Ready or not, the holidays are right around the corner. And like retail stores and other holiday specialists, insurers are preparing for the holiday rush. This seasonal class can be challenging, especially for those insuring Christmas tree farms and lots for which premiums can be low but claims often severe.
However, it is also a reliable market.
According to Tom Wilkins, president of Keelson Partners in Portland, Ore., this market has been pretty stable over the last 10 to 15 years.
Keelson Partners runs the Christmas Tree Liability Purchasing Group in Portland Ore., which offers liability coverage for Christmas tree farms and growers, including choose-and-cut operators, and retail lots, through Great Northern Insurance Co., a member of the Chubb Group of Insurance Cos.
While business tends to be steady, Keelson says there was a bump about three years ago when there was a surprising increase in new Christmas tree lots.
“People could buy 5,000 trees and open up a retail lot,” he says. Wilkins says the average tree goes for around $25 to $75, so it was a way for those struggling during the economic downturn to generate more income.
Wilkins says since the economy has started recovering Keelson’s program has been pretty static without a lot of new operators.
Jimmy L. McElreath, president of First Pioneer Insurance Agency in Aberdeen, N.C., says his agency has seen a lot fewer Christmas tree growers compared with a couple years ago.
“A lot of smaller operations are no longer continuing,” he says. “And the economy has definitely affected our overall sales of the coverage.”
One agency, however, saw an opportunity in the holiday market created by the poor economy.
Safebuilt Insurance Services (SIS) began a program for handymen that install Christmas lights with its risk retention program, Preferred Contractors Insurance Co. (PCIC), which it launched last year.
“We started getting requests from guys who install and take down Christmas lights,” says Charles Lasher, vice president of operations for SIS Insurance in Carlsbad, Calif. “It is a risky class because of the roofing exposure.”
Lasher says high-end homeowners or businesses typically hire someone to install their lights for them, but require proof of insurance for the people they contract. SIS originally offered a one-year liability policy but the insureds would cancel once they were done with the seasonal work, which was a hassle for the company and its agents, who could lose commission.
“These guys do it for two or three months and we typically only sold an annual policy, so brokers didn’t like writing that because of the commission and started shying away from it,” says Lasher. “So last year we made a two-to-six month policy option that was paid in full and covers installing Christmas lights but can also include general handyman work.”
SIS’s policy covers other seasonal work around a house or business like nativity scenes or window paintings. It is strictly a liability policy written on an occurrence-based form. It also has a manifestation provision so there is not a lot of tail exposure. The policy is available in 23 states but SIS sees most of its business in California and New York. Policy premiums start at around $400.
Lasher says the response to this offering has been good, particularly from agents.
“A lot of our retail brokers have a huge web presence and this was a weird web-based request they were getting,” he says.
This year SIS hopes to see even more business as it plans to start marketing in the next month, as opposed to last year when it started much later.
Wilkins of Keelson Partners says his agency is also ready for the holiday insurance madness. Keelson began negotiating renewal policies for Christmas tree sellers back in April, started marketing in July, and had applications begin to trickle in the first of August.
“The real big season starts about October to December, but it is a year round policy,” says Wilkins. “We will get submissions through the fifth of December – there are always a lot of ‘last-minute Larry’s’.”
Wilkins says Keelson began in this class 25 years ago because Oregon is the number one seller of Christmas trees. He says even though the insurance policies that cover Christmas tree sellers are year-long policies, they distinguish between the more seasonal retail operators and Christmas tree farms because of the different exposures.
“The retail operators we know will close down January 15 and will be done for the year,” he says. “Christmas tree growers basically operate all year long but only have customers on the premises between Thanksgiving and Christmas.”
First Pioneer’s McElreath says his agency has just started receiving calls from those with retail lots in shopping centers who need a certificate of insurance in order to set up shop. The agency specializes in agriculture classes and McElreath says Christmas tree farms are an agriculture risk that needs more specific coverage.
“A shopping center will probably require [Christmas tree retail lots] to have a $1 million/$2 million general liability policy and a farm owner policy normally doesn’t extend to cover that,” he says.
McElreath says in addition to the general liability coverage, First Pioneer can also write workers compensation for different types of farms and include the coverage on a package policy. He says many retail lot operators are required to have products liability coverage, which covers any incidents occurring once the tree leaves the lot such as poison from the tree or bug infestations.
“It depends on who they are selling to if they need products liability, but a larger operation would require a farmer to provide a certificate showing they have that coverage,” says McElreath. “We are always recommending the coverage if [a farmer] doesn’t have it.”
Keelson’s Christmas Tree Liability Purchasing Group coverage also offers products liability and can include herbicide or pesticide coverage for overspray on Christmas trees with limits of $100,000 or $200,000.
Wilkins says the general liability policy limits start at $300,000 and can go up to $2 million, with 80 percent of insureds carrying $1 million. The other 20 percent includes those tree farms and lots in California, where the required limit is $2 million.
Keelson’s coverage is rated either on the number of locations or acres and the policy charges for an additional insured. Wilkins says in California they charge a $50 surcharge on policies because the frequency and severity of claims is higher.
The typical claims at Christmas tree lots are slip and fall. Sometimes there are claims from delivery when a tree farm has that option but Wilkins says most do not offer that service because it is not cost-effective for them. He says the coverage also excludes loaning or renting of power cutting equipment.
“Handsaws are fine, but we don’t want them giving chain saws to clients,” he says.
Wilkins says they used to provide property coverage but stopped two years ago when too many claims made it difficult to continue. Keelson also raised its rates over the last few years by $5 per coverage line per location to cover an increase in claims from accidents at choose-and cut-operations.
“When you are doing the volume we are doing, a $20 change makes a big difference,” he says. “It doesn’t have anything to do with the market hardening or anything like that; it’s just the loss experience.”
Luckily there are plenty of great markets that can write short term special events. SECURA Specialty Lines can write tree lots, pumpkin farms, corn mazes, etc. They write in 12 midwest states.