Insuring Your Property & Equipment

Written by Tom Dunn

A couple of areas of insurance that tree care companies probably don’t spend as much time considering as some other exposures is commercial property and equipment insurance. Those who deal with insurance for their companies are probably more likely to lose sleep thinking about property damage their crews might cause to a client’s property or an auto accident or perhaps a work related injury to one of the crew members, before they think of property and equipment insurance. 

However, you should pay attention to this area of your overall insurance program and be knowledgeable on what these policies protect and how losses are paid out. It sounds pretty straight forward based on the names, but as anyone who has to deal with insurance on a regular basis, coverage is not always as it seems. 

Let’s briefly summarize what the coverage is meant for and some considerations you need to be aware of.  

Commercial Property Insurance covers damage to businesses’ buildings (Real Property) and contents (Business Personal Property) due to a covered cause of loss, such as a fire. The policy may also cover loss of income or extra expenses that result from the property damage. 

Most commercial property policies cover buildings and personal property situated at your premises or within a short distance thereof (such as 100 feet) and include a number of coverage enhancements, for example accounts receivable, outdoor signs and property of others that will have their own sub-limits.  

There are different methods for valuing and assigning coverage limits to a commercial property that determines the amount an insurance company will pay at the time of loss. Two of the most common follow. 

• Actual cash value (ACV): The amount equal to the replacement cost minus depreciation of a damaged or stolen property at the time of the loss.
• Replacement cost (RCV): The cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation. Insurers typically will not pay on a replacement cost basis for any loss until the loss or damaged property is actually repaired or replaced. 

Key differences in these two valuation methods are the scope and cost of the coverage. Replacement cost coverage will obviously cost a lot more as your limit will need to be listed at the value to replace the insured item, but will be worth it if you have a major loss and have to rebuild a property from the ground up. 

Why else is ACV and RCV important?  Insurance companies have taken steps to make sure their policy holders are insuring their property to value or at a level to generate enough revenue to pay for any losses that may occur. This is called co-insurance. Basically, the amount of coverage purchased must be equal to at least the co-insurance percentage times the value of the property. If it is not, the policy holder becomes a “co-insurer” for that portion of the value they didn’t insure to. A standard co-insurance percentage used is 80%, but again everyone will have different needs.  

Causes of loss forms establish and define the causes of loss (or perils) for which coverage is provided. The special causes of loss form (CP 10 30) provides what is referred to as all risk coverage or coverage for loss from any cause except those that are specifically excluded.

Commercial property insurance policies will commonly have exclusions for certain perils like earthquakes and floods, unless those perils are specifically added and listed on the policy. Additional coverage for these contingencies can be obtained depending on where you live and the risks in your area of the country.

Other considerations: 

• Business Income coverage: Also called Business Interruption coverage. This covers the loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations. Coverage applies to loss suffered during the time required to repair or replace the damaged property. 
• Extra Expense: Covers expenses beyond the normal day to day operating expenses that are necessary to keep a business going when recovering from a loss. For example, leasing equipment. 

Notice I mentioned earlier that commercial property insurance may cover business income and extra expense. Talk to your agent to make sure it is properly addressed in the insurance company forms being used. Commercial businesses should operate with a Business Continuity Plan (read a past weekly tip on this topic here) Develop an action plan for catastrophic disasters and keep accurate records or prior year’s income and income results. 

Equipment insurance is a generic name that is more appropriately called tools and equipment, contractor’s equipment, equipment floater, and/or mobile equipment. The common theme is they are all names for a type of insurance called Inland Marine insurance.

Why all the different names? Inland Marine insurance originally derived from ocean marine insurance, which protected property transported over water. Once on land, the coverage form changes to Inland Marine. It is also sometimes referred to as an equipment floater, because it covers property that “floats” or moves around, as opposed to staying in one place like the commercial property insurance. Think of your skid steers, stump grinders, and chippers here. Ok, enough of the name game. We will stick with Contractor’s Equipment going forward. 

Most Contractor’s Equipment is written on an “all risk basis” and provide coverage for direct physical damage and loss for exposures like theft, fire, floods, equipment breakdown and vandalism. Contractor’s Equipment is also written on either a replacement cost or actual cash value basis and provides coverage on either a scheduled basis for larger pieces of equipment or blanket coverage basis for items like miscellaneous tools. 

Other Considerations

When looking at Contractor’s Equipment policies, tree care companies should consider the following additional coverages, which may already be included in a policy or may need to be added through an endorsement:

• Coverage for equipment leased, rented or borrowed from others. For many tree care companies, it doesn’t always make sense to own all of their equipment. Sometimes a business will lease equipment from someone else. An equipment lease typically makes the tree care company liable for damage to the equipment that occurs during the term of the lease. 
• Rental reimbursement and continuing expenses. If equipment is damaged by a covered loss, many insurance companies will provide coverage for additional expenses related to the claim, such as rental or lease of similar equipment, overtime wages needed to complete the work and transportation of the rented equipment.
• Coverage for expediting expenses. Specialized or customized equipment that is compromised may not be easily replaced. To keep work on schedule, contractors often incur additional labor or freight costs to expedite delivery of replacement tools and equipment. Some forms of contractor’s equipment insurance can help cover these expenses.

Suffice to say, insurance coverage for a tree care company can be pretty technical but is critical to help keep your company in business. Knowing a little more about what it is and how it is covered can help you when you review your overall insurance program with your insurance agent. 

If you are wondering whether or not you are properly covered, contact the ArboRisk team to set up a free Coverage Review or check out our Thrive Risk Management New Heights Package for more information on developing and growing your business.

Business Continuity Plans

Written by Tom Dunn

As the COVID-19 pandemic evolves, morphs and continues to disrupt the lives of individuals and businesses to varying degrees across the country, the need for an overall business continuity plan is a critical resource for tree care businesses to proactively deal with any crisis you may encounter.

You could argue that the tree care industry was not as affected by COVID-19 as other industries, but safe to say no one predicted the scope and duration or was fully prepared for it. If there are any positive takeaways, the pandemic did force tree care businesses to become more nimble, resilient work forces.

When looking at the bigger picture beyond a pandemic like COVID-19, there are a myriad of scenarios that can disrupt your operations from inside or outside the organization. Natural disasters like hurricanes, tornadoes or wildfires can strike anytime. The loss of key personnel or a business partner can be just as debilitating and sometimes as unpredictable as the weather. Technological hazards are an entire subject area by itself where most tree care companies are left exposed.

The thought of trying to address all of the scenarios can seem daunting, but trying to handle a situation in real time is frightening. Hoping you can recover, without having a plan in place beforehand is not an easy way to go through a tough time. The familiar phrase, “hope is not a strategy, or is not a very good one” cannot be truer. Being prepared with a solid plan, that has been tested, will give you a much better chance to recover and speed up the recovery time.

There are typically four steps to developing a business continuity plan. Using a team approach from different functional areas of the company will help. This approach brings different perspectives, lightens the load for any one person and will result in a better plan. There are endless resources that can be found on the web, but https://www.ready.gov/ recommends addressing the operational and financial impacts from business disruptions through the following steps:

1.     Business Impact Analysis

Assessing the different threats to the business processes that organizations face is usually accomplished through a risk assessment as part of a broader (BIA) Business Impact Analysis. The items that you need to look at to complete a BIA are:

•       Lost sales and income
•       Delayed sales and income –Cash Flow
•       Increased expenses (e.g., overtime labor, outsourcing, expediting costs, etc.)
•       Regulatory fines
•       Contractual penalties
•       Customer dissatisfaction or defection
•       Delay of new business plans

For more help in creating your BIA visit https://www.ready.gov/business-impact-analysis.

2.     Recovery Strategies

Once you have a handle on the impact a specific threat has to your tree care company, it’s time to plan on your recovery. This worksheet from ready.gov is a great resource to help you and your team think about what will be needed in the recovery period. When completing the worksheet, think about the following:  

•       Alternative ways to restore business operations to a minimum acceptable level
•       Prioritized recovery time objectives
•       Developing manual work arounds

3.     Plan Development

The third step is to create the actual plan. Your plan can use any format that you’d like, but ready.gov has a template that you can use to organize the necessary plan components here. A few key areas that you need to look at when developing the plan are:

•       Assemble a business continuity team
•       Address Crisis Communication
•       Incident Management – who’s in charge?
•       Program Maintenance and Improvement

4.     Testing and Exercises

Testing the business continuity plan allows the team to tweak how to approach an incident and find gaps in the plan and address where it needs improvement. For ideas on how to test your business continuity plan, visit https://www.ready.gov/testing-exercises.

In addition to creating your own business continuity plan, most insurance companies will offer loss prevention/loss control services for their policy holders that will further help you mitigate against losses. These services are built into the premium that you already pay so take full advantage of these services. Remember, while business insurance can cover a portion of the losses from these events, and should be a part of any business continuity plan, it will not cover all loss scenarios.

There is no getting around the fact that developing a Business Continuity Plan and updating it regularly will require a significant time commitment from you and your staff, but the time put into it will pay off tenfold during a crisis. Work on the plan during the slow season. Just like your insurance policy, it will provide you with some peace of mind, so you can work on other areas of the business.

ArboRisk has additional resources related to business continuity and disaster planning that our clients have access to. Contact a team member anytime to help you get started on developing a business continuity plan or sign up for our Thrive Strategic Planning Package to set the proper trajectory for your business.

Why Is Strategic Planning Important?

Written by Kevin Martlage

It was the great New York Yankee Yogi Berra that once said, “If you don’t know where you are going, you might wind up someplace else.” That quote is so incredibly relevant especially when you think about the future of your tree care company and your organization. Sure, you may run a successful business that is taking the tree care industry by storm but is your current path sustainable, is it profitable, and most importantly are you achieving all that you can? Do you have a clear goal in place for the next 3-5 years or even next year as you continue to build your company and your team? If not, you will certainly end up someplace, however is that place where you ultimately want to be?

The myth about strategic planning is that it is considered by some to be an arduous task that takes a lot of time and energy to develop a plan to achieve something you were already on the path to achieving. While strategic planning does take some time and energy, if done intentionally and correctly, it will help you define the proper path for your organization that will lead you to new heights and ultimately the personal and professional goals of you as the owner, your team, and the organization. 

Strategic planning involves the organization taking a close look at several different areas to develop a plan for the next 3-5 years. A plan that will help identify key milestones, deliverables, resources, and opportunities to achieve both short term and long-term goals for the organization. There are many ways to complete a strategic plan as the basic concept has been around for hundreds of years. However, if you approach the development of your strategic plan with an infinite and long terms mindset it can help you clearly identify a path for your organization that will determine what else may be possible. 

When I lead organizations through the strategic planning process we typically focus on 5 keys steps:

• Confirm the Why
• Review performance and current state
• Identify what is possible
• Determine how we get there 
• Implement and monitor

The most effective way to start your strategic planning process is to determine, or validate, the “why” of your organization. Why are you in existence? Why do you have a tree care company? Why do you do what you do? Without a good understanding of your “Why” you will be creating a plan that is not in alignment with your organizations core values, mission, and purpose. The “Why” is considered the lifeblood of any organization and without it you will ultimately just end up someplace else. 

After determining or validating your “why” you then need to look at what got you to where you are today. This is completed by taking a deep dive into your current organizational performance and the past 1-3 years. This not only provides you the opportunity to look critically at your organization, but also provides insight into success stories, enhancement opportunities and ideas as to what else may be possible. Typically, this is the most enlightening part of the process as it encourages those working to create the plan the opportunity to step back, take a deep breath and look at the specifics of their organization from a different perspective than the day-to-day work. 

Now comes the fun part of the strategic planning process, the ideation and determination of what’s next? Where do you want to go as an organization? Do you want to maintain the path you are currently on, tweak it a bit to head toward other opportunities, or is it finally time to make some adjustments that will successfully set us up for long-term sustainable growth? Without a clear path you will end up someplace, but maybe not where you want to be. Walking through the determination of where you want to go and what you want to do over the next 3-5 years is a process that can take on a lot of different forms. The key to this is that whatever is determined or identified as a viable long-term goal, it must align with the “Why” of the organization. Without that alignment, you will once again be heading down a path to somewhere else. 

After key long term goals of the organization have been identified, it is now time to ensure that an effective operational and business plan is created to support the goals that have been determined. Too often, I have worked with organizations that have created a great plan, however it sits on the shelf and never gets looked at or used. Just as important as the plan are the steps you will take to achieve that plan and the commitment to keeping the plan alive. To develop those steps, you once again must look critically at your organization to determine the following regarding your goals:

• Do we have the resources necessary? 
• Do we have the knowledge necessary? 
• What are some potential roadblocks that we need to proactively identify?
• What are some outside resources we may need to engage?

Based on your gap analysis between the current organization and the future goals, specific next steps will need to be determined to ensure that the goals can be achieved.  Implementation of your plan, then becomes the next step to ensuring that you continue towards the place you want to be. 

Ensuring that a solid operational and financial plan is in place, will help your organization continue to have the support and ability to achieve the plan, but only if the entire organization is committed to and aware of the plan. Communication is key in this phase of strategic planning. The entire team must be aware of the plan that was created to ensure that everyone is driving to the same place on the map. It is up to the leadership of the organization to ensure that a clear understanding of the plan is in place and that everyone on the team is aware of how they impact the plan daily, weekly, monthly, and annually. 

Strategic planning is extremely important for any organization regardless of how small or large you may be. For those larger tree care companies, strategic planning will help ensure you are continuing to be sustainable and maintain relevance to the industry and your clients. For the smaller to medium size companies, strategic planning will also provide you those things, but it can help take you to new sustainable heights as you take your organization to the next level. In either scenario, a good strategic plan is important to not only your organization and your team, but ultimately the overall tree care industry. 

To learn more about how strategic planning can enhance your organization, I encourage you to look at our Thrive Risk Management Strategic Planning package. In just 4 short weeks we can help you identify who you are as a company, what you want to become, and what strategic milestones will be needed to achieve your goals.