The Birmingham age-herald., 1904-11-27
MUCH INTEREST IN 30 PR CT CLAUSE Co, Insurance Matter Explained
 in Practical Way EFFECT ON POLICY HOL DER Circular Sets Forth 80 Per Cent Rule. General Use of 30 Per Cent
 Clause Claimed to Be
 Equitable.
EFFECT ON POLICY HOLDER

Equltapie.
 The following clear and business like explanation o the effect of the 50 per cent insurance clause which has been a practical question in mercantile and in- surance circles for some time appeared in the New York Commercial of Friday;
 Recent suits in New York courts in which some fire insurance companies have set up the 80 per cent. co-nsuranee clause as defense seem to have caused uneasiness in the minds of poicyholders as to the exact meaning of that clause. Inquiries have been sent to this office and a casual investigation shows that similar letters have been received by several prominent underwriters Henry Il. Hall, of Hall 6 Henshaw, who was re- gently president of the national board of underwriters, was asked to define the meaning of the 80 per cent co-insur- ance clause and in reply showed a copy of a letter which he sent a few days ago to one of his correspondents. The let ter was as follows:
 ne OdSc ENpidlISus
 New York, November 21, 1904.
 Dear Sir-In reference to the 50 per cent eo-insuranee clause we beg leave to say that a short review of the eVo- lutIon of the fire insurance business for the past 20 years will show you we think, the equity of the rule requiring the insertion of the 80 per sent. clause m all policies.
 Twenty years ago fire insurance compa- nies commonly rated merchandise py classes, viz, wholesale dry goods, Whole- sale groceries, etc, each class bearing uniform rate regardless of the character of the building containing the merehan- disc, the difference in rate being simply as between brick and frame. The Boston and Chicago fires taught the insurance companies that this was not only an lh- equitable system of rating, but caused them to take such action as encouraged the improvement of buildings conse- quently, they framed schedules fixing minimum rate for a standard building and charging for deficiencies, wooden cor niees, open elevators, skylights, open stairways, etc, etc. As result the character of buildings has been greatly improved during the past twenty years, and to the influence of these schedules is no doubt due the multiplication of fire proof buildings in our large cities and the general introduction of the automatic sprinkler.
 With the working out of this plan the fire insurance companies, however, soon noticed that the benefits to them secured by the improvement in the character ot buildings were neutralized by the small percentage of insurance carried by cer- tain merchants You are aware that the f | @I,1 Gr1 of,.oI In. Oitipd are borne by the insurance companies, and we found 1t quite common for merchant in a building of superior con- struction to reason that, with the char acter of his building, with his confidence in the fire department and the efficiency of the fire patrol, and without the fear of total loss, he need only place such an amount of insurance on lis property as would represent the probable maxi- mum damage that his stock would sus- tain in case of fire. So the insurance companies, in order to make their rates equitable, found it absolutely necessary to make the percentage of insurance car- ried uniform in each case. This was done as follows
 A and B. have warehouse identical in construction and in occupation. A. is a careful, conservative merchant and in- sures to the full value of his merchandise. B. is venturesome and willing to take the chances of a total loss relying upon the superior character of his building, fire de- partment, patrol, etc., and carries only 90 per cent insurance. It is manifestly un- fair that A. should pay the same rate as B. and inasmuch as 1t is impossible always to ascertain the amount of insur- ance a merchant may carry upon his stock. the insurance companies must as- sume that every merchant insures his stock to the extent of 80 per cent of it's market value and predicate their rates upon this fact. In order that they may not be deceived in this they make 1t ob- ligatory that the 80 per cent clause shall be attached to all policies and the effect of the clause is simply this: That the in- suranee companies cannot possibly be in a worse condition in case of fire than would be the case if the merchant suffer ing damage was insured to the extent Of so per cent of the value of his stock.
 We consider the general use of the 80 per cent clause equitable, from the stand point of the insurer, otherwise 1t would not have been adopted by the fire insur- ance companies of this city; for the boards of directors of the New York in- suranee companies are made up of mer- chants whose interests as insurers are far greater than their interests as insurance stockholders. Very truly yours,
 HALL x HL-JSHAW.