Insurance Disputes over the 1906 San Francisco Earthquake and Fire

James, a California native born close to the San Andreas Fault, has long had an interest in the San Francisco catastrophe. In one book after another, he kept encountering the narrative that the press, politicians and public put so much pressure on insurers that they eventually caved. One history claimed that “a number of disputed cases went to court, and in every case the insurer lost.” Once James began to dig around in reported cases from the era, he could tell things were not so simple.

His article, “Six Bits or Bust: Insurance Litigation over the 1906 San Francisco Earthquake and Fire,” puts into context the good guys/bad guys narrative handed down over the years. While there were underwriters that chose to pay all policyholders in full “irrespective of the terms of their policies,” as Cuthbert Heath of Lloyd’s decreed, there were also European insurers who became infamous for offering 75% or “six-bit” compromises or denying coverage.

James asserts that “credit and blame should not be based solely on concession and denial.” The insurers who chose to pay often had no defenses, so waiving them was like waiving the sleeves off of their vests. Those that contested payment sometimes had very good reasons to do so, including suspected arson by homeowners seeking to “perfect” their fire insurance claims, he explains.

“Despite the hostile atmosphere,” James writes, “many of the insurance companies with the strongest defenses took their cases to the law, and the law heard them out.” He tracked down some 30 court decisions on coverage related to the disaster, most of which had never been discussed in the legal or historical literature. The insureds did prevail in most of these legal actions, including Pillsbury’s victory in the California Wine Association case in the California Supreme Court. However, contrary to the existing history books, insurers did win some decisions – including jury verdicts in San Francisco courtrooms.

The article sheds light on a pivotal chapter in San Francisco’s history while also touching on issues that remain important today. The cases, James notes, “are still relevant to the issue of ‘ensuing loss’ — whether fires or other covered perils, stemming from earthquakes or other excluded perils, are nonetheless insured. This broader question is as current as Hurricanes Katrina and Sandy, and as imminent as the next calamity.”

To read the article in its entirety, click here: Six Bits or Bust: Insurance Litigation over the 1906 San Francisco Earthquake and Fire.