Vine Notes

Debra Costa is senior vice president and vintner practice leader for Heffernan Insurance Brokers in Petaluma. Vine Notes is a recurring column (nbbj.news/vinenotes) by Rabobank, Farella Braun + Martel and Heffernan Insurance Brokers.

In the United States, wine is big business. Wineries face specific exposures and require the right insurance policies and insurance broker partners to protect them.

Exposure 1: Damage or destruction of buildings and inventory due to perils such as earthquake or fire

Earthquakes, fires and other catastrophes pose a serious risk to wineries. The right coverage can provide protection, but it’s important to examine the details of the policy.

We all remember on Aug. 24, 2014, a magnitude 6.0 earthquake shook California’s Napa Valley. The quake did significant damage to the areas many wineries. Infrastructure was damaged, barrels toppled, irrigation systems broke, and hundreds of thousands of gallons of wine leaked. The damage would have been even worse if the quake had occurred after harvest, when the tanks and barrels would have been full, or during business hours, when workers and visitors would have been present.

Mapping of potential earthquake damage through modeling programs which looks at the construction type, year built for buildings and their distance to fault line produce a probable maximum loss (PML). The PML is represented in dollars at risk to assist in analyzing loss potential and structuring insurance programs that effectively transfer risk when economically feasible.

The use of drones to view defensible space can now easily be used to help identify risk factors that can be mitigated to avoid fire loss. Also, having your property appraised for cost to rebuild post the recent wildfires is highly recommended to ensure your buildings are insured to their actual replacement value.

Exposure 2: Wine leakage

Whatever the cause, each drop leaked equals a loss in product and profits. According to the International Risk Management Institute, a stripped wing nut can lead to a leakage claim as high as $240,000.

To make sure your claims will be fully paid, examine your insurance policy carefully.

What you need to know:

• What is your insurance policy’s definition of wine leakage? Does it include losses due to accidental damage, vessel failure or human error?

• What is the maximum value payable per gallon lost?

Exposure 3: Wine stock contamination

Wines can be contaminated in several ways. In 2016, Moms Across America released evidence of glyphosate, an ingredient in pesticides, in wines from California, including wines that were supposed to be organic and therefore chemical-free. Other substances, from arsenic to fungus, can also contaminate wine. (The Wine Institute has answered accusations of glyphosate and arsenic contamination.)

Contamination can decrease the value of your stock. To make sure you’re covered, check your policy.

What you need to know:

• What is your policy’s definition of contamination?

• Does the coverage include contamination by human error and cleaning agents?

• Is smoke tainted wine covered?

Exposure 4: Business interruption

When a catastrophe like the 2017 wine country wildfires and the 2014 Napa Valley earthquake strikes, getting back to business as usual can take a while. Buildings may be unsafe for occupation, equipment may need to be repaired, and a combination of leaked wine and delayed harvests can result in there being less product to sell.

To make sure your winery is protected against business interruption, review your policy.

What you need to know:

Vine Notes

Debra Costa is senior vice president and vintner practice leader for Heffernan Insurance Brokers in Petaluma. Vine Notes is a recurring column (nbbj.news/vinenotes) by Rabobank, Farella Braun + Martel and Heffernan Insurance Brokers.

• What happens if you must interrupt business operations due to fire, earthquake or other disaster? Which losses are covered?

• How does your policy respond to losses resulting from off-premises power failure?

• Does your coverage include payroll for your team and for how long?

Exposure 5: Liability

Wineries that have tasting rooms face the same liability issues as bars. If employees break laws regarding serving minors or inebriated individuals, legal action may follow, especially if an accident occurs as a result.

Wineries may also be held liable for injuries that occur on the premises or for damage that arises from the product.

Make sure your winery has full liability coverage.

What you need to know:

• What are your commercial general liability policy limits?

• Do you have an umbrella policy?

• Do you have liquor liability coverage?

• Are there any coverage exclusions for off-site activities or special events (such as concerts and weddings)?

• Does your policy cover you for chemical drift or overspray causing damage to others?