When it comes to their insurance, agents must appreciate that wineries do much more than grow grapes — they are involved a variety of complex activities and transactions.
Consequently, wineries need nearly insurance coverage available, including two that might be hard to sell because the risks aren’t obvious: intellectual property and cyber liability.
“Wineries do a whole lot more than just process wine, sell wine and grow grapes. It’s a very complicated industry,” said Laurie Infantino, president of Insight Insurance Counseling, who spoke at the recent Insurance Brokers and Agents (IBA) West Agribusiness Conference in Sacramento.
Agents should look at everything a winery is doing to make sure that all exposures are covered, said Infantino. According to Infantino, the following are steps of the winemaking process and other exposures a winery could have where insurance is necessary:
Exposures for Wineries to Consider:
- DE-STEMMING, CRUSHING, PRESSING, RACKING
- ALCOHOLIC FERMENTATION
- PRESSING & TANK CLEANING
- BARREL/TANK AGING
- FINING PROCESS
- CONSUMPTION & MORE
Agents should start at the very beginning of the winemaking process, learning where a winery obtains its vines, how they are being taken care of and how much they are worth. Most carriers do not include intellectual property coverage in their winery policies but this can be a concern, Infantino said. A problem with origins of the root stock could become a vicarious intellectual property claim. Or a winery that doesn’t buy a licensed vine and violates a patent could trigger patent infringement coverage for vines; this is also not on a typical winery policy.
Agents can have a hard time selling intellectual property coverage for vines to insureds if the exposures are not explained in detail, according to Infantino.
Other vine issues for wineries could arise from damage from weather, vine infections, insects, fire, or flood, just to name a few. All of these could result in financial problems such as loss of income. Crop insurance is necessary but agents should know there can be many peril exclusions, such as flood, earthquake and insects.
In addition, “no carriers provide (crop insurance) coverage once the grapes are picked,” said Infantino. This is important for agents and insureds to know because other coverages will have to be obtained for harvesting the wine.
Most winery policies do not provide coverage during harvesting for maceration in a field from a mechanical harvester, grapes fermenting during transport to the winery, or low yields from mechanical harvesters.
Also related to harvest, agents may need to advise about mobile agricultural equipment coverage for equipment used for planting, fertilizing, or irrigating.
Workers compensation for the workers picking the grapes during harvest is another necessary coverage.
Contamination is becoming a big problem for wineries. According to Infantino, it can occur from a foreign contaminant such as pesticides being sprayed on fields nearby, bacteria, or by left over contaminants because of poor pressing procedures. Contamination can happen at any other time during the winemaking process as well, such as with the cork or during bottling. It is important for agents to look at the definition of contamination in the different winery policies, as they vary greatly among carriers, said Infantino.
For wine labels, intellectual property coverage is also must-have coverage. Advertising injury stopped being covered on the commercial general liability policy after 1998. According to Infantino, intellectual property will cover a winery in case it is sued by someone else for using an idea on its label or in case someone steals one of its ideas.
Storage and transportation are the next areas that have exposure for wineries. Wineries interact with many different entities and people for their storage, transportation, bottling and other needs. For example, if insureds are storing the wine offsite, they need coverage for non-owned locations. But too often they assume that another company or location will have insurance coverage for an event where a claim could arise. Agents must explain to insureds that this isn’t the case.
“I think people think that when you have your stuff somewhere else, that other party is the one that has the responsibility to insure it, because after all, we signed a contract to leave our goods there,” Infantino said. “If you don’t have that location listed on the policy, there is not coverage unless there is a modest extension. You have to have all of the locations listed on the policy. It’s a lot easier to put a claim in when it’s my stuff than to rely on somebody being liable for it, because third party implies a responsibility on their part.”
Infantino stressed that it is a lot easier to recoup losses for a winery when it has first-party coverage than when it relies on third-party coverage.
Tasting /Selling & More
Many wineries are doing more than making wine and sponsoring tasting rooms. Some hold big events, provide food or give tours, or rent out their space for others to use. Infantino said all of these activities present significant risks and exposures that need to be addressed.
Wineries are using the Internet to market their wines, perform business transactions through their Web sites or store credit card information online – all of which create the potential for cyber liability exposures. Unfortunately, Infantino said, this is another area where agents have a hard time convincing insureds to buy coverage because many do not believe it is a big threat to their business.
Markets and Risk Management
Carriers such as Fireman’s Fund, Chubb, Chartis, Travelers and Great American have very specific appetites for what they will insure when it comes to wineries. Capitol Insurance Group (CIG) and Travelers prefer boutique wineries, which are considered the smaller wineries and have become increasingly common in recent years. Chubb, Fireman’s Fund and others prefer medium to large-size wineries. All of the policies provide coverages and endorsements to cover the different winery exposures, but agents must often mix and match policies to make sure that all of a winery’s risks are covered.
Infantino suggests that an agent who receives a winery account sit down and chart every single thing that the winery does and look at every signed contract to make sure all the bases are covered.
“It’s amazing how the chart evolves by asking the questions and then you find out where the vulnerabilities are,” Infantino said.
Risk management is the best way for wineries and agents to prevent any claims. “The winery process is only as good the people taking care of it,” Infantino said. “What can they do to control and try to mitigate the loss, starting at the very beginning?”