Different Grapes, Different Insurance Policies

For as many different types of grapes and hops that are available to vintners and brewers, so too are there different types of wineries and breweries. The same can be said for the various types of insurance policies and their coverages available to these businesses.

Insurance is a form of risk management primarily used to hedge against the threat of a contingent loss. In the case of automobile insurance, those contingent losses are easy to define: property damage and bodily injury.

When it comes to insurance for wineries and breweries, however, the potential losses vary. Accordingly, it is important to identify contingent losses specific to these industries so that informed decisions can be made and risk captured.

Basic Coverages for Wineries and Breweries

Four basic types of insurance should be considered by every business:

• Property. This includes tools and equipment subject to theft, rented equipment, and the physical structure where you produce, warehouse and sell wine or beer.
• Liability. If your business is open to the public, liability insurance is critical to guard against the risk of physical injury to one of your customers or guests.
• Workers Compensation. The process of making wine or beer can often involve heavy equipment. Accordingly, your employees (who often have specialized training and are not easily replaced) need to be protected from on-the-job injuries, as do your labor forces in the case of grape or hop picking.
• Business Interruption. Small businesses like wineries and breweries depend heavily upon cash flow to thrive. In the event of a catastrophe (i.e., fire, flood), this type of coverage can provide needed income to allow your business to survive.

Specialized Coverages for Wineries and Breweries

In order to evaluate what specialized types of coverage should be considered, it is best to start at the beginning of the wine or beer making process. For some wineries or breweries, the process begins when grapes or grain are delivered to your business. For others, it begins in the ground with the planting of crops.

• Crop Coverage. This type of insurance guards against risks attendant to the planting and growing stages. These risks include damage to grape or hop vines from weather, infection, insects, etc.
• Storage and Transportation. Brewers and vintners deal with several types of entities for storage, transportation and bottling. If these services are provided by someone else, it is imperative that the entity names your business as an additional insured under their insurance policy. To be safe, it is also a good idea to have coverage for non-owned locations to protect your product when it is in the hands of others.
• Intellectual Property Coverage. Until recently, it was common to be covered for advertising injury under a commercial general liability policy. With exclusions for such claims now the norm, it is important for a winery or brewery to obtain intellectual property coverage in case it is sued for allegedly misusing an idea or design on its label (even if unintentional).
• Miscellaneous Coverages.
  • Product Withdrawal Expense-Covers the costs incurred when contamination or mislabeling causes the recall of product from the marketplace.
  • Liquor Liability-This coverage protects the business (especially those with tasting rooms or attached restaurants/pubs) against claims by a customer becoming intoxicated and injuring themselves or others.
  • Automobile Insurance-Provides coverage for owned, non-owned and hired vehicles.
  • Valuable Papers and Records-Includes proprietary wine or beer recipes that are difficult to value.
  • Life Insurance/Key Employee Plan-Used as part of an estate or succession plan for wineries and breweries, whether or not family-owned.
  • Additional Insured Obligations-If leasing space, the landlord may require the winery or brewery to name the landlord as an additional insured under its policy.

What Is A Vintner Or Brewer To Do?

Once the winery or brewery risks are identified, what next? Is an insurance agent or insurance broker the right person to involve?

Both an agent and a broker are able to obtain insurance quotes. An agent is not an employee of the insurance company, but has an “agency contract” with the company and acts as an independent contractor. In that capacity, an agent has the ability to “bind” coverage, thereby legally obligating the insurance company to provide coverage. An agent can be exclusive to one insurance company, or have agency contracts with several.

An insurance broker, on the other hand, is not tied to any one insurance company and instead represents the client. In this role, the broker is able to approach several insurance companies in an effort to obtain the best coverage at the best price for the client. Brokers do not have the authority to bind coverage. Instead, a broker will determine the client’s needs and gather information for submission to several insurance companies for consideration and a premium quote.

It is never fun to pay insurance premiums, and the amount of insurance needed should be compared to the risk tolerance of the winery or brewery. Certain coverages should not be avoided (property, liability, et al.). However, other types of coverage depend greatly upon the size and scope of the business, as well as the risks faced during the various stages of winemaking or brewing, selling and distributing.