May 20, 2019

Underwriting property to save the environment

Local authorities and their insurers have to balance the risk to property presented by trees against broader environmental considerations.

According to Yuval Noah Harari’s best-selling book Sapiens, one possible reason why humans are so emotionally attached to trees is that we harbour primal memories from an early stage of our evolution in which trees were our homes. Certainly, trees play a central role in our faith, legend and history: the trees of life and of knowledge in the Garden of Eden; the Bodhi fig tree beneath which Buddha meditated; the world ash Yggdrasil of Norse legend; and the royal oak that hid the future Charles II and gave its name to pubs across the country.

Whatever the reason for our affinity with trees, it was clearly evident on the streets of Sheffield last year when council contractor Amey was the focus of protests about its felling of around 5,500 trees. Residents accused Amey and Sheffield City Council of cutting down mature trees to replace them with saplings to save money on tree maintenance. The council argued its contractor was only felling dying, dead or dangerous trees – an argument that was undermined when documents were discovered showing plans to remove as many as 17,500 trees, around half of all those on the city’s streets.

The depth of feeling witnessed in Sheffield demonstrates why tree owners, property owners and insurers alike need to be sensitive to the competing interests of retaining trees and the various consequences of doing so. This is against an all but unprecedented backdrop. According to the latest data from the Association of British Insurers, the exceptionally hot, dry summer of 2018 saw a 200% rise in subsidence claims for commercial properties and 350% for domestic properties. Should another summer in the near future prove similar, these competing interests will become even harder to balance.

Difficult challenge

Tree retention and vegetation-related subsidence is a difficult challenge for owners of tree stock to negotiate, particularly local authorities. On one hand, they have to protect the environment and consider the wellbeing of residents. Aside from the obvious amenity value of urban trees, they afford many other unique and important benefits. Trees filter air pollution and convert carbon dioxide to oxygen; they enhance flood defences by reducing surface water and provide habitats for birds, insects and other wildlife, much of which is already under threat.

On the other hand, trees growing in clay soils present a risk of damage to proximate built structures. Vegetation-related subsidence occurs where clay-based soils become dewatered in summer months, when trees are in leaf. The result is the clay shrinks, reducing its load-bearing capacity, causing anything constructed upon it to suffer downward movement and related crack damage.

At the same time, attitudes towards vegetation-related subsidence within the insurance industry have hardened somewhat in recent years. Up until 12 or so years ago, subsidence claims were generally dealt with by loss adjusters, who tended to seek abatement works to have the offending tree maintained – and that was often the end of the matter.

Today, things have changed. First, insurers have become keen to achieve a degree of certainty that, if they deal with a subsidence claim, it will not be followed by another. The surest way to accomplish this is to remove the tree entirely rather than attempt to maintain it. Second, the industry has seen a trend for insurers to engage in recovery actions against owners of offending trees.

This change in attitude has led to a process whereby solicitors, arboriculture consultants and engineering experts routinely present claims on behalf of insurers. While many claims relate to older houses with shallow foundations, non-domestic premises can also be affected, often leading to higher-value, more complex claims.

Shrinking budgets

The combination of tree retention and avoidance of property damage is made all the more difficult by shrinking tree maintenance budgets. Local authorities, in particular, face the challenge of prioritising management of their tree stock on areas of clay soil, in accordance with known levels of risk. However, increasing episodes of damage and related areas of known risk, as seen in summer 2018, are not matched by similar increases in funding to reduce that risk.

All tree owners can do is to assess risk, allocate their available funding accordingly and trust this responsible approach will be enough to resist the claims that will follow when property damage occurs, despite their best efforts. This is the battleground between tree owners and property owners, with the environment and insurers stuck in the middle. As demonstrated in Sheffield, felling mature trees may be an economical, if unpalatable, option.

The solution, such as there is one, will have to come both from tree owners and property owners. Owners of tree stock can only be expected to do their best but they must take care to do just that. Ongoing assessment of risk, associated allocation of funds and adherence to their own policies is essential. Only then can local authorities and organisations like them seek to rely on budgetary constraints as a good reason for not doing more. Property owners, at the same time, will need to accept the repair of crack damage, which does not have an impact on the structural integrity of their property, as an item of household maintenance rather than cause for an insurance claim. If people want to enjoy the benefits trees offer, they will have to accept the associated issues.

While property insurers can continue to press for tree removal in favour of expensive engineering solutions like underpinning, one assumes they will do so. However, another hot, dry summer within the next few years may, in turn, leave insurers with little option but to review their premiums and subsidence excesses – perhaps even to consider withdrawal of subsidence cover altogether in some cases. Indeed, this may come to be a risk to which some insurers are less than keen to be exposed.

Whether our affinity with trees and the importance of the environment will win over related property damage remains to be seen.