no means were provided to throw out the shafting so the wheels could put all their power into the operation of the pump. I remember, as not uncommon, the suggestion on inspection reports that a large carving knife be kept hung up near the main belt so that in case of fire the knife could be used to cut the main belt, thereby allowing the fire pump to be operated without running the whole mill. It of course is desirable to shut down a mill in case of fire to prevent the belts from spreading fire and water. 230 LECTURES ON FIRE INSURANCE Rotary Although this suggestion of a carving knife is obsolete, it is still Pumps. applicable to many old equipments and would not be at all out of place as an item worthy of attention in some of our risks to-day. Such an arrangement of a rotary pump makes it necessary to enter the mill to get the pump under way and to oil it. In case of fire near the pump it of course would be inaccessible and could not be started. It is due to such defects in location and power that rotary pumps have a somewhat unfortunate reputation. The pump itself is simple, efficient and reliable, and if the same mechanical skill and attention to the elements of good fire protection engineering are employed, as is done in the case of steam fire pumps, the protection furnished by the rotary pump would be superior, other things being equal. There are old rotary pumps in ser\ ice to-day 40 to .50 years old that can deliver oO to TO'y^ of their original rated capacity. Most steam lire pumps which were made at this time passed to the junk heap 10 to 20 years ago. The best methods of driving rotary pumps will be taken up later. STANDARD FIRE PUMPS Steam Steam pumps are often poorly arranged. Their steam sup- Supply, ply may be taken from pipes used for steam for other purposes, making the steam supply likely to be shut off for repairs or other- wise impaired. Boilers furnishing steam for the fire pump were often so located that it would be impossible for men to stay at the boilers to keep up the firing in case of a bad fire in the plant. There are many such to-day. As no chain is stronger than its weakest link, so no steam fire pump can be better than its steam supply. This is an important fact which often does not receive proper attention. A safe steam supply implies good boilers, ample in capacity and capable of being forced to an o\erload if necessary ; a safe location cut off or detached from inflammable rooms and buildings. The cut-off must not only exclude fire but must not permit smoke to enter in sufficient quantities as to dri\ e firemen from the boilers. It also implies safe arrangements of steam pipes. All pipes leaving the boiler room should be provided with valves so that in case of leakage or breakage of steam pipes in a burning building the pipe PUMPS 231 can be shut off and all steam reserved for the lire pump. Safety also demands two independent sources of boiler feed water, each ample and reliable. No steam pump can be called good which is supplied with but a single boiler, as when this boiler is undergoing its yearly inspection it, of course, is cold and the pump could get no steam. Fire pumps should be so arranged as to minimize the amount Pump of lifting necessary for them to get the water into the chambers. Supplies. Pumps can not, strictly speaking, lift water. All they can do is to exhaust air from the suction pipe, which permits the atmospheric pressure on the pond or river to force the water to the pump. Pumps usually run a little smoother at high speeds if there is a slight lift, the pump, for example, being placed about two or three feet above the surface of its water supply. A slight head, however, where water flows to the pump by gravity insures reliability in starting, as the pump can be kept always primed. A fire pump should not have over 15 feet lift, preferably much less. If necessary pumps should be put in rooms sunken in the ground to get them down to the proper level rather than to have them located far above their water supply. Long suction pipes should be avoided. If the pump cannot be Suction located near the main supply, the water can be conducted by gra\ itv Pipes. through a flume, penstock or large pipe, to a special suction well located at the pump. The gravity supply pipe should be designed to give a flow in excess of the possible maximum capacity of the pump, so that the suction well will be kept full. If skill is used it is generally possible to avoid the use of foot \al\es on suction pipes. These are undesirable and should be only used as a last resort. Suction pipes should be laid as straight as possible, turns if any, being made with easy curves. The pipe should rise on a uni- form grade from the supply to the pump. Pockets and high places should be carefully avoided to insure steady running of the pump. Air may be retained in the pipe at high points and cause much trouble in starting and operating the pump. Any air entrapped in a suction pipe will expand and contract at each pulsation of the pump and it will cut down the cross sectional area of the pipe at that point. The pump can never run well under such conditions. For the same reason great care must be used to get the joints of the suction pipe perfectly tight. Moreover, if there is a leakage of air the pump cannot exhaust the pipe and so might be unable to take its water. 232 LECTURES ON FIRE INSURANCE Priming Tanks, Fire pumps should have at least two sources of water for prim- ing purposes. An independent tank reserved solely for this pur- pose is essential for safety where there is a lift necessary. The National rules give the sizes of tank necessary for the several sizes of pump. Priming water is used, to fill the pump and cover the pump valves, sealing them so that they will he air tight. This prevents air working back into the suction after once exhausted and maintains the vacuum. A National Standard Steam Fire Pump. STEAM PUMPS The National The principal features of the standard steam fire pump as dif- Standard fering from ordinary steam pumps are as follows : — Steam Pump. The use of brass plungers instead of cast-iron ones. Bronze piston rods and valve rods instead of iron or steel. Brass lined stuffing boxes. Area of water valves 25 to 50 per cent greater. Suction pipe connections two to four inches greater in diam- eter. Larger air cliamber. Other special features of design tending toward strength, speed, rust-proofing and lilu'ral passage .for the water. There are also PUMPS 233 several important fittings added which are especially needed on fire The pumps. National National Standard pumps must be of the duplex type, whicli has practically two distinct pumps working side by side. This in- p^^^p^ sures a constant flow from the pump and avoids the danger of the pump stopping on a " dead center." The duplex pump also gives more capacity at less speed, is more efficient and safe against break- age than pumps of the single cylinder type. National Standard pumps are made in the following sizes : 14x7x12 for the 500 gallon; 16x9x12 for the 750 gallon; 18x10x12 for the 1,000 gallon, and 20x12x16 for the 1500 gallon pump. An 18x10x12 pump means one with steam cylinders 18 inches in diam- eter, water plungers 10 inches in diameter, and the length of the stroke is 12 inches. It delivers at a speed of 70 revolutions 1,000 gallons per minute, and when new is reqviired to have a capacity of 20 per cent o^■er its rated. capacity. The National rules should be studied carefully in connection with this subject. We will here but briefly mention the principal points which the rules co% er. The steam ports and water passages are liberal in size to enable high speeds to be attained and to insure an ample discharge capacit^• Tlie pumps are rust-proofed hy making the sliding parts of bronze or brass. The minor parts are made strong by the substi- tution of steel forgings, steel castings, or wrought-iron forgings for cast-iron. Extra attachments are found necessary for good fire service on account of the peculiar demands which a fire pump must meet. Some of these are air chamber, vacuum chamber, gauges, relief or safety valve, stroke gauge, name and capacity plate, oil pump, and automatic lubricator. Large pipe outlets and a large number of water valves are provided to give a smooth, free, and uniform delivery. Solid or ring packed pistons with plain non-adjustable slide The Steam valves are operated mechanically by rocker arm levers directly from End. the pistons. The valve is fixed in position wath non-variable lap and lead. This valve was formerly made adjustable, but it was often adjusted improperly by the mechanics in charge of the pump. A steam cushion is formed to prevent the piston striking the end of the cylinder. Ctishion valves to regulate this and thereby govern the length of the stroke are also provided. These valves 234 LECTURES ON HRE INSURANCE are operated liy hand as desired. The steam cushion prevents pounding- and lireakage in case of sudden release of load by a break of the discharge or suction pipes or the sudden admission of air into the suctitjn. Drain cocks are pro\ided at each end of the cylinder to free tbe cylinders of condensed steam. The exhaust pipe is liberal in size and should be installed without bends directly to outside so as to avoid anv possibilitv of back pressure. The yoke is the hea\y casting connecting the steam cylinders to the water end. It is fitted to these with a machined joint, with- out packing-, to maintain perfect alignment. Rocker shafts are of forged iron or steel with bronze bush- ings in wide bearings. No cast-iron should be used for these parts. Cranks, valve-nxl heads and piston-rod spools may be of cast-iron, but preferably of steel or forgings. Levers and ^■alve- rod links must be of steel or forgings. V^alve rods and piston rods are of solid Tobin bronze. All stuffing boxes have brass rings. The Water The zvater chambers are built very strongly and of liberal ^^^' capacity. The hand holes are large, making the interior of the chambers easily accessible. The pliingers and their bushings are of solid brass or bronze of slightly different alloys to prevent scoring. Perfect alignment is necessary, the skill of the builder being put to its hardest test in this work. The plunger rings are removable so that a cylinder can be inserted if desired and the pump changed from a plunger to a piston type. Pistons are pre- ferred where gritty waters must be handled and for automatic pumps. The pump valves are all of one size and interchangeable. They are so spaced as to be well separated from each other, which helps toward a smooth flow. The rubber valve discs are reversible, three to four inches in diameter bv about five-eighths inch thick. They lift about one-half inch off their seats. Many small valves are used in preference to a few large valves, thereby tending to more quiet running when large volumes of water are being pumped. The total area of the suction valves is about one third more than that of the discharge valves. This insures full suction chambers at each stroke. The valve springs and covers are of solid brass. The springs maintain a load of about one pound per square inch on the suction valves, and two or three PUMPS 235 pounds on the discharge valves. Extra stiff springs are used on The Water suction valves when water is taken under a head. These rubber End. valves tend to stick to their seats, so the rule is made that fire pumps be run a little every week to keep them in good condition. Valve stems and seat rings are of bronze, the latter being firmly expanded into the casting to prevent their working loose. The pipe Jiang'es \)YOY\de for large sized pipe connections, as follows — : Size of Pump -Suction Pipe Discharge Pipe 500 gals. 8 6 750 gals. 10 8 1,000 gals. 12 8 Steam Exhaust 3 4 3^ 4 4 5 A National Standard 1000 gal. Rotary Fire Pump. 236 LECTURES ON FIRE INSURANCE Vacuum and air pressure chambers are provided on the suction and the discharge pipes to care for the pulsations and steady the flow. Miscellaneous Gauges are provided for indicating the steam and the water Fittings. pressure. There are hose connections screwed directly into the pump casting so that hose may be used in case the main discharge pipe is broken. A valve is provided in the discharge pipe near the pump for this purpose. A safety or relief valve is provided which will waste water and relieve the pressure if it exceeds that at which the valve is set. This prevents injury to the pump in case the pressure is suddenly thrown back, as it would be if a hydrant were suddenly shut down. An air vent or starting valve is provided to relieve the air taken from the suction pipe in starting up the pump. Priming valves and checks are provided to control the prim- ing water so that each chamber may be promptly filled. The checks prevent water from passing from one chamber to the other through the priming pipes. National Standard Rotary Pumps. ROTARY PUMPS The vStandard rotary pump differs from ordinary rotarv fire pumps in that it is designed with more liberal pipe connections, larger water passages, is rust-proofed and provided with the same special accessories necessary for fire pumps as are called for in the steam pump specifications. There are two tvpes, A and B. The "A" type is built on the old designs, the specifications calling for but slight changes in the patterns. It has, however, the larger inlets and outlets, the air chamber, hose valves, relief valves, starting valve, priming pipe, name plate, gauges and oil and grease cups. The body and cams are of solid bronze. A vacuum chamber is not necessary on rotary pumps. The type "B" has heavy shafts, a single pair of forged steel gears running in oil, long self-oiling bearings and special stuffing boxes designed to make a tight water joint at the pump case wall without the use of packing. The form of the cams and general lines of the pump are left to the judgment and desires of the individual manufacturer. PUMPS 237 In laying out the power for a rotary pump judgment must be Rotary Pump used as to how the pump is to be driven. The local conditions Drives, vary so greatly that each case must be worked out separately. Other things being equal, the methods of driving are recommended in the following order: — A National Standard Type B Rotary Fire Pump. Direct or spur gearing from independent source of power. Spur gearing from the main shaft, with jaw or friction clutch to throw out all other shafting. Grooved friction wheels. With the latter a pump requires about 30 h. p. for each fire stream (120 h. p. for 1,000 gallon pump). Less power is con- sumed bv a direct clutch drive. Friction wheels should never be 238 LECTURES ON FIRE INSURANCE Rotary Pump used where there is not ample power available. Lack of proper Drives. power is the most common defect in rotary pump protection to-day. F'riction wheels should always be guarded to prevent foreign matter, grease, etc., getting on them. Rotarv pumps are run at 200 to 300 revolutions per minute. .Special care is neces- sary as to foundations, for pumps must often be located where a firm foundation is not readily obtainable. A rotary pump should not have a lift of over six feet. The supply should be taken from the raceway or forebay properly screened. A foot valve is necessary if the lift is lo feet or over. Location for Rotary Pumps. Friction Wheels for Dri\ing Rotary Fire Pumps. or where the suction is over 250 feet long. Foot valves should be avoided if possible. Suction ]:)ipes should be one size larger if over 50 feet long. Rotary pumps run a little steadier under a slight lift than under a head, but suction under a head is some- what desirable, as it obviates the necessity of ]:)riming the pump before starting it up. The best location for a rotarv puni]:) is in a detached wheel house. If such a location cannot be provided a fireproof room well cut off should be built enclosing the wheels and pumj:). If the PUMPS 239 wheels are under a Iniilding, a fireproof vault should be built and Location for a passage of similar construction built from a safe place outside Rotary into the pump vault. This would permit one to operate and Pun^ps- tend the pump even though a bad fire was underway in the building above. The vault would protect the pump from falling debris and so permit its operation throughout a bad fire. It is little use to have the wheel and pump start from outside the building. It is much better to make the pump and wheels safely accessible where the pump may be properly primed, oiled, the mill shafting thrown out and, if necessary, hose attached. After a rotary pump is once underway and well supplied with oil it can be safely left running without attendance. This is one of the great advantages of this type of pump. Freezi)ig. Special care is needed to protect against frost. It is best to enclose the pump and keep it heated. The suction pipe should be drained or, if under a head, water kept running through it continually during cold weather. CENTRIFUGAL PUMPS The principle of a centrifugal pump is similar to that of a Centrifugal water wheel of the turbine type, where water pressure, which is Fire Pumps, a product of mass or volume of water and velocity or rate of flow, acts on inclined planes so arranged as to give to the wheel a rotary motion. The centrifugal pump is just the reverse. A mass of water is given a high velocity and the velocity is transformed into pressure. A large mass or quantity of water is presented at the center of a rapidly revolving impeller which throws the water outward radially at a great velocity. The water is guided in its course by channels or passages forming a part of the impeller. The form of these impellers is called the characteristic of the pump. The characteristic varies according to the speed, volume, pres- sure and ideas of the designer. By a sudden enlargement of the passages beyond the rim of the impeller the velocity is changed to pressure. A centrifugal dryer illustrates the action of the im- peller in throwing the water outward. A top spun after wetting it will throw off the water in a similar way. If we reverse the action of a flowing stream passing through a nozzle we will illus- trate the principle of the second part of the pump — the chambers where velocity is changed to pressure. 240 LECTURES ON FIRE INSURANCE Centrifugal The speed of impellers is from 700 to 1,500 revolutions per Fire Pumps, minute. The great advantage of the centrifugal pump is its sim- plicity. There is only one moving part. The disadvantage, aside from the power problem, is the difficulty in operating this type of pump where it must take its suction under a lift. Centrifugal pumps are velocity pumps strictly; all others are displacement pumps. The centrifugal pump, having no power to create a vacuum, must be well primed before it can lie started. The entire pump and suction pipe must be filled. Even after well under wav, if a little air gets into the suction it will destroy the continuity of the current and may stop the pump. A National Standard Centrifugal Fire Pump with Electric Motor. Centrifugal pumps are only thoroughly reliable when taking water under a head or where there are exceptional facilities for priming them. Their efficiency runs from •30'}^, to 70%. They can deliver large quantities of water with a high efficiencv, but are not well adapted to give high presssures. The recent de- velopment of two, three and four stage pumps has enabled higher pressures to be obtained and has led to the development of the National Standard centrifugal fire pump. PUMPS 241 A single stage pump has a single impeller and may raise Centrifugal water from atmospheric pressure up to 40 or 50 pounds pressure. Fire Pumps. Single stage pumps, as usually designed, cannot serve as fire pumps. The rules permit either a two, three or four stage pump. This means a pump with two, three or four impellers. E'ach impeller takes water from the one preceding it, so that the high pressure is created by stages, the first impeller giving say 40 pounds, the second receiving the water at 40 pounds and deliver- ing it at 80, and so on. The same general specifications are laid down as in other standard pumps relative to workmanship, rust-proofing, capacity, strength, details of construction, hose valves, starting valves, gauges and priming supply. A relief valve is only required under variable speed motor and when designed for high pressure. Section of a Centrifugal Fire Pump. Centrifugal pumps may be driven directly from motors or by gearing from the main shaft from the wheels or other source of power. As there is but one moving part, and this has only a rotating motion, no valves or reciprocating parts, this type of pump runs with remarkable steadiness and quietness. It is in a measure self-regulating, as the amount of discharge governs the work the 242 LECTURES ON FIRE INSURANCE Centrifugal pump is doing. It delivers much over its rated capacity at pres- Firc Pumps, sures slightly below that for which it is designed. This is a valuable quality for supplying sprinklers. Little trouble is ex- perienced in operating this pump, aside from the motor or other source of power. The difficulty in arranging a reliable drive for these pumps forms the principal objection to them. Electric power is always liable to failure from different causes, and the cost of motors adds materially to the expense of a centrifugal pump installation. In some cases it may be possible to drive these pumps by other than electric power. Standard Type A Rotary Pump, directly connected to Motor. ELECTRIC PUMPS Electric The L^nderwriters' standard relates to the electric power onl}-. Pumps. Any of the approved types of rotary or centrifugal pumps may be used. Triplex power pumps may be used under special arrangement. The principal points covered in the specifications are as follows: — PUMPS 243 The current supply must be from fireproof, or two inde- pendent stations, reliable at all times and of ample capacity to provide for sudden additional demands. The transmission lines must be two complete independent circuits with separate transformers, if any are required. The feeders must be liberal in size; protectors and other special rulings as to details are also specified as described in the rules. The Pump Room must be fireproof, cut off from the risk, accessible from outside, drained and ventilated. Transformers should be located in a separate vault. The motor is connected to the pump by direct or sjDur gearing. Motors should be protected from water damage by putting them in separate compartments from the pump. Any leaks in the pump or its pipe connections might otherwise wet the motor and cause a burn out. Electric pumps may have an automatic controller, so that the pump can be used as an automatic supply to sprinklers or hydrants. In this case an air pressure tank is required to govern the controller, so that the pump will not be continually starting and stopping with each variation of pressure in the system. Circuit breakers are required on the power line instead of fuses, so that the line may be restored at once. Two relief valves are required on electric pumps as an extra precaution in saving the motor from overloading. AUTOMATIC PUMPS These are ordinary fire pumps arranged to maintain pressure Automatic automatically on sprinkler or hydrant systems. They may be Pumps, electrically driven as previously described or as is more common, steam pumps with automatic governors to admit and cut off steam to the pump as called for. They are not acceptable as a primary supply except as a last resort when no other source is readily obtainable. Theoretically they are very attractive, as they are expected to keep up the pressure continually whether there is little or much draft of water from the system, but in practice they are found frequently out of order. They require skilled mechanics and much attention to keep them in service. The automatic regulator is a device under the control of the water pressure in the system. If set at say 100 pounds the regu- 244 LECTURES ON FIRE INSURANCE lator will keep the steam shut off, and therefore stop the pump, as long as the pressure remains at 100 pounds. If the pressure falls below this the regulator will open the steam valve, allowing the pump to run until the pressure is restored to 100 pounds, when it will again shut off the steam. Auxiliary Where an automatic pump must be used the National rules Pumps. call for an auxiliary pump to operate in connection with the main pump. The auxiliary pump is a small one which by means of an automatic pump governor keeps up the pressure on the system ordinarily when the loss is due only to leakage. If fire streams are taken off, the capacity of the auxiliary pump is exceeded and Steam Fire Pump, Showing Automatic Regulator, Steam Trap and Priming Tank. the pressure drops, operating the main pump governor so that the large pump is started up. By such an arrangement the large pump is saved from continual running and is preserved in good condition for emergency use. There are also two pump gov- ernors, so if that of the auxiliary pump fails the other one will be brought into use automatically. The requirements specify in detail the manner in which the auxiliary pump is connected up under different conditions of PUMPS 245 suction supply. The idea is to so arrange the installation that the large tire pump will always be primed so that it can catch water at once when starting up. These details should be studied in connection with the outside reading for this course. PUMP TESTING A pump should be tested yearly to note its smoothness of Pump action and its maximum delivery. This is done by pumping Testing, through hose streams with smooth nozzles, so that the amount of water can be accurately measured. A steam pump should deliver its full rated capacity at 70 revolutions per minute, and a rotary pump at the rated speed designated by the builders. By adjusting a steam pump to make its full 12-inch stroke and counting the speed, the theoretical displacement can be compared with its actual delivery through the nozzles. New pumps ought to deliver 'iO^^ over their rated capacity with smooth action. If it is desired to determine the maximum capacity of the pump an extra stream can be put on and the pump speeded up until it begins to pound. Often a speed of 85 to 90 revolutions can be attained. A good foundation is an important factor in helping a pump to run at high speed. A pump with worn plungers or leaky or missing valves will have an excessive ''slip." This means that water will pass back from one chamber to another, and the delivery of the pump will be lessened by the amount of such slippage. By closing the dis- charge valve and running the pump slowly at 100 pounds pressure the amount of this slippage may be estimated. A pump in good condition will not make over two or three revolutions per minute under these conditions. If the discharge of a pump is carefully measured under fav- orable conditions its slippage may be determined approximately by comparing its delivery with the theoretical displacement of the plunger or cams. Pumps should slip a little to prevent tightness and avoid danger of scoring the plunger. A pump slipping 10% might be called in good condition. One slipping 20^ would need repairs. If the plunger or pistons are too tight there will lie excessive friction and a waste of power. To determine if this is so the steam pressure is read and compared with the water pressure 246 LECTURES ON FIRE INSURANCE Pump when at full speed. With a water pressure of 100 pounds, a Testing. steam pressure of not over 40 to 50 pounds should be necessary. To determine the tightness of the joints and castings and to develop any weak places, a pressure of 240 pounds is pumped up with the discharge outlets practically closed. The safety or relief valve should also be tested. It should be capable of delivering the full capacity of the pump at its rated speed without letting the pressure rise more than 125 pounds where the valve is set to oj^en at 100 pounds. Rotary pumps are tested for about the same points as are steam pumps. QUESTIONS 1. Under what conditions are fire pumps most used.? 2. Name the three types of National Standard fire pumps, giving the principles of the mechanism of each briefly. 3. Describe the important features necessary to consider in arranging the power for (a) a steam fire pump; (/>) a rotary fire pumjD. 4. Name the important features necessary for a safe water supply for a fire pump. Explain "lift" and "head." 5. Explain the manner in which a pump obtains its water, some defects which might cripple the suction, and why a priming tank is necessary. 6. Tell wherein the National Standard steam fire pump differs materially from ordinary pumps in (a) The steam end. (d) The water end. (c) The connecting parts, 7. What is a relief valve and why is it used? 8. Describe the principal features of a National Standard rotary fire pump which differ from an ordinary rotary pump. 9. Name the methods of driving rotary pumps in the order of your preference. 10. Name the advantages and disadvantages of centrifugal fire pumps. 11. What are the principal features of the requirements for electrically driven fire pumps? What types of pumps are so driven ? 12. What is an automatic pump? What are its advantages and disadvantages? PUMPS 247 13. State the conditions and arrangement under which an automatic pump would be acceptable. 14. State the sizes of pump, sizes of suction and discharge for each, and the speeds used for all pumps covered by the National specifications. 15. Describe the principal tests for fire pumps and the methods for conducting them. BIBLIOGRAPHY National Board of Fire Underwriters — Rules and require- ments. Steam fire pumps, Pam., 57 pp. Electric fire pumps, Pam., 8 pp. Centrifugal fire pumps, Pam., 24 pp. Rotary fire pumps, Pam. 43 pp. Steam pump go^ ernors and auxiliary pumps, Pam, 12 pp. National Fire Protection Association : Gas engines for fire pumps supplying high pressure fire service at Philadelphia, Pa. Proceedings N. F. P. A., 1904 : 209. Owen, Ira J. : Fire pumps. In, Notes on Hydraulics, pp. 358-381. WATER WORKS Introduction. As we are all familiar with the features of an ordinary citv or town water supply system, it will not be necessary to f^o further in this talk than to mention a few of the principal points which are of particular interest to the student of tire protection. Water supplies are maintained for four purposes, — 1. To supply water for food and drink. 2. For sanitary uses : washing and cleanino-. 3. For industrial and productive uses such as manufactur- ing, gardening, etc. 4. For protection against fire. The first and second of these require a pure water, not con- taminated with disease, color or odor. The last item, tire protec- tion, relates to quantities and pressures, the purity of the water not being essential. The industrial demands may or may not call for all the other qualities of the supply. The fire protection calls for relatively such large quantities and high pressures that, if its require- ments are met with, the industrial demands will be more than amply met. The public health must always be first in importance, and in order to carry out its requirements, under some conditions it may be obtained at the expense of quantity and pressure, which are the essentials of a good supply for fire protection. Water is obtained from natural lakes, ponds, springs, ri\ ers, sunken and driven wells. For health the softer waters of lakes, ri\ers and ponds are preferred, providing they are pure or are properly filtered. These surface waters are possibly somewhat less desirable from strictlv a pipe maintenance point of view, as they arc more apt to form tubercles or other obstructions in the pipes than are ground waters. Usually a single waterworks system fulfills all of the four above mentioned purposes. Often, however, the system will be divided, the domestic service being supplied by one S}'stem and the fire pro- tection being furnished by a secondary svsteni, or as an atljunct to WATER WORKS 249 the first system. In other cases a system supplying domestic demands on higher leyels will be extended to a district on a lower leyel, already haying its own domestic supply. The latter district will then ha^ e two supplies, a high and a low seryice, and in this case the high seryice is usually reseryed for fire protection purposes in the low level district. The cities of Hayerhill and Worcester are examples of cities with such high and low pressure systems. I think we can join with our friends the Socialists to the extent Public vs. of agreeing that, from a fire protection point of view, public owner- Private ship of \yater supplies and systems should be encouraged and priyate Ownership ownership should be deplored. In a large majority of cases where private water companies control the supplies we w^ill find low pressures, small pipe lines, scant supplies and general lack of the essentials of a good supply for fire protection. The point of view of the water company is in- come, and as the demands of domestic service call for but a small amount of water as compared with fire service, this income can be procured with a small source of supply, small pumping capacity and small sized water mains, all of which mean a relatiyelv small expenditure of capital with a maximum of income. At the same time, if hydrants are leased at so much a year, they earn the same income whether attached to four-inch pipes or to ten-inch pipes. The amount of water obtainable at the hydrant seems to be a factor not worth considering, from this income point of view. Under public ownership the feature of public service is likely to receive proper attention and the system is more apt to be laid out on lines to furnish both a good domestic and a good fire supply. As 250 gallons a minute roughly approximates the domestic con- sumption of 5 to 6,000 people, and this same 250 gallons a minute represents 07ily one good Jire stream^ the great difference between furnishing water for domestic purposes and for fire protection is evident. Cities and towns should go very carefully in considering the proposition of granting franchises for water companies. It is said that in Paterson, N. J., the water company furnished water under a pressure of not over twenty pounds, and when the citizens sought to rebuke the company it brought out its ancient contract in which it was shown that the company was very liberal, as the franchise was obtained under the stipulation requiring only ten pounds pres- sure. This same company has been credited with charging $500 yearly for a single connection to a dry-pipe sprinkler system. 250 LECTURES ON FIRE INSURANCE D J Water for use of the public fire department in fighting fires is Governing i^ot ^^ 'i rule directly charged for, either by private companies or by Fire Service departments owned publicly. All water companies and many Supplies. public departments charge for connections and water used in main- taining pri\ate fire protection equipments. Publicly owned water is usually connected into private equipments without other charge than for the cost of the necessary connections and fittings, but many cities, to check up losses of water in such systems, are requiring meters, special check ^•alves, sealed valves and other special rules governing fire supplies.* Other towns make an annual charge for sprinkler or other fire connections. The Millbury Water Company charged fifteen cents per vear per sprinkler. Boston limits the size of a connection to four inches, although there mav be as many of these as needed. Rules \ary greatly among different communities. Private fire equipments should not be the cause of additional expense to the owners, as they tend to minimize the consumption of water and the work of the fire department at any given fire. Types of Water Systems There are three classes of water works systems, besides special fire service systems, which latter are in use to some extent. 1. Gravity systems. 2. Direct pumping systems. 8. Combined gravity and direct pumping systems. These take their names from the manner in which the pressure is governed and not necessarily from the mode of supply. Gravity Gravity systems are those in which the main or reserve supply Systems. ig from an elevated lake, pond, reservoir or tank, the level of water in the reservoir or tank limiting the head or pressure in the mains. The flow, therefore, at any given point is due directly to the height of the water in the reservoir above that point. A gravity system may have pumps which run continuously, pumping into the mains, yet if the pressure is maintained by the head from a reservoir or tank it is called a gravity system. In its simplest form a gravity system is one supplied from an elevated pond, lake or other natural body of water. The supply depends on the rainfall, extent of water shed and size of the storage basin, and the pressure depends upon the level of the water in the basin. *See Mr. Dana's talk on Detector meters. WATER WORKS 251 A more common form of the gravity system consists of an arti- Gravity ficial reservoir or tank which feeds the distributing mains by gravitv, Systems, the reservoir or tank being filled bv pumps located at some water supply on a lower level. The pumps may discharge directly into the town pipes, the excess over the consumption flowing back to fill the reservoir, or they may discharge into the reservoir by separate force mains running from the pumps to the reservoir without con- nection to the distributing system. Reservoirs may be formed bv excavating or by being built up of earth dams, brick, stone or concrete. Tanks or standpipes are usually of steel plates riveted together as a boiler is built. Some reinforced concrete standpipes have been built. Some tanks, where a convenient natural elevation is not obtainable, are erected on high trestles to give the necessary head or pressure. The supply for the pumps may be from ri\ers, brooks, springs, lakes, ponds, wells, or driven wells. Driven wells consist of pipes driven into water-bearing soil. IVIanv of these wells are connected together to supply the pimips directly or to supply a large collecting- well sunk in the ground, the collecting well serving as a suction supply to the pumps. In the system just described it is expected that the pumps will take care of the usual consumption during the day and be able to maintain about a constant level in the reservoir. At night, or if the pumps were otherwise idle, or if an unusuallv heavy draft of water should take place, some of the water would be supplied bv the reservoir. With pumps and reservoir located at opposite ends of the town, a very desirable arrangement for fire protection is obtained, as water would flow from both directions into the con- gested district. A reservoir is more desirable for storage than a standpipe, as it gives a more constant pressure, the pressure from a standpipe varv- ing much more if it is not kept full, owing to the ratio of its diameter to its height. Standpipes are also apt to be of small capacitv. A tank 20 feet in diameter can be drawn down 10 feet in 15 minutes by six ordinary hose streams. As generallv located, standpipes must be kept practically full during a fire to insure good working pressure. The pumping capacity should therefore be designed to amply cover any probable demand on the system for fire service. Direct Pumping Systems are sometimes known as Hollv Direct Systems, the pumps for such systems being a specialty with the *'^"™P"'2 Holly Pump Works. ' Systems. 252 LECTURES ON FIRE INSURANCE Direct Pumping Systems. Combined Gravity and Direct Pumping System. In these systeins the pressure in the mains is furnished directly from the pumps. There are no standpipes or reservoirs to govern the pressure. Usually the pumps, which of course must run con- tinuously, are operated slowly, maintaining a moderate pressure in the mains, the pumps being speeded up to increase the pressure to about 100 pounds in case of fire. Care must be taken with such a system to avoid breakage of the pumps or the water mains. Safety or relief \ahes are provided on the pumps and at points on the sys- tem to release water should the pressure rise suddenlv above any predetermined point from a sudden decrease in flow, such as would take place in shutting off hose streams. It should be remembered that water is incompressible. Any sudden stoppage of its flow in the pipes causes so-called " w^ater hammer," which delivers severe blows to that part of the piping where it occurs. Water hammer is caused by sudden changes in flow, or bv plunger eleva- tors, pumps and other apparatus interfering with the normal movements of the water. Except where there are dead ends in the piping, the danger of serious damage from this source is not great. Direct pumping systems are often found in level localities. The pumps should be large and strongly built, and there should be a duplicate set of pumping machinery. Preferably separate, inde- pendent and complete pumping plants, including both boilers and pumps, should be provided. It is necessary to have the fire alarm systems directly connected to direct pumping stations, so that the engineers may be promptly notified that an extra demand for water will be made on the pumps. This is simply a gravity system with pumps, but in addition means are provided whereby the pumps can increase the pressure in case of fire to a point in excess of the pressure which could be furnished from the reser\oir or standpipe. This may be brought about by providing a check \ alve in the pipe leading from the reser- \o'n. The pumps can discharge against this check, closing it so that the pressure may be increased. This is a convenient wav of utilizing a good natural gravity supply which is not at such an ele- vation as will give good fire pressure. In this case the pumps would ordinarily be reserved for fire purposes only. This system is similar to that used in manv large protected risks, where bv the insertion of a check \ alve tiie tank or town sup- ]3lv pressure may be exceeded by the assured's pump. A system may be so arranged that the result is obtained by WATER WORKS 253 closing a valve in the pipe leading from the reservoir, thus enabling the pumps to raise the pressvu'e bv pumping against the closed valve. Again there may be two pump discharge pipes, one lead- ing directlv to the reservoir and the other supplying the pipe sys- tem. In this case the pipe to the reservoir would be shut off, thus enabling the pumps to discharge directly into the mains at a high pressure. DISTRIBUTING SYSTEMS The best kind of water pipe, and that most universallv used, is Pipes. cast-iron, which is furnished in 12 foot lengths with a bell on one end and a projection or spigot on the other, the bells and spigots fitting together and being so formed as to enable a strong water- tight joint to be made when melted lead is poured and tamped into the joint. This pipe is about one-half inch thick and comes in varying weights, that used for fire purposes and in general water supply work weighing 30 to 35 lbs. per foot for- 6-inch pipe, 45 to 50 lbs. for 8-inch, 65 to 70 lbs. for 10-inch and 85 to 90 lbs. for 12- inch. Slightly lighter weights are used for suction pipes and in other cases where little pressure is to be met with, such as that part of mains from reservoirs which is located on the higher levels. Large mains from reservoirs are sometimes made of riveted steel, usually protected by cement inside and out. Some reinforced concrete pipes are in use in large sizes. There are some ccmoit lined steel pipes laid in streets, and many are in use to-day. They keep clean, maintaining their full waterway for an indefinite period, as tubercles or corrosion do not form on the cement surface. They have a long life if not disturbed, but when tapped for branches, service pipes, etc., it is difficult to make a tight joint and leakages and deterioration results. These weak joints break out under high pressures, making such pipes unsafe for good fire protection service if used in congested districts. Cement-lined pipes are especially likely to be damaged by lightning and electrolysis, as the discharges in leaving the steel pipe to pass into the ground must pass through the cement coating. Many towns have removed cement pipes on account of this trouble. It could be avoided, however, by provid- ing good electrical grounds at frequent intervals. There is a pa- tented pipe sometimes used which has machined joints fitting closely together by bolting. A tight joint is obtained without jackets or 254 LECTURES ON FIRE INSURANCE packing. This pipe is meeting some success, hut is considered not as reliahle as the standard pipe. The town of Oxford, Mass., has this pipe in use. Some large conduits from reservoirs have heen built of wood staves and give good service. Very old pipes in New England were made of logs bored out. Some cast-steel pipes have been used. They are very expensive but very strong and durable. Wrought-iron or rolled steel pipe should not be laid underground. Laying Pipe. Depth. Pipes should be laid about 5 feet deep in New Eng- land to be safely below frost. The danger of freezing is more in open, gravelly soil than in clav or heavy soil. In crossing ditches or other places where burying is impossible, the pipes should be protected from frost by one or more outer and larger pipes, the lat- ter being sealed up at the ends to form dead air spaces around the water pipe. In some cases other insulating methods might prove acceptable. In laying pipes care is needed to keep them free from stones and gravel which might later cause great damage by getting into vahes, hydrants, steamei's or other fire fighting apparatus. Each length of pipe should rest firmly in the soil for its entire length. In soft land piles or other foundation should be pro^■ided to support the pipes. Where pipes pass under railroads or where there is hea\y trucking over soft ground, pipes should be protected against the loads from above. Turns should be made by easy curves and at liranches, hvdrants and other places where the cur- rent of water may suddenly change its direction of flow, iron straps or concrete reinforcement should be provided to take the thrust. If possible, pipes should be tested before refilling the trench. No large stones should be placed directly on the pipes in refilling trenches. In making joints, oakum or jute is tampctl into the foot of the joint and melted lead poured in to fill the remaining space. The lead is then compressed by tamping it firmly in place. A joint in an 8-inch pipe requires about 12 poimds of lead. A 6-inch joint will require 8 to 10 lbs. and a 10-inch about 15 lbs. Cast-iron pipe is usually and always should be dipped in tar or asphaltum at the place of manufacture. The pipe should be hot when this is applied. It is a good protection against both rust and the formation of tubercles. Hydrants, A quantitv of loose stones should be placed U-> form tlie Etc. foundation for hydrants, to insure proper drainage. In wet or WATER WORKS 255 low places it may be necessary to plug the hydrant drains and Hydrants, pump out the hydrants. Hydrants should be located \ery thickly Etc. in congested districts. Long hose lines cut do\vn pressure a great deal, and to receive the full benefit of the water supply hy- drants must be placed at such distances apart as \vill minimize the amount of hose to be used. A hydrant should always be located at the crest of a hill or at other high points in the pipes so that the air collecting at such high points can be blown out to give the pipe its full waterway. A pocket of air lodging in a pipe cuts down the cross sectional area and thereby restricts the flow of water. In cities Lowry or flush hydrants are often used. As these are flush with the surface of the ground they may be placed in the middle of the street, thus avoiding danger from falling walls. Their location should always be clearly indicated and they should be kept free from snow. Post hydrants should be strongly built and designed with smooth water passages so as to minimize the losses of pressure from friction. Four-inch pipes are too small to properly supply a hydrant. Hose threads on hydrants should fit hose of neighboring towns, so assistance could be given in cases of emergency. The National standard hose thread should be used where not conflicting with this feature. Air valves, usually automatic, are often located at high places on the mains to relieve the air from the pipes. A vacuum valve is a somewhat similar device. It is used to admit air to the pipes to enable them to be drained of water to make repairs. A proper location of hydrants will usually make the use of these de- vices unnecessary. These are branch pipes with valves used to blow mud and sediment out of the pipes. They are located in the lower places and dead ends where such accumulations collect. A hydrant can be used as a blow-off if located where needed. Gate Valves should be provided on pipes at street corners Gate Valves. to sub-divide the system. In case of repairs being necessary, these valves permit shutting off the impaired pipe line, leaving the re- mainder of the system intact. They should be under strict super- vision, as in some cities carelessness has resulted in many of them being left closed. At an inspection in Detroit some years ago about 400 gate valves were found closed. All gate valves should be right handed valves — those which close by turning in the direction taken by the hands of a clock. 256 LECTURES ON FIRE INSURANCE Pressures and Friction Losses. The static pressure at any given point is the pressure at that point due to the head of the water from the pumps or the reser- voir. To obtain the actual static pressure it would be necessary to stop all flow in the pipes. The term static pressure, as commonly used, is really the dvnamic pressure, that is, the pressure under ordi- nary conditions of flow, and it is always something less than the true static pressure. Pressures usually are slightly higher in the night than during the day, as the consumption of water, and there- fore the rate of flow in the pipes, is less. In speaking of pressures we therefore assume that the water is flowing at a more or less rapid rate in the pipes. This flowage cuts down the pressure below the static pressure, the rate of reduction varying with the square of the velocity ; for example, the loss would be 25 times as great if the flow were 10 feet per second as it would be at 2 feet per second. There is also a slight direct loss due to the velocity which rep- resents the power consumed in moving the water. Flowage losses are directly proportional to the length of the pipe, if the diameter and flow be constant ; that is, the loss in 200 feet of pipe would be twice that in 100 feet under like conditions. The carrying capacitv of pipes is roughly proportional to their areas. It increases a little more than in the proportion of the in- crease of the areas on account of the influence of surface friction, the exact increase being proportional to the square root of the fifth power of the diameter. A 6 inch pipe can, under the same condi- tions, carry about 2.75 times as much as a 4 inch pipe. An S inch is equal to 2.05 6 inch and 5.66 4 inch pipes. A 12 inch pipe is equal to 5.65 6 inch pipes. These figures are important to bear in mind, as they clearly show the false economy of laying small pipes, especially as the difference in cost of the pipe is often a small matter, the cost of trenching and back filling being about the same for 4, 6 or S inch pipe lines. It consumes energy to get water to flow through pipes, and of course the larger the pipes, and the smoother the inside, the less energy in the form of pressure will be lost. We can readily see that if water enters one end of a pipe at 100 pounds pressure and we draw out 1,000 gallons a minute at the other end of the pipe, that water will be delivered at less pressure if the pipe is 6-inch than if it were S-inch. The loss for 1,000 gallons through 1,000 feet of 6-inch pipe would be 50 to TO pounds, depending on the WATER WORKS 257 smoothness of the pipe. The velocity in this pipe would be about 15 feet per second. In 8-inch pipe, for the same length and amount of water, the loss would be but from 14 to 20 pounds and the \e- locitv about 8 feet per second. Bends, elbows and turns all tend to increase friction losses in pipes, and thev should be avoided as much as possible. The tables generally published for friction losses in pipes are mostly figured out theoretically. Actual tests by careful engineers have shown figures indicating that we should add 50 to 1 "s - Wj ."^ S "5 ^ "5 CJ > c ^ ^ i- T~ "0 u r. = U c c . ^ j3 ^ -^ p -' i; ' w u bt i« Z 5 2 I < 5 'Sc r* ■'■•'* -5 ■" i! 2 K o 270 LECTURES ON FIRE INSURANCE Class B. '2. The building to he located so as to be unexposed. 3. Apparatus in the headquarters to be so designed that the system may operate automatically or manually. 4. The apparatus arranged so that the alaruis may be sent by " fast" or " slow " time. For a system to supply a city where o\er 300 alarms per year are handled it is felt that the headquarters should lie a1)solutely fire- proof, and should be so located that it will be unexposed. It will be noted that the location suggested is a park or public square. Such a building may be made artistic, and despite the experience of Commissioner O'Rourke in suggesting placing the high pressure pumping station on the Common, I ludieve that a fire alarm head- quarters in almost any locality of a city should not be ol^jectionable to the citizens. In the apparatus at headquarters considerable change is made over that called for in a Class C equipment. The registers and tappers are speeded so that the alarms are received in " quick " or '' fast " time. By "fast" time we mean a speed which will allow from three quarters of a second to a second between the beginning of one blow and the beginning of the next blow. " Slow" time is wheie this time is lengthened to two seconds. " .Slow" time is necessary when outside bells or whistles are used, since a bell or whistle can- not operate with less than two seconds between the beginning of one blow and the beginning of the next blow. For transmitting these alarms one of two methods may be used. A manual "fast" time transmitter is provided, which is arranged so that alarms may be sent manually by an operator or by means of interlocking switches a box circuit may be connected with the transmitter, and the alarm will then go to all " fast" time circuits; or a repeater may be used which will transmit the alarms the same as they are transmitted with a Class "C" system. In addition to this transmitter or repeater, a manually operated trans- mitter, speeded for both "fast" and "slow" time, is to be pro- vided for sending out alarms on either the "fast" or " slow " circuits. In order that the alarms which are received on "fast" time may be sent to the outside bells or whistles on " slow " time, a device known as a transformer or speed reducing machine is required. Between the headquarters and the fire department houses two circuits are used, one on which the " fast " time alarms, and one MUNICIPAL FIRE ALARM SYSTEMS 271 over which the " slow " time are sent. Arrangements are also re- quired by which headquarters may telegraph over each box circuit. Switchboards, wiring, etc., are the same as with Class C or D. Energy for operating the circuits is to be provided by either storage batteries or motor generators. Boxes are the same as for Class C or Class D. In the fire department houses 6" gongs on the "fast" circuits and 15" gongs for the " slow" circuits are required. With Class A systems, manual operation is preferred, princi- Class A. pally because a station becomes too complicated if we attempt to operate it automatically. It has about the same equipment that the Class B, but is to have at least two competent men on duty con- stantly. Switchboards, protectors, and wiring are not changed o\ er that for Class B. Fire department houses and outside bells or whistles are the same. QUESTIONS, 1. What are the four different systems of Municipal Fire Alarm as recommended by the National Board of Fii"e Underwriters ? 2. Describe the system recommended for the smallest towns. 3. What ai'e the principal types of fire alarm boxes on the market ? 4. What is the proper location of fire alarm l^oxes in con- gested and sparselv settled regions? 5. What instruments are needed in the Central Station in connection with a fire alarm system of Class A? PART IV. FIRE INSURANCE POLICY FORMS AND CLAUSES FIRE INSURANCE FORMS AND CLAUSES FOREWORD The following pages, devoted to the subject of Fire Insurance Forms and Clauses, give the more important features of the lectures on that subject delivered before the Boston branch of the Insurance Institutes of America during the winter of 11*11-12. As much that was said in those lectures was of an explanatory or illustrative nature, it did not seem wise, on account of both time and space, to record it here. The fragmentary style of these Lecture Reports is due to the conditions under which they were prepared, in the odd and often interrupted moments of an over busy life. Possibly what is entered here will serve to bring to the minds of those who were present at the lectures the unrecorded portions. Those to whom they come for the first time in this printed form may, quite likely, regard them as incomplete in consequence of what is unrecorded. If, howe\ er, either hearers or readers are prompted by them to look up and study for themselves the principles touched upon, they will have accomplished their most important purpose. W. B. Medlicott. INTRODUCTORY AND GENERAL It is difficult to imagine a more comprehensive title than the ^ Compre- above. Since rules and forms in fire insurance are almost hensivc Title, innumerable, one might assume that it would be as easily possible to deliver a course of lectures on "• Words" (in which event, it would probably be best to refer to the dictionary), or to make an interesting and profitable talk on the subject of " Drugs and Chemicals." Probably in this latter case the voluminous pharmacopoeia of the drug trade would have to be taken as a text book, for since words and substances are without number, so it may almost be said are the forms and clauses that have crept into use in connection with fire insurance policies. 276 LECTURES ON FIRE INSURANCE A Com- When tlie subject of these lectures was suggested to the writer, prenensivc j^ seemed to him that the man best qualilied to deal with it would be either a broker of long experience or the counter man of some large city agency, for the opportunities presented to men occupying these positions are vastly greater than come to one whose connection with underwriting has mainly been that of a Home Office official. On the other hand, realizing the pressure that is constantly brought to bear by the assured for liberal and at times unjustifiable provi- sions in a policy form, the broker or the counter man must indeed be made of heroic material if he does not become deadened to a sense of the Insurance Company's rights and allow himself to become accustomed to viewing the contract wholly from the stand- point of the assured. No business, especially one so far reaching in its operations as fire insurance, can long preyail or can work lasting good to the entire community, unless proper consideration is given to both contracting parties, and it is more likeh' that those forms which will best stand the test of time and use will be the ones that will commend themselves to the underwriter whose desire for business causes him to be liberal to the assured, and whose ambition to make his underwriting a success, demands a proper caution. In speaking to you then of forms and clauses, it will be my aim to emphasize those that are just and reasonable to both parties to the contract and to discourage the use of such as are wholly one-sided in their application ; in brief, forms and clauses that guarantee the assured his rights and at the same time safeguard the insuring company against uncontemplated or unreasonable risk. Relation of Those wdio attended the lectures of last year on the Standard Forms and Policy were told of its various provisions. In order to take up the Clauses to subject of forms and clauses intelligently, it will be necessary for the Standard ^^^^ j.^ review briefly some of the features of the Standard Policy in ° ^'^^' order to note those of its provisions, which may legitimately be affected by added forms or clauses and those which should never be altered in the slightest degree in their purpose and intent. It may be well at this point to say that the only wise course is to do as little" tinkering" as possible with the .Standard Policy contract. Its provisions are wise and equitable and protect the rights of both parties. On the other hand, there is no question but what under certain conditions and for purposes of more clearly defining the application of this Standard contract, it is wise to attach such clauses as shall provide for special conditions. For example, the addition of any clause that seeks to alter or set aside the FIRE INSURANCE FORMS AND CLAUSES 277 method of procedure in the poHcy over the settlement of a loss would be most unwise, illegal and prejudicial ; or the waiving, by rider attached to the policy, of the conditions of cancellation or the contribution of other interested companies ; or the time that may elapse between the adjustment of a loss and the payment thereof, should be absolutely avoided. On the other hand, if the in- suring company sees fit to grant the storage of hazardous materials ; or to waive the voidance of the policy on account of the unoccupancy of the premises under certain conditions ; or to allow the operation of a manufactui"ing establishment for longer than the usual work-day period, it is a permission that they undoubtedly have the right to grant if they see fit. We shall later take up in detail some of these provisions that can and that can not be wisely waived ; but in the main it is a safe rule to follow, that the under- writer must not devise or accept clauses that directly contra^■ene and set aside the safeguards for either party, that are embodied in the Standard policy form, nor should the assured demand them. In studying this broad subject of forms and clauses, one finds Authorities an almost unlimited field for research, and while it would be on Fo'^ms impossible to enumerate all of the sources of information, I want ^" ^"^" at this time to express a special obligation to the following authors and books : Richards on "Insurance Law." Moore's " Fire Insurance and How to Build." Deitch, "The Standard Policy." Hine's "Book of Forms." Crawford's " Pointers for Local Agents." Various Manuals of Rules and Forms promulgated bj the different Underwriting Bodies here in the East. Collections of forms and clauses issued by certain Insurance Companies for the guidance of their Agents. Now what are forms and what are clauses.? I do not know pv.rr that I ha\e ever seen a definition broad enough to clearly define the Between difference ; but to me it seems in a general way as if for/us zvere Forms and those attachmeiits or riders placed on an uistirance policy that Clauses. are descriptive in their nature^ while clauses are the attach- ments or riders that are either permissive or restrictive in their application. By this I mean that the term "form " may be properly applied to that attachment to the policy that describes who is insured, what he is insured against the loss of, and where it is located ; while clauses may define what can be allowed that the 278 LECTURES ON HRE INSURANCE policy itself may or may not prohibit, what provisions there may be over other interests than those of the party holding the title to the propertv or some agreement that shall fix conditions of liability in the event of loss occuring. These are only a few of the per- missions or restrictions that clauses may bring into the policy contract, but will serve for the present to illustrate the line of demarcation between forms and clauses. So far as I know there has never been an attempt at a general classification of forms and clauses and such classification must to a large extent be arbitrary. In order that we may take up the study of forms and clauses in a consecutive manner, I have decided to sub-diviJe them as follows : Classification of Forms and 1- Those of description, meaning thereby who is insured and Clauses. against the loss of what he is insured and where he is insured. 2. Forms for other than fire liability, such as Use and Occu- pancy, Rent, Leasehold Interest, Profit Insurance, etc. 3. Forms of extended area, that is those that cover the loss of certain defined properties in more than one location. Forms of this character apply especially to floaters and common carriers. Clauses. 1. Clauses of permission, such as permits to store gasolene or to extend operations or to grant builders' permits, etc. 2. Clauses of exemption and warrant, such as spontaneous com- bustion clauses, consequential damage clauses, electrical permit clauses. 3. Clauses of title and insurable interest, such as the Mortgagee Clause, the Leased Land Clause and the Subrogation Clause. 4. Clauses for special emergencies, such as the Earthquake Clause, the Excess Insurance Clause, Binders. .5. Clauses of liability limitation, such as the Average Clause, the Three-quarters Loss Clause, the Three-quarters Value Clause and the Co-insurance Clause. We might also add, judging from occasional practice at the present time, another set of clauses, which could well be entitled " Clauses of Absurdity ! " Clauses of this nature are ones such as some of our western states seem to take great pleasure in indulging in. Also certain ambitious brokers who can only view the insurance contract from one side, namely, that of the assured, are very fertile FIRE INSURANCE FORMS AND CLAUSES 279 in the invention of clauses of this character. Chiuses in fact, which have the general effect of making the company liable no matter who the assured is, what he may do and when or where he does it, clauses that are broad enough to cover any one, anything, anywhere, at any time. A simple illustration of this form is one that has recently been current here in Boston, where a sprinkler guarantee was attached to the policies with the provision that if the sprinkler was not kept in good working order the policy should not be voided thereby ! A clause that contradicts itself. Doubtless clauses of equal absurdity have been exploited by certain of the insurance companies, but for real ingenuity in the invention of these one-sided, absurd and wholly inequitable clauses, the unscrup- ulous and ambitious broker and the ignorant law maker are a long way in the lead. Like everything else in this world, forms and clauses are good or bad and it should be our purpose in studying them and seeking to learn their real meaning and effect, to aim always to so devise and applv them as to work the greatest measure of good to both parties ; to seek to avoid one-sidedness or the taking of a position that places all of the advantage in the hands of one of the contract- ing parties, a rule that should apply to every business contract of whatever nature. In studying the zvorking of any form or cla7isc^ ahvays The View- take the viewpoint of the loss. It matters but little what forms point of the or clauses are attached to the policy if no loss occurs, but it means ^°^» a great deal to one party or the other should such loss occur. Therefore, seek to place yourself in your study of forms and clauses, in the position that you would occupy had a loss occiu'red under the policy and you were seeking to accomplish an equitable settlement of the resulting claim. We must bear in mind that the Standard policy is itself made Provisions of up of clauses or provisions, and it is well at this point to call par- the Standard ticular attention to these provisions, as they must always be con- "o"cy. sidered in the de\ising of either forms or clauses that are to be attached to the policy, since such supplementary forms or clauses either modify the effect of or completely set aside, one or more of these so-called "Clauses" in the Standard policy form. In con- sidering this phase of the Standard policy clauses, we will confine ourselves to those of Massachusetts and New York States, since in the main they embody all of the important features of any well drafted policy. You will note that the first phrase of importance 280 LECTURES ON FIRE INSURANCE Who is Insured ? What is Insured ? Term of the Insurance. Voidance Provisions of the Policy. in cither one of these forms is the naming of the insurer, the con- sideration paid bv the insured for the protection offered liy the insurer, and the Hmitation, or that is, the maximum amount that can be recovered under such poHcy. Also in the Massachusetts form, after speaking of the premium consideration the words, " receipt nvJiereof is Jiei'eby acknoivledged^'' are inserted. Now it would be wholly inadmissible for any clause to be attached to a policy that in any way superseded or set aside these provisions. The next phrase of importance contains the words, " do or does insure.'' Remember that we insure people, not things, and the name of the party or parties seeking the protection of the policy should always be clearly defined at this point. Also the fact and nature of their insurable interest should be beyond question and should be plainly stated. No clause should be attached to a policy that sets aside these provisions other than a Payee or JNIortgagee Clause relating to some other interest in the propert}- or the naming of some party who shall act as attorney for the assured with regard to recovery under the policy in the event of loss. A description of the property for the loss of which the insured is to be indemnified naturallv follows the naming of said insured, and at this point in the policy the insertion of a descriptive form or rider is necessary. This form ordinarily describes the nature and the location of the property, but in the event of the indemnity offered being for other than direct loss by fire, that is, for insurance of the Use and Occupancy, Rent, Leasehold Interest, Profit, etc., type, it is necessarv to define the nature of this insurance in connec- tion with the description of the property covered. It is usual to attach to this form of description such further clauses of permis- sion, restriction or limitation as may be mutually agreed upon. The period for which the contract shall run, or the term of the insurance, is one of the policy provisions that it woidd be absurd to seek to amend or alter by means of any attached rider. Following the description of the property we find in the policy contract a number of provisions defining conditions under which the company shall not be liable, in other words, voidances, such as con- cealment, or misrepresentation or the storage of hazardous or in- flammable compounds, or the conduct of any extra hazardous busi- ness. Also losses that might be occasioned by invasion, insurrection, riot, civil war, military or usurped power, or theft or neglect of the assured to use reasonable means for saving or preserving property. Any of these have the effect of rendering the contract \ oid and free- FIRE INSURANCE FORMS AND CLAUSES 281 ing the insuring company from lialnlity. Clauses waiving any or all, in fact, of these features are clearly within the right of the com- pany to attach to their policies, if they so elect. The assumption of liability for damages caused by lightning, ^^Y not covered by the Standard policy contract is also a condition that ,,,,.. ,,,,., , , , Liability for the nisurer clearly has the right to assume by the attachment of a j),jna,pe bv proper clause, if he so elect. Lightning. That portion of the policy providing the way in which it may be cancelled, it is clearly e\ ident, neither insurer nor insulted has any Provision for right to change nor may either claim any other method of procedure ^^^^ l*°" Cannot be than that defined in the Standard policy contract, and a clause seek- rj^,n„gj ing to effect such change would clearly be out of place. Mortgagee interests may be recognized and therefore form a Other In- proper subject for the attachment of a clause to the Standard policy surable contract. ^''^^"'^'' The removal of property endangered by fire to a place of safety Provision as provided in the Standard policy, is one that would not reasonably over Re- admit of the attachment of any clause to the policy waiving its pro- ™°^* * visions, and it is most unlikely that anyone would seek to devise such a clause. The clause in the contract relating to the way in which losses Provision for shall be adjusted and paid is one that surely admits of no alteration Arbitration or amendment by the addition of attached clauses. cannot be In short, those features of the policy that define clearly its ^ ^"ged. limitations and the methods of procedure thereunder, do not, with any sense of equity, admit of alteration or amendment by the attachment of clauses, while permission to waive certain policy provisions that are designed to safeguard the insurer against unusual hazards or the protection of interests other than those of the party holding title to the property are clearly provisions that admit of special treatment such as can only be accorded by the addition of proper clauses. Furthermore, clauses defining the relation betw^een the insurance carried, sound value and loss, are all of them perfectly proper and admissible, provided both parties agree thereto. This in a broad way defines what may and what may not in the Standard policy form be altered or modified by the use of attached forms or clauses, and in devising forms or clauses to meet special emergencies, those features of the policy which we have mentioned as being distinctly inadmissible of alteration, should always be borne in mind by one who is drafting a form or clause. It is well at this time to emphasize the importance that attaches 282 LECTURES ON FIRE INSURANCE. Desirability to standard uniform forms and clauses. Forms of description must of Uniformity of course vary with e\ery different property or assured covered, in orms an ^^^^^ clauses or forms of permission, of liability limitation, of the assumption of other than tire liability, or for special emergencies should adhere closely to some prescribed standard that meet not only the views of the underwriters, but also commend themselves to the insuring public as a whole. Before we begin a detailed study of the various kinds of forms and clauses, there are a few matters of general instruction both in policy writing and in the devising of forms and clauses that had best be first disposed of. The Con- The fire insurance policy is essentially a contract of perso)ial tract One of indenniity. It is true that some of our State Legislatures in their ignorance have seemingly lost sight of this fact, but it is a fact and Personal In- demnity. any other view is a perversion. Remembering this, that the policy is a contract of indemnity, never devise or consent to the use of a form that makes the policy a contract of another sort, that is, a\oid all forms and clauses that introduce the valued feature into a policy contract. Possibly, to some of you, it is not \vholly clear just what is meant by " valued." It means the so wording of the contract that in the event of a total loss the value of the destroyed property is the amount of insurance thereon, wholh' irrespective of what its actual value may be. Policies of this sort are a premium on fraud, a menace to the community, become ultimately a burden to policv holders as a whole and tend to lower the moral standard of the locality in which they prevail. We ordinaril}- think of the valued policy as applicable onh' to buildings, since they are the class to which the law has generallv made applicable a contract of this sort, still almost unknowingly at times, forms co^ ering personal property are allowed to slip through that contain this same pernicious \alued feature. For example, any form or clause that states that in the event of a loss a certain fixed sum for certain specified articles is agreed upon to be their actual \alue, entirely sets aside the important indemnity feature of the contract and may work great injustice and ill, usually to the insurer, but sometimes to the insured. Again forms or clauses that aim to fix the insurable value of articles destroyed (regardless of who the insured may be) as being the market price for such articles at the time of loss, may work contrary to the principle of indemnity that should ne\ er be lost sight of, since in this obscure way profits are ofttimes being insured as well as the FIRE INSURANCE FORMS AND CLAUSES 283 direct fire loss or damage. Illustrations could be multiplied in- definitely of the way in which this valued feature creeps into the wording of forms and clauses, sometimes innocently, inore often with intent on the part of the framer of the form, and it is always desirable to bear in mind, in the devising of any clause, descriptive or otherwise, to see to it that this pernicious principle shall not even in the least degree prevail. Just a few general instructions as to what might be termed the ^, „ , '•'' headhig of a policy''^ and we will then proceed to the direct jngs of the subject of forms and clauses. The policy writer at the outset has Policy, before him a printed form of contract, the Standard policy of the State, and his first attention should be to enter clearly the amount or limitation of the policy. Coupled with this is the consideration or premium for which the policy in question is issued, this bears, by virtue of the rate, a certain fixed relation to the amount. Then follow the words " does insure " or "do insure " and the name of the insured party, and the entering therein of this name calls for more careful consideration than oftentimes is given it. Avoid initials, write the name or names as fully as possible. Avoid ambiguous phrases, such as " Heirs of So and So " or " So and So, et al." unless at the same time you designate some one party who is empowered to act for all. It is easy to forsee the embarrassment and difiiculty that may arise in the event of a loss under policies where this broad, vague way of defining the insured parties may appear. In the former event, it is at times impossible to know who all of the heirs are, and should a loss be settled without the concurrence of each one of them, and possibly paid, there is nothing to hinder the ignored heir later on from turning up and justly claiming and probably securing recognition of his or her rights. The " et al." feature which sometimes appears where there are several owners, easily leads to the same confusion and possibly double payment, since " et al." is a very difficult party to locate with certainty ! Not only is it necessaiy to name the assured in a clear and unmistakable manner, but in the event of his interest in the property being other than that of sole and unconditional ownership, such fact must be clearly brought out. Cases where there are joint interests, or where individuals are transacting business under a trade name, the nature of the assured's interest, in the former case, and the individual names as well as trade name, in the latter instance, should be clearly entered upon the policy. II. ''Who "is nsured ? " What " is Insured Forms ? FORMS OF PROPERTY DESCRIPTION AND LOCATION In our last lecture we spoke of "who" was insured and in a general way touched upon the various provisions of the Standard policy contract as a whole. Certain things that it was desirable to avoid in defining "who" the Assured is, have also been spoken of. Now, naturally follows, "what" is it that we insure these parties against the loss of? We must again impress upon your minds the question of viewpoint or attitude that it is always essential to take in devising a form that is to be attached to the policy contract. The view- point of the loss is the only safe one to take. Look at the form that you devise as you would had a loss occurred on the property which it is designed to cover. Any other point of view is value- less. Another fact to remember in the drafting of any contract form is that such form, if the contract is to be a thoroughly satisfactory one, must represent the idea that is in the minds of both parties to the contract, that is, the contract should always be effected by the getting together, as we might say, of the minds of these two parties. A contract that means one thing to one of the contract- ing parties and another thing to the other is a trouble-breeder that is most prolific. In speaking of the forms that are attached to the policy contract, we termed them as being riders that are descriptive in their nature, and in the first class of such forms are those that describe the property against the loss or damage to which by fire the insured is to be protected. While forms determine also the nature of the indemnity offered, if other than that of direct fire loss, such for example as use and occupancy, it is our purpose at this point to confine our attention to those forms that describe the property itself, wholly irrespective of whether the covering is against direct loss by fire or loss of someother nature. FORMS OF PROPERTY DESCRIPTION AND LOCATION 285 It is the form also that determines whether the insurance is to be of the specific or of the blanket or compound type, or whether the policy is to be of the usual kind or an open one or a floater, that is, whether it limits the property covered to that of one kind, in one described location, or of several kinds in several described locations, or for a fixed or a variable limit in amount covered, or anywhere within certain more or less widely defined limits. Now, while you all probably know just what we mean by a specific and what by a compound, as well as by an open and by a floating policy, still, possibly some of you do not, and so we will try and define the same. A Specific Policy is one that covers property of one kind or Specific class in one fixed location, or that applies to an aggegate sum Policies, apportioned in fixed amounts between various different proper- ties, or in various defined locations. For example, a policy of $5,000 on one building alone is specific, or for $5,000, stating that $2,500 each is to apply on two described buildings, is also specific. A Blanket or Co?)?pound Policy is one offering a contrast to Blanket or the Specific form, in that it covers properties of different classes Compound or in different locations without apportionment or distribution, as, for example, a policy of $5,000 on a manufacturing plant in its entirety, including buildings, machinery and stock, but not defining how much is insured on each one of these items, or if the plant includes more than one building, how much is insured in or on each one of these buildings. A/i Open Policy may be either specific or blanket in its Open application. It is a policv that is sometimes called a "running" Policies, policy and it is used where the Assured will be likely to require many successive insurances from the same company. It covers properties (usually merchandise) in such amounts and in such places (usually warehouses) and at such rates of premiums, as shall from time to time be agreed upon and endorsed on the policy, or in a book attached to the same. The object of such a policy is to do away with the execution of a new policy for every transaction. Policies of this form are most frequently used where stocks of merchandise are continually being placed in or with- drawn from a storage warehouse. A Ploatiiig Policy is one that is very broad and general in its application, since it may cover certain specified properties 286 LECTURES ON FIRE INSURANCE Floating Policies. Excess Policies. anywhere within more or less widely defined limits. vSuch prop- erties cannot be specifically described because of constantly changing quantities and locations, such as merchandise or other property in transit. The amount covered under such a form of policy can only be determined at the time of loss under the same. A popular definition of a Floater policy is that it is one that hovers over a property until at some point that property is subjected to a fire and then lights on the fire. A// Excess Policy is also something of a Floater in its nature and only attaches to insured property to an excess of value that the direct insurance on that property does not cover. Description of Property In drafting the form that shall describe clearly and concisely the property covered, the greatest care should be used. Just what is covered should be made a^Dparent without question, and not only should the intent of the insurer be clear in the mind of the framer of the form, but the expressions used in these forms should leave no doubt as to what that intent was. There is nothing more annoying to both insurer and insured than to have a dispute arise over a loss on the ground that something not defined in the policy was meant to be covered by the form used, but which apparently was not. Policy writers who fall into this too common error, are members of that dangerous class of humanitv who "mean well," but do not "do well I" One feature of the form that must always be kejDt in mind, is that if there is a discrepancy in an insurance contract between the Standard policy provisions and the written form or rider attached, the latter will always prevail, because it will be assumed by the courts that such riders are inserted with reference to the special printed contract to which they are attached, and therefore supersede it. This is another reason for care in drafting any form that is to become a part of the policy contract. A form in the sense that we are now considering it, namely, that of an instrument of description, does not tend to set aside any of the printed provisions of the Standard policy. That function is confined to clauses as we have defined them. Even with this distinction though, the importance of forms is not les- sened, for if the form be bad, no amount of modifying clauses can set it right, and can only result in a contract that is full of contradictions. Then, too, the underwriter in considering any FORMS OF PROPERTY DESCRIPTION AND LOCATION 287 risk, first looks at the form and if that is bad, either in the description of the property covered or the way in which it applies, he usually gives no further consideration to the offering, but turns down the whole proposition. Forms present more opportunity for the ingenuity of the policy writer than clauses, since the latter are usually standard to the extent of every word used in them, while forms are necessarily, to a large extent, optional, and even \vhere standards are used, in the preparation of forms, it is more a standard of arrangement and classification than of prescribed descriptive language. In the framing of forms, it must ever be kept in mind by the policy writer that if there is any ambiguity in the expression or description used, and litigation should ensue, the court will always decide in favor of the insured party, where any other than one interpretation is possible. This attitude on the part of the courts is not unreasonable, since the issues that arise under forms in dispute are always on those designed to protect the insurer, and if they are doubtful, such doubt might tend to invalidate the entire contract. Then, too, the contract is always made by the insurer and is prepared on the good faith of the insured. Forms are seldom drafted by the party who has to adjust the loss for the company, if one occur. This, too, calls for care in the part of the policy writer. Words should be used by him that will be as clear to the adjuster and to the insured as they are to the party who framed them. The Standard policy, de\'ised as it was by the best of legal and underwriting talent available, often has its wisest provisions entirely set at naught by the ignorant act of an inexperienced form writer. An old underwriter once said that ''if the Standard policy was drafted in Heaven, the Devil himself must have been the author of many of the forms and clauses that are in use." Experienced adjusters probably have no doubt of this, for care- lessly drawn forms cause much to be said and done that will surely tend to swell the ranks of the followers of the Prince of Evil. The company whose forms are blindly or carelessly drawn, suffers both in the trouble that ensues therefrom, in the business they get, and even more from the business that they do not get, owing to the ill reputation they acquire. Now, what are some of the evils that result from carelessly drawn forms of property descrij^tion? .Such description must tell Phrases. 288 LECTURES ON FIRE INSURANCE what the property is and where it is. This surely seems easy, but how often the adjuster finds himself in grave doubt as to these very features, owing to a doubtfully worded form. Some of the troubles that arise from poor wording of the "tf/za/" in a form are the comprehensiveness of the descriptions. In his desire to cover all the insured ought to have covered, the policy writer may draw up a form that can easily be construed to include things never intended to be included, and oftentimes even those that are prohibited. For instance, the phrase, "stock of drugs" can be held to include gasolene in any amount. Trouble- '■'■ Szcc/i other goods as are usiially carried fo7' sale'' \% an- breeding other description of property that it is very desirable to avoid. What does "usually carried" really mean? Take for illustration the contents of a general store. Pretty much everything salable at some time or other is handled in such a store, and a form that winds up with the above phrase would hold the insurance com- pany liable for explosives or volatile oils kept, even though it was not the intent of the agent to cover them, even though the insurance company had no idea such hazardous materials were a part of the stock carried, even though the rate on the property was made with no contemplation of the existence of such hazards, and even though they might prove to be the direct cause of the destroying fire. The agent who loves to use this broad phrase in order to be sure and get everything his customer has or may have under cover would probably say, ''Why, it is not usual to keep such hazardous things, so my form does not cover them." It does though, for even if in some places a special rate is made and an additional premium charged for the extra hazard of their presence, and perhaps they might be clearly specified too, in the form, it establishes the fact to the courts at least, that it is not un- usual to find such merchandise kept in the stock of general traders. ''^Usages of their trade.'" The word "usage" is one we often find in insurance forms and one that is easily capable of misinterpretation. We know that forms devised for special lines of either mercantile or manufacturing business probably seek to conform to the usages of the trade protected, and to consider the special practices and privileges that such trade might require; perhaps these requirements are constant in the business, perhaps they are only occasional or temporary, but if necessary to the conduct of the special business to which they apply, the fact that FORMS OF PROPERTY DESCRIPTION AND LOCATION 289 they are temporary rather than constant, does not void the con- tract. Bar then, the use of this word "usage," as it may be much more comprehensive than the policy writer intended. This makes it all-important that the policy writer in draftingManufac- a form to cover a certain manufacturing plant, for illustration, *"""g f^^*"* should not incorporate the phrase, ''and all other materials neces- sary for their use," ox '"incident to the prosecution of their business f unless he knows absolutely what such materials might be and whether they involve hazards not contemplated by his insuring company in issuing the policy, nor features considered in the fixing of the rate. The same caution should exist in draft- ing a form covering the insured while he may carry on ''such processes as are incident to his business." Not only should the policy writer be absolutely certain of his own position and under- standing when he uses these expressions, but he should be equally sure that the insuring parties know them just as clearly and as fully as himself, and that their understanding agrees. Under such conditions, the use of such articles and processes may lead to no ditticulties in the event of loss, without it trouble is more than likely to arise, since "incident to his business" is a very comprehensive phrase. For instance, suppose you have a form describing a certain manufactory producing advertising novelties. Trade conditions have brought the use of celluloid, often in its most highly com- bustible form, into more or less common use in processes of this sort. A line in the form describing in a general way the property covered and closing with the words, "and all other articles or materials incident to his business, " would allow the assured to use this hazardous celluloid, though probably the factory had been rated when no such extra hazard existed, nor from the form used would the insurance company realize that they were taking on an uncontemplated hazard. A form like this can only be safe for the insurer when there is an insertion or addition calling special attention to the possible use of celluloid or other haz- ardous materials. The use of the words '^merchandise" or "' contents'" without Merchandise. any explanation or restriction is another most unwise practice in devising forms. What is "merchandise?" Anything in the way of stocks. "Contents" is even more comprehensive, since it may cover machinery as well as any form of stock. So the insuring of merchandise or contents without restriction for any 290 LECTURES ON nRE INSURANCE party may be construed to cover anything from pig iron to benzine or from fire bricks to millinery, should he elect to keep them! Possibly you think this is too palpable an error foranvone of even moderate sense to write into a policy form or to even Merchandise think of committing, but as I write this, I have before me a form Forms. used to some extent in a nearby state, reading, "on all the con- tents pertaining to or used in the business of the assured, contained in the brick building, situated , occupied as warehouse and workroom." This is an actual form in use. You will note it does not even specify the business of the assured. Investigation in this particular case revealed the fact that his business was warehousing, which made the form even worse. Can you think of any class of materials, or any process of manu- facture or any custom of trade that such a form would not cover? To submit one like this, the broker or policy writer must be either a fool or a knave, — to accept it the underwriter is, beyond question, the former! Possibly the broker may say it is his duty to get just as much for his insured as he can and to secure for him a form that will cover every possible emergency, no matter what his assured may elect to do. XVithin reason, probably such attitude on the part of the broker is all right, but where the aim is to overreach in the manner that is evidenced by such a form as the one just quoted, it reveals a condition too unfair and unreasonable to be recognized. A condition that will shortly regulate itself and will enable the broker to provide his assured only with policies of sub-standard, carelessly managed, plunging insurance companies. In the event of loss, also, such a comprehensive, overreaching, unrestricted form would be sure to create dissatisfaction and not unlikely liti- gation, since there is also a doubt as to just what such a form really does mean. Held in Another phrase at times misused in defining property cov- Trust. ered is that of '"'' held hi trust.'" This comes in the lines that generally follow a listing of the property described and usually reads, after defining such property, "their own or held by them in trust or on commission or sold, but not delivered." Ex- pounders of the law and adjusters find at times in this a case for disagreement as to just what this phrase really does mean. It is not strange that this is so, since some policy writers who are probably carried away with the sort of euphonious legal sound of the words used, incorporate them into property forms, where FORMS OF PROPERTY DESCRIPTION AND LOCATION 291 their use was not only never intended but where it is wholly out o£ place. They canrightfully be used in policies of carriers, warehouse men, commission and other merchants, to show that the assured, though holding the property of others, is to secure the full measure of insurance upon all the property insured, whether the title is vested in him or not. The words "held in trust" simply mean that the goods or the property are in the custody or care of the insured. He may hold them as an agent or in anv other capacity, so long as he is responsible for their care and preserva- Held in tion. the right under these words is granted to him to protect thatT'ust. right by insurance. We might call it a phrase of privilege, since it grants a benefit to the party holding the property even when the title to it is not in his own name. It supersedes the restriction in the body of the Standard policy as to the insurable interest being that of sole and unconditional ownership. Were we dis- cussing it separately from the form of property described into which it is incorporated, we would say it was a permissive clause relating to title and insurable interest. Under these words in the form, the assured can collect the whole amount due under the policy and may return to the real owner the amount due over the insurable interest that he, the assured, may have as agent or trustee. The real owner, even though he may not have known of the existence of the insurance, may rightfully benefit by it after the loss. For illustration, let us take the case of the ordinary commission merchant handling textile goods. The mills he represents deliver their goods to him in advance of their actual sale being consummated and in many cases the commission merchant makes cash advances to the manu- facturer to enable him to continue turning out his product. While these goods that are thus being held as collateral by the commission merchant for these advances, are in his custody, it is the custom of trade for him to keep them insured, in fact, he often contracts to do so. They are held by him in trust or on commis- sion. In the event of a loss occurring, such loss must be adjusted with him and whatever recovery is made, is payable to him. From the insurance money received he can rightfully deduct the advances which he has made to the manufacturer on the destroyed goods and remit whatever is recovered from the insurance com- panies over and above that advance, to said manufacturer who is, therefore, fully indemnified for the loss he has sustained. This is one of the conditions that arise where due care must be taken 292 LECTURES ON FIRE INSURANCE to see that double insurance is not effected and that, — to carry out the illustration used, the commission merchant and the manu- facturer have not both of them taken out policies of insurance on the same property and for a probable aggregate amount in excess of its actual value. "Held in You may ask why we speak so fully of the conditions that Trust." arise from the use of the words, "held in trust or on commis- sion." It is because of their frequent misuse in forms of prop- erty description. A household furniture form or a form covering the contents of a hotel or a church or a school or of any other public edifice would certainly be complicated by the insertion of these words, in fact, they would be wholly out of place and uncalled for, since the condition of property held in trust or on commission should never occur in them. To the carrier, the warehouse man and the commission merchant, the attachment of such a form is necessary in order to fully protect the interests for which they are responsible, unless an endless number of policies are issued to care for each individual owner who may have goods in his custody. Perhaps you may say, what harm can these words in a form do to any policy, even if thev are not necessarv.'* Sometimes thev doubtless would create no injury, but at others their possibilities as a trouble maker are very great. They admit of other interests and properties being covered, ones that the nature of the insured risk or the interests of its insurers never contemplated. Do not use them then, except where proper and necessary. These are some of the practices and expressions in forms of property description that if wrongly used may cause disagreement and perhaps serious trouble, features that in form writing should be used most guardedlv and advisedly. In describing properties for purposes of insurance, see to it that you describe just what is covered, no more and no less and that you do it in the fewest words that are needed to clearly define it. Don't, for example, if you are writing a form on the stock of a hardware store, say "carpenters' tools, saws, planes, chisels and screwdrivers," for all these last are carpenters' tools, and the multiplication of descriptive words leads to either careless read- ing of the form or to the suspicion that among the great number of w^ords used, something is included that should not be. Never, oh. never, allow the word "etc." to creep into a policy form! Did you ever stop to think what a far-reaching FORMS OF PROPERTY DESCRIPTION AND LOCATION 293 term "etc." is? If not, ask some adjuster who has run across it in the form on a policy under which a claim has been made, and get him to tell you what the assured thought it covered, since his idea is the one that eventually will prevail. Location of Property We have spoken thus far of forms of property description and have sought to call attention to some of the things that good underwriters must avoid. It is not only needful to have the property itself described properly, but its location calls for just as clear a definition. The words ^''zv/iile heated and contained as described ivithin and not etse'uhe7-e" that appear in many policies are just as material to the contract as is the property itself. With varying locations the risk quite likely varies, but whether it does or not, the insurers surely have the right to know^o^'iTis of where the risk is that they are assuming, for it may be necessary ^^°"* for them to decline an insurance because they already have a sufficient commitment in that particular locality, also because outside conditions may make one locality vnidesirable, while the same class of property owned by the same assured in another locality would be perfectly acceptable. It has been held that where the policy says, ^' t/ie follow i no- described property^ contained in a certain biiiJding^^'' further definition of the location is not necessary or material to the con- tract, if the nature of the property makes it clear that it must have been the intention of the insurer and insured to protect it by the policy whether in that particular place or not. In that case a designation of the location is looked upon as being merely descriptive and to be controlled by the necessary use of the thing insured. Conditions are very unusual, however, where the clearly defining the location of the insured property is not fully as material to the contract as the description of the property itself. In the New York form of policy the words "and not elsewhere" are added to those describing the location. These words are a sort of warranty as to the location, and their use certainly seems desirable, even though in the Massachusetts Standard form of policy they do not appear. The use of the word '''' pre/nises" sometimes leads to mis- understandings in the interpretation of a form. Just what are "premises?" The interpretation of this word in the fire policy 294 LECTURES ON FIRE INSURANCE seems to vary somewhat in different courts, and unless the extent of the so-called '"premises" is in some way defined or restricted in the policy form, it appears to be so indefinite as to have, in some cases, been interpreted as covering in localities more or less remote from one another, but all forming a part of some one plant. To define just what '"premises" are is a puzzling propo- sition, so only use it with proper limitations or full and clear understanding both on the part of the insurer and of the insured. Probably no words that are commonly used in forms of prop- erty location have caused so much trouble as ^'■additions and Additions a/teratiofis'' and '''' adjohiing and conuuuuicatiug.'''' They may and Altera- seem clear enough, but it is a fact that our courts have seen fit tions. to regard them as being sufficiently elastic in their interpretation to admit of entirely opposite meanings. The words '"additions adjoining and communicating" in a manufacturing plant has been held to cover all buildings which are either added to the main building and that may be in any way necessary for the complete operation of that plant. "Adjoining and communicating" is not always held, by any means, to require that the buildings under consideration necessarily touch each other. In fact, the w'ords "adjoininor and communicating," when made use of in describing the buildings of a manufacturing plant, have been held to cover any building that is essential to the conduct and operation of the business, even when quite remote. Usually we think of the words "adjoining and communica- ting or connecting" as meaning that the buildings referred to are actually built into or attached to one another. One of our New England courts held that a certain dryhouse at quite a distance from the main plant, but connected to it by a steam pipe, consti- tuted such a communication as was contemplated in the policy, and certain insurance companies were compelled to pay a loss on this dryhouse which they had clearly understood was not in any sense covered by their policy, nor included in the rate. In fact, it was separately and much more highly rated. It is difficult to give a general line of guidance or instruction in the use of these words, and the most that we can say is that before you use them, stop and think as to what the broadest interpretation that might be given them along the lines which we have cited, might cause the company to be called on to contribute for. If in a general form covering different buildings this phrase is used for the sake of convenience to make it more comprehensive, and if it is FORMS OF PROPERTY DESCRIPTION AND LOCATION 295 intended not to cover certain particular buildings, the exception of those particular buildings should be distinctly noted. In defining locations probably the simplest policy forms and the ones most frequently written, namely those applying to dwell- ings, present more instances of carelessness than any other class "East side of Main Street in the town of So & So," is surely an indefinite description of a location, when Main Street may be several miles long; and in the event of a certain party owning several dwellings on the east side of the street, there is nothing to hinder a single policy paying tribute in the event of loss for any one of these dwellings. Descriptions of this sort are by no means rare, but are not the less reprehensible. Another phrase that is commonly used in forms of property location presents a feature of carelessness that makes one wonder that it is not taken exception to more frequently by the under- writer. I refer to the use of the words "" all tvhile contained in.^^ You know how many forms that have described merchandise or building contents of some sort or other end with the words "all while contained in," and then proceed to describe the enclosing building and its location. I think you will agree that this does not really limit the liability of the company to the merchandise or other property covered while in that particular place. To be thoroughly safeguarded, it should read, "^oiily xvhilc contained therein and not elsewhere.''^ Before closing these comments on forms of property descrip- tion and location, I again want to urge upon you the need that there is for your always regarding forms or permits or clauses as being something that modifies the Standard policy contract, and in order to make it conform to some especial usage of trade or to grant certain privileges that are essential to the needs of some particular ownership, do not regard the whole policy as being represented by the provisions embodied in the forms or clauses attached, but remember that these additions are supplementary to the policy contract itself, and while their provisions must super- sede those of the policy contract, yet they are dependent upon same and they must never be considered irrespective of the Stan- dard provisions in the body of the policy. Where forms have been well tried out and have been found Avoid Un- to work no injustice to either insurer or insured, but which necessary clearly define just what the nature of a certain risk is and just Changes. 296 LECTURES ON nRE INSURANCE where it is located, do not seek to continually change the form other than as it may be necessary to describe the actual property insured and the place in which it is insured. In the general use of the various phrases that are so often in dispute, some of which I have spoken to you about, stick closely to the old prescribed forms and don't get the idea that you are doing a brilliant act if you invent some new form that may or may not prove acceptable. Remember, when you are inclined to find fault with a form that has been in use a long time and has in the main proved equitable, that " ^ tis better to etidui'e an ill tJianJly to evils that we know not of r' III. FORMS FOR OTHER THAN DIRECT FIRE LOSS In our last lecture we confined our attention to fire insurance forms of property description and location. You will also recall that in beginning; this course of talks we defined forms as those attachments to the policy which were descriptive in their nature, and we mentioned the fact that forms not only described the prop- erty covered and the place in which it was located, but they might also define the nature of the insurance carried in the event of its being other than against direct loss or damage from fire. We defined attachments of this sort as being " forms for other Use and Oc- than fire liability," such as Use and Occupancy, Rent, Leasehold cupancy, Interest, Profit insurance, etc. It is our purpose to-ni^-ht to briny- ^^ * ^^^^' / . , , . ^ ^ r , , hold Interest forms for msurance contracts of this tvpe to your attention, and the , p ,■. subject is one that we approach with fear and trembling. I recall Insurance, some 10 or 15 years ago, at an Insurance ban([uet, that an address was given by one of the oldest and most experienced Fire Insurance Company Presidents then in acti\ e business. In the course of his address he stated that he had been recently asked as to who under- stood Use and Occupancv Insurance. His replv was that he belie\ cd that a few Special Agents knew something about it, but not a single head office official ! I am fully justified in believing that at that time I was not one of the Special Agents referred to, and with the increasing complications and perplexities that insurance con- tracts of this sort present, I begin to wonder whether I do not, after all, really know less about insurance of this class now than then. So you can see that insin^ance of these varied forms, presenting as it does problems vastly different from those embodied in the direct fire loss contract, and also considering that up to date the experi- ence of the companies writing this class of insurance is a somewhat limited one, naturally causes statements made in regard to it to be uttered with more or less hesitation. We have, howe\er, gone far enough with it to know that there are certain conditions that must be carefully avoided, and it is my 298 LECTURES ON FIRE INSURANCE hope that in this discussion to-ni^ht your attention may be called to them, and that, if we accomplish nothing more, you will be brought into an attitude of mind that will cause you to think carefully of these varied forms (jf insurance whene^■er you have occasion to study or devise them, and will be able at least to a\oid some of the common errors that so easily creep in. Use and The most common of the forms we have mentioned is that of Occupancy "Use and Occupancy." Now, what is Use and Occupancy insur- Insurance. ance ? Just what does this title, "Use and Occupancy," really mean? Many circulars have been issued defining it, and while in the main they agree, still a recent experience of my own with parties taking out contracts of this character and who had sought ad\ ice through \ari(nis sources, revealed the fact that it is ^■ery easy for the insurance man, in seeking to define and explain just what a Use and Occupancy contract covers, to unintentionally mislead his customers. The natural tendency with any man in explaining a somewhat complicated contract of this sort, is to magnify its efficiency and with thoroughly good intentions, and usually with great largeness of heart, to make it appear to cover many things that the under- writer never contemplated insuring against. Let us, from the combined wisdom of those who have written on this subject, and the experience of others, try and give a con- densed statement of the province of Use and Occupancy insurance. Some state that its object is to make good the loss of "profits" that are consequent upon the shutting down of a manufacturing plant by fire. Others state that while it is not primarily designed to insure profits as such, it is to insure the results of production in the sense that product is regarded as income from process of opera- tion. In the event of a shut-down as the result of a fire, this product and income therefrom ceases, while, at the same time, there are always certain fixed charges and expenditures which have to be kept up in order to maintain the organization in such a condition as to not only hurry forward the needfid repairs and re-instatement of the damaged plant, but also to place the same on an operating basis as soon after its completion as possible. For illustration, interest on indebtedness that the concern may ha\e outstanding continues to work whether the plant runs or not ; taxes are seldom materially abated as a consequence of a fire ; royalties for special machinery usually continue in force : salaries of those who are under term con- FORMS FOR OTHER THAN DIRECT FIRE LOSS 299 tracts with the concern ; the wages of watchmen, firemen, engineers, costs of Hghting and heating, and, in fact, you can readily think of numerous other fixed charges which, if it is the purpose of the assured to restore his plant and continue in business as promptly as possible, must be continued in order to enable him to resume a con- Use and dition of satisfactory productiveness at as early a day as possible. Occupancy. Meantime, through the intervention of fire, the income — the funds coming in from the business that are looked to care for these fixed charges — has ceased. It seems to me, then, that those who define Use and Occupancy insurance as covering profits even in the remote sense that some writers use the term, rather misuse the word and are likely to mis- lead. It is a continuance of product, it seems to me, that Use and Occupancy insurance guarantees, in the sense that when a plant is producing goods or when business acti\ities of any kind are being conducted within its confines, whether manufacturing or not, there is a result obtained that brings in through the disposition of that product, an income to meet the expenditures connected with manu- facturing whether they result in a profit or not. Do not think from this that I would consider a plant that was running without making a profit as a desirable subject for a Use and Occupancy policy, but even assuming that it was operating on a highly profitable basis, the Use and Occupancy contract is not designed to make good the loss of that profit which would result from a fire and a termina- tion of the processes of manufacture or trading and the consequent gain resulting from them. There are many losses that result from the shut-down of a plant or store during its periods of activity, even aside from those that we have spoken of, and the money derived from the insurance carried under the Use and Occupancy form has been found again and again to be the only available fund which could be used to lessen the period of inactivity or to carry on the business temporarily while the rehabilitation of the destroyed plant was being carried on. This latter view of the situation is tenable, when we consider that under a Use and Occupancy policy the sum of money paid over to the assured has ofttimes enabled him to either engage temporary quar- ters or to lease some other plant and in that way to continue to supply his customers and hold his business during the same period that his fire policies are rebuilding, re-equipping and re-stocking the destroyed plant. One of the first questions that presents itself to the underwriter, 300 LECTURES ON FIRE INSURANCE and one that should be carefully considered by the assured as well, is as to who are wisely eligible for policies of this sort and for what amount may they be written. As a general principle, it may be stated that only concerns of unquestioned standing and accounting methods should ever be considered in writing insurance of this sort. Some companies go even farther than this, and in order to render the liklihood of a total loss under a Use and Occupancy policy as remote a thing as possible, confine their writings strictly to sprink- lered risks. This latter point is, of course, wholly discretionary, with the underwriting company, but the first feature mentioned that of high standing and efficient bookkeeping, should be always required of those seeking insurance of this character. Use and I t^o not know that there is any rule adhered to by the insur- Occupancy. ance companies as to the proper amount of a Use and Occupancv policy with reference to either value of the property or the amount of business transacted by the Assured. Some have adopted a form calling for 90% of the net income; this would appear to introduce the profit feature, and, in any event, to raise a doubt as to just what " net " income was. As a general proposition 1 believe that about 10% of the annual business of a concern is a reasonably fair average line of Use and Occupancy to carry, and experience would seem to bear out this, since the average amounts carried run not far from that percentage. Let us take the case of a certain concern that comes to my mind at this moment ; its plant is valueil at about $400,000. They are carrying fire policies to the extent of 90% of that value. The annual business averages a million a year. After careful consideration, both underwriter and assured agree that $100,000 Use and Occupancy was just about the right amount to carrv. Conditions of construction, the nature of the business, the fre- quency with which the stock is turned, the protective de\ices in use on the property, all have their bearing on both the desirability and the amount of the Use and Occupancy policv, and the rate at which it should be written, and as experience grows riper, in dealing with contracts of this sort, doubtless more definite rules will be formu- lated for the guidance of the agent and the broker seeking Use and Occupancy contracts, luit at present we are largelv feeling our wav in the dark, though experience has proved that the enterprise thus far not only has been a reasonably profitable one, but also promises well for the future. Cases often arise in manufacturing jilants where a Use and FORMS FOR OTHER THAN DIRECT FIRE LOSS 301 Occupancy contract may rightfully be drafted to cover cjther than the manufacturing or producing buildings. Storehouses that con- tain the product either in an incomplete or a finished state, may properly be covered, since their destruction or the loss or injury of Use and their contents will just as effectively shut off the output of the mills Occupancy. as a fire in the producing portions. A lumber yard directly con- nected with a plant using wood as one of its raw materials may be included, if desired, in the same way that a storehouse might. In the case of a mercantile business, the store where the actual business of distributing is conducted or the storehouses on ^vhich such store depends for its immediate needs are also fit subjects. As to the cjuestion of rate, at present, as you know, fixed tariff rates are not promulgated on insurance of this class. They are purely discretionary with the underwriter. Investigation reveals that they run from ^ to ^ of the regular fire rate. In occasional cases, they fully equal the latter, but we probably are not far out when we say that the great bulk of Use and Occupancy insurance written to-day, here in the east, is written at about 2j of the fire rate. Whatever the rate is, it must be modified largely by the con- ditions that exist in the plant, not only the liklihood of a loss, but the ability to confine that loss within small limits and also such ar- rangement in the plant as makes it probable that a fire will result in but a temporary shutdo\vn at the most. Use and Occupancy policies are written not onl}- with a limita- tion as to the maximum amount payalile thereunder, but w'ith a stipulated per diem contribution which shall continue during the period of shutdown in the event of a loss occurring. This feature of the Use and Occupancy contract is one that probably has created more discussion lietween insurer and insured than any other in the Use and Occupancy policy. For example, suppose a man takes out a Use and Occupancy policy of $3,000 on his factory. We always assume that there are 300 working days in a year and that, therefore, $10 a day for each working day would exhaust the pol- icy in cjuestion. But the Assured will say, " at the most, I can't be shut down over four months. Why then shouldn't I get instead of $10 or that is 1-300 of my policy per day, l-lOO, since there are about 100 working days in four months. In other words, why shouldn't my contract give me $30 instead of $10 a day during the period I am shut down?" A contract drawn in this way and granting this more liberal per diem contribution, would certainly be a valid one if an insurance company sa^v fit to grant it, but it 302 LECTURES ON FIRE INSURANCE would ])v unjust to ask any company, unless they were to receive a very materially higher rate, to accept such a contract for a year. Suppose the assured chose, in the illustration used, to take out his policy for four months and paid a rate accordingly, because he would probably say, " I can have my plant going again under any conditions in that period and 1 don't need a Use and Occupancy policv for a longer term than that." Such an arrangement, if a company saw fit to grant it, would be all right, but they certainly should be paid a very materially higher rate. You will all admit, I am sure, that to take such a contract for a year with the liklihood that cessation for a small part of that vear might completely exhaust the policy, is an underwriting proposition that cannot commend it- self to any careful Insurer. Use and Other features must be considered in discussing Use and Oc- Occupancy. cupancy insurance, and these are especially pro^•ided for in many of the Use and Occupancy forms by stating the method that shall be adopted in determining the actual effect on the business owing to a cessation of working power. A good illustration of this is the case of Use and Occupancy insurance that is written on Street Rail- way properties where the income varies very materially between the summer and the winter months. In properties of this sort, it is customary when taking out Use and Occupancy insurance to specify in the form that as a basis for the computation of daily income, there shall be taken that of the corresponding period of the pre\ious year. Suppose that owing to a fire in its power plant, for example, a certain Street Railway was unable to operate its cars during the entire month of July, July averaging probably as one of the heavi- est months in the annual business of the road. Now, it would not be fair to take the average monthly Inisiness for the entire year as being the loss sustained, and, therefore, a form such as the one we are speaking of would require the determination (which could be readily shown from the books of the assured) of the lousiness of the preceding July, which would be taken as a basis for the amount and damage to its business sustained by the road and would furnish data from which to figure out the contribution by the Use and Oc- cupancy policies. Some Use and Occupancy forms, in addition to the pro\ ision just described, insert one stating that increased or decreased daily or monthly production, owing to a growing or a falling off business condition, may also be consideretl in arri\ ing at the actual loss of output. FORMS FOR OTHER THAN DIRECT HRE LOSS 303 Some lines of husiness, owing to trade or climatic conditions, shut down entirely for certain months in the year and the same treatment is necessary to equitably adjust their loss that is used in the vStreet Railway illustration we have cited. The general experience of companies writing Use and Occu- Use and pancy insurance indicates that it can safely be written at figures re- Occupancy, lated to the fire rates in the proportion we ha\ e mentioned. This, however, we must confess, is still very largelv a matter of conjec- ture, since loss costs and averages are very difficult of determina- tion in insurance of this class and have not as yet been derived from a sufficiently wide experience to really make them of established value. I want to emphasize again the great importance of careful consideration of the individual premises and the financial condition and accounting methods of its owners that are insured under any Use and Occupancy policy. Is the plant one that uses standard machinery and devices that are readily obtainable, or is it one that is wholly dependent on the output of some patented devices that are slow of construction and that are only built when definitely re- quired ? Conditions like these make all the difference between a short shut-down and rapid replacement or a long and tedious wait. The same conditions applv to the building to be replaced. Is it a frame structure that can quicklv be rebuilt, and that has not special features in its arrangement, or is it a brewery, for example, that necessitates slow building methods and special arrangements adapted to its processes? Are the assured's books well and clearlv kept, and can product and income be readily and accuratelv determined? In an industry that is dependent upon large power for its op- eration, is the power plant so built and arranged that it could be easllv crippled and shut down the entire premises? Still further, is the nature of the power used, and the way it is used, such that it would be easv or difficult to install and connect temporary engines or motors in order to get the plant under way ? All such points must be taken into account bv the careful underwriter in consider- ing not only the desirability of Use and Occupancy Insurance, but the rate at which it may be written. In this connection let us sav that it is to be hoped that the time is not far distant when there will be more data on file that will show the actual results. At present rates, insurance of this class appears to be fairly profitable, both as to the ratio which the losses bear to the premiums received, and that more important item, loss cost, which is the ratio of the loss sustained to the total amount insured. 304 LECTURES ON FIRE INSURANCE Before giving illustrations of some of the forms of Use and Occupancy insurance that are desirable and some that are bad, I want to take up briefly these other clauses that are, in a certain way, insurance of the same sort, such as rent, leasehold interest, and proflt. It seems better to speak of these before passing on to Use and Occupancy forms, since there is a tendency, as already stated, in the minds of many to mix the functions of Use and Oc- cupancy insurance ^yith one or more of these other classes, accord- ing to the nature of the risk insuretl. Rent Rent insurance, although of rather recent origin, has grown Insurance. ,-q considerable magnitude and is being regarded with more and more fa\or, both by the Insurance Companies and their patrons. When it is properly written, it proves both equitable and fairly re- munerative. The reasons for this are that properties that are con- sidered fit subjects for insurance of this character, and to which its operations have thus far been confined, are almost in\ariably under both police and fire department protection, and, what is more im- portant, property that is eligible for rent insurance presents a greater freedom from moral hazard. The reason for this is that rented properties are usually under the control as well as the occupancy of tenants and are not freely accessiljle to those who might directly benefit by a fire. Again, the measure of damage resulting from a loss under a contract of this character is very easily ascertained, and owing to this a better salvage is often secured than results from a loss on either buildings or on other property. There are many different forms under which Rent insurance is written, forms of varying length, some clear, some ambiguous, and the tendency appears to be on the part of some brokers special- izing on insurance of this sort, to continually broaden the contract in order to make it more attractiye and thereby secure the placing of more insurance of this character for themsehes. Both experi- ence and litigation have had a good effect on the drafting of Rent insurance forms. Whatever form is used, the same obligation that we spoke of under forms of property description should always be kept in mind. The intent of the parties should be clear, and it should be defined beyond a doubt that the policy is to cover on the rents derived from the building at the time of the fire. To insure this recjuires co-insurance to the extent of the actual rental, but it should not cover the income that might be deri\ ed from properties unrented at the time of the fire. We call your attention especially to this because there is a tendency on the part of some form drafters FORMS FOR OTHER THAN DIRECT FIRE LOSS 305 to make a Rent form co\er not only the actual rents that are lost by the fire, but to use the phrase " rental ^•alue," basing the income thereby on the total rent that would be obtained were the entire Rent property rented. You can readily see that with such a form, old, Insurance. undesirable and unpopular buildings might recei\e, through Rent insurance, a far greater sum than the actual loss of rents which the owners had sustained from a fire. A form that it seems to me covers all that a Rent form should, might be worded as follows : — "It is imderstood and agreed that in case above named building or any part thereof shall be rendered untenantable by fn-e, this company shall be liable to the assured for the actual loss of rents ensuing therefrom, based on the rentals in force from the rented portion of the premises at the time of the fire and not exceeding the sum insured. Loss to be computed from the day of the fire for the time it would require to put the premises in tenantable condition, and not to be limited by the expiration of the policy, excluding from such time such portion thereof as may be consumed by a strike or by anv other delay beyond the control of the insured. In consideration of the reduced rate at which this policv is issued, the insured stipulates and agrees to carry insurance on said rents to an amount equal to the actual rents of said premises, and it is understood and agreed that if at the time of the fire the aggregate insurance upon said rents shall be less than the actual rentals at the time of the fire, the insured shall be held to be an insurer in the amount of such deficiency, and in that event shall bear such proportionate share of the loss." You will note from this that while the object of rent insurance is to indemnify a landlord for the loss of income that would come to him through a fire, and is in a general way insurance of the same class as Use and Occupancv, still there is a wide difference in that the rents lost are definitely ascertainable, while with Use and Occupancv there is alwavs an element of uncertainty as to just the ex- tent of the damage and the necessary contribution therefor on the part of the Insurance Companies. You will furthermore note that while rent insurance, if properly written, should alwavs be accompanied by a clause fixing the amount of insurance to be carried with respect to total income or business, a Use and Occupancv policy could not properlv be sub- ject to such a restriction. Leasehold Interest Insurance covers more \aried interests than are involved in rent insurance. It necessarily, therefore, becomes more complicated. 306 LECTURES ON FIRE INSURANCE Leasehold Interest In- surance. Leasehold interest not only insures the middleman or lessee, but it also insures the profit between what he would pay the owner of the property and what he may receive from tenants to whom he sub-lets the same. Again, it may insure his interest as lessee, and yet again, it may insure his interest in a building which he may erect on leased ground. The fact that such a variety of interests ma}- he brought forward under a Leasehold interest policy neces- sarily raises many features, and some of the objectionable ones are the following. Contracts often exist between the landlord, that is the real owner of the property, and the lessee which are not divulged by the policy and the provisions of which the insurer, and even the broker placing the line, may be in absolute ignorance of it. ThisdifHculty might be overcome by the use of a proper form, Init it is a fact that it has frequently been the subject of tedious and more or less expensive litigation. Many leasehold forms of attachment to insurance policies contain a clause like this : — "It is a conditon of this insurance that this company is liable only in case of such destruction by fire of the above named premises, that the lease held by the insured shall by its terms be cancelled. The company then shall be liable to pay the amount hereby insured." This, you will note, refers to a contract that is not set out in the policy, which often presents objectionalile and dangerous features for the Insurance Company. In some cases the following phrase is used : — "In case of the destruction of the premises by fire, this lease shall cease and be terminated." Under this clause, if the term of the lease would not expire for, say, three years and the building should be replaced in tenantable condition in four months, the lessee could collect from the insurance company for three years rent, if he had insurance amounting to as much as that, wholly regardless of the time that it actually takes to replace the damaged property. The courts are having continually presented to them for adjudication features that were never contemplated by either parties to the contract before the fire, but which have arisen at the instigation of some attorney brought into the settlement of the loss claim. It is difiicult to draft a lease- hold form which will cover all cases, and the only suggestion that can be made is that forms used in Leasehold interest insurance should be prepared with great care and should always be regarded from the standpoint of an occurred loss thereunder. FORMS FOR OTHER THAN DIRECT FIRE LOSS 307 Another and most important feature of leasehold interest, and one that calls for the closest of scrutiny on the part of the underwriter is that insurance of this character is very easily and not infrequently tainted with moral hazard, especially if the lessee desires to rid himself of a bad bargain. The possibilities of making money fraudulently out of an opportune fire under a policy of this kind, where premises leased did not sub-let to advantage, are very fertile ones. Profit Insurance is comparati\ely new and it presents features Profit Insur- that a good many companies object to and many absolutely ance. prohibit. A Profit insurance policy is a dangerous instrument to put into the hands of an}- but the most reputable and reasonable of Assuretl. In itself it creates at once a moral hazard which, while it may not be recognized as such b}- the honest manufacturer or merchant, still does exist, and to those in the business whose virtue is of a less rugged type, it presents a constant temptation to make sure of a greater profit than the conditions of the business warrant. It matters not what the nature of the business is, similar conditions exist under insurance of this form. The fire insurance policy which the Assured carries will make good to him the loss of the plant which he is operating, as well as of its contents of e\ery character, and if we adtl to that the assurance that the profit on all of his unsold merchandise will immediately become his in the event of a fire, we must admit that the temptation placed before the manufac- turer or merchant, in times of slow business and poor trade, is one that weak humanity is sorely tempted to a\ail itself of. Many people would view with comparative et[uanimity the destruction of their property, pro\ided it is well protected by a fire insurance policy, but they might be sorely disturbed if at the same time the profit which they had expected to receive from merchandise in their hands was taken awav from them, antl at this point profit insurance steps in and virtually says, "■ Why lose anything? Why not regain your lost plant, and in addition all of the benefit that would have come to you from the conduct of a profitable business ?" Still further is the increase of hazard created where slow moving stocks, old styles of merchandise and seemingly unsalable articles form a large portion of the assets of the business. Profit insurance, therefore, can only be written with safety by confining it to successful, li^e concerns of established and financial worth, and even then it would not appear amiss to incorporate a clause in the policy and specify that in the e\ent of any loss a fixed 308 LECTURES ON FIRE INSURANCE percentaj^e of the profits should be the limit of the claim to be made under the insurance, much in the same manner that the Three- quarter Value clause is applied in writing certain properties. In addition to this there should be an adequate co-insurance clause attached which should definitely fix the relation between the amount of insurance carried and the total profits derixed from the business for the period of the insurance. Under any conditions, insurance of this character should ne\er be written for concerns or indi\iduals whose system of bookkeeping is not of such a definite character as to show clearly the business conditions, especially as regards the profits made. The Danger So much in a general way for these four kinds of insurance of Confusion, that are closely allied to the direct fire lines. To me it seems as if one of the dangers attendant on writing these classes of other than fire insurance was a tendency to mix their various functions and one or two illustrations may serve to bring that condition more clearly to your minds. I have before me a Use and Occupancy and '' Ex- pense " form issued by one of our best known and most successful companies, which reads in part : — Some Irregu- '*$• • • On the Use and Occupancy of building and lar Forms. machinery of . . . situate . . . and occupied. ... If the said building and its machinery equipment be destroyed or so damaged by fire as to necessitate the total or partial suspension of operations, this Company shall be liable under this policy for loss of net profits on goods, the production of which is thereby prexented." The feature of this form to which I want to call particular attention is in the abo\e use of the words '' )iet profits on goods" for there is no qualifying clause in the remainder of the form that indicates that tlie use of the word '* profits" is other than the ordi- nary understanding of that word. If the Insurer and the Insured know exactly what this form means and are willing to accept it, there would seem to lie no objection to its use, but I fail to see how it can rightfully be termed a Use and Occupancy contract. Another somewhat puzzling and \ ague form that we run across occasionally masquerading as a Use and Occupancy contract, is that which is especially designed to co\er goods that are exhilnteil at some exposition or fair. I ha\e before me one that is designed to protect the exhibitor for one week, that is, a period of six exhi- bition days, and it reads as follows: — • FORMS FOR OTHER THAN DIRECT FIRE LOSS 309 "$.... beino- this Company's pro rata share of the agreed expense and profit of Assured incurred and arising from the carrying on of an exposition or show in the .... IniiUl- ing, located ..... it is understood and agreed that if by reason of fire in the abo\ e-mentioned premises, the Assured shall be pre\ented from carrying on the show for the full time specified in the contracts \\-ith exhibitors, athertisers. or others, then this Company shall pa}- to the x\ssured its pro rata share of the agreed profit and expense on said contracts, or the uncompleted portion thereof. It is further understood and agreed that in the event of fire so damaging the building that the Assured shall be prevented from carr} ing out his contracts, then this Company shall pay its pro rata share of the agreed amount of expense and profits, it being understood and agreed that for the purpose of this insurance, the amount of expenses and profit is \ alued in the sum of $. . . ., pro^•ided, howe\ er, that should the fire occur after the date of the opening of the fair, then this policy shall be subject to deductions of g per diem for such time as shall have elapsed between the day of the opening of the fair and the dav of the fire." It is hard to define just what this form is, '• Expenses antl Profits" and some of both. It certainly is a legitimate contract if an insurance coinpany can be found ready to undertake it, and I do not doubt that there are those that will gladly do so. Surelv it is a very desirable ])olicy for the exhibitor to hold, since so far as its protecting him goes, he has very little to worry about in case the premises burn up during the exposition. He doubtless has fire insurance to pay for the direct loss of his exhibits, and his labor and expected profits in exhilnting them would be cared for under such a contract as the abo\ e. In fact, a fire would be as good as the show, possibly better. From the insurance standpoint, such a form must be regarded like the horse about whose merits a prospec- tive purchaser asked Abraham Lincoln's advice, ** If a man likes that kind of a horse, that is the kind of a horse he would like I " To my mind, the important features in a Use and Occupancy contract are embodied in words like the following — : "It is agreed that if by reason of fire on the premises A Good U. above described occurring during the continuance of this and O. policy, the building and [or] machinery or other movable prop- Form, erty therein, or any of them, in whole or in part to be destroyed, or so damaged as to entirely suspend the production of finished goods, then this Company shall be liable at the rate of 1-300 part of the amount of this policy per day for each working day of such prevention, and in case the said buildings and [or] machinery or other property therein, in whole or in part, be so 3J0 LECTURES ON FIRE INSURANCE damaged as to pre\eiit the making of the full daily a\erage production of finished goods, then this Company shall be liable per day for that proportion of 1-oUO part of the amount of this policy which the said production so prevented bears to the full daily a\erage production of finished goods. '' In order to determine the full daily average production of finished goods, the average daily production for the corre- sponding period of the previous year shall be taken, subject to such increase or diminution as changes in the capacity of the plant or condition of the business shall warrant, but not to ex- ceed in any case the amount of this policy. " Loss, if any, to be computed from the day of the oc- currence of any fire to the time when, after the adjustment of the loss on the above described property, the said premises could with reasonable diligence and despatch be replaced and the machinery installed therein, but not to be limited to the date of expiration named in this policy." The above agreement seems to me to cover everything that can reasonably be expected from insurance of this sort. It makes no mention of profits, but it aims to make good the loss of producing power to the extent that such production is curtailed, which is, to my mind, the legitimate object of Use and Occupancy insurance. This form is a combination of a number of forms in use by large manufacturers and merchants. The phraseology, of course, in the case of the latter having to be changed somewhat to accom- modate itself to the difference between producing and trading. Rent Insurance A Good Rent We have already, in speaking of Rent insurance, given an illus- Form. tration of what seems to us a good form. Another that appears to present the features that can justly be considered, might read : — "$ ... on the Rents of the .... building while occupied .... situate .... " It is understood and agreed that if said building or any part thereof shall be rendered untenantable by fire, so as ^o cau-ie an actual loss of Rents to the Assured, this Company shall be liable for such loss of Rents not exceeding the sum hereby insured. " The Assured agrees to rebuild or repair said building in as short a time as the nature of the case will admit, and the sum insured will be taken as the yearly rent of the building, and this Company shall be liable only for such proportion of anv loss as the sum hereby insured bears to the annual rent of said building. FORMS FOR OTHER THAN DIRECT FIRE LOSS SIJ " Loss to be computed from the date of the Hre and to cease upon the building being again rendered tenantable. In case the Assured shall elect not to rebuild or repair, then the loss of Rent shall be determined by the time which would have been required for such purposes." Then follows an agreement for arbitration in the event of dis- agreement over the time required. This Form properl}- protects the Assured and is a clearly un- derstandable contract on the part of the Insurer. There is a ten- dency, unfortunatelv, here in Boston to broaden these Rent forms materiallv, and I ha\e before me one that is not satisfied v\ ith the actual loss of Rent, but inserts, in a rather obscure manner, the words " or Rental value to the Assured." Leasehold Interest Insurance A leasehold interest form that embodies what seemed to me A Good the proper features for insurance of this kind would read : — Leasehold T ♦ f "$.... on his leasehold interest in the .... build- ing occupied .... situate .... " It is understood and agreed that this insurance is intended to indemnify the Assured against loss of revenue from rents received in excess of amount to be paid by him to ... . under a certain lease of said premises dated .... dav of .... for .... years at the yearly rental of ... . " In case of the total destruction of the premises, thereby vitiating the above-mentioned lease, then this Company agrees to pay the whole amount of this policy, less an amount for the expired part of the year, which amount for the purpose of this insurance will be calculated at the rate of $ ... . per annum from the .... dav of ... . " In case of the partial destruction of the premises by which the lease is not unimpaired, then this Company will pay the amount of Rent so lost not exceeding the rate of $ . . . . per annum in excess of amount paid to the lessor or owner, during the time the premises are untenantable," Then follows the arbitration clause in event of disagreement. This form may seem somewhat cumbersome, and I have before me several specific forms relating to particular properties that in certain of their details are possibly more explicit, but the general points that should be clearly understood by both parties to the contract in entering into an agreement of this sort, seem to me to be well and definitely fixed by the form quoted. Form. 312 LECTURES ON FIRE INSURANCE Profit Insurance A Good -"^ form applicable to insurance of this kind can easily be very Profit Insur- brief and at the same time fully explicit. In fact, a form like the ance Form, following would seem to me to reach adequately almost any case that might arise : — "$ . . . . on the net Profits derived from .... busi- ness as dealers in ... . contained in building situated .... on profits from their stock in trade, their own or held by them in trust or on commission or sold but not delivered. " In case of total loss by fire, this Company shall be liable for the amount hereby insm-ed. " In case of partial loss by fire, this Company shall be liable for such proportion of the amount hereby insured as the value destroyed bears to the average daily value of said stock for the year preceding the date of said fire, subject, however, to variations in values and profits as shall result from changes in the market prices of materials, supplies and manufacturing processes." While this form is absolutely clear in all of its provisions, and it certainly serves to bear out what we have already said in speak- ing more particularly of Profit Insurance, namely, that its safe prosecution is wholly dependent on the evidence of satisfactory bookkeeping on the part of the Assured, and of a healthy business condition revealed thereby. Sprinkler Leakage Insurance Sprinkler Before we pass on to forms covering in extended areas, I w ant Leakage In- ^^■, ^all your attention to one other increasingly common form of surance. insurance against other than direct fire loss. There is an old saying, or proverb, to the effect that there is no great loss without some small gain. In the class of insurance I want to call your attention to for a moment, this proverb might be reversed so as to read, "There is no great gain without some small loss." The installation of automatic sprinklers results, not only in greatly safeguarding the propertv of the Assured and minimizing the losses that otherwise would come to him, but also it enables him to secure a very much lower rate. The benefits certainly are great, but with this great benefit and saving there is a small element of danger and possible loss. Insurance for loss that mav be caused bv leakage of an auto- matic sprinkler svstcm is becoming more and more of a necessity. FORMS FOR OTHER THAN DIRECT FIRE LOSS 3i3 as installations of these systems are growing more common. Sprinkler Fortunalel}', the mechanical (le\ices, not only in the sprinklers ^^'^*S^ ^'^" themselves, but in the way they are attached and superxised, have improved so greatly that the percentage of claims caused by sprinkler leakage is a steadily decreasing one. Accidents will happen though, water hammer in the pipes may cause a weak sprinkler to slowly develop a leak, an accidental blow either from broken machinery or the careless handling of a ladder, or any other movable appliance may break off one of the sprinkler lieads. Or, and perhaps this is the most frequent cause of sprinkler leak- age, freezing of the water in the system will cause broken pipes and strained sprinkler heads. It speaks well for the system that these mishaps are but seldom, but the danger is a present one and at rare intervals damage occiu^s that must be made good by insurance of some sort. Since sprinklers are directly promoted by the Fire Insurance Companies, ami are the means of greatly reduciiag the losses that come to them, and since their installation and maintenance are indirectly supervised by these Insurance Companies, it is only proper that they should guarantee freedom from loss on insured properties through accidents to the automatic sprinkler system from other agency than that of fire. You are doubtless aware that the damage that may be caused by water discharged by a sprinkler opening in the event of a fire is as much cox ered by the direct fire policy as is the damage caused by the fire itself. We are now considering the damage that may result from a sprinkler discharging owing to some other cause than that of fire. It is this emergency that we wish to guard against, and by the use of a proper form in the policy contract, liability of this sort may be assumed. Before we take up such forms in detail, there are certain features which must be carefully taken into account in the writing of Sprinkler Leakage Insurance. For instance, the amount that it is proper to carry under a policy of this sort. The general prac- tice, I believe, is that where sprinkler insurance is carried, it should be so carried as not to exceed 5 per cent to 10 per cent of the amount that is insured under the direct fire policies. This is assuming that the insurance under the fire policy represents at least 90 per cent of the value of the property covered. Conditions will vary with different risks, the points principally taken into considera- tion being, what is the greatest damage that could result from the 314 LECTURES ON FIRE INSURANCE accidental discharge of any one sprinkler, owing to the arrange- ment of the building and the distribution of stock or machinery? You can see readily how necessary it is to take these conditions into account, and also how unlikely it is that more than one sprinkler would meet with accident and commence discharging at the same time. Companies writing insurance of this character have no fixed tariff, but each contract is made at a price based on their individual judgment, after full information regarding the property to be covered has been secured. The construction, arrangement and height of the building should be known, the heating and lighting appliances, the make of sprinklers, the time they have been in service and the presence and efficiency of an automatic alarm svs- tem, one that will operate by the motion of the wafer through the system and not be dependent upon the action of heat. You can readily see that a condition of sprinkler leakage brings about a state of affairs where the ordinary thermostat system or heat alarm would not be effective, while a rotary alarm operated by the motion of the water in the pipes would gi\ e prompt notice that there was a discharge at some point which would call for imme- diate attention. So far as we can learn, the general situation over sprinkler leakage insurance is that the same is usually written to about the extent of 5 per cent of the value of the property covered with a varying range of rates, probably a\'eraging not far from f of 1 per cent. Some companies have charters sufficiently broad to enable them to write insurance of this character, while others are restricted in this respect antl cannot undertake it. Competition, and espe- cially the attitude taken by the Mill Mutuals, has caused more and more of the stock companies to include insurance of this character among their writings. The form for sprinkler leakage insurance issued by the Manufacturers Mutual Insurance Companies, ordinaril}- reads as follows : — "To of Mutual "In consideration of the maintenance of an automatic Sprinkler sprinkler system for the prevention of loss by fire upon the Leakage property insured by Policy No of the Form. Manufacturers Mutual Insurance Company of " The said Company does also insure the party thereby assured against all loss or damage that may occur from the FORMS FOR OTHER THAN DIRECT FIRE LOSS 315 accidental leakage of the said sprinkler system upon the prop- erty insured against hre hy the policy above mentioned, while the said fire policy continues in force and no longer, but this policy does not cover damage to a reservoir, tank, pipe, or other apparatus, by whose failure the leak is caused. " Provided that this Company shall be liable for only such proportion of the sprinkler leakage loss as the aniount insured on said property against fire by the policy above mentioned bears to the whole amount of fire insurance thereon. "Provided also that the total amount of insurance under this policy shall not exceed the amount of the fire insurance policy above mentioned." Following this form is a paragraph providing for conditions of cancellation. A form commonlv used by the stock companies for insurance of this character reads as follows: — - Stock Com- panies Sprinkler " Does insure .... for the term of .... from the dav Leakage of . . . . 19 . . . ., at noon, to the .... dav of ... . Form. 19 . . . ., at noon, to an amount not exceeding .... dollars, to wit : Against all direct loss or damage caused by the accidental discharge or leakage of water from the automatic sprinkler system, including tanks supplying it, except as hereinafter provided, in or on the buildings now erected and occupied wholly or partly by the assured (whether the accident occurs in the portion occupied by the assured or not ), des- cribed and located as follows "And the companv shall be liable under this contract for all direct loss or damage sustained by the assured occasioned by such discharge or leakage, provided same is caused by any accident (including freezing), and applying to all property, real or personal, owned by the assured, or to the property of others held by the assured in trust or on commission, or sold, but not removed, and for which the assured is legally liable, while situate upon the premises above described, but this company shall not be liable for loss or damage occasioned by such discharge or leakage, when such discharge or leakage is caused by fire, lightning, earthquake, explosion, invasion of foreign enemies, civil commotions, riots, any military or usurped power, order of civil authority, or any fraudulent act of the assured. It is further understood and agreed that the entire liability of this company under this contract shall under no circumstances exceed the sum insured, for any loss, claim, or damage whatsoever, and that this company shall not be liable under this contract for any loss or damage to the auto- matic sprinkler system itself." Oftentimes this contract is followed by numerous clauses regarding certain exempted properties, permits for alterations, a 3J6 LECTURES ON FIRE INSURANCE description of the niethotl to be followed in the event of loss, and the filing of a claim thereunder. Also, provisions for the manner in which such a policv may he cancelled. Stock Com- You will note that in the main these two contracts of the pany Forms Mutiials and of the Stock Companies are essentially the same, vs. Mutual, though the phraseology varies somewhat. The ^^utual form eliminates '"damage to reservoir, tank, pipe or other apparatus bv whose failure the leak is caused," while the Stock form says nothing about that, assuming, evidentlv, that leakage from a sprinkler system that woidd cause damage would doubtless be con- fined to the sprinklers themsehes. The Stock form further eliminates loss for mishaps that might occur from what are ordinarilv termed "Acts of God, or the Nation's enemies," while the Alutual form makes no mention of loss under such conditions not being covered bv the contract. Perhaps the more important feature of contrast in these two contracts is, that while the Mutual form states that " This Companv shall be liable for only such proportion of the sprinkler leakage loss as the amount insured on said propertv against fire bv the Policv above mentioned, bears to the whole amount of fire insiu'ance thereon : " reference, you note, is made here to the fact that is brought out in the first paragraph of the jSIutual form, namelv, that this sprinkler leakage insurance is made a part of a regular fire policv. The Stock form we are discussing is a sprinkler leakage form, pure and simple, whollv independent of the fire insurance policies (jn the same prtjperty. Therefore, no reference to them would be needed. Either of these forms is good and seemingly free from defects. Thev are surely clear in every intent and are desirable policies for an assured to have, especially at the low cost at which to-day insurance of this character can be obtained. • At times sprinkler leakage policies give rise to very puzzling questions in connection with losses. The worst conundrum of this character that has ever been referred to me, and regarding which the correct ruling is still a matter of doubt, is the follow- ing : You will note that sprinkler leakage policies state that they instire against direct loss or damage sustained by the assured by water discharge or leakage from the automatic sprinkler svstem. Under the above stipulation the cjuestion is raised as to what would be the condition where a leakage froin the sprinklers caused a short circuiting of the electric system and a resulting fire? Would the assured look for the recovery of his total damage from his sprinkler leakage, or his fire policies? IV. FORMS OF EXTENDED AREA What do we mean by this? The usual hre policy, after Forms to describing the property covered, defines the locality where it is Cover in insured, that is, it fixes its field of operation in some one place. More than T 111 1 • • . 1 ^ • j: .^ • 11 One Place. it wcjiild he not onlv \ery incon\'enient, hut m tact nnpossible, with moving properties to protect them against fire loss in their journeyings, by issuing a separate policy to co\ er in e\ ery place that they might be in. Forms are devised, therefore, to co\er in any place where such moving properties might be. All marine insurance forms are of necessity of this nature. A marine policy derives its name from its being originally devised to insure proper- ties in transit by water. Properties being carried by ships or boats from one place to another on the water. Insurance of this sort was one of the \ ery first forms to come into use. The perils of the sea, both from shipwreck and fire, were recognized long before the danger of loss from fire to properties on the land was given much thought. As time has gone on, the broad covering quality essential to the marine policy has been found applicable to moving properties on land as well as sea, and in consequence, all forms covering property in changing locations have partaken of much that origin- ally was confined to strictly marine or water borne risks. The auto- mobile policies now being written so freely are good illustrations of the way in which the marine form is now being used. The ordi- nary marine policy usually confines itself to property while in some particular vessel or vessels, it not only protects against loss from perils of the sea, at some one particular point, but anywhere that the journe^•ings of the containing vessel may reach. In the same way the fire policy designed to co\ er moving property does not specify that its protection shall be limited to that property in some one particular place. Its purpose is to protect the property any- where within certain more or less widely defined limits. Such policies in a general way are described as floaters. The use of this title in defining a certain class of fire i"-^i^"'3ii*-'<-' Floaters, policies is a very broad one. In fact, its meaning in England is quite different from that attaching to it in this country. There 318 LECTURES ON HRE INSURANCE they speak of a '• floater" as a policy that is (le\ise(l to sort of till in the shortages of other more speciflc insurazice, that may be dis- closed by destroyed \alues at the time of a loss. They use it more in the way that we speak of ''excess" insurance. We, while we regard excess insurance as one kind of floater, still speak of it as excess and confine the use of the name "floater" to an insurance that travels with a m()\able ]:)ropertv t)r properties that are in vari- ous somewhat indeflnitely defined locations. We think of it as a sort of Guardian Angel, and when injur\- b\- Are occurs to anv of the property under its care, it at once interposes itself and seeks to alleviate the loss. It is a kind of journeying phvsician, e\ er with the tra\eler and always at hand to restore him to health if possible. There are many forms wliich insurance of this sort ma\- take. There are those that are de\ised for some specific propertv and specified owner, of which the most common form is what is known as a "• Tourist Policy.'''' Then there ai^e those that are designed to cover miscellaneous goods in the hands of transporting com- panies or indi\iduals who hold the same in the capacitv of " Covi- mo7i Carriers." Both of these classes are floaters, in the broad sense in which that term is used, though thev raise \erv different questions in the treatment which should be accorded to each. Let us in considering forms applicable to insurance covering in extended areas, first confine ourselves to the forms used in connection with so-called tourist policies. Tourist Poll- -^ policy of this character, is, as its name implies, especiallv cies. designed to accommodate those who are engaged in tra\eling and who naturally desire to carry with them propertv, usuallv in the form of clothing and personal belongings, though at times the forms are extended so as to cover things that are not ordinarilv found with belongings of this character. Some of the forms attach- ing to policies of this nature are extremelv broad and protect against loss or damage from more than fire alone ; in fact, thev are practi- cally marine policies in their make-up. A marine form for this purpose reads substantiallv as folk)ws : — Marine " This policy witnesseth that .... is insured in the sum Tourist of $ ... . from .... to ... . on baggage and [or] per- Form. sonal effects being the property of the Assured or anv member of his family or ser\ant accompauNing the Assured or his famih'. "This policy attaches from the time the property insured is taken from the residence of the Assured and continues where- e\ er said property mav accompanv the Assured or his family FORMS OF EXTENDED AREA 319 durin^ the term of the policy, co\eriiig all the risks and perils of fire, lightning, navigation and transportation, including the risk of theft as described hereafter, while being transported by any railroad, express, transfer and [or] transportation company and [or] by any steamship, steamboat or craft on the ocean or on inland watei's, and to coyer the risk of fire and lightning while in any hotel, dwelling, business building" and [or] other repository, excepting theatres and other places of public amuse- ment. "This policy co\ ers while on board of any yacht against loss caused only by stranding, sinking, burning or collision of the yacht. " It is understood that this policy covers against loss by theft while in the custody of any common carrier or other bailee (that is, the person to whom the goods are committed in trust) and is also to coyer against loss by theft of entire trunks, valises or other shipping packages from rooms occupied by Assured, or when checked in any hotel or boarding house, provided that the local police authorities are notified immediately upon dis- covery of loss, but this clause shall under no circimistances be construed to include pilferage, nor the loss by theft of articles in the custody of the Assured, only as herein mentioned. " This policy does not cover or attach in the residence of the Assured nor on property specifically insured, nor in storage, nor on automobiles or motorcycles and their appurtenances or equipments. " This Company shall not be liable for loss of accounts, bills, currency, deeds, evidences of debt, money, notes or securi- ties, under any circiunstances, nor for loss of jewelry or similar valuables by theft." Following the above more important paragraphs, there are a number of warranties frequently attached to a policy of this nature regarding breakage, risks of war, limitation of value, conditions that might arise when the property covered is in several places at the same time, disregard of particular a\'erage and provisions for cancellation. In this country, policies of this character are only limited usually, so far as the area in which they apply, by the limits of the United States and Canada and on steamers or sailing vessels between places in these two countries. "^'ou will note that a form like this protects against other loss Cover More than that which may he caused either directly or indirectly h\ fire. Than Fire Since a form of this nature is so comprehensive, it is usually desired in preference to one that simply safeguards against a fire loss, and its issuance is confined to such companies as are chartered to do a marine business. As we are considering forms applicable to fire Damage. 320 LECTURES ON FIRE INSURANCE Ordinary Tourist Form — Fire Liability Only. policies only, anil also since the majority of tii"e companies are not operating under charters sufficiently broad to enable them to assume all of these outside hazards, we will pass on to the consideration of such a form as is directly applicable to the ordinary tire policy. A form of this nature will read substantialh- as follows : — '•$.... on . *. . . (usually wearing apparel and personal effects) the property of the assured and members of the family whereyer they may go in the United States of America, Mexico or Canada, or while being transported by train, boat or conyeyance of any kind. "It is understood and agreed that this policy does not cover in any place where the assured has specific insurance on the above described property. "It is understood, if in any case of loss and by reason of such loss the assured shall acquire a right of action against any individual, firm or corporation, for damage to the property above described, he Avill sign and transfer such claim to this company upon receiving payment for loss from this C(mipany and subrogate this company to all his rights and demands of every kind respecting the same and permit suit to be brought in his name, but at this company's risk and expense. " In case the property above described shall be in different places, this policy covers at each place that proportion of the whole amount of this polic\- that the value of the property in each bears to the value of all. "But it is at the same time declared and agreed that any property included in the terms of this policy shall at the time of any tire be insured in any Marine Insurance Company, this policy shall not extend to cover the same, excepting only as far as relates to any excess of value beyond the amoimt of such Marine Insurance or Insurances, and shall not be liable for any loss vmless the amount of such loss shall exceed the amount of such Marine Insurance or Insurances, which said excess only is to be under the protection of this policy, it being the true intent and meaning of this agreement that this company shall not be declared liable for any loss unless the amount of such loss shall exceed the amount of the Marine Insurance or Insurances, and then only for such excess." Vou will note that under a policy of this kind one may insure against fire loss anything that the Insurance Company will accept and allow to be incorporated in the property described in first paragraph of the form. You will also note that such a form pro- tects the property wherever it may be in the United States, Mexico and Canada, not onl\ while it is in hotels or other buildings, but also while it is on railroad trains or steamlioats, either standing or in transit. FORMS OF EXTENDED AREA 32J Vou will also note that this form ceases to apply at any point where the assured has this same property specifically insured. For illustration, suppose that a party intending to tra\el, packs his trunks in readiness for his joiu^nev, takes out. from a certain date, a Tourist Floater, such as we are describing, and before his trunks have been taken from his dwelling a fire occurs and damages these trunks and their contents. If, under these conditions, the assured has a policy covering the contents of his dwelling, he must look to that for his indemnity. If, on the other hand, he has not such a policy, but does hold the Tourist Policy referred to, it could be claimed that the Tourist Policy coxered under this form, even though the journey had not actually commenced. Some forms still further define the liability in a situation of this sort h\ stating that the policy attached from the time the property is taken from the residence of the assured and ceases to apply as soon as this property returns to the residence in question, thus eliminating the doubt that we have said might arise where there was no specific insurance on the tourist's home. The Subrogation Clause, forming a part of the form ^\ e are The Subro- considering, is surely a reasonable provision, for it woidd begation Feat- manifestly unfair either for the assured to collect damages both"*"^* from the Transporting Company and the Insurance Company for injury to the same property, and at the same time to ask the Insurance Companies to stand a loss that was guaranteed against by the Transporting Company. Consequently, if the Insurance Company pays for the loss or damage to the property, while in the hands of the Transporting Company, it is only reasonable that the right shoidd be accorded it of taking subrogation, or that is, of having granted to it the same rights of collection from the Trans- porting Company that the assured under his contract with the Transporting Company was in possession of. The clause providing that if the property covered is in several An Average different phices, that the proportion of the whole amount of the Provision Es- insurance under the policy that is applicable to the particular ^^°**^^* location affected by the fire shall be regarded as the insurance at that particular point, is a simple application of the Average Clause. Assume, in illustration of this, that a tourist had three trunks containing property of equal ^ alue and that incident to the circum- stances of his journey two of these trunks were at a hotel, while the third remained at a railroad station, and that a fire occurred at the railroad station that damaged the trunk therein stored. Under 322 LECTURES ON FIRE INSURANCE the provision referred to, one-third of the policy is covering in the raih-oad station and is liable for the loss to the trunk therein stored. The final paragraph of the form under discussion raises the excess feature, and you will recall that I ha\e already said that excess insurance is of the nature of a floater, and as we purpose discussing excess insurance a little more fully later on, we will defer speaking in detail of this particular clause. While the features that we have been mentioning may be mainly defined as forms, there are some provisions mentioned distinctly of tiie nature of clauses. Since these so-called "clauses," such as the Subrogation Clause, the Average Clause, the Exemption of vSpecific Insurance Clause, ha\ e an essential and \ ery direct bearing on the form as a whole, it seemed best to anticipate some- what, and speak of them as we have done. Traveling ^^'ot infrequently the underwriter is called upon to insure some Property. specific piece of traveling property, and the exercise of careful thought is necessary in determining whether insurance of this char- acter is desirable or not. To illustrate this, let us assume that the subject of the insurance is a highly \alued \iolin that a certain artist wishes to take with him to ^arious summer hotels for concert purposes. Here is a very susceptible piece of propertv, and while it is an article that can usually be easily saved, and if it is really valued by the owner, undoubtedly would be the first thing he would try to save in the event of a fire occurring, yet the opportunities sug- gested for an excessi\-e claim, that could probably be maintained, are A-ery great. The Assured usually regards the risk attendant on an article of this kind as very slight, and expects that the insurance can be written at just as low a rate as he obtains on his household furniture, including a piano and other musical instruments at his home. In such a condition as we are describing, the owner mav, quite likely, be living in a dwelling where the contents are rated at say 75 cents for 5 years. When he commences to tra\el, he and his violin may be in summer hotels of varying merits, rated all the way from 2 to ^h% per annum. It is difficult to get a man to see just why he should pay a higher rate the minute his violin lea\ es his home. In considering a proposition of this kind, actual knowl- edge of the true value of the property invoh ed is a very essential thing, and while the form and the rate cannot reach it, the under- writer is certainly beholden to consider the character of the Assured very tlosely and to feel confident that he reallv prefers the violin to I FORMS OF EXTENDED AREA 323 the money which mir In xoluntarv act of the insured, or otherwise." The pro\ ision embraced in this clause is of the highest importance to the insuring company, but at the same time it fiu'nishes a fretjuent cause of misunderstanding to an ignorant or careless assured. The insurance companies certainly ha^ e the right to know who they are contracting with, and it \\ oidd be u holly wrong if any new party could be introduced in the con- tract without their consent. Nor, you will note, under the Aliena- tion Clause can the insin^ed alter the risk. The Massachusetts standard policy being much less explicit regarding tiiis feature, does not recjuire, as a rule, any clause or provision bearing upon it, other than that which may form a part of the ordinary endorsement relative to change in ownership or occupancy. FIRE INSURANCE CLAUSES 339 The same restrictions apply to the assignment of the policy, and such assignments are, as yuu know, effected by an endorsement that must be assented to by the insuring company in order to con- tinue the policy contract in force. This is another outcome of the personal indemnity feature of the insurance contract, and in\olves the uni\-ersal principle that no new party can pose as an assured luider an insurance policy without the consent of the insurer. The next voidance condition is that of vacancy, the standard Vacancy- form stating that the policy will be \()id '' if the premises hereby ^^°^ insured shall become vacant by the remo\ al of the owner or occupant, and shall remain \ acant for more than thirty da3's after such assent." The New York form is a little more explicit in this, using the words "vacant or unoccupied," instead of simply the word '■'■vacant." Furthermore, the terni limit is reduced to ten days under the New York standard form. The reason for the addition of this word "■ unoccupied" is to gi\e the restriction a broader effect in order to more thoroughly safeguard the insuring company. Technicalities in interpretation ha\e so crept into the decisions rendered on insur- ance contracts that it has often been held that a building was not \ acant so long as there was any air in it. We may say that this is absurd, but at the same time it is a fact, and I ha\e before me a list of upwards of twenty decisions that practically sustain that inter- pretation. Why unoccupancy should not call for an equal applica- tion of the saving grace of common sense in its interpretation, I cannot say, but it does not seem to ha\e been subject to quite the same amount of foolishness as the interpretation of the w'ord "■ vacant." The reason we speak of this condition is because so-called Vacancy Clauses are ones of great importance and distinctly come under the same class that we are now considering, namely, Clauses of Per- mission. In order to properly draft and apply these clauses it must be essential for us to know what constitutes vacancy or unoccu- pancy. In the case of a dwelling, it would meet all the requirements of the policy provision if someone is hal^itually living and sleeping there, even though he was not constantly on the premises. On the other hand it has been held and sustained that to constitute an occupied dwelling house it was not essential that it be the sleeping- place of some party, and that presence in the dwelling of anyone at more or less irregular intervals, and for even very brief periods of time, so long as they were present at periods within the term of limitation, would constitute an occupancy that would render the vacancy permit unnecessary, "^'ou will note tiiat in the Massachu- 340 LECTURES ON FIRE INSURANCE Operating Overtime. setts form the mention of vacancy is followed by the words " bv the remo\aI of the owner or occupant," and the insertion of this word ''remo\al" seems to still further complicate tlie situation, for in a neighboring state where the Standard policy has a clause almost precisely like that in the Massachusetts form, the occupant of a house on account of the state of her health left her home unoccupied for a period of three months, taking with her only her clothing. She left with the understanding that someone was to \isit the prem- ises in the daytime at least twice a week. A fire occurred and the admission of the claim being the subject of controversy the Court held that there is a difference in meaning between ''absence" and " remo\al," and left it to the jury to say whether the house was " \acant b}- remo\al." With these somewhat conflicting opinions as to just what the Vacancy Clauses in the standanl policies do really mean, it is some- what diflicult to determine just how a clause should be worded that will permit further vacancy or unoccupanc\' than that allowed by the policy, and at the same time properly safeguard the interests of the insuring company. The tendency seems to be growing for the insured to place himself on the safe side hx the adoption of the so- called I'nlimited Vacancy Permit. There can be no question but what permission of this kind is allo^vable if the company sees fit to grant it, but it often results in the occurrence of losses that are a great surprise U) the company that finds itself paying a claim on what may have been for some time past a practically abandoned property. Coupled with this provision of voidance in the Massachusetts policy is the statement that if the subject of the insui'ance "be a manufacturing establishment running in whole or in part extra time, except that such establishment may run in whole or in part extra hours, not later than nine o'clock p. m., or if such estab- lishments shall cease operation for more than thiity days without permission in writing endorsed hereon." Clauses granting per- mission for both the overtime and the cease operation feature, are perfectly admis-iible if the company elect to grant them, ami the clauses that are ordinarily in use to meet this need are both regular and generally acceptable. It is questioned, sometimes, as to whether there is any increase in hazard or not, when a manufac- turing establishment is running nights, or when it is entirel\- shut down for a more or less extended period. Experience has shown that hazard does increase, owing to various physical causes, such FIRE INSURANCE CLAUSES 341 as over-heated bearings, the presence of fewer operatives, and the consequent delay in the detection of a fire ; and in the cease opera- tion case, the possible introduction of moral hazard and the less close supervision that a property of this character naturally obtains. This calls for the attachment to the clause of a guarantee as to care and supervision — a guarantee which, though necessary, often proves ineffectual. It is somewhat surprising that in the arrangement of the \'oid- Attempt to ance conditions in the Massachusetts policy, there is interjected Defraud, between the permit to cease operations and the prohiliition as to the keeping of certain extra hazardous articles, a proviso stating that the policy should be ^ oid " if the insured shall make any attempt to defraud the companv, either before or after the loss." It would seem as if that proviso should have been made at the outset, or if brought in, in connection with any of the other voidances, that it should have accompanied the first of the men- tioned \oidances ; namely, that of misrepresentation. The framing of a clause to exempt the assured from the voidance of his policy if he has been guilty of fraud in connection therewith, is some- thing that we, fortunately, in this part of the country do not have to consider, but the way that insurance legislation has been going in some of our Western and Southern states, it is not unlikely that fraud may, when perpetrated in connection with a fire insur- ance policv, be ele\'ated from the ranks of crime to those of virtue. Probably the most important of all of the clauses, and the ones Dangerous that are called the most frequently into use are those that are Material, drafted to meet the last of the requirements of this portion of the Massachusetts policy. Those that state that the policv shall be void if gunpowder or certain other hazardous articles mentioned are kept in any manner deviating from that allowed or prescribed by law, or that if certain volatile products grouped usually under the general name of "gasolene," shall be kept on the premises insured. The enormous increase in the use of the so-called volatile pro- ducts has necessitated the almost constant attachment of clauses permitting some one or the other of them to be kept and used under constantly varying conditions. The New York form of policy, in some ways, is more satisfactory in dealing with this question than is that of Massachusetts, for it does not recognize the fact as avert- ing a voidance, that usage or custom of trade in connection with the business carried on in insured premises will waive the provision 342 LECTURES ON FIRE INSURANCE of the policy, which states that such policy shall be \ oid if these hazardous materials are kept. This renders it seemino;ly more necessary to have the Clause of Permission that grants the keeping or using of these so-called gasolene products much more clearly defined when used with the New York policy than with that of Massachusetts, though I do not find that there is any material difference in the phraseology of the forms currently u^ed under each of these policies. The increasing use of automobiles has introduced another feature of this gasolene hazard, and one that is, nowadays, ever with VIS. This has resulted in the combining in one clause of the permission to keep, under certain conditions, gasolene products and to permit also the presence of the automobile in connection with which they are used. This gasolene feature raises the somewhat interesting question as to whether, in the written description of a property, the mention of the presence of these extra hazardous materials will, by itself, waive the policy provision prohibiting them, or whether it is not necessary to have a distinct clause calling attention to the presence of these dangerous substances and pre- scribing the conditions under which they may be kept in the in- sured premises. Sometimes the Courts have held that wherever these prohibited articles might naturally or usually belong to a stock of goods or other subject matter insured, that it is not neces- sary to further grant permit for their use, but such decisions are by no means absolute or unexceptional, and the only safe course to pursue is to attach the regular Clause of Permission that will meet the special condition of the case. Damage by ^^'* mention is made in the Massachusetts form as to the atti- Lightning. tude of the standard policy with respect to loss by lightning, lea\- ing it, therefore, to be ihstinctly assumed that fire resulting from lightning is covered bv the policy. This would except the damage that might be caused bv lightning, other than that which might come from a resulting fire. The New York form of policy places this question beyond doubt, and states that '" liability for direct damage by lightning may be assumed by specific agreement here- on." It is this proviso that has given rise to the use t)f the so-called Lightning Clause, which is not, as so many people seem to think, necessary to enable them to collect for the fire damage that may result from a stroke of lightning, but it also causes the policy to cover the wreckage, or water damage, that may result from a liilhtnin''; stroke in cases where a fire does not ensue. FIRE INSURANCE CLAUSES 343 There are certain special conditions brought into the New Special York policy that, while their recognition may call for the use ofVoidance Permissive Clauses, are still ones that can, perhaps, be more prop- Conditions, erly considered under the topic of "Clauses to meet Special Con- ditions," than for us to dwell on them here. I refer to those exemptions from liability for loss that may be caused by invasion, insurrection, riot, ci\il war, military or usurped power, neglect, explosion, fallen buildings, and in some of our states, earthquake. Permissive clauses to recognize hazards resulting from such sources are, in the case of some of these causes, at least admissible and will be the subject for consideration later on. Another of the special conditions that the New York policy Leased Land, recognizes as constituting voidance, which Massachusetts over- looks, although it is one of the points that the careful underwriter always considers, is that of the leased land feature in cases where the subject of insurance stands upon land held in that manner. The New York policy distinctly states that the policy will be void "if the subject of the insurance be a building on ground not owned by the insured." Massachusetts, doubtless, regards the withholding oi information of this sort as being one of the material facts that should be presented at the time the insurance was applied for. but it is a good plan to have attention especially called to it in the manner that the New York form of policy does. The clause safeguarding the assured in the event of a condition of this sort, while it is a Permissive Clause, is usually incor- porated directly with the form of property description, and states, after defining the property, that it is situated on leased land, located so and so. So much for the conditions that arise under the two mo^t Standard widely used forms of standard policy that call for the attachment Clauses Es- of Permissive Clauses. As to the phraseology of such clauses, scntial to it seems to me, those that are prescribed by the National Board ^^*^* give us as desirable standards to work from as any, and uniform- ity in this respect is greatly to be desired. Remember that clauses are only needed where the waiving of some of the provi- sions of the standard policy are required, and remember what we said in an earlier Lecture that since the standard policy was an instrument devised by the very best of underwriting and legal talent, that it is unwise to attempt to amend it unless conditions absolutely require it. and then only within carefully defined limits. Clauses are in every way fully as important as forms, 344 LECTURES ON FIRE INSURANCE and the same care in drafting them and in seeing to it that they are so worded as to do away with every possible doubt as to their real meaning, should be followed as in the describing of proper- ties, or locations, or kind of liability covered. Illustrations of clauses to meet the conditions we have been speaking of, are the following: — Removal Petmit Permits. "Permission is hereby given during the period of thirty days from date hereof to remove the property insured under this policy from 44 vSouth Main Street to brick building, No. 815 \\\ibash Avenue, Chicago. "It is understood and agreed that during such removal this policy shall attach in both locations in proportion as the value of the property insured in each bears to such value in both localities, that from and after the expiration of said thirty days and prior thereto, if the removal shall have been completed, this policy shall attach in the new location only, and the effect of the average clause be discontinued, and that additional premium pro rata of increase in rate, if any, in the new location shall be paid within thirty days from this date." Mechanics^ Permits a. Builder's Risk. "$ Builder's risk on the story build- incr, with roof in course of construction, including material on ground immediately adjacent thereto, situated.. "Doors and windows to be closed and locked every night, and on Sundays and holidays, and shavings to be thoroughly cleaned out at least once a week. Smoking and fire prohibited in or around said building except fire in plumber's or tinner's pots. Such pots to be taken out of building every night." Note. This mav be used for either owner or builder. When policy is issued to owner of building under construction this form fully protects him, but when policy is issued to the contractor or builder, let the policy be drawn in favor of either (or both) by name, but add always "To cover his (or their) interest." If the owner makes partial payments as building progresses, then the policy should be issued in the name of both owner and builder to prevent legal complications and secure prompt payment of loss. FIRE INSURANCE CLAUSES 345 b. Ordinary Mechanic's Perinit. ''In consideration of $ additional premium paid Permi's. therefor, and the warranty by the insured that no paint or similar substance shall be removed by burning in or upon the premises insured (or containing the property insured) without the consent of this company indorsed on this policy, permission is hereby given fur mechanics to work in and about said premises for months from date, to make alterations, additions or repairs, and this policy (so far as it applies on building) shall also cover all materials and sup- plies therefor, therein or adjacent, and said alterations or additions when completed." Note. This also covers building materials and supplies even though not yet a part of the building. c. Special Alechanic's Permit. "Builders' risks for two months on the two-story, frame dwelling house, in course of erection, situated No fire to be allowed in said building except for heating glue in the kitchen fireplace. Doors and windows to be closed and locked at night, and shavings to be thoroughly cleaned out once a week. " Note. This form may be used with slight modification to cover additions or alterations to an already existing building; to vary the term of permission or to include a charge for such permission. d. Demolition Permit. "In consideration of $ additional premium, this company under this policy shall, in case of fire, be liable also for the loss or damage occasioned by the enforcement of any state law or city ordinance which necessitates, in rebuild- ing, the demolition of any portion of the insured building not damaged by fire, but not beyond the actual value, prior to the fire, of the property subject to such demolition and not for any expense of greater cost of reconstruction; provided that in no event shall this company be liable under this policy beyond the sum for which it is issued, and provided, further, that this company shall be liable only for such pro- portion of the loss or damage as the amount hereby insured bears to the whole amount insured thereon, whether such other insurance contains a similar clause or not." 346 LECTURES ON FIRE INSURANCE I e. ImprovenicJit or Betterment Permit. Permits. "In the event of fire causing loss or damage to assured's improvements, additions, stairways, ceilings, passageways, decorations or other betterments to leased building, or to machinery or fixtures installed therein at the expense of assured, the same shall be adjusted with and paid to the assured without reference to or contribution from insurance on the buildings. The intention of this policy is to place the insured, in the event of loss, in the position of that of absolute owner of said improvements, fixtures and machinerv. " Note. While this permit is one that is not often used, it will avoid the opportunity for dispute that sometimes arises with owners of partly burned properties. Vacancy Permit Clauses waiving voidance under this condition are many and varied, ranging from the broad, unlimited Boston form to the restrictive permission used in the vSouth, reading: — ''Permission is hereby given that the premises herein described may remain vacant or unoccupied between occu- pants during the entire term of this policy. "And in consideration of the increased hazard, bv reason of such vacancy, it is hereby understood and agreed that during such vacancy, and in lieu of an extra charge therefor, one third of the amount of the insurance hereunder shall be and is suspended and of no effect; and, during the vacancv hereby consented to, the amount of this policv is reduced to dollars (being two thirds of original amount of insurance). "Provided, that when the premises hereiii described shall again become occupied, the amount of this policv shall be restored to the amount as at the date of this indorsement." Any of these permits may be subject to time limitations, to additional premiums, or to stipulations regarding supervision of premises. Unoccupancy Permits Clauses granting this privilege can be veiT brief and simply read as follows: — "In consideration of $ extra premium, permission is hereby given for the property insured under this policy to remain unoccupied for a period of from to FIRE INSURANCE CLAUSES 347 Usually some stipulation as to care and supervision of the permits, property follows this. Cease Operation Permit A clause granting this privilege in a manufacturing plant will read as the Unoccupancy Permit just quoted, except that the word "idle" takes the place of "unoccupied," and a clause guar- anteeing continuous watchman's service should be invariably required. Overtime or Extra Hour Permits Clauses similar in arrangement to Cease Operation Permits, but defining the extra hours for which the privilege is granted, are applicable to this condition. Gasolenet etc., Permits ^Standard clauses designed to permit, and at the same time to safeguard the storage or use of hazardous articles of the above class, are almost innumerable. I would refer you to the following adopted by the National Board of Fire Underwriters, as showing what may be granted along these lines and what restrictions or warranties should form a part of such permits. Stai/dard Forms. No. lo — Permits for buildings and contents when Automo- biles using gasolene are kept or stored. No. 16 — Permit for use of a gasolene engine. No. 17 — Permit for use of a gasolene Gas Machine, with outside carbureter. No. 18 — do, do, inside. No. 19 — Permit for the use of gasolene lighting systems having outside tanks and inside flame heated generators. No. 22 — do, do, with inside tanks. No. 20 — Permit for the use of fuel oil. Features necessary for safe underwriting in the granting of these permits are brought out in them and suggest what must be required and guaranteed in the granting of such permission. These safety requirements are more matters of Insurance Engi- neering and Chemical Hazard than of Economics. VI CLAUSES OF EXEMPTION AND OF WARRANT CLAUSES OF TITLE AND INSURABLE INTEREST CLAUSES FOR SPECIAL EMERGENCIES The various Clauses which it is our purpose to discuss at this time, are divided, you will note, into three general classes, each of which is capable of more or less sub-division. Taking them in the order I have mentioned, I would ask you to consider for a time the Clauses that I have termed as being those of "Exemption and of Warrant." Clauses of Exemption Clauses of this nature are ones that are adopted to exclude conditions that materially affect the hazard, and which are de- termining factors in arriving at the rate charged for insurance on the property involved. While the property covered is the same with or without the attachment of clauses of this nature, there are under certain conditions extra features of hazard involved, of which, if no mention was made or against which no exemption was taken, would legitimately be included under the policy as being insured against no matter what was the origin of the fire and whether these extra hazardous features were the cause of it or not. Spontaneous One of the best illustrations of conditions of this sort is that of the familiar Spontaneous Combustion Clause, a clause which you know is quite generally adopted in the insuring of bituminous coal or structures containing the same. While bituminous coal is subject to serious damage from fire that may originate through ordinary or external causes, it is also specially liable to the spon- taneous combustion hazard which carelessness in the handling or storing of it may cause to become a very present and serious menace to the coal itself and to the surrounding property. Danger of loss of this character can, with proper care and watchfulness almost always be guarded against and prevented. On the other hand, carelessness on the part of the coal operator causes, through the likelihood of spontaneous combustion, an undue amount of extra hazard. Realizing this, properties of this character are Combustion. MISCELLANEOUS CLAUSES 349 ordinarily rated in two ways. There is the rate on the Coal Yard or Coal Pocket itself and its contents, with no mention of any exemption, and there is an alternative and much lower rate that can be used if the policy distinctly states that in consideration of this lower rate, it is understood and agreed that the Insuring Company is not liable for loss that may be caused by the sponta- neous combustion of bituminous coal on the assured's premises. Without such a clause, as we have already stated, loss from this special and constant danger is fully insured against, and since the risk of loss from this cause is such a great one, the hazard assumed by the insuring Companv is vastly increased. This is but one of the Clauses of Exemption. In it the exemption exists in the agreement that claims will not be made for losses resulting from spontaneous fire in the coal. The ordinary and simple form of clause ordinarily used in pro- viding this exemption from spontaneous combustion liability is worded substantially as follows : — "In consideration of the reduced rate at which this policy is written, it is mutually imderstood and agreed that this com- panv is not liable for loss occasioned by the spontaneous combustion of bituminous coal on the premises of the assured." Since we have by this illustration shown in a general way the purpose and working of a Clause of Exemption, it may be inter- esting for us to follow out the idea a little more fully, and as certain features of marine insurance illustrate these conditions more clearly, we may with profit dwell on the workings of this extra hazard, as illustrated by insurance of this character. Fire in ships may arise from a variety of causes — from Attitude of lightning; spontaneous combustion of the cargo; negligence of the Marine officers, or crew of the ship ; from the acts of enemies ; or even the precautionary means that sometimes are taken where a vessel is burned by municipal authority to avoid danger of infection from some contagious disease. Now, under the ordinary policy, in such cases, the Insuring Company is liable for loss occasioned by fire, whether its origin is unexplainable, or whether it can properly be assigned to either one of the above mentioned causes, or some other cause akin to them, ivith the exception of combtistion generated through some inherent defect in the s/ib/ect ins/ircd^ that is the cargo of the vessel, or because such cargo was shipped in a dangerous or damaged state. If, however, the cargo was properly defined and was in perfect condition at the time of the shipment, 350 LECTURES ON FIRE INSURANCE and later on comlnistion resulted from the entrance of sea water upon said carg'o and its effect on the same, it would be covered by the policy. In cases \vhere certain goods were insured and fire originated in them under either of the conditions just described and such fire extended to other goods, or to the ship itself, the insur- ance on such other goods is responsible for the tire loss to them and the insurance on the ship could be held to pay the damage sus- tained by it. We have cited this condition of fire loss under marine insur- ance as illustrating one feature that must be considered in connec- tion with spontaneous combustion. If certain goods were damaged by a fire originating from spontaneous combustion in some exposing property, it would be wholly immaterial whether the properties affected by this exposing fire were subject to the provision of the Spontaneous Combustion Clause or not, and even the fact that the property in which the fire originated carried insurance excluding damage from spontaneous combustion, would not relieve the Com- panies insuring the exposing damaged property from liability. As we stated in our earlier comments on these Clauses of Exemption, they are designed not only to eliminate the consequences of certain severe hazards for the Insurance Company, but also, by their attachment to the policy, to effect a very material saving in the cost of insurance to the insured. Exemption Clauses are wise, since they impose on the insured the necessity of his exercising proper care and supervision, which will almost invariably save him from losses that without such supervision are likely to occur. Consequential Damagfe. Another proper fieid for the operation of Clauses of Exemp- tion is the one that is broadly termed ''Consequential Damage," and in no better way can this be brought to yoiu" minds than by the use of another familiar illustration. Cold storage plants are almost invariably written with clauses of this character. Usually in cold storage warehouses the low temperature that has to be maintained for the preservation of perishable merchandise (generally food stuffs of some sort or other) is produced by a refrigerating plant. Such damage by fire as might render the machinery of this refriger- ating plant unable to operate would result almost immediately in a rapid rise in temperature in the cold storage warerooms, and a con- secjuent damage, or total spoiling of the perishable contents. If insurance is written on the contents of a cold storage ware- MISCELLANEOUS CLAUSES 351 house simply describing the property insured, and the location in Cold Storage which it is insured and makes no mention of this consequential Insurance, dam.ige, a loss resulting from a fire would find the Insurance Company liable, eyen though the fire itself did not reach the stored merchandise, but on account of the crippling of the refrigerating plant, caused the destruction of the property through increased temperature. If, on the other hand, the clause exempting from consecjuential damage was attached and the fire crippled the refrig- erating plant and the merchandise was spoiled in consequence, there would be no liability attaching to the Company. This proyision is a \ylse one for just the same reasons that we haye mentioned in connection with the Spontaneous Combustion Clause. A refrigerating plant should be so constructed and arranged, and more than all, so superyised as to render its destruction by fire extremely unlikely, and the care necessary on the part of the cold storage warehouse men along these lines is one that it is not only proper, but is h\\\y incumbent upon them to exercise. Looking at it from the yiewpoint of the Insurance Companies, absence of this Clause of Exemption leayes them open to a \ery seyere loss from a fire, that not only should haye been ayoidable through proper care, but aUo one that may haye been yery trifling in the extent of the actual and direct damage which it caused. Many companies refuse to write cold storage merchandise without the attachment of this clause, and the position is an eminently proper one. The same questions which we raised relatiye to the effect on the rale by the Combustion Clause are applicable to the Consequential Damage feature. A clause covering conditions of this latter sort might properly read : — '• This clause to be attached to all policies covering on merchandise, stocks or products in houses artificially cooled, other than solely by the storage of ice. Notice is hereby given, that it is understood and agreed that the insurance under this policy does not extend in its ap- plication to cover, and this company shall not be liable for any indirect or consequential loss or damage, including loss or damage caused by change of temperature resulting from, occa- sioned, or caused by the total or partial destruction by fire of the refrigerating or cooling apparatus, connections or supply pipes, nor by the interruption of the refrigerating or cooling processes from any cause." 352 LECTURES ON nRE INSURANCE 11 Greenhouse Insurance. You will note that this is purely a Clause of Exemption and not of Warrant, since the assured does not agree under it to maintain any special supervision, process or device for the safeguarding of his propertv, but simply accepts the insurance with a definite under- standing that it does not cover indirect or consequential damage resulting from injury to the refrigerating or cooling apparatus. Another good illustration of the consequential damage feature, and one where the physical conditions are just re\ersed from those that we have cited, is that of greenhouse insurance. In Winter weather the preservation of the contents of a greenhouse is, of course, absolutely dependent on the heating system employed to maintain the proper temperature for the life and growth of the plants. Damage to the so-called " headhouse " or heating plant of the system might, as the result of a very small fire, cause an entire shut-down of the heating plant, producing a drop in temperature in the green- houses themselves, and as a result a lot of frozen vegetation. Consequently this hazard, which should be regarded in just the same way by the assured that the refrigerating plant hre should be, and which should be constantly guarded against, is assumed properly by the assured himself. Bv changing the words, '• refrigerating or cooling" to "heating and circulating," in the form cited for cold storage plants, we ha\'e a proper Greenhouse Consequential Damage Exemption Clause. Since Consequential Damage Clauses applv almost whollv to contents rather than to buildings, it can readilv be seen that the opportunity to get rid of an imdesirable or unsalable stock is a very tempting one, because a small fire that only temporarilv crippled and injured the warehouse or the greenhouse would accomplish it. There is no easier way to dispose of a stock of bad eggs that the owner of the cold storage plant has discovered form a material part of the contents of his plant, than to have a small fire in the refrig- erating building that would allow the temperature to rise to the spoiling point in the storeroom and then to make it appear that it was this circimistance, and not conditions that previously existed, that actually caused the deterioration of the stock in question. Fortunately perhaps, from this viewpoint of cold storage in- surance, the owners and operators of the plant are usually different parties from those directly owning and insuring the contents, al- though not infrequently we find them to be the same persons. MISCELLANEOUS CLAUSES 353 Clauses of Warrant Clauses of Warrant are ones that are applicable to those cases -where special hazards of occupancy or equipment are assumed under the policy, with the understanding and agreement that losses from the ever present and exceptional risks associated with them, are fully covered, provided that in connection with these hazardous but per- mitted articles or devices certain safeguarding methods are to be followed in connection with them. The disposition of this feature is not left in doubt. It is clearly stated as to just what the treatment shall be. You can readily see that a clause of this nature is one that has to be verv decidedly taken into account in the determining of a rate. A good illustration of clauses oi this nature is what is known as the "Acetylene Gas Permit or Warrant," and such a form reads : — " In consideration of the following warranties on the part Acetylene of the assured, permission is hereby granted, when not in Permits, violation of any restriction imposed by law, to use acetylene gas on the premises described in this policy, generated by Acetylene Gas Machine, manufactured by , at provided the machine is contained in a separate and independent building located and constructed as per specifications printed on the back of this permit. "The use of liquid acetvlene or gas generated therefrom on the premises described herein is absolutely prohibited." The permission granted under this form refers to the use of one of the most dangerous compounds ever introduced to the public, and one which should only be tolerated under severe restrictions. Therefore, a clause such as I have just quoted, is alwavs accompanied bv a set of warrants and cautions, the war- rants stating how the acetvlene generator, and the calcium carbide used in it, shall be cared for, and the cautions being matters of an educational nature relati\'e to the special hazards of the acetylene. These cautions are more matters of insurance engineering and the chemistry of fire hazards than of economics, and we will not discuss them here. It is extremelv important, however, that there be attached to the policv, as a part of the clause, these w arranties and cautions, for thev therebv become a part of the contract, and violation of them materially weakens the position of the assured, and further safe- guards the insuring companv. In fact, since the warrants are essentiallv a part of the contract, any violation of them practically constitutes a voidance of the policy. 354 LECTURES ON FIRE INSURANCE Gasolene Permits. Automobile Insurance. Mucl: the same conditions exist in the case of printers and other parties who are likely to use benzine or similar cleaning com- pounds in connection with their business. Ordinarily, in rating^ properties of this sort quite a material advance is made for the assumption that there must be cleansing material of this nature in the phint. Where, however, the assured feels that he can, and is willing to di'spense with the use of them, he is able to effect a con- siderable saving in the cost of his insurance bv the attachment of a clause warranting that such materials shall not be used or kept bv him during the hfe of the policy. Such a Clause of Warrantv is the following : — " Warranted bv the assured that no l)enzine, gasolene, mineral turpentine, naphtha or other product of petroleum, except refined coal oil of lawful test, shall be used or kept on the premises during the life of this policy." The greatlv extended use of automobiles and the provisions that it has been necessary to prescribe as to the way in which thev shall be kept, housed and cared for, have called for Warranty clauses defining and niaking a part of the contract the restricions for safety which it has been deenied advisable to impose. Since it is these same gasolene or benzine feature that is the one of special hazard in connection with automobiles, the clauses of warrant are ones defining the methods used for filling and caring for the machines, and also limiting the quantitv of gasolene that there may be in the insured premises at any one time. Clauses of this nature affect more generallv the policies that are used on the containing building rather than on the car itself, but thev would be equally applicable to lines of fire insurance written covering the automobile specificallv. Since in insuring automobiles it is generally desired to have one policv cover all classes of mishaps to which thev mav possibly be subjected, and since the marine form of policy more readily complies with all of these conditions, direct insurance on automobiles is generally of the marine rather than of the straight fire type. The special feature of warrant that we wish to impress here is that the warrantv clause or rider attached to the policy which grants permission for either the storage or the use of any of the hazardous materials referred to, shall at the same time be restrictive in its nature and shall define clearly the conditions under which such hazardous materials shall be kept and used. In the event of a loss then, the fact that these restrictions and warrants are a part of the MISCELLANEOUS CLAUSES 355 contract gi^•es the strongest sort of a defense in the event of a loss occurring from a tire directly attributable to a non-compliance with the warranty conditions. Another class of warranties may be illustrated by a clause like Some other the following:— Warranties. "It is a condition of this policy and a warranty on the part of the assured that the dwelling above described shall be occupied by the owner and his family, and if occupied by any other party this policy shall be void and of no effect." In this you will note that the owner oi the insured dwelling agrees that the dwelling, against the loss of which he is insured, shall be occupied by himself, and if he fails so to occupy it, and rents, leases or permits its occupancv by any other partv, the insur- ance immediately becomes void. The clauses of warrant that are used in automatic spriidvler insurance further illustrate this warranty feature that we are speaking of. A form used for this purpose is the following : — "■In consideration of the reduced rate of premium granted on the above described premises by the Underwriters' Associ- ation of New York State for the introduction of Automatic Sprinklers therein, it is hereby made a part of this policy that the assured (if the owner of the realty, or if, being a tenant, in control of the sprinkler equipment) shall maintain said Automatic Sprinkler System in good working order during the life of this insurance, and that no change shall be made in said Sprinkler Equipment or the water supply therefor without having first obtained the consent and approval of the said Underwriters' Association of New York State." This form we have alreadv alluded to in speaking of automatic The Con- sprinkler insurance, but it is interesting to note at this point the sidcration. special warranty feature embodied. You see that the clause begins with the words "In consideration of the reduced rate, etc." This is always a wise provision in the framing of any warranty clause, since it plays the same part in the conditions of the contract as do the words " ^"alue received" which are customarily used on pro- missory notes, or " In consideration of Dollars" that is com- monly used as the opening phrase in a deed or bill of sale. It recognizes that there has been a consideration between the parties, and that in the case of an insurance policy the requirements are not made by the insurer without a consideration being gi\ en there- for. In this way the terms of the contract are verv materially strenorthened. 356 LECTURES ON FIRE INSURANCE Electric Warranties. The Im- portant Feature of Warranties and Exemp- tion. You will also note, referring again to this sprinkler warranty, that the assured or whoever is in control of the sprinkler equip- ment, agrees to maintain said equipment in good working order, and to make no change in its arrangement or effectiveness, without o1')taining pre^■ious consent from the proper parties. Still another form of Warranty Clause appears in what is called the "General Sprinkler Guarantee," a form that is espec- ially applicable in places where official inspecticni of sprinkler equipments is both difficult and infrequent. A form to meet such conditions is the following : — "This policy having been issued at a reduced rate of premium on account of the installation of an Automatic Sprinkler Equipment in the premises described, it is hereby made a condition of this policy that the assured shall use due diligence to maintain such Automatic Sprinkler System in good working order during the life of this policy." This Clause, in addition to naming the consideration granted (that of reduced rate), includes a promise by the assured to use due diligence to maintain the sprinkler equipment in good working order during the life of the policy. While due diligence is a pretty difficult thing to clearly define, and a still more difficult thing to prove the non-existence of in the event of a loss, a clause like this acts to quite an extent as a safe- guard, and in some instances as a defense against losses that are directly due to the assured's own carelessness and neglect, and his going back on his pledge and at the same time \'iolating a provision of the standard policy contract. We would also call yoin" attention to the \varranties that are commonly used in connection with electrical equipments. In these clauses not only is permission gi^ en to use electricity for lighting or other purposes, but accompanying this permission is a warranty on the part of the assured as to the nature of the installation of the electrical equipment, aiul also pledges as to the wav in which it shall be maintained. The all-important thing to bear in mind in connection with anv of these clauses of exemption and warrant is to see to it that thev are so worded that they not only become an actual part of the contract itself, but that they define clearly what is allowed, to what extent it is allowed, and the conditions guaranteed to be maintained on account of its allowance. Of course, restrictions of this sort re- late only to those materials, devices or processes that the voidance MISCELLANEOUS CLAUSES 357 provisions of the policy cite as a cause for the immediate nullifying of the contract of insurance. Clauses of Title and Insurable Interest Under this topic your attention is directed to clauses that are frequently used recognizing other interests than those of sole and unconditional ownership. Also clauses stating, if the sul^ject of insurance be a building, that it is located on leased land (if such is the case), and also clauses which may grant any different right, or rights, of subrogation than those that are especially outlined in the body of the policy or that may waive this right. The provisions of the New York standard form of policy call for greater explicit- ness in clauses of this nature than do those that form a part of the Massachusetts standard. The latter form, you will note, states that the policy " shall ^^ss. Policy be void if any material fact or circumstance, stated in writing, has 'ovisions. not been fairly represented by the assured." Further than that there is no restriction as to the presence of mortgages or liens of any kind on the property, or to the fact that the building (if the subject of the insurance be a building) is standing on land owned by someone other than the owner of the building itself. In the event of a loss occurring where any of these conditions exist and where the policy contract in use is of the Massachusetts form, it always raises a question in the event of a dispute arising as to the validity of the claim under this provision, as to whether in the particular case under consideration the withholding of the in- formation as to a mortgage, or a lien, or leased land, was a material fact or circumstance, and if the Court should decide that it was not, and that it created no increase of hazard, there usually can be no successful defense set up. Turning to the New York standard form, we find these pro- New York visions of the policy very much more clearly defined. For example. Policy the policy will be void " if the interest of the insured be other than Provisions, unconditional and sole ownership, or if the subject of insurance 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 encumbered by a chattel mortgage, or if, with the knowledge of the insured, foreclosure proceedings be commenced or notice given of sale of any property coxered by this policy by virtue of any mortgage or trust deed." You will note how much more clearly the voidance conditions that relate to title and ownership are de- 358 LECTURES ON FIRE INSURANCE fined in this New York standard form than is the case in that of Massachusetts. In considering^ clauses that recognize these varying conchtions of title and ownership, if we see to it that they comply with the New York provisions we are sure to be on the safe side in all cases. Mortgagee Much the most frecjuent of the clauses relating to the title to Interests. the insured property are those that recognize other interests. These are mainly in the case of buildings and are usually those of a mort- gagee, or in the case of personal property the conditions that are imposed by a so-called chattel mortgage. For purposes of safety and to give additional security to a creditor, policies are at times made payable to such creditor even though he does not have a formal lien on the property by virtue of a duly recorded mortgage or assignment. In cases of this sort a very simple clause will suf- fice, and such a clause is usually termed the " Loss Payable Clause," and only states that "Loss, if any, is payable to as his in- terest may appear." Should a loss occur, the Insuring Company noting this clause on its policy will, in making out its draft in payment, include not only the name of the assured, that is the party to whom the policy directly runs, but will also include on the draft or check the name of " so and so," the payee mentioned. When a mortgage exists it is desirable to be somewhat more explicit than this, in order to make clear that the provision of the standard policy as to sole and unconditional ownership has not been ignored in the taking out of the insurance, and mortgagee clauses are usually written in one of two different forms. The first is what is ordinarily spoken of as simply the Mortgagee Form, and reads as follows : — " $ On his interest as mortgagee on the four-storv brick building situated and known as Nos It is agreed that whenever this company shall pay to the mortgagee any loss under this policy, and shall claim that as to the mortgagor or owner no liability existed, it shall at once be legally sub- rogated to all the rights of the mortgagee under any and all obligations to the mortgage debt to the extent of such payment, or at its option may pay the whcde principal and interest due on the mortgage, and shall thereupon receive a full assign- ment and transfer of the mortgage, and all other obligations held as security or collateral for the mortgage debt, but no such subrogation shall impair the right of the mortgagee to recover the full amount of his claim." MISCELLANEOUS CLAUSES 359 In contrast to this form clauses are in common use in many of the States which are very much more explicit, and of which the following is a sample : — "Mortgage Clause with Full Contribution Loss, if any, payable to Bank as mortgagee (or trustee) as interest may appear, and this insurance, as to the interest of the mortgagee (or trustee) only therein, shall not be invalidated by any act or neglect of the mortgagor or the owner of the within described property, nor by any fore- closure or other proceedings or notice of sale relating to the property, nor by any change in the title or ownership of the property, nor by the occupation of the premises for purposes more hazardous than are permitted by this policy. Provided, that in case the mortgagor or owner shall neglect to pay any premium due under this policy the mortgagee (or trustee) shall, on demand, pay the same." This is only a part i)i the full contribution mortgage clause. It also contains the following provisions, that the mortgagee (or trustee) must notify the Company of any change of ownership or occupancy, or increase of hazard. Also that he shall be liable on demand for additional premium due to such increased hazard, and that if he does not properly attend to this feature the policy shall be void. Under this form, too, the Company further reserves the right by a special Clause to cancel the policy at any time, as pre- scribed in the standard policy, but that in such case the policy will continue in force for the benefit of the mortgagee for ten days after notice may have been served on him, after which time his rights under the policy cease. This full contribution clause still further provides as to the relation which other insurance on the property shall bear to loss or damage sustained when held by parties having an insurable interest therein, whether as owners or mortgagees. This is a very important provision of the full contribution clause, for it prevents any Company from being obliged to pay possibly a total loss to a mortgagee where the other insurance upon the same property in which the mortgagee has no interest may get off with a very trifling contribution. Both of these forms carry with them the right for the Com- pany paying a loss to the mortgagee to be immediately subrogated to all the rights that the mortgagee formerly held. This usually means that if the Insuring Company shall pay to the mortgagee the full amount of his mortgage, they will immediately he placed in the position of mortgagees and have the same lien upon the 360 LECTURES ON FIRE INSURANCE property, that formed the coHateral for the mortgage, that the mortgagees themselves had. Mortgagee interests are so \aried and the conditions under w hich mortgage loans are made are of such different natures that a wide \ariety of phrasing has crept into the so-called mortgagee clauses, though essentially they are one or the other of the two classes of clauses that we have just spoken of : that is, those either with or without the full contribution feature. Whenever possible, it is, of course, in the interests of the Insuring Company to secure the attachment of the full contribution clause, especially where there may be a doubt as to the placing of the payee or mortgagee clause on all the other policies covering the same property. At times, too, it is desirable for the mortgagee to have made a part of the clause the words, " under present or any future mortgages." This clause, where, for example, on a building in course of construction addi- tional monies may be advanced from time to time as the work pro- gresses, is a safeguard to both the mortgagor and the mortgagee and is not objectional to the Insuring Companv. A somewhat unusual clause in connection with mortgagee interests is the so-called '' Clause of Consent," reading: — " At the request of the insured this companv herebv con- sents that loss, if any, under this policy, shall be pavable to (subject to Mortgagee Clause attached), not intending to waive and not thereby waiving any previous rights, privileges or equities secured to this company by the terms and stipulations of this policy." Clauses of this nature may be attached after the date of the policy, and call for them is brought about by the fact that a pro- perty on which there is already existing insurance has become subject to a mortgage, and the Insuring Companv is asked to con- sent to the payment of the loss, if any, to the mortgagee, but at the same time you will note that it does not waive any of the previous rights or privileges that might accrue to it under the original policy contract. With any payee clause, whether to a mortgagee or anyone else, the condition for the Insuring Company to be sure of is as to the relation of the lien to sound value. In other wortls, what is the equity in the propert}" of the designated owner? Buildings on The clause relating to the leased land feature, in order to meet the provisions of the New York policy, is very simple, and perhaps is more properly a part of the descriptive form attaching to the Leased Land. MISCELLANEOUS CLAUSES 361 policy than a clause of title. It simply states that the insured building stands on leased land. ]More than that it is not necessary to say anything, though the careful underwriter will, of course, at once seek to find out what are the conditions of the lease under which the building is allowed to stand on land belonging to some- one other than the actual owner of such building. Simply stating that the building is on leased land discloses the condition required by the New York standard form in order to pre\ent a voidance of the contract. \Vhile it is not essential here in jSIassachusetts to disclose this fact, so far as a voidance of the policy goes, it is, in justice to the Insuring Company, a feature that should be known, since in many cases it is a material fact or circumstance affecting, the property. Clauses of subrogation are not used to any great extent, because Subrogation, the right to subrogate is clearly granted under both of the standard forms of policy that we have been especially considering. In Mas- sachusetts no restriction is placed, other than the extent of the amount paid on the loss, as to the rights to recover under subroga- tion from anv partv against whom the assured mav feel that he has a claim, usuallv on account of negligence contributory to the tire. In New York State the further restriction is placed that the Insur- ing Company can only claim this right of subrogation (and to the same extent as in Massachusetts) when they are ready to claim that the fire was caused by the act of neglect of some third party. Clauses waiving the right to subrogate are more frequent and are especially so in poHcies on manufacturing plants located on lanil leased from or controlled by a railroad. Such clauses are agreements on the part of the Assured not to grant the right of sub- rogation against the Railroad, and are usually subject to an atldi- tional premium. Clauses for Special Emergfencies Probably the most interesting clauses that we have for consid- eration at this time are those that in a general way may be termed Clauses for Special Emergencies. Under this head I allude to clauses that are drafted for use as binders, and clauses aiming to cover or to exclude losses due to earthquakes or explosions, or some kindred disaster. In a certain sense all clauses of this special emer- gency type are ones of permission, since they grant special privileges not ordinarily contemplated under the standard contract. The first of these special emergency conditions that are spoken 362 LECTURES ON FIRE INSURANCE Binders. of is that of binders. You all know how important it often is to be able to protect by insurance at a moment's notice some property that it is not possible at the time for an insurer to issue a policy on ; merchandise, perhaps, that is being delivered at short notice into a warehouse where tlie rate is not yet known, or where other feature? necessary to the completion of the policy contract are still m.itters of doubt. Under these conditions the binder (an everyday occur- rence) naturally comes into use. There is no special clause or form prescribed for this special emergency instrument. The simple ac- know ledgment by an authorized agent or official that he is holdino- binding a certain amount in his company on a specified property owned by the party in whose interest the insurance is being asked, and located in a properly defined place, or places, is all that is necessary, and wdiile such binders are usually in the form of simple written agreements, a verbal binder in the eyes of the law is fully as binding as if it was the subject matter of a full fiedged legal doc- ument. There would be no use in prescribing anv set form or clause to be used in the phrasing of binders, for since the emergencies under which they are called into use are almost always sudden and unex- pected, no one would think of living up to any such prescribed form or clause, but the Courts have clearly defined that the act of issuing a binder is of absolutely the same importance, except in that of form, as is the writing and delivering of a policy. Binders, it must be remembered, are subject to the same conditions over cancellation that obtain with policies. Earthquakes Emergencies such as arise under conditions of fire losses at- and Distur- tendant upon earthquake, raise questions of intense interest, and bancesof those of us who spent weeks in connection with the losses at San Francisco in 1900 have good reason to belie\e that the effect of earthquake conditions on the insurance contract is truU- a most puzzling one. The standard policy, as ordinarily drafted, lists a number of special emergency conditions, such as invasion, insurrec- tion, riot, civil war, military or usurped power and explosion of any kind. In some instances companies have felt that loss resulting from fire caused by an earthquake could be satisfactorilv voided in the policy contract by the simple insertion of the word "earthquake" along with the •• ci\il war, insurrection," etc., features of the policy. ICxperience has clearly shown though, and it was demonstrated over and over again in San Francisco, that the insertion of this word did not necessarily void the contract. I'hc buideii of proof was at once MISCELLANEOUS CLAUSES 363 thrown upon insuring companies. Did, or did not, the fire that de- stroyed the subject of the insurance start from earthquake? Sup- posing, too, that the earthcpiake did cause a fire in a certain huikling, and that from that building the fire passed on to an entirely separate property belonging to another party and destroyed it. The cause of the destroying lire to the last mentioned building could simply be set down as fire in an exposing building. E\ en were the insurers always able to pro\e clearly that the origin of the fire was from the earthquake (a condition that it is almost impossible to prove where earthquake conditions exist), then in cases like that of the second building there would still be no ground for dispute. \\'hether or no a clause can be effectively drafted by insurers that will void the policy in the event of an earthquake seems to be a matter of grave doubt. The strongest form of clause yet dexised, and the one that was in use with many companies in Jamaica at the time of the Kingston earthquake a few years ago, reads like this ; — "In consideration of the reduced rates atwhich this policy is written, it is hereby mutually understood and agreed that in the event of an earthquake this policy shall immediately cease and be void and shall so remain for a period (usually I believe) of se\enty-two hours." It would certainly seem as if, should a fire immediately follow an earthquake, that a clause of this kind forming a part of the policy contract absolutely voided the same and thoroughly safeguarded the Insuring Company, but even this clause has not proved infallible by any means, for the claim was made in Jamaica that at the time the earthquake occurred there was a small lire just started in one'of the buildings that afterwards fell down, and that, therefore, at the time the lire began which eventually destroyed a large part of the city, the insurance was in force and the contract effective. Illus- trations can be multiplied without number, and many of them ex- tremely interesting, as illustrating not only the ingenuity of the underwriters, but the difficulties of drafting a clause that can truly be said to be earthquake proof. Another interesting feature that arises in connection with earth- Fallen quake losses is that of fallen buildings. There is burned into the Buildings* minds of all who were in San Francisco in the year 1906 the Avords, *'If a building or any part thereof fall, except as the result of fire, insurance by this policy on such building or its contents shall im- mediately cease." What a troublesome clause this was to the San Francisco adjusters ! Not only was it very difficult after a building 364 LECTURES ON FIRE INSURANCE had been destroyed by tire to prove whether or not it was a standing or a fallen building at the time the fire reached it, but the question "any part thereof" was the cause of constant disputes between claimants and those adjusters wdio were seeking to make salvages on any possible pretext, some claiming that where a chimney tipped o\er, or where a cornice was somewhat injured, or the plastering inside the building might have fallen slightlv, that a voidance of the policy was thereby constituted and that there was no insurance in force at the time the tire reached it. There were cases of this sort where there was indisputable proof that the building had been more or less damaged before it burned, but the unreasonalileness of main- taining that because a chimney, for example, had fallen above the roof, that necessarily such building had become unprotected by the policy taken out to safeguard it, was one that the more reputable companies did not seek to make a defense of. The usual course of procedure among these companies, if there was any evidence that the building was in a damaged condition before the tire reached it, was to arrive as satisfactorily as might be at the value of the build- ing in its damaged condition, and adjust the insurance upon that basis. Before lca\ ing this subject of earthquakes, I would call your attention to a form that I see is in use in some places, designed to meet this earthquake condition. This form reads : — " This Company shall not be liable for loss or damage occasioned by or through any volcano, eanhquake, hurricane or other eruption, convulsion or disturbance of nature." My only comment on this form is that it is useless for just such reasons as we ha\e stated. Explosions. Just a word on one of the other special emergency cases for which clauses arc occasionally designed. I refer to explosion. Damage caused by explosion is clearlv not co\ercd bv the standard policy according to its own phraseology. If the explosion is the result of a fire that is already under wav, the fire being the direct cause of the explosion, and the explosion simplv being, as we might say, a part of the tire damage, the tire policy is. of course, directly liable, but if the conditions are reversed and an explosion occurs which causes the tire, then tlie intent of the polic\ is \erv clear that a voidance has been constituted, and that there is no liability. \'()u can readily see that the same conditions of doubt and ditlicult\' of proof will at once come up in cases of this sort that occur under earthciunke conditions, and the same line of reasoning that we spoke MISCELLANEOUS CLAUSES 365 of in connection with earthcjiiake clauses is equally applicable here. A great many extremely interesting features have come up in con- nection with fire losses wheie there were explosions. One of these is the well known Tarrant case in New York, which was the subject of much litigation. A conflagration originated in the Tarrant build- ing itself, these people being wholesale druggists. After burning an hour or so, the fire reached a large stock of explosive drugs and chemicals and an explosion resulted. The effects of this were so terrible that all the neighboring buildings were wrecked, and in the case of one of these buildings, litigation ensued, the Insuring Company taking the ground that the building, was destroyed by ex- plosion and not by fire. The building in question was over fifty feet away from the Tarrant Building; there were other buildings between it and the buiUling in which the fire originated, and also a narrow street. Both of the intervening buildings were blown down by the explosion and the ruins of them, as well as of the building over which litigation was pending, were completelv burned. In this particular case the lower Court found for the owner on the ground that his building was wrecked by an explosion, but that a fire was the cause of the explosion, and that, therefore, the Insuring Company was liable. On an appeal, the higher Court re\ersed this decision and held that the loss was bv explosion, not bv fii"e, and that, therefore, under the provision in the standard policv, the Insur- ing Company was not liable. Probably I ha\e said enough about these special emergencies to cause you to realize that the working out of clauses that may be designed to guard against, or to provide for them, are extremely uncertain as to their outcome. VII. CLAUSES OF DISTRIBUTION AND OF LIABILITY LIMITATION. No class of clauses in common use with fire insurance policies are so essential, and at the same time so much the subject of criti- cism, as those that are designed to define in an equitable manner the extent of the liability of the Insuring Company and at the same time place the contract on such a footing that its proper cost or rate can be determined. By Distribution, and Liability Limitation, we mean clauses like the following: the Three-Fourths Value Clause; the Three-Fourths Loss Clause : the A^•erage Clause ; and the Co-in- surance, or Reduced Rate or Assessed \"alue Clause, these last three names applying to one and the same proyision. Three-fourths Taking up in the order named the yarious clauses mentioned, Value Clause. -vve ^yill refer briefly to the Three-Fourths Value Clause. The or- dinary form of this is substantially the following: — " Three-Fourths Value and Limitation Clause. It is a part of the consideration of this policy, and the basis upon which the rate of premium is fixed that in the eyent of loss, this company shall not be liable for an amount greater than three-fourths of the actual cash yalue of the property coy- ered by this policy at the time of such loss ; in case of other insurance (consent to which must in all cases be indorsed hereon) the company shall, whether policies are concurrent or not, be liable for only its pro rata proportion of such three-fourths value." You will note that the title of this clause is that of Three-Fourths Value and Limitation. You will also note that the attachment of a clause of this character forms a part of the consideration that enters into the tixing of the rate on properties to which it is applied. With such a clause the rate can be materially reduced because as the clause distinctly states, "the company shall not be liable for an amount greater than three-fourths of the actual cash \alue." Also, in the event of there being insurance in more than one company, this same three-fourths of the tot;d sound \alue must be regarded as MISCELLANEOUS CLAUSES 367 the total insurable \alue of the property at the time the loss occurs, and the Insurance must pro rate u]5on that basis. While this clause is emphatically one of limitation, its prime object is to compel the assured to carry a part of the risk himself, and it also very effectively does away with any possibility of gain coming to him by means of over insurance. It is a clause that is especially applicable in classes of risks \\ here the a\erage of loss has been unduly high, and yet where proper care and supervision on the part of the assured would probably have prevented a great number of these losses. Possibly the most notable class of risks that ha^ e been subjected to the attachment of this clause are the Paper Mills of the earlier days, where losses were so frequent, and the insurance regarded as so undesirable by insurers, that the com- panies, as a matter of self-preservation, found it necessary to attach a clause of this nature to the policies to prevent an excessive loss ratio from the class. Clatises of this nattire were among the first that were designed to make the insured a sharer in carrying the burden of his own fire loss. They tend to reduce the moral hazard and make imperative the care and protection that the assured always should exercise. The next clause that we listed is called the Three-Fourths Loss Three- Clause. A clause of this nature is one that limits the liability of fourths Loss the Insuring Companies to three-fourths of the total loss sustained, Clause, and in this way makes the assured carry a part of his own risk in much the same manner that the Three-Fourths Value Clause does. Neither of these clauses are in as common use to-day as they for- merly were, since the classes of property to which they are more directly applicable are now largely under the protection of automatic sprinklers and are subject to the Co-insurance or Reduced Rate Clause. By far the mtn-e important part of this discussion should be Average directed to the so-called A\erage Clause and the Co>- insurance Clause, and Co- The use of the word " Average " in connection with clauses attached insurance, to policies of insurance, appears to be a varying one in different localities. In this country we uniformly, I believe, regard an A\erage Clause as one that distributes the liability of the Company by apporiioning, under some prescribed rule, just what part of the insurance shall apply in any specified locality, or on any specially defined property. In this way it becomes to a certain extent a Distribution Clause. In contrast to this definition of what we mean by an Average Clause, is one that olnains to some extent in countries 368 LECTURES ON FIRE INSURANCE where the same meaning is gi\en to the term "Average" that we apply to a Clause of Full Co-insurance, or, that is. what we would term a 100% Clause. Before we discuss these differences it will be best for us to quote each one of these clauses as they are commonh- applied in this country. The Average Clause reads as follows, and is applicable to blanket or compound forms of insurance : — The Average " This policy to attach in each building or locality in pro- Clause, portion as the value in each bears to that in all." Now to illustrate, let us suppose that a policv for $9,000 was written covering merchandise contained in three different buildings and written with an average clause. At the time of a fire in build- ing No. 2, it was found that building No. 1 contained merchandise to a value of $5000, No. 2 $4000,' No. 3 $3000, or that is, all of the three buildings contained stocks to a total value of $12,000. Under these conditions, one-third of the policy of $9,0.00, or that is $3,000, would be the insurance covering directly in No. 2, the burned building, because 4000/ 12000 equals one-third. This illus- tration certainly makes it appear that the Average Clause is a Clause of Distribution, and it also is a Clause of Limitation, since it fixes the limit under which an}^ policy, or policies, can be made liable in any one particidar place, or on any one specified property. TheCo-insur- Before we speak more fully of the difference in its limiting ance Clause, features between the Average and the Co-insurance or Reduced Rate Clause, let us quote the latter. The form in general use, as you know, reads like this : — " In consideration of the reduced rate at which this policy is written, it is expressly stipulated and made a condition of the contract that in event of loss this Company shall be liable for no greater proportion thereof than the amount hereby insured bears to per cent of the actual value of the property de- scribed herein, at the time when such loss shall happen, nor for more than the proportion which this policy bears to the total insurance thereon; provided, however, that if the aggregate claim for any loss shall not exceed 5% of such actual value no special inventory or appraisement of the undamaged prop- erty shall be required. If this policy be divided into two or more items, the fore- going conditions shall apply to each item separately, and if two or more buildings or their contents be included in a single item, the application of the provision as to special inventory or appraisement shall be limited to each building and its contents." MISCELLANEOUS CLAUSES 369 It is claimed by some that this Co-insurance Clause is not only a Cause of Limitation, but that it is also one of distribution, the contention being based on the words, " nor for more than the pro- portion which this policy bears to the total insurance thereon," it being argued that in the case of a blanket policy covering several properties, that when a loss occurs on some one of these properties on which there is specific insurance covering only on that one, that the presence of a Co-insurance Clause virtuallv fixes the part of the blanket policv that can be assessed under conditions such as we have described : the contention being that the words, " nor for Tiiore than the proportion which this policy bears to the total in- surance thereon," being equivalent to the Average Clause in divid- ing the blanket policy into specific parts instead of the entire blanket policy being liable to be called upon to contribute on any one or all of the properties on which it covers. The general interpretation, however, of this portion of the Reduced Rate Clause that we are speaking of is the reverse of this, and simply limits the maximum for which the policy carrying this Clause can be liable in the same way that the Limitation Clause in the standard policy contract limits the liability on any one policy by the use of the words, in the Massachusetts policy, " that if there shall be anv other insurance, the insured can recover on this policy no greater proportion of the loss sustained tiian the sum hereby insured bears to the whole amovuit insured thereon." Substantially the New York Standard policy Limitation Clause is the same, only as is usual in the New York Form, it is more explicit and goes further into details in defining the nature and extent of this liability. This makes the entire blanket insurance assessable on its full face for contribution for loss on anv one of the properties to which it may applv. To me it seems clear that the Average Clause is a clause of Average both Distribution and Limitation ; of distribution in that it appor- Clause is one tions the amount of insurance that is applicable to any particular ° '^ " "" , . ,,,... . , , ,.,..,. r . tion and sumect : and of imiitation \n that, bv this chstribution, it states uist t . .... J ' ' , / , Limitation, what portion of the total policy can be assessed in one loss. While Co-insurance the Co-insurance clause is purely a Clause of Liability Limitation, is one of in that it fixes definitely the amount for which the insuring com- Limitation pany can be liable with reference to conditions of sound \alue, loss °" ^* and amount of insurance carried. This almost always causes the lilanket insurance to suffer where there are both specific and blanket 370 LECTURES ON HRE INSURANCE policies covering on the same group of properties and only a por- tion of the group is damaged by a fire. Another form of so-called Average Clause in use, especially in connection with lumber insurance, reads as follows : — "It is understood and agreed that no claim under this policy shall be for a greater proportion of the whole loss or damage to the property insured thereby than the amount in- sured thereby shall bear to tlie whole value of the property insured at the time of the tire." This form of Average Clause may be said to also possess cer- tain of the limitation features. In fact, in its effect on the recovery at the time of a loss it would operate in much the same way that a Three-Qviartcrs \'alue Clause would, although based on a different principle. Essential Fea- The Co-insurance Clause is vastly more essential to proper ture of Co- underwriting than the majority of the people using it begin to rea- lize. Possibly a word or two in justification of this Clause may not be amiss here, since it is the subject of such general criticism. That it is a necessity is evidenced by the fact that a good many years ago in England an Act was passed by which parties taking out insurance were obliged to place a lixed amount upon each sepa- rate building or contents item, or where the fixing of such an amount was not practicable on account of the stock being of a movable character, changing its location from time to time, or, if from any other cause, and the insurance was in one sum over all, the insured in such cases was only to recover pro rata for any dam- age in the proportion that the insurance on the damaged property, at the time of the fire, bore to the whole value of the insured prop- erty. It is nearly one hundred years since this position was taken up and legalized by English statute, but you can see that it recog- nized the principle that there was a relation between insurance carried and sound value of property coyered, that must be to some extent a definitely fixed relation, in order to have the business of underwriting placed upon a sound economic basis, and to enable insurers to know what to charge for their policies. (^uite a common opinion regarding co-insurance, you know, is that it is unreasonable and unjustifiable, and that if we are willing to insure a man for $1,000, it should make no difference whatever to us whether the property that we insure him against the loss of was worth $1,000 or $5,000 or $10,000. This is the popular argument against co-insurance, the assured oftentimes maintaining MISCELLANEOUS CLAUSES 37J that it should make no difference to us if we are wilHng to run $1,000 worth of risk on his property, as to what the value of that property was, so long as under anything but a valued policy there was at least $1,000 worth of it in existence? But think a moment. In the case of a $5,000 property with $1,000 thereon, and a 20% property loss, there is a total loss for the company ; in the case of $10,00<» property value with the same $1,000 insurance thereon, and a 10% loss, a total loss for the company again. In other words, since the great majority of losses (probably upwards of 90% of them) are not total losses, and among this 90% of partial claims are losses ranging e\ery where from fractions of 1% up to 99%, of the insured property, the great majority of them being under 10%, or, at the most, 20% in extent, the company writing a small line, such as we ha\e spoken of on a property of high value, stands lial)le, in the great majority of the losses that may occur, to have them prove total losses, rather than partial ones. To take the illustration of a property insured for 10% of its value, there is vastly more than ten times the liability, on the part of the Com- pany, to sustain a total loss than there would he if the assured was carrving insurance up to approximately the value of the property covered. Another pet argument advanced by people who object to the Co-insurance Clause is, for illustration, " Why, I am perfectly willing to carry half mv risk myself." After many years of expe- rience, and many times asking the assured, " Well, in that e\ent, suppose half your risks burns; whose half is it, yours or the Insur- ance Company's?" His answer invariably has been, ''The Insur- ance Company's, of course." Does it require any very keen logic to show that a position like that absolutely refutes the idea of the assured carrying half of the risk himself. Only would such a de- fined position on his part be lived up to if he were ready to agi"ee that half of every loss sustained should be borne by him, and the other half paid bv the Insuring Company. Were the assured will- ing, as a general proposition, to have a clause defining such an apportionment as this attached to the policies, I have but little doubt but what the Insurance Companies would very gladly accede to it, and that the fire waste of the country would be reduced by a very large amount. The onl}' way to secure a provision of this nature in the policy and to oblige ihe assured to live up to an agreement to cany part of his risk himself, in fact as well as in name, is to so draft the 372 LECTURES ON FIRE INSURANCE contiMct that for :i certain consideration granted by the insuring company, the assured agrees to carry insurance to an amount bear- ing a certain fixed relation to the value of the property insured under the policy at the time of the fire. This means that the in- sured becomes an insurer of his own property in case he has not taken out sufficient insurance to reach the proportion of his sound value called for by the contract ; in other \\-ords, he becomes a " co-insurer." The consideration granted by the Insuring Companv for the attachment of a clause warranting this condition, is a material reduc- tion in the rate. Hence, all co-insurance or reduced rate clauses commence with the words, "In consideration of the reduced rate at which this policy is written." Then follows the reason why this reduced rate is granted, stated in these words, "It is expressly stipulated and made a part of this contract that in event of loss this company shall be liable for no greater proportion thereof than the amount herebv insured bears to per cent of the actual ^ alue of the property described herein at the time when such loss shall happen." This, you note, is practically an agreement or warrant on the part of the assured to carry the specified proportion of the \ alue of his prop- erty in insurance. But it does not stop there, for it further stipu- lates that only such proportion of his loss as is represented by the ratio existing between the amount of insurance carried by any com- pany and this specified percentage of the \ alue of the insured prop- erty can be collected from that company. The working of this ratio is to call for a total contribution by the insuring companies whenever there is short insurance and a loss greater than the speci- fied per cent of the property value. The operation of the clause is not altered, but no saving to the insurance companies is effected by its attachment. The 5 % Pro- The final provision of the Co-insurance Clause is one that is vision of the often misinterpreted. I refer to the so-called hfj, item. The por- Co-insurance ^^Jq^i of the clause regarding this reads : "If the agforegfate claim for any loss shall not exceed 5*^ of such actual value, no special in\entory or appraisement of the undamaged propertv shall be required." Frecjuently inexperienced adjusters interpret this as meaning, that with losses of less than .5% of the actual sound \alue, this wai\cs the main proN ision of the Co-insurance Clause, that which makes the insured a contributor to his own loss, if he is short of MISCELLANEOUS CLAUSES 373 the required percentaj^e of insurance. This is not so ; the Clause clearly makes no waiver of this sort, and a 1% or a 5% loss is as fully subject to the working- of the Clause as one of greater amount. Its object is simply to do away with the requiring of a detailed inventory or appraisement in case of these small claims which might otherwise be required. It would seem singular, were it not for the fact that State Leg- The Blind islaturcs ha\ e o^ er and o\er again e\idenced their inability to ^"° understand insurance problems, that certain of the States absolutely ^^^^ ^*^ , ., . ,. \ . . . , o Attitude prohibit any policy of insurance covering property in such htate ^£ c^.^^ which shall contain any provision recpiiring the assured to take out Govts. any specified amount of insurance with respect to the value of his property, or that shall render him liable as to co-insurance in the event of his not taking out a sufficient amount of insurance. .Such action on the part of any State necessarily materially increases the cost of insurance to the people of that State. Now what are some of the real reasons wh}- the Co-insurance Xhe Clause is such an essential factor in the business? It is absolutel}' Reasons necessary that underwriters should have a suthcient amount of in- 'O*" Co-insur- surance, with respect to the \alue of the property covered, to a\ oid ^*^"* the continual payment of what are in reality only damages, or partial losses, but which in effect, owing to short insurance, become total losses. On no other basis than that of a fixed relation between insurance carried and sound value of the property insured is it pos- sible for the cost of insurance, or that is, the rate, to be determined with any fair amount of accuracy. It would be obviously unjust to a man who was carrying insurance to the extent of 90 "y^ or 100 (y^ of the value of his property, to ask him to pay the same price per dollar for such insurance as his neighbor, the owner of precisely identical property both in value and physical condition, but who only carried half as much insurance, since the risk to the companies in the former case is reduced over one-half from what it is in the latter. It is just as essential, in order to properly assess the cost of in- surance, that is, to fix the tax or rate that the companies must receive in order to collect funds suflicient to carry on their business, that the relation of insurance to value should be considered, as well as the various physical features of the insured property that enter into the original making up of the rate. We all know by experience that a low rate with a proper co-insurance clause is in the long run more profitable than a materially higher rate and absence of the Co-insur- ance Clause and a consequent light carrying of insurance. 374 LECTURES ON nRE INSURANCE It has often seemed to mc that the opponents of the Co-insur- ance principle wei-e men who, to put it phiinly, were prepared to kick because thev dithi't receive something; that they hadn't paid for. Really, this crude description sums it all up. Objectors to co-insur- ance are mainly men who saw ht to carry a part of the risk them- selves, as thev were pleased to term it, up to the time when a loss occurred, then they immediately abandon the idea that they are in any way responsible, and insist that the Insuring Company should pay them for something that they had not bargained for in the first place. From any point of view the co-insurance principle is a right one, not only from the standpoint of the Insurance Companies, since it defends them from an excessive nvmiber of total losses and enables them to determine more closely the cost price of their commodity, but the fair minded policy holder should also regard it as a friendly clause ; friendly to his interest, since it works distinctly against the speculative and avaricious claimant, whose action causes an added burden for the Insurance Companies and thereby increases the cost price of insurance to the community as a whole. Comments on It is interesting to note the way in which the Co-insurance the Co-insur- principle appears to men of trained minds who have had no actual ance Prin- experience in the insurance business, since it brings out an unbiased, "^^* logical presentation of the situation. I am glad to take this oppor- tunity to quote from several short essays that were written by members of the Fire Insurance Class in the Graduate School of Business Administration of Harvard Uni\ ersity during this past season. These extracts are from five different papers that were presented on the Co-insurance Clause. The papers are not persented in full, but the more inportant portions of them are as follows : — •'The Co-Insurance principle is absolutely necessar\- to secure justice between property owners, and to enable the com- pany to collect premiums from all commensurate with the risk assumed. It is a well known fact that in cities with good fire protection onlv about one out of every twenty-five fire losses is a total one, many of the remaining losses being only nominal in amount. "The Co-insurance Clause provides that every property owner shall have his losses paid only in the pro])ortion that he is willing to pay premium. "•Fire insurance is a tax paid by all the property owners of the communitv for the purpose of indemnifying unfortunate losers. In form it resembles a general property tax, except that it is collected and disbursed by private companies instead MISCELLANEOUS CLAUSES 375 of by the government. As the government tax, to be equitable, is paid by the owners of property in proportion to the \ ahie of the same, so the fire insurance tax, to be equitable, should also be based upon the value of the property owned. "The Co-insurance Clause protects the small property owners against the efforts of the great industrial and mercantile corporations to shirk the payment of their just share of pre- miums. In most large mercantile plants the property is so situated in different localities each separate from the other or by fireproof walls that in a great majority of cases the fire can be easily confined and under such circumstances a total loss is hardly to be expected. Therefore the large concerns could protect themselves against fire loss by insuring a portion of their value while a small concern would have to insure for nearl}' full value for equal protection. The only argument I can see against the use of the Co-Insurance Clause is that a pro- perty owner insuring for a small percentage of his value may claim that in event of total loss he is taking a large proportion of the risk himself, and therefore in event of a small loss should be paid in full. If his property was so situated that in e\ent of a fire the entire property would be seriously endangered a claim like this would be just, and there is no doubt but what the moral hazard would beO. K. as the owner would naturally take all precautions to guard against possible loss." " Fire insurance is a tax and like all taxes should be assessed in proportion to the value of the property protected by it. The absence of co-insurance makes it possible for the large corporation and the property owner who wants to keep a small insurance to take advantage of the small property owner who will not take the risk of only partly insuring his property. Experience has shown that the fire loss averages around 60% of the premiums collected, and those premiums must be col- lected if the insurance company is to do luisiness. If the large corporations will not pay them, the obligation falls upon the scrupulous property owner, which is manifestly unfair. The Co-insurance Clause (N. Y. policy) provides that the company shall not be liable for a greater proportion of loss than the amount of the insurance bears to the per cent of actual value of the property. Most of the losses are comparatively small in amount, not being over $100.00 or $200.00. Without co-in- surance people would only take out insurance to a small amount, the companies would have to pay all losses in full and many would be forced to the wall. For instance, two people each own buildings worth $10,000, one insuring for $8,000 and the other for $2,000, the rate being the same in both cases. If each suffers a loss of $2,000 they are both paid, but one has been taxed four times as much as the other, and has received no more. Thus it is seen that co-insurance protects the interests of the man who is unwilling to take the risk of partial insur- 376 LECTURES ON FIRE INSURANCE ance. In the case mentioned the man insuring for $2,000 shouUl be allowed to collect only one fourth of his loss, or $500.00. In most places the company requires the owner to insure for 80% of the value, and in case of total loss the owner is co- insurer to the amount of 20 f;^." " The owner of propeity is not, however, alwavs obliged to carry 80% insurance. He may carry less, but he must pay a higher graded premium. Co-insvirance also decreases the moral hazard. " The only objections that can be raised against co-insur- ance are that it puts an obligation on the insurer to carry a certain amount of insurance, and where the 80% co-insurance clause is the practice, it makes it impossible for the property owner to secure full indemnity in case of complete loss. The first of these objections has been practically removed by the graded premium. The second will appeal chiefly to unscrup- ulous property owners." " The foremost argument in favor of the adoption of the Co-insurance Clause is that it is in accordance with the law of average, which is the basic principle of insurance. If the principle were adopted that every one must insure his property to a certain proportion of its actual cash value, or receive in case of loss only such proportion of the loss as the amount in- sured bears to the full value of the property, then the ratio of losses to amounts written or to premiums in a certain class would be a reliable basis from which an average rate would be justly and correctly arranged. No one assured w^ould re- ceive any greater protection for each dollar of valued assured than any other. Yet vmder the present conditions, that is where the Co-insurance Clause is in onlv partial use; the losses in its absence are in larger proportion to premiums and values insured and the cost of insurance is increased to those who carry full or nearly full insurance, whereas the cost is re- duced for those who insure but a part of their property and vet get protection up to the full amount insured. " Manifestlv this arrangement of the insurance tax. for it is virtuallv a tax, is unfair. The cost of insurance is just as much a tax as is that le\ied by the go\ernment on property. And does the government allow the citizen to pay on just what proportion of his total property he desires to? Certainly not." '' Suppose, for the sake of illustration, the assessment system of levving taxes were abolished. Now ' A ' decides to pay taxes on 75% of his property, ' B ' on 50% and so on. The equality of taxation would be absolutely destroyed, and the government could get no idea how much to make the tax rate in order to raise the necessary fluids. And the case of in- surance is preciselv analogous to this. '' Were insurance conducted by the government, it would very cjuickly be true that losses antl expenses would be assessed MISCELLANEOUS CLAUSES 377 against the insurance taxpayer in precisely the same manner as taxes — that is, upon the full assessed vakie of property so protected. " The fact that such an immense corporation as the United States Steel objected to the Co-insurance stipulation when it insured in private companies, yet when insuring its own prop- erty demanded that each plant contribute to the general fund in proportion to the full value of that plant, showed that they recognized clearly the principle of Co-insurance and appre- ciated its value. " The probable effect of the adoption everywhere of the Co-insurance principle is also a strong argument in favor of its use. " In two ways the average rate would be reduced. First, because larger sums would be paid the companies for premiums and thus the average loss rate would be reduced ; second, be- cause in many cases the liabilitv of the companies would be reduced. '' To my mind the arguments in favor of Co-insurance clause are far more convincing than those against it. Person- ally, 1 belie^e the Co-insurance or Reduced Rate clause to be a benefit to the community at large. These are my reasons. In a pre\ious lecture we learned that the ' Loss Cost ' of an insurance company is the amount that burns for every $100.00 insured ; or better, it is the ratio between the amount burned and the amount insured. In the same lecture we learned that the 'Loss Ratio' of an insurance company is the ratio between the losses incurred and the premiuins received. Now it is not ditlicult for one looking at the Co-insurance clause to realize that if it were strictly lived up to, both the Loss Cost and the ' Loss Ratio ' of the insurance companies would tend to diminish, because the companies would be writing larger policies, thereby receiving larger premiums and consecjuently the ratios would be smaller. This will be clearer when we realize that insurance losses are governed by the law of average. It is not logic to maintain that the amount of losses in a com- munity increase proportionately with the gross amount of in- surance written in that community. Therefore, since the basis of the premium rates is determined from the average loss cost of the different classes of risk, the rates for insurance would tend to be lower, and the insuring public would in the long run be the benefiting party of this insurance contract." You will note that the viewpoint taken by the writers of the papers just quoted is in several instances strikingly original, but none the less logical and convincing. I have assumed that you all know the phraseology and the workings of the Co-insurance clause so fully that it is not necessary 378 LECTURES ON FIRE INSURANCE The Opera- for us to dwell on either of those points at this time. The term tionof theCo- tt p^,i] Co-insurance " is used where 100''y(, is carried, that is where insurance .1 ^ x. i • • ^- n -1 1 1 r 1 -, tlie total insurance is practically the same as the value of the prop- erty insured. Percentage Co-insurance Clauses, usualh' either 80% or 90%, mean that the insurance carried is agreed to be either S0%, or 90% of the sound value of the insured property. The operation of this clause in the event of loss is more a matter of loss adjustment and apportionment than of a discussion of the Clause itself. \\ here properties are under good public protection and in con- sequence there is a less chance of total losses resulting, the presence of a Co-insurance Clause is of the greatest importance. Where properties are entirely outside of protection, and where losses are nearly all total, it is not, of course, as important a matter since the operation of the clause in the event of a total loss alwavs gives the claimant the face of the policv unless s;mie exceeds the loss sustained. With Sprinklered Risks where the vast preponderance of the losses are of relati\ely small amounts when contrasted with the total insurance involved, owing to the safeguarding effect of the Sprinkler system, a higher percentage of insurance with respect to vakie is essential and therefore, a clause guaranteeing 90% or even 100% of the sound value is almost in\ariablv issued. Guaranteed J" some cases, a guaranteed amount of insurance is specified by Amounts in a clause attached to the policies in place of a percentage amount. lieu of Co-m- Xhere are reasons both for and against this practice. Its favorable surance. r ^ • n , , ,1 1 • •. 1 leatures are especially apparent to the assured, since it retluces ma- terially the element of doubt as to what the actual value of the insured property will be considered. You will note that we sav "reduces" this element of doubt. It does not entirely remove it, as is often assumed to be the case. If, at the time of a loss, it were found that the property was actually of less value than the guaran- teed amount of insurance, a sum in excess of this actual value would be no more collectible with a guaranteed amount of insur- ance than would be secured imder the operation of the Co-insurance clause itself. Guaranteed amounts of insurance do not make the policy a " valued " contract. The objection to using this clause are fluctuations in vahie, and also the fact that it can only be admissible where a formal appraisal by disinterested and competent experts has been made in order to determine the sound value of the prop- erty and from that to fix the guaranteed amount of insurance that MISCELLANEOUS CLAUSES 379 shall be carried. There is always difficulty and expense attendant upon the securing of dependable estimates of this sort, and as we have just stated, appreciation and depreciation of property that is sure to result, especially if the appraisal is one of many years stand- in^', in leaving the assured either short of needed insurance or to have been at the expense of carrying more than he needed. It is objectionable too, in that for a possible benefit to the few who have losses, it adds to the cost of insurance to the community as a whole. The question is sometimes raised as to what is the effect on a Average and policy where both the Average Clause and the Co-insurance Clause Co-insurance are attached, some seeming to think that one does away with the ^^S^*"^""* other and that complication is likely to result. Under the condi- tions of the Average Clause, the policy becomes Specific and the Co-insurance Clause is as applicable to a vSpecific policy as to one of a blanket or compound nature, the procedure, therefore, is to make the policy specific according to the provisions of the Average Clause and then apply the Co-insurance Clause to these various specific items separately. Many of the most embarrassing non-concurrencies that develop Non-Concor- in connection with loss settlements are due to the presence ofrencies. either Average or Co-insurance Clauses, on some of the policies and their absence on others. The questions that arise under this condition are ones that can be more intelligently treated in a dis- cussion of losses and adjustments, but it wdll not be amiss here to state that it seems very desirable that insurance companies should get together over this and adopt a universal clause to be used on all policies stating the procedure to be followed in the event of non- concurrencies, either from the conditions such as we have just de- scribed or those that arise from other variations in description of property or clause attachments to the policy. Our British brethren have to a large extent done away with this difficulty that we so frequently are forced to confront by adopting what they are pleased to term the "Second condition of Average." 380 LECTURES ON FIRE INSURANCE QUESTIONS I 1. What is the purpose of Forms and Clauses in the writing of fire insurance policies? 2. To be permanently satisfactory what should be the nature of Forms and Clauses? 3. To what extent can Forms and Clauses be rightfully used on the fire insurance contract? 4. What is the main object of the standard fire insurance policy? 5. Name some of the standard policy provisions which re- quire the addition of a Form. 6. What are some of the provisions of the standard policy that do not admit of alteration by the attachment of either a Form or a Clause? 7. In their relation to the standard policy where can Clauses properly be used? 8. What are Forms? 9. What are Clauses? 10. Into what classes would you sub-divide Forms? 11. Into what classes would you sub-divide Clauses? 12. W'hat is the dangerous tendency of those devising Forms and Clauses? 13. From the viewpoint of what condition should you always regard a Form or a Clause? 14. How may any Standard policy be made a Valued one? 15. What sort of a contract is that of fire insurance? 16. Why is a valued policy an undesirable contract? 17. In filling in the "headings" of a policy what special care should be exercised? QUESTIONS 381 II 1. How should a Form be regarded by insurer and insured? 2. What will determine whether a policy is specific, or blanket, or open, or floating, or excess? 3. As an instrument of description what should a Form accomplish ? 4. Name some of the common but dangerous phrases used in descriptive Forms. 5. What should the policy writer be sure of when drafting a Form ? 6. In Forms of property description what are some of the more frequent errors ? 7. W^hat may the phrases ''Premises" and "Adjoining and communicating" be construed to mean? 8. Is it better in describing the location of movable property to say "All while contained in," or ''Only while contained in," and why ? 9. Is new phraseology in Forms desirable as a general proposition? Ill 1. What do we mean by Forms for other than fire liability? 2. Define the following kinds of insurance: Use and Occu- pancy; Rent; Leasehold Interest ; Profit: Sprinkler Leakage. 3. What should be first determined in placing insurance under each of these Forms? ■4. Why should the per diem contribution under an annual U. & O. policy be 1-300 of the policy, even though the plant on which the insurance is taken out could be replaced in a portion of that time? 5. Does the operation of an U. & O. contract necessarily cease at the date of expiration of the policy? 6. Why is the phrase "'Rental value" a dangerous one in a Rent policy ? 7. What contract other than that of insurance may have an important bearing on a Rent or Leasehold Interest policy? 8. What should this outside contract condition suggest to the policy writer? 382 LECTURES ON nRE INSURANCE 9. Why is a Rent insurance contract generally freer from moral hazard than a Leasehold Interest contract? 10. What conditions should the underwriter always be sure of in writing Profit insurance? 11. Sprinkler Leakage insurance — what should be determined before issuing a policy for same? 12. Draft Forms giving the essential features of the five kinds of insurance against other than direct fire loss that we have just mentioned. IV 1. What kinds of policies cover properties in more than one location ? 2. What general form of contract is used in insuring proper- ties that are in various locations? 3. What is a Floating policy of fire insurance? 4. Describe a Tourist policy; its purpose, and its usual limitations. 5. Draft a Tourist policy form. 6. What is meant by the term "Common Carrier"? 7. Common Carrier liability insurance is designed to protect whom and to w^hat extent? 8. What should be known by the Insurance Company in order to safely draft a form for insurance of this sort? 9. What is Excess insurance, and what is it designed to cover? 10. Draft an Excess form. V 1. What in general do Clauses of Permission accomplish? 2. What do we mean by a "Waiver" in fire insurance? 3. If a policy is voided by the assured performing or allow- ing some condition forbidden by the contract, what is the status of that contract after the forbidden condition ceases? 4. What is the status of the contract if the forbidden condi- tion causes a fire? 5. Name some of the policy conditions that can properly be waived bv Clauses of Permission. QUESTIONS 383 6. Name some of the provisions of the policy that cannot properly be waived by Clauses of Permission. 7. Draft three Permissive Clauses each waiving a different policy condition. VI 1. What do Clauses of Exemption in fire insurance accom- plish ? 2, Give an example of a Clause of Exemption and describe its object. 8. What is meant by "Consequential Damage"? 4. What are the purposes of Clauses of Warrant? 5. What is the usual effect of a Warranty Clause on the rate? 6. Give an illustration of a Warranty Clause. 7. What are some of the Clauses that relate to Title or Insurable Interest? 8. What are some of the special emergencies that may arise in connection with claims under fire insurance policies that call for special clauses? 9. What is the attitude of the standard policy on losses where an explosion occurs, both when the fire causes the explosion and when the explosion causes the fire? vn 1. What is the purpose of the following Clauses: — Three-quarter Value; Three-quarter Loss ; Average ; Co-insurance or Reduced Rate. 2. Illustrate each one of these Clauses. 3. In general what are these Clauses used for? 4. Why is the Co-insurance Clause an equitable and a desir- able provision, both from the standpoint of the Insurance Com- pany or the Insured, and of the community as a whole? 384 LECTURES ON FIRE INSURANCE BIBLIOGRAPHY. Bament, W. N. : Forms. From the Company's standpoint. An address before the Insurance Society of New York, Feb. 20, 1912. Pam., 27 p., N. Y., 1912. Cavell, J. Scott: A few remarks on the arbitration clause. Jour- nal Insurance Institute Great Britain and Ireland, 7: 177. Crawford, William S. : Pointers for local agents. 255 p., Chi- cago, 1908. (Western Underwriter Co.) Daniels. W. H. : The apportionment of loss and contribution of compound insurance. 77 p., Indianapolis, 1902. (Rough Notes). Evans, Hugh C. : Contribution in respect of fire losses. Journal Institute Insurance, Great Britain, 12:143. Hine, C. C. : Hine's Book of policy forms, -tth ed., revised by Samuel R. Weed, 235 p.. New York, 1909. Huebner, Solomon S. ; Property insurance. 421 p., New York, 1911. D. Appleton & Co. Lucas, Julian. Jr. : Forms. From the broker's standpoint. An address delivered before the Insurance Society of New York. Feb. 27, 1912. Pam., 22 p., N. Y., 1912. National Board Fire Underwriters: Clauses and forms adopted l)y the N. B. F. U. Pam., 15 p., New York. 1911. Pipkin, Samuel J. : Average conditions of a fire insurance policy. Journal Insurance Institute Great Britain and Ireland. 1:243. Richards, George: Forms. In, A treatise on the law of insur- ance. New York, 1911. (Bank's Publishing Co.) Sloan, E. J. : The average and eighty per cent clause of fire insurance policies. Proceedings, Insurance Institute of Hartford, 1909 : ()7. BIBLIOGRAPHY 385 Spectator Co.: Hints to the assured. Pam., G4 p., New York, 1904. Whitney, Albert W. : The co-insurance clause. Proceedings, Fire Underwriters' Association of the Northwest, 1904:154. Williams, T. H. : Permits and clauses. Proceedings Fire Under- writers of Pacific 1912: 104-138. PART V. LOCAL AGENCY Organization and Management COMMON LAW OF AGENCY ^Vhel•e anyone authorizes another to do any act or series of acts for him, the first party becomes the principal and the latter the agent. The authority may be expressly conferred in writino- by power of attorney or appointment, or may be implied by the deal- ings between the parties. Anyone of full age and sound mind may be a principal or agent. No person of unsound mind can he either principal or agent ; nor can the following be competent as principals : — (a) Minors. (6) Alien enemies appointed during war. (c) Driuikard's contract \oidable. But (a) Infant may be agent. Brown v. Hartford Fire Ins. Co. : 117 Mass., 479. "If a settlement is made by a member of a firm with an insurance company, for a loss occasioned to property of the firm by a peril insured against, the firm cannot maintain an action on the policy without first restoring or offering to restore what has been receiyed under the settlement, although the part- ner who made the settlement was a minor, and the settlement was effected through the fraud of an agent of the company." Brown, who made the settlement for himself and his partner, was a minor, but it was held that as agent he bound the trrm. In Commonwealth v. Holmes: 119 IMass., 195, a minor son as clerk made liejuor sales for his father, and the latter was held criminally liable for the acts of his agent. \b) It was uniformly held, during the existence of slayery in the United States, that a master might constitute his slave his agent. In Chastain v. Bowman: 1 Hill (S. C.) 270, the court said? " There is no condition, howeyer degraded, which depri\ es one of the right to act as a priyate agent ; the master is liable eyen for the act of his dog, done in pursuance of his command." (c) Wife can be agent of her husband, or ((/) HtisbiDid of wife. Whateyer a man can do himself he can do by his agent, unless : — 390 LECTURES ON FIRE INSURANCE (a) Forbidden by law, e. ^>-., libel for divorce. {d) Against public policy. (c) Principal acting in a position of personal trust, e. g-.^ pid^lic officer, executor, administrator, trustee, guard- ian, director, etc. A corporation ?>iiist act by agent. Stockholders may vote, but agents must carry out the vote. Principal is bound to third party : — (a) By acts in scope of agent's authority. (3) By acts in scope of agent's apparent authority, (c) When contract made with agent, and principal after- ward disclosed. Agent is bound to third party : — (a) When authority is exceeded. (^) When agency is unknown to party dealing with him at time of dealings whether the principal is subsequently disclosed or not. Principal is not bound : — («) By unauthorized acts of agent, unless (1) Ratified by him. He cannot take the benefits and decline the obligations (2) Within the apparent scope of his authority, and («) Limitation not known to party dealing with agent, and circumstances not such as to charge him with duty of ascer- taining scope. Agency cannot be proven by testimony of the agent alone. The agent is bound to utmost good faith to principal, and prin- cipal to agent, either to exact terms of agency, or as implied from relationship, and must make good to the other party for any loss occasioned by breach of contract, expi'ess or implied, or breach of duty. INSURANCE AGENTS Who Are Insurance Agents In general, at common law, an insurance agent is an agent employed by an insurer, usually an insurance company, to perform some act or acts in furtherance of the business of his principal. In a narrower, but more familiar sense, the term is used to designate those agents employed to solicit risks and effect insurance. While it is not necessary to prove an express contract between an insurance company and one alleged to be its agent to establish the relation of principal and agent between them, either that must be done or the conduct of the parties must be such that the relation may be inferred therefrom. Whether, upon a given state of facts, one is or is not to be deemed the agent of the insurer, has generally been held to be a question of law. 16 Am. & Eng. Ency. of Law, 2d ed., p. 907. A person who agrees to solicit business for a certain company to the exclusion of other companies is an insurance agent and not a broker. Lake Charles v. Equitable L. Ass. Soc. 114 La. 836. Holding one out by the insurer as agent or ratifying his acts as agent is sufficient to establish agency. However, in Massachusetts the term "agent," as applied to insurance agents, is defined by statute^ and agents for insurance companies must be licensed before they can transact lousiness law- fully. But they may bind principal on insurance imlawfully negotiated. A General Agent may in the due prosecution of the com- pany's business, delegate to another authority to do any act within the scope of his authority ; and the acts of a sub-agent done in pur- suance of such delegated authority will have the same effect as if done by the general agent himself. In such case the sub-agent becomes the agent and direct repre- sentative of the principal. And the fact that he is compensated by a commission on the business he brings in does not affect his legal status or make him an insurance broker. 16 Am. & Eng. Ency. of Law, 2d ed. 909. INSURER'S AGENT NOT AGENT OF INSURED In Respect to Principal. Additional Insurance by another Agent. The agent of an insurance company is not the agent of the in- sured in any matter connected with the issuing of the policy. If he {a) prepares the appHcation ; (d) or makes any repre- sentations to the insured as to the character or effect of the state- ments in the appHcation he is still agent of the company, and the co77ipa)iy cannot limit the agency by instructing the agent that he is agent only for the purpose of receiying and transmitting the appli- cation and the premium. The Massachusetts statutes simply re-at!irm these rules. Ho\y- eyer, \yhere the agent \\\\o procures the insurance does so in sey- eral companies besides the one or more for which he is agent^ his standing is as a broker in obtaining insurance in those companies and as agent of tJie assured. Westtield Cigar Co. v. Ins. Co. of No. America : 169 Mass. 382. Powers, Rights, Duties and Liabilities of Agent 1. Powers and Rights (a) In general (and in the absence of statute) are in the main goyerned by the same rules of law as those apply- ing to all classes of agents. {b) Where there is an express contract its terms \yill goyern. Right to Compensation. (a) Is usually according to the terms of an express contract. [b) But eyidence of a well established custom among insur- ance companies is admissible to explain the contract if it is technical or ambiguous. If one agent procin'es an application for insiu'ance and subse- quently another agent of the company induces the applicant to in- crease the amount applied for, the first agent is entitled only to his commissions on the original amoimt. So where the first application is refused and a new application for an increased amount is secured by another agent. Compensation of Sub-agents is usually fixed bN- the general agent who appoints them but the Company is liable for payment and not the general agent, if he acts within his authority. INSURER'S AGENT NOT AGENT OF INSURED 393 Forfeiture of Compensation for Misconduct or Breach of Trust . (a) The implied condition in contracts of employment is that the agent will honestly and faithfully look out for the interests of his principal. (3) If he misconducts himself or proves unfaithful to his employer's interest to a gross and ag-gravated extent he may forfeit all right to compensation. Ordinary or slight misconduct is not enough for such forfeiture. Duties and Liabilities, (a) In gc7teral. The agent is bound to ser\e the company in good faith Duties and to the best of his ability, and if he is careless or negli- Liabilities of gent, or acts in bad faith to the company, he is liable ^*" ' to it for any damages sustained by the company through such negligence or bad faith. (1) Ordinary rules of law as to damages apply, /. e., liability for all damage actually and properly arising from the act complained of. (3 ) Liability for Writing Insurance Contrary to Instructions. (1) He is liable for loss so occasioned unless the company expressly or impliedly ratifies his act. Failure to repudiate, if long enough, may work a ratification, (c) Liability for Neglect to Cancel Policies. (1) If the agent's authority includes cancellation of policies, and he does not, when so ordered by the company, cancel zvit/iin a reasonable time^ he will be liable for any loss to the com- pany resulting from his negligence. What is a reasonable time is a question for the court if the facts are clear, (la) The fact that his own judgment does not agree with the company's is no excuse for delay {lb) Xor that he ga\ e notice of cancellation to the broker. The Broker in this case is the agent's agent, not the agent of the assured. (Ic) It is not competent to relie^■e the agent of liability to pro\e a custom to procure can- cellation of policies by the agency of the broker who negotiated the insurance. 394 LECTURES ON FIRE INSURANCE How Direction to Cancel must be given Cancellation. It is not necessary that notice to cancel shall be a command. Notice that company desires to cancel is enough. It is not contributory negligence on the part of the company that it d(jes not itself proceed to cancel a policy when the agent fails to do so under his instructions. The Company may waive Cancellation, either (a) expressly, or, {6) by conduct such as to mislead the agent. In either case, the company cannot hold the agent for loss. The measure of damages follows the usual rule, /. c, the actual loss only is recoverable. Unauthorized or wrongful cancellation is go\erned bv the same rules, as well as any other act in ^•iolation of duty to the company. In Respect to Assured — Power to Bind Company (a) In general, as in other cases of agency, an insurance company is bound by the acts and representations of its agents done and made within the scope of their employment and authority : and in Massachusetts the legislature has further said that a foreign com pany is bound by the acts of the agent within the apparent scope of his authority . Acts of 1907, c. 576 ^ 92. A Kansas case has held that an insurance company is liable to third persons in a civil suit for the frauds, deceits, concealments, misrepresentations, and omissions of duty of a general agent in the course of his employment, although the company did not authorize or justify such misconduct. New York Life Ins. Co. v. McGowan : 18 Kan. 300. It is also bound by (a.3) their knowledge of facts, and (^4) receipt of notices affecting the business which they are authorized to conduct. (See Massachusetts statute as to apparent scope of authority of agents of foreign companies.) See vStuart v. Reliance Ins. Co. ; 179 Mass. 434. Knowledge of or notice to officers or agents: — A mutual fire insurance compan\- cannot be held to have waived compliance with a by-law reiiuiring a consent for subse- INSURER'S AGENT NOT AGENT OF INSURED 395 quent insurance to be endorsed on the policy by the secretary, liecause the same person acted as agent for both companies in issuin«^ the two policies, or because the first company, long after the obtaining of the second policy, notified the insured of an assessment due from him, and accompanied such notice with a schedule of losses claimed of the company, in which his claim was included, and marked '' unadjusted." Forbes v. Agawam Mut. F. Ins. Co. ; 9 Cush. 470. A policy of insurance provided that the use of the place during the continuance of the insurance for any trade or business denomi- nated hazardous or extra hazardous, or specified in the memorandum of special risks, without permission of the company, should a\ oid the policy ; also, that the conditions annexed should be used or resorted to to explain the rights and obligations of the parties in cases not otherwise specially provided for. One of the conditions was that, if after insurance the risk should be increased by any means in the control of the insured, or the premises lie so occupied as to render the risk more hazardous, the policy should be void. Held, that parol evidence was inadmissible to show that the use of the building for a purpose specified in the memorandum of special risks, and not mentioned in the policy, or indorsed thereon, \yas in fact known to the agent of the company, who visited and examined the premises, agreed with insured on wdiat facts were material to be stated, filled up the application, and issued the policy. Lee V. Howard Fire Ins. Co. ; 3 Gray 683. \Vhere a policy contains a provision that the agent through whom the insurance is effected shall be the agent of the applicant and not of the company, evidence of knowledge on the part of the agent that insured's title was not as described in the application is inadmissible to show a waiver of condition that a misdescription of the title or interest should avoid the policy. Cancellation. Abbott V. Shawmut Mut. F. Ins. Co. ; 8 Allen 569 But if by the terms of a contract of insurance it is expressly provided that the application on which the policy is issued shall be held to be a warranty on the part of the assured, knowledge by the agent ox officers of the company that certain answers in the appli- cation were not correct is no evidence of a waiver by the company. Tebbetts v. Hamilton Mutual Ins. Co. ; 3 Allen 569. Where a policy of insurance on a dwelling house contains the provision that it becomes void when the occupant personally vacates the premises, unless immediate notice be given to the insurers and 396 LECTURES ON FIRE INSURANCE additional premium paid, a notice to an agent, who was authorized only to receive and forward applications for insurance, to collect premiums, and to bind the company on special hazards for ten days only, is not sufficient^ although the assui'ed did not know of the limited extent of the agent's authority. Harrison v. City Fire Ins. Co. : 9 Allen lJ31. Forfeiture of a policy of insurance for operation of a factory at night time, in violation of its provisions, cannot be a\oided bv proof of knoivledge on the part of the agent that similar establishments were run at night, and that plaintiff could not successfidly and profitably carry on his business without working at night. Reardon v. Faneuil Hall Ins. Co. ; 13o Mass. 121. This would doubtless be true if the knowledge referred to the operation of the factory insured. Neither the previous habits of a person insured to cease oper- ating his manufacturing establishment during the dull season, nor the general custom of manufacturers in the same business so to do, nor the knowledge by the ins/i ranee agent of such custom, will render nugatory an express provision in a policy of fire insurance that it shall be void if the establishment ceases operation for thirty days. Stone V. Howard Ins, Co. ; 153 Mass. 475. In the interesting case of Newburyport v. Fidelity Mut. Life Ins. Co. ; 197 Mass. 596, a city treasurer paid annual premiums on his life insurance with city checks. It was held that the company had notice by the receipt of such checks by its cashier that in the absence of express authority the checks were invalid. Newburyport v. Fidelity Ins. Co. ; 197 Mass. 596. AUTHORITY TO RECEIVE NOTICE OF LOSS. Notice of The fact that local agents of an insurance company are not Loss. authorized by their commission to receive proofs of loss will not pre\ent a delivery to them of proofs of loss being a delivery to the company, where the policy issued does not notify the policy holder that they are agents of limited powers, and it appears that they had apparent authority by custom to recei\e proofs of loss. Harnden v. Milwaukee Mechanics' Ins. Co ; 164 Mass. 382. This does not establish the ride that delivery to atty agent is sufHcient wherexer he may be located. Apparent anihoritv on the part of a local agent of an insur- AUTHORITY TO RECEIVE NOTICE OF LOSS 397 ance company to receive proofs of loss may be implied fro))i utii- versal custom among insurance companies for local agents to pre- pare proofs of loss and send them to the companies, when it is not done by the adjusters. Harnden v. Milwaukee Mechanics' Ins. Co ; 164 Mass. 382. ((5) Nature and Extent of Authority. General Agents are the Company practically, unless under known limitations. A general agent of an insurance company may bind his principal by any act or agreement within the ordinary scope of the kind of insurance business carried on by the company which is not known by the assured to be beyond the authority granted to the agent, such as ; — (^1) One dealing with a general agent of an insurance company is under no obligation to investigate his authority to issue a policy on a risk which is extra hazardous and located in a place other than the town in which the agent's office is located. German F. Ins. Co. v. Columbia Encaustic Tile Co. ; 15 Ind. App. 623. (/^2) Waive conditions. (3o) Correct a description of propertv insured. The \\n\'i\' one of their agents without knowl- edge of the person to be insured, for insurance on a l)uilding stated that *■' the property to be insured " belonged to him \\ hen in fact he owned the Iniildiiig on]\ , and was a mere tenant at will of the AUTHORITY TO RECEIVE NOTICE OF LOSS 403 land on wliich it stood. A policy was issued thereon, expressly made subject to the lien of the company on the interest of the assured in any personal property or buildings insured, and the land under such buildings, upon which lien the company expressed their intention to rely, and to the by-laws, the conditions of which were declared to be a part of the policy, and provided that the applica- tion should be a part of the policy and warranty on the part of the assured; that any policy should be yoid "unless the true title and interest of the insured be expressed in the proposal or application ; " that property held by lease, or standing on land so held, shall not be insured, unless specially described as such in the application; that, "in case the application is made through an agent, the appli- cant shall be held liable for the representation;" and that, "no insurance agent or broker forwarding applications to this ofHce is authorized to bind the company in any case whatever," Held, that the assured, by accepting the policy, adopted the representations of the agent, Kibbe v. Hamilton Mut, Ins, Co. ; 11 (irav 1(33, Held, further that parol evidence of the agent's knowledge of the actual facts as to the insured's interest was inadmissible. Kibbe v. Hamilton Mut. Ins, Co. ; 11 Gray 163, Where a policy of life insurance pro\ides that the application shall be part of the contract, and any untrue answers render the policy void, material misrepresentations in the application will avoid the policy, though inserted therein by the soliciting agent, without knowledge of insured, who orally stated the truth to the agent. McCoy V. Tvletropolitan Life Ins. Co, ; 138 Mass, 82. Sts. 1861 c. 170 and 1864 c. 114 do not apply. {b) Liability for Neglect to Effect Insurance. Where an insurance agent contracts with a person to effect for him a policy of insurance and receives from him a premium there- on, he will doubtless be liable for any damages resulting from his neglect to do so. {c) Liability for Loss Resulting from Cnauihorized Acts or Representations. Is of course perfectly clear. But Stat, of Frauds applies to misrepresentations. {(i) And an agent who issues a policy in a foreign com- pany not authorized to do business in the State is per- sonally liable to the policy holder for any loss occurring under the policy, both at common \a.\\ and under the Mass. statutes. 404 LECTURES ON nRE INSURANCE Termination of Agency. ( a) How (al) As a general rule may be by election of either party (a2) Or by operation of law if either party is inca- pacitated such as agoif s licei/se or company' s authority to do hiisiness rexoked (a3) By agreement of parties (<5) Effect of Termination. ((51 ) Agent's power to bind principal ceases, tinless termination unknown through neglect or fault of company to prior customer still dealing with agent. ((32) Agent's right to commissions on renewal policies ceases unless his express contract provides otherwise. This is generally a question depending on the contract between the company and agent. Insurance Brokers. Dejinitio7i. Broker De- " An insurance broker is one who acts as a middleman between lined. ("he insured and the insurer, and who solicits insurance from the public, under no employment from any special company, placing the orders secured either with comjjanies selected by the insured, or, in the absence of such selection with the companies selected by himself." 10 Am. & Eng. Ency. of La\v, 2d. ed. 970. The term •' in'>urance liroker " is generally imderstood to mean a person who owes no duty or allegiance to any particidar corporation. He is free to procure insurance for others in any company he may select, and to solicit and procure business and patronage for any insurance company or companies he may select. McKinney v. Alton; 41 111, App. 512. The Massachusetts statute defines an *•' insurance broker " as follows: " \Vhoe\er, for compensation, not being the appointed AUTHORITY TO RECEIVE NOTICE OF LOSS 405 agent or officer of the company in which any insurance or reinsur- Broker De- ance is effected, acts or aids in any manner negotiating; contracts of fined. insurance or reinsurance or phicing risks or effecting insurance or reinsurance for a person other than himself, shall be an insurance liroker, and no person shall act as such broker except as pro\ ided in section 1*5." Acts of 1907 c. 576 § 98. (Section 95 provides for licensing brokers.) The broker's license is strictly personal. It does not extend to the clerks in his office. They cannot do acts forbidden to persons not licensed, except under the immediate direction of the licensed employer or incidental to the work as clerk. 2 Opinions Atty. Gen. 'IX'o. One negotiating insurance in domestic companies, but not licensed under the statute as an agent or broker, who furnished to a duly licensed agent the names of persons desiring insurance, for the purpose of aiding such agent to effect such insurance, in con- sideration of a stipulated share in the commission by means of which information such agent was enabled to effect such insurance, is an insurance broker, within the statute. Pratt V. Iku-don ; 1(>S Mass. 596. Distinguished from Insurance Agfents There is a marked and well-detined distinction between insur- ance brokers and insurance agents representing corporations. Such insurance agents during their employment sustain a fixed and per- manent relation to the companies they represent. They are clothed with general powers and authority, and assume responsibilities not conferred upon or assumed by brokers. They owe duty and alle- giance to the companies employing them, and seek patronage only for the profit and benefit of such companies, and are precluded from soliciting insurance business for others. 16 Am. & Eng. Ency. of Law, 2d ed. 970. Agency of Broker In general (a) Ordinarily Agent of Insured in all matters within the scope of his employment. Westfield Cigar Co. v. Ins. Co. of No. America; 169 Mass. 382. Comm. Mut. F. Ins. Co. v. Wm. Knabe & Mfg. Co. ; 171 Mass. 265. 406 LECTURES ON FIRE INSURANCE 173 Insurance Faulkner v. Manchester F. Ass. Co. ; 171 Mass. 349. Broker. Comm. Mut. F. Ins. Co. v. Fairbank Canning Co. Mass. 161. Same v. Swift ; 174 Mass. 226. and within that scope his acts, representations, and conceahnents are chargeable to and binding upon the insured. Brokcr^s Clerk. A. applied to B., an insurance broker, for insurance. B. ob- tained a policy from C, agent for the tlefendant company. After- ward the defendant requested C. to cancel and return the policy. C. went to B's otKce, but finding him absent, informed D.. the clerk in charge, that he was instructed to cancel the policy, and requested D. to get it for cancellation. It was held that D., in returning the policy for cancellation, acted as the agent of A., and not as the agent of the defendant. Faulkner v. Manchester F. Assu. Co. : 171 Mass. 349. This is so eyen although the broker solicits the insurance, and the fact that the policy is deliyered to him, and that by an arrange- ment or agreement with the insurer or with an agent of the insurer he obtains from either his compensation, does not change his legal status. 16 Am. & Eng. Ency. of Law, 2d ed. pp 971-2. Comm. Mut. F. Ins. Co. v. Wm. Knabe & Mfg. Co. 171 Mass. 265 {b) When Agents of Insurer (1) When employed as such. Of course, when employed by the company as its agent, all his acts, within the scope of his agency, will bind the Company. (2) Agenc\' in Deliyering Policy and Collecting Premiums. In some states it is held at common law that in those matters he is agent for the company. (And in Massachusetts it is fixed by statute — that the broker in recei\ ing the premium is the Company's agent, whateyer may be contained in the polic\ . Acts of 1907, c. 576 § 96.) Where the insured merely tells the broker to haye the property covered, the broker is the assent of t lie insured in the picking out of the company and the term and amount of the policy, and if he makes a mistake on these matters, he does not bind the Cduipany, AUTHORITY TO RECEIVE NOTICE OF LOSS 407 but the insured. For the time being in this particuhir transaction Insurance he is the insured's agent. Broker. Bowditch V. Norwich Union Fire Insurance Co. ; 193 Mass. 565. Accounthig by Broker. Where custom is for company to dehver policies to liroker and charge him with premiums, for him to collect premiums, and ac- count to the company monthly, company can sue broker for prem- iums collected by him, although company was insolvent when policies were issued ; but not for premiums not paid on policies delivered to him, although policies not returned. Monitor Mut. F. Ins. Co. v. Young; 111 Mass. 537. (<:) Effect of Provision in Policy Declaring Broker Agent of Assured. Policies frequently contain a clause providing that if any <5;'0^er or any person other than the insured has procured the policy he shall be deemed to be the agent of the insured and not of the insurer in any transaction relating to the insurance. This has been held valid ; that under it the broker who obtains the insurance is the agent of the insured, and that his representations will bind the insured. (But note that in Massachusetts by statute the broker is the agent of the company always in the receipt of the premium.) 2. When Employed Only to Procure Policy. The broker's agencv terminates wdien the policy is executed and delivered absolutely to the insured or his agent. Green z' Star Fire Ins. Co. ; 190 Mass. 586. If delivery is conditional on approval by company and it is not to take effect until so approved, notice by the insurance com- pany to the broker that it does not approve the policy will be notice to the insured. Young V. Newark F. Ins. Co. ; 59 Conn. 42. After unconditional delivery notice to the broker of cancella- tion is not sufficient notice to the insured. ''Assuming that the contract of insurance was perfected, so that the risk attached, the defendant fails to show a termination of the insurance before the fire, in accordance with the terms of the policy." The provision is that " the insurance may be terminated at any time at the option of the company, on giving notice to that effect, and refunding a ratable proportion of the premium for the unexpired term of the policy." 408 LECTURES ON FIRE INSURANCE Insurance (The present standard form says "Notice to the insured ?inCi. Broker. /^ any mortgagee to whom this pohcyis made payable," etc.) The letter of the general agent to Hunt (the broker who pro- cured the policy), giving him notice that the company did not wish the risk at the rate named, and demanding a return of the policy, without an offer to return any part of the premium, was not sufli- cient. The facts do not conclusively show that Hunt was the agent of the plaintiff to receive notice of a termination of the risk, and the provision in the policy making the person who procures the in- surance "the agent of the assured in all transactions relating to the insurance," cannot be construed to mean that such person shall be ao-ent to receive notice of the termination of the insurance at any time during the life of the policy ; it plainly refers to the original transactions connected with obtaining it." White V. Conn. Fire Ins. Co. ; 120 Mass. 330 at 333. Evidence of a General Custom in the Insurance Business authorizing insurance companies to give notice of cancellation to broker procuring insurance is not admissible. Where Broker Undertakes to Do Acts Outside of His Em- ployment, the question for whom he acts depends upon the special circumstances of each case: and upon the ordinary rules of evidence and agency, such as (1) Burden of proof is on party seeking to bind the other by his acts to prove his authority (2) and, in absence of direct authority, to show (2«) Ostensible authority, or (2(5) Ratification. 3. When broker is authorized to represent principal in all insurance matters, his authoritv as agent not only extends to (3ia:) procurement of insurance, but (33) modification, or (3r) cancellation of policies and notice to him would bind his principal, III Licensed lirokers. Where brokers must be licensed under statutes (as in Massa- chusetts) bringing together the protective assured and the insurer is acting as an insurance agent or broker and retiuires a license. If Rights and AUTHORITY TO RECEIVE NOTICE OF LOSS 409 done without a license no action can he maintained for his commis- sion h\ the broker. Pratt V. Burdon ; 168 Mass. 596. Rigfhts, Duties, and Liabilities of Brokers. 1. Lien upon policy and moneys received thereon. (a) In general. duties of An insurance broker has a //cf/ upon all policies in his hands Brokers procured by him for his principal, and also upon the moneys re- ceived by him upon such policies^ for the payment of the sums due to him for (dil) commissions, {a'l) disbursements, (a3) advances, and (^•4) services in or about the policies. But the lien does not extend to cover any balance due upon business foreign to that of effecting insurance. The mere intermixing of charges in reference to policies with other items in general account is not a waiver of the lien. 16 Am. & Eng. Ency. of Law, 2d ed. 974. (/^) When broker is employed by agent. (1) When broker knows of agency. When the broker knows that the person who employs him is merely the agent for the party insured, he has a lien for (la) the premiums paid by him (1(5) his commissions on the policies which he effects but not for (Ic) general balance of his insurance account with the agent. 16 Am. & Eng. Ency. of Law, 2d ed. 974. This is, of course, on the familiar ground that he can only hold a known principal for the debts of the principal. (2) When broker does not know of agency. he has a lien for such general balance of his insurance account, and has a right to apply money received upon the policy to the satisfaction of that balance, as well after as before notice that it belongs to a third person. 4 JO LECTURES ON FIRE INSURANCE 16 Am. & Eng. Ency. of Law, 2a cd. pp. l»74-5. (c) Extinguishment of lien by parting with poHcy, l\y their delivery to insured, or his agent. {(/) Re-attachment of lien upon repossession of policy. (dl) Lien revives if policies again come into broker's hands from person against whom right originally existed, but //o^ if (d2) come as property of some other person, or (^ 114. Hewins v. London Assu. Corpn. ; 184 Mass. 177. " A policy so issued must be construed as it reads and not as if Construc- it were in the standard form." *^o"* "According to the recent ruling of Judge Bell in the superior court, in regard to a foreign insurance company con- tracts executed without the state are binding here. "His decision awarded the plaintiff $18,507.92 in the suit of Theodore W. Stone, receiver of the Electric Mutual Casualty Association of Philadelphia against the Old Colony St. Ry. Co. He found for the defendant in set-off for $1,595.54. He reported the case to the full bench of the supreme court. "The insurance company was organized to do business of accident insurance on the mutual assessment plan. Policies were issued to street railway companies, now consolidated under the name of the Old Colon\- St. Ry. Co., the defen- dant in this action. "The defendant companv set up in defense that the pol- icies of insurance were invalid for the reason that the insur- ance company had not complied with the insurance laws of this state. "The judge finds the contracts were made in Penns\l- vania, were to be performed there and were valid under the laws of that state." 422 LECTURES ON FIRE INSURANCE Oral Con- tracts. Agent for Company. •5. There is nothing in the laws to prevent companies from making oral contracts of insurance. Brown v. Franklin Mutual Fire Insurance Co. : IGo Mass. 56-3. An agent or broker acting for another person than himself, shall for the purpose of receiving premiums he held as the assent of the company iv hat eve?' may be in the policy. Acts of 1907, c. .")76, >; 96. "The statute of 1861, c. 170 (since repealed and re-enacted in a modified form) relating to agents of insurance companies, does not change the rules of the common law regulating the power of agents to bind their principals; it only defines what classes of persons shall be deemed so far agents of insurance companies as to be lia])le to the penalty prescribed b\- Gen. Sts. c. 58, § 77." ■'If a polic\- of fire insurance contains a clause providing that any person other than the assured, who may have procured the insurance to be taken, shall be deemed to be the agent of the assured, the assured is bound by representations made by an insurance broker, who obtains the insurance." Wood V. Firemen's Fire Ins. Co. ; 126 Mass. 316. „ . And if the ag-ent or broker knowing-h' procures payment, or Premiums, ^ fc> . i r . etc. Obtained ^'''^' obligation for payment, of the premium by fraudulent repre- by False Rep- sentations. he is liable to a fine of not less than $100 nor more resemations. than $1,000 or imprisonment for not more than one \ ear. Acts of 1907, c. .376, § 96. Definition. ^^ '* person makes a representation of a present fact which he either knows to be false, or ought to have known to be false, with the intent that the person to whom he makes the representation shall act on it, and the person does act on it, and is damaged by so doing, this is an actionable, fraudulent representation. And it makes no difference whether or not the party making the representation believes it to be true, if he makes it recklessly or willfully and without proper investigation. Brokers Definition of "Whoever, for compensation, not being the appointed agent Broker ^^ officer of the company in which any insurance or reinsurance is effected, acts or aids in any manner in negotiating contracts of insurance or reinsurance or placing risks or effecting insurance or reinsurance for a person other than himself shall be an insur- ance broker, and no person shall act as such broker except as provided in section 9o." Acts of 1907, c. 576, § 98. MASSACHUSETTS STATUTE LAW OF AGENCY 423 Brokers^ Licenses The insurance commissioner may: — Broker's Li- (a) upon payment of $10 issue to cense Fee. (d) suitable person resident in Massachusetts or resident in any other state granting broker's licenses to resi- dents of this state, a license: — 1. to negotiate contracts of insurance, 2. or reinsurance, 3. or place risks, or 4. effect insurance with any qualified domestic insurance company or its agent or with the authorized agent in this Commonwealth of any foreign insurance company duly admitted on the following conditions: — (1) Written application filed with insurance commissioner Application, on form provided by him, sworn to by applicant and kept on file by commissioner, states (a) name; (d) age; (c) residence and occupation of appli- cant at time of making application; (, papers, and accounts of his a<^encv shall be open to the inspection of the Tax Commissioner at anv time to enable him to verify the statements and transactions aforesaid. If agent — (a) ne<;lects or refuses to make such return, or (/)) refuses to submit books, papers and accounts of his agency to such inspection, tax commissioner reports to the insurance commissioner who cancels the agent's license and makes publication thereof. License so cancelled shall not be renewed within one year Limitation, thereafter ; but only such agents shall be subject to this provision as are not recjuired to make said returns to any other agent in this Commonwealth for j^remiums received. Acts of 1907, c. 576, § 93, For willfully making a false annual or other statement required by law the company and the persons making oath to or subscribing the same shall be severally punished by a fine of not less than $500, nor more than $5000. A person who makes oath to such false statement shall be guilty of perjury. Acts of 1907, c. 576, § 110. Punishment imprisonment not more than 20 years or fine not more than $1000, or imprisonment in jail not o\er three years or both such fine and imprisonment. Acts of 1911, c. 184. also provides that anv person — (a) making false report to the insurance commissioner etc. (or other commissioners), or (d) testifying or affirming falsely to any material fact in anv matter wherein an oath or affirmation is required or authorizetl, or (c) making any false entry upon any book, report, paper or statement of any company making report to any of said commissioners or commissioner, or to any agent appointed to examine the affairs of an}' such company ; or to deceive the stockholders or any officer of any such company ; or to injure or defraud any such com- pany, and any person who with like intent aids or abets another in any violation of this act shall he punished by fine not more than $1000. or b\- imprison- ment not more than one year, or by both such fine and imprisonment. Penalty. False Reports to any Com- missioner. Perjury. False Entries. Penalty. MASSACHUSETTS STATUTE LAW OF AGENCY 429 Every insurance company must file on or before |an, liMh Annual Re- with insurance commissioner a statement of its financial condition PO""' o^ on preceding Dec. 31st. For cause commissioner can extend time ^°"»it*o"* not later than March 1st. Acts of 1907, c. 576, § 101. If it neglects to make and Hie such report in time, it shall for- Penalty, feit $100 per day during time neglect continues, and upon notice ^^vocation 1 • • • -^ ^1 •.. . 1 1 • 1 11 of Authority. by insurance ct)mmissioner its authority to do new business shall cease while such default continues. Acts of 1907, c. 576, § 110. Failure to file the annual statement at the proper time may not render void a subsequent contract; especially if the statement is ultimateh" hied. Atlantic Mutual Fire Ins. Co. v. Concklin ; 6 Gray 73. "The annual statement of a company of a foreign country shall Foreign embrace only its business and condition in the United States, and Companies, shall be subscribed and sworn to by its resident manager or princi- pal representati\e in charge of its American business." Acts of 1907, c. 576, §101. [Chap. 162. Acts of 1912.] An Act rei.ative to the annual returns of insurance companies. jBc it enacted^ etc.^ as follows : Section 1. Every fire insurance company doing business in this commonwealth shall include in its annual statement required to be filed by section one hundred and one of chapter five hundred and seventy-six of the acts of the year nineteen hundred and seven, a list of all claims under policies issued by it to persons in this common- wealth which, during the year covered by the statement, have been made the subject of suits in the courts and also of those which at the time of making the statement are in suit. These returns shall be in such detail as the insurance commissioner shall prescribe. Section 2. If upon examination of said returns, or upon com- plaint, the commissioner, after investigation and a hearing, is of the opinion that a fire insurance company is unreasonably and unfairly delaying the settlement of claims or is unduly engaging in litigation, he shall make a special report of his findings thereon to the legisla- ture at its next session. Section 3. This act shall take effect upon its passage. S^-Ap- proved February 2Jf^ 1912."^ The insurance commissioner may, whenever he determines it -c to be prudent for the protection of policy holders in this Common- tionsby wealth, visit and examine, personally or by proxy, any foreign in- Com- surance company seeking admission, or already admitted to do missioner. 430 LECTURES ON FIRE INSURANCE Imsiness here, and shall have free access to all its books and papers and those kept bv any of its agents. Testimony. He can sinnmt)n and administer oath to and examine as Avit- nesses its directors, officers, agents or trustees, and any other per- sons, relative to its affairs, transactions and conditions. Acts of 1907, c. 576, § 6. Penalty for Whoever, without justifiable cause, neglects upon due sum- Failure to mons to appear and testify under section 6 before the commissioner Appear and or obstructs him, his deputy or examiner in their examination of an lestity. insurance company, is liable to a fine of not more than $10U0, or imprisonment for not more than one year. Acts of 1907, c. 576, § 117. Procedure for If the commissioner is of the opinion that a foreign insurance Revoking . , . ^ ^ company — Authority of ^ "^ . . P . ^ ((7) IS in an unsound condition, (d) has failed to comply with law, or, (c) provisions of its charter, or (d) condition such as to make its proceedings hazardous to public or its policy holders. (e) or its officers, or ( 1 ) Agents refuse to submit to examination, or to perform any legal obligation relative thereto. He shall (a) Revoke or suspend all certificates of authority granted to — (1) said foreign insurance company, (2) its officers, or (3) agents, (/>) cause notice thereof to be published in the newspaper in which the general laws are published and no ^/czc biisit7ess shall thereafter be done by (a) it, or {b) its ag-cjtts. while such default continues, nor until its authority to do business is restored bv the commissioner. Annual Re- Fire insurance companies are obliged annually, and at such turns of Re- ,,ther times as the insurance commissioner requires, to make sworn insurance. ,-,^.tui-n.s to him of all re- ifisurancc contracted for, or effected by it, directly or indirectly, on property in this Commonwealtlu If it neglects or refuses to make such returns, the commissioner MASSACHUSETTS STATUTE LAW OF AGENCY 431 may i"e\'oke its authority (if a foreign company) or report the facts to the attorney-general (if a domestic company). Acts of 1907, c. 576, § 20. For violation of this section the company, and the agent effect- Penalty, ing or acting in negotiation of such re-insurance shall severally be punished bv a fine of $50t). Acts of li)07, c. o7(i, >? 111. A foreign insurance company doing business in this Common- wealth is not required, in case it desires to reinsure a risk, to take out its policy of insurance by and through an agent resident in this Commonwealth. 2 Opinions of Atty. Gen. 123. E\idence that a foreign insurance companv, admitted to do business in this Commonwealth, has reinsured in a company not so authorized and without tiling the alfidavit required by section 88, justifies the commissioner in revoking the authority of the company, and it is immaterial that the contract of reinsurance was made and to be performed outside the state. Opinions of Atty. Gen. 42. (1904.) " ^Yhoever violates any pro^'ision of this act (1907, c. 576) Penalty for the penalty whereof is not specifically provided for herein, shall be Violation of punished by a fine of not more than $500." ^f* "°* ^P^' cifically Acts of 1907, c. 576, § 120. Covered. QUESTIONS, 1. In case of conflict between common and statute law, which governs ? 2. What information is required bv the Insurance Commis- sioner for the issuance of agency license? 3. May a corporation be licensed as an Agent? 4. What important requirements apply to advertisements of companies represented by an agent ? 5. Qiiote the substance of statute requirements as to over-in- surance? 6. Define a broker and state conditions under which a broker may do business in Massachusetts? 7. State briefly the statute provisions relating to insurance in imauthorized companies ? 432 LECTURES ON FIRE INSURANCE 8. What are the provisions relating to an a^^ent or broker who receives money for premiums? 9. What are the requirements as to returns for taxation? BIBLIOGRAPHY Crawford, William S. : Pointers for local agents. 255 pp. Chicago, 190S. Western Underwriter Co. Hine C. C. and Nichols, Walter: Fire Agents' law book, 95 pp. New York, 1887. Insurance Monitor Co. Richards, George : A treatise on the law of insurance. 959 pp. New York, 1911. Banks Law Pub. Co. Wolff, Louis H. : Wolff's Law of Agency. oo2 pp. Indianapolis, 1904. Rough Notes Co. V LOCAL AGENCY OFFICE SYSTEMS AND ACCOUNTS Necessity for System There is probably no business or profession in the world which requires more accuracy in handling or more careful atten- tion to details than the Fire Insurance business, where an over- sight or error may cost either the company or the assured thousands of dollars, and cause annoyance, trouble and embarrassment that can never be remedied. The overlooking of an expiration or the binding of a company for an amount in excess of its authorization may lose to the agent either a valuable client or a very desirable company connection, to say nothing of his loss of reputation as an underwriter and a business man. One of the most important things in the conduct of a local agency office is "Systein, " without which it is absolutely impos- sible to carry on the business of to-day with any satisfaction either to the customer or to the agent himself. With a well ordered, up-to-date system the actual woik of an agency can be reduced at least one half, and a large volume of business can be handled accurately, promptly and with surprising ease, consider- ing the detail that is necessary even under the most favorable con- ditions. When we compare the present office systems with those of Office Sys- twenty years ago the difference is surprising; and we wonder temsPast how we were able to handle the business at all under such adverse _, "resent, conditions. The change has been one of gradual evolution and one that has taken years of study and experiment to perfect. Twenty years ago it was the custom to use policy registers fur- nished by the companies, each company having its own register, so that when an agent represented fifteen different companies there were fifteen such books to handle every day and to put away for safekeeping each night. These books varied in size. Many of them were large and cumbersome to handle, and were the property of the companies who furnished them. As a result, when the agency of a company was transferred, either by action of the company or on account of the resignation of the agent him- 434 LECTURES ON FIRE INSURANCE self, it was customary for the company to claim its property and insist that the agent give up the register, which contained the only complete record of the business of that company which he had in the office, so that it might be turned over to the new agent for his information and further use. Under such conditions the agent was obliged to "get busy" and have copies of all the forms and other records in the book made in order to have an abstract of his own business. Company Another disadvantage of the company register system was Register ^j-jj^j- vvhere a large line was divided among a dozen or more com- ys em. panics it was necessary to have a copy of the form for each book, or, in other words, a dozen copies. Where printed forms were used this was not so bad, but where typewritten forms were necessary it made considerable additional labor, and in the old days before typewriting machines had come into general use and the clerks were obliged to write out each form with pen and ink, it meant a day's work to complete the record of one large risk. General Reg- The first improvement over this very objectionable system ister and vvas the General Register and Form Book, which were separate orm Doo . volumes of great weight and imposing appearance. They were, in fact, so heavy and unwieldy that no lady clerk could carry them unless she took a physical culture course out of business hours. However, they were such time savers that they were at first regarded by local agents with great approval, and many agencies adopted them as being an advanced system. This method sim- plified the work greatly, because only one form was necessary, no matter how many companies were interested on the risk. The form was numbered and the various companies were noted by number or name, with policy number and amount on margin of the form book opposite the form. The General Register contained simply a one line abstract of the risk, referring by number to the form upon the form book. These books, containing as they did the records for all companies of the agency, were the property of the agent who purchased them with his own money and could not be taken by a companv trans- ferring to another agencv, which was another distinct advantage in their use. These clumsy and unsatisfactory books gave way in their turn to the Duplicate Daily Report and Card System now in use, and which in various forms has been adopted generally by practically all agencies of any size throughout the countr_\-. LOCAL AGENCY OFFICE SYSTEMS 435 Recordingf Systems The Duplicate Daily Report is of course an exact copy of Daily the report sent to the company, which in its turn is a duplicate l^cport of the policy itself, so far as policy number, amount, rate, ^ premium, date of issue and of expiration, term and form of policy are concerned. These duplicate daily reports are the same size as the originals furnished by the companies, and are made of a • good quality of fairly thick paper, so that they may be placed on file in a vertical position in a cabinet without becoming wrinkled or losing their shape. The paper is usually tinted instead of white, so that they will not soil easily in much handling. The only printing upon them is the name of the company at the top and a notation at the lower left-hand corner to the effect that they are the property of the agent. When the original daily report is struck off upon the type- writing machine for the company the duplicate is made at the same time by in<;erting a sheet of carbon paper between the two, thus preparing both at one operation, with the exception of the forms which are manifolded under a separate operation and attached afterwards. Although new originals have to be made for the companies each year the duplicate can be used for several years in succession by merely changing the policy number and dates of commencement and expiration upon the blank, which is a great saving in the matter of expense and filing space. These duplicate dailies are filed in numerical order according to policy number so that they can be easily referred to, and are divided by months. When a policy is canceled the report is removed from the regular filing case and placed in its numerical position in another case or receptacle known as the "dead file," where it can be found without difficulty whenever reference to it is necessarv. In addition to the duplicate daily report a Card System is used, which, as a rule, comprises five features, viz., street loca- tion, expiration, index, ledger accounts and company monthly abstracts. Entries upon these cards are made from the duplicate daily report, so that the original report may be stamped by the stamp clerk, and forwarded to the company without delay. The Street Location card is a record of great convenience, Street Loca- and is so ruled as to give space for location, name of assured, tion Card, policy number, amount, rate, expiration, name of company and 436 LECTURES ON FIRE INSURANCE class of risk. They are filed in a cabinet according- to the loca- tion which appears on tlie top line, the names of streets being placed in alphabetical order, and according to street number, the odd numbers being divided from the even numbers by a guide card, so that all risks on one side of a street are together, and separated from those on the other side of the street. As all lines written by the agency on each risk at the given location are entered on these cards, it is possible to tell at a glance how much insurance the agent has upon the risk, and when the policies expire. The agent can also instantly answer any question of the assured as to any of the facts shown upon the card without refer- ring to any other records, and pl'actically all the information lacking is the matter of form, which can be found in another minute by referring to the daily report from the policy number shown upon the card. J. LOCATION CARD Location Assured Policy No. Company Amount Rate Expiration Remarks Month Day Year All lines on or in the same building are noted upon the company daily report from this card, so that any entry upon the maps is unnecessary unless the company also requires information as to "block lines." There are several kinds of Expiration Cards, one of the best LOCAL AGENCY OFFICE SYSTEMS 437 being a combination of expiration and index, which accomplishes Expiration two purposes in one set of cards. These cards are the same size Cards, as the location cards already described, although they are usually a different color so as to be easily distinguished from the others, the location cards being white and the expiration cards being buff or some other light tint. Expiration cards are ruled some- what differently than the location cards, but contain practically the same information, with name of assured at the top. They are so cut that a small projection or tab at the top contains a notation as to month of the year. 2. EXPIRATION AND INDEX COMBINED Ap EXPIRES Name of Assured Month Day Year Location Policy No. Company Amount Property Premium - Rate Term Register Broker Form To secure the advantage of the index feature they are filed according to name of assured in alphabetical order, so that all cards for each assured come together in the cabinet, and can be referred to in a moment at any time. Before the end of each month the cards of expiration for the coming month are taken out, arranged according to dates, and placed together in another section of the cabinet, from whence they are taken day by day as the poli- cies are renewed. The work of taking these cards from the gen- eral cabinet is greatly facilitated by the tabs at the top which I have already mentioned, the only point being to make sure after locating the card for that month that it comes due in the current year. There being many term policies written, this takes con- siderable time and care, but as it has to be done but once a month, and then at a time when other work of the office is not pressing, there is no particular objection to it on that account. 438 LECTURES ON FIRE INSURANCE Filing Some offices file their expiration cards without regard to Methods. index of name, placing them according to month and year, which of course avoids the necessity of going through the whole cabinet and picking them out each month. In such cases a separate system of indexing has to be kept, so that each method has its advantage over the other, and it becomes simply a matter of choice. Accountingf Systems Ledger Card. The Ledger Card is considerably larger than those already described, it being ruled with debit and credit columns, with sufficient space for several entries. These ledger cards have a distinct advantage over books of any description, even the loose- leaf ledger folio, as they are light, easily handled, and take up very little space. When an account is paid they are immediately taken from the cabinet, jDosted from the cash book, and jDut away in the "dead" file for future reference, being placed in alpha- betical order, with name of the customer, broker, or company, as the case may be, at the top. By following this plan only live or open accounts are in the working cabinet for ready reference. These cards can be used again and again so long as there is any blank space left upon them, which is a considerable saving not only of labor but of expense as well, as they are much more costly than the smaller ones used for location and expiration pur- poses. Monthly Ab- The only other card necessary to the system I am describing stract Card, is the Company Monthly Abstract Card, which is larger than any of those previously mentioned, being the size of an ordinary account current. These cards when completed contain all the information appearing on the monthly account rendered to the company as to business written for the month, except the cancela- tions, reinsurance, rebates, charges, commission, and balance due, these figures appearing of course upon the ledger card. These duplicate account cards are also placed in the vertical file, being arranged according to years and months, and are very val- uable to the agent as a source of reference. Collections and Remittances Importance The matter of collections is an important feature in the con- of Collections. (i,^jct of a local agency, and one which requires systematic and careful handling in order to secure satisfactory results, and yet not antagonize the assured. LOCAL AGENCY OFFICE SYSTEMS 439 In the matter of payment of insurance premiums the public may be divided into five classes: those who pay cash immediately upon delivery of the policy; those who remit promptly at the end of the month in which the policy takes effect; those who mail check upon receipt of second bill; those who never mail checks, but cheerfully draw same whenever request is made upon them by the agent in person; and those who never pay until forced to do so under threat of cancelation of the policy. An agent who looks after his collections closely soon discovers in which of these classes the customer belongs, and governs himself accordingly. A valuable assistance in the collection of premiums, and a Collection method which has worked out very well in many agencies, is the Methods, practice of enclosing bill with each policy upon delivery, in which case the assured usually either draws check for the account on the spot, or places the policy in a safe deposit box and puts the bill in a pigeon hole of his desk to be paid with others when drawing checks for his bills of the month. Another plan which has proved of great assistance in the col- lection of premiums is the sending out of notices about ten days in advance of expiration on all policies of small amount, usually household furniture risks where the premiums range in sums of anywhere from $'2 to $7 or $8. These notices are printed upon slips of proper size for mailing in small ordinary envelopes, blank spaces being left to fill in on typewriting machine, covering name and address of assured, policy number, company, amount, class, term of policy, expiration, and amount of premium. In response to these notices about eighty per cent of assured either call at the office, order renewal and pay cash in advance, or reply that they do not care to have the insurance continued, there being very few of the latter class. The day the policies expire letters are sent to the other twenty per cent who have failed to reply to their notices, advising them that not having heard from them it is assumed that renewal is not desired, and that the insurance therefore stands canceled. The next day about ten per cent, or one half of the delinquents, come in, state that they have forgotten the matter, and of course wish their insurance kept in force. They, too, pay cash, and their policies are mailed to them. The remaining ten per cent are usually transients who have removed from the city, and are therefore of no further value to the agency. The notice system for small accounts saves an immense 440 LECTURES ON FIRE INSURANCE Small Ac- amount of time and removes one of the most annoying features counts. formerly so prominent in the matter of making collections. Each agency should have its own rule as to usual limit of credit, and follow it out so far as practicable, making exceptions only in special cases where unusual accommodation is reasonable and necessary. Remittances. In the matter of remittances all brokerage accounts should be paid within thirty days or during the month following the issu- ance of policies as the agent writing the business for the agency controlling the risk receives a small part of the commission only, and should not therefore be kept waiting for the money with which to pay his companies. The matter of remittances to the companies by the agent representing them is a question for mutual understanding and adjustment. The companies have always shown themselves very liberal in this respect, and are always ready to grant an agency any accommodation within reason, some agencies, for local and financial reasons, requiring more latitude than others. Such understanding once having been arrived at, remittances should be sent promptly upon the dates agreed upon so that the company may know exactly what to depend upon and be saved the annoyance of letter writing or of further action on their part or that of their field men. Importance of Promptness and Accuracy Promptness. The importance of promptness and accuracy in the local agency business cannot be overestimated, both being absolutely necessary for its success. The request of a company for the cancellation or amendment of a policy should be acted upon with the same promptness with which an order for new business from a property owner is exe- cuted. Many an agent has learned to his cost the embarrassment that is likely to follow his delay in carrying out instructions of this character, particularly when the risk burns prior to his having done so. Promptness in completing an order from the assured is equally important, and the line should be bound immediately, and a written binder given or mailed the property owner, stating in which company the insurance has been placed, unless there is time to issue the policy itself, upon the day the order is received. The necessity of accuracy has already been emphasized in the opening paragraph of this address, and too much stress cannot LOCAL AGENCY OFFICE SYSTEMS 44 J be laid upon it. The modern and more advanced systems which have come into vogue, some of which I have tried to describe, have done much to assure accuracy in a greater degree, as they are time savers and therefore permit opportunity for more careful handling of the different entries necessary in the detail of an agency office. One of the most valuable assets an agency can have is a reputation for promptness and accuracy, which is, I believe, usually given full recognition both by the companies and by the assured. BIBLIOGRAPHY Cook, J. Thornton: How to work insurance agencies. 94 p., London, 1909. Guilbert Pitman, Pub. Crawford, William S. : Pointers for local agents. 2.55 p. Chicago, 1908. Western Underwriter Co. Eke, J. A.: The elements of insurance. 127 p., London, 1910. Isaac Pitman & Sons, Ltd., Pub. Hardy, E. R. and Lindner, Walker: Insurance and real estate. 204 and 505 p.. New York, 1911. Alexander Hamilton Institute. Moore, F. C. : Fire insurance and how to build. 800 p. New York, 1903. Baker Taylor Co. National Association of Local Fire Insurance Agents: Bulletin. Published monthly in the interest of local agents, Boston, Mass. Rough Notes: In the front office. Plans and suggestions for writing more fire insurance. 124 p., Indianapolis, 1910. Right to the point. A manual for fire insurance agents. 75 p., Indianapolis, 1902. Schmidt, Oscar: Fire insurance practice. 56 p., Indianapolis, 1910. The Rough Notes Co., Pub. Sweetland, Charles A. : Insurance and real estate accounts. A working handbook of modern methods. 154, 48 and viii. p., Chicago, 1910. American School of Correspondence. Von Szeliski, Paul: Office records of a fire insurance agency. Proceedings, Toronto (Can.) Insurance Institute, 1908-09 : 65-78. NOTES ON LOCAL AGENCY COMPENSATION Introduction For the last forty years the question of proper compensation for the local agent of fire insurance companies has been one of the livestof the live issues of the business in this country, and not a month has passed but there have been sharp discussions and sincere disagreements, — as well as some not entirely sincere, — on its merits. It is hardl\- possible to believe that there will be a continuance of the present unsatisfactory conditions for even a few years in the future, because this item of the expense account of the companies is a focus of the attention rot only of company managers and directors and agents, but of the heads of insurance departments and prominent legislators throughout the country. The companies themselves are attempting with considerable suc- cess to adjust conditions so they will be defensible against any reasonable investigation or inquiry, while the recent conventions of insurance commissioners have expressed themselves so forcibly and clearlv that it is evident that the companies will have their full support in the endeavor. "The Commission Question," as it is commonly called, is essentialh- the result of competition for business among the com- panies, whose writing capacity is tested in but few of the larger congestions of property value in the great cities and who naturally strive each for itself for the largest possible income from the safer field of the smaller communities. With the establishment of generally uniform rates in the latter part of the nineteenth century came the secondary competition, inside the agencies, by rearrange- ment and increase of the compensation allowances. These have not been harmonized by agreements anything like in extent those which control rates of premium, and conscquentl}- the average commission allowance has steadily increased until in 1911 (quoting from the report of the joint committee of the New York Senate and Assembly) it was represented by approximately 21 5-10% of the premium and more than 50% of the entire expense of transacting the business. In this connection it is well to know that for many years of the earlier history of the fire insur- ance business in this countr\ the agents were allowed but •)% NOTES ON LOCAL AGENCY COMPENSATION 443 commission, with an occasional agreement to pa\- 10% if the Early income from the agency would justify such extravagance. There Compensa- were, to be sure, fees for issuing policies and endorsements, ^'o" but these were paid by the insured. It is reported that some agents in those days received no commission at all and derived their whole income from the survey fees, policy fees and brokerage paid by their customers. The Philadelphia Chamber of Commerce in 1823 provided a maximum fee of 5% for fire in- surance brokerage, to be paid by the purchaser of the insiirance. The statistics of the National Board of Fire Underwriters include the following table, which shows the average expense of the stock companies in the United States and the average commis- sion, from 1860-1910 inclusive. All Stock Companies in the U. S. Av. Rate. Av. Expense. Av. Com 1860- 1870 31.06 33.16 11.32 14.09 71- 80 . . .9432 81- 90 . . .9880 35.16 17.95 91- 00 . . 1.0313 36 69 19.25 01 . . 1.0605 37.45 20.76 02 . . 1.1518 35.73 20.28 03 . . 1.1874 36.89 21.31 04 . . 1.1613 36.93 21.22 05 . . 1.1679 36.92 21.45 06 . . 1.1469 38.65 21.45 07 . . 1.1697 38.16 21.22 08 . . 1.1444 39.24 21.89 09 . . 1.1223 38.50 21.50 10 . . 1.0822 39.16 21.61 1860-1910 . . . 1.0637 36.23 18.95 The available literature on this subject is very limited in quantity and with few exceptions deficient in quality (the ex- ceptions being listed at the end of these notes), as it consists largely of partisan pronouncements intended to emphasize the arguments and promote the interests of the writers without attempting to weigh fairly the propositions with which they were not in agreement. It will be the endeavor in this discussion to show the relations of the several interests involved, to describe compensation methods in actual use and to present theoretical and 444 LECTURES ON FIRE INSURANCE practical arguments pro and con without any attempt to prejudice the student imduly. Parties The compensation of the local fire insurance agent is a sub- Interested ject of legitimate interest not only to him, but to the companies \yhich he represents and also to the public whose money he col- lects and disburses. To him the income from his profession is his means of liyelihood, and naturally his first desire is to maintain it at the highest possible figure. Many agents never look at any other phase of the question. Those, however, who incline toward thoughtful study and sound reasoning will observe that high com- missions mean more agents and brokers and therefore keener com- petition, and also that the value to his office of companies whose commission allowances are quite moderate is often greater, because of other conditions, than that of the "high commission" com- panies. These are valid considerations, and have led many an agent to come to the conclusion that high commission is a worse evil than low commission, and that quality of company represen- tation and permanence in the business do not always go hand in hand with the highest figure of income. The second interested party is the company, whose expense account must be exhibited to the world and defended to its directors and stockholders, as well as to those whose interest is more general. The manager of the company is entrusted with the work of increasing his principal's income without exceeding a moderate and reasonable loss ratio, and is faced daily with the proposition that the only way to bring about such results is to pay his agents more for the business produced. He is in competition with hun- dreds of others, and he is wise indeed if he can so steer the busi- ness of his companies as to avoid the Scylla of excessive losses and the Charybdis of abnormal expense. The third and perhaps most powerful interest is that of the public, which sees in fire insurance only an elaborate system of taxation, and often fails to appreciate any of the benefits resulting therefrom or the immense amount of labor and detail connected therewith. Through state legislatures and insurance departments there is from year to year more and more insistence upon the demand that the fire insurance companies shall conduct their business openly and efficiently and be prepared to defend their rates not only from the standpoint of losses incurred and paid but also in the details of expense. It is not necessary that expense be kept at an extremely low figure, Init the public must be NOTES ON LOCAL AGENCY COMPENSATION 445 convinced it has quid pro quo. There is no objection to the heavy expense for example of transacting steam boiler insurance, because the accompanying inspection system is clearly of great value. The public reasonably insists that commensurate values shall be demonstrated for that part of the premiums paid which is consumed by commission and other operating expenses. It is well to keep in mind these three interests of the agent, the com- pany and the public in forming conclusions about the subject in hand. As a first principle it may be stated that in every agency Uniform surely and in e\eYy cowA-nwnxiy -pYeiernhXy the system of compcit- Plan sation should be uniform. The protection of the public and Necessary, fair treatment of the companies require that competition for busi- ness and the distribution of premiums should be on the basis of quality of indemnity only and should not be dependent upon per- centage of commission, which might induce agents to adopt the tactics of tradesmen who offer something "just as good" when standard commodities are asked for. Whatever may be said in these notes about the various schemes of compensation will be based upon the assumption that the agent has a uniform system in vogue with all of his com- panies, and that there is no disposition to play one against another. In practice there are three well known compensation systems Systems in clearly divided in principle and application and each having its Use. advantages and disadvantages. They are known as (tr) Flat Com- missions, (/>) Flat and Contingent Commissions and (c) Graded Commissions. Of these the first mentioned was the first used and is the best known. Under its provisions the agent retains the same percentage of commission from all premiums on all classes of risks. It is wholly consistent with the average theory of fire insurance and has the practical advantage that it indicates to the public that there is no discrimination in rates or among risks. It is a popular system as the accounts are easily kept without chance of disagreement or error and the agent at all times has accurate knowledge of his income. The objections most often offered are that the agent is en- couraged to over- insure property, or at best is not discouraged against such practice, his interest being only in the volume of premiums written ; and also that it tends to excessive brokerage 446 LECTURES ON FIRE INSURANCE where agents are greedy in their competition for insurance placed by middlemen. The very fact that an agent can figure his income so closely and accurately enables him to run up the brokerage allowance to inordinately high figures. Flat and Con- (6) Flat and contingent commissions are generally understood tjngent Com- jq mean a flat minimum percentage allowance to the agent from missions. month to month on premiums reported, with additional payment at the end of a term, usually one year, if the underwriting result of the business from his agency has been profitable. A sample form of agreement between company and agent for such com- pensation is the following: — " This Memorandum of Agreement niade this day of 191 , by and between the FIRE IN- SURANCE COMPANY of , and Agent of said Company at Witnesseth: That in consideration of the compensation here- inafter named, the said Agent hereby agrees faithfully to represent the said Company in all matters pertaining to and within the juris- diction and scope of the Agency, and with fidelity to serve said Company in the capacity of Agent, using his best endeavors to in- crease the \olume and improve the quality of the business written for said Company at the Agency from year to year, and in consid- eration of such faithful service the said Company agrees to allow the said Agent the following compensation, to wit : Fifteen per cent flat commission on the amount of the net premiums remitted monthly by said Agent to the Company, and an additional profit sharing commission of Ten per cent on the net results of the business of the Agency for each profit sharing year ending on the last day of , the said profit sharing commission to be computed by deducting from the net premiums written and remitted to the Company for that year, the sum of the losses incurred during that year on risks in "force on the books of the Company at said Agency, whether placed there by present Agent or turned over to him for supervision and attention at expiration, and on all risks hereafter written by said Agent in said Company, together with all expenses, including state and local taxes and licenses. It is mutuallv agreed that the foregoing commissions include all Agency expenses such as postage, exchange, advertising, solicitor's fees, personal local license fees, clerk hire, rent, services of agents in adjusting losses under policies issued at the Agency and all other Agency charges whatsoe\er, excepting only maps, map corrections, advertising as required by law and Local Board expenses and taxes. It is understood that the words "net premiums" wherever they occur in this agreement, mean gross premiums \\ritten less return premiums and premiums on policies not taken. NOTES ON LOCAL AGENCY COMPENSATION 447 It is understood that at the expiration of the profit sharing- year the said Company will make up the profit sharinjj; account, and on Form of request will remit (all premiums for the profit sharinoj year ]:)ein^ Commission paid and not otherwise) the amount found to be due, if any, or that Agreement, the Agent will charge the same in the next monthly report. In view of the fact that said Agent is not charged with un- earned premium in computing the net results for the profit sharing year he is to have no compensation, profit sharing or otherwise, on the business or its profits after the termination of the Agency. It is further understood that this agreement shall continue from year to year unless terminated by either party, the right of resignation or removal, at any time, being recognized by both parties. It is understood that if the Agency is terminated by either party before the end of any profit sharing year the said Agent will be paid the profit sharing commission, if any is due, at the end of the profit sharing year on the net results of the business written from the beginning of the profit sharing year to the termination of the Agency, but to include all losses to the end of the full profit sharing vear. This agreement takes the place of and abrogates any contract, agreement or understanding, referring to compensation to be paid said Agent, whether verbal or written, of prior date, between the parties mentioned herein and is to take effect 191 " The theory of this method of compensation is that the flat allowance takes care of the ever present element of luck, and if fortune is against the agent and his "good risks" burn he still has in hand a fair remuneration, while beyond that the offer of contingent payment induces him to guard against o\ er-insurance, to use to the fullest extent his local knowledge and ability in the selection of customers and risks, to interest himself in building construction, fire protection, rates, adjustment of losses, etc. This theoretical argument is generally recognized as having great actual value as well. An additional practical advantage is that the limited flat commission is a check against excessive brokerage and rebating, the certain income being too small. Against this plan it is urged that it is wrong in theory, being a wide departure from the average basis of the business. The treatment of agency accounts becomes absolutely local, often even to such a degree that the safety or loss of a single risk determines an an agent's compensation for a year or more. It is applied specifically to the business of a single agency in a single community, and is based on the returns for a given term of months, usually one year. A loss in December has no effect beyond the end of that month, while 448 LECTURES ON FIRE INSURANCE a loss ill January may '• spoil the record " for a year. This plan induces an agent to follow the rule '■'■ small lines and scatter your risks," which often means that lines are too small and t(;o scattered because of the agent's timidity or conservatism, and that he places outside his office lines which could be carried easily bv his companies or loads his office w^ith too manv companies for the same reason. This is especially true of sprinklered business on which rates are low and companies' authorizations often extremely large. Because of the many and strong arguments in favor of some form of flat and contingent allowance that plan is the choice of many of the most thorough students of the theory and practice of the business, including in their number the in\estigating committees of several conservati\e legislatures. It is their opinion that a closer affiliation of the agent with the company will result from such an arrangement, and will bring about improved conditions, in- cluding the elimination of many crooked losses, which will be apparent in a reduction of the fire cost of the nation. Graded Com- (<^) The third form of commission plan is known as Graded missions. Commissions. A form of agreement between company and agent is as follows: — It is hereby Agfreed between the company and the agent as follows: — (1) The agent agrees to perform faithfully all his duties as agent of the company during the life of this agreement and to further its interests in every legitimate way. (2) The agent agrees that he will not, during the life of this agreement, accept from any other company or companies, directly or indirectly, on any fire or tornado risk or classes of risks, commissions or emoluments of any description higher than or different from the commissions hereinafter in this article (2) defined; and (so long only as the agent observes such stipulation) the company agrees to pay and the agent agrees to accept as full compensation on business written by him for it commissions at the following rates, viz. : — (a) Twenty-five per centum (25 ^^ ) on the following build- ings and their contents, viz. : Dwellings (excluding farm prop- erty), private barns (when insured in connection with dwellings), hospitals (when no patients are under legal restraint), institutions and homes for the deaf, dumb, aged or blind or for soldiers or sailors, federal, state, county and city public buildings, art gal- leries and museums, waterworks and pumping stations, police, fire department and patrol stations, libraries (public or proprie- tary), observatories and other so-called public buildings (except those specifically classed elsewhere), not including special hazards owned or operated by the public. NOTES ON LOCAL AGENCY COMPENSATION 449 (/') Twenty per centum (20%) on the following buildings Graded and their contents, viz. : Churches, chapels, synagogues, lecture Commis- halls, colleges, academies, boarding and day schools, seminaries, sions. monasteries, convents and polytechnic institutes. (r) Twenty per centum (20^) on the following buildings (not contents), viz. : Brick or stone mercantile buildings occu- pied exclusively for the following purposes with or without dwelling occupancy, viz. : Mercantile, office, public hall (with- out stage or movable scenery), masonic or other orders for lodge purposes or for Y. M. C. A. purposes. (d) Twenty per centum (20%) on tornado business. (e) Fifteen per centum (1-3%) on the contents of brick or stone mercantile buildings occupied exclusively for the following purpose with or without dwelling occupancy, viz. : Mercantile office public hall (without stage or movable scenery). Masonic or other orders for lodge purposes or for Y. M. C. A. purposes, and on the following Buildings and their contents, viz. : Insane asylums, retreats, sanitaria, penitentiaries, poorhouses, reformatories, workhouses, special hazards owned or operated by the public, and on farm property, and on all other classes of risk not enumerated else- where herein, excepting automobile floater insurances which are not covered by this agreement. (/") The commission on the premiums of policies covering leases, rents, use and occupancy, and jDrofits and commission, to he the commission applicable to the building wherein or whereon or to which such lease, rent, use and occupancy, and profits and commission insurance applies. (»•) Each and all of the foregoing commissions to include all agency expenses such as postage, exchange, advertising, solicitors' fees, personal local license fees, clerk hire, rent, serv- ices in adjusting losses under policies issued at the agency and all other agency charges whatsoever, excepting only maps, map corrections, advertising as required by law and local board expenses and taxes. The theory of this method is that among the various classes of Graded risks distinguished either by construction, occupancy or protection, ^ommts- there are different degrees of desirability from an underwriting . ^ -^ *' Agreement, viewpoint, and also that there is a disproportion of agents' labor and expense among the classes. It is argued that even at rates acknowledged to be fair measures of the actual loss cost incurred there will still be "preferred" risks ; /. c, those which can be under- ^vritten more safely than others because of the comparative absence of the element of luck and chance and of conditions not contemplated in the rate, the most prominent being the dw^elling class, which is "preferred" because of the comparative absence of conflagra- 450 LECTURES ON FIRE INSURANCE tion hazard and moral hazard. Mercantile property generally speaking is exposed to both of these undesirable conditions, and manufacturing risks are continually developing unforeseen changes of internal hazards. It is claimed also that the highest figure of commission is compensation to the agent for getting the class of business which requires numerous small accounts, that occupy in proportion more of his time and that of his office force than do those of the larger insurers of mercantile and manufacturing property; moreover that the "preferred" business being usually written for a term of years, an agent has not the renewal commission so frecjuently and is entitled to more on that account. From the companies' stand- point it is probably true that the highest commission can be afforded o\\ classes of business not requiring expenditure for maps, bureau surveys or other special inspection, and where renewal transactions are three or five years apart. The opponents of graded commissions object that encourage- ment is offered thereby to over-insure property and to overlook the moral hazard, as mentioned in discussing flat commissions, and furthermore than the indication to the public and its representa- tives is that rates are unreasonably high on the so-called "pre- ferred" classes and that these classes are carrying a part of the load which should be borne by others. This system allows of ex- cessive brokerage and rebate to an extent even greater than do flat commissions, and there is necessarily a great deal of detail in the accounting and reporting, so that over charges (and indeed under charges occasionally) are made by agents, resulting in more or less irritating disagreements and correspondence. To be practically successful this system should be reinforced by classification letters opposite all risks in the printed tariff of Commissions. j.^j-gg^ 3j-,^| I^q |-,g defensible against investigation, graded commis- sions should be based upon statistics of evident value. From the foregoing it is apparent that there are serious ob- jections and practical arguments against each of the systems of compensation now in use. It is not to be hoped that a perfect system will be evolved, but surely some improvement may be expected. The flat and contingent j^lan is supported by so many who influence legislation on the subject that it is surely woith while to devote critical thought to its strength and weakness, and in this connection the suggestion has been brought forward recently that a modification of that method as at present operated Objections to Graded NOTES ON LOCAL AGENCY COMPENSATION 45 J could be made which, while retaining existent features of recog- nized worth, would widen their application and thus add to their value and bring the scheme closer to the general principle of broad average which underlies the whole of the theory and prac- tice of fire insurance. It is evident that the application of the extra contingent expense to the business of the individual agency impairs its value, because no one agent transacts an average of business, and few approach even remotely to an average of the business of their own communities. This is proportionally true, of course, of the business of any whole state, which fails of producing an absolute grand average, but the control of companies' operations is so emphatically divided among the several states that it would be futile to attempt any plan involving more than a single state in its scope. So in brief, the suggestion is that all the agents of each company in each state be compensated by a uniform minimum flat commission plus a contingent share of the state tinderwriting pfofit of that company; /. ) Activity in Board. (c) Association with local interests. (d) The breadth of the business. Conclusion. Introduction. The writer, entering upon the preparation of this lecture, was much impressed with the absence of any literature bearing particularly upon the subject now touched upon, and what is here outlined is the result of actual experience in the field with the formation, organization and management of agencies, having also in mind certain ideals that he feels every agent should of neces- OFFICE ORGANIZATION AND MANAGEMENT 455 sity have, if he is to prosecute the business which he has taken lip as a life work. I have divided the subject into five chisses, with further sub- divisions as contributory to the subject under discussion as shown in the synopsis. A successful agency should have a certain amount of capital. Capital. The amount, of course, is entirely dependent upon the extent of the business done, and the credits to be extended by the agent. Very often a local agent entering a new community finds that the older agencies have established systems of long credit. In competition with them he of necessity will have to be more or less liberal with this accommodation. In fact, almost all mercantile concerns have a definite method of paying their bills, and in many cases discounts are given for prepayment, an incentive impossible, of course, in the insurance business. In my opinion, if the companies were to grant a discount for pre- payment of a bill, it would mean a relatively higher rate of premium. The companies in an agency generally arrange a basis for the payment of accounts, and it is generally accepted that the maximum time allowed is sixty days from the sending of the monthly account. All this I think, cannot but impress upon you the fact that capital is an absolute necessity, and I know from various conversations with leading agents that the amount of money that is at all times being carried in their business is aston- ishing, and will compare with the amount of capital required in many lines of mercantile or manufacturing business. Assuming that you have the necessary capital, you now pro- To Get the ceed to secure the agencies of companies to be represented in the Companies, community in which you desire to establish the agency. How shall you proceed.'' A man already in control of some insurance business, that is, the sub-agent or broker, who may have solicited /^ business and reported through the principal agent, must of ne- cessity have an advantage over one who has had no association with the work. The former in getting his business would become more or less identified with such companies as he wished to represent. Under this condition he naturally would make per- sonal application to those companies whose policies he had been used to securing. A man without this experience, and without this knowledge, would be at a loss how to proceed. Under such condition, the state list of companies, and their annual statements, as published by the Commonwealths through their 456 LECTURES ON FIRE INSURANCE Selection of Companies. insurance departments, would be the means of securing informa- tion as to names, addresses and standing of the companies, and a careful canvass might win an agency. Possibly the following clipping, which the writer took from the New York Conimcr- cial Bullet iu^ is interesting as showing an up-to-date application for agencies: — "Having entered the domain of fire insurance in the capacity of agent, it gives me pleasure to acquaint you with this fact. As my desire is to extend my lines to a point that will make it possible for me to take care of large risks, I respectfully submit my ability to promote your interest in this section, and with such an end in view I would like very much to represent your company. With respect to equipment. I am fully pre- pared to compete for good business, by which I mean that a large circle of acquaintance, supplemented with stability of credit, should suffice to assure you of my encouraging outlook and financial responsibility. Should you feel disposed to take up this matter with me, kindly advise at your earliest convenience and oblige." Either method of forming an agency must of necessity be tedious and experimental, and wherever possible, it would be advisable to buy an interest in an already estalilished agency, or to purchase it outright. This would immediately present the c[uestion, ''What should it cost.''" The cost to a prospective purchaser would naturally depend upon the demand for the agency. In my experience I have known of agencies of very limited income being competed for by three or four responsible parties desiring to embark in the business. I have on the other hand seen an agency, paying several thousand dollars income, where there were hardly any biddei s at all. The next feature to consider in our course is the annual income of the agency. This, of necessity, fluctuates from year to year; it is generally accepted as the average of a five-year period, and this average is taken as the basis upon which the final price is agreed. Another feature in arriving at the cost is the amount of direct business. That is. the amount of business on which the agent gets his full commission as against that portion of it which mav come to him through brokerage from other agencies, and upon which he must p:iy a In-okerage commission. It i