Tree Care Insurance and Risk Management
Arranging, managing, and servicing insurance needs for companies in the tree care industry is not an easy task.
Tree care companies, by nature of their operations, assume a large amount of risk in comparison to other industries. Insurance costs, therefore, tend to be higher those of most other industries. This means that few quality insurance options are available that properly address this specialty area. Furthermore, by the shear nature of their business, tree care companies often tend to operate “on the fast track” with multiple day-to-day service needs. These needs require a quick response from insurance providers who then need to be prepared to address a potentially wide range of needs and issues.
C&H not only understands the insurance marketplace as it pertains to tree care operations but also to the tree care industry itself. Our knowledge begins at the basic premise that not all tree care companies are alike. We realize these differences lie not only in individual company services and workforce make-up but also in the business philosophies and goals of individual company owners. This basic understanding is only the beginning — matters of proper risk avoidance measures, claims management, and a number of other important considerations follow. By tying all these components together, the end result can be a combination of controlled insurance costs, availability of quality insurance coverage, and demand meeting service standards.
Insuring Your Machinery and Equipment
A few helpful hints from C&H's Tree Care Insurance Specialist, Rick Weden.
"When visiting prospective and existing customers alike, one of the things I enjoy most is seeing all the equipment that they have in their yards and garages. I’m not exactly a gear head but ever since I was a kid I’ve always liked machines and been interested in how they work and what they do. Tree care companies feed my interest well as many use equipment not seen in other trades. Beyond the obvious chippers, grinders, steers and so forth we’ve got specialized aerial lifts, mulching machines, air spades and other kinds of special equipment needed to perform the unique services that this industry provides. The other thing I see in all of this is money, and lots of it. To put it bluntly, this stuff ain’t cheap and if something happens to it, someone has to pay. Should such an event happen let’s hope that “someone” is the insurance company!
With most tree care companies having some form of insurance covering their equipment what I often find surprising is a false sense of security many have over insured equipment. “It’s insured so don’t worry about it” seems to be the spoken words of many. So what do you say we get a little worrying done here and perhaps if we do, you really won’t have to, well……worry.
Policies insuring a company’s machinery and equipment are often referred to as a Contractors Equipment Form, or an Equipment Floater policy. These policies are readily available in the insurance marketplace and whenever a given insurance product is readily available, it usually turns out that policies of various insurers will differ greatly in terms, coverage, and conditions. Here are some things to think about."
Do you borrow equipment from others? Do you loan your equipment to others? Be careful, as many (but not all) equipment policies will only cover equipment that you own, borrow, or lease from others, and may not cover your equipment while being loaned or leased to others. The best practice is to consult your agent or review your policy before loaning, leasing, or borrowing any equipment. If your policy excludes coverage in any of these situations you may be able to change your coverage to properly address these situations.
Some equipment polices are specific as to what forms of equipment they will agree to insure. Many policies do not insure what may be considered a vehicle in the policy definitions so be careful to make sure before adding any larger road-worthy equipment that the policy coverage allows for this.
It’s important to understand how your equipment is insured on your policy. Some policies only insure your equipment for what is referred to as actual cash value or ACV. Damage or loss to equipment insured on an ACV basis results in a depreciated value settlement from the insurance company. This could spell trouble particularly if you have any equipment on a long term lease that contains conditions requiring you to pay the leasing company the full balance value of the lease if the equipment was completely destroyed or stolen. Some policies will offer Replacement Cost Coverage which obviously is a good thing so long as you have a sufficient limit of coverage on the policy to replace the equipment in question. Many polices will only grant replacement coverage on equipment that is five years old or less so it’s wise to review your coverage annually to determine if any equipment has “aged off” from the replacement cost provision and may then become insured for ACV. Also, many equipment policies contain a coinsurance provision. Simply put, a coinsurance provision allows an insurer to offer a reduced settlement in cases where a piece of equipment was not insured to a specific percentage of its value at the time of loss.
Most equipment policies allow an insured the choice to insure their equipment either on a schedule basis, or on a blanket basis. One should consider separately scheduling larger and more valuable pieces with individual values of $5,000 or more. A Blanket value method can be used to insure many smaller pieces of equipment such as saws, climbing gear, etc. under one limit of coverage. If managed properly this can work well as a company can establish a limit of coverage and thereby avoid the need to periodically add smaller pieces of equipment as they are purchased. Make sure, however, that you establish an adequate maximum value per item, and sufficient overall policy value to avoid any potential shortfalls. The blanket value should periodically be reviewed to ensure that the blanket limit is adequate.
I have encountered situations in the past where a piece of equipment was insured on a Business Auto Policy, where it was covered for ACV, and by moving the physical damage coverage on the equipment from the auto policy to the Equipment Policy, the insured was able to change their coverage from ACV to Replacement Cost. This can usually only be done with equipment that is newer, less than five years old. The Liability Coverage remains with the Business Auto Policy and the identity of the equipment and value are added to the Equipment Policy. As always, it is extremely important that you verify that the insurer of your Equipment Policy will agree to this before you make any changes, and always remember that once the equipment in question becomes older than five years, coverage may revert back to ACV. This is another example of why a periodic review of your coverage is important.
Rick Weden - Tree Care Insurance Specialist
Rick began his career in the insurance industry in 1983. He focuses on providing insurance products and advice to select specialty industries including healthcare, manufacturing operations, technology, and contracting operations. He also provides expert witness testimony in various insurance related litigation matters.
His experience and enjoyment working in the contracting trades led him to his commitment to providing insurance products and risk advice to the tree care industry, his primary specialty. His methods of addressing the insurance needs of this industry involve a radical departure from normally accepted approach of that process. He spends a significant amount of time researching and learning all facets of the tree care industry. This includes emphasizing the understanding of the causes of loss in the industry which include the impact of loss (both financially and emotionally) and the methods one can use to avoid them.
Rick is an active member of both TCIA and the Mass Arborists Association. His involvement with TCIA includes the contribution of numerous insurance related articles to Tree Care Industry magazine, as well as providing educational services such as “Boot Camp” programs at past TCIA Expos. He is actively involved with the TCIA sponsored ArborMAX Insurance Program not only as an agent but also working in partnership with the ArborMAX Team and other ArborMAX agents to insure a continued availability of a quality insurance option to those in the tree care industry.
Tree Care Insurance Articles
View Rick’s presentations and publications on the tree care insurance industry.
- Insurance Considerations for Contract Climbers
- Buildings & Personal Property: Insurance for the Tree Care Professional
- Should Employers Self-Pay Workers’ Comp. Claims?
- Minimizing Motor-Vehicle Related Liability Risks & Insurance Costs
- Controlling Workers Compensation Costs
- Managing Workers’ Compensation Costs
- Insuring Crane Operation Exposures