A number of admitted carriers write coverage for the logging industry. Joe Davis, program manager with Britt/Paulk Insurance Underwriters, says that they write with several “A” rated carriers. Marie Bernier, senior vice president at Victor O. Schinnerer, explains that their forestry program is written only with Chartis.
Scott Sackers, commercial underwriter at Roush Insurance Services, Inc., places business primarily with non-admitted companies including Atlantic Casualty Insurance Company, Century Surety Insurance Company, and Markel.
Eddie Daigle, Jr., president of Daigle & Associates, Inc., says his firm provides only equipment coverage and places it with Argonaut.
There are numerous potential logging customers, even for limited coverage lines. Mr. Daigle says, “We've been writing loggers equipment coverage since 1974 through local independent agents around the country.”
Mr. Sackers identifies Roush’s potential customers as “loggers, axe men/women, and anyone involved in logging operations (sawmills, landscapers, etc.).”
According to Mr. Davis of Britt/Paulk, “Our coverage is intended for timber harvesting accounts. We sell primarily to logging/lumbering companies that cut and haul timber to sawmills, pulp mills and timber yards.” Ms. Bernier identifies Schinnerer’s target markets as “operations that involve logging, log road construction, reforestation, sawmills, and the hauling of logs and chips.”
Mr. Davis also explained, “Workers compensation presents the greatest frequency of loss, followed by equipment, automobile, motor truck cargo and general liability.” Ms. Bernier says that the auto line experiences frequency and severity.. She explains, “Loggers utilize heavy trucks/tractors to haul logs, and the hazard is increased in areas where the road is narrow, steep or winding. That is why many carriers will not write monoline auto for logging operations; they want the other lines to support it.”
The biggest equipment exposure in the south and west, according to Mr. Daigle, is fire. Mr. Sackers identifies theft, vandalism and fire as the most common causes of losses for this class. He also comments that “Improper supervision of skidders and other logging equipment when engines are shut down and proper cool off procedures are not followed poses a fire hazard to surrounding wooded areas.”
According to our experts, every member of this class of business should purchase workers compensation, general liability, equipment, and commercial automobile coverages. In addition, Mr. Davis states, “Risks with shops and offices should purchase property coverage, and those that transport logging equipment for others should consider motor truck cargo coverage.” Tony Armor, commercial underwriter at Roush Insurance Services, Inc., says, “Many logging operations also have their own sawmills and lumberyards. Those exposures and equipment should not be overlooked.”
Mr. Davis describes a specific logging coverage commonly referred to as “fire and overcut.” It includes fire suppression expense coverage, property damage to timberland not owned by an insured, property damage to autos and railroad cars not owned by the named insured, and timber trespass. He elaborates further by stating, “Each carrier’s coverage part is specific to its policy and must be reviewed carefully to determine the scope and nature of coverage.” One example of this coverage could be the loggers broad form, an enhancement described by Ms. Bernier. It includes key coverages for fire suppression, damage to timberlands, and loading and unloading of logs.
Equipment coverage can also be enhanced. Mr. Daigle explained that the “all-risk” policy his agency provides prevents coverage gaps from being a problem. However, he notes, rental reimbursement has proved to be a popular enhancement in the Northwest and Midwest.
Overcut liability (coverage for trees taken down by mistake), loading and unloading property damage, and workers compensation are three coverages that are difficult to purchase, according to Mr. Sackers. He explains that most carriers do not write overcut liability and says that causes a significant gap in coverage. He believes that “It is best for loggers to work closely with landowners to ensure that trees to be cut down are properly marked to reduce overcut claims.”
Ms. Bernier explains that workers compensation is a very volatile line that her program does not offer and goes on to state that it can be difficult to obtain. Mr. Davis agrees, saying, “The markets that provide workers compensation coverage get any supporting lines they want as long as their pricing is reasonable."
As mentioned in Growth Potential above, most loggers are small operations that work on property of others. As such, they are subject to contractual insurance requirements. Mr. Davis explains, “Due to the demands of mill and timberland owners, very few coverage gaps occur because loggers can’t work for owners without the proper coverages, as evidenced by certificates of insurance.”
Our experts characterize the pricing for this class of business as thin, soft, and competitive. Any tightening appears to be only on accounts with adverse loss experience. In addition, there are very few geographic underwriting concerns, although Mr. Armor notes, ”Broadened coverage is readily available in the Mid-Atlantic, Southeast and Northwest regions of the country, where logging and lumbering operations are more common. Experience with this type of exposure gives underwriters a greater comfort level that often results in more flexibility and better coverage options.”
The economic downturn has had a significant impact on this class of business because the construction industry is a major consumer of timber products. Mr. Daigle explains, “The construction industry has been hit hard by the recession and the slump in demand for new buildings. That, in turn, has had a severe effect on logging contractors. Another problem is that tight credit for contractors affects their ability to purchase new equipment.”
Mr. Sackers notes, “The decline in demand has caused some loggers to reduce or eliminate coverages.” Mr. Davis comments, "Small and marginal loggers have left the business, resulting in a smaller number of risks seeking coverage. In addition, many larger risks have reduced the number of crews active in the woods and the amount of timber they harvest. However, the situation appears to have stabilized over the past six months.”
Ms. Bernier comments, “Even though construction demand is reduced, demand remains for paper, furniture, and other forestry products.” She adds this positive note: “So far, 2010 doesn’t feel as bad as it did this time last year.” |
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