Tribute to Terrafirma: Helping land trusts stay on solid ground

Such insurance is essential because of two harsh realities that land trusts face. One, that they will eventually have to take action against someone who violates a conservation easement or trespasses on a preserve. And two, that land trusts will strain or even break their budgets if they try to cover the hefty costs of dispute resolution (negotiation, mediation and ultimately litigation) without an insurance safety net.

“A land trust with a decent endowment might be able to defend a few conservation easement violations in court,” says attorney Jim Phillippi, board member at The Land Trust for Santa Barbara County and a member of Terrafirma’s all-volunteer Claims Committee. “But with numerous easements to defend, you’d be in trouble. I’ve seen cases where land trusts spent $500,000 or $1 million in litigation costs. Without insurance, you don’t fight many cases of that size and keep your land trust.”

Terrafirma has been helping land trusts uphold lasting conservation since 2013. Now, as Terrafirma marks its 10-year anniversary, it sees increased disputes of all types and sizes, with the original grantors of easements and with neighbors to preserves and conserved lands. As more protected lands change hands and as land trust acquisitions increase possibly through state and federal programs, the conservation defense safety net provided by Terrafirma is more valuable than ever. Beyond insurance, Terrafirma offers members numerous resources to head off conflicts before they reach crisis stage. And, once a claim is accepted, Terrafirma provides much more than just legal defense funds.

“Having had two conservation easements violated before the existence of Terrafirma, our small volunteer-led land trust finds Terrafirma’s insurance and drafting updates for easements highly comforting,” writes Owl Creek Conservancy, members of Terrafirma since its founding. “Insurance means not only that we can meet our obligations to donors and to protected properties without the worry of exhausting our reserves, but also that legal assistance with national experience and perspective can be available to us.”

Still, since Terrafirma is not your usual insurance company, it’s essential that members understand how it operates. Especially when it comes to filing claims and taking necessary steps to avoid claim rejections.

Land trusts had worried about the inherent legal risks of conservation easements long before Terrafirma was formed. As the number of easements grew, there were bound to be occasional deals that went south. Or west, as it turned out.

“It wasn’t any particular problem we ran into,” recalls Dan Pike, with Colorado Open Lands. “We just started asking what we would do if we ever had to go to court on our easements. And honestly, we didn’t have a good answer.”

In the late 1990s, a group of western land trusts worked with attorneys Jessica Jay and Andy Dana to explore options for enforcing easements. Their findings suggested that a pooled insurance model could work, provided that enough land trusts came together on a national scale. It was exactly the kind of partnership that the Land Trust Alliance was well-suited to establish. Nonetheless, the road from tangible to achievable was hardly a straight line.

“Before we decided on an insurance structure, we tried Lloyds and Chubb (world leaders in the insurance market). But creating insurance for land trusts wasn’t on their to-do list,” says Leslie Ratley-Beach, conservation defense director at the Land Trust Alliance and vice president of Alliance Risk Management Services LLC (ARMS), the wholly owned subsidiary of the Alliance contracted to provide day-to-day management for Terrafirma.

Ratley-Beach joined the Alliance in 2007 to lead the creation of Terrafirma along with starting the Alliance’s first ever conservation defense national initiative. The Alliance did its actuarial homework to decide how many insured parcels a fledgling insurance company would require in order to generate sufficient reserves to pay claims and operations costs. “Commitments from 423 land trusts came in, which was the critical mass needed to convince insurance regulators and the IRS that Terrafirma wouldn’t fall on its face,” says Ratley-Beach.

Since then, Terrafirma has lived up to the Latin rendering of its name: “on solid ground.” It now has 554 land trust members in 48 states, with over 11.1 million acres insured. What began with 14,000 protected parcels has nearly tripled to over 37,000 in 2023, a growth rate of 5%-12% per year. Along the way, Terrafirma has paid out $5.8 million in member claims and offered $3.1 million in premium discounts.

As a nonprofit captive insurance company, Terrafirma doesn’t exist to benefit shareholders or earn any profits. Rather, it’s a form of self-insurance that’s 100% owned by its members. And to be clear—since it’s often a point of confusion—Terrafirma provides liability insurance, not property insurance. This means it will pay for the legal cost of a preserve or easement challenge, but not if a big oak falls on your office roof.

To join Terrafirma, members pay a registration fee ranging from $375-$4,000, depending on the size of their conservation portfolio. A land trust may insure its entire conservation easement/ deed restriction portfolio or its entire fee-owned land portfolio or both, but may not select individual properties or easements for coverage. In addition, members pay a premium of $67 per insured property. Each policy carries a $5,000 deductible with a maximum of $500,000 per claim. There are discounts for land trust members that adopt practices to limit risks, such as becoming accredited and completing Terrafirma risk management training.

Another Terrafirma difference that members find surprising — in a good way — is the claims process. For anyone with car or home insurance, the idea that one should file claims for anything but a major loss sounds dubious—that’s how you get stuck with higher premiums and a higher deductible. Not so with Terrafirma.

“People say, ‘We don’t want to inundate you with claims,’” explains Tom Kester, ARMS operations manager and secretary. “I say, ‘Please, inundate us!’ You can go online and file a placeholder claim in mere minutes. A Terrafirma claim won’t affect the cost of your premiums or ability to renew your policy.”

The placeholder claim simply notifies Terrafirma of a situation that may escalate later. Here, it’s best to err on the side of caution. Additionally, there is no obligation to proceed further with a placeholder claim. Terrafirma recognizes that filing claims is an indicator that land trusts are out doing their jobs to uphold lasting conservation.

“We need members to file a placeholder claim as soon as they see a problem. Even if it is a trivial or uncertain matter,” Kester says. “Otherwise, it may snowball and cost much more in legal expenses than if it were reported early. Plus, once you’ve filed a placeholder claim, you can still seek an amicable resolution.”

Members can later ask for the claim to be reviewed by the Claims Committee, whose members have deep experience in real estate, insurance and land trust law. To analyze whether the claim is covered under the Terrafirma insurance policy, they’ll use monitoring reports, communications with landowners, photos and other data. Since 2013, Terrafirma has denied only 4% of its claims (82 out of 1,971). When claims are denied, it’s nearly always for these reasons:

• The violation pre-dates the member’s Terrafirma policy — i.e., an event that occurred before the insurance took effect.

• The claim is for one of the 37 excluded items that Terrafirma does not cover. Visit terrafirma.org/exclusions for a complete list.

• The claim was filed past the policy term or extended reporting period. The policy year runs from March 1 to March 1, and the deadline to file claims is April 30.

Once a claim has been approved for coverage by the Claims Committee, Terrafirma covers the member’s legal costs for conservation defense up to the claim limit and based on standard attorney rates, not full commercial rates. This includes fees for attorneys and experts for attempts at a voluntary resolution, but also mediation and, if that fails, litigation. Other unusual aspects of Terrafirma are that it covers land trusts initiating dispute resolution, covers all aspects of voluntary settlement and defends if the land trust is named in a lawsuit provided that the claim has been determined by the Claims Committee to be covered. And should members go to court, they have good reason to feel optimistic— Terrafirma’s record speaks for itself.

“The perception in court is that we’re the good guys here,” says Phillippi. “The public good argument for our conservation work comes across very well. I think it’s stunning that in Terrafirma’s 10-year history we’ve only had three losses. The majority of cases were settled without further litigation.”

Terrafirma recommends using local attorneys who know the lay of the land, says Grant Weaver, a Terrafirma Claims Committee member from Sonoma County, California. “We retain experienced litigators who know the community, the jurors and the courts. They know legal idiosyncrasies that others won’t. For instance, California was once part of Spain. Our attorneys need to understand an arcane system that includes Spanish civil law and English common law.”

Speaking of local, many land trusts have attorneys who serve on their boards. Might they represent their organization in court? Weaver advises against it. For one thing, they may not be litigators. For another, he says, “It’s more helpful to have someone who’s not so close and can be dispassionate about the case.”

For the most part Terrafirma cases rarely go to trial. While the opposing party may bluster, they will negotiate if they know they’re wrong and stand to lose big in court. Although in cases where the opposing party refuses to relent, litigation remains the only option.

For the accredited San Juan Preservation Trust in Washington state, litigation was the only way to obtain a $100,000 settlement.

The landowner owned a bed-and-breakfast uphill from the 38-acre John H. Geary Shoreline Preserve, which occupies 1.25 miles of shoreline along Burrows Bay on Fidalgo Island. In 2013, the landowner illegally cut a wide swath of trees on the preserve to create a waterfront view. The damage was doubly hurtful as the 22 parcels that comprised the preserve were protected in 1992 by a neighborhood coalition formed to stop development there. Adding insult to injury, the offending landowner then advertised the expanded view of Puget Sound in ads for the B&B. Fees from the settlement reimbursed Terrafirma’s litigation costs, with the remainder used by the land trust to restore vegetation on the denuded hillside.

Terrafirma’s insurance and risk management resources include assisting insured land trusts to obtain voluntary resolution of disputes. Especially early on when the problem is smaller and the parties less entrenched, Terrafirma can help find an out-of-court resolution that upholds lasting conservation.

About 85%-90% of placeholder claims get resolved without legal action. In some cases, a promptly filed placeholder claim can give land trusts quick leverage to defuse an unfolding situation.

Consider the case of a successor owner who threatened to install a prohibited apartment above their permitted garage. The land trust didn’t wait; it filed a claim immediately. Next, the land trust talked with Terrafirma about the landowner’s plans. The land trust decided it should tell the owner it had insurance to cover enforcement of these types of disputes. And, that the land trust hoped the landowner “would respect the conservation easement and not build the apartment.” Soon after this message was diplomatically conveyed, the land trust reported to Terrafirma that the successor owner withdrew the demand. Nothing has been heard from them since.

“We want to see both sides talk and hopefully work things out,” says Kester. “When land trusts can resolve matters this way, it’s a testament to the value of good relationships.”

Finally, as that rare bird in the insurance industry, Terrafirma wants to hear from its members. The ARMS staff and the Terrafirma volunteer committee members believe in service to the insured owner members of Terrafirma. And members will never hear an insurance jingle as hold music.

“Feel free to call us anytime, you’ll get a live person,” says RatleyBeach. “We’re always ready as a sounding board and resource. It’s our job to help land trusts keep their promises.”