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Properly Insuring Rented Equipment

by | Dec 12, 2022 | Business Strategy | 0 comments

Properly Insuring Rented Equipment

Written by Tom Dunn

Just as employees are the valuable life blood of a successful tree care company, the equipment that is used to complete the production work is also a critical piece of the puzzle and insuring it properly is of utmost importance. Your equipment is typically covered under an Inland Marine/Contractor’s Equipment insurance policy, which is a pretty straight forward insurance policy until you start renting or borrowing equipment to or from others.  We’re going to go over some of the coverage concerns that you need to be aware of when you rent or borrow to or from others. 

Renting/Borrowing Equipment From Others

There will certainly come a time due to unforeseen events like equipment breakdown or theft or just not owning the right piece of equipment to complete a specific job requires that you lease, rent or borrow a piece of equipment to meet your tree care business needs. Your Commercial General Liability will pay for injuries or damage you cause while using a rented piece of equipment, however, the actual rented equipment itself likely will not be covered. Most insurance policies exclude property that is temporarily in your possession. 

So how do you insure the physical damage to the piece of rented equipment? If you are renting from an established equipment rental business, they may offer equipment rental insurance. We often recommend tree care companies to take the rental insurance if it is available depending on the cost and terms of the coverage. 

If you do not choose to purchase the rental agency’s coverage, or they don’t offer it, then you need to look to your current Inland Marine/Contractor’s Equipment policy for coverage. There may be a small amount of coverage (usually only $25,000) for this automatically built into the policy. Check with your insurance agent to learn what your policy covers automatically for rented equipment. If the piece of equipment is under that automatic coverage limit, then you should be just fine. 

When the value of the rented equipment is more than the automatic coverage limit, then you will need to add coverage for the rented equipment directly on the policy. For a short term rental, this is done with selecting a limit of coverage that is equal to the value of the piece of equipment. For a long term rental, you may be able to add the exact details of the machine onto your policy. Depending on how your insurance coverage is set up, there may be a reporting condition that requires you to report the total amount of expenditures for contractor’s equipment that is leased or borrowed from others within 30 days from the end of your policy. This could create an adjustment to the overall premium. 

Another word of caution. If you are renting a piece of equipment and are required to sign a rental agreement make sure you read and understand your obligations. The contract may say that you are responsible to replace the piece of equipment with a brand new, similar make and model. The majority of rented equipment insurance policies only provide coverage on an Actual Cash Value (ACV) basis, which means they don’t pay for the replacement cost, but rather the value of the machine in today’s world. There can be a significant difference in these two amounts and therefore could create a number of associated out of pocket costs. 

Equipment Rental contracts also usually have some form of indemnification/hold harmless language that has someone agreeing to hold another harmless for certain claims, losses and damages. While these are commonly used, there is no standard language used and some indemnification clauses will be more one sided than others.

Renting/Borrowing To Others 

On the flip side, what if one of your valued employees asks if they can “borrow” a piece of equipment to do work at their own property? As soon as your equipment leaves your care, custody and control, your Inland Marine/Contractor’s Equipment policy will stop and there will be no coverage for the physical damage to that piece of equipment. Because there likely is not going to be a contract in place for this equipment with whoever you borrow to, you will not be reimbursed if the equipment is damaged or stolen. 

Your liability exposure from the borrowed piece of equipment would likely be covered under your General Liability policy, however as a business owner, you are increasing the exposure unnecessarily not to mention also increasing the wear and tear on the equipment. Unless you are going to have the employee sign a contract and provide rented equipment coverage for the damage to the equipment, our recommendation is to avoid this situation and don’t rent/borrow your equipment to anyone.   

To conclude, here are three takeaways for insurance concerns and rented equipment:  

  1. Before you need to rent equipment, make sure you understand obligations of any rental contract. 
  2. Talk to your agent to see if you are adequately covered under your contractor’s equipment policy.
  3. Avoid the practice of letting employees borrow company equipment for their personal use. 

 

If you have any other insurance related questions, please connect with an ArboRisk team member today. We have many resources that can help you with this, in addition to our Thrive Risk Management Program, which can provide one-on-one help to take your business to new heights.

Tom Dunn

Pollution Liability

by | Dec 9, 2022 | Business Strategy | 0 comments

Pollution Liability

Written by Mick Kelly

No matter your exact operations, every tree care company has an exposure to pollution liability. From transporting PHC chemicals to running chainsaws and equipment at the jobsite to performing maintenance on their vehicles in their shop, tree care companies need to understand what the potential for a pollution event happening to them is and how to properly protect themselves from a costly remediation. Fortunately, there are insurance policies that you can purchase to transfer the risk of the remediation cost to, however, the world of pollution insurance can be a bit confusing. 

In this article we’ll talk about the most common liability exposures that tree care companies face and which insurance coverage/policy you can buy for it.  

 

What is Pollution Liability Insurance?

Pollution Liability Insurance is coverage that protects a business against liability (or alleged liability) from damages or injury caused by pollutants they work with or produce. The coverage protects against claims for contamination of soil, water or property along with bodily injury, illness or death. Gas and airborne pollutants are also covered. Pollution liability insurance is also known as environmental liability insurance or contractors’ pollution liability.

Pollution liability used to be included in general liability policies but started to be excluded in the 1980’s due to the size of the claims being made in regard to asbestos. Nowadays, Pollution Liability Insurance policies are standalone policies and are usually set up on a claims made basis.

What is a pollutant?

A pollutant can be any substance that is discharged or ends up somewhere it shouldn’t be. While toxic substances or poisonous liquids are the first thing that come to mind, everything from water, cheese, milk, lead or carbon monoxide can be considered a pollutant if introduced to the wrong environment. 

I have herbicide/pesticide applicator coverage. Why do I need a separate policy?

Many tree care companies are growing their Plant Health Care side of their businesses and will often have Herbicide/Pesticide applicator coverage. While some companies will include limited pollution coverage in with their herbicide/pesticide applicator coverage, most policies will not react to a pollution event. 

The herbicide/pesticide applicator will cover instances where there was a mistake in the application such as a lawn being burnt due to a bad mix or overspray killing some trees or shrubs that weren’t supposed to be sprayed. 

In the event that the tank carrying the herbicide leaked onto soil or into a water source, a pollution policy is what is needed to cover remediation of the soil/water and to pay for any loss of income your client may suffer due to not being able to use their land. If the pollutant was deemed to have caused bodily injury, the pollution policy will also cover the damages and any judgment handed down.

What does a pollution liability policy cover?

Legal defenses – The policy will provide a specialized lawyer who can help determine if there is a case against you. If there is a case, legal costs, fees, defense costs and settlements/judgements are covered. 

Remediation – Clean up and contamination of hazardous waste are covered and tend to be the bulk of claims. For this reason, there are usually high deductibles on pollution liability policies that can be adjusted if desired.

What isn’t covered?

Asbestos – typically this is excluded from all pollution policies.

Intentional Acts – if it is found that a pollution was carried out knowingly, the policy will not cover any of the above remedies. 

Fuel Tank coverage

Many tree care companies now have their own fuel tanks on site. A benefit to this is that employees can go straight to jobs from the main workshop without having to make any detours or stops, which often lead to accidents or claims and certainly lost time scanning the aisles of the convenience store.

However, if there is an issue with the fuel tank, most General Liability and even most stand alone Pollution Liability policies won’t cover it. 

A stand alone tank pollution insurance policy will be required to cover Third Party Liability, Loading and Unloading, Site Pollution Liability, Spill and Overfill coverage and Business Interruption. 

Detailed descriptions of tanks along with photos and operating procedures are required for quoting and issuing coverage. 

What if my truck gets in an accident carrying my herbicide/pesticide?

In the event that your truck gets in an accident, spills the contents of its tank and pollutes an area, herbicide/pesticide applicator coverage will not respond. While a stand alone pollution policy may respond, usually a Broadened Auto Pollution endorsement or Broadened Transportation Liability Endorsement are needed on the auto policy to cover the loss. 

Varying from carrier to carrier, the coverage may be added to the policy to cover all vehicles or may be added to an individual vehicle. 

As you can see there are a lot of pollution liability concerns for tree care companies and a variety of nuances to the coverages/policies that you can purchase. If you want to find out more about Pollution Liability policies or find out if one is a good fit for your company, please contact an ArboRisk team member today.

Tom Dunn

The Hard Market Is Coming

by | Dec 6, 2022 | Business Strategy | 0 comments

The Hard Market is Coming

Written by Eric Petersen, CIC

Like most industries, the insurance industry has market cycles. The insurance industry uses the terms “soft” and “hard” to describe the particular economic conditions the industry at large is enduring. As a whole, the insurance industry has been operating within a soft market for most of the past decade. In a soft market, insurance companies are more willing to take risks by insuring businesses and individuals who may not meet an exacting underwriting criteria. They also typically do this for a cheaper cost than during a hard market. The soft market creates a greater competitive situation for insurance companies and therefore the insurance customer will get better coverage for less money.

The flip side is a hard market, where insurance companies become more strict and rigid with their underwriting requirements and prices go up to reflect their discomfort with the risks that they are insuring.

Now while some may argue that insurance for tree care companies (especially General Liability and Workers’ Compensation) seems locked in a perpetual hard market, all indications point to a hardening market for all tree care insurance coverage lines coming in 2023.

 

There are many factors that contribute to why the insurance market hardens, but here are the most common factors:

  • Insurance Company Investment Income – In a perfect world, insurance companies will make their income from their investment portfolio, versus from their underwriting revenue. When investments are not growing at an acceptable rate, insurance companies need to make up the lost income by raising their rates for coverage.
  • Economic Uncertainty – Like most other industries, the insurance industry does not do well with economic uncertainty. The unknown of what is coming typically makes insurance companies protect their financial strength by increasing their rates to balance out losses to their company, whether that be from future claims, inflation costs to existing claims or from past claims being reopened.
  • “Social Inflation” – Today’s legal climate is unpredictable in many ways and leads to what insurance experts call social inflation. Large jury awards (otherwise known as “nuclear verdicts”) raise the potential for a minor accident to turn into a multi-million dollar case. Insurance companies have been on the front end of these social inflation claims for many years now.
  • Loss Ratios – When an insurance company is paying more dollars in claims than they take in from premium, their loss ratio begins to swell and the company loses money. Large weather events that produce widespread damage are a major contributor to loss ratio problems across the country.

 

So what can you do about the upcoming hard market to minimize the impact to your company?

Up your Risk Management Game – You’ve heard us talk about how purchasing insurance is only part of risk management before, but it becomes even more important when the insurance industry is in a hard market. Identify what areas of your business could be improved to reduce the likelihood of an injury or accident happening and then implement a plan to take action upon that risk. Seek help from your insurance agent and insurance company on what proactive risk management activities will have the most impact upon your insurance rates.

Explore Self Insurance with Intent – Every insurance claim that you file has an adverse impact to your insurance cost. Look at increasing your deductibles so you aren’t as willing to file a small claim as well as find areas within your insurance coverage that you can self insure, think small tools/equipment or the physical damage on older vehicles. A lot of little insurance claims will have a much greater impact on your insurance cost than one large one.

Explore Non-Traditional Risk Transfer Options – Captives or self-insured funds become more attractive to larger tree care companies when the insurance market hardens and traditional insurance programs cannot offer stable rates and terms. There are many different options to explore so work with someone who understands each of the options available to help you select the appropriate one for your business.

Choose the Right Agent – Ensure you are working with an agent who actually understands your business. Your agent is the first line of defense versus large premium increases and insurance market instability. They will know when an insurance rate increase is fair and justified and when it is out of line. They also will know how to position your business to the insurance company to receive the lowest possible rate.

 

Understanding what a hard market is and how to minimize the impact to your company can be a huge difference maker in your profit margin. Make sure to ask plenty of questions when reviewing your insurance policies with your agent at renewal time. And while no one knows for sure how long or severe a hard insurance market will last, they typically are shorter in length than a soft market. If you have any other questions on what the changing insurance market means for your business, please contact an ArboRisk team member today.

Tom Dunn

Business Planning Q&A with Jim Skiera and Kevin Martlage

by | Nov 28, 2022 | Business Strategy | 0 comments

Business Planning Q&A with Jim Skiera and Kevin Martlage

Written by Eric Petersen, CIC

We all know how critical business planning is for your organization, yet so many business owners get frozen by the mere thought of it. To help our readers understand business planning better and how to make planning a reality for their company, I went to the business strategy planning experts from our Thrive team, Jim Skiera (JS) and Kevin Martlage (KM). 

  1.   What is the most important aspect of Business Planning for a tree care company?

JS – Taking the time each year to do it. It’s surprising how many companies don’t have a business plan. Step one is realizing the value of business planning and step two is committing to doing it every year. 

KM – Great points Jim, I would also like to add that I am always surprised at how many tree care companies’ plans are not strategically developed and in alignment with their company’s “why” and purpose. It is extremely important to develop a business plan for your company to ensure you are pursuing the ‘why’ strategically and fiscally responsible. Another key area is communication. Once you have a plan, let your team know how they can impact the plan and make the plan happen on a daily, weekly, monthly, and annual basis.

 

  1.   What is the hardest part about planning?

KM – Getting started on the development and then ensuring that it is properly communicated, understood, and impacted by those responsible for making it happen. There is a huge myth out there that business planning is difficult and takes some magic approach and formula to make it relevant and attainable. While there are some nuances that should be considered, the approach to developing and implementing an effective business plan starts with committing to making it happen. Intentionality and commitment to the development and need will help the team ensure that a plan is created and is ultimately relevant and sustainable by the organization. 

JS – I agree with you Kevin, for most it seems to be just getting started. Often people in the tree business do not have a business background. They know how to care for trees but often don’t know how to manage and care for a business. If you are an accomplished arborist you went through a learning process to become one. You took the time to learn the standards and best practices that guide how you approach and plan how you prune or provide other care for trees. Approach business planning in the same way. When you were new to tree care you likely worked for someone or with someone that mentored you. Find a business mentor to help you get through it the first time. There are plenty of good business people out there and most enjoy helping others succeed. You can find free business plan templates online to get you started.

One of the challenges of running your own business is remaining objective with your expectations. Having a mentor who is willing to ask tough questions about your assumptions and goals will help you develop a stronger plan. It will also prepare you for your visit with your banker should you need to apply for lines of credit or loans.

 

  1.   What differentiates Strategic Business Planning from Annual Business Planning?

 KM – Strategic planning typically has a longer time frame and it focuses further into the future (typically 3 to 5 years). Annual business planning is still strategic but is focused on the performance of the past year and what needs to happen in the near future (next year) to help achieve the overall longer term strategic plan. Both are equally important, with the differences falling primarily on the time frame being planned for.

JS – A strategic plan has a longer planning horizon, that sets future business expectations and establishes the strategies to be used to meet those expectations. The annual business plan is more tactical, establishing the tasks, responsibilities and resources required to achieve those long-range goals.

 

  1.   What is the most common objection you hear to doing Business Planning?

JS – I don’t have time to write up a business plan, I’m just too busy. 

KM – Yep, the time objection is the largest objection I hear as well. “It takes too much time and we do not have time to “worry” about trying to get something else completed”. 

Additionally, for those that have a business plan, there is also an objection and issue with making sure the plan is kept alive and remains relevant to the organization. Too often, organizations develop a great plan only to get busy and focused on the day-to-day “fire drills”. This always has a negative impact on the plan effectiveness and eventually leads to more lost time and course correcting that if the plan was followed and executed in the first place.

 

  1.   What is the largest myth or misconception about Business Planning?

KM – “We do not need a plan; we are already extremely successful just by taking care of our customers”

“Planning it too time consuming and we do not have the time.”

“I do not know where to even start even if I had time to create a plan.”

“Plans are too confusing and only company leadership/owners need to have a plan. It is not relevant to me.”

All comments I have heard firsthand, but are extremely detrimental to every organization in my opinion. If done correctly, business planning can take your company to the next level while making sure you remain relevant, sustainable, profitable, and a great place for your employees to continue working.

JS – The reality is every business has some form of business plan; it just may not be written down. For a small company it may be in the owner’s head, and the risk with that is if something happens to that person the business fails.

 

  1.   What is the easiest way to start a Business Planning session for a tree care company?

KM – Schedule 1 one-hour-long meeting with the leaders of your organization to talk about the current challenges and successes you are seeing. During that discussion identify the top 3 areas you are challenged with as an organization and the top 3 areas you feel you are succeeding in. Next identify 1 thing you will do to maintain and support the successes and 1 thing you can do to address the challenges. Commit to meeting in 30 days to see how you are doing with those items and to continue the conversation.

The point is, if you simply begin the conversation, you will quickly understand how important it is for your company to plan your next 1-5 years and you will see how engaged your team will be in having these relative conversations. Conversations about how to improve the overall effectiveness of your team and ultimately your company. Whether planning is done formally or informally, the most important first step is to begin talking about it.

Another option is to reach out to the Arborisk Thrive team and engage in the Business Planning package which will help you organization walk through the steps while you continue to focus on your business.  

 JS – If you are going through it for the first time it may be wise to hire a consultant to help you write up your first plan. The consultant has been through it many times and can help move through the process efficiently. Because they have experience, they will ask you those tough questions and help you clarify your expectations and goals. Alternatively, as previously mentioned there are many free business planning templates available online. Start by filling out one of those templates and you can go from there. If you feel you need additional help the answers will help you identify where you need more assistance. Then if you do have a mentor or consultant review the plan with them and you will be off to a good start.

Thank you Jim and Kevin for a great conversation about business planning! Your collective experience is invaluable to ArboRisk and all of our Thrive clients. We are really appreciative to have you on the team.

If you are struggling getting started on an Annual or Strategic Planning session, reach out to an ArboRisk team member directly or enroll directly into our Strategic Planning Package today!

Tom Dunn

Elements of a Business Plan

by | Nov 4, 2022 | Business Strategy | 0 comments

Elements of a Business Plan

Written by Eric Petersen, CIC

At ArboRisk, we often write about how critical planning and being intentional with your business is. Obviously the more focused you can be, the quicker you will realize your goals, but how does a company stay on track in a sea of opportunity that comes their way?

The easiest way is to create a business plan for you to follow.

In the simplest terms, a business plan is a document that will guide your business through the next three to five years. As an added bonus, a business plan can help you achieve funding from a bank to continue to grow your business. 

While every business plan will be unique, there are some common elements that your plan should include. Working though each of these elements allows you to focus on your business and marketplace today and what you envision them both to be in the future.

1. Executive Summary – Even though this is the first section in the business plan, write this section last. The Executive Summary should be just that, a summary of your overall plan and why you are/will be a successful company. It is much easier to do this after you’ve written the other sections. If short on time, the Executive Summary should provide the reader the highlights necessary to understand where the business is heading.

2. Company Description – Start by describing your company structure, its management team and mission for its existence. Explain your organization’s competitive advantages and how your team is unique in delivering your service(s) or producing your product(s). This is the place in the business plan to brag about your business.

3. Services and/or Products – This section represents the chance to go into detail about the actual services and products you sell and the benefit your customers receive from them. Limiting the discussion in your plan to only your top 3 services or products will help you keep your focus on those strengths as a business. All too often, tree care companies get involved with providing so many services they do not become masters of any. It is only when a company specializes in a few select services that they truly provide value to their customers.

4. Marketing and Sales – Nothing happens for your company unless a sale is made. And you won’t make any sales if you don’t have a marketing plan to let people know who you are and the benefits that your company provides for them. This is where you explain your sales process, customer journey and post-project communication with your customers. Analyzing your market (local competitors, customer demographics and regional economics) in this section will transition you nicely to discuss your marketing efforts. Discuss your strategy for reaching your customers in-person and in-print, whether on paper or digitally.

5. Financials – The final section of your plan will include financial numbers. Use either projections on sales and expenses or a summary from the prior two years to explain the financial position of the company. This section presents your chance to request funding and explain where the funds would be directed in the company.

 

There is no one correct way to write a business plan, but incorporating the above sections into your plan will allow you to create a powerful document for your business to follow. If you are struggling with creating a business plan or setting the strategic direction of your company, sign up today for ArboRisk’s Strategic Planning Package or Business Finance Package.

Tom Dunn