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<br />Insurance Coverage and Damage Caused by Trees <br /> <br /> <br />When a tree limb falls off or a tree is blown over and causes <br />damage, you have three options: file an insurance claim, take <br />an income tax deduction for a casualty loss1 , or file a lawsuit <br />seeking compensation for the loss.2 This fact sheet deals with <br />insurance. <br /> <br />What does insurance cover? <br />Most insurance covers two things: damage that you experience (casualty) and damage for <br />which you are responsible (liability). <br /> <br />What is casualty insurance and what does it cover? <br />When it comes to residential landscape plants (trees, shrubs, lawns, etc.), casualty <br />insurance generally covers losses caused by fire, lightning, theft, hail, vandalism, or other <br />calamities. Landscape losses caused by wind, a tornado, or hurricane may not be <br />covered, except to cover the cost to remove a fallen tree from a house or other structure <br />and have the tree debris hauled away. The insurance policy often puts a cap on this type <br />of loss. For example, the insurer may agree only to pay up to $500 for the removal of the <br />debris from a tree that has fallen. Check your insurance policy for the details of your <br />coverage. <br /> <br />What if my insurance does not cover the loss? <br />The general rule is that losses not compensated by insurance or other means can be <br />deducted as a casualty loss on a person’s federal income taxes.3 The Internal Revenue <br />Service defines a casualty loss as “the damage, destruction, or loss of property resulting <br />from an identifiable event that is sudden, unexpected, or unusual.” If the loss is caused <br />by progressive deterioration, the loss does not qualify. Landscape plants (trees, shrubs, <br />and other plants) that are damaged or destroyed by a disease, termites, or other insect <br />pests generally do not qualify as a casualty loss, because the damage is progressive rather <br />than sudden. <br /> <br />If, however, the cause is unexpected and unusual, the Tax Court has allowed a tax <br />deduction. In one instance, the Tax Court found that that a black oak tree attacked by <br />two-lined chestnut borer insect died suddenly – within a few weeks – and constituted a <br />casualty loss.4 The taxpayers in that case were allowed to deduct the amount of the <br />diminished value of their property resulting from the loss of the tree. By contrast, termite <br />damage does not qualify as a casualty loss, because it is not sudden.5 <br /> <br /> <br />1 IRS Publication 547, entitled Casualties, Disasters, and Thefts.” See also, 26 U.S.C. 165(c)(3). <br />2 Guide for Plant Appraisal, 8th Edition, Savoy, IL: International Society of Arboriculture (1992). <br />3 Internal Revenue Code, Section 165. <br />4 McKean v. Commissioner, T.C. Memo 1981-670, 42 T.M.C. (CCH) 1709 (1981). <br />5 Rev. Rul. 63-232. <br /> Insurance Coverage and Damage Caused by Trees 1