This article was adapted from a longer
report on outdoor wood boilers found in
the Personal Lines section found here.
The good news for residential property insurers is that the use of outdoor wood boilers, a new trend in home heating, does not appear to be as hazardous as wood-burning stoves.
The bad news is that they present different exposures of their own, and insurers have little history of underwriting or rating them.
They’ll have to learn, as it is estimated there could be as many as 500,000 outdoor wood boilers in use by 2010.
Outdoor wood boilers (OWBs) are freestanding outdoor boilers that look like small metal sheds and are used to heat water and one or more nearby buildings.
OWBs, which cost about $5,000 to $10,000 fully installed, are also known as wood-burning boilers, outdoor wood-fired boilers, and outdoor wood furnaces. Unlike wood-burning stoves, they require electricity for their operation.
The boilers heat water by burning wood in a large firebox, which is surrounded by a “jacket” of water that circulates to the building via underground water pipes.
OWBs are marketed as a safer source of home heat than wood-burning stoves. Theoretically, at least, the fire and smoke are removed from inside a residence to a safe distance outdoors.
Nonetheless, there are concerns about the safety and environmental impact of outdoor wood boilers.
USA Today reported in January 2008 that OWB fireboxes are large enough to allow owners to burn tires, paletts, railroad ties, construction debris, and trash, releasing harmful chemicals.
According to a consortium created by northeastern states to monitor air quality, one OWB can produce as much pollution as 8,000 gas furnaces or 2,000 oil furnaces.
A 2005 report by the New York attorney general found that even properly used OWBs produce significant pollution because they “burn incompletely, or smolder, resulting in thick smoke and high particulate emissions.” (The water surrounding the fire box cools the fire and causes it to burn at a reduced temperature. That, in turn, leads to incomplete combustion and greater smoke.)
According to the Wood Heat Organization (WHO), much of the smoke condenses as flammable creosote on the cold steel internal surfaces. WHO adds that an OWB, connected to a modest-size house, is in the off mode most of the time, particularly during mild temperatures. An OWB emits the most smoke while in the off mode with the fire still smoldering.
Boilers require a large amount of firewood to operate, and manufacturers typically recommend using only dry seasoned wood. However, most owners do not have wood sheds big enough to accommodate the amount of wood required; this can lead to the burning of wet or snow-covered wood, which increases smoke emissions.
While indoor wood-burning stoves have been tested and certified by the US Environmental Protection Agency (EPA) for emissions since 1990, OWBs had not been addressed since they were developed more recently. OWB manufacturers, however, recently worked with the EPA to develop emission standards. The new standards are expected to lead to a new generation of more efficient EPA-certified OWBs.
In most cases, OWBs are built as enclosed units that would be categorized as related private structures covered under the Cov. B limit of AAIS and other residential property forms.
For that reason, outdoor wood boilers may be safer than indoor wood-burning stoves for the residences they serve, but there is still a considerable fire exposure to the boiler units themselves.
Unlike fireplaces and wood-burning stoves, OWBs involve fires that are typically unattended. Similarly, a damper could malfunction without being noticed, causing a unit to overheat. Also, since the units are outdoors, their owners may be less attentive to the buildup of creosote in chimneys and other maintenance issues.
Moreover, the farther a boiler is from a residence, the less efficient it is in providing heat; some have been known to be as close as 10 feet from a house. In one case, a house burned down after ashes escaped from an OWB and set fire to wood piled near the residence.
Thus, while OWBs may be safer for residences than wood-burning stoves, they still constitute an additional fire hazard under the Cov. A residential property limit.
With fire comes smoke, of course, and an exposure, however remote, to first-party claims for smoke damage.
Smoke damage to insured property is generally covered under AAIS Homeowners base forms as long as the smoke damage is sudden and accidental in nature (see table on page 10).
Those forms have not contemplated covering losses from prolonged exposure to smoke arising from fires deliberately started in fixtures implemented by an insured. (HO 0008, a limited perils form, excludes all loss caused by smoke from fireplaces, even if sudden and accidental.)
When considering a risk that has an outdoor wood boiler, underwriters will need to consider its potential for causing sudden and accidental smoke damage, and how such damage will be distinguished from smoke damage that would occur from normal operation of the wood boiler.
Coverage D - Additional Living Costs And Loss Of Rent pays for living costs if the “described
location” is made unfit for use as a residence by a loss covered under the property coverages.
Also, AAIS Homeowners forms include exclusions for smoke damage arising from agricultural
and industrial smudging operations.
Similarly, underwriters will have to consider whether and how the presence of an outdoor wood boiler expands an insurer’s exposure to water-related damage.
The essence of an OWB’s operation is to pipe water into a home during cold weather. Any loss due to freezing is typically covered under most residential policy forms, provided the insured has taken reasonable steps to maintain heat in the building or described location.
Some installers insulate and bury waterlines 4-5 feet underground, which should prevent freezing.
Other installers, however, dig a trench that is only one or two feet deep and attempt to avoid freezing by wrapping insulation around the pipes. That type of set-up has a greater likelihood of resulting in frozen pipes.
An Internet search reveals multiple anecdotes of individuals who blame OWBs for their frozen indoor plumbing. One report states that pipes froze even while the unit had a burning fire.
According to a December 2007 New York Times article, OWBs have spawned a “rash of lawsuits” and numerous local ordinances across the country. The effect of smoke on neighbors appears to be a leading cause of liability claims.
In one case, an Illinois couple alleged that smoke from a neighboring OWB caused them sore throats and headaches and forced them to move from their home. A family in southern Ontario, Canada, also filed suit claiming that smoke from a neighboring OWB caused health problems. Those cases include elements of bodily injury, which would trigger homeowners coverage.
Outdoor wood boilers also present a liability exposure as an attractive nuisance. The boilers feature untended fires and hot fixtures that could cause severe injury to curious children.
The contentious issue of smoke emitted from OWBs has led to greater public control of the risk. The following limitations on where units can be operated have been implemented or introduced:
- Connecticut, Maine, and Vermont have enacted laws limiting emissions of OWBs and restricting where the units can be operated;
- Similar legislation has been proposed in other states;
- Numerous counties and municipalities have passed ordinances addressing the smoke from OWBs; and
- Numerous injunctions were issued to shut down the operation of specific OWBs.
With greater public attention being paid to the risks posed by outdoor wood boilers, insurers may find it easier to accept and underwrite these risks.
Outdoor Wood Boilers 
