Insurance - Offer, Acceptance, And Inspection Risks
( Originally Published 1911 )
Offer and acceptance of risk.—In the beginning of fire insurance it was the practice to have all applications submitted in writing over the signature of the person desiring insurance. How complete a statement concerning the property to be insured was required in the early days we do not know, but the practice soon developed of requiring on any business property a some-what complete statement or survey, as it was called, of the proposed risk. Naturally the more hazardous the risk the more complete the statement required. A building in which a person lived, or which was occupied merely for dwelling purposes, would have fewer points to be considered than a factory devoted to manufacturing, or a store or warehouse used for buying or selling goods.
In all cases the location of the property and its area would be required, with a description more or less complete of the kind of building—that is, whether wood, brick or stone. Careful inquiries were made about the stove and the stove pipes, and the method of lighting the premises. In the case of a manufacturing plant a minute description of the business was also required, including the number of hands employed, and the ex-tent to which the work was carried on, since some factories might only do a portion of the work of making woolen cloth while others might carry through all the processes from raw material to finished cloth. There would also be a report on any special apparatus for fire-extinguishing purposes, the amount of insurance desired, and the number' of machines on the property. These surveys, if approved by the company, were filed with the other papers pertaining to the risk.
This method of application has practically passed away. It is very doubtful whether in the United States it is now used to any great extent. This is due to the fact that the companies have developed inspection or survey bureaus to cover the entire country. If the bureau should not have an inspection covering a special risk the company may send its own inspector. In fact, a person at present seeking insurance simply makes a direct request, and unless asked would not be required to fill any special form, the company making its own inspection and investigation.
As already stated, formerly the application had to be in writing. This is not necessary now, most of the business being done on verbal application and acceptance. The method of written application was necessary in the early days as the companies were not so well sup-plied with knowledge of the properties offered for insurance, and with maps, surveys, etc., concerning every important risk in the country. Thus if a person some years ago wrote from a distant point for insurance, and the company possessed no knowledge of the property, it would hesitate to accept insurance thereon with-out first having made an inspection to be sure the risk was desirable. It is sufficient to state that the acceptance need not be in writing.
Importance of inspections.—An accepted principle of the commercial world is expressed by the Latin phrase "Caveat emptor"—Let the buyer beware. The insurance company stands in the position of a buyer.
Whenever it is offered a certain risk it buys the opportunity of insuring that risk, receiving a certain sum of money. It is something which men do not buy unless needed; hence the company being the buyer must have the opportunity of inspection before purchasing. And it does make a minute inspection of the property, not from the owners' point of view but from its own. A retail dry-goods store for the purposes of business may have an admirable location in town or city, but for the purposes of insurance it may be in the poorest. Its advantages in the first instance may be disadvantages in the second. The exact condition of the property is necessary to a just estimate of the undertaking; therefore the inspection. The inspector is probably as old as the fire insurance business. Two hundred years ago the Sun Insurance Office appointed a carpenter and a mason to inspect properties.
The inspections were more or less simple affairs in those early days as compared with those of the present time, the development of inspection arising in the last fifty years, or since the Civil War. It was the result of the expansion of business following the war and the tendency to increase the size of properties. At that time the average business building was about 100 by 25 feet and four or five stories high. Few merchants wanted more than $50,000 of insurance, while $100,000 was a large amount. At the present day single properties carry millions, there being one block carrying six mil-lions in New York City. It can thus be seen that the problems to be solved to-day are wholly different from those of fifty years ago.
The New England mutual companies were probably the first to require detailed information regarding proposed risks on which to base their writings. In time the system spread to stock companies.
Methods of inspection.—To attain success in inspecting a man must be of alert perception and have accurate judgment. Tact he must possess or acquire. He must note all that increases the possibility of fires starting, entering, or spreading on the premises, and all that tends to prevent such starting, entering, or spreading. Before visiting the premises he should gather information about its occupancy and the manufacturing carried on, and then inform himself as to whether the materials and processes of manufacture involve any special hazard of fire. A map of the building would greatly simplify his task. In default of the owner's map he should make one himself. This is the first step in inspection. To do this, he will need a two-foot rule, a tape measure or scale rule, and a supply of co-ordinate paper, unless he uses the scale rule, with which plain paper is preferable. First, he should determine upon the longest, simplest line of the building or group of buildings as a base line from which to make all subsequent calculations. It is then plotted on coordinate paper by allowing each section to represent a certain number of feet, or with a scale rule on plain paper by allowing each sub-division of the inch on the scale rule to represent a definite distance. Then the angle made by the walls at each end of it are to be plotted. In most cases this is a right angle, but to be certain the inspector should take two points ; the first one four feet from the corner in one wall and the second three feet from the corner in the other. If the line connecting these points is five feet long the inclosed angle is a right angle. Acute or obtuse angles, howver, should be determined by triangulation. If the wall to be drawn goes off at an obtuse angle from the wall he has already drawn, he should make or drive a stake at some point on this second wall. This point may be call A. He should then return to the corner and walk out from the building in a straight continuation line from the wall he has plotted. He should continue pacing until he is abreast of the point A. By measuring the distance he has walked he can plot this second point B. If at B he makes an accurate right-angled turn toward the building and continues he will come directly to the point A. By measuring this last distance he can locate the point A on his map. A line drawn from the end of the wall already plotted, passing through A, will be the desired line representing the second wall. An acute angle can be ascertained by taking a point at a convenient distance from the corner on the wall already drawn, starting at right angles to this wall toward the wall to be drawn. Consider the point at which this wall is reached as P. By measuring and plotting the line walked the point P of the second wall can be determined, and a line from this corner through this point P will represent the direction of the wall de-sired. The diameter of circular tanks, chimneys, etc. can be obtained by measuring the base circumference and dividing by 3.1416. If the inspector carefully deter-mines one line or angle at a time he will have no difficulty. Doors, windows, chimneys, etc. he can represent by arbitrary symbols. Having completed his map he checks off the information he gathers during his inspection.
General information about risk.—Starting with outside details he should first examine surrounding buildings and industries to determine the risk from exposure.
Next come the features of the building itself; whether of frame, mill, brick, or fireproof construction. Does it communicate with adjacent buildings, and are there proper doors and cut-offs to protect these communications? Is the roof protected by proper parapet and covered with fireproof materials? Have skylights, windows and doors, the proper screens and shutters to hinder the breaking and letting in of flying embers in case of near-by fires? Satisfactory information having been gained on these points the inspector should then examine the inside and make note of (1) materials of walls, floors, ceilings, supports, etc. ; (2) all unprotected metal or light masonery which would warp or fall in case of fire and pull down other parts; (3) all stair, elevator or dumbwaiter shafts, belting, chutes or any other floor or partition opening which would act as a flue in case of fire, noting the provision for cutting off such openings ; (4) all concealed or inaccessible places; (5) condition of building, whether walls or ceilings are cracked, allowing fire to enter. These in general are the points to be investigated, although any building may present special features.
Occupancy.—Then comes the occupancy of the building, and here the inspector needs to go carefully and not to be too credulous. He must not rely upon the information furnished by proprietor or tenant who wishes to present as safe a risk as possible, but must investigate for himself. He should first find the names of the tenants and what part of the building each occupies and for what purpose. If manufacturing is carried on, the number of employees at dull and at prosperous seasons, and the number of these engaged in hazardous processes must be ascertained. If parts of the building contain stock he must find out whether it is in storage or for wholesale or retail trade, also how this stock is arranged, whether on open counters, shelves, tables, hooks, or skids six inches from the floor, or packed in closed boxes or fireproof vaults.
Protection of machinery.—Where manufacturing is done it is necessary to know how many machines are used and whether they are operated by mechanical or manual power. It is important to report whether drip pans are used under these machines and whether the floor needs a metal covering to protect from oil soaking; whether or not woodwork and dust machines have blowers, and whether individual motors are used for power. The inspector must ascertain whether any heat, flame or fire other than for power is used for manufacturing purposes, and the number and purpose of these appliances, what fuel they use, how they are set and how the surrounding woodwork is protected. In case of enclosures for baking, drying or steaming such as caul-boxes, drying-rooms or japanning ovens—the inspector must find their number, size, material, and construction ; particularly smoke pipes, ventilators, and steam pipes, noticing if they are safely arranged or if heated pipes come in contact with wood or other light inflammable materials.
Dangerous substances.—Raw stock and materials used in the process of manufacturing are exceeding liable to include highly volatile and explosive liquids and substances. Here especially the inspector must be sure to cover all the ground and to see all that is going on in spite of the assurances of the tenant that all is safe and needs no investigation. A list of the dangerous substances most often found is of great.. value. Chief among these are: Benzine, gasoline, naphtha, collodion, rubber cement, paints, oils, varnishes, alcohol, lacquers, thinners, and celluloids. All loose packing materials, such as excelsior, hay, straw, and cut paper, are a source of danger. Spontaneous combustion often occurs from bituminous coal and where wet lime comes into contact with wood. When any one of these dangerous substances is found, especial care should be taken to report accurately the supply and how kept and if in safety cans or bins. These receptacles should be examined for defects; nearby gas jets or flames should also be noted.
Heating, lighting, and power.—Is the building heated by steam, furnace, or stove? If by steam the inspector should describe the size in H. P., the construction and location of the boiler, and test the whole system for unsafe features, such as heated pipes coming into contact with unprotected inflammable materials, etc. If a furnace is used he should describe its location, size, and any dangerous features. Where stoves of any kind are used the inspector must report whether the surrounding woodwork, especially the floors, is properly protected, and what the stovepipe enters, whether wood, glass, or lath and plaster partition. If gas is used it is important to know how it is supplied, whether through rubber tubes or not, and how the tube is attached and protected.
Next the lighting is examined. If protected gas jets are less than eighteen inches, or unprotected ones less than thirty-six inches, beneath unprotected woodwork or lath and plaster they should be considered unsafe. Bracketed lamps and gas jets must not swing against unprotected, combustible walls. The lights in the windows should be protected by globes. Stables need safety lanterns, and lights for work tables should be enclosed in cages of suitable construction. If electricity is used the method of installation should be reported and the system examined for defects that may cause short circuiting and fire.
Now the inspector comes to the power. If it is manual, pedal or animal, it is necessary simply to state it in his report. If it is mechanical it must be more minutely described. Its construction, location, size by H. P., setting, whether it is open, enclosed or cut off are all important details. In addition, if gas or electricity is used, the materials of their surroundings with their protection must also be described.
Facilities for extinguishing fire.: After the inspector has carefully examined for defects and unsafe features of the power plant he should observe the means provided to check a probable fire in its outbreak, and the available aid for fighting it. There is given in Chap-ter VI a list of the fire checking and fighting apparatus in common use, and also the standard requirements. These requirements furnish a guide for this part of the inspection, and any deviation or defect or mismanagement which might render any apparatus unfit for instant use should be reported for correction. The water supply must be ascertained in detail. If it comes from the city main the available pressure must be determined; if from a private supply the pump and tank capacity must be disclosed as well as the pumps' supply. Should it come from a creek the inspector must learn the depth of the water in the dry season; whether the suction is in a crib sunk in the bed of the creek ; what arrangements are made to prevent sand and gravel filling the crib and how often it is cleaned out. Besides these facts he must not neglect to find out the distance to the nearest fire engine house and alarm box, and whether the service is volunteer or paid and what equipment it has.
Possible sources of fire.—Throughout his inspection the inspector should be alert to notice any faults of management or defects in buildings, machinery or apparatus which would increase the probability of fire. This contingency largely results from carelessness and untidiness; such as broken plaster and windows, holes in floors, walls, or ceilings, uncovered stove holes, oil sprinkling of floors, sawdust in cuspidors, ashes in wooden boxes or barrels, gatherings of rubbish or waste, whether inside on floor or in wooden boxes or barrels or outside in yard, cellar, alley, vaults, or under sidewalk gratings; any floor opening or closet used for storage of old clothes, oil-soaked rags, oil lamps, or any other dangerous articles; all cotton waste and material used for wiping and polishing which result in absorption of hazardous chemicals if not kept in self-closing waste cans; crowded stock that leave aisles less than three feet wide and not leading to windows; piling stock to ceiling and obstructing windows, thus preventing entrance of firemen.
This enumeration of the causes of fire could be continued indefinitely and yet not cover all points of danger of this class. The inspector's ability is shown not only by accuracy in obtaining information upon definite points but by readiness in discovering the individual or unusual point of danger. To indicate how widely these causes of fire may differ the following are given: Friction from a chafing belt, or from a shaft not running true, may strike fire to the oil in the bearing, which would spread to the nearby woodwork; an open fuse may be too near combustible material; a rubber tube on a gas heater may break ; small scraps of oilcloth, harmless when scattered over the floor, become dangerous when collected in quantities; small heaps of iron scraps or shavings, more or less oily, on the floor of a machine shop are likely to generate heat when they become rusty.
Qualifications of inspector.—As indicated by the foregoing an inspector's work requires that he be in-formed on a great variety of subjects. Some knowledge of draughting, mechanics, electricity, and chemistry is indispensable. To obtain all the information necessary a tactful treatment of the tenant or proprietor may be required. Minute questionings naturally arouse the suspicions of a manufacturer who has secret processes in his works. Only tactful questionings supplemented by keen observation should be depended upon to determine the moral hazard. If a plant is extending its operations and increasing the number of its employees the chances of its being burned for its insurance are at a minimum. If, however, poor transportation facilities make raw stock more expensive there than to a more fortunately situated competitor or if building or machinery shows evidences of neglect the inference is that the plant is unprofitable to its owners. From such observations, together with information gained from the answers to seemingly casual questioning, such as "Business good?" the inspector should draw his conclusions regarding the moral hazard.
From the observations made the inspector is often asked to recommend improvements for a risk. A point to be observed in making recommendations is that the additional protection afforded by carrying out his suggestions should be sufficient compensation for the expense.
Though fire insurance engineering is a comparatively new line of work an inspector should never forget its importance. Every point of danger he can discover and have remedied may mean a serious fire averted; any point overlooked or neglected may cause, beside the loss of thousands of dollars to his employers, the more serious loss of life, property, and employment. His work well done is of value not alone to the insurance companies and the assured but to the whole community; it has been called "active philanthropy on a business basis."
Classes of buildings.—From the foregoing general considerations of the inspector's duties it is well to consider the subject in detail. Buildings may be divided into four classes:
1. Frame building.
Frame building.—There are two distinct methods of framing a building. The type in general use in the larger part of this country a generation ago is known as the braced construction and is a more expensive and difficult style than the balloon construction which has gained in popularity, the latter having proved itself well adapted to withstand wind pressure and tornadoes, as well as being a simpler and quicker method of framing.
In braced construction the beams are fitted together with mortises and tenons and held by wooden pins, while all angles are braced by cross pieces framed in by mortises and tenons. In building a house the sills are first laid on the foundation walls, then the corner posts, which are to extend to the plate, are placed firmly in their mortises and securely spiked. They are held rigid by braces fitted into the mortises cut in both sills and corner posts. Next the horizontal timbers or girts which tie the frame and support the floors are framed into the corner posts. The two of these, running parallel to the floor beams, are on a level with them, the other two, running at right angles to these first girts, are dropped a little to support the ends of the floor beams notched down to them. The four angles made at each corner by the corner posts and girts are strengthened by braces. After the floor supports are put in the plate is added, the angles of which are halved together and mortised entirely through in order to fit over the long tenons left at the tops of the posts ; the angles between the posts and plate are left braced. The frame is now ready to receive the studs, which are mortised into sills and girts so that each floor has a separate set.
When balloon construction is used in framing, the sills are put in place on the foundation, and then the studs of the outside walls as well as the corner posts, all of which are to extend the entire length from the sills to the plate, are erected and securely nailed. These are now temporarily braced by stay lathes—pieces of wood nailed diagonally across the studding. All these uprights are next measured and cut off at the proper height to receive the plate, which is made of two thicknesses of 2" x 4" or 2" x 6" timber, the first laid directly on top of the studs and nailed to each one, and the second timber nailed to the first, but breaking joints with it and overlapping at the corners. The studs are now marked with two lines four inches apart at the proper height for placing the ledger-board which supports the beams of the floors above the first. The studs are next notched between these lines, and a board an inch thick and four inches wide is fitted into the notches and finally nailed in place. This ledger-board, though sufficiently strong as a support, is quickly burned off in case of fire, allowing the floors to fall. To prevent the building from springing under wind pressure long pieces of board are applied diagonally over the studs notched to hold them.
The form of construction most frequently found varies in different parts of the country. Often features of one type are combined with those of the other according to locality or use of the building.
The following is a description of a standard frame building from the "Universal Schedule" :
A standard frame building may be described as one not exceeding two stories in height, with a ground floor area not exceeding 1,000 square feet, say 20X50. The building itself and all chimneys should rest on substantial foundations of brick or stone laid below the frost line. The sidewalls should be of clapboard finish on substantial hardwood studdings, either filled in with brick between studs ("brick-nogged") or instead with back-plastering on inside of outside sheathing between studs. (These two forms of finish are usually employed as non-conductors of heat and as a protection against the weather, but they are also admirable provisions for preventing the rapid spread of fire, particularly in connection with certain fire stops that cut off drafts from floor to floor.) If the building is veneered with brick, or sheathed with metal, tin, or corrugated iron, deductions are made in rate. Wooden side walls and roof should be painted with good fire resisting paint. Roof should be of metal or tile, or shingles laid in mortar."
Ordinary building.—The majority of this class of buildings inspected for fire insurance have brick walls, though the number of concrete buildings is rap-idly increasing, while a few are found with an outside of stone. A cast iron post is often used on such buildings if they are built or remodeled for store purposes. Except in the material of these walls these three classes do not differ from the frame building, i. e., the beams, floors, etc. are of wood and the finish of wood, lath, and plaster.
Even when erected under the restriction of excellent building laws a building seldom if ever conforms to the following description of a standard building as is given in the "Universal Schedule":
The standard building has walls of brick or stone (brick preferred) not less than twelve inches thick at top story (six-teen inches if stone), extending through and twenty-four inches above roof in parapet and coped and increasing four inches in thickness for each story below to the ground, the increased thickness of each story to be utilized for beam ledges. Ground floor area not over 2,500 square feet; height not over four stories, or fifty feet; floors of two-inch plank covered by seven-eighths or one-inch flooring, crossing diagonally with waterproof paper or approved fire-resisting material between ; wooden beams, girders, and wooden story posts or pillars, twelve inches thick, or protected iron columns ; elevators, stairways, etc., cut off by brick walls or plaster on metal studs and lathing; communications at each floor protected with approved tin-covered doors and fire-proof sills; windows and doors in exposed sides protected by approved tin-covered doors and shutters; walls of flues not less than eight inches in thickness, to be lined with fire brick, well burned clay or cast iron, with throat capacity of not less than ninety-six square inches if steam boilers are used; all floor timbers to be trimmed at least four inches from outside of flue; heated by steam ; lighted by gas ; cornices of incombustible material ; roof of metal or tile ; if partitions are hollow or walls are floored off there should be fire stops at each floor.
Mill construction. —A mill constructed building, or building of slow-burning construction, is one having brick walls and with all woodwork in the form of heavy planks and timbers laid in compact thick masses, with the least number of ignitable angles or projections. If the materials used are of sufficient size and are properly put together a building of this type may have excellent fire-resisting ability. To obtain this condition the lumber used should be not less than eight inches in either cross dimension. Over the floor and roof beams there should be a covering of spliced or tongued and grooved planks at least three inches thick, while tongued and grooved boards an inch or more in thickness should be laid diagonally and properly nailed on top of the floor planking. Between these boards and the floor planks two thicknesses of waterproof material should be laid and flashed at least three inches around all wells and posts or columns and openings with moldings or base.
The cross sectional area of all wood supports for floors and roofs except in top story should be at least one hundred square inches, while each dimension should be at least ten inches for the supports on the top story. A cross sectional area of sixty-four square inches is sufficient provided that neither dimension is less than eight inches. These wooden posts should have caps or boxes of cast iron which may serve as bases for the posts above. The ends of the girders should be fastened to the caps or boxes in such a manner as to be self-releasing. There should be no openings through the floors, all stairways, elevators, etc., being cut off' in brick towers. A building of this type does not readily ignite, though even in case it should catch fire it is likely to burn so slowly that the fire could be put out without serious difficulty, as all parts are easily accessible to a stream of water.
Fireproof construction.—The chief point of difference between the ordinary building and the building of fireproof construction is that in the latter the frame work is usually of metal and the floors of fireproof material, an especial advantage as they separate the various stories from one another.
Fireproof buildings should have walls of brick, stone, Portland cement, or concrete, with floors and roofs of wrought iron, or steel floor beams, which in stores and warehouses and factory buildings should be placed not more than five feet apart on centers but which on other buildings may be eight feet apart on centers. Suit-able tie rods should tie the beams together at short intervals. Incombustible flooring should be put between the beams in both floors and roof. There may be used for this purpose any fireproof material approved by the insurance companies, such as brick arches, hollow tile arches of hard burned clay, or porous terra cotta, or arches of Portland cement, concrete, plain or reinforced with metal. Stairs and landings should be built of brick, stone, Portland cement, concrete, iron or steel, or a combination of these, and, like all elevators and dumbwaiters, should be enclosed in a non-combustible shaft. No kind of inflammable material should be used in partitions, flooring or ceilings and the frames and sashes of windows should be of metal both inside and outside.
Four inches of hard burned brick, terra cotta, concrete or any other approved fireproof material should be entirely fitted over all cast iron, wrought iron, or rolled steel columns, including the lugs or brackets in such a manner as to be without air space next to the metal. All pipes, wires, or conduits of any kind should run outside of and not be enclosed in fireproofing surrounding columns, girders, or beams of steel or iron. The exposed side of steel or iron beams should be covered with at least four inches of fireproofing material, and two inches of such material is required to protect properly the exposed flanges of these girders or beams.
The following is the standard fireproof building according to the "Universal Schedule":
Walls not less than sixteen inches for the upper twenty-five feet portion, thence increasing four inches for each twenty-five feet to the bottom ; not exceeding five thousand square feet of ground floor area; height not over eight stories; floor beams and girders to be supported by masonry. (If skeleton construction floors carried entirely by iron frame work, there is a charge.) Not to be occupied above seventh floor for storage of merchandise or other combustible material where burning would injure the ironwork. All iron beams, girders, and pillars, or story posts to be protected by approved fire resisting material, except in office and hotel buildings, in which there is a half charge for absence of covering. If wrought iron or steel is used in construction that portion of the masonry in contact with the metal should be free from cement or plaster of Paris, lime mortar only being used. At least all stairways to be fireproof with metal treads, stone treads, whether marble or slate, being dangerous.