GROWfHANDPROSPERITY(1920-1930)

CHAPTER V

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need for cooperation and trustand, all too often, had lamentedabout the result ofits absence.As early as 1898, President P.H.Sims suggested the associationmust provide "adequate protec­tion to the loyal and conscien­tious members against theindifferent and sometimes unscru­pulous conduct ofa memberwhose sense ofhonour is dim oroverpowered by his anxiely forbusiness".Not all infractions were deliberate.Some were the result ofmisplacedrating slips or human fallibilily.But whatever the cause, compan­ies and agents alike were particu­larly upset when policies werereturned 'not wanted', becausesome other tariff company hadoffered a contract at a lower rate.It was obvious the associationhad reached a turning point.Measures had to be undertakento guarantee equaUry ofopponu­nily for all members.At the 40th annual meeting in1923, President Alfred Wrightassessed the situation: "In thepast our anxieties have mainlyarisen from without, and all havebeen successfully surmounted,but now our principal difficultiesare from within." He warned theassembled members that disre-gard on the part ofsome seriously

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The early 1920s marked theemergence of this country fromthe instabilily and uncertainlythat had characterized the imme­diate post-war years. By 1923,Canada had embarked on a per­iod ofunmatched prosperily thatlasted until the stock marketcollapse in 1929.At the outset of the 1920s, theassociation renewed its effort toeliminate the rate and rule infrac­tions which had prevented thesmooth operation of the organiza­tion. Non-tariff competition wasdiscouraging, but rate cutting andother unfair competition amongmembers themselves was a muchmore serious matter. It under­mined cQnfidence and bred mis­trust and suspicion among bothcompanies and agents, Bothgroups demanded the associationprovide protection against thesequestionable practices.If conditions were poor whenfewer than 50 companiesbelonged to CFDA, the situationbecame much worse (and thepossibilily ofeffective controlmore remote) in 1921 whenmembership swelled to 115.Good falth, often expressed inlegal terms as 'uberrima fides' ,was essential to the operation ofthe association. President afterpresident had emphasized the

/

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imperilled the very existence ofthe association, and he expressedhope that its work, so beneficialto insurance interests, be carriedon for many years to come.

At a special meeting four monthslater, both the Eastern and 'Most­em Infractions Committees hadmuch to report. The westernerscommenced by stating:Following the remarks of the Presi­dent at the last Annual Meeting. andthe expression of dissatisfaction onthe part of several Members at that

meeting with respect to numerousviolations of Rules, your Committeeconsiders it advisable to reportspecially on such cases of infractionsthat have come before it thac areevidently outside of the ordinaryand, to some extent, excusableerrors or omissions that in the largelire business of the Province arealmOSt certain to occur.The members were quite reasona­bly discontented. Infractionsdetailed in the report induded:(1 )The Globe and Rutgers had accepted

a two-millIon dollar line in totaldisregard of tariff rates. When calledupon to cancel, one item was can­celled and placed in another Com­pany in the same group and insteadof cancelling either line "a dilatorycorrespondence inrroducing unten·able technical points had been main­tained from March to July, at whichlatter date the policy expired" .(2)The Niagara denied having beeninterested in a risk which it hadactually written at an incorrect rate.

'R!sting an automatic lire alarm system at the underwriters Laboratories,New York, circa 1923.

The ~ssJer patented fire ladder,/920.

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Lyman Root, CFUA President,1921.

having first written to the SprinkJeredRisks Department for the correctrate. on a policy series which had notbeen reported to the Stamping Officerat London.(3)The canada National. upon beingqueried about a cerrain clause deniedthat it was on the policy, whereas thepolicy contained a clause almostidentical in wording with that quotedin the query, and absolutely identicalin meaning.(4)There was also the case ofthe Com­pany Inspector who had a connectionwith American Brokers to whom hereferred his agents whenever theywished to secure lower sprinkleredrates than were quoted by the Associ­ation. The same Inspector obtained aquotation from Detroit Brokers of10~ on the Witchell-Shields ShoeCompany's risk at Windsor, the Thriffrate for which is 12~. The aboveshows the lengths to which someCompanies will go in endeaVOUringto obtain agents.The answer to the problem ofinfractions was stamping,although its implementation wasmoving at an extremely slowpace. Stamping began in '!bronto,under the old '!brontO Board,then spread to Hamilton, Ottawa,

London, Windsor and Montreal.SporadiC in its enforcement, itachieved only partial success ­just enough to show there was aconsiderable volume of businesswritten by member companieswithout regard for tariff rates andrules. Agitation for the generalimplementation of stampingcontinued intennittently for some10 years. But the opposition ofasmall minority succeeded inhaving it postponed. Despitemany attempts, no agreementcould be reached.

This important matter dragged onuntil the Infractions Committeetabled a report at the annualmeeting in 1923. The reportmade a strong impact and amotion ordering "that the stamp­ing of business be extended tocover the entire territory of theAssociation and that the same bedone in the Association offices atthe two centres where the ratesfor the risks are promulgated"was unanlmously carried. Generalstamping commenced in thespring of 1924. The WesternCanada Board had stampedpolicies for many years and thestamping officer from Winnipeg,C.I.R. Coyle, came to '!bronto tosupervise operations and orga­nlze work in the two provinces.Meanwhile, those opposed tostamping had not yet exhaustedtheir resources.

The minority opposition to stamp­ing was initially based on theexpense involved. By 1920, theprinciple had been accepted and

the objections directed at themethods to be used for enforce­ment. (A few members wereagainst stamping because itwould prevent them from writingbusiness as they pleased regard­less of board regulations).

In April 1924, a special meetingofthe association took place inMontreal at the request of47 ofthe 129 members "to considerthe whole question of the Stamp­ing ofbusiness" .

The secretary of the OntarioBoard was subsequentlyinstructed by the Executive Com­mittee to issue a circular to allagents in the province directingthem to send their business tothe board office for stampinginstead of directly to the compan­ies, as previously had been thecase.When some members learnedabout this order, they protested:.. .inasmuch as it has been shown byactual experience that stamping doesnot prevent violation oftariff: and,that being so, no justification existsfor this disruption and addirion to theexpense. That this will resuit indisruption of business is evidencedby the protests received from somany of the principle agents andagents' bodies throughout the terri­tory affected: and it is certain thatthe not inappreciable addition to theexpense would but accentuate thehandicap under which the old lineCOmpanies are suffering today incompetition with the reciprocals andmutuals whose slogan, 'insurance atcost' is proving so attractive to thehard pressed premium payer.They further argued that by issu­ing instructions directly to agents"the Association exceeded itsprerogative" and requested thatthe stamping instructions berescinded, and "that the wholequestion ofstamping be reopened

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St. George Garage Limited, seen in 1925. was exemplary ola combinationof various risks.

, 'I 'l/~_. ~

changed to a spot check at headoffices, branch offices and generalagencies at irregular intervals.Members recognized the impor­tance of the hard-won stampingoffice and, not willing to tamperwith success, defeated themotion.The development of the StampingDepartment was but one of anumber of important measuresimplemented between 1920 and1930. Another innovation wasthe formation on February 1,1923 of rhe Investigation andLoss Bureau, with HarryRethonet appointed as its firstmanager. Since its founding in1883, the association had beenconcerned about losses causedby incendiarism and had done itsbest to cutb them. Committeesworking persistently at bothbranches for more than 40 yearshad secured several convictions.But crime was now too importantto be dealt with on an ad hocbasis. Members thought an

STORAGE

LimitedSUPPLIES

GarageREPAIRS

51. George

mission arrangements that borelittle relation to those authorizedby the association. This affairmust have particularly embar­rassed company ptesident AlfredWright, of whom it was laterrecorded thar his high standardofpersonal integrity won therespect ofali. The managerresponsible was fired andreplaced by one who cooperatedfully with the stamping depart­ment in rectifYing the situation.The value of the stamping proce­dure to the general operation ofthe association cannot be over­esrimated.ln 1927, amotionsuggested that, "in view of theStamping System haVing been inforce for nearly three years, andhaving in that time effected excel­lent service in disclosing andcleating up many irregularities,so that today the writing ofbusi­ness is with but a few importantexceptions, in good orderthroughout the tertitory controlledby the association" the policy be

and given further consideration" .With certain minor concessions(for example, an agent had theoption of sending business tocompany or association offices:submission of renewal receiptsdUring the remainder of 1924was not compulsOl)'; and busi­ness was to come under stampingby degrees according to thecapacity of the department tohandle) the action of the associa­tion was confirmed. Ontariovoted 68 to 29 in favour ofstamp­ing, while in Quebec the vote was74 in favour and 12 against.With opposition to stampingstronger in Ontario than Quebec,CFUA:s Stamping Department,and particularly C.J.R. Coyle, theStamping Officer, were underconstant fire from a few of thegeneral agents. Any mistake onthe part ofa hard pressed exam­iner (an experienced examinerwas expected to stamp or tagabout 300 documents a day) wasblown out of proportion as evi­dence of total incompetence.Coyle was, in fact, a man ofresolution and tact who receivedfirm support from the secretary,John A. Robenson, and mostresponsible members. In 1925,he addressed the convention ofOntario Insurance Agents' Associ­ation, on the advisability ofdeveloping a Central UniversalStamping Office. The success ofCoyle's department convincedthe Maritime boards to initiatesimilar services in 1926.

One of the most spectacularresults achieved by the OntarioStamping Depanment was thedisclosure regarding the Mer­chant's Fire. The stamping officerfound out that company businesswas being written with wholesaledisregard for the tariff, and com-

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Alfred Wright, CFUA Presidenr,1923.

unreasonable sum was beingpaid on claims arising from fraud­ulent causes, and that as theseclaims were necessariiy reflectedin the rates, they had a duty tothe public to take more effectivecontrol measures. As anyonewho is at all familiar with thehistory of the association wellknows, its efforts have alwaysbeen to promote, by means ofstandards and inspections, safetymeasures so that rates might beheld at the lowest possible level.Most expenses of the association

John Jenkins, CFUA President,1922.

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were allocated to this purpose.The interests of private enterpriseand the public good were closelyaligned.At the newly-formed bureau,records kept ofall suspiciouslosses were made available tomembel companies thIough acard index. Alittle more than ayear after he took the position,the manager reponed the docu­mentation of25,000 fires and theinvestigarion of97 losses, leadingto a number ofconvictions. It isdifficult to estimate the resultingsavings to member companiesand the general public, but theywere indisputably significant. Forexample: In January 1924, thecompanies were warned about aninsured parry who had had threeserious fires, each invoiving aloss of about $25,000 and inevery case the cause was reponedas "Unknown". Because theyignored or overlooked this Infor­mation, two companies paid over$20,000. On another risk with arecord of four fires in two years, aloss information card was issued.The insured parry tried to getinsurance from seven companies,but each declined. Undeterred,he approached an eighth com­pany, and for some reason thiscompany failed to check with thebureau and within a month wasfaced with a claim.The manager of investigation andloss stressed that even small firesshould be reponed to the bureau.He warned that the" recordsshow a number of claimants whochanged from one company toanother after obtaining paymentfor a fire loss and who used thesame ankles at a later date as abasis for another claim." In 1925,he stated:

In our previous year's repon wemade mention oftwo outstandingcases, Yet one ofthese paniesobtained insurance during the pastyear with the usual result. The otherone, after numerous unsuccessfulattempts to obtain insurance, movedto a different city, changed his tradename, and there succeeded in obcain­ing a great amount of over-insurance"As we are continuously follOWing upour cases, this parry was located athis new address and the proper stepstaken to safeguard the interests ofour companies, all ofwhom havecancelled.The bureau conducted investiga­tive work in addition to providinginformation. Arson convictionswere difficult to secure prior toformation of the bureau becauseevidence gathered was insuffi­cient and poorly presented. As aresult, local authorities rarelyborhered to artempt prosecutionofarson offences. Public recogni­tion of the value of this fearurewas instantaneous, with about50 percent of the requests forinformation in 1925 coming from

How It Was Done

In tht, biliOUS Undt'rwritl'fs' Lahoratorit'<;BlIildill~, 011 Ea"f Ohio Slrt'el. 1ll'3f Ihc ChicagoRi,'cr, a ,i .. it"r 10 l"h~' 11'''1<; would Ita\"{' found a

mRssi \'{'I~ -c. IlhtrUl'tt'd, \ lk-linc·(j challlht'f sur­mounted hy a lofty structufe uf Slt'\'l franH'work.

piprs and c.,lintll'rs. I \{' would han' ~('l'l\ snllH'huihlillt:" t"nlUtllll taken (rom tht' 1,lacc of storag-eand carried h~" a,tra\'t'lillg" crall('. to tht' i..l\lrrillr ofIhr c!lam!lrr, Iht'rr tu br hu!trl! SITurl'1y inhl IIlac(',and a multitude of refined h('ut and t1dormalionapparatus adjusted. Th('n the opC'lling wouh! have

Jl'l'1l dU:'>l.'li and 1111,:: ga~ IHlflh'r., i~lli~\"ll. A [It"r

l time thc obsn'Tr al thc lui',1 \\ 'lIdow wouldlan: sct'n Iht, ('1I!lITnn 1Jq.::in I.. anllur(' {"I"r :lIld

ht'll rcach a dllil KIllw ff',Tn lite 1·.11~ C"IlIIIlUf'/"

ntellsity of Ill(' hl'at. !t.f('all\\llilt-, tllr p',n,]. rOll'll''3m of the pr('ss woulll be l'x('r1J1lg" tlJ(· s:c:trlylrl'-:'~llf(' (\1 imaginary loaded flnors ah(H'{'. I'tr­lJp." as he \\"3ldl('d th l' eITe.:t he mig-ht sre cracksIPCll up in th(' cnatil1g and thell thr slow fall oflirces hrr(' and Iherr, <'Xposing the black sl('d1('IlC3th, This 51C('1, in turn, would hl'gin to glow, cherry red and finally to buckle under the tre­lendous pressure, thus proving its vulnerability,

police and fire depanments,crown prosecutors and otherpublic officials. The bureau dem­onstrated that evidence

unearthed by their qualifiedinvestigators would often revealthe cause of fires.

\,

I

The CFUA utilized data from the Underwriters Laboratories, Here in theChicago facility a ponderous structure was built to test rueproof columns,

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The name was changed to theFire Underwriters' Investigationand Loss Information Bureau,whose mandate was:... the repression of incendiarism andarson, including the apprehension,conviction and punishment ofcrimi­nals guilty of that crime; the gather·ing and recording of statistics.establishment ofsuch classificationof hazards and losses and makingsuch compilation thereof as may bein the interest of the Members.beneficial to the Public, and calcu­lated to reduce the fire waste of thecountry.Between 1920 and 1930, a solu­tion was finally worked out to theproblem ofcommissions. InFebruary 1921, a special meetingwas called to consider two com·munications from the OntarioSuperintendent of Insurance, V.Evan Grey. He suggested setcommissions for lbronto and therest ofOntario, arguing that hisplan would lower costs whichcould then be passed along to thepublic in the form oflower pre­mium rates. Grey feit the timewas right for the implementationof his plan because companieshad "enjoyed a very favourableexperience in the last three yearsin fire losses". He further sug­gested that provincial legislationin the matter might be helpful ­if not inevitable.

The association was told that thelikelihood ofany legislative actionbeing taken at the present sessionwas slim. Members decided thatsettling the matter among them­selves was preferable to beingdictated to by an outside body. Acommittee was appointed to draftrules for the payment ofcommis­sions in lbronto, and in April, aspecial meeting was held to con­sider the committee's reporr. lbthe consternation of thosepresent, the committee presented

losses in that district. They can­celled all the agent's policies aswell as the agency. Fire lossesthereafter showed a remarkabledrop. The same agent also losttwo suits against companies forlosses which occurred prior to theinvestigation.

Bureau investigations were notwithout a humorous side: One ofthe bureau special agents wasmaking a routine check on thefire record of two people with thesame surname and initials. Whenhe rang the doorbell he was metby a rather belligerent femalewho in not too graceful a mannerasked, "What do you want?"The following conversation thenplace:"Are you Mrs. 10hn BrownT "Yeah.So what?" "Did you and your hus·band live last year at tODD tst Ave.T"What do you want to know for, areyou a cop?" "Did you have a firethere?" No answer. "You had a fireat your present address about twomonths ago, is that right?" "Yeah.So what, can't a man have a firenowadays?" "we want to know ifyou are the same party that had afire on tODD 1st Ave. so that we cankeep our records straight." "ForPete's sake (language was stronger),you fellows are as dirty as the cops,you always want to make a fellow'srecord worse than it is. You can't dothatl tell you, you can't do that. Thefire was an accident. He set the oneon 1st Ave. but Iswear, so help me,this one was an acddent:' Exit thelady, shutting the door with a bang.The bureau increased the numberof prosecutions and convictionsfor arson and other related crimesand saved money on fraudulentclaims. While initially establishedat the expense of the CfDA, itsoverwheiming success promptedmembership to be thrown opento all companies transacting fireinsurance in Canada with adominion or provindallicense.

HI. E. Baldwin, CFUA President,1924.

The following example illustrateshow the bureau proceeded in oneinstance. Fire reports camerepeatedly from a specific districtin lbronto. The claims sharedcommon characteristics - 100 to500 percent over-insurance,cause unknown and no one athome at the time of the fire. Thebureau carried out an exhaustiveinvestigation of the suspiciousconditions in the region andlocated an agent who representedseveral association companies.His agency, which had beencancelled a number of times, wasdirectly or indirectly involvedwith most of these losses. He notonly acted as agent, but also asadjuster for the insured parry, forthe company, notary, etc. Thebureau established his direct linkwith five fires. The result of thisinvestigation was made known toall companies who had paid

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nizing agency connections. partiCU­larly those of his companies, built upover 75 and 90 years, they would bescrapped as unworkable. He alsoreferred to the 'notoriously' badsimations as revealed by the alarmingnumber of infractions which havebeen brought to light by the CFUAofficers.(Editor'S note: At a March meering,20 to 30 pages ofMinutes weretaken up by infractions).In view of the special positionoccupied by the western Group,the association permitted them topay unlimited commission to atotal of four additional agents

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'!bromo; that despite this and despitethe fact that the writer was at thetime a Vice-President of the Associa­tion, these Companies were notinvited to attend the Montreal Confer­ence and to explain their pOSition;that it did not seem right that theyshould be expected to scrap agencycormections made over a long periodofyears within the rules of the Assa­dation; that the rules passed by alarge majority vote in 1922 were sodefective that they had never beenenforced, neither had they beenwithdrawn. He predicted that thesame thing would happen to thepresent rules, Le. that after disorga-

no schedule of rates, havingfound it impossible to reach aconsensus.

At the thirty-ninth annual meet­ing, President John Jenkins(Employers' Liability) tabled twoletters, one from the Ontariosuperintendent of insurancesuggesting that dwelling rates inOntario were too high, and onefrom the attorney general of theprovince acting in his capacity aschairman ofa select committee ofthe legislarure to consider insur­ance matters. The latter com­mented on the lack ofcommissionrules governing the transaction ofassociation business in Throntoas distinct from the rules in therest of the province. He chargedthat the Thronto commissionswere unreasonably high and thatthey formed a vety importantelement in the matter of insurancecosts in Ontario. He observed theunfairness ofThronto agents andbrokers receiving a higher rate ofcommission than was payable tothe local agent in the place wherethe risk was siruated. The attor­ney generai concluded by remind­ing members that if they did notget their house in order, the jobwould be done for them.

In spite of this ultimarum, thematter remained unresolved. Atthe semi-annual meeting, Decem­ber 1925, some rules for commis­sions to Thronto agents werepassed by an overwheimingmajority of 116 to 9. Among thedissenters was the BritishAmerica-western Group. At aspecial meeting in March 1926,Wilfred M. Cox, president of thegroup, offered a letter which readin part:That the British-America was incor­potated in 1833. the v,;,stem in1851 with both Head Offices in

A series of typical equipment labels

from the Underwriters Laboratories.

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Wilfred M. Cox, CFUA President,/928.

J. W; Binnie, CFDA President,/929.

who were already 'exceptedagents' ofother companies.

Increased competition in fireinsurance affected agents as wellas companies. An edirorial on thesubject describes the change inthe pace of an agent's life broughtabout by this new intensity in theindustty,Formerly. when the representative ofany leading fire company got agoodline on his books, he simply had tocall around with his receipts to collectthe renewal premiwn. Those werepleasant days for the lucky agent ofa first class company; he could takeit easy when in town, or go otT for afew weeks shooting or fishing, feelingthat business on his books would notbe interfered with. Adecided changehas come over the scene, and the fireman, like his life brother, has tohustle for business or else the 'otherfellow' gelS ahead of him. All sorts ofdevices are used to get a desirableline, some of them deserving ofcondemnation, while others displayshrewdness and energy.(Insurance and Financial Chronicle,March 12, 1928.)

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In 1926, the Dominion Board ofFire Underwriters was formed onthe recommendations of the"Montreal Conference", a meet­ing in October 1925 ofgeneralmanagers of British companiesand chief executives of Americancompanies. The suggestion ofadominion-wide board was firstdebated in 1883, and membersfinally recognized it was "desir­able in the general interests ofInsurance in canada that a super­visory or controlling Board forthe whole Dominion be formed;composed of salaried Officials ofMembers and that a SpecialCommittee be appointed to drafta Constitution and also consultall Companies and Members ofthe various Underwriters' Associ­ations in Canada." Aconstitutionwas agreed upon and Arthur A.Stead (Secretary of the WesternCanada Fire Underwriters' Associ­ation) was brought to Montrealto be its manager.

While the association continuedro make positive strides in manyfields, there remained problemsto be resolved, including contin­ued infractions. All sprinkleredrisk rates were published subjectro line limits, with a view rogiving a broad distribution withas many companies as possibleparticipating. In 1920, the SI.Paul Fire and Marine claimed itsvolume of premiums on sprin­klered business was so trivialthat it would no longer observeline limits. The company stated,In view of the fact that we havederived absolutely no benefit fromthe rule all the years we have been amember of the canadian Association,we feel that we will be better off outof (he organization than in it. 'Ne arefinnly convinced that if it comes to aquestion ofmembership in the Asso­ciation and compliance with theSptinklered Risk rule we will foregothe Association.

CLEAR DAY TOMORROWgy TI-l' LOOKS OF TI-{'

SKY!

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With the comp/lmenb of

The General Accident Assurance CompanyOF CANADA

Accident and Sickness, HEAD OFFICE: 357 BAY ST., TORONTO 2. Burglary, Plate Glass,Automobile, Fire Electrical Machinery

1926 MAY 1926SUNDAY MDNDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

1234 5 6789 10 11 12 13 14 1516 17 18 19 20 21 22~~ 25 26 27 28 29

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Lyman Root, President of theSun, wrote a lengthy letter to theThronto representative of the St.Paul. He provided details of theearly experience with sprinkJeredbusiness, which read in pan:Many years ago, when the Assuredwere beginning to sprinkler theirbuildings, a few companies here in"!bromo made up their minds thatthis Sprinklered business would bevery desirable to place on theirbooks. They therefore formed abureau, limiting the membership, Ithink, to either five or six members.They established their plant,appointed their inspectors, madetheir own surveys and enjoyed for atime very considerable revenue withvery Uttle opposition except fromunlicensed COmpanies. Other Com­panies were quick [0 see the advan­tage these Companies had and tookup the matter with them of joiningthe Pool. The anginal Pool Companieswere somewhat loath to let in otherCompanies, inasmuch as the busi­ness of course at that time was verylimited, oniya few nsks being spnn­klered. However, they consented toform a Pool or Bureau, allowing allCompanies, members ofthe CFUA,to join, the absolute understandingbeing, however, that there would bea line limit, so that all Companiesparticipating in the Sprinkleredbusiness would receive a fair amountofthe business offering. On no otherground would the anginal COmpaniesgive up theif private Bureau. So itwas the new Bureau was fanned andfrom that day to this we have gone,until today. ofcourse, there is a veryappredable income from this class ofbusiness and it is divided amongstthe various offices doing businesshere and not placed out as reinsur­ance in England or Russia or Ger­many or some other place.The St. Paul responded by quot­ing the prenniums they hadreceived on this class year afteryear in each proviince (they were,more often than not, less than$5(0) and said that, "It is ourdesire to abide by the rules of

any Association that we belongto when we get a square deal. Ifwe cannot get fair treatment,then we will disobey the rulesand openly avow it. we can carryon many risks $100,000 net andto say that we shall only keep$20,000 and to cede to compan­ies who do not recognize us at allfour-fifths of the time is absurd."'ie will not do it."

The assembled companies regret­ted this attitude and hoped acompronnise cottld be reached.But W.E. Baldwin of the Conri­nental was more fonhright. Hewrote to the manager of theSprinklered Risks Depanment:"Re attached line limit declara­tion. Please do not send us anymore of these. we have no inten­tion ofsigning them while the St.Paul and other Companies areallowed to use the records of theSprinldered Risks Depanmentwithout observing the line limits."On receipt of a letter from themanager of the Sprinklered RisksDepanment, the Continentalreplied in pan:It will do no harm to have the nameof our Office also included as one ofthose who refuse to make returnswhile other Companies are exceptedfrom doing so. The annual meetingof the Spnnklered Committee has noterrors for us. When the writer got upand seconded Mr. Root's resolunonto discipline this Company, themeeting declined to act but passedthe usual vote ofcensure. Votes ofcensure did not hurt the offendingCompany and they will not hurt us.we have no respect for a Boardwhere a Member is allowed to do ashe pleases, and the other members,in annual meeting assembled, havenot said enough to tell thar Companyto either adhere to the rules or resign.The matter remained unresolvedunril December 1923 when it wasdetenmined that the St. Paul. nothaviing complied with CFUA's

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ruling regarding line limits, shouldbe deprived of rates, inspectionrepons and other matters apply­ing to sprinkJered risks. Thisseems contrary to the pnnciplethat a company could not with­draw from only one depanmenrof the association. It was notuntil 1929 that the full services ofthe associarion were restored tothe St. Paul and Mercury, when ithad pledged its intention to con­fonm with the rules of the CFDA.

Another case that engaged muchCFDA tinne and energy was thatof the Niagara (Manager W.E.Findlay) and an agency in Hamil­ton, Ontario. It was alleged thatthe company paid this agencycommission over and above thatpenmitted by association rules.The member declined to answerthe charge. In October 1927,following an interview with thepenmanent chainman, the com­pany reponed that its arrange­ments with this agency were nowin accordance with the rules.Almost immediately afterwards,the company reponed it hadappointed this Hamilton agent asa Thronto excepted agent. Themember refused to cancel theappointment "while the ThrontoCommission Rules remained as atpresent" and it was not until June1930 that Findlay advised theappoinrment had been cancelled.

In 1926, the CFDA faced anotherinvestigation inro its businesspractices, on this occasion inSttperior Coun. George Thnguay,an insurance agent or broker inMontreal, c1ainned that the associ­ation was guilry ofconspiracy inrestraint of trade. He stated thatthe CFUA, an urtincorporatedbody, enacted rules and regula­tions providing that no insuranceagent licensed under the laws ofQuebec was allowed to place

everything that appellant has saidwith regard to the inconvenience hehas suffered, there is nothingremotely approaching an illegalconspiracy, The so-called 'tagging' ofappellant's policies was, therefore,merely a routine repon from office ofthe Assadation to the differentcompanies.(Insurance and Financial Chronicle,November 1. 1929.)Probiems in the fire insuranceindustry were not confined tocentral canada. The agents inwestern canada had been con­cerned for some time about whatthey regarded as unfair competi­tion from the east. In the prairieprovinces, a non-intercourse rulewas in effect, putting them at agreat disadvantage in severalrespects, An Eastern broker couldincorporate a western canadarisk in a dominion-wide scheduleor 'floater' at a rate "not relativeto the proper schedule ratesaveraged over the various loca­tions involved". He could furtherreduce the cost to the insured byplacing part of the schedule withnon-tariff companies.

western companies also com­plained that their colleagues"write the line in the East withoutregard for the rights of the agentsin this territory and withoutregard to the maximum brokerageof 10 percent established in ourrules". There was no gainsayingthe facts; the difficulty was toknow how to make amends. Thecompanies did not wish the non­intercourse rule abrogated, norwould they seek to do anythingbut uphold their western agents,whose loyalty and sacrifice hadmade the rule enforceable.

On the other hand, what couldbe done, short of introducing anon-intercourse rule in the East ­where it had long since been triedand found to be utterly impractic-

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no damages, and asked that theaction be dismissed with costs.Despite the efforts ofat least oneprominent Montreal generalagent to support Thnguay's caseand to harm the stand taken bythe association, Mr. Justice Hallruled the action was not directedagainst the association itselfas abody conducted in violation ofthe Criminal Code ptovisionsrelating to combinations inrestraint of trade. It was simplyan action in damages against thethree defendants named in thesuit, viz.-Lewis Lany, president;J, W. Binnie, vice-president andLeonard Howgate, secretaty­treasurer of the organization. Heconcluded:In my opinion therefore. the exten·sive review of jurisprudence on theillegal conspiracies in restraint oftrade made by appellant is entireiyirrelevant [Q the present proceedings.The Canadian Fire UndelVlriters'Association does not come withinthe purview of Article 498 of theCriminal Code (Surveyor, I.) and isnot an illegal association...Admitting

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insurance with the various insur­ance companies in Montrealwithout first obtaining permissionfrom the association and thepayment ofan annual fee. Heclaimed he was prevented fromplacing risks with insurancecompanies in the city as a resultof the illegal acts of the defend­ants. Thnguay was at the time ofthe action general agent for anon-tariff company. The companyhad applied to the assodation forregistration, but its applicationwas not acted on because thesponsoring company, learning hewas an agent for a non-membercompany, withdrew its request.

The non-member companyreferred to was the Matylandwhich, under the management ofMr, Findlay of the Niagara, wasadmitted to membership in theassociation in March 1926, auto­matically making Thnguay eligiblefor the services of the latter, Thedefence claimed there had beenno conspiracy in restraint oftrade, that the plaintiff suffered

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-64-

STAND/1RDSFOR

O?ENIN6S To ROOF SPACE.

able - to prevent Eastern brokersplacing lines as seemed expedientto them? Furthermore, in thecompetition for business, few, ifany companies would placemuch faith in the strict observ­ance of the 10 percent commis­sion rule on the pan of theircompetitors. The problem waspassed to a special committee forconsideration. On December 4,1928, a committee from thewestern Board came east, byinvitation, to confer with thespecial committee and presentedan admirably concise summaryof the situation. They then statedthe causes of the'existing evils':(1 )Disregard of the overhead Writingrule and commission regulations ofthe WCFUA on the pan of EasternCompany offices, either throughignorance or willful infractions.(2)The second cause, and the moreserious one, is the absence of theseparation rule (non~intercourse) inOntario and Quebec. The report readin part:While these two sources of existingevils are matters which primarilyaffect the AgeniB, this is distinctly aCompany problem, for in the fmalanalysis it is the Companies who aregoing to suffer if these evils are notremedied. If something is not done,\\estern Agencs in self-defense aregoing to throw off their obligarions tothe Companies and demand freedomofaction.The remedies suggested werethat Eastern company officesshould famliiarize themselveswith, and absolutely observe, theoverhead writing ruies amd com­mission regulations of theWCFUA, and secondly, thatseparation and overhead writingrules in Ontario and Quebec beintroduced.

The repon referred to work doneby Walter Blackburn who in the

autumn of 1927, after spendingsome months in Ontario visitingagents, public officials, insurers,and holding meetings with com­pany inspectors, made sugges­tions about the best ways ofcounteracting non-tariff competi­tion, one being the introductionand enforcement of the 'separa­tion rule'. He believed if agentswere educated graduaUy to theacceptance of separation, the ruiecouid be enforced. He suggestedthe best method of accomplishingseparation would be by workingin the various cities individuallyand having the request comefrom the agents.The committee was granted thepower to add to their number andcontinued to study the report inan attempt to arrive at soiurions.

.l'F OPENIHGS rHRouGHRooF SPACES A~£ curOFFBY PR('N'£R ~NCLOSllRE"L­FIRE WIJ-L BE RETARDED /'"JTtJ"'"ENreRINt:! ROO' SfflCE .AND IrsRAPIO .sPREAO F/ifEVENTED,

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At the semi-annual meeting inDecember 1929, a gesture wasmade; in naming a rate for ascheduie haVing items in anotherterritory the board office was touse the rate applicable and toadvise the other offices of thefinal rate named. There was alsothis ingenuous paragraph: "TheStamping Depanments beinstructed that the BrokerageCommission applicable to thatpomon of the premium which isproduced by property in theterritory ofwestern Canada is 10percent". It may be questionedwhether there was ever any hopeor even honest intent that theserecommendations would havethe slightest effect on the evilsthey were supposed to address.

O~'N""~ To:>,rOOF" SPAcE

ENCLOSEO (""''''~O''~D.J

The Underwriters' LaboratoriesofCanada was incorporatedunder a dominion charter onAugust 15, 1920. For a fewmonths there was some difficultywith regard to the personnel ofthe directorate. The associationinsisted the majority should beCanadian and finally won itspoint. The purposes and objectsof the Underwriters' Laboratoriesofcanada were described in thecharter: "Th establish and main­tain laboratories and an inspec­tion service for the examinationand testing ofappliances anddevices and to enter into con­tracts with the owners and manu­facturers ofsuch appliances anddevices respecting the recommen­dation thereof to insurance orga­nizations and others" .The Underwriters' Laboratoriesof Canada Inc. reported in 1928that three inspectors were work­ing full-time, and four outsideThronto on a part-time basis.

The Montreal agency had onefull-time inspector and two part­timers. That year, the assocationgranted financial support for theestablishment of a testing stationand laboratory in Canada. Thework of the Underwriters' labora­tories included tests such as thefollOWing on a fire door:The object ofa fire door is to re­create the walls in a building, wherean opening occurs, thereby forminga fire cut-olfand confining the fire tothe section of the building in which itoctginated...The Manufacturer sendshis door to the Underwriters' Labora­tories and it is tested under exactlythe same conditions as it would haveto withstand in the case of afire ...The fire door is set up in a brickwall which is siung on a traveilingcrane and this wall is put into a gasfurnace and the door is subjected toexactly the same heat and flameconditions that it would have towithstand in a conflagration...After acertain time, which is gauged,approximately, by the time necessaryfor a standard building to bum, thefire door is taken out on the crane

The Electrical Inspection Depart­ments in both provinces contin­ued their good work. The Quebecdepartment had started slowly inthe first decade of the century,and had been incorporated onJanuary 1, 1915 as the CanadianUnderwriters' Inspection BureauLtd. The principal office waslocated in Montreal, withbranches operating in QuebecCity, Sherbrooke and Three Riv­ers. Nearly 300 municipalitiesreceived compulsory inspectionby the bureau before electricalconnections could be made.Inspectors made occasional callsin numerous other towns. Feescharged for ccnificates allowedthe bureau of 29 people to bealmost self-sufficient.

Relations with the power com­panies, the municipalities, firedepartments and the ElectricService Commission ofMontrealremained excellent. In 1928, theQuebec provincial governmentpassed an act placing inspectionofall electrical installations andthe approval of all marerials anddevices used in electrical installa­tions under its control after June1Sl. Before third reading, a dele­gation from the association inter­viewed Quebec PremierAlexandre Taschereau, and oneof his ministers, and was assuredthat the bill was not intended todo away with the bureau. Shortlyafterwards, the governmentdecided there was not room forboth of them, and declared thebureau must be abolished. Theassociation attempted to extractsome indemnity from the govern­ment to proVide for the properdisposal of the staff, leases, etc.on such short notice. It is notrecorded whether this wasentirely successful. The govern­ment did take over 14 staffmem­bers, while the Chief ElectricalInspector and two other employ­ees were retained by the associa­tion. The rest found positionselseWhere.

LaFrance Fire BucketTank

Contains sill: fire bu(:k~

E'ts, each one instantly andautomatically available.Clean and r('liable protec­tion for store, warehouse orfactory in case of fire.

-'-

Watchman'. ClockEnsures efficient and n-·

gular patrolling of everyfactory, warehouse. or otherindustria! establishment inwhich it is located. A n~·cord maker and ke('per.

Labelled Oily WasteCan

Safest, cleanest and mostconvenient. Approved byNational Board of Fire Un­denvriters.

industrial fire-fighring equipment oftbe early 19205.

Spanneu and Hydrant Pike Poles, Axes andWrenches Crowbar-

All LaFrance Tools :Ire de.o:igned for long Sf'rvic", andsimplicity in use.

Siren Horns\Vell made and in every feature up to LaFrance brand

of dependability. Operated by hand or electricity.

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and subjected to a water test from astandard fire hose and if it stands upunder this test, as it would have tostand up under ordinary conditionsin a fire. it then receives the Under­writers' label, and in order that thepublic may be assured that everydoor they buy from the manufaerurerwill be up to the standard passed bythe original door, which has beensubjected to the test, every doorwhich the manufacturer makes. isinspected by the Underwriters'Laboratories inspector to see that itis made in exactly the same way andcontains exactly the same materialwhich was in the original door sub·mitted to the Underwriters' Laborato·ries for the test.(Monetary Times, June I, 1928.)

Other prodttcts tesled includedsprinJder heads, sprinJder sys·terns, automobile locks, automO'bile bumpers, roofing materials.fire'ptoof safes, flooring supplies,electrical equipment and firehoses.

On March 11, 1927, Alfred Wil­liam Hadrili died at the age ofseventy-eight. Hadrili was one ofthe most notable figures in thebusiness. He served as secretatyof the Montreal Branch of theassociation from 1883 and hadpreviously been secretaryuf theMontreal Insurance Exchange,He retired in 1924 with pensionfrom his position as the perma­nent chairman of the ExecutiveCommittee. He consistently actedwith perfect impartiality in hisdealings with both the public andassodation members, and hadthe invaluable qualities of tactand diplomacy. The assodationrecorded in its minutes that, "hisdevotion to high prindple, just­ness, and uprightness of purpose,carried out with such markedefficiency, secured the respectand personal regard of ali Mem­bers".

In 1927, Robert Lynch Stailingstated the greatest burden con­fronting the association was nolonger the loss ratio. but theexpense ratio:

As late as 1910 the average expenseratio was only about 33 percent.lbday it is nearer 43 percent. It iseasy to put one's linger on the ele·ments which account for thisincreased expense ratio, butextremely difficult to control them. Itis true that there has been somejustifiable increase in commissions.that board dues, salaries, travellingexpense, rents and the costs ofsupplies have increased, but theelement which is most largely respon·sible for the marked increase inexpense is taxes. Prior to the GreatWar the taxes and government feeswhich the companies had to paywere qUite nominal and levied onlyfor the administration expenses ofthe various insurance depanments.lbday fire insurance companles aretaxed by the Federal Government.the Provincial Government and bymany municipalities to an extent ofat leastS percent of their premiumincome.(Monetary Times, July I, 1927.)The 1920s constituted an eventfuJperiod in the progress of thecanadian Fire Underwriters'Association. Accomplishmentsincluded the introduction ofgen­eral stamping: the formation ofthe Underwriters' InvestigationBureau, the Dominion Board andthe Underwriters' Laboratories ofcanada; an increase in member­ship; Simplification of rules:amendment of the Constitution(1929); and a decrease in theaverage rate of premiums. TheMontreal Conference had, tempo­rarily at least, solved commissionproblems: liaison was establishedbetween the two branches by the

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appointment of John A. Robert­son as permanent chairman; atroublesome lawsuit was won;and the inspection departmentsof the association were enlargedto keep pace with the generalgrowth of the country. In short,the future looked promising fortheCFUA.

In assessing the general positionof the association at the 46thannual meeting, J.W. Binniestated:',Ie have been favoured with anotheryear of profitable results as a wholeto the Companies and while we maynot expect an unbroken continuanceofsuch favourable loss experience,we have every reason to look forwardto the future with confidence...May Iexpress a feeling, which I am sure weall share, ofcheerfulness and grati­tude for continued prosperity andoptimism surrounding the businessand industrial condition of our coun­try.These optimistic remarks weredelivered in June 1929, onlymonths before the stock marketcollapse that signalled the begin­ning of the Grear Depression.

Chemical Fire EnginesaCt, durablc, reliablc and efficient. Upon requcrt, wc

wiUscnd an intcresting c::irc::ular dClI<:ribilli this indispe.na­able pie~ or fire·ligMing apparatul ro~ rnanufactunncplants, railroads, warehouse.. public:: building' and privateproperty o( all kinds.

1. Fin hl$ur-utee il Dot enouJb.. The owner'. nola do not come in until11:le prOfHlrt, MI been rebuat aDd fe.let.

2.. Property u a ...fe invedment oJ'ly when inlured qai,ut fire and ....henit is .1_ protected by • rtnlaJ ...Jve poli<:y.

3. The afte:r-th•• fire 10.. u: what ren~l value co"..rl.f. Rental cove...... il th_ bal ...Jeluard for tbe pJ'Optlrl)' ownerl.

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~. A whole row o( Pt"Opert;1l!1 wal wi~ out here. It,.,u to he hopedlhe protection covered ..11 IOlse. up to re~p.ncy.

6. The build;ng and its re:nlal income-cornptete protectioo•

7. R.,nW "..Iue inlurll.nce j" tlUl hal protection in a ea.. like lh'"

8. Fire lIUU~bt:e and rl!.l1tal yalll6 inaur:a.nee p hand in hand.