USA > Rhode Island > Rhode Island : three centuries of democracy, Vol. II > Part 36
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The clearing house report of $813,885,000 exchanges in 1928 may be interpreted as mean- ing that credits for that amount of money were achieved practically without the use of specie ; for such purposes bank checks had served as media of exchange. A summary of the condition of Rhode Island trust companies for June 29, 1929, included deposits of $283,743,517.74 among total liabilities of $333,735,506.18. Capital stock, surplus, guaranty fund and undivided earnings, that is, the trust companies' own or invested money-amounted to $34,178,707.21, or approximately little more than one-tenth of deposits. In large part, therefore, the extensive banking business carried on by trust companies rests upon deposits, which may be withdrawn, and in that sense are not, strictly speaking, subject to control. In other words, much of mod- ern banking credit rests upon resources that are entrusted to the banks by depositors; the
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number of participation deposits in 1929 was 188,286. Or, as compared with early commer- cial banking, the twentieth century system differs essentially in the number of persons who have enlisted to establish a banking credit system-from the small number of enterprising busi- ness men whose names were synonymous for credit a century and a quarter ago, to the multitude who now furnish banks with working capital by depositing their savings. The principles of sound banking have not changed with the variations in practice-it is still the function of the banker to select with care debtors who offer adequate security or whose character and ability identify them as first-class risks. The assets of the Rhode Island trust companies in 1929 included $7,000,000 cash, $20,000,000 due from other banks, $52,000,0000 public securities, $42,000,000 bonds, $21,000,000 stocks, $67,000,000 mortgages, $56,000,000 loans on collateral, and $59,000,000 other loans. Dividends amounted to $6,327,206.78. State banks and trust companies are subject to legislation regulating reserves and investments in quick and reserve assets, and are under rigid supervision and subject to examination by the Bank Commissioner. Except in the instance of banks in liquidation because of the financial troubles of 1907, which led to the creation of the office of Bank Commissioner and the enactment of a code of state banking laws, depositors, while subject to temporary embarrassment by suspension, have suf- fered no losses even by reason of liquidation of banks under state supervision, and stock- holders have been well protected. Thus it must be while so much depends upon the confidence of depositors, who number close to 400,000 and who have entrusted $460,000,000 to produc- tive funds of the banks.
INSURANCE COMPANIES-The first incorporated insurance companies in Rhode Island were the Providence Insurance Company and the Newport Insurance Company, both of which were chartered in 1799. Long before that time, certainly so early as 1756, when the name of Stephen Hopkins was associated with "a system of insurance policies highly appreciated by the merchants," private underwriters were active in obtaining individual subscribers to agreements to pay shares of losses in return for participation in the distribution of premiums. The Rhode Island practice resembled closely that at the Lloyds coffee house in London of underwriting and buying and selling marine risks, which preceded the organization of insurance companies. John Mason, Joseph Lawrence, John Gerrish and Henry Paget, perhaps others, conducted insurance offices in Rhode Island in the eighteenth century. The early underwriting, as at Lloyds, was almost exclusively of marine risks and the first two Rhode Island companies engaged in marine insurance. The first Rhode Island fire insurance company was the Provi- dence Mutual, which was chartered in 1800 and is in active business in 1930.
An early close association of insurance and banking appears from the facts that the Provi- dence Insurance Company bought stock in the Providence Bank, holding 150 shares in 1814, and that the Newport Bank, chartered in 1803, was authorized to organize the Rhode Island Insurance Company, which was to become a subscriber for half of the capital stock of the bank. The Exchange Bank of Providence was chartered in 1801 in connection with the organization of the Washington Insurance Company after the latter had rejected overtures for association with the Providence Bank on the same terms as the Providence Insurance Com- pany. Similar relations and associations of banks and insurance companies appeared in Bris- tol and Warren, and later in the instance of the Bank of Commerce and the Merchants' Insur- ance Company, both of Providence and both chartered in 1851. The Providence Insurance and Washington Insurance companies refused to underwrite insurance on vessels engaged in the slave trade; the reason may have been extra hazardous occupation quite as well as oppo- sition to slavery, against which there was a strong sentiment in Providence. The Bristol Insur- ance Company, Captain James De Wolf,* President, was not so scrupulous; nineteen of the forty-five marine policies known to have been issued by the company covered voyages to the
*Later Senator De Wolf. He was engaged in the slave trade, and during the War of 1812 fitted out privateers.
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coast of Africa and return to the West Indies. Besides the companies mentioned, other early companies were Warren Insurance Company, 1800; Hope Insurance Company of Providence, 1804; Mount Hope of Bristol, 1805; Marine of Providence, 1807; Union of Warren, 1807; Marine of Newport, 1811, and another company of the same name, also of Newport, 1815; Peace, Union and Commercial, all of Providence, 1815; Eagle of Providence, 1817; Colum- bian Fire and Providence Fire of Providence, Ocean of Newport, Bristol Marine, 1818; Hop- kinton Horse, 1818, and Kent Horse, 1819; Providence Marine, 1821. The Providence and Washington companies consolidated as the Providence-Washington in 1820. Most of the early companies were marine companies. The Marine of Providence, 1807, was authorized to underwrite any legal risk, and the Marine of Newport, 1807, might insure lives, houses, vessels and all other legal risks. The first horse insurance companies, 1818 and 1819, pro- tected against loss by theft. Early in the nineteenth century Rhode Island insurance com- panies sought business beyond the borders of the state, and extra-state companies established agencies in Rhode Island, among them the Phoenix Assurance Company of London, England, 1805; and the Aetna and Hartford, both of Connecticut.
The Manufacturers' Mutual Fire Insurance Company was organized in 1835 on the initiative of Zachariah Allen, who had introduced fire-resisting construction, a fire pump and fire hose, and a central heating and ventilating plant, instead of shop stoves, in his cotton fac- tory at Allendale. When fire insurance companies refused a lower rate because of the reduced risk, Mr. Allen introduced the mutual principle of joint underwriting. Additional to obtain- ing lower rates because of reduced risk, an extension of the principle established by Mr. Allen has led in modern insurance practice to introduction of standard fireproof and fire-resisting construction, to provision of fire-fighting apparatus in factories, to equipment with sprinklers, to inspection of factories and to careful surveys of premises for the establishment of preferen- tial ratings for reduced premiums, with emphasis on safeguarding against fire as better than insurance against losses. Other successful mill mutual fire insurance companies, of type simi- lar to the Manufacturers' of Rhode Island, and all in active business in 1930, were established as follows : Rhode Island, 1848; Firemen's, 1854; State, 1855; Blackstone, 1868; Mechanics', 1871; What Cheer, 1873; Merchants', 1874; Enterprise, 1874; Hope, 1875; American, 1877; Mercantile, 1884. Six of these companies --- The American, Enterprise, Manufacturers', Mechan- ics', Rhode Island and State --- for many years have been so closely associated as to occupy the same quarters and to elect the same administrative officers. They constitute a thoroughly organized association of mill mutual insurance companies. The Union Mutual, chartered in 1863, underwrote principally insurance on dwellings and furniture; it has been associated with the Firemen's. Other associations occur in the instances of the Blackstone and Mer- chants', Hope and What Cheer, Mercantile and Narragansett, the last named chartered in 1894. Other successful mutual fire insurance companies, operating on the mutual principle of distributing profits as rebates on premiums, include the Providence Mutual of 1800, the Tiv- erton and Little Compton of 1865, the Pawtucket of 1844, the Patrons' Fire Relief Association of Kingston, chartered in 1900. The Franklin Mutual of 1854 was discontinued after sixty years of active business. The Automobile Mutual, 1907, and American Motors Mutual, 1917, are the most youthful mutual companies engaged in active business in 1930. The mutual companies in their reports to the Insurance Commissioner for 1929 showed $59,000,000 of admitted and $175,000,000 of contingent assets, with $21,000,000 of liabilities and $38,000,000 of surplus. They underwrote $474,000,000 of insurance in Rhode Island in 1929, on which they collected $3,500,000 premiums.
The great Chicago fire of 1871 and the great Boston fire of 1872 wrought havoc among Rhode Island stock insurance companies. The Chicago fire crippled the American, 1837; the Roger Williams, 1848; the Atlantic Fire and Marine, 1852, which was completely reorganized
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with new capital ; the Hope, 1858, and the Providence-Washington, 1799. The capital of the Providence-Washington was exhausted when the company had paid the losses incurred because of the Chicago fire, but fresh capital was obtained, and the company was reorganized in 1872. The Boston fire crippled the Narragansett Fire and Marine Insurance Company, 1859, and inflicted heavy losses on other Rhode Island companies. The Chicago and Boston fire losses were so serious as to discourage investment in insurance stock, and no stock companies were organized in Rhode Island for thirty-five years thereafter, the first being the Rhode Island, incorporated 1905, which began business in 1907. The Providence-Washington, 1799; Mer- chants', 1851, and Equitable, 1859, were the only Rhode Island stock insurance companies of the nineteenth century that continued business into the twentieth century. The Merchants' went into liquidation, which was almost complete by the end of 1917. The active stock insurance companies of 1930 include the Providence-Washington, the Equitable, and the Rhode Island ; a new company bearing the name of the old Merchants', and the Anchor and the Guaranty. The stock companies were capitalized at $8,250,000, and had admitted assets of $45,000,000, liabilities of $16,000,000 and surplus of $21,000,000. Of Rhode Island insurance the stock companies underwrote $147,000,000 in 1929, on which they collected premiums amounting to $500,000.
Several Rhode Island companies chartered for life insurance have left no record of hav- ing actually engaged in business. The Economical Mutual Life Insurance Company, chartered 1866, transferred its business in 1874 to the Republic Life Insurance Company of Chicago, which failed in 1875. The Columbia Life Assurance Company, chartered 1892, transferred its policies and assets early in 1894 to the Commercial Alliance Life Insurance Company of New York, which failed in October of the same year. None of these companies was founded on sound actuarial principles. The period witnessed the founding, and also the collapse or insolvency, of many companies offering life insurance at rates that could be maintained only in the period of constant and rapid increase in the number of policyholders ; and the records of these life companies were paralleled by equally unsound fraternal and beneficial insurance schemes. The Puritan Life Insurance Company, chartered in 1907, when life insurance prin- ciples were better understood, is the only Rhode Island life company writing life insurance in 1930.
State supervision of insurance companies, Rhode Island as well as extra-state and foreign companies, doing business in Rhode Island was introduced in 1859, and entrusted to a com- mission of three members, one of whom was the State Auditor. Later the commission was abolished, and the State Auditor became Insurance Commissioner, and continued as such until the State Auditor's office was abolished in 1929. The Insurance Commissioner continues in 1930 as head of an independent department.
The Providence Steam and Gas Pipe Company was organized in 1850, its business includ- ing, besides other pipe installation and pipe fitting, the building of sprinkler pipe systems in mills, factories and warehouses. The primitive sprinkler was a perforated water pipe located near the ceiling of a room, and connected with a supply pipe, through which water could be forced by pumping or other pressure into the sprinkler. The control was by valves operated by hand; in the instance of a system equipped with a high tank or other reservoir, the sprink- lers were fed by gravity when the valves were opened. In other systems the supply pipe was or could be connected with a pump. Frederick Grinnell, who purchased an interest in the Providence Steam and Gas Pipe Company in 1869, experimented with various types of devices intended to improve the sprinkler system, including the water-joint sprinkler invented by Henry S. Parmelee in 1874, which operated when a cap covering a reaction turbine was released by the melting of solder at 155-160 degrees Fahrenheit. Mr. Grinnell in May, 1882, invented a new sprinkling device, which operated when released by the melting of a metal alloy sensitive at a lower temperature. He thus produced an entirely automatic device, which went into action quickly when the temperature of a room was raised above the normal safety
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point. The Grinnell sprinkler was recognized immediately as a most important accessory for extinguishing fires in the incipient stage, and was almost universally adopted. Mr. Grinnell organized the General Fire Extinguisher Company of Rhode Island in 1892, with offices in the larger American cities. Incidentally, the introduction of the Grinnell Sprinkler led to the development of a new type of insurance-against loss by sprinklers. The underwriters of Providence, in 1875, organized the first of two quasi-public fire companies, known as "Pro- tectives." The function of the Protectives, who were housed centrally on Richmond Street, was to respond to all alarms of fire, and to undertake to reduce losses incidental to the use of water as an extinguisher, by covering property as protection against wetting by dripping. The Protectives also removed water from a building so soon as possible after a fire, removed property against loss by theft, and covered property against further loss from exposure to weather. The Protectives, through a career of nearly fifty years, were maintained by the underwriters. Rhode Island's interest in reducing fire losses has extended to teaching fire prevention in the public schools as a part of the required curriculum for one hour per month. The Commissioner of Education has published for distribution in the public schools a pamphlet on safeguarding the home against fire, a course of study in fire prevention, and a uniform code for fire drills, through which pupils and teachers are taught to leave schoolhouses quickly and by orderly procession on the sounding of an alarm of fire. A statute enacted in 1929 required the placing of a fire alarm box in every schoolhouse.
Insurance had passed through the era in which the courts of England refused to enforce contracts for insurance as wagers, when enterprising Rhode Islanders began to organize banks and insurance companies as the earliest types of business corporations-the first for accumulat- ing capital and credit to promote commercial enterprises and the second for relieving adven- turous merchants of the hazards of total losses of their argosies. As in England, the earliest insurance was marine; fire insurance won its way gradually to recognition, and in Rhode Island particularly assumed a characteristic form through the Allen type of mutual company. The Allen Mutual Fire Insurance Company, and the Grinnell sprinkler rank as Rhode Island's most important nineteenth century contribution to insurance.
Life insurance, the third important form in the nineteenth century, was carried by Rhode Islanders, aside from fraternal and beneficial forms, principally in standard life insurance companies chartered by other states. In the twentieth century almost every conceivable risk may be covered by some type of insurance; it is related that London merchants insured the life of Queen Victoria against death before the celebration of her jubliee, and that promoters of outdoor entertainment insure against losses incident to unfavorable weather. Rhode Island insurance reports for 1930 classify risks as follows: (1) Life; (2) accident; (3) health; (4) fire; (5) ocean marine; (6) motor vehicle; (7) inland navigation and transportation ; (8) tornado, windstorm and cyclone; (9) aircraft; (10) sprinkler leakage; (II) earth- quake; (12) riot, civil commotion and explosion; (13) automobile liability; (14) liability other than automobile; (15) automobile property damage; (16) fire and theft of automobiles ; (17) automobile collision; (18) engine and machinery; (19) livestock; (20) surety; (21) workmen's compensation; (22) burglary and theft; (23) credit indemnity; (24) fidelity ; (25) plate glass; (26) steam boiler; (27) unclassified. The workingmen's compensation statute of 1912 practically introduced a new type of insurance in Rhode Island, as employers sought indemnity against the increased liability; most corporations transferred the onus of compensation to insurance companies on the basis of payment of an annual premium. Horse insurance has disappeared with the almost complete extinction of the horse as a draft animal, and new types of insurance have been devised to cover almost every liability that the universal vehicle of the early twentieth century has created. Insurance keeps pace with modern develop- ment : witness aircraft insurance. The Rhode Island bill for insurance amounted to $42,566,- 372 in 1929, of which $9,219,703 was paid as premiums for insurance against loss of prop- erty, $6,852,236 for insurance against liability of various types, and $26,494,433 for life insurance.
CHAPTER XXVIII. TRANSPORTATION AND OTHER PUBLIC UTILITIES.
HESE pages .... have been printed at so great a distance from home that the author has been unable to revise the proof with all the care that he could wish." The "great" distance thus referred to by Francis Wayland in the preface to "Thoughts on the Present Collegiate System of the United States," was the forty- four miles that lay between Providence and Boston, less than a century ago, in 1842. It is difficult, in a century in which telegraph, telephone, radio, railway, automobile and airplane have almost annihilated both time and distance, to realize the difficulties that beset travelers in the wilderness of New England three and one-half centuries ago, when rivers and streams must be passed by fording at favorable shoals and when roads were Indian trails in the forest scarcely kept free of growing grass by the bare feet or soft moccasins of the Indian brave or hunter. Rhode Island, penetrated deeply by bay and inlet and river, was Venetian in its waterways, which at once facilitated commerce in boats between communities relatively far apart, and obstructed travel on foot or on horseback between nearby places. The earliest device for solving the problem of communication was the ferry. Except during the winter of 1740, when a horse could be driven over the ice near Newport, and again during the winter of 1780, when wood was carried on the ice from Narragansett to Newport, the island towns of Jamestown, Middletown, Newport and Portsmouth were dependent upon ferries for main- taining contact with the main. One of the earliest ferries was established, possibly in 1640, near the present site of Rhode Island Stone Bridge. Providence, as settled by Roger Wil- liams, lay on the east side peninsula. A ferry across the river to the west preceded the build- ing of the Great Bridge, later Market Square, and was reestablished in 1815 until the bridge, which had been carried away in the September gale, could be rebuilt. Lower down the river there were at various time other ferries connecting east shore and west shore: (I) between James Street and Ship Street; (2) near the present Point Street bridge; (3) the railroad ferry from the India Point station of the Boston and Providence Railroad to the Providence end of the Stonington Railroad near Hill's Wharf; (4) between India Street and Hill's Wharf ; (5) between Kettle Point and Field's Point; (6) between Pawtuxet and Vanity Fair, and (7) between Pawtuxet and Crescent Park. A ferry crossed the Blackstone River near Lonsdale. Easterly from the Providence settlement by the Moshassuck stretched the Wampanoag Trail toward the upper narrows of the Seekonk near the present site of Red Bridge, and the Watchemoket and Montaup trail toward India Point and the lower narrows near the site of Washington Bridge. The Seekonk was crossed at both narrow places by ferries long before the Brown brothers built-Moses the Red Bridge and John the Washing- ton Bridge. The Wampanoag Trail marked the beginning of the colonial trek to Boston; the Montaup Trail the road to Newport. Other ferries along the east shore connecting north and south settlements crossed ( I) the Barrington and (2) Warren Rivers and (3) Bristol Nar- rows from Bristol to Bristol Ferry at the northerly end of Portsmouth on the Island of Rhode Island. The Barrington and Warren River ferries were replaced by bridges in the nineteenth century, and the Bristol ferry by the Mount Hope Bridge only in 1929. Bristol is still con- nected with Prudence Island by ferry. The Island of Rhode Island was connected with the mainland east across the Seaconnet River not only by the Stone Bridge ferry, but also by other ferries at points further south; westerly, ferries established connections with South Kings- town by way of Jamestown, and with North Kingstown at Wickford. In the twentieth cen- tury Newport's connection with the mainland west is by ferry to Jamestown, by road across
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the island, and again by ferry from Jamestown to Saunderstown. Other ferries have been maintained from time to time (I) between Stonington and Watch Hill; (2) between Pru- dence Island and the west shore, and (3) between Oakland Beach and Buttonwoods. The post rider between Providence and New London crossed three ferries, passing the Seekonk, Barrington-Warren Rivers, and the Narrows at Bristol, to reach Newport, and two more, from Newport to Jamestown, and Jamestown to South Kingstown, to regain the mainland. Small wonder that he preferred the post road out of Providence starting southwestward along the Narragansett Trail, and that a change was made in Revolutionary days when the British occupation of Newport disrupted communications on the line across Jamestown. Ferryboats varied in design from long rowboats and flat scows, the latter sometimes operated by ropes stretched across the stream, through various types of sailing vessels, boats operated mechani- cally by live horsepower on treadmill or windlass, to steamboats and small gasoline-driven motorboats. The conventional ferryboat, operated in either direction without turning and landing in a specially constructed pier, is distinctly modern. Ferries were the earliest public utilities regulated by statute in Rhode Island. The General Assembly granted franchises and monopolies as well as wharf and landing rights, established legal fares for passengers and rates for animals and freight, limited the load to be carried, prescribed equipment to assure reasonable safety, and regulated operation to insure uninterrupted service and to guaranty travelers against unreasonable delays. On occasion, to maintain continuation of service, the colony or state became owner and operator, or authorized municipal ownership and operation, or municipal subsidy in the form of investment in capital stock or bonds of ferry companies. With the assumption by the federal government, following the decision in Gibbons vs. Ogden,* of jurisdiction over inland navigable waters, ferryboats became subject to regulations pre- scribed by Congress and to federal inspection, both the volume of state legislation and regula- tion declining consistently.
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