Magazine article Risk Management

When the Bough Breaks: The Threat of Falling Trees

Magazine article Risk Management

When the Bough Breaks: The Threat of Falling Trees

Article excerpt


Trees are valuable assets that are coveted by many property owners for both aesthetics and the significant value they can add to a location. But they can also be highly destructive, and even deadly.

There are, conservatively, billions of large trees located on residential and commercial properties across the United States. Although the statistics are limited, it is safe to assume that millions of these trees fail (fall or lose large limbs) each year, with the vast majority occurring during adverse weather events. It was estimated, for example, that 320 million trees failed during Hurricane

A mature hardwood can weigh more than 40,000 pounds and the failure of a single tree can cause structural damage of $500,000 or more. Given the enormity of this still-overlooked risk. the insurance industry has an opportunity to protect their clients and themselves from this danger and expense.

Historical facts offer compelling data to highlight the risk that trees pose to insured property and provide insight into why the industry has had a difficult time quantifying this risk. There is also overwhelming evidence that this risk can be both measured in advance of binding coverage and mitigated to reduce the risk of loss and possible personal injury. Controlling this risk offers great potential for risk reduction and savings for both insurers and property owners today.

The traditional claims process followed by the majority of insurers today incorrectly classifies, and therefore drastically under-reports, the majority of losses directly caused by falling trees and tree limbs. During Hurricane Ike, hundreds of thousands of claims were filed involving large trees that had fallen on homes, fences, cars and other insured assets.

When adjusting a homeowner's claim involving trees, the adjuster has several costs to consider: (1) removing the tree from the insured asset, (2) repairing or replacing the insured asset, and (3) removing the debris (including the tree) from the insured's premises. In one claim during Hurricane Ike, physically removing the tree from a home cost $2,500, repairing the home from the "storm damage" was estimated at $35,000, and the debris removal to get the trees and other damaged building materials off the property was $1,800.

In this situation, the adjuster attributed the cost of the tree removal and home reparations ($37,500) to "storm/ wind damage" and the $1,800 was classified as debris removal. When evaluating this loss data, the carrier would conclude that this was a $39,300 wind/ storm claim, when the actual proximate cause of the loss was a single fallen tree. Instead of accurately recording the primary cause of loss as a fallen tree, the insurer (and most insurers) will view this loss as being storm-related and largely uncontrollable.

To further this example, the Ohio Insurance Institute reported that following Hurricane Ike the state had in excess of 100,000 claims filed, resulting in over $550 million in structural damage. According to the institute, over half of the claims were due to fallen trees. In all likelihood, the carriers in Ohio who experienced insured losses from Ike do not realize that roughly $300 million of damages were the direct result of tree failure, not storm damage.

Similarly, one local insurance agency in Houston estimated that roughly 40% of the claims they were receiving following Hurricane Ike were also the result of fallen trees. Galveston and Houston estimated about $10 billion in total losses from Ike. Across the United States, it is safe to say that the loss to the insurance community from fallen trees and tree limbs is substantial and, conservatively could reach as much as hundreds of millions of dollars each year.

Still, the insurance industry somehow seems to be generally oblivious to the risks posed by trees to their insured properties. It is apparent that many insurers believe that wind alone is the cause of tree losses and that little can be done--save cutting down all the trees--to avoid this risk. …

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