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- The Spirit of 1906 - 5/6 -


settlement of claims during this period. All kinds of pressure, all kinds of seduction and all kinds of bribes were offered the adjusters. There appeared to be in the minds of many a conviction that this was the time to make a claim against the insurance companies; that everything was burned and that with the upset conditions any old claim could get by. Stevedores, laborers and others not generally credited with an excess amount of worldly wealth gayly and festively swore to proofs showing the loss of family plate, ancestral pictures, silk underwear, ball gowns, evening clothes and jewels. There was no possibility of disciplining these perjurors and it was up to the expertness of the adjusters to defend their companies from being looted.

There were all kinds of attempts to defraud on the part of other policyholders. One instance in which the California was interested was a proof for a $16,000 loss on a policy covering on stock of dry and fancy goods located in a building on Market street. I received a visit from the policyholder who made a request for prompt payment. I explained that our funds were being raised by assessments which were levied once a month and that, if agreeable, we would pay him sixty per cent of his claim and the balance in sixty days. This appeared to be satisfactory and he left in a happy frame of mind. Thirteen thousand dollars of the risk in question was ceded to other companies and we naturally filed claims with the reinsurers for their proportion. The following day a friend who was acting as chief adjuster for another office which was one of the re-insurers on this risk, called upon me regarding this particular claim. He laid upon my desk a photographic album and called my attention to a large photograph of the building wherein the stock was located. It was a two-story brick and the picture showed that the entire front of the second story had, as the result of the earthquake, been thrown into the street. This was taken before the fire had reached the property. He stated that the authenticity of the photograph was absolutely guaranteed and that in event of litigation, the testimony of the photographer was available. He further stated that acting for the re-insuring company, he would not follow the California for more than sixty-five cents on the dollar. I borrowed the photograph and at once sent for the claimant. He called the next day. It was found on examination that he had made the statement to the general adjustment committee that the property was not damaged prior to the fire. Unfortunately, no affidavit was taken from him to that effect. With the photograph before me, I realized at once that the claim was not an honest one. I explained that the larger part of our policy had been ceded to other companies and that some of them demanded, earthquake affidavits with every claim; that while I regretted to put him to any inconvenience, it would be necessary for him to produce this testimony. He looked me squarely in the eye and said, "I'll sign it and swear to it. Not a brick in the whole building was disturbed." He attached his signature to the affidavit. I showed him the photograph and then stated that we should be compelled to penalize him to the extent of thirty-five cents on the dollar. As a matter of equity, there was little, if any, liability under the policy. He shouted, "Fake!" "No," I replied, "simply a matter of contractural rights and of justice. The picture is absolutely bona fide." He left, emphatically stating that he would at once "go to the bat." I suggested that he submit the matter to his attorney. Fortunately for him, he had a wise one who promptly advised that he accept the terms offered.

This is another angle of the settlement of the San Francisco losses - no more nor less in fact, methods, and manner, than that with which other legitimate companies had to contend.

Another instance is recalled of a claim for a thousand dollars covering on lodging house furniture in a building on Sixth street, with the loss made payable to the owner of the building. I supposed that the policy was collateral for payment of rent. It developed that the claimant was a widow with one child. She was without a cent in the world, and called to request payment. By this time the company was running short of ready funds to such an extent that instructions had been issued to adjusters that all claims hereafter would take the customary sixty days before payment. She stated that the fire had canceled her lease, that she had seen the payees and that they would waive the claim and that she was absolutely destitute and would be willing to take whatever we would offer, if she could get the cash. The position of the company was explained to her with the result that she felt that we were working for a discount. But it was not the intention of the California to take advantage of people's necessities and we informed her that such was the case. Her claim was a just one. I accepted her proofs, paid her twenty-five per cent cash and the balance at the end of thirty days. These are but isolated instances among many.

Special Meeting of Stockholders

Another historical meeting was held August 9th. This time at the office of the company. It was a special meeting of the stockholders. Three assessments had been levied of forty dollars each, amounting in all to $720,000. This money had been paid out in settlement of claims. This was the first meeting of the stockholders proper since the fire. The directors realized that in response to inquiries from the stockholders who were principally interested that they were entitled to a report as to the progress made and the policy to be adopted for the future. Over ninety individual stockholders were present and in order to accommodate the crowd, the employes removed their desks and chairs, and during the time of the meeting adjusted losses and discharged their duties on the sidewalk in front of the building. The early-comers had seats. The late-comers stood, but so interesting was the meeting that discomforts were forgotten. The president made a very full and analytical report, finishing with the announcement that another million dollars would be needed to continue the splendid work and accomplish the final result of bringing the California through the disaster with justice, equity and fairness to all its contract-holders. The atmosphere was charged with optimism and enthusiasm and amongst all the speeches made, and they were many, not one bore any intimation of regret or of any desire to do other than march steadily ahead. Mr. Ignatz Steinhart, at the time manager of the Anglo-Californian Bank, careful, cautious, shrewd and a hard-headed financier, in his speech practically struck the keynote of the whole meeting. He said in substance:

"I have lived here many years and I expect to die here. I love San Francisco and I know you all feel the same and it is my honest conviction that the directors of the California have adopted the proper and only course and that its stockholders will stand behind them, and that, the company will pay its losses at the rate of one hundred cents on the dollar without discount. I now present a motion that it is the sense of this meeting that the Board of Directors be given all that they request and that all their actions are hereby heartily ratified, approved and confirmed."

There was not a single dissenting vote. At this time a stockholder enthusiastically jumped on his chair and proposed three cheers for the company and the management. The clerks on the sidewalk and some of the passers by rushed into the crowd to see what was the cause of the commotion. When the meeting adjourned, the confidence of all was renewed. The barometer of their enthusiasm and determination had risen and smiles and handshakes put the period to the gathering. Seldom, if ever, has an Irish dividend meeting been held and disbursed with such a wholesome feeling of satisfaction. It was more like a "melon cutting" than a preparation to excavate to still lower depths their pocketbooks. Never was the true California spirit more faithfully portrayed.

The Final Supreme Effort

The annual statement of the company at the end of the year showed beyond the peradventure of a doubt that the company had kept the faith, but it was left with a very attenuated surplus. Then business began to grow by leaps and bounds. The bread which had been cast upon the waters was returning and another problem now confronted the company - to protect the reserves on the rapidly increasing income. This required a working surplus and meant more assessments which seemed to be adding insult to injury. The stockholders had already provided the funds to pay losses and to now ask for more money for any other than loss-paying purposes, gallant as was the spirit of those directly interested, seemed dangerous. The directors and some of the more prominent stockholders met informally and discussed the situation and the concensus of opinion was that the honor of the company demanded that it continue to the end to accomplish to the fullest that for which so many financial sacrifices had been made - to take any other course, to discontinue, to fall down, or to break faith with those who had given us their confidence would be suicidal. In this deduction proof was given of the sound judgment and business acumen of those who bore the brunt of the burden in those hot days of battle. They took the position that the reputation which the company had already builded was an asset of almost unlimited value and realized that the peak of the mountain was just a few steps further on - that summit from which the company could look out upon the valley of success and reap the full reward for all the sacrifices its stockholders had made. Plan after plan was submitted for financing, change after change was suggested, but for a time concerted action seemed almost impossible of attainment. Finally, I called upon the largest stockholder and treasurer of the company, Mr. Geo. L. Payne, in his office at the Payne Bolt Works. I laid before him the plan of increasing the capital stock from six thousand shares to ten thousand shares by the sale of four thousand shares at sixty dollars per share which would realize for the company a total amount of $240,000 of which $160,000 could be applied to capital, bringing that item up to $400,000, and $80,000 to surplus. While this did not make the surplus as much as was desirable, we were used to economies, to making every dollar count. This has always been a feature of the management of the company. With this sum and by a continuance of conservative methods and proper management we believed it possible to provide for all contingencies. Mr. Payne listened quietly, a pad of paper before him and a pencil in his hand. When I had exhausted every argument and made the best possible statement of the exact conditions, he stated that he realized fully the gravity of the position and then came the flood. He said that, if it became necessary, he, as the largest stockholder in the company, would endorse the proposition to the extent of taking the entire issue. The balance of the consummation of the idea was merely a matter of detail. Another meeting of the stockholders was called and of the many meetings that we had gone through, this stands out brightest of all. The plan was presented and as might naturally be expected invoked little enthusiasm and did not appear to interest anybody. Mr. Payne quietly rose to his feet, explained the position of the company as he saw it and then shocked the assemblage into activity by making public the announcement of his willingness to take the entire issue of additional stock. That was a flash of optimistic lightning the bolt of which apparently struck every man in the room. They sat up, took notice, and awoke to the fact that they were possibly missing something worth while. The outcome was that Mr. Payne was only able to secure his pro rata as the entire issue was promptly over subscribed by the stockholders, it being understood that the right of subscription should be confined rigidly to stockholders of record. Never in my business career have I seen the value or virtue of a leader expressed in so forceful a manner as in the effect of Mr. Payne's offer upon that meeting. It was the greatest evidence of applied psychology that ever it has been my good fortune to experience.


The Spirit of 1906 - 5/6

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