When a Tree is Damaged or Destroyed
Updated: Mar 15
A guide for the real estate, insurance, tax and legal professions in dealing with casualty losses to trees and other landscape plants.
Almost everyone knows that trees and other landscape plants are valuable. They contribute to the beauty of a property, purify the air, act as sound, site and wind barriers, and produce cooling shade.
However, many people don't realize that trees and other landscape plants are worth money. Trees and shrubs on private property contribute to the value of the whole property. Trees and shrubs on public or business property have a value of their own apart from the buildings or property as a whole.
It is wise for real estate professionals to advise their clients of the value of their investment in landscape plants and to suggest that they:
Plan new or additional landscaping for both beauty and functional value.
Protect and preserve their plants to maintain their value.
Take photographs on a regular basis as the landscape matures to show the importance of trees and other landscape plants to the overall property value.
Keep receipts for plant material and maintenance of the property.
Consult a professional tree and landscape appraiser should any casualty strike.
Insurance Limits and Appraisals
Most homeowner's insurance policies cover casualty losses caused by fire, lightning, explosion, riot, civic commotion, vandalism, aircraft, or a vehicle not operated by an occupant of the premises. Generally, losses caused by the wind or ice storms, floods, earth-slides, hurricanes, tornadoes, or the homeowner's vehicle are not covered by a homeowner's policy but may be considered a casualty by the Internal Revenue Service (IRS). In any case, the law in almost every state limits reimbursement from homeowner's insurance for landscaping losses to $500 for any one tree, shrub or plant, an amount often below the amount of casualty damage. In cases where casualty losses are caused by a vehicle, the limit could be the amount of the property-damage liability coverage of the vehicle.
There are four factors in determining the value of trees and other plants:
The size of the tree. The older and larger the tree, the more value it will generally carry.
The kind of tree. Trees which are hardy, durable, highly adaptable, low maintenance, and free from objectionable characteristics are worth the most.
The condition of the tree. A healthy, well-maintained tree will have a higher value than one in poor condition.
The location of the tree. A tree that makes functional and/or aesthetic contributions to the property will be worth more than one, for example, in a wooded area.
One of the biggest problems for insurance adjustors is determining the value of damaged or destroyed plants. When plants are small enough to be replaced, the computation is straightforward. The total of the receipts for costs to restore the property to its original condition is the amount of the casualty loss. However, one may not be entitled to full remuneration of replacement cost of a casualty tree or trees. Allowances must be subject to species, condition, and location factors.
In the case of a large tree which cannot be replaced, determining the value is more complex. Professionals in the tree, nursery and landscape fields are guided by a fairly intricate set of standards in making the evaluation, and those guidelines are normally judged to be admissible evidence by the courts.
If a casualty loss on private property is not covered by the homeowner's insurance, or the amount of the loss is greater than the maximum provided by the policy, the IRS permits a tax deduction for such non-business casualty losses to landscape trees and shrubs.
On private property, a casualty loss is measured for tax purposes by the difference in fair market value of the total property before and after the casualty. On public and business property, each element is considered as a separate entity, and casualty losses are determined separate from the value of the property as a whole. In the absence of other means to determine loss, replacement costs can be used.
In both cases, losses must be adjusted by any insurance or other reimbursement. The court has also awarded the cost of clean-up and restoration in addition to the value of the trees when public property is damaged. In all cases, written appraisals, receipts and photographs are advised.
In the Courts
A professional appraisal performed by an experienced arborist trained in plant appraisals is vital. Several court cases reflect the importance of professional, qualified witnesses who can give expert opinion on the value of casualty losses.
Casualty losses are defined as losses caused by sudden, unexpected or unusual events. Generally, damage to landscape plantings caused by insects and disease is not an allowable casualty loss.
For more educational information on a variety of tree care topics, visit: https://www.treesaregood.org.