FIRE INSURANCE IN GENERAL 1. Purpose of fire insurance.—Fire insurance in demnifies one N•ho may sustain a "direct loss" by rea son of fire. If a claim for a loss is to be sustained under the policy it is necessary that there shall be an actual fire, a "glow," as it has been termed in the court reports. Mere smoke of itself, with no fire, is not suf ficient. The phrase "direct loss," with reference to a fire, however small, is used to indicate the damage caused by the smoke of the fire, as well as incidental damage that may be done, as by the use of water in putting it out.
2. Origin of fire fire insurance bus iness was carried on in a crude way on the mutual principle previous to 1667, but there was apparently no well-developed system. Moreover, among the guilds there had been for centuries some allowance made for protection against fire losses. If a member suffered loss from fire, his fellow-members made good a portion tho not all of his loss. But the beginning of fire insurance on a commercial basis dates from the year 1667, after the great fire of London.
3. Nicholas Barbon and Richard Barbon of London, a man of considerable education, who had studied medicine, returning from the conti nent shortly after the great fire of London, devoted himself to building houses. In conjunction with this, and probably also to further his building plan (altho the facts are not known) , he set up an office where he might 9rry on a business of insuring property against loss by fire. Barbon insured buildings only. These he grouped in two classes—the wooden and the brick or stone.
Richard Povey followed Barbon in the insurance field. His contribution to the business of fire insur ance was the insurance of personal property. These two men, then, are properly associated as the founders, so far as the English speaking world is concerned, of the business of protecting real and personal property from loss by fire, which has grown now to such enor mous proportions.
4. Stock companies orig inated in England in 1720. Previous to that time the business of underwriting had been entirely a mat ter of individuals or groups of individuals. After 1720 the companies began to branch out into the col onies, and the English companies stand very distinc tively for a world-wide business. The business in
England is controlled by only a few companies whose capital stock is usually divided into shares of very small amounts, five pounds not being uncommon.
5. Early American the American continent insurance was practised in the colonies along much the same lines as in England. Groups of indi viduals combined and underwrote certain properties.
Owing to the scantiness of the population and of the financial resources, the business was one of small portions until the beginning of the nineteenth century.
The first company was a mutual company in Charleston, S. C., which organized in 1735. It did not survive the great fire of 1740. The next, and a very successful one, was the Philadelphia Contribu tionship in 1752. Among its first members, and the second man to sign the deed of settlement, was Ben jamin Franklin. The real projector of the enterprise was John Smith, whose descendants have been identi fied with the company ever since.
The third company, also organized in Philadelphia, is mentioned simply because it illustrates a principle. The first company passed a resolution that to facili tate the control of fires all shade trees in front of mem bers' houses must be cut down six months from that date. Members who demurred withdrew and estab lished a mutual insurance company, which they called the Green Tree Company. This company divided its risks into two classes, charging a higher rate when there were shade trees in front of the house.
6. Early characteristics.—Fire insurance was lo cal in character from its beginning until about the time of the Civil War. There were many companies, most of them with small capital and limited assets, doing business within a restricted sphere. This feature proved very disastrous to the Illinois, Massachusetts and New York companies when the big conflagrations occurred in Chicago, Boston and New York. The New York fires, however, occurred in 1835 and 1845, and their effect had passed away when the great fire of Chicago took place in 1871, and the Boston fire in 1872.