Property and casualty claim data indicate that the insuranceindustry spends billions of dollars each year removing fallen treesand shrubs (trees) from insured structures and properties. Claimsinvolving trees tipping over have sharply risen over the last tenyears because of a number of factors. Among the factors are theoccurrence of stronger, more violent storms; growth of the greenmovement, which is causing an increase in the acquisition oflandscape materials and new plantings as well as the preservationof large trees during construction; and an increase in landdevelopment that encroaches upon natural areas containing maturetrees.

Furthermore, over the last two years, enhanced landscapepolicies have been filed by leading residential and commercialcarriers with available coverage levels of $100,000 or more pertree, a development that will certainly increase the industry'sexposure to tree and landscape losses. Adjusters with a solidunderstanding of how to price tree care (removal) work, establishthe primary cause of loss when a tree falls, and calculatereplacement costs for landscaping will be able to adjust thesecategories of claims more effectively.

Estimating Costs for Tree Care Work

The primary situations an adjuster will face when tree damageoccurs are either the removal of a tree from a structure or theremoval of debris from fallen trees. Currently, available claimestimating software provides limited data as it pertains to treeremoval. Simply knowing the diameter of a fallen tree, for example,does not supply sufficient information to evaluate an estimate.Moreover, the pricing of tree removal services as currentlypresented in estimating software includes pricing data forunqualified companies performing tree care work. This fact hascreated two major challenges for adjusters. First, tree work ishighly undervalued by estimating software, and while this mayappear to save insurers money, the ultimate result is that itpromotes unprofessional or unqualified work by the lowest bidder.Sub par work can result in further damage and therefore higher lossadjusting expenses (LAE) and increased exposure to liability. It isimportant to note that while tree care work is one of the mostdangerous professions in the United States, it is also one of theleast regulated. For the most, part no licensing, accreditation orprofessional training is required to operate a tree care business.According to recent statistics, the likelihood for a tree careworker to have a fatal accident is more than three times that of aconstruction worker. Second, adjusters generally do not havesufficient experience working with tree care companies to know howto correctly adjust a loss other than by relying on availableestimating software.

There are many factors that can greatly impact the cost of atree removal. Having a basic understanding of the key variablesaffecting these costs will be helpful to effectively adjust whatmay be the most dangerous and potentially costly aspect of a claim.Obviously the size of the tree involved is a main factor in thecost of removal. However, it is also important to know the extentof damage the tree caused the roof of a structure. Even a largetree can be routinely removed if it is simply lying on the roof. Bycontrast, a small tree that has heavily impacted the roof can bevery complex and costly. Another important variable is access tothe site. Clear access enables a professional crew to utilize themost appropriate equipment and techniques for the job, which almostby definition means the most cost-effective. Poor access canrequire dangerous maneuvers or specialty equipment, such as acrane, to safely remove a tree.

In an effort to establish some realistic standards by whichadjusters can audit tree removal costs, the chart accompanying thisarticle was developed to describe "typical" tree loss scenarios anda price range for each. The pricing information was gathered fromtree care companies that are members of the Tree Care IndustryAssociation (TCIA), the niche's only self-regulating tradeorganization that subjects its members to codes of professionalconduct and ethics. The work procedures described below andassociated costs assume that the work is being completed by aprofessional tree service that is fully insured and that has fiveyears or more of experience.

There will be cases where tree removal costs exceed $4,700, andthere is no specific condition that will cause a tree removalproject to escalate to this level. Generally speaking, claims ofthis size involve very large trees (48 inches plus DBH), ormultiple trees that have caused extensive damage to a structure orare tangled in power lines or difficult to access.

Landscaping Replacement Costs

As previously mentioned, a growing number of residential andcommercial insurers are increasing coverage for landscape losses.Traditionally, an average home owner's policy would cover between$250 and $500 per tree lost, and the covered perils were usuallylimited to lightning and fire. With the investment in landscapingsurging to almost $75 billion dollars each year, however, insurersare taking steps to protect this valuable asset class. The resultis enhanced coverage for landscaping and trees with sub-limits to$100,000, with limits going as high as 10 percent of the insuredvalue of the property, and specialty landscape endorsements beingunderwritten for virtually unlimited amounts. Given theproliferation of this newly insured class of living assets, theneed for adjusters to gain a greater understanding of adjusting forlandscape losses and potential exposure for insurers isincreasing.

In light of the foregoing, determining the cause of loss oflandscaping may determine whether a significant claim payment ismade. When living assets are involved, this may require specialexpertise. Two tests should be considered when pinpointing thecause of loss. First, what was the primary cause of loss -- forinstance, lightning, wind, ice, flood, and so on? Next, you shoulddetermine whether it is a covered peril. The second test iscommonly overlooked and includes an analysis of whether apre-existing condition -- root or trunk rot, insect infestation,and the like -- was present and whether said condition was actuallythe reason the tree failed. Depending on the circumstances and thepolicy terms, determining whether a pre-existing condition waspresent may decide whether the loss is covered. The capability toestablish the cause of loss may require special expertise.Additionally, in instances where the cause of loss is not obvious,an International Society of Arboriculture (ISA)-certified arboristis the best resource for procuring a professional opinion. Treecare experts will support that a vast majority (+75 percent) oftrees fail because of pre-existing conditions.

In the event that the tree loss is covered, it would benecessary to establish its replacement cost in to process theclaim. There are two primary cost methods for determining eitherthe replacement cost or appraised value of a tree. The first methodis the replacement cost method; replacement costs for trees arecalculated by using median wholesale prices for trees that arecommercially available (the industry standard is using the averageof at least three different wholesale prices). If a tree is largerthan what is generally available in a nursery environment, then thereplacement cost is determined and extrapolated based on theCouncil of Tree and Landscape Appraiser's (CTLA) trunk formulamethod, which is a recognized industry standard. The replacementcost includes the cost of the tree and typical transportation andinstallation costs and generally is equivalent to 2.5 to 3.5 timesthe tree's wholesale price.

The second method is the appraisal method; there is nodepreciation per se for trees, and trees actually appreciate invalue over time. A consulting arborist will generally perform atree appraisal and will use a species rating. This species ratingis based on the species of tree, the geographic area where the treeis located, the species' ability to adapt to the geographiclocation and the species' desirability in the landscape. Thisrating is then combined with other information gathered on site --including tree condition and location -- and applied against thereplacement cost of the tree to determine whether the appraisedvalue deviates from the replacement cost.

In most cases, the replacement cost analysis is the method usedin adjusting an insurance claim, and a mature tree may have areplacement cost of $50,000 or more. Appraised values are morecommonly used in legal proceedings or casualty loss claims.Appraised values are very subjective and it is not uncommon to haveappraisal results that differ greatly from arborist. Thereplacement cost method is more aligned with a standardized methodof cost analysis performance. Ultimately, it is the language of thepolicy that will determine the method to be used in a specificcase.

It is clear that adjusting losses involving living assets havemany variables and thus require specific expertise. The insuranceindustry has traditionally lacked firm guidelines for claimsinvolving trees and landscaping. However, as underwriting exposureincreases and a desire to reduce LAE becomes more predominant inthe industry, it will be necessary for the green industry andinsurers as a whole to work together to ensure professional workand standardization for adjusting tree and landscaping relatedclaims.