The following is an abbreviated description of a Proposal Sun Fire Insurance Office issued on July 8, 1727. For a quick history of the fire, see Debra Kelly, “The Great Fire of London Finally Explained,” GRUNGE (October 16, 2020). (GRUNGE is apparently a British on-line publication.)
A number of different fire policies had been issued and purchased after the several days long Great London Fire of 1666. Posts have been published in “Quinn’s Commentaries on Insurance Law” briefly describing and discussing several earlier Proposals.
In those days, at least at first, it appears that “Proposals” became “Policies,” almost automatically, when ordered, with the exception of some policy limits and premium levels. There does not appear to have been much room for negotiation as to English fire policies at around this time. But see Article IV below. Thus, the idea that standard policies are a new-fangled idea is a myth. By 1794 when Sun issued another Proposal/Policy, this point will have changed markedly.
It is easy to see why contracts of insurance (i.e., policies of insurance) have to be standardized to a significant degree, and frequently this has been done throughout history, sometimes haphazardly or without much data. Gathering data for underwriting, including reserve creation and preservation, pricing, etc., would be impossible if the policies did not substantially resemble each other. Even then, data collection and applicable mathematics had been very uncertain until recent times. Intuition was much more important in earlier days than it may be now for most types of insurance, although intuitive guesswork based on experience is always required.
One of the most interesting features of the historical development of fire policies is how they started off very simple and grew more complex, fairly quickly. The early level of simplicity was that the policy covered buildings (or “houses”) destroyed or damaged by fire. Nothing else was covered. As time went along, again fairly quickly, policies began to cover some of the contents of houses. Once commercial buildings were included within the category of “houses,” other sorts of what we now call “personality” were included in the coverage.
This Sun policy represents a real advance in the growth and diversification of the sorts of things that were covered. These changes came along pretty quickly. The coverage in the 1724 policy about to be discussed here is a lot more expansive and diverse than it was in policies used a mere decade before.
As everyone knows, contracts of insurance are often called “insurance policies.” On and off, over many years, I have wondered why, but have been too lazy to try and find out. This project has given me what I tentatively think may be the answer. It’s definitional. In Volume II of Samuel Johnson’s, A DICTIONARY OF THE ENGLISH LANGUAGE (4th Ed. at p. 1477), there is a definition of “policy,” and it contains three alternatives. Only one of them is possibly applicable. Definition #2 reads this way: “Art; prudence; management of affairs; stratagem.” [Spelling Updated] Surely having insurance is prudent management of one’s affairs, so–perhaps–the contract which constituted exactly that ended up being called a policy. In these days and times, it is relatively common to use a noun into a verb, for some purposes. Long ago we see verbs being converted into nouns.
MSQ: Of course, the dogma of “Originalism” requires that the dictionary used to try and interpret a legal text (including contracts) must be published as of the approximate the same date as enactment or publication. By analogy, there might be some criticism of my using Samuel Johnson’s Fourth which was published 46 years later. Then again, maybe not.
[Usually, the use of italics in what follows means that it is the author’s addition, though not always. For example, see the very next paragraph.]
I shall refer to the document I’m working from as a policy, even though the document’s actual title is “Proposal.” The specific title of the Proposal is this: “From the Sun Fire Office, near the Royal Exchange, for insuring Houses and other Buildings, Goods, Wares, and Merchandise from Loss and Damage by Fire.” [Michael Sean Quinn: Italics in the original text.]
[MSQ] I have suggested in an earlier Post that the word “house,” referred to any sort of building, whether a dwelling or a commercial building. I’ll stick by that view, for now, but even if I’m right, the vocabulary changed very quickly.
[MSQ] The Proposal consists of several “Whereas Clauses,” and 12 Roman numbered “Articles,” plus a small assortment of other prose. They generally note the dangers of great fires, and the ruinous effect they can have on buildings and families. They also note the growth of the insurance industry and its social importance, noting that Sun Fire “Society” has been the recognized leader in this change in the social order. Its claims history has been excellent since it has the resources and the will to “punctually discharge all demands[.]” The Proposal is thus saying that Sun is excellent at handling claims. It goes on to say or imply that Sun has grown so much that it has the resources to handle any claims that are pressed upon it. Thus, we see that the “Whereas Clauses” in the Proposal are to some extent a form of advertising or public relationship statement, as well as a part of the policy.
Now for the “Articles.” They are not titled in the Proposal. I am providing titles for them, however, since they will do nothing but orient the general reader. They have not been italicized.]
Article I [Coverages]: The policies “insure houses and other buildings, household furniture, goods, wares, merchandize and utensils and implements in trade, being the property of the person insuring[.]” Notice that what we in our age would call the “insured” is here referred to as the “person insuring.”
There are exclusions: “glass and china wares not in trade,” business papers of various types, including “ready money” (currency), bonds, accounting records, such as “tallies,” etc., and in addition: “jewels, plate, pictures, and gunpowder,” as well as wearing apparel, hay, straw, and all manner of fodder and corn unthrash’d [.]” However, there are exceptions to the exclusions: “unless the same be particularly valued and expressed in the policy.” One can easily imagine what the bargaining process looked like if a merchant wanted coverage for his wife’s necklace and a room filled with hay, he sold to m local to whoever wanted it. (I think there may not have been horse-drawn taxi or delivery services.)
Article II [Further Coverages]: Although under Article I, the insured must own the property insured, Article II extends coverage to houses and other buildings, goods and merchandize, etc. (except as aforesaid), the insured does not own but which are in his trust (or, entrusted to him] or on commission. Coverage can be arranged for such items, provided they are “declared in the policy to be in trust or on commission[.]” There are no other ways for property to be covered: owned by the insured, held in trust by the insured, or held by the insured in anticipation of a commissioned sale.
Article III [Procedural Requirements]: “All persons ‘bespeaking policies’ must deposit with Sun a specified sum for governmentally required tax revenues, “stamp duty and mark.”
MSQ: (1) To “bespeak” a policy was something like reserving, ordering, or setting it aside for purchase. In a way, it was a near-purchase, since further formalities were required. (2) American readers should remember the phrases “stamp,” “duty,” and “mark” from what all led up to the American Revolution. Think “Stamp Act.”
Furthermore, “no insurance is to take effect till the policy is in the actual possession of the insured, or his or her agent.” Article III states that this is to prevent “frauds and disputes.” (Back in Article I the Proposal stated what had to be so before an actual insurance policy came into being: “All policies shall be signed by three or more trustees or acting member and seal’d with the seal of the Sun.”)
Article IV [Rates & Risks]: Probably the only feature of Article IV is the way it classifies various sorts of risks and the names it uses for them:
Under the heading of “Common Insurances” insured structures are to be understood “any buildings cover’d with slate, tile, or led, and having the front, rear, and side walls of brick or stone; and wherein none of the hazardous goods or trades hereafter specify’d are deposited or carry’d on. “
“Under that of “Hazardous Insurances” are to be understood timber and plaister buildings, and goods and merchandise therein, not hazardous, or brick or stone buildings wherein hazardous goods or trades are deposited or carried on.”
“Under that of Doubly Hazardous are to be understood all thatch’d buildings, all timber or plaister buildings wherein hazardous goods or trades are deposited or carry’d on, and also the following trades and businesses, as sugar bakers, and distillers in brick or stone buildings, any china, glass or earthenwares, houses on London Bridge, and all mills. The hazardous trades and goods are apothecaries, chymists, bread and bisket-bakers, ship and tallow-chandlers, stable keepers, inn-holders, and malthouses; hemp, flax, tallow, pitch, tar, and turpentine, hay, straw, and fodder of all kinds, and corn unthrash’d.”
MSQ: As categories for pricing premiums and engaging in underwriting all these make obvious sense, though it is unclear to me why ship-chandlers and tallow-chandlers would go together as one category, unless ship supplies include such things as candles. What is fodder, anyway?
The categories just recorded are to be found at the top of different columns in a “Table of Annual Premiums To Be Paid For Insurance” that is part of the Proposal (and presumably the policy). Underneath the Table, the policy states that if larger amounts of coverage are sought or different overages are sought, special arrangements and prices can be arranged.
MSQ: Interestingly, these three categories continued in Sun’s repertoire until at least into the early part of the 19th century, at the earliest. See Sun’s Proposals dated November 1, 1794 and see its Proposal dated January 5, 1816. Both of these Proposals are to be found reprinted in David Jenkins and Takau Yoneyama Eds., A HISTORY OF INSURANCE: FIRE (2000) at 145ff and 149ff. The Proposal under discussion here is to be found in the same volume at 129ff.
Article V [What’s Covered]: “Any number of houses or out-houses, or goods therein, may be insured in one policy, provided the sum insured on each is particularly mentioned, and the respective heads of insurances, and that the whole sum does not exceed the greatest sum specify’d in the Table, under the respective heads of insurances, and in all insurances the premium is to be paid for every hundred pounds.”
Article VI [Other Insurance]: No coverage under this policy, if there is also coverage from another carrier, unless permission is specifically obtained from Sun and noted by an “indorsement” on the back of the Sun policy, in which case the Sun policy will pay its “equal average on any loss or damage.” [Finding some lack of clarity here; think maritime or ocean marine insurance for what may be meant. Don’t count it, however, for a literal bank of information. The meaning and function of the term “average” in property insurance became a significant and controversial concept into the Nineteenth Century. This provision is designed to prevent “frauds” on Sun. MSQ Sidenote: the word now spelled “endorsement” was recorded here as it was spelled in the Sun 1727 Proposal. The same is true for the phrase “on the back of.”]
Article VII [Standard Exclusions]: No coverage for fire loss or damage resulting from “any invasion, foreign enemy, civil commotion, or any military or usurped power whatsoever[.]”
MSQ: Keep the phrase “civil commotion” in mind. It will be discussed in a subsequent post.
Article VIII [Moving Elsewhere]. Coverage may continue for both building and personality if authorized by an “indorsement” of the insurer, Sun, and the “nature and circumstance of the policy is not altered.”
Interestingly, whereas we today would discourse “coverage under the policy,” back then the Proposals (and therefore policies) read in terms of “benefits under such and such policy.”
Article IX [Fraud]. If an insured obtains coverage which is at variance with the Table and its description of various categories or rates, there will be no coverage under that policy.
Article X [Timing of Premium Payments]: Quarterly during the first year, and after a first year, annually, if the insurer agrees to renewal.
Article XI [Claims Procedures]. The insured shall give notice to the insurer at its office as soon as possible. after the loss. The insured must detail the claim and make proof by “oath or affirmation” from the insured, or “domestics or servants, according to the form practis’d in said office [i.e., by the insured], or by their book of accounts, or other proper vouchers, as shall be required, and procure a certificate under the hands of the minister and churchwardens, together with some reputable inhabitants of the parish not concerned with the loss importing: that they are well acquainted with the character and circumstances of the sufferer or sufferers, and do know or verily believe that he, she, or they have really and by misfortune without any fraud or evil practice, sustained by such fire the loss and damage of the value therein mentioned.”
Further, if there is a disagreement between Sun and the insured, the matter shall be referred to neutral conclusive and binding arbitration. If the insured prevails, the claim will be paid immediately. However, insured-insurer agreements work differently: “when any loss or damage is settled and adjusted, the sufferer or sufferers are to receive immediate satisfaction for the same, deducting only the usual allowance[.]”
However, “if there appears any fraud or perjury, such sufferers shall be excluded from all benefit by their policies.”
[MSQ: Notice that if there appears to be a fraud in a claim under Policy A, then the insurer(s) has(have) no right to benefits under any of their policies. Or maybe this means, the insured has no right to recover under any part of a complex policy. In any case, it’s hard to imagine that the term “appears” as used in the policy meant what it means today.]
MSQ: Now for a twist: “In adjusting losses on houses, no wainscot nor any sculpture or carved wood is to be valued at more than [the small determinate sum of] 3s per yard.”
Article XII [Reserve and Quasi-Reinsurance]: Money–one moiety set aside from each premium and pooled. If that sum is exceeded by payable claims, then members of Sun are liable. [MSQ: I’m not completely sure I understood all the language of this section. Enough said for now.]
N.B. [“Farther Encouragement of Persons Insuring”]: Fire engines plus uniformed firefighters and porters provided. A promise to subsidize the acquisition of firefighting equipment for all cities and great towns upon applications from them, “agreeable to the number of insurances made by [Sun] in such respective cities or great towns.”
[MSQ: There was already a description of a “Salvage Policy” in a Post published herein on August 27, 2020.]
[MSQ: I wonder how the claims handling process worked at the time and what the adjusters did with fire losses in those days. I suppose one has to wonder if there were such things as professional adjusters; probably not. But then how did the executives of the “Insurance Office” do the work?.]
Michael Sean Quinn, Ph.D., J.D.