Buying a Tree Company: Licenses, Contracts, Bonds

A tree service company usually runs on four kinds of paper: customer contracts (some with insurance clauses), licenses and permits that differ by state and city, bonds on some public work, and a yard lease. There is no single national tree license, and whether any of it moves to a buyer depends on the deal structure, the issuer and your state, so a new owner should list every requirement, who holds it and which policy proves it. This guide is for the buyer who inherited the customer list, the certificates the seller issued and a license that may have been tied to the seller personally. It describes how these items generally work. Your state and city rules, your contracts and your attorney decide the specifics.

The short answer

Residential customers often ask for little. Commercial properties, cities and utilities more often ask for additional insured status, completed operations wording, higher limits and certificates.
Licenses vary: some states license tree experts, some treat tree work as contracting, most license pesticide applicators, and heavy trucks bring commercial driver's license rules.
Do not assume a license, permit or bond transfers to you. Ask the issuer and your attorney how it works in your state and deal structure.
A certificate of insurance is information, not the policy. Check that the endorsements a contract requires are actually on the policy.

What do tree service customers ask for in their contracts?

What customers require depends on who they are. The table lays out general patterns from construction and contractor work, not a survey of tree contracts. Limits vary widely, so read each major contract against your policy instead of relying on a rule of thumb.

Customer types, the insurance asks you may see, and what to check
Customer type	Insurance asks you may see	What to check
Homeowners	Often little in writing, though a neighbor's claim can still follow a job	That your general liability limit and completed operations limit fit residential work
Commercial property owners and managers	Additional insured status, a certificate, indemnity (hold harmless) language, sometimes waivers of subrogation	That the endorsements exist on the policy, not only on a certificate
Cities and other public bodies	Higher limits, additional insured status, completed operations wording, sometimes bid, performance or payment bonds	The bid documents, the umbrella limit and any bond language
Utilities	Often contract-specific insurance exhibits (check each contract). They may also ask about crew qualifications for work near energized lines	Whether crews meet the qualification and training rules for work near energized lines (the Occupational Safety and Health Administration (OSHA) covers line-clearance tree trimming in 29 Code of Federal Regulations (CFR) 1910.269)
Federal agencies	Where the contract applies the Federal Acquisition Regulation (FAR) insurance minimums (FAR 28.307-2): bodily injury liability of at least $500,000 per occurrence, employer's liability of at least $100,000 (not required in monopolistic-fund states), and workers' comp as required by law. Auto and other terms are in the FAR text	Whether the contract applies the FAR minimums and that your limits meet them. The FAR figures are a floor for federal work
Your yard landlord	Liability insurance with the landlord as additional insured	That the lease matches the premises you use, including fuel or chemical storage

The guide on checking customer contracts against your policies shows how to build a contract-by-contract review, and lease insurance requirements covers the landlord side.

Ask whether any contract or customer specification points to industry standards such as the American National Standards Institute (ANSI) A300 standards (tree care practices) or ANSI Z133 (safety).

What do customers mean when they ask to be an "additional insured"?

Customers commonly send a contractor a list of insurance terms. Here is what the common ones mean.

Additional insured status: the customer is added to your policy so it can respond if the customer is sued over your work.
Completed operations wording: that protection continues after the job is finished.
Primary and noncontributory: your policy pays first, before the customer's own.
Waiver of subrogation: you give up your insurer's right to recover from the customer what it paid.
Indemnity or hold harmless language: a promise to cover the customer's losses tied to your work.

A certificate of insurance (COI) summarizes coverage and, on the ACORD 25 form, says it is issued as a matter of information only and confers no rights on the certificate holder. If the holder is an additional insured, the policy itself must be endorsed. See why a certificate is not coverage and additional insured, waivers and primary wording for new owners.

Anti-indemnity statutes limit how much liability a customer can push onto a contractor, but whether a given state's statute reaches tree contracts is a question for your attorney.

A hypothetical example. A city's annual street-tree pruning and storm-debris contract requires completed operations additional insured status. A crew finishes pruning over a parking lot, and weeks later a limb fails and damages a car. The inherited general liability policy carries an endorsement that covers the city only for ongoing operations, while the contract calls for completed operations, and the certificate on file lists the city as an additional insured without that distinction. The new owner needs to know which endorsement the contract calls for, whether the carrier will change it, who bears the gap for work already done, and whether the contract has a change of control clause that the sale triggered. A certificate review in the first month can surface this. The guide to certificates the seller issued explains how to run one.

Which licenses and permits might apply?

Tree licensing is not national. Some states license tree experts, some regulate tree work as contracting, most license pesticide applicators, and cities and counties add business licenses and removal permits. The table gives examples of kinds, not a complete list, and you should verify each with your own state and local authorities.

Kinds of licenses and permits that may apply to a tree service company
Kind	Example	What to verify
State tree expert license	Maryland requires a license for tree expert work and ties it to proof of liability and property damage insurance. Supervised employees do not need their own license	Whether your state licenses tree work and who the license holder is
Contractor license	California counts tree removal, pruning, stump removal and cabling or guying as contracting for anyone not otherwise exempt, with a job-size threshold, so confirm with the board whether your work needs a license	Whether your work is covered, which classification applies and who the qualifier is
Pesticide applicator license	The Bureau of Labor Statistics (BLS) says most states license pesticide applicators, usually after a test. Texas licenses applicators for lawns, ornamentals and rights-of-way through its agriculture department	Whether crews spray or inject, and who holds each license
Commercial driver's license (CDL) and vehicle rules	Federal rules require a CDL for heavy vehicle and combination classes, and the trade association's magazine says tree combinations often pass 26,001 pounds	Driver qualification and medical certification files
Local business license or removal permit	Cities and counties may require business licenses or removal permits. Ask the permit office where your crews work	The rules where your crews work
Voluntary credentials	International Society of Arboriculture (ISA) Certified Arborist and company accreditation by the Tree Care Industry Association (TCIA) are not government licenses	Which credentials your team holds, since some carriers weigh them

The Maryland example shows how a lapse in inherited insurance can threaten the license itself. A licensed tree expert must report the liability, property damage and workers' comp insurance of companies working under the license, and failing to maintain required insurance is grounds for suspension or revocation after a hearing. The guide to licenses, permits and registrations when buying a business covers the general process.

What happens to licenses, contracts and bonds at a sale?

Do not assume anything moves on its own, and do not assume it cannot. It depends on the license, the issuer, the state and the deal structure.

California contractor license. One named individual qualifies the license and must meet experience and employment rules, and the statute does not provide for a license to be transferred or assigned. In an asset purchase the buyer's new company generally needs its own license. In a stock purchase the licensed entity stays the same, which may leave the license in place, but whether the qualifier and other board rules are still met after the ownership change is a question for the board and your attorney.
Maryland tree expert license. It is issued to a person after an application and an exam, so a buyer who is not already licensed needs a plan for operating lawfully after closing. The statute does not speak to sales directly, so confirm with the state.

Pesticide applicator licenses, where a state requires them, come from that state's program, so ask the state agency whether the license is held by the individual applicator, the business or both, and what an ownership change requires. Local business licenses and permits depend on the issuer.

Contracts follow the deal structure. In an asset purchase, a contract with an anti-assignment clause (the contract cannot be handed to a new owner without consent) generally needs the other party's consent to move to your company. In a stock purchase the contracting entity does not change, so a plain anti-assignment clause is usually not triggered, but a change of control clause (a trigger when ownership changes) can be. Your attorney owns that analysis. For insurance, the point is to make sure the proof of coverage each contract and license demands is in place in your company's name on day one. Read when the seller holds the contractor license and buying a business in a licensed trade.

Are bonds part of tree work?

Bonds are not a general requirement for every tree company, but some licenses and some public or utility contracts call for one, so check which of your contracts ask for a bid, performance or payment bond. California's contractor bond and limited liability company bond rules apply to contractor licensees, so confirm with the board how they apply to tree work. Maryland's tree expert statute does not mention a bond. A surety bond is not insurance for the principal: if the surety pays a claim, it expects you to repay it, so a bond is closer to a credit arrangement. See the surety bonds overview, the comparison of surety bonds and liability insurance and whether surety and license bonds transfer.

How do you keep track of every contract, license and lease?

Lenders care about the trucks, chippers and lifts that secure the loan, so the loss payable wording must match each financed unit. Keep one tracking sheet with a row for each contract, license and lease: who holds it, what insurance it requires, the expiry date, and the certificate or endorsement that proves it. The first-month certificate tracking guide shows the routine, and Morrow can compare the seller's certificates with the endorsements on the policies you inherited. See also the after-you-buy guide for tree companies and coverage gaps for tree service companies.

Keep reading

Frequently asked questions

Does a tree service company need a license?

It depends on the state and city. Maryland licenses tree experts, California treats tree work as contracting, most states license pesticide applicators, and heavy trucks can require commercial driver's licenses. There is no single national tree license, so check your state and local authorities.

Does the seller's tree license transfer to me?

Do not assume it does. Licenses are generally issued to a person or a qualifier, and the rules depend on the state and the license type. Ask the issuing agency and your attorney before closing, and plan how the business will operate lawfully on day one.

Do customers require additional insured status from tree companies?

Commercial customers, cities and utilities commonly do, and homeowners usually do not. The requirement lives in the contract, so read each major one and confirm that the endorsements are on the policy, not just on a certificate.

Do I need a bond to run a tree service company?

Not as a general rule. Some licenses and contracts may call for a bond, such as California's contractor bond for licensees or bid and performance bonds on public work. Check your contracts and licensing authority.

Is a certificate of insurance proof that I am covered?

No. A certificate is a summary issued for information only. The policy and its endorsements control, so confirm that any additional insured, primary and noncontributory or waiver endorsement a contract requires is actually on the policy.

References

Just bought a business? Get your insurance reviewed.

Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.

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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.

Contracts, Licenses and Bonds for a Tree Service Company