Appendix — American Insurance v. Lucas
Supreme Court brief1941
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"RICAN INSURANCE, COMPANY, “A CORPORATION,
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INDEX
PRELIMINARY OBSERVATIONS
. WITNESSES, and Their Relations to the Parties ———--
IL. INSURANCE GROUPS
Ii. CO-OPERATIVE ACTIVITIES
A. THE NATIONAL BOARD AND LOCAL BOARDS
B. INSURANCE EXECUTIVES ASSOCIATION -..
Companies in the Missouri Rate Case in the Fed-
eral Court not affiliated with Insurance Execu-
tives Association ‘
C. WESTERN INSURANCE BUREAU
D. WESTERN UNDERWRITERS ASSOCIATION
E. MISSOURI INSPECTION BUREAU
F. SUBSCRIBERS ACTUARIAL COMMITTEE -.......----
1. Organization, functions, meetings, officers and
members
2. Management of rate litigation
3. Employment of attorneyS
G. CO-OPERATION THROUGH COMMITTEES .-.........-
IV. CHARLES R. STREET ~~. -—————————-—————
Vv. INSTITUTION AND PROGRESS OF THE LITIGATION
A. oe NATURE AND CONTROL OF THE
B. LIST OF THE COMPANION CASES NOW PEND-
ING IN THIS COURT -.
C. STATE COURT LITIGATION. DECREES IN STATE
COURT RESTITUTION CASES
D. THE SETTLEMENT
E. THE DECREE OF THIS COURT
F. THE DECLARATION OF TRUST a
G. IMPOUNDMENT OF FUNDS AND DISTRIBUTIONS
H. PAPERS FILED IN THIS COURT AND INTER-
LOCUTORY INJUNCTION
VI. EXPENSES OF LITIGATION AND ASSESSMENTS ........
vil. NOTICES AND KNOWLEDGE IN GENERAL -.........-----
5
18
25
25
25
27
30
30
30
31
31
34
36
37
43
50
50
52
60
66
67
75
111
123
125
133
133
133
INDEX
C. NOTICES TO ALL COMPANIES 138
D. THE GOVERNING COMMITTEE - 142
Vill. MR. STREET'S USE OF MONEY TO PROCURE A
SETTLEMENT
145
IX. THE MEETING IN NEW YORK IN 1935 153
X. PAYMENT OF THE 1935 ADVANCE BY THE NEW
YORK COMPANIES. THE KNOWLEDGE AND ACTIONS
OF THEIR OFFICERS ;
IN GENERAL
GROUP ELEVEN ..
GROUP TWELVE—
A. At the Home Office
B. At the Chicago Office
GROUP TWENTY
GROUP TWENTY-THREE
GROUP THIRTY-FOUR
GROUP FORTY-THREE
GROUP FIFTY-SIX ....
THE MEETING IN HARTFORD IN 1935
PAYMENT OF THE 1935 ADVANCE BY THE HART-
FORD COMPANIES, THE KNOWLEDGE AND ACTIONS
OF THEIR OFFICERS
IN GENERAL __...
GROUP TWO __..
GROUP FIVE ___.
GROUP EIGHT ._.
GROUP TWENTY
GROUP TWENTY-TWO
GROUP TWENTY-EIGHT
GROUP THIRTY-ONE—
A. At the Home Office
B. At the Chicago Office
GROUP FORTY _.
GROUP FORTY-FIVE . 251
GROUP FIFTY-THREE _. ... 255
XIII. CHANGE IN TERMS OF PROPOSED SETTLEMENT __ 258
A. COMMUNICATION WITH NEW YORK COMPANIES 258
B. COMMUNICATION WITH HARTFORD COMPANIES 261
XIV. NEGOTIATION OF SETTLEMENT 266
XV. THE MEETING IN NEW YORK IN 1936, AND COLLEC-
TION OF THE GENERAL ASSESSMENT 277
A. THE MEETING
INDEX
XVL KNOWLEDGE AND CONDUCT OF INDIVIDUAL OF-
FICERS AND EMPLOYEES
GROUP ONE
GROUP TWO
GROUP THREE
GROUP FOUR
GROUP FIVE
GROUP SIX
GROUP SEVEN .-.
GROUP EIGHT
GROUP NINE
GROUP TEN
GROUP EIGHTEEN
GROUP NINETEEN
GROUP TWENTY
GROUP TWENTY-ONE
GROUP TWENTY-TWO
GROUP TWENTY-THREE
GROUP TWENTY-FOUR
GROUP TWENTY-FIVE
GROUP TWENTY-SIX
GROUP TWENTY-SEVEN
GROUP TWENTY-EIGHT
GROUP TWENTY-NINE
GROUP THIRTY --
GROUP THIRTY-ONE
GROUP THIRTY-TWO
GROUP THIRTY-THREE
GROUP THIRTY-FOUR -
GROUP THIRTY-FIVE
GROUP THIRTY-SIX
GROUP THIRTY-SEVEN
GROUP THIRTY-EIGHT
GROUP FORTY-ONE —------------nnn
GROUP FORTY-TWO ....
GROUP FORTY-THREE
GROUP FORTY-FOUR
GROUP FORTY-FIVE
GROUP FORTY-SIX -
INDEX
GROUP FORTY-SEVEN
GROUP FORTY-EIGHT
GROUP FORTY-NINE
GROUP FIFTY
GROUP FIFTY-ONE
GROUP FIFTY-TWO
GROUP FIFTY-THREE ..
GROUP FIFTY-FOUR
GROUP FIFTY-FIVE
GROUP FIFTY-SIX
GROUP FIFTY-SEVEN
NORTH BRITISH AND MERCANTILE GROUP ......
XVII. MR. STREET AND THE SUBSCRIBERS ACTUARIAL
COMMITTEE
XVIII. MR. STREET AND MR. FOLONIE
A. Mr. Folonie cleared checks for Mr. Street in 1935
B. Mr. Folonie cleared checks for Mr. Street in 1936
C. Reasons why Mr. Folonie did not ask for cupenation
friction between Mr. Folonie and Mr. Street .. 663
D. Mr. Folonie’s knowledge, and his participation in
the settlement 672
CONCLUSION oe
IN THE
Fistrict Court of the United States
FOR THE WESTERN DISTRICT OF MISSOURI.
CENTRAL DIVISION.
IN EQUITY.
No. 270
and other companion cases Nos. 271 to 426, both inclusive, except
those cases which have been dismissed.
[ee
AMERICAN INSURANCE COMPANY, A CORPORATION,
PLAINTIFF,
VS.
RAY B. LUCAS (SUCCESSOR IN OFFICE TO R. E. O'MALLEY,
SUCCESSOR IN OFFICE TO JOSEPH B. THOMPSON), SUPER-
INTENDENT OF THE INSURANCE DEPARTMENT OF THE STATE
OF MISSOURI, AND ROY McKITTRICK (SUCCESSOR IN OFFICE
TO STRATTON SHARTEL), ATTORNEY GENERAL OF THE
STATE OF MISSOURI, DEFENDANTS.
MASTER’S REPORT.
To
The Honorable Kimbrough Stone,
_ Senior Judge of the United States Circuit Court of
Appeals for the eighth circuit; a,
The Honorable Albert L. Reeves,
and
The Honorable Merrill E. Otis,
Judges of the District Court of the United States
for the Western District of Missouri,
sitting as the judges of a district court of said judicial
district organized under Section 266 of the judicial code,
as ‘amended (28:'U. S. C. A., Sec. 260). aes
PRELIMINARY
The undersigned, Paul Barnett, was appointed by this
honorable court as special master in chancery, by an order
made and entered in each of the above entitled causes,
on the third day of July, 1939. The undersigned accepted
such appointment and qualified as such master by filing
a master’s oath with the clerk of this court on the eighth
day of July, 1939. Pursuant to the terms of his commis.
sion, the master appointed Miss Emily Miles to take and
transcribe the testimony heard by the master; she ac-
cepted such appointment, and has taken and transcribed
such testimony. Such transcript, consisting of four vol-
umes of typewritten matter, is returned herewith.
The master conferred with counsel to determine where
and when the testimony of the witnesses might be taken
with the most convenience and dispatch, and then set
times and places for the hearings before the master. The
first of such hearings was held in Chicago, Illinois, be-
ginning July 27, 1939. Other hearings were held in New
York City, Hartford, Connecticut, Chicago, Illinois, St.
Louis, Missouri, and Kansas City, Missouri. The taking
of testimony was concluded on September 11, 1939.
The master has expressed no conclusions of law, be-
lieving it to be the better practice in cases pending before
three judges sitting pursuant to Section 266 of the ju-
dicial code as amended, that the judges decide questions
of law in the first instance, without the previous advice
or recommendations of a master in chancery.
After hearing a substantial portion of the testimony,
the master concluded that the question of guilty knowl-
‘ edge or the absence thereof (upon the part of insurance
executives representing various plaintiffs herein) con-
cerning the actions and conduct of Charles R. Street must
be determined, not from direct evidence, but from infer-
ences from the direct evidence. In addition thereto, in
nearly every instance the legal question was involved as
to whether the evidence was, as a matter of law, suf-
ficient to permit an inference of guilty knowledge, as dis-
tinguished from the question as to whether or not such
an inference should be drawn. This observation is not
PRELIMINARY 3
applicable to the plaintiffs in the so-called “Great Ameri-
can group” for reasons appearing in the testimony. The
master accordingly conferred with his honor, Judge Mer-
rill E. Otis (the other judges of this court being then
absent from Kansas ‘City, Missouri), and the honorable
Judge Otis advised the master to merely analyze and ar-
range the evidence, leaving the questions of fact to be
decided by the court in the first instance. This advice
has been followed by the master.
The master has prepared but one report to be filed in
each of the 137 companion cases for two reasons: (1) Much
of the testimony is pertinent to the same identical is-
sues which are common to all of the cases and (2) there
are practices peculiar to the fire insurance business which
throw some light upon the question as to whether the
conduct of various individual insurance executives in con-
nection with the payment of money to Charles R. Street,
and the reaction of such executives toward the conduct of
Mr. Street, justifies an inference of guilty knowledge
upon the part of any one or more of such executives. This
court may or may not conclude that, in that connection,
it is permissible to inquire whether the conduct of any
particular insurance executive was the normal reaction of
a man engaged in and familiar with the practises of the
insurance business, as evidenced by the reactions of all
insurance executives who had acted in the same or simi-
lar circumstances.
Because the facts will be found by the court in the
first instance, the master has not felt at liberty to treat
any testimony as irrelevant or impertinent, or to omit
the substance of any testimony, except in a few cases
where record evidence definitely fixed a date, an amount,
or other transaction, in which cases the estimates and
hazards of opinion, and qualified statements by witnesses
who testified from memory have not always been re-
the evidence that the testi-
estimate or qualified state-
ment. In
tention on either side that there was any doubt concern-
4 PRELIMINARY
ing the fact, the master has attempted to so report the
evidence that the conflicts in testimony sharply appear,
and the evidence that witnesses testified from memory or
merely gave an estimate or qualified their statements has
been preserved in the master’s report. Statements con-
tained in the digest of the evidence are the substance of
the testimony of the witnesses. Statements by the master
are contained in notes, designated as such.
Explanations of Citations.
Citations (referring to the transcript of the testi-
mony) are to the printed transcript which has been pre-
pared by the parties and filed in this court. A person’s
name appearing in parenthesis indicates the witness,
the substance of whose testimony precedes the citation.
The Roman numeral following the name of the witness in-
dicates the volume of the printed transcript in which the
evidence referred to appears. The Arabic numeral follow-
ing the name of a witness indicates the page of the
printed transcript so referred to. An Arabic numeral, fol-
lowed by a dash and another Arabic digit or digits, indi-
cates that the evidence referred to appears beginning
on the page indicated by the first numeral and ending on
the page indicated by the digit or digits after the dash.
Two or more Arabic numerals separated by a comma or
commas, following the name of a witness, indicates that
the witness has testified to the same effect two or more
times, as evidenced at the separate places in the printed
transcript indicated by such separate numerals.
WITNESSES
)
WITNESSES, AND THEIR RELATIONS TO THE
PARTIES.
The master observed the demeanor and appearance
of all of the witnesses when they testified, except the
witnesses, Robert R. Barbour, O. E. Lane, Walter F.
Brady and F. J. Breen. The testimony of these four
witnesses was taken by deposition. The master observed
nothing about the demeanor or appearance of any wit-
ness that indicated that the witness was incredible.
THE FOLLOWING WITNESSES TESTIFIED:
A.
1. George S. Allen, New York City: now is and in
1935 and 1936 was chief accountant of the Svea Fire and
Life Insurance Company, Ltd., and secretary of the Hud-
son Insurance Company (Allen, II, 153).
B.
9, BR. V. A. Baker: general auditor of Tokio Marine
and Fire Insurance Company. In 1935 and 1936 he was
supervisor of accounts of that company (Baker, II, 218).
3. Robert P. Barbour: Montclair, New Jersey: now
is and in 1935 and 1936 was United States manager of the
Northern Assurance Company group of Insurance Com-
panies, including London and Scottish Insurance Company.
His office is at 80 John Street (Barbour, I, 337, 339).
4. John R. Barry: vice-president of Carroon & Reyn-
olds, Underwriting managers (Barry, II, 117).
Illinois: was on the
years 1935 and
arious times
es (Bell, I, 137).
had entire char s companies in
their western departmen He is manager
_ gf the western department (Bell, I,
6 WITNESSES
sole authority to take care of all legal expenses and mat-
ters of litigation (Bell, I, 150).
6. Homer H. Berger, Kansas City, Missouri: at-
torney at law. His firm was employed in the present
litigation in May, 1930, and since September, 1930, he has
been the one in that firm that has been attending to the
litigation with Mr. Folonie (Berger, III, 391).
7. KR. M. Bissell, Farmington, Connecticut: in 1935
and 1936 he was president of the companies (except the
Northwestern) in the Hartford Fire Insurance Company
group (Bissell, II, 442, 443).
8. Laurens R. Bowden, New York City: now is and
in 1935 and 1936 was first vice-president of Bankers’ and
Shippers’ Insurance Company group (Bowden, II, 75).
9. Walter F. Brady, Larchmont, New York: vice-
president and secretary of Merchants Fire Assurance Cor-
poration. In 1935 and 1936 he was secretary of that com-
pany. He had supervision of whatever was done in his
office (Brady, I, 371).
10. Frank J. Breen: in March, 1936, he became presi-
dent of Standard Fire Insurance Company of New Jersey.
In 1935 he was General Agent out of Chicago (Breen, I,
383).
11. S. M. Buck, Evanston, Illinois: member of the
Subscribers Actuarial Committee since December, 1937,
Western Manager of the Firemen’s Fund Insurance group,
prior to March 15th or 16th, 1938 (Buck, I, 231, 245).
C.
12. John J. Campbell, 2912 Linwood, Kansas City,
Missouri: in charge of the office of the custodian of the
funds impounded in these cases. His employment began
sometime in 1932 or 1933. He now has charge and direc-
tion of all the books and records of the custodian’s of-
fice (Campbell, III, 519).
_13. Harold T. Cartlidge, New York City: deputy
United States manager of the Royal Insurance Company,
Ltd., and second officer with its affiliated Fire and Ma-
rine Companies. The title has been changed, but his
position, duties and prerogatives were the same in 1935
and 1936 (Cartlidge, I, 462; Warner, III, 355).
WITNESSES 7
14. John R. Cashel, Evanston, Illinois: now is and
in 1935 and 1936 was western manager of the Providence
Washington Insurance Company (Cashel, I, 315).
5. Harry G. Casper: assistant United States mana-
ger until July 1, 1935, and thereafter United States man-
ager of Eagle Star Insurance Company, Ltd. (Casper, Il,
105-106).
16. Sheldon Catlin, Philadelphia: now is and in 1935
and 1936 was vice-president of the Insurance Company of
North America group (Catlin, II, 271).
17. Herbert A. Clark, River Forrest, Illinois: mem-
ber of the Subscribers Actuarial Committee, vice-presi-
dent of the Firemen’s Insurance Company of Newark,
New Jersey (H. Clark, I, 249; Hobbs, I, 5), and of each
of its affiliated companies (H. Clark, I, 249); manager of
the western department of the Firemen’s group (Weiser,
I, 214). He was a member of that committee when this
litigation originated and was located at Chicago then, but
was not with these companies. He has been with these
companies since 1925, and on the committee since 1921
(H. Clark, I, 250).
18. Robert R. Clark: manager in the United States
of the Caledonian Insurance Company, for approximately
the last twelve years (R. Clark, II, 415). Has been in the
insurance business twenty-five or thirty years (R. Clark,
II, 439).
19. Carsten Claussen, Chicago: now is and in 1935
and 1936 was manager of the western department of
London & Lancashire Insurance Company and all of the
companies in the group (Claussen, I, 317).
20. John R. Cooney, Newark, New Jersey: now is
and in 1935 and 1936 was president of the Firemen’s group
of companies (Cooney III, 14-15).
21. Bernard M. Culver: now is and in 1935 and
1936 was president of each of the companies in the Con-
tinental or “America Fore” group (Culver, Il, 397-8;
Emes, II, 326, 336; Koop, I, 396). He succeeded Paul L.
Haid as president of the companies in this group (Haid,
II, 374).
8 WITNESSES
D.
22. Hart Darlington: now is and in 1935 and 1936
was United States Manager of the Norwich Union So-
ciety, manager of its New York department, and presi-
rT 28) the Eagle Fire Insurance Company (Darlington,
II, 288).
23. William C. Dent: now is and in 1935 and 1936
was assistant secretary in charge of underwriting of the
Potomac Insurance Company (Dent, II, 264).
24. Frederick M. Dominick, Braintree, Massachu-
setts: now is and in 1935 and 1936 was assistant secre-
tary of the Boston Insurance Company and the Old Colony
Insurance Company (Dominick, II, 490).
25. C. A. Dosdall, St. Paul, Minnesota: now is and
in 1935 and 1936 was secretary of St. Paul Fire and Ma-
rine Insurance Company and Mercury Insurance Company,
in charge of their fire business west of the Mississippi
river, including Missouri (Dosdall I, 168; McKown, I,
166).
26. Ray B. Duboc, Kansas City, Missouri: president
of the Western Fire Insurance Company (Duboc, III, 255).
E.
27. Edward West Elwell: in 1935 and 1936 was as-
sistant manager of the British Companies, and vice-
president of the American Company in the Royal Exchange
Assurance group. He is now United States manager of
the British Companies, and president of the American
Company in that group (Elwell, III, 415-416; Koenig,
II, 72).
28. W. H. Emes: in 1935 and 1936 was auditor of
the American Fore group and is now comptroller of that
group, which is the same position, except as to title
(Emes, II, 326, 336). He is now at the home office, 80
Maiden Lane (Moeckel, II, 308).
29. J.D. Erskine: now is and in 1935 and 1936 was
secretary of the Insurance Executives Association (Ers-
kine, II, 347). He is the assistant manager of the asso-
ciation, acting under Paul Haid (Nourse, II, 125; Koop,
I, 414, 410).
WITNESSES 9
30, Esmond Ewing: now is and in 1935 and 1936
was vice-president and secretary of the Travelers Fire
Insurance Company (Ewing, III, 26).
F.
31, Robert J. Folonie, Chicago, Illinois: licensed
lawyer for 39 years and attorney for plaintiffs in these
companion cases since their inception (Folonie, III, 156-7)
as chief counsel (Berger, III, 391). He had supervision
of the Kentucky rate case (Folonie, III, 212).
G.
39. G. N. Gardner: now is and in 1935 and 1936 was
vice-president of Merchants Fire Insurance Company
(Gardner, Ill, 297).
33, John F. Gilli Collingswood, New Jersey:
now is and in 1935 and 1936 was vice-president of the
Camden Fire Insurance Company (Gilliams, III, 110).
34. I. Lloyd Greene: in 1935 and 1936 was vice-
president of Boston Insurance Company and Old Colony
Insurance Company (Greene, II, 503).
H.
35. Paul L. Haid: now is and in 1935 and 1936 was
president of the Insurance Executives Association (Smith,
Ill, 32; Erskine, II, 347; Haid, II, 373). Before May 1,
1932, he was president of the companies in the America
Fore group (Haid, II, 373).
36. Harry Halprin: in 1935 and 1936 was assistant
secretary and assistant branch secretary of the Royal
Exchange group (Halprin, II, 93). He is Mr. Koenig’s
assistant (Koenig, II, 73).
37. John C. Harding, Evanston, Illinois: member
of the Subscribers Actuarial Committee since 1926. He
now is and in 1935 and 1936 was resident executive vice-
president of the Springfield Fire and Marine (Hard-
ing, I, 279-280; Hobbs, I, 5) group of companies, in ——
of the Western department. He is the manager of the
western department (Harding, I, 279-280; Schlesinger,
Il, 535-536).
38. William R. Hedge: now is and in 1935 and 1936
was president of the Boston Insurance Company and of
the Old Colony Insurance Company (Hedge, II, 517).
10 WITNESSES
39. Ernest A. Henne, Evanston, a suburb of Chicago:
now chairman of the Subscribers Actuarial Committee,
having succeeded Mr. Street in. December, 1936. He was
active in the affairs of the Actuarial Committee from
1935 until he became chairman, and attended its meet-
ings regularly (Henne, I, 20). He has been on the com-
mittee since 1932 (Henne, I, 21). Since about July, 1931,
he has been manager of the western department in charge
of the western office of the following companies (1) Con-
tinental Fire Insurance Company, (2) Fidelity-Phenix,
(3) Niagara, (4) American Eagle, and (5) First American
(Henne, I, 65-66), and was held responsible for the under-
writing results in 18 states including Missouri (Henne,
I, 66). He is in entire control of the Western office out-
side of imperial questions of policy (Culver, III, 414). He
is vice-president of all of these companies (Henne, I, 65).
He was vice-president of the Continental in 1935 (Henne,
I, 23; Hobbs, I, 5).
40. Bernard E. Hobart (I, 300): auditor in the Chi-
cago office (Harding I, 290) of the Springfield Fire and
Marine group (Schlesinger, II, 537).
41. Russell D. Hobbs, Chicago, Illinois: is and since
September, 1935, has been secretary of the Subscribers
Actuarial Committee (Hobbs, I, 3). Before he became
secretary, he was Mr. Parker’s assistant and worked very
close to him all the time (Hobbs, I, 16).
42. Joseph K. Hooker: now is and in 1935 and 1936
was vice-president of the Automobile Insurance Com-
pany and of the Standard Fire Insurance Company
(Hooker, III, 130).
43. Fred A. Hubbard: president of the Globe and
Rutgers Insurance Company in 1935 and 1936. He severed
his connections with that company in September, 1938
(Hubbard, II, 7). He is now president of the Hanover
Pie Insurance Company (Van Horne, I, 456; Hubbard, II,
ee .
I.
44. T. J. Irvine: U.S. manager of the Phoenix As-
surgnce Company of London, and President of the three
other companies in the Phoenix Assurance group since
May 1, 1935. Prior to that he was secretary for the
group (Irvine, 1, 200), ©
WITNESSES 11
K.
45. Gilbert Kingan: attorney for and manager of the
Eastern department of the United States and London
and Lancashire Fire Insurance Companies; president of
the Orient Insurance Company and of the Safeguard In-
surance Company and United States manager of the
Law Union and Rock Insurance Company (Kingan, III,
18).
46. §S. Clarence Kline: now is and in 1935 and 1936
was superintendent of agencies of the Tokio Marine and
Fire Insurance Committee (Kline, II, 184).
47. F. W. Koeckert, New York: now is and in 1935
and 1936 was United States manager of the Commercial
Union Assurance Company, Ltd., of London, England,
(Koeckert, I, 495; Hobbs, I, 5), the British General In-
surance Company, the Palatine Insurance Company and
the Union Assurance Company; president of the Com-
mercial Union Fire Insurance Company which is a New
York, American, affiliated company, and of the American
Central Insurance Company of St. Louis, Missouri; man-
ager of the California Insurance Company of San Fran-
cisco, California (Koeckert, I, 495); now is and in 1935
and 1936 was the New York member of the Subscribers
Actuarial Committee (Koeckert, I; 516). vee Tews
48. John Koenig, Rutherford, New Jersey: now is
and in 1935 and 1936 was branch secretary of the United
States branches of the Royal Assurance of London and of
the State Assurance Company, Ltd., of Liverpool, and sec-
retary and treasurer of the Provident Fire Insurance
Company (Koenig, II, 68).
- 49. William H. Koop: now is ‘and in 1935, 1936,
1937 and 1938 was chairman of the board of North Caro-
lina Home Insurance Company, and president of all of
the other companies in the Great American Insurance
group (Koop, I, 393-394), including the Detroit Fire and
Marine Insurance Company (Waldron, I, 211).
50. Wilfred Kurth, Ridgeway, New Jersey: chair-
man of the board of the Home Insurance Company. In
1935 and 1936 he was president of that company (Kurth,
I, 422-423). ,
WITNESSES
L.
51. ©. E. Lane, Westtown, Chester County, Pennsyl-
vania: now is and in 1935 and 1936 was president of the
companies constituting the Fire Association of Phila-
delphia group (Lane, I, 363; Powrie, I, 111).
52. Frank D. Layton: now is (Bell, I, 164) and in
1935 and 1936 was president of the National Fire Insur-
ance Company and of the Franklin National, the Mer-
chants and Traders, the Mechanics and Traders and the
Transcontinental Insurance Companies (Layton, III, 75).
53. W. L. Lerch: now is and in 1935 and 1936 was
300806) the Underwriters’ Grain Association (Lerch,
54. George C. Long, Jr., Hartford, Connecticut:
president of the companies in the Phoenix Insurance
group, except that he is not president of the Minneapolis
Fire and Marine or the Central States Fire Insurance
Companies. As he recalls, he is vice-president of each
of the latter, but may not be vice-president of the Cen-
tral States. In 1935 and 1936 he was vice-president of
the major companies and had supervision over the West
(Long, III, 84). He has been in the insurance business
since 1904 (Long, III, 108).
55. F. B. Luce, Providence, Rhode Island (Luce,
II, 526): now is and in 1935 and 1936 was vice-presi-
dent of the Providence Washington Insurance Company
(Luce, II, 519).
M.
56. F. W. Maasen: now is and in 1935 and 1936 was
auditor of the London Assurance Corporation group (Maa-
sen, II, 343; Nourse, II, 124).
57. W. R. McCain, Hartford, Connecticut: now is
and in 1935 and 1936 was president of the companies
constituting the Aetna Fire group (McCain, III, 331).
58. A. L. McCormack, Richmond Heights, St. Louis
County: has been engaged in the insurance business
practically all of his life. He thinks that in 1935 he was
a member of the board of directors of the Missouri As-
sociation of Insurance Agents. He thinks he was presi-
dent of that organization in 1933 and 1934. He has been
president of the Central States Life Insurancé Company
WITNESSES 13
and a member of its board of directors (McCormack, III,
998-229). He has been manager of an adjustment company
in St. Louis (Folonie, Ill, 188).
59. J. C. McKown: now is and in 1935 and 1936 was
one of the secretaries of St. Paul Fire and Marine Insur-
ance Company and Mercury Insurance Company (Mc-
Kown, I, 165) in charge of underwriting east of the Mis-
sissippi River and in Canada (McKown, I, 166).
60. Frank B. Martin, Plainfield, New Jersey: not
now connected with the Yorkshire Insurance Company
group, but in 1935 and 1936 was acting manager. He is a
— of Frank and DuBois, who were the United
tates managers of this group, and he gave his atten-
tion to the operations of the insurance group. His con-
nection with these companies terminated March 31, 1937
(F. Martin, I, 190).
61. Ronald R. Martin, Montclair, New Jersey: now
is and in 1935 and 1936 was United States manager and
member of the local board of directors of the Atlas Insur-
ance Company (R. Martin II, 1).
62. Louis Moeckel, 3250 Perry Avenue, the Bronx:
now is and in 1935 and 1936 was supervisor of the statis-
tical department of the Continental Insurance Company
(Moeckel, II, 305) in its New York office (Henne, I, 47).
He is not an executive (Moeckel, II, 306).
63. Thomas C. Moore: now is (Dent, II, 264) and
in 1935 and 1936 was vice-president and manager of
the Potomac Insurance Company (Moore, I, 529).
N.
64. Everett W. Nourse, New York: now is and in
1935 and 1936 was United States manager of the London
Assurance Corporation group. He is president of the
Manhattan Insurance Company (Nourse, II, 122) and a
member of the Insurance Executives Association
(Nourse, II, 124).
P.
65. J. L. Parsons, New York City: now is and in
1935 and 1936 was president of Crum & Forster (Par-
sons, III, 317-318; Wyatt, II, 163).
14 WITNESSES
66. Theodore Plessner: president of the North Amer-
ican Insurance Company since December 19, 1938. In
1935 and 1936 he was its vice-president and treasurer
(Plessner, II, 145).
67. A. F. Powrie, Park Ridge, Illinois, a suburb of
Chicago: now is and since 1923 has been manager
of the western de ent of the Fire Association of Phila-
delphia group (Powrie, I, 109-110; Lane, I, 363). He is
not an accountant (Powrie, I, 127).
R.
68. Charles A. Reekie: now is and in 1935 and
1936 was vice-president and secretary of the Detroit Fire
and Marine Insurance Company (Reekie, I, 212).
69. W. R. Reilly: assistant secretary of the Dubuque
Fire and Marine Insurance Company, acting under Mr.
Weiser (Reilly, I, 228).
70. Gustavus Remak, Jr.: president of The Insur-
ance Company of the State of Pennsylvania continu-
ously since September 1, 1913 (Remak, II, 220).
71. John J. P. Rodgers: now is and in 1935 and
1936 was vice-president and treasurer of The Insurance
Company of the State of Pennsylvania (Rodgers, II,
225; Remak, II, 220).
S
72. Robert D. Safford, West Hartford, Connecticut:
now is and in 1935 and 1936 was vice-president and as-
sistant secretary of the Travelers Fire Insurance Com-
pany (Safford, III, 43; Ewing, III, 26). He has charge
of its western department (Ewing, III, 30).
73. Frank A. Schlesinger, Springfield, Massachu-
setts: treasurer of three companies of the Springfield
Fire and Marine group and assistant treasurer of a non-
resident subsidiary, namely the Michigan Fire and Marine.
Since 1935 his position has been —— with the New
England. He was elected treasurer of that company about
two years ago (Schlesinger, II, 528-529).
74. Cecil F. Shallcross: United States manager for
the North British and Mercantile Insurance Company,
and president of the Commonwealth Insurance Company
of New York, the Homeland Insurance Company, the
WITNESSES 15
Mercantile Insurance Company of America and the Penn-
sylvania Fire Insurance Company of Philadelphia (Shall-
cross, II, 342).
75. C. A. Siedel: until August, 1935, he was assist-
ant secretary of the Stuyvesant Insurance Company.
Since then he has been its secretary (Siedel, II, 28).
76. Frank M. Smalley: now is and in 1935 and 1936
was president of the Glens Falls Insurance Company and
of the Commerce Insurance Company (Smalley, II, 37).
77. J.D. Smart: now is and since last September has
been president of the New Hampshire Fire Insurance
Company and of the Granite State Insurance Company.
In 1935 and 1936 he was vice-president of the New Hamp-
shire Fire Insurance Company and secretary of the Granite
State Insurance Company (Smart, Ill, 115).
78, Charles H. Smith, Chicago: in 1935 and 1936 he
was the assistant general agent of the Hartford Fire In-
Company and the Citizens Insurance Company
(Smith, I, 334). He has served continuously as a member
of the Subscribers Actuarial Committee since June, 1937
(Smith, I, 334).
79. Clyde P. Smith: now is and in 1935 and 1936 was
secretary of the Hartford Fire Insurance Company (Smith,
III, 30, 38-39) and of the Citizens Insurance Company
and the New York Underwriters. He is assistant secre-
tary of the Northwestern Fire and Marine and Twin City
Insurance Companies (Smith, III, 38). He is a bookkeeper
(Smith, III, 39).
80. Paul B. Sommers, Maplewood, New Jersey: now
is and in 1935 and 1936 was president of the American
Insurance Company and Columbia Fire Insurance Com-
pany (Sommers, II, 131-132).
81. George W. Swallow: now is and in 1935 was
secretary-treasurer of the New Hampshire Fire Insurance
Company, and secretary of the Granite State Insurance
Company (Swallow, III, 126).
T.
82. William H. Talcott: auditor of the Scottish
Union and National Insurance Company (Talcott, III, 152).
16 WITNESSES
83. A. T. Tamblyn: now is and has been president
of the Lincoln Fire Insurance Company (Tamblyn, II,
299) which company took over the Chicago Fire and Ma-
rine and Presidential Fire and Marine Companies at the
end of 1931 (Tamblyn, II, 300).
84. Paul W. Terry, St. Louis: now is and since Oc-
tober, 1919, has been manager of the Missouri Inspection
Bureau (Terry, III, 372).
85. John M. Thomas: now is and in 1935 and 1936
was president of the National Union Fire Insurance Com-
pany (Thomas, II, 243).
86. Oswald Tregaskis, New York City: now is and
in 1935 and 1936 was manager of the United States
branch of The Sun Insurance Office and president of the
Patriotic Insurance Company (Tregaskis, II, 16).
V.
87. John R. Van Horne: secretary of Globe & Rutgers
Insurance Company. In 1935 and 1936 he was resident
counsel of the company (Van Horne, I, 453, 455).
He was in the office of the company in 1936 (Van Horne,
I, 454).
88. J. H. Vreeland: United States manager of the
Scottish Union and National Insurance Company since
1920, and president of the American Union since its or-
ganization which was prior to 1935 (Vreeland, II, 461-
462).
W.
89. Raymond Waldron, Detroit, Michigan: has been
vice-president of the Detroit Fire and Marine Insurance
Company since 1935. So far as that company’s activities
were concerned the Missouri Fire rate litigation was un-
der his jurisdiction (Waldron, I, 206). His sole connection
with the group was with the Detroit Fire and Marine In-
surance Company (Waldron, I, 211).
90. Harold Warner, Forest Hills, New York: now
is and in 1935 and 1936 was United States manager of
the Royal Insurance Company and of the Liverpool and
London and Globe Insurance Company, and president of
the Federal Union Insurance Company and the Star In-
WITNESSES 17
surance Company and of the Newark and the Queen In-
surance Companies (Warner, III, 351).
91. H. F. Waterman: now is and in 1935 and 1936
was secretary of the Agricultural Insurance Company
(Waterman, II, 54).
92. Robert C. Weigel: in 1935 and 1936 was secre-
tary and comptroller of the Rhode Island Insurance Com-
and of the Merchants Insurance Company of Provi-
dence (Weigel, III, 1).
93. S. F. Weiser, Dubuque, Iowa: now is and in 1935
was secretary of the Fire and Marine Insurance Company
and of the National Reserve Insurance Company (Weiser,
I, 213, 222). He is in active management of these com-
panies (Weiser, I, 222).
94. Henry P. Whitman: vice-president of the Phoenix
Insurance Company (Whitman, Ill, 127).
95. Herman L. Wilkins: was secretary-treasurer of
Importers and Exporters Insurance Company in 1935 and
1936. He ended his connection with this company on
April 30, 1937 (Wilkins, Il, 100).
96. Walter D. Williams, Rockford, Illinois: is retired
from active work, but was for many years vice-president
(Williams, I, 70-71; Hobbs, I, 5), and manager of the west-
ern department of the Security Insurance Company of
New Haven, and for the last three years was president
of the company. He was in charge of the western de-
partment for both the companies and for its affiliated com-
y known as the East and West. He retired May 1,
1939 (Williams, I, 71). He was a member of the Sub-
scribers Actuarial Committee throughout the year 1935
and retired in 1937 (Williams, I, 71, 89).
97. Henry J. Wyatt: now is and in 1935 and 1936 was
connected with a management group, namely, the Crum
and Forster group (Wyatt, II, 162), and vice-president of
“the companies” (Wyatt, Il, 163).
Il.
INSURANCE GROUPS.
A great many insurance companies are operated in
groups, each company having the same or nearly the same
officers and having the same office and employes. The
group is usually known by the name of the oldest or
largest company in the group.
COMPANY GROUPS.
Defendant’s Exhibit 320 is a list of the various plain-
tiff companies in these 137 cases showing the number of
each individual case and the companies grouped as to
their various affiliations as the groups existed in 1935
and 1936 as was testified to by the various witnesses. It
was agreed that except as otherwise specifically shown
by the record the companies so grouped are under common
management (III, 326-7). Said Defendant’s Exhibit 320
(III, 327) is as follows:
“List OF PLAINTIFF COMPANIES SHOWING NUMBER OF EACH
CASE AND GrouP AFFILIATIONS.
( 1) American Insurance Company No. 270
Columbia Fire Insurance Company No. 296
( 2) Aetna Insurance Company No. 273
The World Fire and Marine Insur-
ance Company No. 422
( 3) Agricultural Insurance Company No. 271
( 4) Atlas Assurance Company, Ltd. No, 280
5) Automobile Insurance Com of Hart-
i: ford ited No. 281
Standard Fire Insurance Company of
Connecticut No. 400
( 6) Bankers and Shippers Insurance Com-
pany No, 282
New Jersey Insurance Company No. 364
Pacific Fire Insurance Company No. 377
Boston Insurance Company No. 283
. Old Colony Insurance Company No. 375
INSURANCE GROUPS
Caledonian Insurance Company
Camden Fire Insurance Association
Chicago Fire and Marine Insurance Com-
pany
Presidential Fire and Marine Insur-
ance Company
7 ata Union Assurance Company,
American Central Insurance Company
California Insurance Company
Commercial Union Fire Insurance Com-
pany
Palatine Insurance Company, Ltd.
Union Assurance Society, Ltd.
Continental Insurance Company
American Eagle Fire Insurance Company
Fidelity-Phenix Fire Insurance Company
First American Fire Insurance Company
Niagara Fire Insurance Company
Dubuque Fire and Marine Insurance
Company
National Reserve Insurance Company
Eagle Star and British Dominions Insur-
ance Company
Fire Association of Philadelphia
Lumbermen’s Insurance Company
Reliance Insurance Company of Philadel-
phia
Victory Insurance Company
Fireman’s Fund Insurance Company
Home Fire and Marine Insurance Com-
pany
Firemen’s Insurance Company
Concordia Fire Insurance Company
Girard Fire and Marine Insurance Com-
pany
Mechanics Insurance Company of Phila-
delphia
Milwaukee Mechanics Insurance Com-
pany
(21)
(22)
(23)
(24)
(25)
(26)
INSURANCE GROUPS
National Ben Franklin Fire Insurance
Company
Superior Fire Insurance Company
Glens Falls Insurance Company
Commerce Insurance Company
Globe and Rutgers Fire Insurance Com-
pany
Great American Insurance Company
American Alliance Insurance Company
County Fire Insurance Company
Detroit Fire and Marine Insurance Com-
pany
Massachusetts: Fire and Marine Insur-
ance Company
Hanover Fire Insurance Company
Hartford Fire Insurance Company
Citizens Insurance Company
New York Underwriters Insurance Com-
pany
Northwestern Fire and Marine Insurance
Company
Twin City Fire Insurance Company
The Home Insurance Company
City of New York Insurance Company
Franklin Fire Insurance Company
National Liberty Insurance Company of
America
Importers and Exporters Insurance Com-
pany | |
Insurance Company of North America
The Alliance Insurance Company
National Security Fire Insurance Com-
pany
Philadelphia Fire and Marine Insurance
Company
Insurance Company of the State of Penn-
. sylvania
No. 354
No. 406
No. 321
No. 297
No. 322
No. 324
No. 275
No. 304
No. 305
No. 345
No. 326
No. 327
No. 293
No. 366
No. 372
No. 411
No. 328
No. 294
No. 318
No. 356
No. 332
No. 334
No. 274
No. 358
No. 381
No. 335
(27)
(28)
(29)
(30)
(31)
(32)
(33)
(34)
(35)
(36)
(37)
(38)
(39)
CO)
INSURANCE GROUPS
The London Assurance Corporation
Manhattan Fire and Marine Insurance
Company
Union Fire Insurance Company
London and Lancashire Insurance Com-
pany, Ltd.
The Law Union and Rock Insurance Com-
pany, Ltd.
Orient Insurance Company
Safeguard Insurance Company
Merchants Fire Assurance Corporation of
New York
Merchants Fire Insurance Company
a Fire Insurance Company of Hart-
or
Franklin National Insurance Company
Mechanics and Traders Insurance Com-
pany
Transcontinental Insurance Company
National Union Fire Insurance Company
New Hampshire Fire Insurance Company
Granite State Fire Insurance Company
The Northern Assurance Company, Ltd.
London and Scottish Assurance Corpora-
tion, Ltd.
Northern Insurance Company
— Union Fire Insurance Society,
The Eagle Fire Company of New York
Phoenix Assurance Company, Ltd.
Columbia Insurance Company
Imperial Assurance Company
United Firemen’s Insurance Company
Potomac Insurance Company
Providence Washington Insurance Com-
pany
The Phoenix Insurance Company
Connecticut Fire Insurance Company
oe
21
No. 339
No. 344
No. 413
No. 340
No. 336
No. 376
No. 394
No. 348
No. 349
No. 355
No. 319
No. 425
No. 409
No. 359
No. 363
No. 323
No. 369
No. 342
No. 370
No. 374
No. 307
No. 382
No. 295
No. 331
No. 414
No. 426
No. 386
No. 383
No. 302
INSURANCE GROUPS
Equitable Fire and Marine Insurance
Company
Minneapolis Fire and Marine Insurance
Company
Central States Fire Insurance Company
Rhode Island Insurance Company
Guaranty Fire Insurance Company
Merchants Insurance Company
Royal Exchange Assurance
Provident Fire Insurance Company
The State Assurance Company, Ltd.
Royal Insurance Company, Ltd.
Federal Union Insurance Company
Liverpool and London and Globe Insurance
Company, Ltd.
The Newark Fire Insurance Company
Queen Insurance Company of America
Star Insurance Company of America
St. Paul Fire and Marine Insurance Com-
pany
Mercury Insurance Company
Scottish Union and National Insurance
Company
American Union Insurance Company
Security Insurance Company of New
Haven
East and West Insurance Company
Springfield Fire and Marine Insurance
Company
Michigan Fire and Marine Insurance Com-
pany
New England Fire Insurance Company
Sentinel Fire Insurance Company
Stuyvesant Insurance Company
Standard Fire Insurance Company of New
_ Jersey
Sun Insurance Office, Ltd.
Patriotic Insurance Company of America
No. 310
No. 383
No. 383
No. 391
No. 325
No. 347
No. 392
No. 387
No. 403
No. 393
No. 312
No. 338
No. 361
No. 389
No. 402
No. 395
No. 350
No. 396
No. 279
No. 397
No. 309
No. 399
No. 351
No. 362
No. 398
No. 404
No. 401
No. 405
No. 379
INSURANCE GROUPS
Svea Fire and Life Insurance Company
Hudson Insurance Company
Tokio Marine and Fire Insurance Com-
pany, Ltd.
The Travelers Fire Insurance Company
Western Fire Insurance Company
Yorkshire Insurance Company, Ltd.
London and Provincial Marine and Gen-
eral Insurance Company, Ltd.
Crum and Forster
British America Assurance Company
North River Insurance Company
United States Fire Insurance Company
Westchester Fire Insurance Company
Western Assurance Company
United States Merchants and Shippers In-
surance Company
(57) Underwriters Grain Association
(This is an impounding account solely.)”
The evidence supports the grouping of Companies
shown by Exhibit 320: -
Group 1. Sommers, ll, 132. Group 2. McCain,
Ill, 331. Group 3. Waterman, II, 54. Group 4.
Martin (R. R.), I, 1. Group 5. Hooker, Ill, 130.
Group 6. Bowden, Il, 75. Group 7. Dominick, II,
490; Hedge, II, 517. Group 8. Clark (R. R.), Hl,
415. Group 9. Gilliams, II, 110. Group 10.
Tamblyn, II, 299. Group 11. Koeckert, I, 495. Group
12. Henne, I, 57, 65; Moeckel, II, 305; Culver, Ill,
397. Group 13. Weiser, I, 213. Group 14, Casper,
II, 106. Group 15. Powrie, I, 109; Lane, I, 363.
Group 16. Buck, I, 231. Group 17. Clark (H. A.),
I, 249; Cooney, III, 14. Group 18. Smalley, Il, 37.
Group 19. Van Horne, I, 453; Hubbard, II, 7. Group
20. Koop, I, 393; Waldron, I, 206. Group 21. Hubbard,
II, 9. Group 22. Smith (C. H.), I, 334; Bissell, II,
442. Group 23. Kurth, I, 423. Group 24. Wilkins,
24
INSURANCE GROUPS
II, 100; Barry, II, 117. Group 25. Catlin, II, 271.
Group 26. Remak, II, 220; Rodgers, II, 225. Group 27,
Nourse, II, 122; Maasen, II, 343. Group 28. Claussen,
I, 317; Kingan, III, 18. Group 29. Brady, I, 371.
Group 30. Gardner, III, 297. Group 31. Bell, I, 137;
Layton, III, 75. Group 32. Thomas, II, 243. Group
33. Smart, III, 115; Swallow, III, 126. Group 34,
Barbour, I, 339. Group 35. Plessner, II, 145. Group
36. Darlington, II, 288. Group 37. Irvine, II, 200,
Group 38. Dent, II, 264; Moore, I, 529. Group 39.
Cashel, I, 315; Luce, II, 519. Group 40. Long, III,
84; Whitman, III, 128. Group 41. Weigel, III, 1.
Group 42. Koenig, II, 68; Elwell, III, 415. Group 43.
Cartlidge, I, 462; Warner, III, 351. Group 44. Mc-
Kown, I, 166; Dosdall, I, 168. Group 45. Vreeland,
II, 462; Talcott, III, 152. Group 46. Williams, I, 71.
Group 47. Harding, I, 279; Schlesinger, II, 529. Group
48. Siedel, I, 28. Group 49. Breen, I, 383. Group
50. Tregaskis, II, 16. Group 51. Allen, II, 153.
Group 52. Kline, II, 184; Baker, II, 218. Group 53.
Ewing, III, 26; Safford, III, 43. Group 54. Duboc,
III, 255. Group 55. Martin (F. B.), II, 190. Group
56. Wyatt, Il, 162; Parsons, III, 318. Group 57.
Lerch, I, 306.
CoopERATIVE ACTIVITIES 25
III.
CO-OPERATIVE ACTIVITIES.
THE NATION2!: BOARD AND LOCAL BOARDS.
The National Board is the National Board of Fire
Underwriters. The Local Boards are those to which the
ies have to contribute for organization purposes
to keep their organization going (Koeckert, I, 505). The
National Board has, as part of its service, a very extensive
legal department (Koeckert, I, 503).
INSURANCE EXECUTIVES ASSOCIATION.
This association was organized on May 1, 1932 (Er-
skine, Il, 359; Haid, II, 373), and still continues. Its of-
fices are in New York where the New York heertag this
‘proceeding was held. Its only executives are Mr. Haid
and Mr. Erskine. Its other employes are secretarial and
stenographic. That was the situation in 1935 (Erskine, II,
359). No prior organization performed substantially the
same functions (Haid, II, 374) after it was formed it
opened offices and started to work with Mr. Haid and Mr.
krskine as its salaried executives (Haid, II, 374).
Mr. Haid, the president (see witnesses), is the em-
ploye of insurance executives. Under his agreement of
employment in 1932, he was requested to sell the stock
that he had in any insurance company and to not there-
after be a stockholder in any insurance company
so long as he held his position, which he did. He is not,
and since 1932 has not been, a director or an officer in
any fire insurance company, and has not been an agent for
any fire insurance company, except as might be inferred
— his being president of this association (Haid, I,
This association is a convenient vehicle for looking
after those things where the insurance companies have a
common interest. A good many of the activities of the
association are and have been carried out through the or-
ganizations which are set up especially for some partic-
ular jurisdiction, but these are sometimes confined to
a particular territory and sometimes to a particular branch
of activity; whereas, the executives have to be interested
in all of the activities in all of the territory. That resulted
26 COOPERATIVE ACTIVITIES
in, or at least it had something to do with, the formation
of this association (Erskine, II, 357-358).
This association is used as a sort of working forum in
which matters of general interest to the stock fire insur-
ance business may be considered by its members. It is a
sort of clearing house of information in matters of that
kind, and of trouble. It aids in developing policies on
things that affect the various insurance companies in com-
mon. It has a board of trustees (who rotate) of fifteen
members (Haid, II, 374).
Defendant’s Exhibit 207 (Haid, II, 407) is a list of
the trustees of the Insurance Executives’ Association for
the year 1935. It shows that such trustees were as follows:
C. W. Bailey Edward Milligan
R. P. Barbour Victor Roth
R. M. Bissell Benjamin Rush
W. H. Koop C. F. Shallcross
Wilfred Kurth Earnest Sturm
O. E. Lane Harold Warner
F. D. Layton E. W. West
W. Ross McCain
Defendant’s Exhibit 208 (Haid, II, 407-408) shows the
trustees of the association for the year 1936. It shows
that the executives were the same as in 1935, except that
John M. Thomas had succeeded E. W. West.
In order to be a member of this association a man
has to be a chief executive with a rank of president, or
vice president of an American company or with the title
of United States manager or United States assistant man-
ager of a foreign company, due to the fact that so far as
a foreign company is concerned, the United States man-
ager is the chief officer in America. The companies with
which these men are connected must be affiliated with
the major regional organizations of the country, namely:
The Western Underwriters’ Association, the Eastern Un-
derwriters’ Association, the Southeastern Underwriters’
Association, the Board of Fire Underwriters of the Pa-
cific and the National Automobile Underwriters’ Associa-
tion. They have to be what they deem “organization com-
panies” (Erskine II, 355-356.
The purposes of the organization are set forth in the
first paragraph of its articles of association (Defendant’s
Exhibit 204, II, 360). They are as follows:
CoopEeRATIVE ACTIVITIES 27
“(a) To maintain among its members a spirit of
loyalty to obligations, to establish the practice of fair deal-
ing and the observance of ethical principles in compe-
tition with one another, and to support all territorial and
special organizations which shall be listed by the board
of trustees and of which companies represented in the
organization are or shall become members,
“(b) to bring about improvements, reforms, and
economies in the methods and practice of conducting the
business of fire insurance and its allied lines, so that
the methods for making rates may be simpler and more
economical; that rates may be better adapted to the
needs of various localities, classes of business and individ-
ual owners; that forms of coverage better suited to the
changing conditions of business and manufacture
devised; and in general that the operations of compa-
nies may be more efficiently conducted and better service
rendered to the insuring public, and
“(c) to promote the interests of stock insurance com-
panies” (Defendant’s Exhibit 204, II, 360; Erskine, Il, 356-
357). Mr. Erskine believes that this association has never
done anything contrary or in opposition to those limita-
tions upon its powers (Erskine, II, 371).
The membership of the association at — consists
of 38 executives (Haid, II, 374; Erskine, II, 71) who repre-
sent more than one hundred companies (Haid, Il, 374).
Witness does not know how many companies they repre-
sent, but he would judge around 125. Companies in
addition to these 125 were in the Missouri litigation.
great majority of the 137 companies involved in the fed-
eral court litigation were represented by executives in
this association (Erskine, II, 371-372).
Defendant’s Exhibit 209 (II, 408-409) is a list of
companies that were plaintiffs in the Missouri rate cases
in the federal court which were not affiliated with the
Insurance Executives Association. They are the fol-
lowing.
MISSOURI RATE CASE IN THE FEDERAL
WITH THE INSURANCE
British America Assurance Company
Bankers & Shippers Insurance Company
Camden Fire Insurance Association
Chicago Fire & Marine Insurance Co.
28 COOPERATIVE ACTIVITIES
Concordia Fire Insurance Co. of Milwaukee
Dubuque Fire & Marine Insurance Co.
Firemen’s Insurance Company
Girard Fire & Marine Insurance Co.
Globe & Rutgers Fire Insurance Company
Hudson Insurance Company
Importers & Exporters Insurance Company
The Law, Union & Rock Insurance Co., Ltd.
London & Lancashire Insurance Co., Ltd.
Mechanics Insurance Co. of Philadelphia
Merchants Fire Assurance Corporation of New York
Merchants Fire Insurance Company, Denver
Milwaukee Mechanics Insurance Company
National Ben Franklin Fire Insurance Co.
National Reserve Insurance Company
New Jersey Insurance Company
Northern Insurance Company
North River Insurance Company
Orient Insurance Company
Pacific Fire Insurance Company
Patriotic Insurance Company of America
Presidential Fire and Marine Insurance Company
Safeguard Insurance Company
Standard Fire Insurance Company of New Jersey
Stuyvesant Insurance Company
Sun Insurance Office, Ltd.
Superior Fire Insurance Company
Tokio Marine and Fire Insurance Co., Ltd.
Transcontinental Insurance Company
United States Fire Insurance Co.
United States Merchants and Shippers Insurance Co.
Westchester Fire Insurance Company
Western Assurance Company
Potomac Insurance Co. of the District of Columbia
Svea Fire and Life Insurance Company”
The Insurance Executives Association and its paid
officers represented those executives who could have
taken charge of the litigation if they had desired to do
so, or had thought there. was any reason to do so, but
witness would say that .the officers and employees of
CoopeRATIVE ACTIVITIES 29
the Insurance Executives Association did not attempt to
keep track of what was going on in Missouri with the
rate litigation. He does not think that any particular
consideration was given to the Missouri situation. The
Executives Association did not receive the direct reports
as to what was going on. If any report came, it was the
same kind of a report that might have been sent or sub-
mitted to each of the companies. The Insurance Execu-
tives Association did not request any such report. Wit-
ness, the secretary of the association, paid no attention
to the litigation, and he does not believe that the presi-
dent of that association did (Erskine, II, 358).
The association does not have any control over any in-
surance business in any way at all. It does not actually
transact any insurance business whatever. The only con-
trol that it has over any operation of the insurance busi-
ness is suggestions to the so-called regional organization.
They do a lot of talking and hope they can help each other
(Culver, III, 413).
This association did not have anything to do with
the direction of the Missouri rate litigation down to the
spring of 1935 (Haid, II, 375; Erskine, II, 347). It had
no management or control whatever over that litigation
(Culver, III, 413).
It has nothing to do with rates or.litigation anywhere
in the United States. It has never done anything in
connection with rates or rate making or raising or lower
ing rates or looking after lawsuits for any companies. Its
activities do not embrace those things. It uses the long
distance telephone extensively (Erskine, II, 354-355).
Until 1936 witness had had no communication from
Mr. Haid, or ever heard of him having anything to do
with the Missouri litigation (Luce, II, 523). Mr. Haid
was not a member of the Actuarial Committee, and wit-
ness thinks he was not connected in any way with his
company’s litigation or suits (Smart, III, 120). Mr.
Charles R. Street was not a member of this association,
but Mr. Koop, the president of his companies, was a
member (Haid, Il, 374). The association’s connection
with the Subscribers Actuarial Committee is that, in a
general way, this association has contacts with all the
various regional and rating organizations, including the
Western Actuarial Bureau (Haid, II, 375).
30 CoopERATIVE ACTIVITIES
WESTERN INSURANCE BUREAU.
This is an organization, composed of about thirty com-
panies, for the purpose of cooperating in good underwit-
ing practices, dealing with agents (Clark, I, 278; Weiser,
I, 214). Mr. Clark’s companies and the Dubuque were
the only companies in this litigation that were members
of this bureau (Clark, I, 278; Weiser, I, 214).
WESTERN UNDERWRITERS ASSOCIATION.
This is a large organization which represents most
of the companies. These two last named associations con-
form in their agency contracts, with some difference with
respect to commissions (Clark, I, 278). The Western
Underwriters Association is not a rating bureau. It has
nothing whatever to do with rating matters (Henne,
I, 60).
The Governing Committee is the executive commit-
tee of the Western Underwriters Association. It is the
executive committee or the board of directors of the
Western Underwriters Association, which is a trade as-
pool their common efforts on matters that affect stock
fire insurance companies in general (Henne, I, 60).
MISSOURI INSPECTION BUREAU.
The Missouri Inspection Bureau is Paul W. Terry, do-
ing business as the Missouri Inspection Bureau. It is
unincorporated. The purpose of the bureau is maintain-
ing fire insurance rates, filing of schedules for various
companies as an actuarial bureau under the Missouri Rat-
ing Act. It prepares and files general basis schedules,
including basic charges, charges, credits, terms, conditions
and riders, and permits for the doing of fire and tornado
insurance business in the State of Missouri. For its com-
pensation it makes assessments on the members of the
bureau. It has a more or less set overhead expense for
the ordinary routine. Every company is assessed on the
basis of its premiums written in Missouri and that was
the situation in 1935 and 1936. The bureau has been
under Mr. Terry’s direction since October, 1919 (Terry,
Ill, 372-373). A few witnesses mentioned that their com-
panies were members of or subscribers to this bureau
(Duboe, III, 255; Gardner, III, 297; Bowden, II, 92).
CoopPERATIVE ACTIVITIES 31
_ This bureau makes a general assessment every year
which includes excess expenses over the regular bureau
expenses (Terry, III, 384).
SUBSCRIBERS ACTUARIAL COMMITTEE.
1.
Organization, Functions, Meetings, Officers and Members.
The committee was originally formed in 1915 for the
purpose of working out the details of the method of writ-
ing insurance for more than one (1) year at rates reduced
from the annual rates (Hobbs, I, 6). The duties and
obligations of the Committee are not governed by any
Constitution, by-laws or rules, but with the passage of
time it has been given more work because it represents
all interests (Hobbs, I, 7). By common consent the mat-
ter of term rates and fire insurance rates was delegated
through the bureau to this Actuarial Committee (Hobbs,
I, 7). It held meetings regarding this case during the
ncy of the rate suits and the Secretary kept a record
thereof, largely for his guidance as to what transpired
and what needed to be done, so far as he was concerned,
he being the man who handled the details of the work
(Hobbs, I, 7). This committee always meets in Chicago.
Witness has never known of a meeting elsewhere, ex-
cept, perhaps, in White Sulphur sometimes in the spring
or the fall (Koeckert, I, 516). The individual state com-
mittees of managing underwriters for each state to whom
the bureaus looked for advice were abandoned, and the
Subscribers Committee was given the task, in addition
to the term rule, of supervising the activities of the
bureaus with particular reference to their administrative
and financial problems. There was a feeling that by so
doing the entire operations in which the companies had
a common interest could be more economically handled.
As that work developed, the Committee, being the only
one representing the common interests of all companies
subscribing to these bureaus, all problems relating to
16) bureaus were referred to the Committee (Hobbs,
J. V. Parker, now dead (Hobbs, I, 3), was Secretary
(Terry, III, 380; Hobbs, I, 3; Folonie, III, 186) and was
versed in rate making (Folonie, III, 186). He was Mr.
Hobb’s predecessor (Hobbs, I, 3; Folonie, III, 186). Mr.
Parker was also manager of the Western Actuarial
32 CooPERATIVE ACTIVITIES
Bureau, and was consulting actuary to Mr. Terry of the
Missouri Inspection Bureau (Terry, III, 380). Mr. CR
Street was Chairman (Hobbs, I, 4) of the Subscribers’
Actuarial Committee (Hobbs, I, 4). The committee is
elected at the semi-annual meeting of the Subscribers to
the rating bureau. These subscribers voluntarily sub.
scribe to the bureau for their own purposes and are Fire
Insurance Companies, except that there are some casualty
companies belonging to the bureau because of the statu-
tory requirements relating to automobile business (Hobbs,
I, 5). The committee is composed of men representing
all of the different organizations that support the move.
ment (Duboc, III, 283-4).
In the first half of 1935 (Hobbs, I, 4) the Actuarial
ttee was composed of the following executives of
the following groups of companies (Hobbs, I, 5) (See De-
fendants’ Exhibit 320, “II, Insurance Groups” and
Witnesses’’).
CoMPANIES
Group 11
. Commercial Union As-
surance Company, Ltd.
- American Central Insur-
ance Company
. California Insurance
Company
- Commercial Union Fire
Insurance Company
. Palatine Insurance Com-
pany, Ltd.
. Union Assurance Society,
Ltd.
Group 12
. Continental
Company
. American Eagle Fire In-
surance Company
. Fidelity-Phenix Fire In-
surance Company
Insurance
EXECUTIVE
F. W. Koeckert, United
States manager of the
Commercial Union Assur-
ance Company, Ltd., the
Palatine Insurance Com-
pany, Ltd., and the Union
ance Company;
president of the Commer-
cial Fire Insurance Com-
pany and the American
Central Insurance Com-
pany, and manager of the
California Insurance
Company.
E. A. Henne, Vice-President
and manager of Western
department.
CooPERATIVE ACTIVITIES
CoMPANIES
4, First American Fire In-
5.
surance Company
Niagara Fire Insurance
Company
Group 17
. Firemen’s Insurance
Com
pany
. Concordia Fire Insurance
Company
. Girard Fire and Marine
Insurance Company
. Mechanics Insurance
Company of Philadelphia
._ Milwaukee Mechanic’s
Insurance Company
. National Ben Franklin
Fire Insurance Company
. Superior Fire Insurance
Company
Group 31
. National Fire Insurance
Company of Hartford
. Franklin National Insur-
ance Company
. Mechanic’s and Traders
Insurance Company
. Transcontinental Insur-
ance Company
Group 46
. Security Insurance Com-
pany of New Haven
. East and West Insurance
Company
Group 47 ©
. Springfield Fire and Ma-
rine Insurance Company
. Michigan Fire and Ma-
rine Insurance Company
John C. Harding,
EXECUTIVE
Herbert A. Clark, Vice-
president and manager
of Western department.
George H. Bell, manager of
the Western department.
Walter D. Williams, Vice-
president and manager of
the Western department.
Vice-
president and manager of
Western department.
34 COOPERATIVE ACTIVITIES
CoMPANIES EXECUTIVE
3. New England Fire and
Marine Insurance Com-
pany
. Sentinel Fire Insurance
Company
Group 20
- Great American Insur- Charles R. Street, Vice.
ance Company president and manager
- American Alliance Insur- for the Western depart-
ance Company ment except that he was
- County Fire Insurance not manager of the sep.
Company arate Western depart-
. Detroit Fire and Marine ment of the Detroit Fire
Insurance Company and Marine Insurance
. Massachusetts Fire and Company (See “Iv
Marine Insurance Com- Charles R. Street’’).
pany
Mr. H. A. Clark was a member of this committee
(Weiser, I, 216; Cooney, III, 17). He was the Western
Insurance Bureau member of the committee (Weiser, I,
216).
Mr. Williams attended the meetings of the Sub-
scribers Actuarial Committee very infrequently after he
commenced commuting between Rockford and New Haven
every other week, and finally he resigned because he could
not attend (Williams, I, 91). Mr. Koeckert met with the
committee as often as he could. He did not attend all of
the meetings (Koeckert, II, 517).
Neither Mr. Street nor any member of the Subscrib-
ers Actuarial Committee was a lawyer to witness’s knowl-
edge (Weiser, I, 227).
This committee acts only in an advisory capacity
(Henne, I, 23). It handled many other matters for the
companies besides the Missouri litigation (Luce, II, 522).
2.
Management of Rate Litigation.
This committee had charge of this litigation (Hobbs,
I, 7) for all the companies involved; so the activities of
the committee were for all the companies (Clark, I, 250).
It was placed in charge of this litigation at the time that
CoopERATIVE ACTIVITIES 35
the litigation developed (Henne, I, 20). It was handling
the Missouri Impounded Premium case (Weiser, I, 216).
So far as known to the president of the Insurance
Executives Association, the Subscribers Actuarial Com-
mittee directed the Missouri litigation from the time of
its inception (Haid, I, 375).
As Mr. Bissell understands and recalls, the suit was
originally authorized by the chief executives of the com-
Tt was a very important matter (Bissell, II, 454).
This litigation goes back a long way. Mr. Williams
thinks that the genesis of the litigation antedates his
membership on the committee, which began along in
1923, 1924 or 1925, and continued until December, 1937
(Williams, I, 71). He would say, in a very general sort
of a way, that this Actuarial Committee had charge of
the litigation as it has charge of all matters of common
interest, such as litigation (Williams, I, 72).
When Mr. Harding came on the Actuarial Commit-
tee in 1926, the Missouri rate litigation was pending.
Thereafter, the committee directed that litigation through
the attorneys (Harding, I, 280).
Mr. Bell first said that this committee was handling
this litigation for the companies (Bell, I, 137). Later he
said that he never had any telegrams or telephone calls
or letters from the executives of any other company re-
garding the bringing of those suits or the authority to
bring them or the authority to settle them. He never
had any personal, telegraphic, telephonic or written cor-
respondence with the executives of his own company
about bringing those suits in Missouri or about the set-
tlement of them until after it was over (Bell, I, 163).
Neither Mr. Harding nor any member of the commit-
tee, so far as he knows, either by. writing, telegraph,
telephone or personal communication, ever at any time
got word from any insurance company whatever, author-
izing or telling them that they could bind them in this
litigation or the settling of it (Harding, I, 299).
When the Subscribers Actuarial Bureau undertook
to handle the litigation, that was purely a self-appointed
‘and voluntary action on the part of the committee. Nei-
ther witness’s company nor his group of companies nor
any other companies so far as he knows, ever by tele-
phone, telegraph, letter, or personal vérbal request, ever
asked the Actuarial Bureau to handle this litigation (H.
Clark, I, 279).
36 CoopERATIVE ACTIVITIES
3.
Employment of Attorneys.
The attorneys for the companies were the firm of
Hicks and Folonie (Warner, III, 351; Henne, I, 21; Wit
liams, I, 72; Terry, III, 374), and Mr. Homer Berger was
the Kansas City Counsel (Williams, I, 72) or the Kansas
City firm of Morrison, Nugent, Wilder & Berger (Henne,
I, 21). The Committee engaged counsel for all of tu
companies engaged in that litigation (Hobbs, I, 7); namely,
R. J. Folonie and Mr. Homer Berger or Mr. Morrison, or
both (Hobbs, I, 15).
Mr. Folonie employed the firm of Morrison, Nugent,
Wylder & Berger with Mr. Street’s consent (Folonie, III,
160).
When the suits were started, Mr. Folonie employed
local or assistant counsel in Missouri. He first em-
ployed Morrison, Nugent, Wylder & Berger of Kansas
City (Folonie, III, 159). Mr. Folonie went to Kansas
City and made investigations and recommended the em-
ployment of this firm. He secured the approval of the
chairman and, presumably, the committee, to employ
them (Folonie, III, 160).
Thereafter additional counsel were employed from
time to time. Subsequently Honorable W. T. Ragland
of Jefferson City and Igoe, Carroll, Higgs & Keefe were
employed. Their employment was suggested by Mr.
Street. So far as Mr. Folonie knows, they were intimate
friends of Mr. McCormack, a St. Louis agent who recom-
mended the firm and stated that they would be highly
helpful, both because of their political connections and
because they had been friends of Mr. McCormack, who
was and had been president of the State Agents As-
sociation. He believed it would be highly desirable from
the agents’ standpoint if they were employed (Folonie,
III, 160-161).
Witness did not investigate the fitness of the St.
Louis firm, except perhaps to look in a directory or
something of that kind. He thinks he personally inter-
viewed them at the time he employed them. It is mostly
an impression, but Mr. Folonie believes they had been
contacted with reference to employment before he con-
tacted them. Mr. Street said they were very intimate
friends of Mr. McCormack, and that the latter wanted
them employed (Folonie, ITI, 161). The suit had been
CooPpERATIVE ACTIVITIES 37
in progress for some time, as Mr. Folonie recalls, before
either Judge Ragland or the St. Louis firm was employed.
They were employed some years prior to the compromise
agreement and prior to any negotiations resulting in the
compromise which was signed in May, 1935 (Folonie,
Il, 161). In later years possibly some more attorneys
came into the picture (Williams, I, 72). When Mr. Henne
came into the picture in 1932 the attorneys had been em-
ployed (Henne, I, 21).
So far as Mr. Hobbs knows the employment of the
lawyers to represent the companies was verbal. Mr. Fo-
lonie had represented the companies and witness thinks
his practice was very largely with the fire insurance com-
panies for a number of years. In questions of this kind
it is customary to discuss the problems and tell Mr. Fo-
lonie, or whoever the attorney may be, to handle the situa-
tion (Hobbs, I, 19). Mr. Folonie was employed in these
137 federal cases through the same source and by the
- game people. The federal cases may be considered as
one unit through one employment (Folonie, III, 159).
Mr. Henne could not give a direct answer to the
question as to whether the Subscribers Actuarial
Committee hired Hicks and Folonie and Mr. Berger
in the 137 suits in Missouri except this way:
Hicks and Folonie are the retaining counsel of the Sub-
scribers Actuarial Committee, or of the group of com-
panies known as the Western Underwriters Association.
They are counsel for a number of their activities. The
association would quite naturally refer this case to Mr.
Folonie and tell him to go ahead with it. Witness does
not know who told Hicks and Folonie and Mr. Berger to
bring these suits in the names of the 137 companies. He
does not recall that this was ever officially before the
committee for action. He would have to refer to the
records for that. He thinks the Missouri Inspection Bu-
reau sent out a general letter that this litigation was
started. He doesn’t recall its substance, but is sure that
would be the formal procedure (Henne, I, 69-70).
COOPERATION THROUGH COMMITTEES.
The smaller companies do a great deal of following
and very little leading (Casper, I, 116). An executive
of the Phoenix Assurance Company was asked whether,
when he looked back; he wondered why he treated the
whole thing (the insurance. rate settlement) - so. noncha-
lantly. He answered, “Yes and no”; that it is perhaps a
38 COOPERATIVE ACTIVITIES
peculiarity of their business that they frequently have
cases in litigation or loss cases where a number of com-
_ panies are interested, and usually one company is active
in the conduct of the case. It is usually the one that
has the biggest policy, and they rely upon it (Irvine,
II, 214-215). An executive of the National Union Com.
pany said that, knowing Mr. Street as he knew him, it
did not occur to him as at all unusual that Street did not
state what his arrangement was (concerning collection of
funds). The litigation had been running on since 1922,
and the present suit originated about 1929 or 1930. It had
become very involved and if a man attempted to keep
track of all those things he would not have any time
to attend to his daily duties. In his business they were
accustomed to leaving joint action to a committee. This
must necessarily be so. He thinks that the average per-
son, not in this business, fails to realize what a large
proportion of the insurance business is transacted on good
faith. It is not anything unusual when a matter, requir-
ing joint action by a lot of companies, comes up, to place
it in the hands of a committee and forget it, knowing
that ultimately you will get a correct account of any con-
tribution you may be called upon to make. That is an or-
dinary business transaction. They do not think anything
of it. Of necessity the rate litigation had to be deliv-
ered to a committee. He would do whatever the com-
mittee asked him to do. They are accustomed in their
business, on a complicated matter, to have a committee
handle it. They turn it over to a committee and forget
it (Thomas, II, 251-253). They assumed then and still
assume that when a committee representing one hundred
thirty odd companies is involved in litigation where no
individual can ever hope to keep track of it, they will do
just what the committee requests (Thomas, II, 263).
The companies have in their organization a number
of companies, 135, in some organizations 200. It is just
like the Congress of the United States, which is so large
that the main body cannot carry on the necessary functions;
so they appoint committees like the Ways and Means
Committee in Congress and the Rivers and Harbors Com-
mittee. When those committees go into the details of a
proposition and come back after a complete study of it
and recommend it to the main body, in nine cases out of
10 that is adopted the same way. The insurance organiza-
tion is run in the same way. They have a committee
(as the Subscribers Actuarial Committee) which is
CoopPpERATIVE ACTIVITIES 39
charged with handling that litigation. They are in close
touch with it all the time. As president of his group of
companies witness does not pretend to keep up with
the details of that at all. They leave that to “them” (the
committee). When that committee reports to them, and
a man of the standing of Mr. Street, who for thirty-five
or forty years had represented a company successfully, and
they think fairly and honorably in the West, makes a
recommendation to them it would not have made any spe-
cial difference whether he had asked for $5,000.00 or $15,-
000.00. They would have given it to him without question
(McCain, III, 338).
An executive of the Phoenix Assurance Company said
that the real explanation why he gave very, very little
attention to the matter is, he was following the leader.
He was assuming somebody else was checking up and some-
else was watching it to see that everything was
straight and all right. If he had had a big loss and
there had been a dozen, fifteen or twenty policies, but he
had a much bigger policy than anyone else, he surely
would have taken charge of the whole thing, and then he
would have treated everybody pro rata, and they would
kind of looked to him. But if he had had a little policy
and some other had had a great big loss on fire, the
chances are he would have followed the leader and as-
sumed they would have made a settlement if possible.
Their practice in matters of this kind is “what is so
and so doing?” As an outsider looking in, he can see
that the matter calls for some kind of an explanation. It
is the practice in the business. Very seldom that wit-
ness’ company or any other company is interested alone
in litigation, they are not solely interested. There is al-
ways a number of companies interested. There always
has to be somebody to take the responsibility to see that
the thing doesn’t go haywire. It is true that everybody
cannot rely upon somebody else. If it so happened that
witness’ companies had the principal interest, the largest
amount at stake, witness’ company would probably carry
on the case. They would either be checking it very
-closely or would be satisfied that somebody else was
checking it closely, on whose judgment they would be
content to rely but the chances are they would be doing
it themselves. In this particular case they felt they were
following the leader. and somebody else was looking after
“it; because they: always felt that their interest,.as com-
‘pared with some -other companies, was quite. small. (Ir-
‘vine, II, - 216-218.. ome Be
40 COOPERATIVE ACTIVITIES
It is generally conceded that in the insurance busi-
ness it is impossible for stock fire insurance ay ony to
operate entirely independently of each other. hey can
compete for the business, but even though they do so
they have a common interest in rates and in regulations
of various incidents. They have a common interest in
the adjustment of losses on account of the fact that large
risks are usually covered by a number of different com.
panies. It is either placed with a number of different
companies to begin with, or if the whole risk is placed
with one company, it is likely to be reinsured to keep
the risk spread. Regardless of the fact that the business
is competitive, the companies have many things in com-
mon. It is witness’ understanding that the Missouri rate
a was really delegated to a committee of five out
of Chicago. Witness presumes that the chief officers of
the fire insurance companies who brought the suits, if
they desired, could withdraw that control from that com-
mittee (Erskine, IT, 357-358).
When a committee that has charge of a matter in
which a lot of companies have a common interest, and
are looking after it in any way, and they send in a re-
quest for a contribution for expenses, they pay it and just
rely on the committee as making the proper request
(Smart, III, 126).
An executive of the Merchants Fire Insurance
Company who had sent a check to Mr. Street for expenses,
without knowing the expenses were not paid by the
trustees, was asked why he paid the money. He said
that, thinking back on his own reactions at the time, he
would say it was more a matter of psychology than of
any definite information. That psychology was built up
by the fact that the insurance business, since he has been
in it, probably depends on confidence and faith more
than anything else. It has been customary, ever since
he has been in the insurance business, to delegate ques-
tions where several companies are involved to a committee
or to an individual and follow what - j do, particularly,
say, in loss adjustments, the handling of delinquent agen-
cies, and other things which come a It has been built
over a long period of years, and is done constantly.
itness’ own thought and reaction was possibly due
simply to confidence in that manner of doing business and
the fact that they are in a very, iy, Sane business
and cannot investigate everything. ey have to dele-
gate matters to other people. In the case of this commit-
tee, they had handled the thing for years, and witness
CooPpERATIVE ACTIVITIES 41
had great confidence in Mr. Street and his ability. That
is about where his reasoning on the thing stopped (Gard-
ner, Il, 311).
If the Stuyvesant Insurance Company turns any liti-
gation over to a committee, it follows that committee
without argument (Siedel, II, 32). It has never with-
drawn from any committee (Siedel, II, 4).
So many things are handled by committees. There
may be a loss and maybe twenty-five companies involved.
Not every company would have its own representatives.
they have so many. There are committees, national
board; all that kind of things. Witness is not in the
underwriting end. He is in the financial end of it and
he just sees the book end. They have requests for ex-
penses, either in full or very frequently partial expenses
on things of that kind that are going through being set-
tled in committees, and in this case it struck witness that
this was one of those things that would probably “be
further, es oe
An executive of the Royal Insurance Company stated
that he absolutely considered the Missouri rate litigation
entirely out of his hands; that whatever its technical posi-
tion might be with the individual companies, when it
came to this group effort, this kind of combined effort of
137 companies, the actual authority had to be vested
someplace else (Warner, Ill, 371).
There are so many things handled by committees, na-
tional board, and there are other boards and things of
that kind all over. They meet, they may take action on
rates, maybe losses, claims maybe, on various things of
that kind. There are so many companies on those things
they have to have committees. There is perhaps a
board, we will say New England Insurance Exchange As-
sociation. There is a committee to act on certain matters
that come up. One of witness’s companies—perhaps one
of another New York company or something of that kind—
business where many companies are involved instead of
one. They do not duplicate each other’s work. It has
been done for years. They try to save expenses on that.
That sort of thing is very common. For forty years that
42 CoopeRATIVE ACTIVITIES
witness has been in the insurance business. there have
been committee matters and committee matters (C. P.
Smith, III, 37-38).
Where a number of fire insurance companies have a
common interest in some transaction they will appoint a
small committee to handle it on behalf of all the companies
interested. When you have a committee handle some.
thing for a large number of companies in which you are, as
one of the companies, interested, you accept something
from that committee without investigating it because you
know that in the end they will give you a full accounting
of everything that is done (C. P. Smith, III, 39).
Cuar.es R. STREET
IV.
CHARLES R. STREET.
Mr. Street lived in Chicago (Vreeland, II, 463; Koop, I,
394). He was chairman of the Subscribers Actuarial Com-
mittee (Dosdall, I, 169; Weigel, III, 12; Bell, I, 137; Weiser,
I, 226; McCain, III, 332; McKown, I, 166; Brady, I, 372;
Lerch, I, 309; Kurth, I, 437; Vreeland, II, 463; Clark, II,
416; Folonie, III, 160; Casper, II, 873) and vice-president
of the Great American (Clark, Il, 416; Waldron, I, 211;
Hobbs, I, 5; Brady, I, 372) and vice-president of all of the
companies in the Great American group (Waldron, I, 211;
Koop, I, 394-395), and Western manager of the Great
American (Clark, II, 416) and all of the companies be-
longing to that group, except the Detroit Fire and Marine
and the American National Insurance Companies. But
he was regarded as the dominating factor in the Western
territory and the other officers would follow his direc-
tions (Koop, I, 394-395).
The Companies of which he was vice-president were:
The Great American Insurance Company,
_ The American Alliance Insurance Company,
. The County Fire Insurance Company,
4. The Detroit Fire and Marine Insurance Com-
pany,
5. The Massachusetts Fire and Marine Insurance
Company,
6. The Rochester American Insurance Company,
(Koop, I, 394-395).
He represented all of the Companies in the group
in the Missouri rate litigation (Koop, I, 395).
Mr. Street conducted the negotiations in regard to
the compromise (Clark, I, 250). He was known to be in
charge of the Missouri rate litigation on behalf of the
Subscriber’s Committee. Everyone recognized that
and was glad to have him attend to it (Kurth, I, 425).
This litigation had gone over the term of three presidents
of the Home Insurance Company before Mr. Kurth. Mr.:
Street was known to be in charge of the Missouri rate
litigation on behalf of the Subscribers Committee in
Chicago. Everyone recognized that he was in charge of
44 CHARLES R. STREET
it and was glad to have him attend to it, because it was
getting on a lot of people’s nerves, the length of time
it had been going on (Kurth, I, 424-425). He was the
member of the committee that did most of the work and
most of the supervision of the litigation (Hobbs, I, 16),
He handled the whole thing (Culver, III, 415).
The Subscribers Actuarial Committee certainly did
give Mr. Street sole authority to negotiate a compromise
settlement of the litigation, and it put no restrictions on
his authority to witness’ recollection (Bell, I, 138),
When Street suggested a course of action, he being the
key man in the Missouri litigation, his requests were
acted upon (Kurth, I, 438).
' A member. of the Subscribers Committee, in reply
to an inquiry whether Mr. Street was in closer con-
nection with the litigation than the other members, re-
plied “He was not only in close connection, he was the
sole connection” (Harding, I, 280). The Subscribers
Committee handled the whole transaction, that is, Street
did (Safford, III, 67).
Mr. Street’s character and personality made him an
outstanding man (Nourse, II, 123). He occupied a most
unusual position in the business (Bell, I, 158). Probably
there was not another character like him in the busi-
ness (Koeckert, I, 523). Witness always admired him
(Moore, I, 540). Witness has been in the business 50
years, and to his knowledge, there has never in the his-
tory of the business been a man that occupied the same
position that Mr. Street did (Bell, I, 158).
Witness only met Mr. Street once or twice, but by
reputation witness thought he was a splendid, reputable
fellow and that witness’ companies were in good hands
(Tamblyn, II, 303). In 1935 and 1936 Mr. Street was
apparently held in high regard for honesty, integrity and
character by the high executives of the companies in-
volved in the federal litigation and by the fire insurance
fraternity generally (Folonie, III, 220). There was no
reason in the world to question his word. His reputation
was very good, highly satisfactory (Weigel, III, 12). Wit-
ness regarded him as a strictly honorable and honest man
(Lerch, I, 313). He was looked upon as one of the
most honorable, capable men that was ever in the fire
insurance business in this country (Bell, I, 158). No one
stood higher in respect, integrity, ability, honorable prac-
tices and willingness to work (Layton, III, 83). Witness
had known Mr. Street for thirty. or- thirty-five years and
CHARLES R. STREET 45
had never known him to do anything dishonest or dis-
honorable, and Mr. Street’s reputation bore out this opin-
ion (Lerch, I, 314). Witness thinks that, until these
developments came out about Mr. O’Malley, Mr. Street
had, for thirty or forty years, stood in the estimation of
the fire insurance companies and their executive officials
generally, without exception, in the highest regard as a
man of character, integrity, ability and great experience
in the fire insurance business; although there is, per-
haps, a number of people who did not like him personally
because he was a hard-boiled individual. He certainly
did possess witness’ absolute confidence so far as in-
tegrity, character and honesty were concerned. Witness
believes that he had the same of the entire fire insur-
ance fraternity (Safford, III, 73). Witness had im-
plicit confidence in him (Moore, I, 540). They all had
confidence in him (Dosdall, I, 187, 195). They had every
confidence in him (Kurth, I, 425). He had witness’ un-
bounded, absolute, unconditional confidence in all things.
Witness thinks he knew Mr. Street about twenty years,
up until the time he died. He absolutely had full con-
fidence in Mr. Street (Culver, III, 402). Witness held
him in the greatest esteem (Koeckert, I, 522). He was
very prominent in the Western Underwriters (Remak, II,
221). The Actuarial Committee permitted Mr. Street to
handle matters, only making formal reports to the com-
mittee, because they had the utmost confidence in him,
and because one man can do a better job in negotiations
and they thought Mr. Street was the man best qualified
for the job. It was well handled and witness was satis-
fied to leave it (Harding, I, 280-281).
Mr. Street felt that he knew more about certain
things than anyone else; that he knew more about the
Western business than anybody in the organization (Koop,
I, 406). Whenever anything was discussed in relation to
Missouri, he was the one who always discussed it (Nourse,
II, 123). He was a man who had a pretty fair opinion
of himself (Bissell, II, 445). He thought fairly well of
himself (McCain, III, 333).
It was his habit to grasp power (Bell, 1, 158).
Mr. Williams would say that Mr. Street was negotiating
the settlement of this litigation as chairman of the com-
mittee. In answer to the question, how it got out of
the committee’s hands and into Mr. Street’s hands, he
said he could not answer that question; that if you know
Mr. Street the question would answer itself. Mr. Street
46 CHARLES R. STREET
was an individualist. The committee did not surrender
anything, but Mr. Street was a man that did not consult
people; he just went uhead and did things (Williams, |,
73).
He was the sort of man who, if you appointed him
chairman of a committee, he was the committee (Nourse,
II, 123; Bissell, II, 445; Koeckert, I, 523). He was the
Actuarial Committee (Safford, III, 67). He had a yen for
that sort of thing (Harding, I, 280). Witness absolutely
knew that if Mr. Street was chairman of the Actuarial
Committee and the litigation was turned over to that
committee, Mr. Street would take charge of it (Nourse,
II, 123). He had a disposition in the committee to kind
of take things in his own hands and run them his own
way, and anybody that opposed him came out second
best (Bell, I, 158).
He was a man of few words (Warner, III, 354) he
did not very well brook cross-examination about what he
was doing (Koeckert, I, 522). He did not like to be
asked things, nor want to tell them; he would not tell
them (Koeckert, I, 522). He was not inclined to give any
information or make any explanation of anything (Lerch,
I, 313). He was a man that because of his high standing
in the business, because of his temperament and personal-
ity, was not inclined to divulge his plans in detail (Layton,
Ill, 77). He did not report to the Actuarial Committee;
he went through the form of doing so, but it was very
“formy” (Harding, I, 280). One hesitated to ask him any
questions, because you probably would not get the an-
swer (Warner, III, 354). Often they did not suggest
things to him because they felt, if they did, they would
get no answer (Koeckert, I, 522). When asked if he in-
quired of Mr. Street what the expenses of the litigation
were, witness said, “You don’t know Mr. Street * * * I
knew him” (Lerch, I, 313). It is probably true that the
Actuarial Committee did not ask Mr. Street what he was
doing because they did not believe he would tell if they
did (Harding, I, 280-281). If you undertook to say, “Now
just why are you doing this, Mr. Street, may I ask” —“You
leave that to me” (Koeckert, I, 523). Witness knew it
would be useless to ask Mr. Street anything about his
handling of the settlement. If he had, witness thinks Mr.
Street would have said, “I am in charge of this affair and
this is'money that is needed for litigation in Missouri”
(Lerch, I, 313-314). It is about right, that Mr. Street
would not give it if you did, and: then he would feel
CHARLES R. STREET 47
so hurt. He turned on witness on one occasion, not about
Missouri, and said ‘but since when don’t you trust me.”
Witness told Mr. Street he did trust him, that every
man in the business that he thought a lot of, trusted
him. The trouble was that Mr. Street had gotten to the
place where he had not trusted them; but they did not
go into anything that he was handling (Koeckert, I, 524).
Witness does not know that Mr. Street would not have
told him what he was doing if witness had asked, but
witness did not ask him because witness knew Mr. Street
was in charge of the litigation (Lerch, I, 314).
He was a man with very strong principles (Bell, 1,
157). He was a very impulsive, very blunt individual.
He stated exactly what he thought, and he did not mince
words about anything he had to say (Haid, II, 398).
445). He was that kind of dominating character that
never made witness feel badly, although at the moment
he was riding right over witness, who, as a boy, probably
tried to resist as a boy might; but you might as well re-
sist a stone wall (Moore, I, 541). His was the dominating
mind on all subjects connected with the litigation. He
had a dominating personality (Nourse, II, 123). He was a
sort of a Hitler, you might say. He dominated everything
with which he was connected (Bell, I, 158). He was a
very positive character, quite strong in his opinions; but
as a rule, his opinions were pretty well founded (Layton,
Ill, 83). He rode over everybody (Moore, I, 540). The
older he got the more arbitrary he became (Koeckert, I,
523). Mr. Koeckert was sorry to see some of these ar-
bitrary actions. He often wished that Mr. Street had
retired earlier than he did, because in later years Mr.
ie am saw this change coming over him (Koeckert,
I, 523).
It was suggested to witness that if a man is naturally
secretive, naturally given to not taking people into his
confidence, it does not usually work out that he can hold
their confidence. Witness answered that Mr. Street had
risen to a high point in their business; a point where the
work he had done, the time and effort he had put into it,
and the sincerity of purpose, that everyone just held him
in that great respect so that you would not, or at least
witness did not, ever think of asking him why he was
doing so and so—why he was doing it this way (Koeckert,
I, 523). The best explanation Mr. Koeckert can give of
the way that all acted with Mr. Street is that that is
the way it grew to be (Koeckert, I, 524).
48 CHARLES R. STREET
“Q. Of course he had risen to a high position in the
insurance world. But some of the rest of you, you for
instance, in fact at that time, were holding a higher
position in the insurance world than he was, and so was
Mr. Kurth and so was Paul Haid, and so were other men
higher in the insurance world than he?
A. Right.
Q. The truth is he had taken a step back. He had
when he came East, he had not quite made it, and you
say that he was secretive, that he would not take people
into his confidence. It seems strange to me that a man
who would not take other people into his confidence could
hold their confidence. Can you explain it, or is it just
one of those things?
A. I think that is the answer, just one of those
things. I can’t imagine any man who labored with him
or tried to take ar interest in the business, ever wanting
to approach Mz. Street for an explanation” (Koeckert,
I, 523-524).
Mr. Street died on February 1, 1938 (Folonie, Ill,
185; Kurth, I, 451; Koop, I, 407; Powrie, I, 134; Williams,
He was quite positive in his actions (Bissell, I],
I, 96; Thomas, II, 254). He was a pretty sick man, suf-
fering from cancer, but lived nearly two years after he
made the collection to furnish the 5 per cent (Koop, I,
420).
Witness thinks he can give a very fair presentation
of the esteem in which Mr. Street was held by the life
insurance fraternity generally. He was unique. Witness
has never met another man like him. Mr. Street was
the outstanding manager and executive in the midwest.
Apparently he had only two interests, two subjects in
which he took pride; one was the business itself, and the
other was the midwest. Witness thinks he had a sneak-
ing contempt for all who had anything to do with the busi-
ness in the east. He used to refer to them as the “wise
men of the East” which witness Suspected he said with
a grain of salt, with a mental reservation. Witness thinks
he was the hardest working man he has ever known in
the business, reputed to get down to his office between
7:30 and 8:00 o’clock and left at dark. Witness thinks
that during the time he knew Mr. ‘Street, he must have
devoted 25 per cent or 30 per cent of his time to the
general activities of the business, not to the selfish in-
térests of his own company. He loved the business. He
CHARLES R. STREET 49
was proud of the part he took in it. He had a magnifi-
cent record in connection with all activities that he con-
ducted, was chairman of a great many committees, and
as chairman he did the work and did it with such a fine
average of performance that he came to be regarded by
all who had acquaintance with him as being, as the French
would say, “without fear and without reproach.”
Question. He was the Chevalier Bayard in other
words?
Answer. “Well, in rough exterior, very blunt, very;
stepped on your toes if you got them in his way; but none
of us ever questioned his integrity.”
Witness attended a fiftieth anniversary party that
was given in Mr. Street’s honor about one-half dozen years
ago, and the evidence there of the esteem in which he
was held was quite overwhelming. Witness thinks that
the opinion as expressed’ was the opinion generally en-
tertained by the presidents and other high executives of
the fire insurance companies involved in the Missouri
litigation. You will find an occasional man who has per-
mitted personal prejudice to obscure his impartial judg-
ment, but witness thinks that what he has said about him
is very generally true (Long, III, 108-110).
50 INSTITUTION OF LITIGATION
V.
INSTITUTION AND PROGRESS OF THE
LITIGATION.
INSTITUTION, NATURE AND CONTROL OF THE SUITs.
The Missouri fire rate litigation began in 1922 (Terry,
III, 373). In January, 1922, there was an order of the
Superintendent of Insurance making a reduction of 15
per cent. A bill to enjoin it was filed in January or
February, 1922, dismissed in the early months of that
year, the temporary injunction order was dissolved, the
rate order was withdrawn, and a written Stipulation was
made that the Superintendent would have a new rate
order with a hearing preliminary. to it, having had none
as to that first rate order. That stipulation was entered
into by a number of lawyers, including Mr. Folonie’s
partner, Mr. Hicks. Mr. Folonie did not participate in
that first case. In October, 1922, after some kind of a
hearing, another rate order of 10 per cent reduction was
entered. Mr. Folonie counseled a little in that but took
no active part in it. He went into a hospital that win-
ter about the time the order was entered (Folonie, III,
207). He entered actively into the lawsuit and the series
of litigation in June, 1923 (Folonie, III, 157, 207). The
companies brought suit in 1922. It was a defense by the
companies against the 10 per cent rate reduction ordered
by Superintendent Hyde (Terry, III, 373, 374). The Sub-
scribers Actuarial Committee, in conjunction with P.
W. Terry, Manager of the Missouri Inspection Bureau,
was responsible in initiating and instituting these suits
(Folonie, III, 157). Mr. Terry cannot definitely tell who
recommended the suits or finally determined upon their
institution (Terry, III, 374). When Mr. Folonie actively
entered the litigation in 1923 he was instructed by Mr.
Ralph Ives, the chairman of the committee ond predeces-
sor of Mr. Street, that the objective of the litigation was
to secure a declaration of the underlying methods of set-
ting up a proper account with the State as to profit and
loss; that their predicate was earned premiums as income
and incurred loss and expense as outgo as the principal
items. The attitude of the state was that it was to be
primarily written premiums and paid losses and expenses.
Mr. Folonie was advised that the money involved was
INSTITUTION OF LITIGATION 51
entirely secondary to establishing that principle, and to
take it to the highest court he could take it, preferably
to the Supreme Court of the United States, to have that
accounting principle settled because it made trouble in
every state (Folonie, III, 207-208).
Thereafter these 16 2-3 per cent suits were brought
(Terry, III, 374). They were commenced in May, 1930
(Folonie, III, 157). Witness recommended that they be
prought after conferring with Mr. Folonie (Terry, IU,
374). He conferred with Mr. Folonie about them and
they agreed to bring the suits (Terry, III, 375). Mr.
Folonie was in consultation in the preparation of the fil-
ings precedent to any litigation. The filings were the
applications and supporting data filed by the Superin-
tendent of Insurance upon which an increase in rates was
based (Folonie, III, 157). Mr. Terry made certain filings
with the Insurance Department in December, 1929, for
the purpose of securing an increase in the insurance rates.
From time to time the effective date of the increase was
postponed until June 1, 1930. Previous to that date, after
consultation with Mr. Folonie, Mr. Terry, representing
all stock fire insurance companies, directed Mr. Folonie
to sustain that filing, if possible (Terry, III, 375-376).
Mr. Folonie brought the suits (Terry, Ill, 375). Mr.
Terry, of the Missouri Inspection Bureau, had charge of
filing the papers in connection with the 16 2-3 per cent
rate increase. He was the filing agent. Mr. Folonie
went in advance and saw what he was doing with them.
They were carried by Mr. Terry to the office of the Su-
perintendent of Insurance and placed upon his desk. They
constituted applications for an’increase in rates, supported
by figures of the companies and the’ annual statements,
and computed profit and loss, to show that. the present
rates weré inadequate. Mr. Folonie would say they were
tabulated on hundreds of very large accounting sheets.
There was a great big stack of papers; company by com-
pany. The facts relied upon in filing these papers were
their five years’ experience prior to 1929, the five years
immediately preceding that as shown by their books and
records and their filings in the Insurance Department.
Their construction of them was- that they showed that
the rates, as collected, resulted in a loss, which. did not
leave more than a reasonable profit if the. companies got
oe te for which they were filing (Folonie, II,
52 INSTITUTION oF LITIGATION
After they were started the responsibility was up to
The question as
ught depended
Terry con-
what he
erry has al-
g the legal aspect of it,
the suits. They were not
name of the Missouri Inspection Bu-
name of the individual companies. A
titution matters arising
The suits in the federal
and (3) A suit in the Circuit Court of Cole
In addition
Mr. Folonie
of the litigation
75 or 76 companies
gation and not in-
. the companies that
in dropped out, and some of them were
in the federal: court, and made parties in the
state court. The number changed, but it was 75, more
or less (Folonie, III, 212).
LIfT OF COMPANION CASES NOW PENDING IN
THIS COURT.
Defendant’s Exhibit 1 (I, 8-15) is a list of the cases
that were pending in the federal court at the time the
final decrees were entered February 1, 1936. Each com-
pany is an individual plaintiff, except that in case No.
383 the plaintiffs are The Phoenix Insurance Company,
The Minneapolis Fire and Marine Insurance Company
and Central States Insurance Company, and The Phoenix
Insurance Company only is named as plaintiff in the ex-
hibit.. Said exhibit is as follows:
INSTITUTION OF LITIGATION 53
“Court
Number
271 Agricultural Insurance
Company vs. Ray B. Lucas et al.
973 Aetna Insurance Company vs. “
274 The Alliance Insurance
Company vs. “
275 American Alliance Insur-
ance Company “= *
276 American Central Insur-
ance Company 6"
277 American Eagle Fire In-
surance Company = *
279 Americar. Union Insur-
ance Company of New
York = *
280 Atlas Assurance Com-
pany, Ltd. vs.
281 Automobile Insurance
Company of Hartford,
Connecticut vs.
282 Bankers and Shippers In-
surance Company vs.
283 Boston Insurance Com-
pany vs.
284 British America Assur-
ance Company vs.
286 Caledonian Insurance
Company vs.
288 California Insurance Com-
pany vs.
289 Camden Fire Insurance
Association vs.
292 Chicago Fire and Marine
Insurance Company vs.
293 Citizens Insurance Com-
pany =
294 City of New York Insur- .
ance Company —_ ”
295 Columbia Insurance Com-
pany (New Jersey) =
296 Columbia Fire Insurance
Company vs.
54 INSTITUTION OF LITIGATION
297 Commerce Insurance
Company vs. Ray B. Lucas, et al,
298 Commercial Union Assur-
ance Company, Ltd. = *
299 Commercial Union Fire
Ins. Co. vs, “
301 Concordia Fire Insurance
Company of Milwaukee vs. “
302 Connecticut Fire Insur-
ance Company vs. “
303 Continental Insurance
Company “— *
304 County Fire Insurance
Company of Phila-
delphia - “Se
305 Detroit Fire and Marine
Insurance Company _
306 Dubuque Fire and Ma-
rine Insurance Com-
pany ie
307 The Eagle Fire Company
of New York >
308 Eagle Star and British
Dominions Insurance
Company =
309 East and West Insurance
Company —*
310 Equitable Fire and Ma-
rine Insurance Com-
pany ve ™
312 Federal Union Insurance
Company — *
313 Fidelity Phenix Fire In-
surance Company = *
314 Fire Association of Phila-
delphia =.*
315 Fireman’s Fund Insur-
ance Company = *
316 Firemen’s Insurance
Company ie
Court
Number
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
334
335
336
First American Fire In-
surance Company
Franklin Fire Insurance
Company of Phila-
delphia
Franklin National Insur-
ance Company
Girard Fire and Marine
Insurance Company
Glens Falls Insurance
Company
Globe and Rutgers Fire
Insurance Company
Granite State Fire Insur-
ance Company
Great American Insur-
ance Company
Guaranty Fire Insurance
Company of Providence
The Hanover Fire Insur-
ance Company
Hartford Fire Insurance
Company
The Home Insurance
Company
Home Fire and Marine In-
surance Company
Hudson Insurance Com-
pany
Imperial Assurance Com-
pany
Importers and Exporters
Insurance Company
Insurance Company of
North America
Insurance Company of
the State of Pennsyl-
vania
The Law Union and Rock
Insurance Company,
Ltd.
INSTITUTION OF LITIGATION
vs. Ray B. Lucas, et al.
vs.
vs.
vs.
vs.
vs.
Vs.
vs.
Vs.
vs.
vs.
Vs.
vs.
vs.
vs.
Vs.
vs.
Vs.
“ec
“
‘ec
56 INSTITUTION oF LITIGATION
338 Liverpool and London and
Globe Insurance Com-
pany, Ltd. vs. Ray B. Lucas, et al.
339 The London Assurance
Corporation >
340 London and Lancashire
Insurance Company,
Ltd. vs. “
341 London and Provincial
Marine and General
Ins. Co., Ltd. = *
342 London and Scottish As-
surance Corporation,
Ltd. =“ *
343 Lumbermen’s Insurance
Company = *
344 Manhattan Fire and Ma-
rine Insurance Com-
pany =-.*
345 Massachusetts Fire and
Marine Insurance Com-
pany = =
346 Mechanics Insurance
Company of Philadel-
phia vw *
347 Merchants Insurance
Company vs. *
348 Merchants Fire Assur-
ance Corporation of
New York =
_ 349 Merchants Fire Insurance
Company “= *
350 Mercury Insurance Com-
pany 2 ™
351 Michigan Fire and Ma-
rine Insurance Com-
pany vs. “
352 Milwaukee Mechanics In-
surance Company = *
Court
Number
355
356
357
358
359
361
362
363
364
366
367
369
370
371
372
374
375
354 National Ben Franklin
Fire Insurance Com-
pany
National Fire Insurance
Company of Hartford
National Liberty Insur-
ance Company
America
National Reserve Insur-
ance Company
National Security Fire In-
surance Company
National Union Fire In-
surance Company
The Newark Fire Insur-
ance Company
New England Fire Insur-
ance Company
New Hampshire Fire In-
surance Company
New Jersey Insurance
Company
New York Underwriters
Insurance Company
Niagara Fire Insurance
Company
The Northern Assurance
Company, Ltd.
Northern Insurance Com-
pany
North River Insurance
Company
Northwestern Fire and
Marine Insurance Com-
pany
Norwich Union Fire In-
surance Society, Ltd.
Old Colony Insurance
Company
vs. Ray B. Lucas, et al.
vs.
vs.
vs.
LINSTITUTION_OF_ LITIGATION
“
“
“
INSTITUTION OF LITIGATION
376 Orient Insurance Com-
pany vs. Ray B. Lucas, et al.
377 Pacific Fire Insurance
Company =“
378 Palatine Insurance Com-
pany, Ltd. vs. “
379 Patriotic Insurance Com-
pany of America = *
381 Philadelphia Fire and
Marine Insurance Com-
pany vs. “
382 Phoenix Assurance Com-
pany, Ltd. a.
383 The Phoenix Insurance
Company et al. vs. “
385 Presidential Fire and Ma-
rine Insurance Com-
pany —
386 Providence Washington
Insurance Company —-*
387 Provident Fire Insur-
ance Company ~~“ *
389 Queen Insurance Com-
pany of America vs. “
390 Reliance Insurance Com-
pany of Philadelphia vs. “
391 Rhode Island Insurance
Company "“*
392 Royal Exchange Assur-
ance =”
393 Royal Insurance Com-
pany, Ltd. ~~
394 Safeguard Insurance
Company —*
395 St. Paul Fire and Marine
Insurance Company —
396 Scottish Union and Na-
tional Insurance Com-
pany ~~ *
Court
Number
398
399
400
401
402
403
410
411
412
413
414
397 Security Insurance Com-
pany of New Haven
Sentinel Fire Insurance
Company
Springfield Fire and Ma-
rine Insurance Com-
pany
Standard Fire Insurance
Company of Connecti-
cut
Standard Fire Insurance
Company of New Jersey
Star Insurance Company
of America
The State Assurance Com-
pany, Ltd.
Stuyvesant Insurance
Company
Sun Insurance Office,
Ltd.
Superior Fire Insurance
Company
Svea Fire and Life Insur-
ance Company
Tokio Marine and Fire
Insurance Company,
Ltd.
Transcontinental - Insur-
ance Company
The Travelers Fire In-
surance Company
Twin City Fire Insur-
ance Company
Union Assurance Society,
Ltd.
Union Fire Insurance
Company
United Firemen’s Insur-
ance Company of Phila-
delphia
INSTITUTION OF LITIGATION
vs. Ray B. Lucas, et al.
vs.
vs.
VS.
VS.
vs.
vs.
vs.
Vs.
Vs.
Vs.
vs.
vs.
6“
“ce
“cc
“cc
sé
“cc
“
60 INSTITUTION oF LITIGATION
415 United States Fire In-
surance Co. vs. Ray B. Lucas, et al.
416 United States Merchants
and Shippers Insurance
Company 2 *
418 Victory Insurance Com-
pany vs. “
419 Westchester Fire Insur-
ance Company i
420 Western Assurance Com-
pany vs. “*
422 The World Fire and Ma-
rine Insurance Com-
pany vs.
423 Yorkshire Insurance
Company, Ltd. “= *
425 Mechanics and Traders
Insurance Company’ vs. “
426 Potomac Insurance Com-
pany of the District of
Columbia” “ *
STATE COURT LITIGATION DECREES IN STATE COURT
RESTITUTION CASES.
In the early part of 1935, D. F. Calfee, referee, in
the state court case, had found in substance that the
com es were entitled to two thirds of their increase
on the fire class of business and all of their increase on
the tornado class; and the case was pending on exceptions
to that report by both sides (Folonie, III, 212).
In December, 1935, there was a decree rendered in
the restitution case in which the court, not at the instance
of the insurance companies’ attorneys, incorporated $200,-
000.00 of the judgment against those companies in addi-
tion to the amounts which it was found they were en-
titled to restore or bound to restore. The court distrib-
uted that pro rata over all the companies in its decree,
and Mr. Folonie saw Mr. O’Malley repeatedly over a
short period of time after that to get Mr. O’Malley to spe-
cifically agree that he would not demand this $200,000.00
which they had ee he was to have; in addition
to what the court already collected. Mr. O’Malley
INSTITUTION OF LITIGATION 61
finally agreed that that was correct; so that the proceeds
would inure to him, and he should not exact the $200,-
000.00 all over again, as agreed in the written contract
(Folonie, III, 192).
The fact that there was not a complete identity made
Mr. Folonie feel that there might be a claim that it was
in addition to the $200,000.00. In fact, it was an identical
item. There was an exact identity of parties in the res-
titution case in which the judgment was rendered, but
the $200,000.00 that the court incorporated into the judg-
ment was not identified as being the $200,000.00 that they
had stipulated in writing they would pay to the Super-
intendent to reimburse him for expense in that litigation.
The parties in the new and old litigation differed (Folonie,
III, 192).
Plaintiff’s Exhibit 330 (IV, 474-511) is a certified
copy of a final judgment entered by the Circuit Court of
Cole County, Missouri, December, 1935, in the case of
Aetna Insurance Company et al. v. R. E. O’Malley, (III,
473-474). The judgment recites that the matter came on
to be heard on defendant’s motion for restitution, asking
restitution for amounts asserted to have been collected
by the plaintiff in excess of lawful and legal rates upon
fire, lightning, hail, and windstorm insurance transacted
by the plaintiffs in the State of Missouri between No-
vember 15, 1922, and August 8, 1929, and also upon the
report of the commissioners and custodians appointed by
the court and the exceptions to the report (III, 474).
It recites that the court finds that each of the plaintiffs
presented and filed its full and complete account with
the commissioners and custodians showing the _ total
amount of excess premiums by them respectively collected
in excess of that justified by the order of the Superin-
tendent of Insurance of October 9, 1922, and the amount
in its hands remaining unrestored to policyholders, and
that they are truly and correctly accounted for, reported,
and are in the respective amounts therein set out.
The decree then sets out opposite the name of each
of the plaintiffs in said case the total excess collections
as to each of said companies, and the amount not refunded
to policyholders by each of said companies, and the total
of collections by all the companies was $12,354,747.96,
and that the total of the amounts not refunded to policy-
holders was $1,613,402.81 (III, 474-481).
The decree then recites that, subsequent to making
such full, true, and complete accounts, certain of the
62 INSTITUTION OF LITIGATION
plaintiffs therein named made payments to the commis-
sioners of amounts in addition to those contained in their
accounts creative of an additional liability for restitution
as to them, and that such plaintiffs had made corrections
in their accounts. The names of such last mentioned
plaintiffs were then set out, with amounts of such ad-
ditional payments made by them set opposite their
names, and it is recited that the total of such additional
payments amounted to $1,436.31 (III, 481-482).
The decree then recites that the interest properly to
be calculated against the sum owing by respective plain-
tiffs, as the court had by its order of December 14, 1934
directed, is, as respects such plaintiffs respectively, in
amounts as follows:
The name of each plaintiff is then set out, such
amount of interest as to each company is set opposite
each name, and it is recited that the total amount of
such interest is $857,688.09 (III, 482-487).
The decree then recites that the court further finds
that certain plaintiffs therein next enumerated addition-
ally owe and ought to pay amounts owing as restitution
for which they assert they issued outstanding checks and
drafts and which the court finds is subject to restitution,
notwithstanding such additional amounts and such
checks and drafts are outstanding, which are found to be
as follows:
Then follows the name of each plaintiff and opposite
the name of each is the amount so found for which such
companies had issued outstanding checks and drafts, and
there is a recitation that the total thereof is $48,492.63
(III, 488-490).
The decree then recites that, in addition, the plain-
tiffs and the Patriotic Insurance Company ought justly
to further pay the sum of $200,000.00 which they had
agreed to pay to the Superintendent of Insurance, and
that in addition to the specific sums found owing as resti-
tution, the sum of $199,618.22 of said $200,000.00 should,
by the plaintiffs in the aggregate, be paid as additional
restitution, which said sum is allocated to the respec-
tive plaintiffs (III, 490), in the proportion that excess
' collections of each bears to the total excess collections
of all remaining plaintiffs, which said distribution of
$199,618.23 is in the respective sums as follows: (The
sum of $381.77 to be aSsessed against the Patriotic In-
surance Company in a separate suit for restitution pend-
INSTITUTION OF LITIGATION 63
ing in such a court.) Then follows the name of each of
the plaintiffs and opposite each name appears the amount
assignable to each out of $200,000.00 (III, 490-496).
The decree then recites that the plaintiffs have re-
spectively paid to the commissioners and custodians sums
on account of restitution above recited for which they are
entitled to credit in the amounts hereinafter respectively
recited, namely:
Then follows the name of each plaintiff and opposite
the name of each appears the amount so paid to the com-
missioners and custodians (III, 496-502).
The decree then recites that the court finds that the
Chicago Fire and Marine Insurance Company and the
Fidelity Union Fire Insurance Company, plaintiffs there-
in, are insolvent and that any judgment against them
would be uncollectible; that therefore the sums assigned
against them in the sum of $200,000.00 are assigned
against the remaining plaintiffs and that the Chicago
Fire and Marine Insurance Company and Fidelity Union
Fire Insurance Company are dismissed from the proceed-
ing (III, 502-503).
The decree then recites that respective plaintiffs are
still indebted to the defendant as representative of pol-
icyholders, and still owe, as amounts. necessary to make
full and complete restitution to policyholders, the sums
set opposite their. respective names thereafter appearing,
and therefore (II, 503), the court doth order, decree, and
adjudge that each plaintiff shall respectively pay into the
registry of the court the balance respectively owing as
therein next recited, namely:
Then follows the name of each plaintiff, and op-
posite the name of each appears the amount of the bal-
ance owing ky them and reciting that the total of the
a owing by the plaintiffs is $1,067,948.80 (III, 503-
).
The decree then recites that the court further orders,
decrees and adjudges that, whereas the accounting made
by Northern Insurance Company of New York includes
the accounting of and was made for and in behalf of As-
surance Company of America, ag restitution on its part
(III, 508); that the accounting made by Phoenix Insur-
ance Company of Connecticut ifcludes an accounting of
restitution owing by Central Stftes Fire Insurance Com-
pany, and Connecticut Fire Insurance Company, Equi-
table Fire and Marine Insurance Company and Minneap-
64 INSTITUTION OF LITIGATION
olis Fire and Marine Insurance Company, therefore, up-
on payment by (III, 508-509) Northern Insurance Com-
pany and by Phoenix Insurance Company as above pro-
vided, of amount found by them owing it shall constitute
a satisfaction and discharge of claim of restitution against
those companies, and that all provisions of the judgment
thereafter contained, wherein reference is made to plain-
tiffs, are declared to be applicable to said mentioned com-
panies as well as to those specifically listed (III, 509),
The decree then contains provisions as to how and
when payment shall be made by the respective plaintiffs
to the commissioners and custodians of the court, and
for the report thereof to the court, and that upon making
of such payments, the respective plaintiffs are entitled
to have the judgment against them satisfied and dis-
charged (III, 509) and by such action on their part will
have made full restitution to all policyholders from whom
any unlawful or excess premium collections were ex-
acted and collected in excess of the legal rate fixed by
the order of the Superintendent of Insurance of October
9, 1922; that all policyholders are enjoined and restrained
from asserting or making any claim for restitution against
the plaintiffs or any of them who so comply, because of
exaction of excess premium collections in excess of the
rate fixed by said order on October 9, 1922, and collected
between November 15, 1922, and August 8, 1929. The
decree recites that said policyholders shall have their
sole recourse against the sums so paid into court (III,
509).
The decree recites that the Commercial Union Fire In-
surance Company has paid to the commissioners and cus-
todians in excess of its liabilities for restitution, out-
standing drafts and checks, interest and pro rata part of
the $200,000.00, and directs the commissioners and cus-
todians to refund said excess to said company in the sum
of $2,990.70, and that said Commercial Union Fire In-
surance Company (III, 509-510) is discharged from all
obligations for restitution.
It is further provided that upon payment of the re-
spective amounts therein adjudged, the plaintiffs and the
510.511) on their bond are discharged and released (III,
510-511).
Plaintiff's Exhibit 331 (III, 511-512) is the certificate
of the clerk of the Circuit Court of Cole County, Mis-
souri, that the above judgment is satisfied of record by
INSTITUTION OF LITIGATION 65
the following entry which appears on the margin of the
record:
“This judgment is satisfied in full, debt, inter-
est, and costs, this 16th day of January, 1936, and I
do further certify that in accordance with the provi-
sions of the within judgment and decree the sums
therein adjudged to be paid have been paid to the
Commissioners and Custodians as therein required
and said Commissioners and said Custodians have, in
accordance with said judgment and decree, reported
to the Court that all the parties therein named have
paid to them the amounts therein adjudged to be so
paid.”
Plaintiff’s Exhibit 332 (III, 513) is a copy of the final
judgment of the Circuit Court of Cole County, Missouri,
in the case of R. E. O’Malley, Superintendent of the In-
surance Department of the State of Missouri, plaintiff,
y. Patriotic Assurance Co., Ltd., and Patriotic Insurance
Company, defendants, No. 7825. It is similar to the judg-
ment, Exhibit 330, except that only two insurance com-
nies are defendants. It shows that these two defend-
ants’ total excess collection was $23,641.13; that the amount
not refunded to policyholders was $16,793.14, which last
sum has been ordered paid to the- commissioners and
custodians as provided for in an order of October 5, 1935;
that the interest properly calculated against such said un-
refunded sum is $4,787.45; that the pro rata of the $200,-
000.00 (III, 513-514), which the companies agreed to
pay to the Superintendent of Insurance, as to these de-
fendants, is $381.77; that the defendants are still in-
debted to plaintiff, as representatives of policyholders,
and still owe the sum of $5,169.22, as the amount neces-
sary to make full and complete restitution to policyholders.
It is ordered, adjudged, and decreed that defendant,
Patriotic Insurance Company, shall pay into the registry
of the court the sum of $5,169.22. The decree is dated
December 2, 1935 (III, 514-515).
Attorney for plaintiffs stated to the master during
the hearing that the judgment (Exhibit 332) was satis-
fied of record on June 16, 1937. Attorney for defendant,
in making his admission, did not expressly admit that
the judgment was so satisfied and did not deny the state-
ment of plaintiffs’ attorney (III, 512).
66 INSTITUTION OF LITIGATION
THE SETTLEMENT.
On May 18, 1935, a written agreement of settlement
of these cases was signed by R. Emmet O'Malley, Su-
perintendent of the Insurance Department of the State
of Missouri, and Charles R. Street, as agent for the stock
fire insurance companies, parties to rate litigation in the
United States District Court for the Western District of
Missouri and in the Circuit Court of Cole County, Mis-
souri (see “XIV Negotiation of Settlement”).
The objects of the settlement were: (1) To satisfy
the local agent, (2) To satisfy some companies that felt
that they were sick and tired of this litigation and ex-
pense, and (3) It was interfering with the progress of
“our business in Missouri” (Bell, I, 139).
The companies were unable to make filings of rates
and to procure the policy forms and coverages which
were filed in adjoining states; in other words, their prog-
ress in Missouri was being blocked by this continuous,
longstanding litigation. They had better sacrifice some-
thing than continue it. The agents would have profited
to a greater extent if the settlement had been made, with
the agent getting only the commission on that part of
the impounded premiums which the companies retained
(Bell, I, 139). Under the settlement Mr. O’Malley put a
new rate schedule into effect which theoretically raised
the rate level over the one which Mr. Hyde had fixed.
The minimum or maximum figure that Mr. Street set
up in the compromise was about 97 1-2. While he raised
the level at the same time by re-rating individual classes
of risks, it did not come out just exactly that way. It
came out very much lower. While he got the raise in
the rate level, yet when you reclassify your risks the ef-
fect on the gross income of the Missouri compromise did
not amount to what it would if you had just put in that
raise of level and let it go at that. The bare outline of
the rate charge was that they had previously drawn up
figures which were approximately between the 105 level
and the 90 level. That was done in the summer of 1934;
but at this time they contemplated that it was very es-
sential to get increases on certain particular classes. Those
increases were the ones which were foregone after Mr.
Terry’s conference with Mr. Street in 1935 (Terry, II,
385-386). . After the stipulation for settlement Mr. Folonie
worked almost. continuously on presenting the. matter to
respective courts in which cases were pending and in dis-
cussion of the matter with Mr: Street and others in in-
INSTITUTION OF LITIGATION 67
terest, to facilitate appropriate court orders securing the
completion and approval of the settlement by the courts.
Mr. Folonie was often in conference with Mr. Street in
regard to those matters (Folonie, III, 191).
After the compromise was agreed upon, Mr. Terry
started, in'a general way, to prepare the details of the
filings. He had no conference with Mr. Street in regard
to the matter (Terry, III, 384). Mr. Folonie and Mr.
Berger prepared the motions for a decree in Mr. Berger’s
office, and Mr. Berger verified the motion. At that time
Mr. Berger absolutely believed that the compromise had
been made in good faith, or he would not have verified
the motion (Berger, III, 395). The decree was entered
on February 1, 1936 (Folonie, III, 191).
THE DECREE OF THIS COURT.
Defendants’ Exhibit “3” was introduced in evidence
(I, 32-40), which is a copy of the decree that was ren-
dered by this court on February 1, 1936, and entered in
each of the 137 companion cases. It recites that the cause
came on to be heard upon the verified motion of plaintiff
for a decree and a stipulation executed by counsel for
plaintiff and defendants; that evidence was heard in
open court; that no policyholders contributing to the funds
deposited under order of the court ‘had intervened as
permitted by an order of the court on November 13, 1935,
and It Was Ordered, Adjudged and Decreed as follows:
“1. The controversy herein having been settled and
disposed of by the parties and no controversy between
the parties remaining, this cause is hereby dismissed.
“9 The court does direct W. T. Kemper, heretofore
appointed Custodian of the said funds, to distribute the
said impounded funds in his custody as follows:
“A. As respects funds reported and impounded by
plaintiff upon policies effective prior to May 1, 1935, he
is directed to refund to (pay to) the assured (policy-
holders), in the manner hereinafter provided, one fifth
(1/5th) of all net amounts so impounded. As —_
funds reported and impounded by plaintiff upon policies
effective after April 30, 1935, he is directed to refund to
(pay to) the assured, in the manner hereinafter provided,
one-third (1/3rd) of all net amounts so impounded. Such
payments shall be made to the respective assured on the
prorata basis of the net amounts impounded on their re-
spective policies.
68 INSTITUTION OF LITIGATION
“Aa. The Custodian shall additionally pay to the as.
sured, assured’s proportion of the net interest and ac-
cretions from impounded funds as same exists at the date
of this Decfee, such proportion to be ascertained and de.
termined aS hereinafter in this sub-clause Aa provided,
The amount assignable to case of plaintiff shall be an
amount bearing the same ratio to the total amount of net
interest and accretions as the total net amount of funds
impounded by this plaintiff bears to the whole net sum
impounded by this plaintiff and all of the other contribut-
ing companies to the funds impounded with the Custodian
(such other contributing companies being plaintiffs in
companion cases in which decrees identical with this
Decree are being entered concurrently with the entry of
this Decree, including those companies mentioned in
paragraph 9 hereof). This amount so found properly as-
signable to Plaintiff’s case shall be allocated to all as-
sured of this plaintiff to the extent and in the same
proportion aS the impounded fund is allocated to them in
sub-paragraph A above. For the purpose of distribution to
assured this Sum so allocated to all assured of plaintiff
shall be divided into 276 moieties, whereof 23 moieties
shall be allocated to policies appearing on the report for
the first impounding period, and 22 moieties to policies
reported on the report for the second impounding period,
and so progressively one moiety less for policies reported
for each suc€€SSive impounding period. The fund so al-
located to anY impounding period shall be prorated among
the several policies appearing on the report of this plain-
tiff for such impounding period by finding the ratio exist-
ing between the amount of the fund so allocated to such
impounding Period, and such portion of the total funds
impounded by this plaintiff for such impounding period as
shall be allocated to the assured according to the pro-
visions of subparagraph A above, and by applying such
ratio to the amount to be refunded to the assured (as pro-
vided in subparagraph A above) out of the total premiums
impounded for such period in respect of each such
policy. The foregoing provisions as to distribution of in-
terest and accretions to assured is upon the assumption
that the plaintiff has made 23 impounding reports; and
if the plaintiff has made less than 23 impounding reports,
the CustodiaM shall make the distribution in a similar
manner and #pon a similar basis.
“In determining net earnings and accretions for
purposes of this paragraph the Custodian shall take into
INSTITUTION OF LITIGATION 69
consideration as of the date of this Decree: Bank deposits
and accrued interest, market value of securities at closing
ice on New York Stock Exchange at close of business at
date of this Decree, accrued interest thereon, accounts re-
ceivable, expenses paid in advance, and from aggregate of
above deduct total remaining impounded principal, all
unpaid allowances and expenses of the Custodian. The
difference so computed shall be the net interest and ac-
cretions within the meaning of this paragraph.
“Determination of net interest and accretions for other
shall be made in accordance with usual ac-
counting practice.
“Ab. To render certain, and not subject to fluctu-
ation, the amount so to be paid to the assured, the Cus-
todian is directed to sell and convert into cash sufficient
of the securities now in his custody to create a fund
from which the Custodian shall make restitution to as-
sured as respects both impounded fund and net interest
and accretions as herein provided, and if the amount can-
not by him be calculated with certainty, he may create
such fund upon estimation subject to later correction by
him, which said sums so derived he shall deposit, sub-
ject to his withdrawal as Custodian, as a trust fund with
The Commerce Trust Company of Kansas City, Missouri,
out of which the Custodian shall make distribution to as-
sured, but such trust company shall not be responsible
for the disposition of such fund by the Custodian; Pro-
vided, that if such sum or sums be deposited upon estima-
tion, and be later found to be excessive or inadequate,
the Custodian shall make the necessary adjustments in
said trust fund.
“Ac. The Custodian shall pay and distribute to the
assured the amounts as provided in paragraph A and para-
graph Aa hereinabove, as soon as is practical for him after
closing his books and accounts, and shall pay the said
sums on each policy by the issuing and mailing of a check
to the assured named in the original impounding report
in his ession, and to the addressses therein given, Pro-
vided, however, that if there are or shall be any claims or
assignments filed with him that create any dispute as
to who is entitled to the fund due on any particular policy,
he may apply to this Court for further orders in regard
thereto; the Court retaining full jurisdiction to make any
and all further orders in regard to the preservation, pay-
ment and distribution of these funds, as to the method and
70 INSTITUTION OF LITIGATION
manner of so doing, the determination of the rights of
particular parties to receive the funds, and any and all
other matters in connection therewith except that such
or assignments must be filed with the Custodian
on or before June 30, 1936, or be forever barred in distribu-
tion under this Decree. The Custodian shall not be re-
quired to personally sign such checks, but may delegate
others to sign same, or may use any of the customary
signature-making or check signing devices in executing
same. The Custodian may place on such checks a re.
cital providing that same shall not be valid unless pre-
sented for payment on or before a date to be fixed by him.
“B. At the time, in the manner, and subject to the
withholding, and the right to withhold, and upon the con-
ditions, hereinafter set forth, the Custodian shall distrib-
ute and pay:
“1. To the plaintiff, 50% of the net fund reported
and impounded with him by the plaintiff upon all policies
upon which impounding is made; and
“2. To Robert J. Folonie, one of the counsel for
plaintiff, and Charles R. Street, Chairman of the Com-
mittee for the Insurance Companies, who, for them, are
supervising this litigation, as Trustees for and on behalf of
plaintiff, or the survivor of them or their successor or suc-
cessors, 30% of the net funds reported and impounded
as respects all policies effective prior to May 1, 1935, and
16-74% of the net funds reported and impounded by the
plaintiff upon policies effective after April 30, 1935, which
said sums so paid to said Trustees are paid to them as
Trustees for the plaintiff for which (as well as any other
amounts to be paid to them under this Decree) they shall
account only to the plaintiff; but if this Court shall so
order, they are to file a report of disbursements with the
Judges of this Court. The Custodian shall not be obligated
to see to the application by the Trustees of the amounts
by him paid to them under the provisions of this Decree.
“The Custodian is directed forthwith to disburse to
the plaintiff as a partial payment on account of the above
mentioned distribution provided for plaintiff, an amount
equivalent to 50% of the net fund impounded. with the
Custodian by plaintiff up to July 15, 1935; and the Cus-
todian is directed forthwith to disburse to said Robert
J. Folonie and Charles R. Street, Trustees, as a ‘partial
payment’on account of the above mentioned distribution
provided for said Trustees, an amount equivalent to 30%
INSTITUTION OF LITIGATION 71
of the net fund impounded with the Custodian by said
plaintiff up to July 15, 1935; Provided, however, that if
these distributions (together with the distributions to be
to the assured under the provisions of subpara-
A hereof) would result in distributing all or
within five per cent (5%) of the total net fund impounded
by the plaintiff, the Custodian is authorized to reduce
the percentage or amount of the distribution to the plain-
tiff to an amount that will leave in the possession of the
Custodian after making provision for refunds for the as-
sured under paragraph A, a sum equivalent to five per
cent (5%) of the total net fund impounded by the plain-
tiff. The balance of the fund remaining subject to distribu-
tion to the plaintiff and the Trustees respectively as pro-
vided in this subparagraph B shall be withheld and re-
tained by the Custodian subject to the further order of
the Court.
“All payments in this Decree provided, whether of
principal distributable to plaintiff, or principal or interest
and accretions distributable to the Trustees, shall be
made by the Custodian as far as practicable by the de-
livery to the party entitled to receive payment, of se-
curities held by the Custodian, to be selected by the Cus-
todian, which shall be accepted and credited on the
amount payable at the market value thereof (including
accrued interest) as reflected by the closing quotation
on the New York Stock Exchange at the close of busi-
ness on the last business day preceding the date of the
—- making delivery, or ordering the shipment
ereof.
“C, The Custodian shall, out of the balance of ac-
cretions and interest left after charging against the
same the amount to be refunded to assured under the
provisions of paragraph Aa hereof, pay the court costs;
all unpaid or future expenses of the Custodian as have
been or may be by the Court authorized and the lawful
charges of and allowances to the present or past officers
or appointees of this Court, and their agents, employees
and attorneys; and other charges which may be by the
Court from time to time directed. Any interest or gain
from the handling of the funds subsequent to the date
of this Decree shall be added to the interest and accre-
tions above referred to, and if any securities shall be sold
at a loss or other losses occur, the deficiency shall be
charged against such balance.
72 INSTITUTION OF LITIGATION
“After the Custodian has made all of the payments
and distributions required under the provisions of this
Decree, the remainder of said fund not so expended or
required, shall be paid to Robert J. Folonie and Charles
R. Street, Trustees for the plaintiff, or the survivor of
them, or their successors, provided that if at any time
it shall be made to appear to the Court that it is unneces-
sary to longer retain all of said fund, then upon proper
application therefor the Court may order payment to the
Trustees of such part as the Court finds to be in excess
of the amount necessary to be retained for such purpose.
“The Custodian need not allocate or assign any part
of the net balance of interest and accretions fund as same
exists at any time, to the plaintiff, as said fund has been
derived from the investment of funds of this plaintiff and
the other said companies having companion suits in this
Court as part of this same controversy.
“D. The amounts which under the provisions of
paragraph B hereof are to be withheld and retained by
the Custodian subject to the further orders of the Court,
may be resorted to in case the above interest and accre-
tions fund shall be exhausted, in which event said amount
so retained shall be subject to having imposed against
it all charges above provided to be made against said in-
terest and increment fund. If the Court shall at any
time deem the amount so withheld and retained to be
excessive, or to be no longer necessary, upon proper ap-
plication therefor it may order the distribution thereof
in whole or in part.
“3. Whenever reference is made herein to im-
pounded funds, or fund reported and impounded by plain-
tiff, or plaintiffs, it includes the principal amount of im-
pounded funds in the hands of the Custodian at the date
of this Decree, or the principal amount of funds that
may come into his hands at some later date as herein pro-
vided. By the term ‘net amounts impounded,’ or the term
‘net funds’ impounded, is meant the amount of the prin-
cipal of all impounded funds remaining after all credits
by cancellation, or otherwise, have been allowed by the
Custodian. No interest or accretions shall be considered
in determining either the amount of the impounded
funds, or the amount of the net impounded funds. In
making distribution as herein provided, the Custodian
may rely upon any facts contained in the records of im-
pounding as filed by the plaintiff, and shall not be re-
INSTITUTION OF LITIGATION 73
uired to consider any facts outside of said records ex-
cept as contemplated in Ac above.
“4. The Federal Reserve Bank of Kansas City is
hereby authorized and directed to deliver any or all bonds
now or hereafter held by it for said W. T. Kemper, as
Custodian, to, or as directed by said W. T. Kemper.
“5 Except to the extent that same may be incon-
sistent with specific provisions hereof, all power and au-
thority given to the Custodian by this Court under any
of its orders heretofore entered, shall continue until fur-
ther order of the Court.
“g. The Custodian is authorized to permit or re-
quire the plaintiff to report other additional impound-
ings of any premium collections respecting policies effec-
tive prior to November 11, 1935, and not previously re-
ported, and cancellations or endorsements effective prior
to November 11, 1935, upon policies effective prior to that
date, and shall advise the plaintiff by mail at least ten
(10) days before the final closing of his books after which
no further reports will be accepted. Such additional
and supplemental reports shall be considered as supple-
mental and additional to and a part of the impounding
reports for the twenty-third impounding period.
“7 Notwithstanding dismissal of this cause, the
Court expressly reserves power and authority, and re-
tains jurisdiction as respects taxation and assessment of
costs and allowances for fees to its officers and appointees
(and their attorneys and agents) for services already ren-
dered, or hereafter rendered, and to make orders respect-
ing the obligation of the parties, or the fund for payment
thereof, and to make further orders in aid of distribution
of impounded moneys, and to make appropriate orders
respecting sale, investment, safe-guarding and distribu-
tion of impounded moneys, interest and accretions, and
disposition of office furniture and fixtures, and dis-
charge of incidental costs and expenses, and to make fur-
ther orders respecting disposition of records and files in
the possession of the Custodian, and to require reports
and: accounts respecting performance of duties by the
Custodian and restitution of moneys to assured, and to
take any action deemed necessary to effectuate the pur-
poses of this Decree. Jurisdiction over all persons or
parties affected by this Decree is reserved for all pur-
poses of effectuating this Decree.
74 INSTITUTION OF LITIGATION
“8. The plaintiff and its sureties are hereby dis-
charged from liability upon temporary injunction bond
and interlocutory injunction bond heretofore exacted by
this Court and entered into by the plaintiff and its
sureties.
_ “9. It appearing to the Court that separate deposits
have been made with the Custodian by Underwriters
Grain Association and special deposit made by Pittsburgh
Underwriters Department, and separate accounts and re-
ports filed by them embodying an impounding for more
than one insurance company, the provisions as to distri-
bution to assured above provided, shall be made in iden-
tical manner as respects the said funds; and the pay-
ments herein provided to be made to the plaintiff shall,
as respects such special funds, be made to the said Un-
derwriters Grain Association and the said Pittsburgh Un-
derwriters Department as if they were a plaintiff herein
and subject to like payment to them and to the Trustees
as is herein provided respecting payments to insurance
companies, except only that payments provided to be
made to the plaintiff shall, as respects said funds, be
made to said depositors of said funds.
“10. The plaintiff, the defendants, the aforesaid
Robert J. Folonie and Charles R. Street as Trustees, and
the parties mentioned in paragraph 9 thereof, in open
court, consent to the making and entering of this Decree.
The above Trustees and the parties mentioned in para-
graph 9 hereof enter their several appearances as parties
hereto and nominate the present counsel for plaintiff as
their counsel herein and they andthe parties to this suit
consent for themselves and their successors that service
of notice of any subsequent proceeding in this suit may
be upon the present attorneys of record, or their suc-
cessors, for the parties.
“Entered this lst day of February, 1936.
“KIMBROUGH STONE,
Judge of the Circuit Court.
ALBERT L. REEVES,
Judge of the District Court.
MERRILL E. OTI!s,
Judge of the District Court.”
INSTITUTION OF LITIGATION
DECLARATION OF TRUST.
Defendant’s Exhibit “4” (I, 40
of trust dated February 7, 1936, executed by
Street and
J. Folonie, do hereby declare
funds which now ar
heir hands, and certain securi
of certain
come to t
now are or may come i
and pursuant to the terms
Court of the United.
of Missouri, Central Di
entered in case i
led “American
E. O’Malley, et al.,”
urt being all pending cases
o 426, both inclusive,
sty
R.
said co
from No. 270 t
certain causes were
but were theretofo
we have reduced to po
in the custody of City
Robert J. Folonie. It is as follows:
75
-44) is a declaration
Charles R.
“The undersigned, Charles R. Street and Robert
themselves trustees
pany, as follows:
“Receipt
Number
A94024
87
549
A63940
A716442
A65650
A90151
and securities may, 1n
tody and
suant to
cuit Court of Co
can Constitution
“And it is anticipa
Kind of Bonds
Treasury Notes B1938,
2 7/8%, due 6-15-38
Treasury Notes B-1939,
1 3/8%, due 12-15-39
Home Owners’ Loan A
3%, due 5-1-52
Treasury Bonds 1955-60
2 7/8%, due 3-15-60
Treasury Notes A 1938
2 5/8%, due 2-1-38
Treasury Bonds
3%, due 6-15-48
Treasury Bonds 1941
3 1/4%, due 8-1-41
Home Owners’ A
3%, due 5-1-52
n equity,
control, pursuan
decrees which may
le County, Misso
Denomination
$100,000.00
100,000.00
100,000.00
100,000.00
100,000.00
100,000.00
100,000.00
100,000.00
e or may hereafter
ties which
nto their possession, under
of decree of the District
States for the Western District
vision, being a certain decree
No. 270 in said court,
Insurance Company, plaintiff, v.
and other cases pending in
in said court,
in which series
not pending at February 1, 1936,
re dismissed. As such trustees
ssession certain securities now
National Bank & Trust Com-
Par Value
$100,000.00
400,000.00
100,000.00
200,000.00
200,000.00
700,000.00
600,000.00
200,000.00
ted that further sums of money
‘n like manner, come to our cus-
t to such decree and pur-
‘be entered by the Cir-
uri, in case of Ameri-
Fire Assurance Company V. O’Mal-
INSTITUTION OF LITIGATION
ley, or by order of the Supreme Court of Missouri in
said cause on appeal.
“Both of the undersigned do declare that they
have no personal interest in said fund directly, al-
tho said Robert J. Folonie has a contingent interest
therein, arising out of unpaid fees and expenses which
may, in the future, be discharged therefrom, for
services rendered and to be rendered, and expendi-
tures made and to be made in connection with such
litigation.
“Said moneys and securities above mentioned are
held in trust for the benefit of interested insurance
companies, namely, insurance companies involved in
litigation in the courts of Missouri in connection with
insurance rates, the general nature whereof is well
known to such interested insurance companies so rep-
resented by said trustees.
“The conduct of such litigation has been en-
trusted by various companies involved therein to the
conduct and management of Subscribers Actuarial
Committee, which is a committee existing and cre-
ated by interested insurance companies for manage-
ment of such litigation and who have had the conduct
thereof under their supervision. The said committee
has a membership which changes from time to time,
the present membership thereof consisting of Charles
R. Street, chairman; Herbert A. Clark, vice-chair-
man; George Bell, John C. Harding, Walter D. Wil-
liams, Ernest A. Henne and Fred W. Koeckert.
“Said trustees will, out of the moneys in their
hands, pay various sums provided in certain Memo-
randum of Agreement, made May 18, 1935, between
Charles R. Street, as agent for stock fire insurance
companies, and R. Emmet O’Malley, superintendent
of insurance, and witnessed by Robert J. Folonie and
John T. Barker, a copy of which is hereto attached.
Said trustees will undertake discharging the obliga-
tions of such agreement according to their interpre-
tation and understanding thereof, and, in particular,
payment of certain sums to the Superintendent of In-
surance and his attorneys, as therein prescribed, and
will additionally pay therefrom any sums arising by
way of costs, fees, and expenses assessed or adj dged
by any court in which such matters are pending, se-
curing vouchers for such payments; and for other
INSTITUTION OF LITIGATION ~
ents not so arising out of court orders, judgments,
or assessment of costs and fees, will disburse moneys
and securities in their hands under direction of Sub-
scribers Actuarial Committee, which directions they
will secure from them in writing, to be evidenced by
orders or directions for payment upon certification of
J. V. Parker, secretary for such committee, or his suc-
cessor, of action of such committee, or upon the signed
order of any two members of such committee, which
shall be evidence of the action of such committee in
authorizing and directing any payments from such
moneys and funds.
“The trustees may convert any of such securities
and sell or cause to be sold any of them, and may
invest or reinvest the proceeds thereof in their dis-
cretion.
“Such trustees shall continue to act until the
ses of the trust are completed, namely, disposi-
tion of all financial attributes of such litigation, in-
cluding not only sums assessed against the companies
for costs, fees and expenses which may properly be
discharged therefrom, but also such fees, expenses,
repayments of loans or other disbursements which
may be so certified to them by Subscribers Actuarial
Committee in the manner in which certification there-
of is above provided. ’
“The trustees will keep such amount as they
deem proper from time to time in bank account, sub-
ject to their withdrawal, and, when the purposes of
the trust are completed, will distribute the amount
remaining under direction of Subscribers Actuarial
Committee.
“In the event of the death or written resigna-
tion of C. R. Street, or upon some new person being
created as chairman of Subscribers Actuarial Com-
mittee, the Subscribers Actuarial Committee may
designate a successor, and such successor, as a con-
dition of succession, shall cause notice thereof to be
given to W. T. Kemper, custodian, or his successor
in that position; and upon the death or resignation
in writing of Robert J. Folonie, the Subscribers Ac-
tuarial Committee shall select a successor, who shall
be an attorney at law and who shall, if the said case
in the District Court of the United States above men-
tioned be still pending in any particular, file an entry
of appearance in said court and show his succession
INSTITUTION OF LITIGATION
to the court and file his appearance therein and sub-
mit to the jurisdiction of said court.
“Said trustees declare it to be their intent, after
the purposes of this trust are fulfilled, to distribute
to insurance companies, or representatives of insur-
ance companies entitled thereto, the remaining
of such fund and secure the approval of Subscribers
Actuarial Committee to such proposed distribution as
making an appropriate distribution thereof.
“It is here set forth as information for the bene-
fit of all parties concerned that the Subscribers Ac-
tuarial Committee is a Committee created by the
companies, of all classes, who are subscribers to cer-
tain activities in which the companies are individ-
ually and jointly interested, one of the functions of
the Subscribers Actuarial Committee being represen-
tation of all companies associated in litigation con-
cerning matters of general interest, which included
and includes the rate litigation in the State of Mis-
souri.
“Said trustees propose to open a bank account
with City National Bank & Trust Company and to
give directions to said City National Bank & Trust
Company from time to time as to the sale, purchase
or conversion of securities, and to make withdrawals
from deposits by them made in such bank; but said
City National Bank & Trust Company shall not be
required to inquire into the authority o. said trustees
in any acts by them so taken, nor justification nor
warrant of said trustees in making any payments,
nor verify that appropriate authority from Subscrib-
ers Actuarial Committee has been secured by such
trustees for performance of any act by them.
“In Witness Whereof, we have hereunto affixed
our signatures and seals this 7th day of February,
A. D. 1936.
(Signed) Charles R. Street (Seal)
(Signed) Robert J. Folonie (Seal)”
Mr. Folonie and Mr. Street executed this declaration
of trust after the federal court decree was entered, where-
by they took charge of the 30 per cent of the impounded
premiums (Folonie, III, 191). Then they proceeded to
administer that trust (Folonie, III, 191, 193) in accord-
ance with its terms (Folonie, III, 191), and paid out sums
INSTITUTION OF LITIGATION 79
in ce with Mr. Folonie’s report filed in this court
at a later date (Folonie, III, 193).
It was anticipated that the 30 per cent would be
uate for the payment of all expense in connection
with the litigation. They did not know what all the ex-
might be. It was discussed at the time the set-
tlement was drafted. Mr. Folonie, revealing no figures,
discussed that the companies were away behind in pay-
ing his compensation. The settlement contemplated set-
tling both the state and the federal cases. The impound-
ment in Jefferson City had been depleted to pretty nearly
$100,000.00 by allowances out of the principal. There
were matters of allowances to special masters, referees,
injunction bonds, and everything else; so they had no
way of knowing at that time just what all the expenses
were going to be. But it was contemplated that the 30
cent would be more than adequate to do it; other-
wise they would have set up more. They felt sure it
was more than adequate (Berger, III, 395-396).
The 30 per cent aggregated over $2,500,000.00 (Folo-
nie, III, 191). The trustees never paid anything out of
this trust fund without a written direction from the Sub-
scribers Actuarial Committee (Folonie, III, 215).
In the early party of March, 1936, the trustees started
to make a distribution of 6 per cent out of the 30 per
cent. It was the subject of discussion between Mr. Street
and Mr. Folonie. They were mutually agreed that they
had more money in trust than would be required for prob-
able expenditures in the future. Witness wanted to dis-
tribute $1,000,000.00 to the companies to divest themselves
of responsibility for the money, and to freeze a profit
they had in the bonds which would show quite a material
profit if they sold them at that time, and which might
disappear if they kept them long enough. Mr. Street
opposed this, and said $500,000.00 was enough. They
could not tell what they would need the money for. After
discussions on that proceeding for some little time, Mr.
Folonie gave in to Mr. Street and they agreed on a dis-
tribution to the companies of 6 per cent. Checks were
drawn for that distribution. Mr. Folonie drew a form,
or letter of communication to go with that. He thinks
that Mr. Street had the checks made out and sent them
to him to sign. Mr. Folonie made a list of the companies
and the amounts each one was entitled to, and had it
verified. He checked each check to see that the amounts
80 INSTITUTION OF LITIGATION
were correct, and delivered all the checks to Mr. Street
for distribution to the companies about March 9. Within
ten days after that Mr. Street told Mr. Folonie that he
had changed his mind, that he thought it would be ad-
visable to follow witness’ suggestion to distribute $1,-
000,000.00 instead of one-half million dollars, and that the
probabilities were that they would lose some of the profit
on the bonds if they held them too long; that he would
send the checks back to Mr. Folonie and they would cance]
them and make new checks (Folonie, III, 193-194).
Mr. Folonie brought over his book in which he keeps
all of the trustees’ business and everything he thinks
has any bearing on it. Mr. Street finally sent back pieces
of checks to witness, consisting of the righthand end of
each check, showing the number, the amount in dol-
lars (not the amount written out) and in most cases,
the tail-end of the names “Street and Folonie” and the
word “trustees.” Mr. Street said he had destroyed the
remainder of those checks. Mr. Folonie had his office go
through before he would take any further action, to check
up and see that these were all the checks that he had
signed, and he found that there were a number of checks
missing. He instructed the bookkeeper to paste in some
kind of a little slip showing the missing checks, which
she did. When witness called Mr. Street’s attention to
the fact that some of the checks were missing, Mr. Street
said that he had delivered a few of the checks to people
he happened to see, and the thing to do was to make
checks for 11 per cent to those who had not had their
checks, and to make checks to each one of those missing
for the difference between the amount they had already
received and the 11 per cent. That was done, and the
checks were made, and on the succeeding pages of wit-
ness’ book appears each of the checks for the 6 per cent
that were outstanding and all of the checks made in the
second batch. Those in the second batch for 11 per cent
were also dated March 9, 1936, by Mr. Street. He an-
tedated the checks to the date of the former checks. Mr.
Folonie did not raise any question about his doing this,
and did not think it was important (Folonie, III, 194).
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.