One summer evening in 1862, half a dozen San Francisco businessmen gathered at the home of hay-and-grain merchant Henry Dutton to listen to a retired sea captain outline a money-making proposition. The man's name was William Holdredge, and his scheme was intriguing, if not entirely original. He proposed they form an insurance company which, in addition to indemnifying property owners against the peril of fire, would reward the volunteer fire companies of San Francisco with ten per cent of the profits each year. It would be called the Fireman's Fund Insurance Company.

Holdredge's logic was irresistible. Since each policy-holder was to be given a Fireman's Fund plaque to nail to his building, everybody would want the obvious extra protection the plaques would afford. Any fool could see what would happen if the fire companies raced to the scene of a fire only to find they had the choice of playing their hoses on a building insured in the Fireman's Fund or on one that was not.

It was as simple as that: more premiums, fewer losses. Holdredge would run the company, and although he knew no more about insurance than the others, common sense and attention to detail would see him through.

As sound as the proposition seemed to some, the first attempt to raise the $200,000 capital failed, and it wasn't until May 1, 1863, that the Company was organized. On May 6 the articles of incorporation were filed.

Holdredge was an original thinker, and a man not given to let an advantage slip. If ten or twelve directors were considered adequate for some companies, fifty would be on the order of four or five times better. And fifty directors it was. Not a soul among them knew anything about insurance except that they bad to buy it themselves and that others appeared to make a profit in the business. There were names on that original list that even the most casual student of California history will recognize: Flood, Brannan, Phelan, Wadsworth, Stratman, Kohler, Scannell; Ebbetts, Dodge, and more to be added later.

Captain Holdredge was a fine talker, but he lacked some now unknown quality. The Board of Directors gently fired him at the end of the first year in favor of Samuel H. Parker, the popular San Francisco post-master.

In less than two years under Parker, the Company's capital was increased from $200,000 to $500,000 and the small staff had learned the basic principles of the insurance business. Premium income had risen, their investments produced excellent profits, and stockholders were satisfied with the regular dividends. For all of this, though, Parker should be remembered best for resolving a problem that could have wrecked the Company.

As with many good ideas, the arrangement with San Francisco's fire companies had its faults, not the least of which was the failure to define "profits" in the original agreement. The Company wanted to confine it to underwriting profits, which is nothing more than the balance, if any, left from premium income after losses, commissions and operating expenses are paid. The firemen thought they were entitled to ten per cent of the investment income also.

Although the Company has side-stepped this question over the years, there is no reason to ignore the simple truth any longer. The firemen were right. The Company had stated unequivocally that it was organized to give "one-tenth part of its entire net profits to the San Francisco Fire Department Charitable Fund." This is not to say that the men of the Fireman's Fund acted dishonorably. Because the firemen's "extra zeal" produced no measurable advantage for the Fireman's Fund, the burden of carrying expenses ten per cent greater than the competition's led the Board of Directors to an unassailable conclusion: they must end the payments or retire from business.

If they retired from business there would be nothing for anyone except the stockholders. The firemen, faced with the fact that the Company had no obligation to stay in business, met with representatives of the Company and in short order dropped all claims against the Company in exchange for $5000 in gold coin. The contract which both sides signed may not have been drafted by a lawyer, but it ended with a note of irrevocability hard to beat. It released the Company "from any claim of any name or nature from this date on unto the end of the world."

Today, $5000 is far from a king's ransom, but the fact that a number of the volunteer firemen continued on the Board of Directors indicates that the settlement was satisfactory all around. Five thousand dollars, incidentally, was only slightly less than Parker's yearly salary.

At noon on March 14, 1866, Sam Parker fell dead as he was entering the Lick House for lunch. In addition to their personal loss, the directors then faced the difficult task of replacing Parker, whose two years in the presidency had set the Company on a course with a promising outlook.

After Parker's death, Vice-President Michael Lynch signed the necessary papers in the six-week interim while a committee of the Board of Directors cast around for a successor.

It was not a long search. Many of them knew Staples and it took very little discussion to conclude that he was their man. He declined their invitation at first on the grounds that he didn't know anything about insurance. But he was the man they wanted, and he finally accepted after they agreed he could serve as vice-president on a trial basis for the first year. William Dutton, of whom we shall presently hear, recalled:

"Staples didn't know anything about it, except he was a Boston man and they knew everything."

So, on May 3, 1866, Staples took over management of the Company. The records show Staples as vice-president for the first year (May 1866 to May 1867) but this was a formality. From the time he took the job until January 1, 1900, Staples ran the Company, and ran it well he did.

In the thirty-four years he guided the Fireman's Fund, all of the other California companies writing fire and marine business either went bankrupt or retired from business because they couldn't make a profit.

When Staples took over as vice-president and manager, William Bowers Bourn was chosen by his fellow directors to hold the honorary office of president.

Bourn was a wealthy man and careful about money, and as chairman of the finance committee he perhaps had a greater familiarity with the Company than anyone else. However, he didn't know insurance, and the job of managing the underwriting fell to Secretary Charles R. Bond.

One of the first things Staples did was to buy a 40 X 80-foot lot at the southwest corner of Sansome and California streets. The lot cost $35,000 and the three-story building, which was completed early in 1867, an additional $45,000. Most of the space in the building was rented out to others. If you will look at the picture of the building you will see that the five-man staff would have been hard put to find use for even one of the floors. The entire Company consisted of Staples, Bond, a bookkeeper, a clerk, and a handy man.

When Staples was formally installed as president in 1867, the Board approved his suggestion that the Company enter the marine insurance field. At this point, our story becomes two.

Fire and ocean marine underwriters did then and to this day live in somewhat different worlds. There was considerably more rapport and business cooperation between the marine men of the various companies, and likewise the fire men, than between the two branches in any given company. The underlying differences are ancient in origin and can be stated in fairly simple language: fire rates are based on statistics, marine rates on the underwriter's judgment; marine underwriters insure against all perils, fire underwriters insure against specified perils; and finally, loss adjustments, except in the case of total losses, are made under entirely separate sets of rules. Of this there is more to tell, but for the present let us watch the fire operation spread under Staples' hand.

Until 1865, the Company insured nothing but San Francisco property. If you wanted a policy, you marched down to the corner of Sansome and California and bought it across the counter. A few brokers in town brought in some extra business, but no one went out of the office to drum up trade. Staples set out to appoint agents cautiously: first, one in Sacramento, then another in Stockton, and then a third in Folsom. It didn't take long to see the results and more were added. In 1868, Staples went to New York to set up a general agency under the partnership of Messrs. Skeels, Bowers & Boughton to handle all the states east of the Rockies.

Later, he hired George Dornin, a fellow forty-niner and an experienced insurance man, to sow the Fireman's Fund seed up and down the coast. By the end of the year the Company was doing business in every town of consequence from New York to the frontier. Premium income doubled between 1868 and 1871. The Company was off and flying.

The records have long since vanished, but it is entirely possible that Skeels, Bowers & Boughton, Eastern managers for the Company, brought to Staples' attention the excellent job their young agent in Chicago was doing. His name was Thomas Chard, and had it not been for his uncommon effort in writing Chicago business, the men of the Fireman's Fund would have missed their first chance to show the nation their mettle.

On October 8 and 9, 1871, Chicago burned down.