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THE FOUNDING OF THE FIREMAN'S FUND: BY EX-PRESIDENT WILLIAM J. DUTTON
From the Fireman's Fund Record, Vol. XL, No. 5, Pages 3-20, May 1923.

So intimately is the early history of the Fireman's Fund linked up with the history of San Francisco that many of the events connected with the founding of the company would be robbed of their significance without a brief sketch of San Francisco history up to the time of the founding of the Fireman's Fund Insurance Company.

San Francisco became a city almost over night. Until the discovery of gold at Sutter's Fort in January, 1848, precipitating the enormous influx of adventurous gold seekers, San Francisco had been a placid little village. In one year 775 shiploads of fortune hunters passed through the Golden Gate and dropped anchor in the magnificent natural harbor of San Francisco. One hundred thousand eager, excited humans of every language, race and condition were literally dumped on shore to provide for themselves what shelter they could among the sand dunes and chaparral. All were in feverish haste to be off to the mines. None expected to make their home in the new country.

Under these conditions the first buildings in the city were of the poorest sort of frame construction. Many were a framework of joists covered with canvas and paper. Light, portable houses were popular since they could be easily shipped and very quickly erected. To provide any sort of shelter for the vast hordes that came and went in the years of '49 and '50, thousands of these fragile structures were erected.

Then came the first great San Francisco conflagration of May 4,1850.

It is significant that the seal of the city of San Francisco, which was adopted in the early fifties, was the fabled Phoenix rising from the ashes. Certainly if there is any city with a prior lien on that famous bird, so familiar to insurance men, it is the city of San Francisco. The conflagration of 1850 destroyed practically the entire city. On June 22, 1851, just long enough afterward for the reconstruction of the flimsy buildings, another conflagration swept the city. These conflagrations were both undoubtedly of incendiary origin.

Vigilance Committee

Of course, many of those who came in quest of gold were of the finest type of Americans from the Middle West, the Atlantic seaboard and New England. But along with these, who later became the builders of the San Francisco of today, gold had attracted many of the worst classes from Europe and the Orient, and large numbers of ex-convicts from England's prison colony in Australia.

Lawlessness had full sway in the first furious days of gold seeking. Everyone was too busy with his own affairs to interfere. Incendiarism, for the purpose of robbing and plundering was a common crime. The "Hounds," as the band of robbers, murderers and incendiaries styled themselves, became so strong and so well organized that they openly defied the city authorities and the courts. Finally conditions became so intolerable that a committee of Citizens was formed to take things into their own hands. This was the beginning of the famous Vigilance Committee of 1851, of which Samuel Brannan, later to be one of the first directors of the Fireman's Fund, was the organizer and first president.

Whatever criticisms the world may have had of the summary methods of administering justice practiced by the Vigilance Committee of San Francisco in 1851 and 1856, time has proven that there was nothing in their motives that could be impugned.

Some conception of the character of these men who composed "the greatest popular tribunal the world has ever witnessed" may be obtained from the following comment by Hubert Howe Bancroft, the great Pacific Coast historian: "I search in vain for one serious error of judgment, or for a single failure in the attempted execution of their purpose. .It is easy to magnify motives which actuate either good or evil results. Always I strive to deliver myself from this propensity. And yet it seems to me that the candid observer of heroic actions which illumine the highways of history, fails to discover higher or purer considerations than those which governed these men."- Bancroft Works: Vol. 37, p.138.

Through the whole history of the two great Vigilance movements of 1851 and 1856 appear the names of Henry Dutton, J. C. L. Wadsworth, Samuel Brannan, Cyrus Palmer, Caleb Hyatt, Arthur Ebbets, David Scannell, A. B. Stout, Charles R. Bond, William Fell, and G. A. Worn, all among the original officers and directors of the Fireman's Fund.

Fire Department

A few of the California pioneers of '49 saw that there was more gold to be had right in San Francisco than in digging for it at the mines. They opened stores, restaurants, saloons, hotels - and all made enormous profits. The frequent conflagrations, to which the City was subjected, were a constant source of worry to such men. George D. Dornin, later General Agent of the Fireman's Fund, relates in a history written thirty years after his arrival in California, that, at the age of twenty, he had twice built up businesses worth several thousand dollars, only to have them wiped out by fires. Samuel Brannan had a general merchandising store that was doing an average monthly business of $150,000, until a conflagration destroyed it. Experiences of this sort were almost as numerous as were the business establishments of the city.

The first steps toward alleviating the conditions that periodically paralyzed business in San Francisco was the extermination of the "Hounds" by the Vigilance Committee. The next step was the establishment of a fire department.

On Christmas, 1849, after another fire in the city, a meeting was held by numerous influential citizens who had been old Atlantic firemen. Among them were Frederick D. Kohler and William McKibben, both of whom were later members of the first directorate of the Fireman's Fund. In January, 1850, the council appointed Kohler Chief Engineer with instructions to proceed to permanently organize a suitable fire department. At that time there were just three hand pump engines in the city.

Three Companies, known as the San Francisco, Empire and Protection, were soon formed for each of these and brought into service in the conflagrations of May and June of the following year.

Before this last conflagration was well burned out, public notice was given for meetings to be held that very evening to take measures properly to organize fire companies. It was evident that such conflagrations might he momentarily anticipated and what could three imperfectly provided companies do to arrest them? As a result of these actions the fire department was regularly organized by ordinance of council and passed July 1, 1851. The first election under this ordinance was held in September, and Frederick D. Kohler was chosen Chief Engineer.

Some conception of the character of the men who composed the Volunteer Fire Department of early San Francisco maybe obtained from the following comment by a chronicler of the period: "At the ring of the bell it is not alone the errand boy, the counter clerk, or the rowdy corner loafer that start for the scene of excitement. But the merchant millionaire Springs from his cushioned seat; the judge leaves court and cases; the industrious mechanic drops his tools; editors, lawyers and doctors abandon quills, briefs and pills, and with pallid cheek, but nervous sinews, hurry their engines to the threatened spot." "Firemen in other cities are immensely useful - but the fire brigade of San Francisco enters on a service of terrific danger. Their hard-fought battles, their many victories, and the able defense and guard they exercise over their precious charge, have gained them, better than laurel or gold, the sincerest thanks and warmest attachment of fellow citizens."- Annals of San Francisco, published in 1854.

Not until five or six years after the establishment of the fire department had the Vigilance Committee and the twenty fire-fighting companies that existed by that time made San Francisco a reasonably safe place for persons and property. Conditions by this time were propitious for the insuring of property against loss by fire - but only with the utmost care in the selection of risks.

As values increased and the necessity for insurance protection became urgent, a few eastern and one or two foreign companies established agencies here, but restricted their business to insuring goods in the brick warehouses and a few of the larger establishments in reasonably isolated locations. As the settlement grew into a city, wives and families were brought from the East, and the inhabitants, realizing that they were here to stay, commenced the construction of permanent buildings for business and for home life, and insurance was permitted to cover a broader field.

How the Fireman's Fund Got Its Name

The first attempt in California to organize a stock insurance company for doing a general fire insurance business was in 1862, when William Holdredge, a retired sea captain, conceived the plan of organizing a fire insurance company, the business of which should be general in its scope, covering all classes of property in every city where there was a fire department and safeguarding itself by taking the fire department into partnership.

I well remember, as a boy, Captain Holdredge calling at my father's home a number of evenings, discussing the opportunity for development of the organization as a paying proposition financially and particularly urging the benefit that would accrue from partnership with the fire department. At that time it was the custom of insurance companies to advertise themselves by nailing metal plates on the buildings, announcing that they were insuring the property, and Captain Holdredge's idea was that by affixing an attractive plate in some conspicuous place on the buildings insured by a "Fireman's Fund Insurance Company," the firemen would realize that they were interested in the preservation of that building, to the neglect, if necessary, of other property not so labeled.

The incorporation papers were filed in September, 1862, and subscriptions for stock invited by James Phelan and A. Himmelmann, capitalists; William McKibben, proprietor of an iron works; I. W. Tucker, a leading jeweler; and R. H. Waller, a prominent attorney, styled in the circular as "Commissioners." In their advertisement they announced the purpose of giving our citizens, and particularly members of our fire department, (which was then a volunteer organization, comprised of citizens serving without pay) an opportunity of not only making a safe and attractive investment, but of contributing to the charitable fund of the organization.

Apparently the plan was not actively pushed or met with slow response, for it was May 3, 1863, when new incorporation papers were filed by the following: Henry Dutton, Joseph H. Moore, Daniel H. Breed, James H. Cutter, A. Himmelmann, Michael Lynch, R. H. Waller, Wm. Holdredge for the Fireman's Fund Insurance Company, a joint stock corporation, started with a paid-up capital of $200,000 in twenty thousand shares at $10 each, to be later increased to $500,000, and incorporated for the purpose of making insurance upon "dwelling houses, stores and all other kinds of buildings; household furniture, merchandise, mortgages, leases, interests, vessels and their cargoes; and personal and other property, against loss or damage by fire." This was evidently the completion of the work of the Commissioners, as the names of two of the five appear in the above list.

The evident intention was not only to have the stock well scattered, as indicated by the price of the shares, but also to have the company democratic in its management, for the organization provided that it should be managed by a board of fifty directors, and the loyalty of its organizers was evidenced by the provision that the directors chosen for the first year should all be Citizens of the United States, and a majority of them citizens of California, and the good faith of their promise to the fire department was guaranteed by a provision that one-quarter of their directors should be active or exempt members of the San Francisco Fire Department, elected from a number of nominees chosen from shareholders by the Board of Delegates of the San Francisco Fire Department.

These directors were well selected from among the prominent citizens of San Francisco. The names of many of them arc associated with the history of California and the Pacific Coast.

Community Idea

We might well speak here of the peculiar community features of the company, of which its fifty directors was one incident. The idea of Captain Holdredge from the start was clearly to utilize elements other than purely financial ones in developing the company. First, the small price of the stock and the large number of directors indicated his idea of making the company a community organization. Next, in the selection of his directors, he provided that one-quarter should be picked members of the fire department. Now, while this was a volunteer organization, it was doubtless composed of two elements - one, members from principle, and largely composed of business men; the other, active, vigorous young men, who enjoyed the excitement of fighting the fire and then fighting one another; and this active element was probably the most popular and most largely represented in the directors selected; and this would tend to interest all elements in the community in this particular corporation.

Their directors' meetings were held in the evening. The glass folding doors separating the president's office from the main body of the office, being thrown wide open, desks moved, and the crowd practically all standing, overflowing from the president's room out into the main office, very like the attendance at a political meeting. At these meetings opportunity was given for full discussion of any peculiar views which might be advanced by a member. This often made the meetings very interesting.

Annual Elections

The annual election was also conducted in a manner no longer followed by any corporation, so far as I know. Tickets were printed, as at a political election; a ballot box was provided; a judge and clerks of election appointed; and balloting was kept open for three hours - from 12 to 3 p.m.

As an attraction to the stockholders, a somewhat elaborate lunch was provided by a caterer, who was present with his assistants, and served salads, cold meats, fowl, and California wine, and imported champagne ad lib., and even a few black bottles for those whose taste called for a stronger appetizer; and the president saw that there were plenty of good cigars for those who smoked. This system became so popular that it was continued up to 1906, and only succumbed, like our city, to destruction by that conflagration.

Many of our present merchants and underwriters will remember the smile with which they greeted the appearance of the company's long burgee floating from its flagpole, and announcing not only to its stockholders but to all its friends in and out of the profession that this was reception day at the Fireman's Fund office, and hundreds of our friends called to express good will, and take a sandwich and a glass of wine and a cigar with us on our birthday, whose patronage, as well-wishers, was of far greater value to the company than the financial interest of absentee stockholders. It was a delightful custom and was very seldom taken advantage of by anybody, beyond a handshake, a clink of the glass of good fellowship, and a wish for many happy returns of the day. It could not have been continued in any event, under present prohibition conditions, but its discontinuance has deprived the present generation of an annual reminder of a peculiar custom of the time of their fathers and grandfathers, when everybody in San Francisco knew everybody else who was anybody.

The First Year

The Fireman's Fund began its career in Rooms 1, 2 and 3, Government Block, on the northwest corner of Washington and Sansome streets. The original building is still standing, being one of the few to escape the conflagration of 1906. So often has it been remodeled, however, that little remains as it appeared in 1863.

The first officers of the Fireman's Fund were William Holdredge, President; Samuel H. Parker, Vice-President; and William Fell, Secretary.

Policy No. 1 was issued June 18, 1863, for one year, to Walter Hawxhurst for $1200 "on the one undivided half part of one thousand five-gallon kegs of Boston Syrup, owned by William Bosworth and said Hawxhurst, stored in a building known as the Union Warehouse, situated at Battery Street, corner of Union Street." The premium was $12 and $1.75 tax.

The experience of the company during its first year was doubtless like the first year's experience of all new fire insurance companies, when every risk is a new risk, accepted upon its merits after inspection, and where perhaps three-quarters of the year's premiums have come in during the latter six months; carrying an average of about three month's actual hazard, as against the whole year's premium credited to earnings (for in those days there was no insurance department and no estimate of reinsurance reserve to be made in figuring a company's liabilities at the end of the year) and doubtless the company's results were very encouraging, and probably had much to do with the activity in organizing fire insurance companies during the following year.

The Chicago fire of November 8 and 9, 1871, extinguished all the Chicago, many eastern, and several of our California companies, and put a damper on the enthusiasm for organizing new companies.

From that time on the speculative tendency in American fire insurance gradually disappeared and was replaced by more definite and permanent features; the result of the combined and careful study of professional underwriters giving their lives to the service.

The lesson of the Chicago fire also probably completed the dissolution of some of our local companies that had been falling behind in the struggle for remunerative business, for in the directory of 1872 we find noted only the names of the California, Fireman's Fund, Home Mutual, State Investment and Union.

New Management

While Captain Holdredge's energy was sufficient to secure the launching of this enterprise, it would seem that his ability as an underwriter did not impress itself upon his directors, for at the end of the year his connection with the company terminated, and Samuel H. Parker, who had been Vice-President, was elected President, and Michael Lynch, one of the fire department representatives of the Board of Directors, and the then President of the Board of Education, was chosen Vice-President.

The original Secretary, Wm. Fell, was replaced by Chas. R. Bond, also a member of the fire department, and a particularly competent man, with a long previous experience as a bookkeeper in a Boston bank.

The directors, recognizing the advantage of a ground-floor occupancy, and doubtless in order to keep in close touch with the financial district, in May, 1864, at the end of the company's first fiscal year, moved their offices to 238 Montgomery Street, where they remained until the company constructed its own building three years later.

With the new officials and new location apparently came a distinct change in the character of the company's business management, and an appreciation of the important fact that a premium is not earned until the policy has expired, for we observe in the company's advertisement that year the statement "This company takes risks against loss or damage by FIRE upon all kinds of insurable property on as favorable terms as any other responsible company." (Note the two features of a distinct limitation of claims to actual damage by fire and the restriction of its competition to the terms offered by responsible companies, indicating that already legitimate insurance was commencing to experience unscrupulous competition.)

This advertisement also states "one-tenth of net profits from insurance paid to the charitable funds of the fire departments of San Francisco and other cities. (Note here the change from the announcement of the Commissioners in their original request for subscriptions, which proposed to organize on the plan of giving one-tenth of all its profits to the San Francisco Fire Department's Charitable Fund.)

The early records of the Fireman's Fund were all destroyed in the conflagration of 1906. However, it is probable that in compiling their second annual statement in May, 1865, they entered in their liabilities a proper reserve to care for unexpired risks, which materially reduced, or perhaps eliminated, the profits together with the dividend to the fire department, for an altercation arose this year over the distribution of the bonus; the fire department's representatives claiming one-tenth of the company's interest earnings for the year, under the wording of the original advertisement for stock subscriptions.

The matter was referred to a joint committee, with the result that the whole charitable fund division plan was eliminated in consideration of a cash payment of $5000, and an ironclad receipt was taken, which was copied in extenso in the cash book by the careful secretary, releasing the company "from every claim of any name or nature from this date on unto the end of the world." Following this settlement the company made another step forward, increasing its capital from $200,000 to $500,000.

Parker's Death

At the end of the first year of the company's existence it became relieved of its visionary president. At the end of the second year it purchased its release from a visionary plan of division of profits and settled down to legitimate underwriting on a purely business basis. At the end of the third year it faced a greater problem in the selection of a new president, for Samuel H. Parker, its organizing vice-president and president in 1864 and 1865, dropped dead suddenly on March 14, 1866, at noon, as he was entering the Lick House, where he resided.

The company's finance committee at once took charge of the company's affairs and for the six weeks intervening before the annual meeting it ran without a president, the vice-president, Michael Lynch signing policies and any necessary documents, while a special committee under the chairmanship of Chas. W. Brooks, the head of the shipping house of Chas. W. Brooks Company, was appointed to select a new president.

David J. Staples

At the annual meeting May 3, 1866, this committee recommended the employment of David J. Staples, then serving as Port Warden. Mr. Staples was a newcomer here and but slightly acquainted with our people, and knew nothing whatever of the insurance business, but had long resided at Stockton, where he had been prominent in city and state affairs. History later proved the wisdom of the committee in its judgment that he possessed the qualities which later made the company a success. In view, however, of his entire ignorance of underwriting, the affairs of the company were, for the first year, to continue in the hands of the Finance Committee. Its chairman, W. B. Bourn, the father of the present president of the Spring Valley Water Company, being elected president, and Mr. Staples, vice-president.

In April, 1866, the California Legislature enacted a law providing for the enlargement of the scope of business of a local fire insurance company, to include marine insurance, and in December, 1866, the Fireman's Fund Insurance Company adopted the provisions of this act. During the same year the company purchased the lot on the southwest corner of California and Sansome streets and commenced the construction of a building upon that location, which has ever since been its home.

Company's Own Building

In April, 1867, the company moved into its new building. The building was mentioned in the "Historical Review" of that year's directory as one of the notable features of the city's improvement during the previous year. It was stated to the writer by David Farquarson, the architect, that it was the first building constructed in San Francisco with the ground floor surmounting a half basement, the idea having been suggested to him from observing similar construction in St. Louis.

The lot cornered on what was originally the beach, which runs from Montgomery and Jackson streets past this corner, curving down to Market Street at its junction with First Street, everything east of that line being made ground, and the excavation for the half basement doubtless reached the water line at high tide, and the committee evidently having in mind the question of solidity, for this basement was very solidly constructed over a subbasement, properly ventilated through the end walls of the building.

An office employee of the present day would say that the original office of the company was woefully deficient in one thing. Beyond the chairs in the president's office, for the president and the directors, there was neither a chair nor a stool in the Fireman's Fund office.

At this time the company's working staff consisted of D. J. Staples, vice-president and manager; Charles R. Bond, secretary; Charles S. Wood, bookkeeper and cashier; Alexander S. Tibbey, clerk; and Michael Cochrane, an old soldier and veteran of the Mexican War in Colonel Stevenson's regiment, as porter and general utility man.

At the meeting in May, 1867, the company's first stockholders meeting in the new building, D. J. Staples was elected president of the company and Henry Dutton vice-president. It seemed an excellent omen that May 3rd, the date of the company's annual meeting, at which Mr. Staples was elected, was also his birthday. At this meeting it was voted to open a Marine Department.

Summary of Important Events of Founding

The five years from 1863 to 1868 are taken as the period of founding of the Fireman's Fund because the important events of those years all tended toward a stabilizing of the company's operations upon a definite plan and policy. Furthermore, during that period the personnel of the company became fixed, only to be increased from time to time as the development of the company warranted.

These are the significant events of the period of founding of the Fireman's Fund:

  1. 1863 - Articles of incorporation filed May 3, the capital being $200,000.
  2. 1864 - Captain Holdredge, promoter and first president of the company, was replaced by Samuel H. Parker, former vice-president, a man of more practical qualities than Holdredge. The original secretary, William Fell, was replaced by Charles R. Pond.
  3. 1864 - In May the company moved to ground-floor quarters in a more central location at 238 Montgomery Street.
  4. 1865 - The annual statement of this year in May contained a reserve to care for unexpired risks. Up to this time it seems that the important fact that a premium is not earned until the policy expires had not been fully realized.
  5. 1865 - The charitable plan of division of profits with the fire department was abandoned.
  6. 1865 - The capital was increased to $500,000.
  7. 1866 - David Jackson Staples was appointed vice-president, becoming president in 1867.
  8. 1867 - The company moved into its own building at California and Sansome streets, the site of the present Head Office.
  9. 1867 - The Fireman's Fund entered the marine insurance business.

[Fireman's Fund Archives: 4-1-3-4-34; 0406]



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