Liability insurance is coverage that protects the insured against legal liability resulting from negligence, carelessness, or a failure to act, resulting in bodily injury, property damage, personal injury or advertising injury to others. Oftentimes, an Excess Liability policy is obtained when coverage is needed above and beyond what is offered in a primary General Liability liability policy.
Due to the hazardous nature of tree services, arborists, and utility line clearers, it is especially important to maintain adequate coverage for business risk exposures, which are most likely to require Excess Liability coverage. Unfortunately, tree care companies and similar businesses are currently experiencing significant difficulties finding the right coverage, especially tree serviceslocated in the western United States. Many experts predict that these trends may continue for the next few years.
Batten Down the Hatches to Protect Against Wildfires
The current hard market for tree service liability insurance coverage is primarily attributed to an overall increase in severity, frequency and intensity of wildfires. As the National Association of Insurance Commissioners (NAIC) states, “the frequency, size, and intensity of wildfires vary significantly by year, but many of the worst years for wildfires have been in the past decade. Total acreage burned only surpassed 9 million twice between 1960 and 2010. Since then, acres burned surpassed 9 million in 2012, 2015, and 2017.”
While most states have experienced wildfires in the past 10 years, they are most common in the western U.S., particularly California. According to a recent study, 2017 to early 2018 mudslides and wildfires produced $13.8 billion in insured losses in California alone.
Inverse condemnation is a complex legal doctrine that entitles property owners to just compensation if their property is damaged by a public or private utility companies(i.e. PG&E). While most insurance companies will not cover any damages due to issues that originate outside of the home on homeowner policies, if the property is located in state where inverse condemnation laws exist, such as California, homeowners may be able to sue a government entity (i.e., certain investor-owned utility companies located in California) found responsible for their damages.
Therefore, in these instances, the utility company is liable for costs associated with wildfire damages caused by the company or its equipment, including fire suppression, property damage and litigation. Because any tree care servicers and other similar companies (landscapers, underground workers, etc.) that are under contract with that utility company are considered agents, they may also be liable for damages if fires are traced to what the contractors did (or failed to do).
When it Rains, It Pours: Higher Limits and Rising Costs for Contractors
Due to the increasing threat of wildfires and the rising associated liability costs, most utility companies are requiring much larger limits for their tree service companies. The higher the liability limits that a tree service maintains, the more likely it will be able to secure utility company business. Furthermore, insurance companies recognize the increased risks associated with utility company business so they are more selective in the risks they choose to insure, limiting coverage, or simply canceling policies. In fact, many reinsurance companies have specific tree work exclusions that leave many insureds entirely exposed in the event of a wildfire. When Excess General Liability coverage is offered, many insurance companies are charging exponentially higher premiums. It is not uncommon for a policy that covers only $5 million in liability to cost over $700,000 today compared to $200,000(?) two years ago. When considering that $35 to $40 Million Excess Limits are required, the insurance costs associated with these types of projects can be unsurmountable for small businesses.
Are You Chasing Rainbows to Find the Right Coverage?
It is all too important for tree care companies to find excess liability coverage that adequately covers risk exposures, especially when operating in states with an increased probability of wildfires, like California. The ability to meet those limits required by utility companies while also protecting the tree service against liability costs associated with wildfire liability, property damage, and legal defense may seem extremely expensive. NIP Group offers a unique solution that covers excess general liability, as well as excess automobile (large fleet) coverage which is equally hard to obtain.
Tree care business owners can obtain coverage that is specifically tailored to their business’ risks, with limits stacked separately for larger exposures, such as wildfire risks. Separate forms are offered to mitigate costs of the three major areas of wildfire liability, property damages, and litigation.
Tom Doherty the lead NIP Group expert in excess placements, says they’ve come up with a solution with TreePro. NIP has the ability to cap costs for business owners to meet utility company contractually required limits, while also maintaining an affordable cost.