The fire raged across Chicago, driven by a merciless wind. It burned from Sunday night until the early morning hours Tuesday. When it was over, 2024 acres had been leveled and 250 people, overtaken by the onracing horror, had perished in the streets.

It was the worst conflagration the world had ever seen.

The insurance community was shaken badly. About half of the $196,000,000 in property was covered - a liability of almost $100,000,000 spread among 201 companies.

Staples knew the Fireman's Fund was in trouble, but not until the New York managers wired their estimate of the Company's share - $350,000 - did he make any public announcement. He called a hurried meeting of the Board of Directors as soon as the news arrived on Wednesday and asked them to endorse a resolution he had drafted. The Board approved, and his words, as illustrated on this page, were advertised across the country.

Staples and Dornin left the next day by train for the stricken city. Twenty-two years before, it had taken Staples four and a half months to travel from Independence to San Francisco over much of the same ground on which the railroad tracks were now laid. When California was admitted to the Union on September 9, 1850, it took almost six weeks for the news to reach San Francisco via Panama. Now the daily Central Pacific train between San Francisco and Omaha made the trip in a routine 103 hours, with Chicago just a day beyond.

If the $350,000 figure staggered Staples - and it had - what he and Dornin found in Chicago must have stunned even the strongest of the directors. The Company's obligation reached almost $530,000.

Staples' first problem, after ascertaining the extent of liability, was to convince the policyholders that they would serve their own interests best by not throwing the Fireman's Fund into the hands of a receiver. Although the Company's assets were perhaps $200,000 greater than the Chicago loss total, the Company had many other obligations. If forced into bankruptcy no one would get more than sixty cents on the dollar. He offered to pay fifty cents cash immediately and issue I.O.U.'s for the balance, on which the Company would pay interest until an assessment of the stockholders could be levied. The policyholders agreed. Staples made the offer, of course, without knowing whether the directors would hack him and force collection of the assessment.

With the policyholders' acceptance, he wired home in the strongest of terms that the assessment must be made and the losses paid dollar for dollar. It wasn't going to be easy. Stock assessments were old stuff to San Franciscans. Many fortunes, large and small, had been and were then being wiped out in this process by the Comstock Lode mining companies. San Francisco newspapers carried columns full of assessment notices and lists of delinquent stockholders. A typical one begins:

"St. Louis Gold and Silver Mining Company - Location of Works, Gold Hill, Storey County, State of Nevada - Notice - There are delinquent upon the following described stock, on account of assessment No. Ten, levied on the fifth day of September, 1871, the several amounts set opposite the names of the respective shareholders, as follows..."

They called it the "freeze-out" game, and after years of watching good money follow bad, stockholders looked at any call for money with a wary and sophisticated eye.

Staples could see that if the Company weathered the crisis, people would knock on the Fireman's Fund door for their insurance. Someone once observed that it takes a bigger man to recognize an opportunity than to meet an emergency. Staples did both. Armed with moral right and a good business argument, Staples generated the optimism and determination he needed from the Board of Directors. Only a few wavered, and on October 27 the Company called for $5 for each $10 (par) share.

Staples had not only the policyholders, the directors, and shareholders to satisfy. He had the insurance commissioner of the state of California to convince. Technically, the commissioner should have asked the Fireman's Fund to suspend business until the impairment of capital, amounting to $290,000, was corrected. But he realized that the Company was in trouble through no fault of its own, and that it would have to stay in business if any solution short of bankruptcy were to be had. In his report for the year 1871 the commissioner wrote:

"Upon the ascertainment of the insolvency of these companies [the Fireman's Fund and the Union Insurance Company] a question arose as to the proper construction of that portion of . . . the Act . . . referring to the revocation of the certificate of authority of insolvent companies.

"A rigid interpretation seemed to call for the immediate revocation of the certificates of authority of these companies, and the suspension of all business on their part.

"These companies, however, hoped to repair their shattered capitals, and justly claimed that if their certificates were revoked their business would seek new channels, income would cease, stockholders and the public generally would lose confidence, and ruin inevitably follow.

"Had these bankruptcies resulted from mismanagement or fraud on the part of the officers of these companies, there would have been no doubt as to the course to be pursued; but, following as they did an unprecedented calamity, the circumstances called for the most liberal treatment.

"I concluded, therefore, to withhold the revocation of their certificates and to permit them to continue transacting business, pending their efforts to repair their capitals."

When word went out that stockholders were being assessed and that every loss would be paid dollar for dollar, it was not, unhappily, with the full backing of the Board of Directors.

In 1867, when the Company went into the marine insurance field, Gardner T. Lawton, a retired sea captain, had entered the Company as director and vice-president. The latter title was largely an honorary one, but when Staples left for Chicago, Lawton came to the office every day to help during the emergency. Secretary Charles Bond was the only other officer left and for his own reasons refused to talk to anyone about the Company's troubles. Lawton was also a director of the Pacific Insurance Company, and news of that company's imminent failure coincided with the Fireman's Fund call for cash from its stockholders. Lawton was pessimistic about the Company's outlook, and it was reflected in his fainthearted assurances to worried stockholders. Henry Dutton, one of the Company's organizers, learned from his son Will that Captain Lawton was "singing a funeral dirge," and took his place at the counter, forcing Lawton out.

Dutton had the "Fireman's Fund religion." He wasn't alone: Michael Lynch, one of the old fire boys who despite the uncertain beginnings never lost faith in the Company, John Barton (who had nominated Staples in 1866), Comstock millionaire Alpheus Bull, and a pair of bankers, Peder Sather and George Hickox, pitched in to make certain that the assessment was collected.

To relieve the financial pressure, Sather credited the Company with a $50,000 overdraft, and Hickox authorized purchase of up to $50,000 worth of the Company's I.O.U.'s.

Their enthusiasm spread among the stockholders. When the final accounting was made, only two small blocks of stock remained delinquent, and these were held by estates which for some legal reason could not comply.

Two hundred and one companies had written insurance in Chicago before the fire. Sixty-eight of them failed. More than eighty paid less than dollar for dollar and these companies retired from business in all but their home states. Fifty-one, including the Fireman's Fund and the Union of California, paid every cent due. All of these companies were honored across the country.

Some of them, including the Fireman's Fund, worked their advantage to the fullest. Their fire premiums for 1872 were twice what they had been in 1870. The Union, on the other hand, retreated to California and did a modest and successful business for twenty years, only to be absorbed by a large English concern.

Over the years, the Company has recalled the Chicago affair with pride, as indeed it should. Had Staples and the others lacked faith, there would be no Fireman's Fund to write about today.

The stockholder who paid his assessment took a calculated gamble that another conflagration wouldn't sweep the Company into oblivion. But it wasn't a matter of honor alone that prompted him to pay. If the assessment wasn't collected he would have nothing. In paying his assessment, he was buying a $100 share in a solvent company for $50. He might also have recalled that the Company, in its eight years of existence, had paid him more than $100 in dividends for each share.

If anyone doubted that it was still a risky business, however, events of 1872 would make a believer of him. On November 9 of that year a fire started in a hoopskirt factory at the corner of Summer and Kingston streets in Boston. Before it was stopped, fifty acres in the heart of the business district lay in waste. More than $75,000,000 in property was lost. Staples sent Dornin east to adjust the losses, and knowing that their liability was going to approach $200,000, again faced the problem of keeping the Company going. Another assessment was out of the question.

Aside from retiring from business, which was not seriously considered, only one course was open: transfer $200,000 from capital to surplus, pay the Boston losses, and pray hard that no other American city would burn down before they got back on their feet.

It was another tight squeeze. In order to show the commissioner assets equal to the $300,000 remaining capital, everything they owned had to be reappraised at the highest value permissible. Secretary Bond, whose business training had been gained in a Boston bank, refused to go along with any change in the books. He argued that if their building was carried on the books at $80,000 before the fire, how could it be worth $100,000 the day after?

When logic failed, Mr. Bond found himself the only officer in the history of the Company to be demoted back to the ranks. Dornin was appointed secretary, and Bond carried on in charge of bookkeeping.

By scraping together everything they owned, including inkwells and nibs, they satisfied the commissioner and again set out to build a surplus that would allow them to weather storms of the 1871 and 1872 magnitude.

Boston was as grateful as Chicago, and the Company could now boast two testimonials that only money could buy - dollar-for-dollar money.

Staples found that the size of the Board of Directors had proved to be more of a hindrance than a help in times of emergency. As a result he recommended early in 1873 that the number of members be sharply cut, and this was done. The Board was reduced to eleven.

The depression following the panic of 1873 will be remembered as one of the gloomiest periods in the nation's history, and during this time the Fireman's Fund built its business cautiously. So cautiously, in fact, that when Virginia City went the way of Chicago and Boston in 1875, the Company paid its losses of $164,000 without even pausing for breath. The stock-holders felt a slight pinch in 1876. Dividends dropped from twenty-one per cent to thirteen per cent. But in 1877 they totaled twenty-two per cent, and with the last quarterly payment the stockholders had received back more than they had paid in 1871.

There were bumpy years between the Virginia City fire and 1906, but not many. As far as can be known, no single fire or marine catastrophe made the difference between an annual profit or loss. If one did, no one bothered to record it.