Bought a Tree Service Company? Insurance Checklist

A new tree service owner will usually want six kinds of coverage in force under the name of the company you now own: workers' compensation for the crews, general liability for falling limbs and damaged property, commercial auto for the chip trucks and bucket trucks, equipment coverage for the chippers, grinders and lifts, property coverage for the yard and, often, an umbrella over the top. The seller's policies may not follow you, so the first weeks are about confirming what is in force, for which company, and for which crews. This guide is for a buyer who inherited a tree company's trucks, saws and paperwork.

The short answer

The core stack is workers' comp, general liability, commercial auto, equipment (inland marine) coverage, property for the yard and an umbrella. Tree work adds questions about cranes, spraying and arborist reports.
In an asset purchase the seller's policies do not simply move to your new company. In a stock purchase the company keeps its policies, but the carriers still need to hear about the ownership change.
Under National Council on Compensation Insurance (NCCI) rules, the seller's experience mod (the workers' comp score) usually follows the business, and the policy asks you to report the ownership change within 90 days. Independent bureau states (which run their own rating bureau) and state fund states (where the state sells the coverage) have their own rules.
A bucket truck is usually an auto, but injury from operating the boom may be excluded from the auto policy. Ask for the auto and liability split in writing.
A quote is not coverage. Nothing is in force until the carrier binds it.

Which policies should a tree service company have in force?

Tree work puts people at height with saws, chippers and heavy trucks, next to other people's houses, cars and power lines. The Bureau of Labor Statistics (BLS) says tree trimmers and pruners "have one of the highest rates of injuries and illnesses of all occupations," so workers' compensation is the policy to confirm first. Then work down the list of exposures below. Which policy answers a given loss depends on the wording of your policies, so use the right-hand column as a list of questions, not as a promise of coverage.

Tree service company exposures, the policy that usually responds, and what to confirm
Exposure	Policy that usually responds	What to confirm in the first weeks
A climber or ground crew member is hurt cutting, chipping or dragging brush	Workers' compensation with employer's liability	The named employer is the company you now own, payroll is split correctly by class, and you have the mod worksheet if the company has a mod
A limb or tree lands on a house, car, fence or line	General liability	Limits, the completed operations limit (for claims that surface after a job is finished), and a written list of exclusions on the inherited policy
Chip trucks, dump trucks, bucket trucks and trailers on the road	Commercial auto	The covered auto symbols and any vehicle schedule match the trucks and trailers in the yard (by vehicle identification number, VIN, where the policy is scheduled), drivers are listed, and the lender is on financed units
Boom, crane or spray rig operation	Split between auto and general liability by wording	A written answer on which policy handles each of these
Chippers, grinders, saws, skid steers and lifts that move between jobs	Inland marine (equipment coverage that follows gear from job to job)	Replacement cost or actual cash value, how the limit compares with real value, and theft conditions
A spray or injection job, or a fuel or fluid spill	Pollution questions on the liability and auto policies, or a separate pollution policy	How each policy treats it, and whether applicators' licenses and records are in order
An arborist's written report or tree risk assessment	Professional liability, usually claims-made	Whether the company issues reports and whether any policy is written for them
Shop, yard, office and contents	Commercial property with business income	Whether you own or lease the yard, and what is stored there, including fuel
One large claim above the primary limits	Umbrella or excess liability	Which policies it sits over and what your customer contracts ask for

What changes in week one depending on how you bought the company?

In a stock or membership interest purchase, you buy the same legal entity, so its policies, claims history and unknown liabilities stay with it. In an asset purchase, your new company takes only what the agreement transfers, and standard policy wording says the insured's rights "may not be transferred without our written consent." Your attorney owns the deal-structure question. The insurance question is simpler: whose name is on each policy today, and is anything bound for your company on the day you start work? The article on stock versus asset deals and old claims goes deeper.

A hypothetical example. A buyer closes an asset purchase on a Friday. On Monday two climbing crews, a chip truck and a bucket truck go out on a city street-tree job. The workers' compensation, auto and general liability policies are all in the seller's company name, the bucket truck and chipper are financed with a lender named on the seller's policies, and the seller has told the broker to cancel at the end of the month. Nothing is bound for the buyer's new company. Before Monday the buyer needs to know whether workers' compensation and auto can be bound that morning, which company the city's certificate names, how the trucks titled to the seller will be scheduled, and whether the lender's loss payee wording is ready. These questions are easier to answer before closing than after.

Whichever structure you used, tell the workers' comp carrier about the ownership change. The standard policy asks for notice within 90 days. The workers' comp and payroll guide for tree companies explains how the mod and state rules work.

What should you confirm in the first 30 days?

Work through these in order. Each one is a document request to the carrier or your broker, and the answers belong in a file you can show a lender or investor.

Named insured and dates. Does each policy name the company you now own as the insured, and when does each renew?
Vehicles and drivers. Does the schedule match what is parked in the yard? Check who holds a commercial driver's license (CDL). Federal rules require one for a single vehicle rated 26,001 pounds or more, or a combination at that rating when the towed unit is over 10,000 pounds, and the trade association's magazine says tree company combinations often pass that line. Ask who keeps the medical certification records.
Equipment. Is there a schedule with serial numbers and values for chippers, grinders, lifts and cranes, including units you rent?
Workers' comp records. Do you have the mod worksheet (if the company has a mod; very small companies may not), payroll by class code and certificates from every subcontractor crew?
Loss runs. Do you have up-to-date loss runs (the insurer's claim history reports) for every line, ideally five years? Underwriters often ask for that much history. See how to read loss runs.
Customer contracts and certificates. Which customers require additional insured status, and does the policy actually carry the endorsements? The contracts, licenses and bonds guide covers this.
Lender paperwork. Is the lender shown correctly on financed trucks and equipment?

The calendar in your first 90 days of insurance shows where these fit alongside everything else a new owner is doing.

What might the seller's program not address for your plans?

A program built for the previous owner's plans may not match the business you plan to run. The coverage gaps guide for tree companies takes boom and crane work, spraying and arborist reports in turn. Four more items are worth asking about in the first 30 days.

Umbrella limits. One falling tree, crane tip-over or truck crash can exceed a small primary limit, and some customers ask for more.
Employment practices liability insurance (EPLI). Seasonal crews and turnover are common in this trade, and EPLI is usually claims-made with change in control terms.
Storm and out-of-state work. Temporary crews and travel change payroll, drivers and licensing, so tell the broker before the next storm.
The yard. Fuel, oil and chemical storage should match what the property policy and the lease describe.

How do lenders and investors change the list?

If a Small Business Administration (SBA) 7(a) loan financed the purchase, the lender's insurance conditions are part of your closing documents. Three points to confirm with your lender, based on SBA's lender guide, Standard Operating Procedure (SOP) 50 10 8.1:

Hazard insurance. The guide calls for it on assets pledged as collateral for 7(a) loans over $50,000, with two narrow exceptions for loans of $500,000 or less, so ask which conditions apply to your loan.
Equipment. The guide calls for full replacement cost (or maximum insurable value) and a lender's loss payable clause that gives the lender at least 10 days' notice of cancellation. In an equipment-heavy business, check the wording on every financed truck, chipper and lift.
Life insurance. For a standard 7(a) loan that is not fully secured where the business depends on one owner, the guide calls for life insurance equal to the collateral shortfall. Other loan types follow the lender's policy, so ask the lender and a life insurance specialist.

The detail is in SBA lender insurance requirements. Investors and a board will want a one-page summary of limits, deductibles and renewal dates. If the owner you bought from was the top climber and the only salesperson, they will also ask about key person risk. A Morrow review of the inherited policies can help assemble that summary, and the insurance checklist for buying a business is a good pre-closing companion.

Keep reading

Frequently asked questions

What insurance does a tree service company need?

The usual building blocks are workers' compensation, general liability, commercial auto, equipment coverage, property for the yard and often an umbrella. What your business needs depends on the mix of work (pruning, removal, crane work, spraying, storm work), your contracts and your lender. A broker can map your operations to the policies.

Do the seller's policies transfer to me when I buy a tree company?

It depends on the deal. In a stock purchase the company and its policies stay together, though carriers need notice of the change. In an asset purchase, policy rights usually cannot move without the insurer's written consent, so the buyer's new company generally needs its own coverage in force at closing.

Should I keep the seller's insurance broker after I buy a tree company?

Possibly. The seller's broker knows the account's history and may fit well. The test is whether the program fits the work you plan to run, so put the same written questions to the current broker and to any new one, and decide before renewal. The broker guide for tree companies lists the questions.

Do I need to tell the workers' comp carrier that I bought the company?

Usually, yes. The standard policy asks the employer to report an ownership change within 90 days, whether or not there is a current mod. Under NCCI rules, a recalculated mod can apply back to the date of the change. Independent bureau states (such as California, New York and Pennsylvania) and state fund states (North Dakota, Ohio, Washington and Wyoming) have their own rules, so ask your broker which route your state uses.

Can my crews work under a quote the broker sent me?

No. A quote, an application or a request for coverage is not bound coverage. Coverage starts only when the carrier binds the policy and confirms the effective date, so confirm that before crews work under a new 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.

Just Bought a Tree Service Company? What Insurance Do You Need?