With the devastating Atlantic hurricanes last year and severe winter weather recently departed, homeowners, property owners, and insurance adjusters are keenly aware of tree destruction that can significantly alter the appearance, enjoyment, and value of a property.

Natural events, however, are not the only cause of damage to trees. Fires, vehicle accidents, improper construction activities, and vandalism can all inflict permanent damage on them. In some cases, even simple confusion about boundary lines can lead a property owner to mistakenly remove a tree that actually belongs to a neighbor. Other cases involve intentional trespass, which may have more significant insurance implications.

Whatever the event, the loss or destruction of trees can represent a substantial claim requiring expert valuation. Even partial damage may require professional assessment of repairs necessary to minimize the loss or mitigate potential risk to people and structures.

When a particular tree or group of trees is suddenly missing, the focus–and value–of a property's landscape design may be lost. In addition to their aesthetic benefits, trees provide natural enhancements, such as shade and privacy, while also acting as wind breaks and reducing storm water runoff that might otherwise destroy a property or threaten the health of nearby streams and waterways.

Like any other insurance appraisal, an accurate and impartial assessment of the value of trees that have been damaged requires the right expert. Tree appraisal demands special experience and expertise in arboriculture, current appraisal methods, and appropriate measures of damages.

Increasingly, insurance professionals are enlisting the help of Registered Consulting Arborists, tree industry experts who are among the most highly trained professionals in arboriculture. These experts, also referred to as consulting arborists, undergo intensive training to earn the designation from the American Society of Consulting Arborists and therefore are highly sought-after resources for the insurance industry.

Components of a Good Tree Appraisal

An insurance tree appraisal typically begins with a consultation with the adjuster, manager, or attorney handling the case and is followed by an on-site inspection and inventory of the damaged trees. The consulting arborist will consider the species, size, condition, and location of the affected trees.

In the written tree appraisal report, the consulting arborist will support the appraisal with specific calculations using one of the nationally recognized valuation approaches for estimating the value of damaged trees and plants. Frequently, the report will show a comparison of value using different appraisal methods.

The replacement cost method, trunk formula method, and the cost of cure method are commonly applied to landscape and amenity trees. These methods take a depreciated replacement cost approach to value. Depreciation is an important step that recognizes, for instance, when a dead, dying, or poorly located tree has reduced value. Establishing values for damage to orchards or forest stands may require an income-based approach to determine crop or timber value. Similarly, loss to a commercial enterprise may require an income approach. In other cases, where there may be a loss in property value, a market approach may be indicated. Consulting arborists may work with a qualified forester, real estate appraiser, or other expert in some cases.

The replacement cost method is usually applied to trees within a size range normally available through local nurseries. Typically, this method would be used for trees with a trunk diameter up to six inches.

The tree's value is based on price quotes from various local or regional nurseries for a replacement tree of the same or similar species and size, including a one-year warranty. In addition to the cost of the replacement tree, other costs to consider in the final appraisal include:

Removal of the damaged tree
Restoration of the ground around the damaged tree
Transportation for the replacement tree
Installation and maintenance for the replacement tree

The trunk formula method is used for trees that are too large for typical replacement. A skillful application of this method requires even greater knowledge, expertise, and judgment than the replacement cost method.

In applying the trunk formula method, the appraiser starts with the cost to buy and install the largest, reasonably available replacement tree while also factoring in the same costs considered in the replacement cost method. Then the appraiser calculates a unit cost for such a tree and applies it to the size of the larger, appraised tree to obtain a basic cost. This cost is adjusted according to species, condition, and location factors to reflect the difference between the basic tree cost and the reasonable value of the appraised tree.

The cost of cure method is most often used when there is damage to hardscape (walks, walls, etc.) in addition to trees. Like replacement cost, this method can be used for trees of replaceable size, and like trunk formula, can be used for larger trees. Some arborists prefer to use it to reflect a cure of a functional loss rather than depreciated size-for-size replacement.

For example, a number of trees might be used to cure the loss of a larger one, or the loss of a large tree in poor condition might be cured by replacement with a smaller one. In any case, the final opinion reflects the reasonable value of the appraised tree and any hardscape loss.

Professional Judgment

Tree appraisal requires more than simply applying a formula in a vacuum. Each appraisal must consider the individual claim as well as state and local laws. Professional judgment is essential.

Consulting arborists encounter a wide range of property owner sentiments surrounding damaged or destroyed trees. The maple tree that shaded decades of family picnics, only to be lost when a drunk driver swerved off-road; the towering oak that brought character and beauty to a verdant college quad before being splintered by lightning; a prized historic tree in a small town square, damaged by utility work. While difficult to quantify, such human components of value should not necessarily be ignored.

Insurance professionals can render a valuable service to their clients and policyholders by including the right professional on the appraisal team to identify reasonable value for damaged trees. Registered Consulting Arborists can help insurance professionals identify and document, reasonable tree values in a wide range of cases.

Scott Cullen is a Registered Consulting Arborist in Connecticut.

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