Winery Insurance
Insurance Community University
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Your Instructors Today
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center
Gary Delucchi Vice President
AmWINS Insurance Brokerage
of California
Sponsored by: AmWINS Insurance Brokerage
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What This Course Will Cover
1. Exposure and Risk of the Winery
Operation
2. Focusing on specialty risks of a winery
such as contamination; spoilage; ecommerce; valuation.
3. Discussion of the specialty winery
coverages
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Exposure and Risk
Sponsored by AmWINS Insurance Brokerage
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Wineries and Vineyards
Wine Stock
De-Stemming
Storage
Storage
Planting
Crushing
Plant Disease
Fining/Filtration
Storage
bottling
Transportation
Sales
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Harvesting
Blending
Corking
Sales
Harvesting
Testing and Lab
Labeling
Lots of Fun
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There is exposure at every
step of the process
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Polling Question #1
Your insured is a new winery called Eagles
Nest and has chosen a label with an Eagle.
Eagles Crest, an established winery in
Sonoma, sued Eagles Nest for their choice of
name because they thought it could be
confusing to wine buyers and also sued them
for using an eagle on their label that closely
resembled the eagle on the Eagle Crest label.
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Intellectual Property and
Wineries (root stock/grafting)
• The United States Supreme Court,
in a 6-2 decision authored by Justice
Clarence Thomas, has declared that
it is legal to claim utility patents on
plants.
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Intellectual Property and
Wineries (root stock/grafting)
• The December 10, 2001 ruling states
that the Plant Patent Act (PPA) of 1930
and the Plant Variety Protection Act of
1970 (PVPA) are so broad that they can
cover any type of plant that is “new,
distinct, uniform, and stable.” No
exclusivity is granted to genetically
modified plants
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IP and Vineyards
• Vintage Nurseries Sued for Selling French
Clones
• The clones in question are not patented but
are sold to US nurseries under license
agreements
• http://www.dailyfinance.com/2010/06/18/ho
ld-for-mitch-tennessee-ag-says-nurserycompanies-deceived-cust/
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Exposure and Risk
Vineyards
Own
Own “some”
varietals
Receive
grape stock
from other
Insurance
Issues
Crop Insurance
(check exclusions)
Crop Revenue
Programs
Trellis & Grape
vines “limited”
coverage
Relationship and
Risk Management
Issues
(pesticides; dogs;
GPS; organic)
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Crop
• Crop as used in insurance forms and
generally refers to “growing crop”. In the
case of the vineyard it is the “growing
grapes”
• Crop insurance is available to farmers
for loss to growing crops from natural
hazards as defined in the form.
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Crop Insurance
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Adverse Weather
Fire
Wildlife
Earthquake/Volcanic Eruption
Failure of irrigation water supply if
caused by an insured cause of loss
• Disease (check policy)
• NO coverage for Phylloxera
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Polling Question #2
Your insured had a fire in their vineyard and
there was an estimated $25,000 damage to
vines that had to be replaced. How could this
loss be covered?
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Vine Coverage
• NOT really available in the industry
• Limited coverage on some winery forms
for limited perils
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Specialty Winery Program
Coverages
• Vineyard Coverage Physical Damage
Outdoor Vines or Trellises
– Does NOT include grapes
– Limited perils
– Limited amount ($25,000)
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Specialty Winery Program
Coverages
• Trellis Coverage
– CAN include grapes growing on vines
– Can EXCLUDE grapes growing on vines
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Different Types of Wineries
IMPORTANT how the winery
represents itself
(Advertising Liability)
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Different types of programs
• Insurance Companies have different
“appetites” for winery risks
• Many winery programs are BOPish
• Some winery programs have extensive
form language modification
• Some winery programs have significant
endorsements
• Some winery programs are larger and
“all encompassing”
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Different Exposures—Different
Players
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Hobby Winery
Boutique Winery
Larger Winery
Vineyard Operation
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Farm Owners
Definition
Definition
Farm Department
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No Two Wineries are Alike
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Vineyard and winery operation
Winery ONLY
Traditional Winery
Organic Winery
Biodynamic Winery
ETC
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Traditional Winemakers
• It is imperative that the wine label
contain the necessary information about
the winery and the American labeling
laws are enforced by the Alcohol and
Tobacco Tax and Trade Bureau.
• There are minimum requirements that
must appear on the label
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USA Wine Label Information
• Brand identification or brand name
• Class or type of wine
• Name and address of the bottler or
producer. 'Produced and bottled by' is
allowed if the bottler fermented and
clarified at least 75% of the wine.
• http://www.wine-searcher.com/winelabel-usa.lml
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Appellation of origin
• The appellation system in the US is
commonly referred to as AVA or
American Viticultural Area. These AVAs
are based on distinct climatic and
geographical features, and are an
important source of information.
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Appellation of origin
• In order to have an AVA appear on a
wine label, the following specifications
must be met:
– The majority of US states require 75% of
the grapes in a wine to be grown locally.
– If a wine label specifies an officially
designated viticultural area (e.g. Sonoma
Valley), a minimum of 85% of the grapes
must come from within the named region.
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USA Wine Label Information
• Varietal Labeling (75% of the specified grape—
exceptions like Oregon 90%)
• Vintage labeling (95% of the grapes must be
from a particular vintage for that year to
appear)
• Alcohol content
• Declaration of sulfites and additives
• Volume of contents
• Government Warning Label
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Labeling
Grapes, Milk, Fish Guts: Vintners
May Have to Label Allergens
• Vintners have been using byproducts from milk,
eggs, wheat and even fish gut in the winemaking
process for centuries
• A new federal proposal could require American
wineries to disclose all ingredients used as
additives. The U. S. Treasury Department’s Alcohol
and Tobacco Tax and Trade Bureau is expected to
publish a final rule on the issue by late 2007.
• The Insurance Journal 1/17/07
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Organic Wineries.
• The consumption of organic wine grew at a
rate of 3.7 percent over the year ending
September 19, 2009[1], out-pacing growth in
the consumption of non-organic wine which
grew 2%[2] during a similar period. There are
an estimated 1500-2000 organic wine
producers globally[3], including negociant
labels, with more than 885 of these organic
domaines in France alone.
• http://en.wikipedia.org/wiki/Organic_wine
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Organic Wine and Wine Grapes
• In order to legally use the term “organic” on a
product label, the grower must become
“certified” by a third-party agency (such as
California Certified Organic Farmers, Oregon
Tilth or Demeter Stellar), which assures that
USDA NOP regulations are followed. A 3-year
transition period is required, in which an
Organic System Plan (OSP) is implemented.
• http://californiaagriculture.ucanr.org/landingp
age.cfm?article=ca.v062n04p138&fulltext=yes
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Organic Wine and Wine Grapes
• Typically, this includes: not using
conventional crop protectants and
fertilizers; implementing a soil fertility
program with cover crops and compost;
and developing a pest management
program with spray materials approved
for organic growing
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Biodynamic Wine
• There are currently more than 450
biodynamic wine producers worldwide.[
Currently, for a wine to be labeled
“biodynamic” it has to meet the
stringent standards laid down by the
Demeter Association,[ which is an
internationally recognized certifying
body.
• http://en.wikipedia.org/wiki/Biodynamic_wine
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Biodynamic Wine
• As a practical method of farming,
biodynamics embodies the ideal of everincreasing ecological self-sufficiency just
as with modern agro-ecology, but
includes ethical-spiritual considerations.
This type of viticulture views the farm as
a cohesive, interconnected living
system.[
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Polling Question #3
Your insured just finished spraying their
pesticides and fungicides on their vineyard.
There was a windstorm that night and their
wind carried the chemicals to a neighboring
farm that was registered “organic” and caused
damage to the crop. How could this claim be
covered.
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Specialty Winery Coverage
• Chemical Drift Coverage
– Sometimes provided as a sub-limit
– Can be added by endorsement
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Exposure and Risk
Processing
De-stem
Crush
Fine/filtrate
Blend
Barrel Aging
Insurance
Issues
Contamination
Spoilage
Wine Leakage
Errors
Business Income
Test
Cork Contamination
Bottle/cork/label
Product Recall
Store
Intellectual Property
Product Recall
Transport
Mode of Transportation
Sell
Retail/Wholesale/Internet Sales
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Contamination and Spoilage
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Definitions of terms
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Flaws in Wine
Faults in Wine
Spoilage of Wine
Wine Contamination
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Contamination
Flaws
• Off Character
• Wine is Atypical
• Off color
• Off odor
• BUT, is drinkeable
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Fault
Major departure from norm
Significantly Atypical
Significant residue
Broken down cork
Often Undrinkable
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Flaws and Faults
• Attributable to winemaking
– Incorrect sulphiting
– Failure to top off
– Check for fermentation levels
– Failure to add nutrients
– Failure to test for completion of MLF
– Cork quality
– Acetified grapes
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Contamination
• Attributable to winemaker technique
and cellar management
– Failure to rack property
– Maintenance of Tanks
– Storage
– Transportation
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Contamination
• Attributable to cork/corking
• Corks and TCB
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Oregon Winery Files Lawsuit Against
Maker of Altec Corks
• Problems look to be snowballing for Sabaté,
one of the world's largest cork
manufacturers: Van Duzer Winery, a winery in
Oregon’s Willamette Valley, files a lawsuit
against Sabate, one of the world’s largest cork
manufacturers located France. Van Duzer is
claiming that Sabaté's Altec composite
stopper ruined 1,200 cases of Chardonnay
with a retail value of more than $240,000.
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Oregon Winery Files Lawsuit Against
Maker of Altec Corks
• Bottle samples were sent to a
commercial laboratory, which found that
the wines had average TCA
(tricloroanisole) levels were well above
many consumers' threshold of taste.
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Polling Question #4
Your insured shipped their 2012 Chardonnays
and Merlots to a large restaurant in San Diego.
There were a total of 25 cases shipped. After
opening the first bottle, the restaurant owner
noticed a “cork” taste and wanted all of the
wine to be returned to the vintner. How would
this loss be covered?
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Insurance Issues
• Product Contamination
– Accidental
– Malicious
• Products Recall
• Replacement Costs and Rehabilitation
Expense (AIG)
• 3rd party Business Interruption and Recall
(AIG)
• Product Tampering
• Product Extortion
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Specialty Winery Coverage
• Wine Contamination
– CAUTION: Carefully check definitions,
limitations and exclusions
• Vineyard Contamination
– For harvested grapes owned by you due to
sudden and accidental release of fluids
from machinery used in harvesting
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Specialty Winery Coverage
• Wine Leakage
– Check definitions
– Check deductibles
• Can be a percentage like 10%
• Can be a dollar amount like $1000/occurrence
– Check covered cause of loss
– Check if covers “implosion”
– Check if covers E & O in the workmanship
of the insured and their employees
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Transportation
Storage
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Transportation/Shipping
(Crop/Finished)
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Owned Vehicles/Trucks
Air
Rail
International
International Airspace/Waterways
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Specialty Winery Coverages
• Harvested Grape Transit Coverage
– Transit within 100 miles of premises
– Specified perils
– Specified amount $25,000/$5,000
• Contingent Orchard & Vineyard Transit
– Insured cannot collect bill of sale for
orchard or vineyard products shipped at
buyers risk of loss because of covered
damage.
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Specialty Winery Coverage
• Transportation
– Check modalities
– Check perils
– Check territory
– Check if only Inland Marine OR also
includes Ocean Marine
– Check contractual agreement as to transfer
of ownership and responsibility
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Polling Question #5
Your insured stored all of their finished wine at
a non-owned warehouse in a neighboring city.
There was a fire at the warehouse that they
later determined was caused by arson done by
one of the wineries storing the wine. Your
insured lost all of their inventory and wants to
know if he has coverage.
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Storage Insurance Issues
• Storage can include:
– Storage of grapes and grape by products
(refrigeration/spoilage)
– Storage of finished goods
– Storage of “owned” and “non-owned”
• Does the insured store property of others
• Review Contracts
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Storage Insurance Issues
• Storage in owned locations
• Storage in non owned locations
– 3PL (Third Party Logistics Handlers)
• Storage outside the United States
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Mare Island Warehouse Fire
10/12/05
• A eight-alarm fire that consumed
at least half of a 240,000
warehouse storing wine on Mare
Island may be Vallejo's most
costly blaze ever.
Approximately 150 customers,
comprised mostly of Bay Area
wineries and private collectors,
stored wine in the 63-year-old
building. The CEO of Central Wine
Services, which owns the
building, estimated $100 million
worth of wine was in storage. The
facility was also used to store
pasta, sugar and sauces.
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Mare Island Loss
• The loss was determined to be arson by
one of the winery owners who stored
their wine there.
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Warehouseman’s Legal
Liability
• The standard of care is imposed upon a
warehouseman by Section 7-204 of the
Uniform Commercial Code
– Most contracts follow this duty of care
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UCC § 7-204. Duty of Care; Contractual
Limitation of Warehouseman's Liability
(1) A warehouseman is liable for damages for
loss of or injury to the goods caused by his
failure to exercise such care in regard to them
as a reasonably careful man would exercise
under like circumstances but unless otherwise
agreed he is not liable for damages which
could not have been avoided by the exercise
of such care.
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UCC § 7-204. Duty of Care; Contractual
Limitation of Warehouseman's Liability
(2) Damages may be limited by a term in
the warehouse receipt or storage
agreement limiting the amount of
liability in case of loss or damage, and
setting forth a specific liability per
article or item, or value per unit of
weight, beyond which the
warehouseman shall not be liable;
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Polling Question #6
Following the loss at Mare Island it was
determined that your insured’s wine was
salvageable. The labels on the wine bottles
were damaged AND the insured wanted the
bottles to be labeled differently so they could
sell them as a different wine at a reduced price.
How could this be covered by insurance.
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Issues & Solutions
• Need First Party Coverage NOT Third
Party Coverage
– Property vs. Liability
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Specialty Winery Solutions
• Wine Stored Off Premises Endorsement
• Wine Stored for Others Endorsement
• Adding the location AS a location
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Valuation—you’ll find out what it
really means at the time of loss
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Valuation
• Different Valuation Clauses based on
“type” of wine at risk
– Finished Stock that is sold
– Finished Stock that is NOT sold
– Stock in Process
– Cellared, Rare and Vintage Wines
– Wines in the state of process
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Valuation

Finished Stock that is sold
– Selling Price
– Market Value
• Finished Stock Not Sold
bottled winery products ready for sale based
on the price for which stock could have been
sold as case goods at the time and place of
the covered direct physical loss or damage,
had no loss or damage occurred;
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Valuation
• Stock in Process including in bottles,
tanks or barrels, will be valued at the
lessor of:
1. the three year average wholesale
market price of your finished stock, less
uninsured costs (ie: bottling, storage,
labels, printing, labor) for your varietal or
vintage or from a specific vineyard;
(Chubb)
;
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Valuation
2. the three year industry wide average
wholesale market price of your finished
stock, (continued) less un-incurred costs for
that varietal or vintage; or
3. the cost to replace the wine with
wine of like kind, quality and state of
fermentation, if replaceable
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Valuation
• Cellared, rare or vintage wines, if
irreplaceable in the market,
– will be valued on the date of loss at the
average market listing of three well
established and reputable wine merchants
selected by us;
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Valuation
D. wine sold in bulk, the lesser of:
1. the price for which the wine could have been sold
at the time and place of the covered
direct loss or damage had no loss occurred; or
2. the market price of replaceable wine of like kind
and quality at the time of the covered direct physical
loss or damage had no loss or damage occurred,
but we will not pay more than the amount you
actually pay to replace the wine.
All values include applicable state, county and
local taxes that you must pay.
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Exposure and Risk
Premises
Owned Buildings
Owned Structures
Non Owned Locations
Warehouse
Insurance
Issues
Property
Coverages
Warehouse
Coverage
3PL
Locations outside US
Homes
Farm Dwelling Coverage
Restaurants
Specialty Coverage as
indicated
Gift Shops
Caves
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“Perils”
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Types of Buildings
• Residence
• Garages
• Guesthouse (with dining
room for visitors and grape
pickers)
• Bed & Breakfast buildings
• Storage buildings
(Supplies)
• Storage buildings (Finished
Product—case storage)
• Fermentation buildings
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Bottling plant
Cellars (1st yr, 2nd yr…)
Caves
Tasting room (building)
Non Owned Location
Considerations
• Gift Stores
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Exposure and Risk
Equipment
Mobile Agricultural
Equipment
Gondola Trucks
Conveyors
Fermenting Tanks
Storage Containers
Filtration System
Store
Transport
Sell
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Insurance
Issues
Business Auto
Mobile
Agricultural
Equipment
Equipment Insurance
Property
Equipment Insurance
Equipment Breakdown
Limits and BI
considerations
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Exposure and Risk
Computers
Computerized Equipment
Remote computer sensor
equipment
Computerized equipment
in the fields
Insurance
Issues
Property Policies
EDP
Equipment
Breakdown
GBP
Software
Data
Proprietary Software
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Limits and BI
considerations
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Exposure and Risk
Stock and
Merchandise
Supplies
Raw Materials
Stock in Process
Insurance
Issues
Property Insurance
Equipment
Breakdown
Spoilage
Off Premises
Brand & Label
Sold Finished Stock
Personal Property of Others
Unsold Finished Stock
Property Off Premises
Merchandise
Property in Transit
Limits and BI
considerations
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Exposure and Risk
Other
Operations
Tasting Rooms
Wine festivals
Sell products other then
wine
Special Events
Valet Parking
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Insurance
Issues
Liability
Liquor Liability
Umbrella
Garage
Business Auto
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Other Considerations
• Business Income
• Dependency Coverage
– Income Support Properties
• Packaging Error
• Exhibition coverage
• Contractual Penalties
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Other Considerations
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Cyberliability
Crime
Intellectual Property
Advertising Liability
Auto
Garage?
Workers Compensation
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Liability Coverages—they
need them ALL
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Liquor Liability
Special Events Liability
Pollutant Cleanup and Removal
Environmental
Umbrella
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Upcoming CE Classes
7/12/12
Winery Insurance
7/18 & 19
Ethics
8/8
Equipment Breakdown, Spoilage, Off Premises
FREE Community Class
7/17
5 Things You Need to Know about Securing your
Email and Protecting Privacy for YOU and YOUR
clients (Link
7/26
Understanding Logging Industry and Forest Products
Mattei
Join the Community TODAY at:
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Disclaimer
Insurance forms and endorsements vary based on insurance
company; changes in edition dates; regulations; court decisions;
and state jurisdiction. This instructional materials provided by
Insight is intended as a general guideline and any interpretations
provided by Insight do not modify or revise insurance policy
language. The authors of these materials, Insight Insurance
Consultants is a division of Insight Consulting and Management
Inc. In providing these materials, Insight assumes neither liability
nor responsibility to any person or business with respect to any
loss that is alleged to be caused directly or indirectly as a result
of the instructional materials provided.
Copyright 2010 – 2012 All Rights Reserved
www.insurancecommunitycenter.com
Laurie: 714.803.5830 laurie@insurancecommunitycenter.com
Marjorie: 714.206.9583
Marjorie@insurancecommunitycenter.com
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