ADJUSTING FOR TREE DAMAGE AND LOSS OF LANDSCAPING
Article 14 - Written by Doug Malawsky
Property and casualty claims data indicate that fallen trees and shrubs cost the insurance industry billions of dollars each year in removal and reconstruction costs. These claims are rising due to a number of factors, including: the occurrence of stronger, more violent storms; growth of the green movement, which is causing an increase in the preservation of large trees during construction; and an increase in land development that encroaches upon natural areas containing mature trees. Furthermore, over the last two years enhanced landscape policies have been filed by leading residential and commercial carriers, some with available coverage levels of $100,000 or more per tree, a development that will certainly increase the industry’s exposure to tree and landscape losses. Adjusters having a greater understanding of the legitimate costs for professional tree removals and how to establish primary cause of loss replacement costs for trees and shrubs will be able to adjust these categories of claims more effectively.
Estimating Costs for Professional Tree Care Work
The primary situations an adjuster will face when tree damage occurs are either the removal of a tree from a structure and/or debris removal of fallen trees. Currently, available claims estimating software provides limited data as it pertains to tree removal costs; simply knowing the diameter of a fallen tree, for example, does not provide sufficient information required to evaluate an estimate. Furthermore, the pricing of tree removal services as currently presented in estimating software includes pricing data for work performed by unqualified companies performing tree care work. This fact has created two major challenges for adjusters: first, tree work is highly undervalued by estimating software and while this may appear to save insurers money, the ultimate result is that it promotes unprofessional or unqualified work by the lowest bidder that can result in further damage and therefore higher loss adjusting expenses (LAE) and increased exposure to liability. It is important to note that while tree care work is one of the most dangerous professions in the US, it is also one of the least regulated, and for the most part no licensing, accreditation or professional training is required in order to operate a tree care business. Second, adjusters generally do not have sufficient experience working with tree care companies to know how to correctly adjust a loss other than by relying on available estimating software.
There are many factors that can greatly impact the cost of a tree removal. Having a basic understanding of the key variables affecting these costs will be helpful to effectively adjust what may be the most dangerous and potentially costly aspect of a claim. Obviously the size of the tree involved is a main factor in the cost of removal. However, it is also important to know the extent of damage the tree caused the roof of a structure. Even a large tree can be routinely removed if it is simply lying on the roof. By contrast a small tree that has heavily impacted the roof can be very complex and costly to remove. Another important variable is access to the site. Clear access enables a professional crew to utilize the most appropriate equipment and techniques for the job – which almost by definition means the most cost-effective. Poor access can require dangerous maneuvers or specialty equipment, such as a crane, to safely remove a tree.
HMI has conducted hundreds of tree removals using its national network of licensed and insured tree care professionals. Based on this experience and consultation with several of its partners [all members of the tree care industry’s only self-regulating trade organization, the Tree Care Industry Association (TCIA)], the company has created a chart that describes “typical” tree loss scenarios and a price range for each. The work procedures described below and their associated costs assume that the work is being completed by a professional tree service that is fully insured and that has five or more years of experience.
Tree Removal Cost Chart*
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Level 1
$1,200 or Less |
Level 2
$1,201 - $2,200 |
Level 3
$2,201 - $3,500 |
Level 4
$3,501 - $4,700 |
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DBH |
Spread |
DBH |
Spread |
DBH |
Spread |
DBH |
Spread |
Tree Size: |
<24" |
<40' |
<24" |
>40' |
>24" |
>40' |
>24" |
>40' |
Access: |
Unrestricted |
Unrestricted |
Possible Restriction |
Possible Restriction |
Structural Impact: |
Slight to Moderate |
Moderate |
Moderate to Heavy |
Moderate to Heavy |
Special Equipment: |
None |
1 Extra Piece |
Multiple or Large Crews, Crane |
Multiple or Large Crews, Crane ≥90 tons |
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Definitions:
- Special Equipment: Second bucket truck, skid steer/loader, crane, etc.
- Tree Size:
Diameter at Breast Height (DBH): Diameter of trunk roughly 4 ½’ from the ground.
Spread: The Spread on a tree represents the width of the crown (branches).
- Access:
Unrestricted Access: Tree service is able to move workers and equipment freely.
Restricted Access: May require, for example, a crane to reach over a home to extract a tree, or that a tree be cut-up into small pieces and removed manually.
- Structural Impact:
Slight: Minor damage to the roof.
Moderate: Structural damage to the roof joist or decking.
Heavy: Tree has broken through the roof and is greatly imbedded in the structure.
There will be cases where tree removal costs exceed $4,700, and there is no specific condition which will cause a tree removal project to escalate to this level. Generally speaking, claims of this size involve very large trees, 48” or wider DBH, or multiple trees that have caused extensive damage to a structure or are tangled in power lines or difficult to access.
Determining Cause of Loss and Replacement Costs on a Landscaping Loss
As previously mentioned, a growing number of residential and commercial insurers are increasing coverage for landscape losses. As this newly insured class of living assets proliferates the market, adjusters are being required to gain a greater understanding of adjusting for landscape losses as the potential exposure for insurers is increasing.
In light of the foregoing, determining the cause of loss of landscaping may determine whether coverage is available and a significant claims payment is made. Two tests should be considered when determining cause of loss: first, what was the primary cause of loss, e.g., lightning, wind, ice, vandalism, etc., and is it a covered peril; the second test is commonly overlooked and includes an analysis of whether a pre-existing condition, e.g., root or trunk rot, insect infestation, etc., was present and is said condition actually the reason the tree failed. Depending on the circumstances and the policy terms, determining if a pre-existing condition was present may decide whether the loss is covered or not. The ability to determine cause of loss may require special expertise and in instances where the cause of loss is not obvious, an ISA (International Society of Arboriculture) certified arborist is the best resource for procuring a professional opinion. It should be noted that tree care experts support that a vast majority, 75% or more, of trees that fail during storms suffered from pre-existing conditions.
In the event that the tree loss is covered, it may then be necessary to establish its replacement cost in order to fully process the claim. The primary method for determining the replacement cost of a tree starts by calculating the median wholesale price for the same type of tree that was destroyed. The wholesale price is adjusted to reflect typical installation and transportation costs. If a tree is larger than what is generally available in a nursery environment, then the replacement cost is determined based on the Council of Tree and Landscape Appraiser’s (CTLA’s) trunk formula method, which is a recognized industry standard.
It is clear that adjusting losses that involve living assets have many variables and require specific expertise. The insurance industry has traditionally not had firm guidelines by which to function when claims involving trees and landscaping are involved, but as underwriting exposure increases and a desire to reduce LAE becomes more predominant in the industry, it will be necessary for the green industry and the insurance industry to work together in order to ensure professional work and standardization for adjusting tree and landscaping related claims.
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