IS THERE A REMEDY FOR THE FIRE WASTE?
A CCORDING to the present estimates of fire insurance statisticians, the fire losses for the present year will be from fifteen to twenty-five per cent greater than they have averaged for the past ten years—greater, in fact, than in any year except those which included the Chicago and Boston conflagrations. The actual loss of property this year bids fair to reach $120,000,000 or more—a sum so enormous as to demand that some remedy be sought at the hands of our national legislature. We have discussed this subject in all its phases, and have given publicity to the suggestions of many thinking, practical men, but have come to the conclusion that the only feasible way to reduce the fire loss is to enact such legislation as will prohibit insurance companies paying more than three-fourths of a proved loss where the fire originates on the premises destroyed. In France, where the damage by fire is trifling compared with what it is in this country, owners and occupants of buildings are held responsible for a fire originating on their premises, and persons suffering damage in consequence of such fire may sue such owner or occupant for damages, and even cause his imprisonment. Such laws, making the propertyowner directly and pecuniarily interested in the care of his property, tend to destroy all incentive to incendiarism and to induce care and thoughtfulness. Then, too, in France they have better building laws, and they are more rigidly enforced than here, so that fires resulting from faulty construction are few in number. Here the propertyowner has no incentive to put up solid, substantial buildings, or to provide means of prevention or protection, for the simple reason that the insurance companies will insure a highly combustible building for all it is worth or more, for the same price that they will a building upon which large sums of money have been expended to make it fireproof, or as nearly so as may be. So long as the insurance companies will insure against any and every hazard, indemnifying owners to the full extent, or beyond, of their losses, there is no inducement to erect fireproof buildings or to exercise any special care in the protection of the inflammable ones. On the contrary, the fact that they will so indemnify propertyowners is a direct temptation to incendiarism. Thousands of instances might be given where propertyowners have set fire to their premises with the sole object of collecting the amounts for which they are insured. This occurs most frequently among small merchants or tradesmen who occupy rented premises, who are over-insured on their own stock, and care nothing for the losses that other tenants of the building may suffer. Often such incendiary fires have been started in buildings occupied by many families, by unscrupulous persons who took the chance of adding murder to the crime of arson. If the law prohibited insurance companies paying more than three-fourths of a loss where the fire originated on the premises, there would speedily be an end to incendiarism perpetrated for the purpose of collecting insurance. It would also compel all classes of propertyowners and tenants of buildings to adopt every possible precaution to prevent fires and to have at hand the most improved appliances for putting out any accidental fire that might occur. We believe that the passage of such a law by our legislature would reduce the fire loss in this State at least one-half, and similar results would follow such legislation in every State.
We have stated repeatedly that, because of the heavy and increasing losses, the fire insurance companies were not doing a profitable business. Several were driven out of the field last month, and it is anticipated that several more will withdraw by the close of the year, when they are required to submit their annual reports. The Spectator, an insurance journal, has recently been interviewing a number of prominent underwriters upon the situation, and in the course of their remarks they give the reasons for the heavy losses, suggest the remedy for them, and pay high and deserved compliments to the fire departments. We make a few extracts, as follows :
Edmund Driggs, president of the Williamsburgh City Fire Insurance Company, said :
The general impression of the best fire underwriters is that the fire losses will aggregate for the year about from $r 15,000,000 to $120,000,000. They will be far in excess of any previous year except 1871 and 1872, and the number of fires, as well as the values destroyed, has largely increased. I consider that the only thing that has really saved our insurance interests from utter ruin has been the efficiency of the fire departments and good water supplies in the cities throughout the country. Were it not for the well-drilled and equipped fire departments and the ample water supply provided in the various cities, the entire insurance interest would have been nearly wiped out by the fires of the present year. In connection with this subject of fire losses, I might remark that in my judgment from fifty to sixty per cent, or fully sixty per cent, have a direct incendiary origin or are attributable to gross carelessness that is about equivalent to criminalty. The question then arises what can be done to check this willful, intentional destruction of prop, erty, the great carelessness in the management of property, this deplorable and criminal negligence? Various plans have been suggested. In my opinion, all the various plans that have been suggested have failed to meet the case with one exception, and that is the French system of making the assured a loser to the extent of from twenty-five to fifty percent of any loss that may occur in consequence of fire originating on his premises. In other words, a three-quarter or one-half loss clause should apply in all cases where the fire occurs on the premises. That would prevent intentional burnings and induce propertyowners to be careful as regards the fire risk. After many years’ experience and a careful consideration of the subject, I do not believe there is another plan that will ever put a stop to this unnecessary waste by fire in the United States.
As to the value of careful inspection to provide against over-insurance, so far as manufacturing or mercantile risks are concerned, it would be impossible to intelligently inspect the volume of risks covered. A merchant may have $500,000 worth of stock to-day and the next day he may have not more than $250,000 in store. The manufacturer may have his storehouses filled to-day and the next day it may be empty. But so far as buildings are concerned, it is perfectly consistent with the duties of the insurance companies to see to it that they do not over-insure them. The insurance of buildings can be thoroughly controlled by a good system of protection, but we cannot thus control manufacturers’ and mercantile risks against over-insurance. I might also say right here that I advocate a system of thorough surveying, conducted by the companies who take lines on the risks.
John L. Douglass, secretary of the Merchants Insurance Company, said :
The fire losses have largely increased during the year, and there has been an increase in premiums, but the increase in premiums will not compensate for the additional losses. I agree with other underwriters that we should adopt the foreign method of compelling the assured to take a portion of the risk, as a part of the policy contract, in order to stop the great waste and destruction of property that is now so prevalent. The three, quarter loss clause is the only remedy now open to underwriters in America, and I would recommend the use of the three-quarter loss clause and the use of the coinsurance clause in certain instances. * * *
In regard to improving fire risks, I believe in the adoption of the most approved methods everywhere for extinguishing fires, and in influencing proper precautions to prevent fires. I think that the best method of water supply for fire department purposes is the Holly system of direct pressure. Had the city of New York adopted this system in 1879, when it was presented, the entire city could have been covered in one year, and every hydrant would have been a fire department in itself. All city insurance men are familiar with the contract offered to the city by the Holly company. It would have given fire protection in the fullest sense of the word and, at the same time, have improved the wants of the people as to water supply for domestic use in the upper stories of dwellings and manufactories. To the system mentioned can be added the further immediate protection by the use of fire extinguishers, hand grenades, automatic sprinklers, casks and pails of water filled with fire extinguishing material as used in fire extinguishers. One of the most effective methods of extinguishing fires that is now attracting attention is the use of steam. The extent to which steam can be utilized for this purpose will bo ascertained by the great steam heating companies in the future. Its efficiency is unquestioned. The New York Steam Company will in due time give ample protection in the dry-goods and other down-town districts, as their mains are extended.
We all know that the present system of surveying is an abortion. It should be done by a full corps of expert surveyors, who are thoroughly competent and skilled in all the various branches of business, manufacture and industries. Their duties should be divided up into districts, and the superintendent of each district should be held responsible for everything within the limit of his district. All companies should be connected with the central office by telephone and telegraph, and the reports, when made, should be enforced whenever enforcement is necessary to make the risk a better one, improve the standard and prevent the use and occupation of the premises for purposes that would invite fire. To more fully elicit and carry out these views it would be necessary for each and every company and agency to comply fully with the rules as laid down by the bureau of surveys and refuse the insurance of all property in question until correction of existing abuses shall have first been made. Landlords should be held responsible for the negligence and carelessness of their tenants, and this could be embodied in the lease at the time of letting the property. The cost of this method of survey would be a trifle in comparison with the present cumbersome and. irrational method of independent survey of each company and agency. I would recommend the passage of such laws as would enforce, by actual order and service by the superintendent of surveys upon the violator, the adoption of proper measures to overcome the dangers to his property and to contiguous property, and compel the owner or occupant to be on the alert and keep all useless matter cleaned and carried away. Oily rags, naphtha and other inflammable material are very prolific sources of combustion.
Peter Notman, president of the Niagara Fire Insurance Company, spoke as follows:
I think that fires have been more numerous and the aggregate of fire losses has been larger in 1884 than in any other year, except the years of the Chicago and Boston conflagrations, when the aggregate amount of loss was of course greater than the past year. It is difficult what cause or causes to attribute this increase of fire loss to, but the increase in the fire waste has certainly been abnormal as compared with previous years, and I consider that the number of fires and the amount of property consumed have increased out of proportien to the increase in the national wealth. Doubtless the use of inflammable materials, like the products of petroleum, benzine, naphtha, etc., in the arts is increasing, and is one cause— one of the physical causes of the increase of fires. In this connection, I think the address delivered by J. T. Dargan before the Fire Underwriters Association of the Northwest last September was timely. Mr. Dargan’s paper was on the essential difference of the fire hazard in the United States and Western Europe. He attributed this difference to the comparatively limited use of coal oil and its products in Western Europe and its unlimited use in the United States, and predicted that as long as the oil wells hold out, in the present situation, we may look for no apparent decrease in the loss ratio. There are moral causes for the increased fire waste in the depressed condition of business, the dullness in trade, excessive over-production and consumption necessarily limited by the hard times. I think the present condition of the business brings us to the necessity of introducing the coinsurance clause in policies wherever admissible and making the insured his own insurer proportionately with the insurance company; and where that is not admissible, then the threequarter loss clause, which forbids the insured from recovering more than three-fouiths of the actual loss caused by fire. The use of the threequarter clause might be limited to where the fire originated on the premises of the party insured.
B. S. Walcott, president of the Hanover Fire Insurance Company, said :
The increasing fire losses of the country is an important question for insurance men to consider. It is well known that a large proportion of the fire losses are attributed to the unpardonable carelessness of the people, and I think that in the burnings of 1883 and 1884 this has been unquestionably true. You know when business of any kind is suffering, and a man is fully insured, fires are very apt to occur. Absolute trust in the insurance companies encourages carelessness and recklessness on the part of the assured, whereas in times when the confidence of the public in the companies has been shaken temporarily, as in the case of great conflagrations, the tire experience following such great fires indicates that propertyowners then exercise greater care and precautionary measures against the burning of their property. After the Chicago and Boston fires, for instance, the people for a time were rendered timid by the inability of several companies to keep their promises, and, becoming dubious about the standing of the companies in general, everybody seemed to feel greater individual responsibility as to fires ; greater care was taken, and the result was that the losses of the companies were comparatively small throughout the country for a brief period following these conflagrations. If the masses could be educated to the importance of this responsibility at all times and greater care used in the construction of buildings, a great public good would be accomplished.
If we accept the statement of Mr. Driggs, that sixty per cent of all fires are chargeable to over-insurance, it is full time that a limit should be fixed to the payments the companies may make to incendiaries, who not only destroy their own property, but imperil the lives and property of others. A law prohibiting the payment of more than three-quarters of a loss where the fire originated on the insured premises would do away with all motive to incendiarism. Make the insured bear part of the loss himself, and render it impossible for anyone to make a profit by setting fire to his property, and the loss by fire will be materially reduced.