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Prescribed Fire Liability Insurance: Unavailable, Unaffordable, And Vital

July 25, 2022

by Daniel Godwin, Director of Programs and Partnerships with The Ember Alliance

This blog post was originally published by The Ember Alliance on June 28, 2022.

An underdiscussed, poorly understood, and dire challenge is hindering efforts to use prescribed fire to mitigate wildfire risk to communities and ecosystems – an obstacle that could eventually grind this important work to a halt. This threat is the lack of prescribed fire and smoke liability insurance for individuals and private entities like contractors, nonprofit organizations, and prescribed burn associations.

Why does this matter? Because private entities are needed to work on lands where local, state, or federal land management agencies are unable or unwilling to work. Government agencies are limited by statute, by their capacity, or by their policies on what kinds of lands they can work on. Some are unable to work on private land or only under certain conditions (e.g., USFS and Wyden authority). Others simply lack sufficient resources to complete prescribed fire treatments on their own lands, such as many state and local agencies. Private entities fill gaps to complete prescribed fire on both private and public lands.

Private entities create a public good by reducing wildfire risk and protecting communities, but many are forced to internalize all the risk. Without prescribed fire liability insurance, these organizations expose themselves to existential risk to their finances and their operations and, understandably, many choose not to engage at all.

What Is Prescribed Fire Insurance?

Prescribed fire liability insurance protects the organization and individuals conducting a prescribed fire in the event of claims made against them related to fire or smoke. Although generally thought of as related to escaped fires, this type of coverage protects against damage from smoke as well as (sometimes spurious) litigation related to other concerns, such as viewshed impacts, wildlife impacts, etc. General liability and umbrella coverages almost always exclude “hostile fire” – the insurance term that is used to describe wildfires or escaped prescribed fires. Specific and separate coverage is thus necessary for coverage related to prescribed fire events.

Some prescribed fire practitioners argue that burn bosses or organizations assume little to no liability when conducting prescribed fires, but this is contrary to evidence. Private burn bosses or organizations employing the burn boss conducting a prescribed fire carry the burden of liability for their actions and, even if no fault is found during legal proceedings, open themselves up to legal action from individuals. Even in states where gross negligence standards exist, burn bosses or organizations are not protected from even the most spurious of lawsuits, which can lead to lengthy legal battles and significant legal costs.

Less than half of the states in the U.S. have enacted laws that clearly define negligence standards for prescribed burning liability. While the definition of negligence standards is an important step in creating a standardized, predictable legal environment for prescribed burners, it alone is insufficient to address the major issue of lack of access to prescribed fire liability insurance. Even in states where civil liability is set at a gross negligence standard, burn bosses and organizations can become embroiled in criminal litigation that would otherwise be handled (or settled) by an insurance provider.

Reinsurance, Rising Prices, And Climate Change

The insurance industry relies on reinsurance, or insurance for insurance, to address high consequence events. Due to pressure by the reinsurance industry, the insurance industry has reduced their risk portfolios after large payouts related to claims from storms, civil unrest, wildfires, and other disasters. Consequentially, prescribed fire liability insurance has become increasingly difficult or even impossible to obtain due to the perception that it is high risk (despite evidence that less than 1% of prescribed fires escape). Insurance premiums have gone up 300-400% for this coverage in the past few years. This is a worldwide problem, with organizations from large fire contractors to small nonprofits losing insurance or being priced out of the insurance market. As sea level-rise and other climate disasters become more frequent and intense, claims will increase and pressure by the reinsurance industry to shed risk will accelerate. Without action, prescribed fire liability insurance will only become harder to find and more expense. The worst is still ahead of us.

Insurance providers place limits on who they will consider for underwriting, further complicating the issue. The few insurance companies willing to underwrite prescribed fire liability insurance often will only look at organizations that dedicate less than 15% of their business to this work. While this is ostensibly to reduce risk to the insurance providers, this may in fact select only for organizations that have smaller, perhaps less practiced prescribed fire programs. Would you want a surgeon that only does surgeries 15% of the time?

Insurance providers also put spatial limitations on coverage. Some will only offer coverage in the Southeast. Others specifically exclude the western states like Colorado, New Mexico, Arizona, and California, likely influenced by media coverage of wildfires in these states and a resulting poorly informed assessment of risk in these states. This is at odds with the priority firesheds identified by the USFS Wildfire Crisis Strategy and illustrates the disconnection between the unregulated prescribed fire liability insurance market and national priorities. Our collective ability to complete prescribed fire should not be constrained by the misplaced restrictions of insurance providers. Prescribed fire practitioners face a challenge analogous to being excluded from coverage for “pre-existing conditions” based on the arbitrary proscriptions of insurance providers.

Lack of prescribed fire liability insurance creates a brittle, unstable system. Any organization may lose prescribed fire and smoke insurance coverage at any time. While some private entities like The Nature Conservancy and other private contractors either retain prescribed fire liability insurance, they face the constant threat of either nonrenewal or escalating premium prices. This makes strategic planning, partner support, and investment challenging and can lead to private contractors abandoning prescribed fire programs entirely. With so few actors in the system, the loss of any one burning organization can set back prescribed burn targets by years.

Many funding agencies require recipient organizations to have prescribed liability insurance before they will pass through support for prescribed fires. This is out of concern by funding agencies that they could be held liable for prescribed fires that they funded. However, without liability insurance options for the recipient organizations, this policy effectively means that many government agencies are unable to fund prescribed fire projects. This is particularly problematic due to the amount of investment coming through to federal, state, and local groups from the Infrastructure Investment and Jobs Act. As an example, the state wildlife agency for Florida needs contractors to implement prescribed fire on its lands but faces significant challenges in finding contractors who can meet their insurance requirements.

Solutions

Few good, comprehensive solutions exist to address this crisis. Catastrophe funds, like the one approved in California recently can help reduce the overall risk to insurance providers and encourage them to reenter the market. This model creates a state-backed fund for paying for damages from prescribed fires. This state-by-state solution raises equity concerns around variable access but has the benefit of influencing the market while providing immediate support for practitioners. Varner et al., 2021 provide a thorough overview of this approach.

Ultimately, this issue has international drivers and local impacts. As practitioners, we need to raise this issue with policy makers, talk about this issue amongst ourselves, and daylight what has been a simmering problem. We need to support federal, multistate action on this issue. This could take many forms, but likely will need governmental support to backstop risk exposure to private insurance providers. This approach has been applied for risks from terrorism and adverse vaccine reactions previously and could hold promise here. Without access to prescribed fire liability coverage, it will be impossible to increase the pace and scale of prescribed fire necessary to treat the acreage needed to reduce wildfire risk and protect communities and ecosystems. Without action on this critical issue, we will fail to meet the challenge facing us.

Daniel Godwin is the Director of Programs and Partnerships with The Ember Alliance. He can be contacted at daniel@emberalliance.org