Drought and fires ? another challenging time for forest owners?
Jo McIntosh, New Zealand Tree Grower May 2015.
It has been another hot dry summer which once again has increased the risk of fires in rural New Zealand. There have been some recent high profile fires which caused millions of dollars of damage to properties and incurred large fire-fighting costs. If the fire was in your forest, how would your insurance policies have responded?
We all need to be aware of the risk and liability which comes with being in rural New Zealand. When a fire starts in a rural region, how the fire is controlled, contained and extinguished will fall under the control of the local Rural Fire Officer as set out in the Forest and Rural Fires Act. Under section 43 of that Act, liability for starting forest fires is very strict, irrespective of negligence. Anyone who causes a fire will almost certainly be held liable for the cost of the damages as well as the costs of fighting the fire.
As much as 98 per cent of land in New Zealand is deemed rural which means that the Forest and Rural Fires Act has vast scope. The liabilities are extensive and significant. Some of the most recent fires required the use of up to 10 helicopters to fight the flames. Helicopters are expensive to run and it does not take much to end up with costs in the hundreds of thousands of dollars.
The Forest and Rural Fires Act is complex. We do not expect small-scale forest owners to know the Act thoroughly, but we do encourage you to have a basic understanding of the main sections and obtain the right amount of insurance cover. The power of a Principle Fire Office or Rural Fire Officer at fires is extensive and wide ranging. The liability for costs in relation to fire-fighting does not limit the scope for the charges which can be made.
How we can help you
The NZFFA has worked with Aon and Insurance Facilitators to develop insurance to cover some main areas of risk. It is now almost 12 months since we first worked together with the NZFFA to develop an offer with special rates for members.
We had a good uptake from members last year. We understand that you appreciated the clear and easy-to-read policy wording, the broadness of cover and the ability to nominate your own values for the trees and fire-fighting expenses, along with the competitive pricing. We discovered that for many members it had been quite some time since they last reviewed their standing timber insurance. As a result they took the opportunity to amend their limits, add extra cover for major risks such as wind, which is a major cause of loss, and to add worthwhile extensions such as re-establishment costs.
Take time to review the policy
As with any insurance, it is very important that you take the time to review the coverage, benefits and exclusions. The standing timber policy wording for NZFFA members gives you the option to cover loss of trees from fire and wind. The policy is an agreed value policy where you set the value listed for your stands and in the event of a loss, this is the value used to calculate a claim.
The fire fighting expenses section of the standing timber policy covers reasonable expenses. These are over and above your normal operating costs and levies imposed by the district fire authority for controlling, restricting, suppressing or extinguishing a fire which they deem is a direct menace to your forest. This policy does not cover the spread of fire from your property to another because that is where you need public liability insurance which we will cover in another article in Tree Grower.
When you take out any insurance it is important that you know how the policies interact. In simple terms the standing timber policy is about the trees and costs to remedy and look after those trees. Once you get beyond the forest boundary you are into the realms of public liability.
We are often asked about setting values for trees. That is a question for a forest professional such as a forest valuer or stumpage harvester. There is such a range in pricing depending on access, distance to port, quality of trees and species. Our main advice is to talk to an expert in this area.
We also get a lot of questions about setting fire-fighting limits. There is no one answer. When setting your limits we encourage you to think about matters such as −
- How remote your forest is
- Access for fire fighting
- Rainfall in your area
- What your neighbours do
- The value of property nearby
- History of fire losses in your area.
Having an understanding of these factors will help you set adequate fire fighting limits. It is also worth being aware that the National Rural Fire Authority noted that $100,000 of insurance cover would have covered 80 per cent of forest fires in the 1980s. However recent large fires are reported to have caused damage well in excess of $1 million.
It is also important to understand how your standing timber fire-fighting limit interacts with a public liability policy. Aon and Insurance Facilitators have worked to make sure that it is clear how these interact, but not all insurers will respond the same way. You need to ask the questions and get confirmation.
Everyone will have a different approach to risk. Only you can make the decision on how risk is managed. We would like the opportunity to discuss your risk so that you can make an informed decision. It is worth remembering that Aon pays a financial contribution to NZFFA for every policy we place for members.
Jo McIntosh is Executive Director for Aon New Zealand.