Quietly and almost silently the directors gathered. The only emotion
apparent was that of the usual caution shown by men of large affairs who
meet to face a crisis. The president called the meeting to order and
stated that the object of the gathering was to inform the directors that
the company was heavily involved in the conflagration which visited San
Francisco on April 18, 19 and 20, 1906, that the amount of which
obligations was at present unknown, that they overshadowed the resources
of the company and that ways and means would have to be devised to
finance the California through this crisis.
The fire maps of the company were entirely destroyed and it was not
advisable to open the safe in which the records of the company were kept
until it was sufficiently cool to prevent danger of combustion. In light
of these facts, it was impossible to immediately ascertain the actual
amount of the company's obligations.
In response to an inquiry as to the probable extent of our liabilities,
I, as secretary of the company, ventured the statement that I believed
they would reach a total of $1,500,000 net, explaining that I based this
estimate upon the company's income and the average rate. I also knew
that the larger part of the entire liabilities in San Francisco were in
the burned area and that if the safe did not afford protection it would
mean the loss of the company's records, leaving it without means of
ascertaining the amount of the loss until claims were filed. This would
cause a delay of several months before the exact total could be
developed. I explained that the policy contract allowed sixty days for
filing claims and expressed the thought that this limit would
undoubtedly be extended by legislative action in view of the magnitude
of the disaster.
In the meantime, in the April 27 edition of the Examiner, on the first
page, extending over its entire width, had appeared the following
statement:
"The California Insurance Company Will Pay in Full."
This was discussed and the meeting began to assume a more lively
interest and the members to more actively participate. Director W. E.
Dean offered a resolution that has passed into history as being,
possibly, the most noticeable ever adopted by the directors of a fire
insurance company. It is a question whether a motion under like
conditions had ever before been put or carried or ever will be in the
future. This motion was seconded by Director Mark L. Gerstle. It was as
follows:
That the action of the president of this corporation in publicly
announcing that the California Insurance Company would pay all its
losses in full as ascertained and adjusted, be, and the same is hereby
confirmed and ratified, provided that each of the directors of the
corporation affixes his signature to the matters of this meeting. Unless
such ratification be unanimous and evidenced by the signature of each
director to the matters of this meeting, the above action of the board
be null and void.
The signature of each and every director was subsequently affixed to
this resolution and it then remained a matter of detail to find how
funds were to be procured to make this resolution possible of
fulfillment and something more than a mere matter of words.
In the absence of any specific or definite information as to the amount
of the company's indebtedness this action of the directors was a most
magnificent exemplification of nerve and integrity and a superb
testimony reinforcing the axiom that a California man's word is as good
as his bond.
The board might have instructed its secretary to make the best
compromise settlements possible and have wound up the affairs of the
corporation. The public mind was in a receptive mood to accept such
compromise settlements and such action would have resulted in extreme
financial advantage to the stockholders at the time when the resolution
was passed. No one at that time believed that the California would
discharge its obligations on a parity with the largest and strongest
insurance companies in the world. Indeed the public announcement that
the company would pay in full was regarded as ridiculous and
unbelievable and was generally considered in the light of an extremely
sagacious bluff.
The directors of the company were not bluffers; they were made of
different stuff. They did not hesitate. They were in deadly earnest and
absolutely meant to live up to their spoken word and the world knows how
they redeemed their promises.
My original estimate of $1,500,000 fell far short of the final net
payment which amounted to $1,840,000, but long before this had developed
the stockholders were too deeply involved to think of turning back even
had they desired to do so. Staunchly and loyally they stayed and paid to
the end, building a monument to their good name that turned the sneers
of welshing competitors into envy and admiration.