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Great Fires: 1906 Great Earthquake & Fire

Pacific Insurance Companies Report
1906 Great Earthquake & Fire
Reminiscences and lessons of the San Francisco Conflagration 18 - 21 April, 1906

WHEN any great catastrophe overtakes us, we are generally so overwhelmed for the time that we get distorted views of the disaster and the lessons to be learned from it. It needs time to give us the true perspective and that calm spirit which is so necessary to a right judgment, and which are so specially needed in our profession.

One can never forget the receipt of the first news of the disaster. The very thing had happened which had been feared for many years. "One day San Francisco will be destroyed by fire" had so often been said that at last no one believed it.

There did not, however, appear to anyone to be any cause for alarm, and Companies continued to write as freely as before. Had not the business proved very profitable? The loss ratio over a number of years had hovered between 20 and 30 per cent—great improvements had been made by the construction of so-called fireproof buildings—the fire brigade, or fire department as it is known on the "other side," had been greatly strengthened and was considered by most people fully able to handle any fire that might arise.

The disaster, however, which overwhelmed San Francisco upset all calculations and theories.

Let us now go back to Wednesday, the 18th of April, 1906. The grey dawn was stealing peacefully over the sleeping city—the air was balmy and the sky cloudless with only a suspicion of a breeze. All nature appeared to be calmly resting before an ideal spring-day, but men knew not the inner movements of this restless earth of ours, for whilst all was so calm upon the surface, great strains below were culminating in one of those sudden breaks which in the past have built up the mountain ranges.

The strain could be endured no longer, something must give way, so a fresh break occurred along an old geological fault line, which runs for three or four hundred miles through California, near to and almost parallel to the ocean, and after passing through Point Arena  about 100 miles northwest of San Francisco, proceeds under the Pacific for an unknown distance.

SOON after five o'clock in the morning the slip happened—the time was different at different places, ranging over the whole length of the fault from ten to fifteen minutes past five. The shock struck San Francisco at 5:13, proceeding by a succession of earthwaves from the fault line, which passes along the coast immediately behind the city.

Great havoc was done to the Spring Valley Water Company's mains that supplied San Francisco. These had in several cases been carried on wooden trestles across swampy land, and were so near to the fault that they were absolutely ruined.

The break had the natural effect of causing other strains and slips in the geological formation on either side, lessening in intensity as the distance increased from the original fault.

The actual shock itself was all over in about 48 seconds, but this appeared an endless period to the half-million of people in the doomed city. Chimneys were falling on every hand; cornices were in many places toppling over into the street; occasionally the whole front of a building would slither off, leaving the interior exposed to view, and in the houses the furniture was thrown down in every direction. Large halls and churches, and other buildings with unbraced walls and gables, were generally badly shattered. No one knew what was coming next. The supreme instinct was to get out of the buildings as soon as possible. In a few minutes the streets were filled with half-dressed men and women in the agony of despair.

After a while many gained courage enough to return to their houses to dress, when at 8:15 another shock occurred, almost as violent as the first. In the meantime, as if the city had not already suffered severely enough, fires broke out in every direction, principally amongst the manufacturing risks, in the district south of Market Street, that well-known main artery of the city 120 feet wide. Within a few minutes a dozen large fires had started, and there were fifty in a short space of time in that morning.

There was one man who had made a special study of the conflagration danger and how to fight it. He was Dennis Sullivan, the chief of the fire department, but he was lying fatally injured by bricks which had fallen from the California Hotel immediately adjoining the fire engine house in Bush Street.

The fire alarm headquarters had been wrecked by the shock, and to all intents and purposes the whole system of fire protection was crippled, and yet, to the undying honour of the firemen, one must record a magnificent stand made against the great enemy that now began to ravage the city.

IT WOULD take too long to tell in detail much of those three days of battle against the flames, three days full of tragedy, full of indomitable pluck and persistent courage.

Fires had arisen from a number of causes—overturned stoves, scattered fuel from furnaces, and short-circuiting of powerful electric currents were amongst the most frequent, but the remote cause in each case was the earthquake.

It could hardly have been foreseen that all three sources of water supply would be crippled simultaneously. Nor was this all, for in nearly every case there were so many breaks in the street mains leading from these reservoirs that in a very short time what little water was left had been exhausted.

On the evening of the second day, when dynamiting was placed in the hands of the military authorities, systematic plans were adopted, and, by destroying buildings well ahead of the conflagration, a large part of the city was saved.

The very air seemed to be on fire, so great were the temperatures evolved. The fire spread across great distances and attacked and destroyed buildings which had been considered as fireproof.

All Thursday night the fate of the remainder of the city hung in the balance, but on Friday morning the East wind fortunately ceased, and was succeeded by a strong wind from the West. This had the effect of driving the fire back upon itself, and upon some portions which had so far escaped.

A few smouldering fires lasted until the Saturday morning when a heavy rain finally extinguished the dying embers, and the world's greatest conflagration had burnt itself out.

I HAVE entered somewhat into the incidents of the three days of earthquake and fire in order, if possible, to enable you to realize the circumstances through which they had passed and the situation when we, who represented the fire insurance companies, came upon the scene.

If you wish to walk the whole distance from the Ferry Building to the utmost confines of the conflagration you must be prepared for a weary three mile tramp through streets piled up with debris of brick walls and thick with half suffocating lime and mortar dust; or if you prefer to walk across the district you must make up your mind to a still more difficult tramp of two and a half miles.

An area of 2,831 acres, or nearly five square miles, was contained within the borders of the devastated portion of the city. This comprised 514 blocks and approximately 25,000 buildings, of which about 3,000 were of brick or stone and 22,000 of wood. Half of these buildings were occupied for mercantile or manufacturing purposes and the remainder as dwellings.

The value of the property destroyed has been variously estimated at from $350,000,000 to $500,000,000 whilst the insurance thereon was approximately $235,000,000 principally in 117 companies, including subsidiary companies. Of these 77 were American, 28 British, 4 Colonial, and 8 Continental. There were about 150 other companies involved for small amounts and re-insurances.

Fire Insurance is of the nature of a public trust for the benefit of the Insurers. Would it now in the hour of its greatest trial be able to stand the enormous strain? At Chicago 35 years earlier, companies had failed by the score, although called upon to face a much smaller loss. What would happen now? In the case of a very large number of the people, the Insurance Companies alone stood between them and penury.

Every one realized that in this conflagration many new and unique questions would arise.

Some 16 Companies had some form of earthquake clause in all or some of their policies. These varied considerably and were capable of different interpretations.

Most Companies had the "fallen building clause." How would that clause apply? These were questions agitating the public mind.

On the side of the Companies were other questions. How were we to check the claims? All usual means were absent. Under ordinary circumstances we have some data to go upon—the ruins contain many evidences, but here the ruin was so complete, and everything that was consumable had so entirely vanished, that little or nothing could be learnt by a visit to the scene of the fire. In ordinary circumstances there are next door neighbours and friends that can readily confirm the Assured's statements, but here all neighbours had gone—no one knew where, some, thousands of miles away, others scattered through many a refugee camp, and almost as difficult to find as the proverbial needle in a hay-stack—nor could confirmation be obtained by reference to the retail or wholesale firm from whom the articles were purchased—they had been burnt out too.

Every Insurance Company's Office had been destroyed by the fire, and some had lost all or a great portion of the records of their business and could only find out very laboriously, and then not with absolute certainty, what properties they covered.

WITH these and other new and unusual problems before them the representatives of the Companies met on April 21st, three days after the earthquake, at Reed's Hall, Oakland, just across the Bay from San Francisco, to consider the situation and to arrange for joint action where several Companies were interested. The result was the formation of the General Adjusting Bureau to handle all claims in which more than five Companies were involved.

At subsequent meetings it was soon clear that there were divergent opinions as to the liability of the Companies, and for this reason the Committees appointed to adjust the losses were instructed to ascertain the actual fire loss, and report the same to the interested Companies leaving each Company free to come to an agreement with its Assured according to its own idea of liability.

These were not the only questions agitating some of the Companies. There were others of a more acute nature. Several of the Companies were in no financial position to meet their liabilities without assistance from their Shareholders, and some delay was necessary to enable them to look around and decide what financial expedients to adopt. It is therefore all the more creditable to such Companies that there were only about a dozen failures.

All those who visited the devastated city, and took pains to investigate the subject were soon impressed with the fact that the actual damage by earthquake was not so very great, indeed the shock itself was only classified by the scientists under Class 8 which is the lowest of the "destructive" classes; Nos. 1 to 7 are known as harmless, No. 8 as "very strong shock," "fall of chimneys, cracking of walls of buildings." No. 9 is "extremely strong shock," and No. 10 "shock of extreme intensity great disaster and ruin."

It may be of interest to note that it has been estimated that the total of all claims arising out of this disaster was about 100,000, of which 42,077 were made upon the 35 companies who were liable approximately for 50 per cent of the total loss caused by this conflagration.

At the end of six months from the date of the disaster the newspapers classified the companies according to the way they had met their claims. There were five classes, the first of which was known as Class A, or "Roll of Honor," and consisted of 39 companies.

The London Assurance was an "Honor Roll" company.

Their names have been spread broadcast over the States not only through the Press, but through the report of a special committee of the Chamber of Commerce of San Francisco, ably drawn up by Professor Whitney, the report made at the instigation of the National Association of Credit Men, and the exhaustive report issued by the Alfred M. Best Company, of New York City.

The natural result has been that on the Pacific Coast these 39 companies have had all the business offered to them that they could carry, and have been able to make most valuable connections. The results are shown very forcibly in the following figures giving the premiums received by such companies, before and after the conflagration:

Premiums received on Pacific   




Premiums received on Pacific Coast by the 39 Class A Companies 



By all other Companies 






The Class A Companies increased their business between 1905 and 1907 85.7%. The other companies show a decrease of 4.4%.

IMMEDIATELY after the disaster, temporary offices were established by the different companies for dealing with the claims—a few in San Francisco but mostly in Oakland, four miles across the Bay. For the first few weeks nothing could be done but receive in an unending stream, the "notices of loss" required by the conditions of the policies.

To handle such a number of claims required careful and thorough organisation, and that at a time when everything was in confusion. As soon as it could be arranged, each of the companies gathered together a staff of loss adjusters from all over the country.

Crowds of anxious men and women besieged the offices of the companies every day—often remaining for hours day after day until their claims could be dealt with.

The "dollar for dollar" Companies had nailed their flag to the mast and were pledged to treat each claim upon its merits.

In certain quarters it has been customary to look upon the claimants as robbers of the companies without compunction, but my experience extending over 3,200 claims, leads me to the same conclusion as is expressed in the report of the Committee of Five, which says—"The Committee of Five found claimants generally fair, patient and honest." I do not believe there was any greater proportion of dishonest or fraudulent claims than is to be found in a similar number of ordinary losses, either in America or England.

We had a unique opportunity of studying character as day by day we watched the never ceasing queue of loss claimants patiently waiting to interview the Adjusters, and upon the whole the impression was favourable. They were of course "out to get their Insurance money," as the slang expression so tersely put it, but there is nothing wrong in getting what you are entitled to, and under similar circumstances each of us would probably be equally keen.

The nervous strain of day after day meeting a constant stream of claimants, and the incessant call for good temper, courtesy, and tact, soon told upon all who were actively engaged in this business. Few of the adjusters could stand more than three months of it, and all were much relieved when, about six months after the conflagration, we could leave the few remaining cases to be dealt with by the permanent staff in the ordinary way.

Unusual events are often not so useful in conveying valuable lessons as the common oft repeated occurrences of every day, and at

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first sight it seemed to many of us upon the spot that there was very little to learn from this catastrophe which would be of much use as a guide to future underwriting. A disaster which occurs once in a generation cannot well form a guide for the everyday regulation of the insurance business except on very broad lines.

THERE are, however, several lessons which stand out prominently. Some of them have been seeking recognition for years past. Will this most serious of all conflagrations bring them home to the man in the street and to the Insurance Companies?

First, there is the question of so-called fire-proof buildings. I say "so-called" because in most cases it was again proved that this was a misnomer—they were more or less fire resisting, but in many instances the fire proofing was not at all satisfactory.

The heat engendered was so enormous, being often between 2,000° and 2,200° Fahrenheit, that buildings were set on fire by heat alone at distances of 125 feet and over—glass softened and ran in a molten state, and it was quite a common thing to find iron articles fused together. Under such degrees of heat nothing but the very best system of fire proofing could stand the test.

The earthquake was a great revealer of good or bad workmanship. As a rule the good stood well—the bad suffered. Honestly constructed buildings, having good foundations carried down to the solid ground and having their walls properly bonded, showed very little sign of the shock.

The Companies had also some lessons to learn from this disaster, and first of all I should like to refer to one or two which may be helpful to some of the younger men in the profession. Remember that the good name of your company may often be in your keeping—keep it untarnished. "Honesty is the best policy" was well exemplified in comparing the methods adopted by different companies in their loss settlements. Every consideration was due to the Insurance Companies who had suffered so heavy a blow, but consideration should not be all on one side; the vast proportion of the people of San Francisco had suffered more heavily, and as long as the companies were able to pay, they were in duty bound to pay their losses with the best grace possible. Such companies as did so have had their reward, as I have already pointed out.

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