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Universal Mercantile Schedule.

The table consists of three

columns, a typical illustration of which is herewith given:

Occupancy.

Cause. Media. Effect.

D2

10% 20%

D3

D3

10% 20% D3

100a ACADEMIES in Mercantile Buildings.. 10%
Technical Schools with apparatus..
Manual Training with woodwork.
ADVERTISING Novelties, etc....

b

с

101

A few words of explanation are necessary to show the application of this table as compared with the Universal Mercantile Schedule. As will be observed, Mr. Dean has divided his occupancy table into three columns, under the headings of (1) Cause, (2) Media, and (3) Effect. In the first of these columns is found the percentage to be added to the building rate for the particular occupancy because of its tendency to cause a fire; in the second column is found the charge which represents the combustibility of the stock, that is to say, the extent to which goods will contribute to the spread of a fire; and the third column indicates the grade of the article (the grades being represented by D1, D2, D3, D4, and D5) with reference to its "damageability," that is to say, the extent to which the goods are likely to be injured by the effects of fire, such as smoke, water, heat, breakage, etc. This classification of occupancies, it will be observed, very elaborate. As regards "cause," it is apparent that some occupancies are much more dangerous than others, some, according to the schedule, being "inert," like banks, offices, studios, etc., while others are "active." Again, as regards the classification of "media," some occupancies involve merchandise of low combustibility, such as hardware, rubber goods, wool, and woolen goods; other occupancies involve merchandise which burns moderately, such as retail groceries, dry goods, and the like; other merchan

is

dise burns freely, such as straw goods, hay, millinery, etc.; other goods burn with great intensity, such as matches, saltpeter, celluloid goods, etc., but are not subject to spontaneous combustion or destruction, except through actual contact with fire; while other grades of goods are of an extremely inflammable character, because they are liable to spontaneous combustion or burn with an intensity amounting practically to an explosion.

Mr. Dean has also elaborately classified the "effect" or damageability of various classes of merchandise. Merchandise, represented by the insignia "D1" in the table of occupancies, includes articles, such as leather goods, etc., which are largely immune from damage from the indirect effects of fire, such as water, smoke, and heat; "D2" represents articles, such as retail groceries, dry goods, etc., which are but moderately affected; "D3" relates to merchandise, such as paper, butter, fruit, books, etc., which are easily damaged; "D4" refers to merchandise, such as millinery, florists' stocks, contents of cold-storage warehouses, etc., which are liable to heavy damage from slight effects resulting from fire; while "D5" consists of mixed stocks of goods, such as those contained in department stores and general storage warehouses, which require a personal estimate to ascertain the average damageability.

Having added to the building rate the charges for occupancy found in columns 1 and 2 of the occupancy table, the difference between the total of the debit and credit columns in the rating sheet shows the percentage of the basis rate, which is to be added to it in order to obtain the "occupied rate of the building." From the rate as obtained up to this point there are next deducted certain credits for protective features.

4. In order to get the rate on the contents within the building, reference must be made to the "contents tables" of the schedule, with a view to adding to the occupied

building rate the amount indicated by the insignia D1, D2, D3, etc., as the case may be, according to the grade of protection for the town and the location of the contents in the building. Mr. Dean's contents tables are very ingeniously devised, the tables being so arranged that they take into account (1) the basis rate used in rating the building; (2) the class of city according to the type of fire protection; (3) the location of the contents, whether in the basement, or on the ground floor, second floor, etc.; and (4) the nature of the contents to be rated, whether belonging to class D1, D2, etc. Numerous tables are devised embodying the foregoing features, so that the rater need only look up the proper table with a view to finding the amount to be added to the occupied building rate, in order to determine the rate on the contents.

5. One of the most important features of Mr. Dean's schedule is the so-called "exposure formula.” This has received much attention from underwriters, and has been commended very highly. His treatment of the exposure hazard is very detailed, and merely the general outline can here be presented. External exposures are classified under three heads, namely: "(a) Radiated Exposure, consisting of the proportion of its own hazard a risk radiates toward exposed risks; (b) Absorbed Exposure, consisting of the proportion of the radiating hazard absorbed by an exposed risk; and (c) Transmitted Exposure, or the proportion of the hazard a risk absorbs from one side, and which is transmitted by it to a risk on the other side."

In connection with the above classification Mr. Dean points out: "(1) That every exposing risk radiates some ratio of its own hazard toward exposed risks; (2) that every

1See Richard M. Bissell's remarks concerning Mr. Dean's exposure formula in his lecture on "Rates and Hazards,” published in the Yale Insurance Lectures, Vol. II.

exposed risk absorbs some ratio of this radiated exposure; (3) that every risk transmits some ratio of the hazard it absorbs; and (4) that radiated, absorbed, and transmitted exposure is modified by structure, clear space, and firedepartment protection." Mr. Dean next submits elaborate tables of alternative standards, with recommendations as to their application in the case of different classes of property, with reference to the clear space between the exposing and exposed buildings, and the grade of municipal fire protection.

CHAPTER XVIII

REINSURANCE

THE modern stability of fire-insurance companies and their ability to cope with even large conflagrations is largely due to their policy of limiting their "lines" of insurance. As was explained when we considered the organization of companies, the officers are equipped with special maps of towns and cities, which show the character of the fire department and water supply, the width of the streets, the class, construction, and occupancy of buildings, and the nature of the exposure hazard. These maps also show the "lines" of insurance in force on a building, or in an entire block or conflagration district. To make the application of the law of average reasonably certain, it is the policy of companies first of all to place a limit or so-called "line" upon the amount of insurance that they will carry on a building. Next a "block limit" is fixed, which represents the amount of insurance a company will carry on all the buildings within the block; and, finally, to afford protection against large conflagrations, companies will fix a "conflagration limit,” which represents the amount of insurance the company is willing to carry on all the property situated within the area considered subject to sweeping fires.

In this connection it should be stated that companies very frequently have offers to accept much larger amounts of insurance on a given building or within a given area than they care to assume. Such "surplus lines" are distributed among other companies, i.e., are "reinsured." It is a com

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