Wine Damage During Bottling Underscores Importance of InsuranceBusiness, Wine
Wine is a very fragile product that can be damaged by heat, light, physical damage to bottles, or even during the bottling process itself. The damage suffered by a Washington cult winery during bottling underscores the importance of obtaining proper insurance.
Cayuse Vineyards recently sent an email to its customers informing them that “during bottling we discovered paraffin particulates caused by faulty corks.” As a result Cayuse was devastated to announce to mailing list customers that it would not be selling 2,995 cases (750ml) and 2,678 magnums of wines from the 2015 vintage. The gross value of these wines is likely in the millions of dollars. Cayuse stated that it has been working diligently with its insurance company to ensure that customers receive refunds for the affected wines.
Certain types of insurance coverage are common for all businesses, including Automotive, Commercial General Liability, and Property coverage. However, a winery should consider other coverage, such as coverage for agricultural operations, an “Errors and Omissions” policy that may provide coverage for the acts of employees, as well as additional coverage or endorsements to the Property coverage that can cover tanks, barrels, cellars, vines, trellises, and inventory in the event of loss.
In the event of a loss such as that experienced by Cayuse, although it may be possible to pursue claims against the seller of contaminated or defective supplies, it is always safest if a winery has its own insurance to cover potential losses. For example, some endorsements and additional coverages can provide protection when a winery’s inventory becomes contaminated by the introduction of impurities or foreign substances. Contamination in the tank or during the bottling process could be a covered event, depending on what insurance a winery has secured.
Wineries should consult with an insurance broker or agent to identify all potential coverages available for the varied risks involved in operations. These risks can include construction of tasting rooms and production space, vineyard operations, lodging, dining, special events, parking facilities, serving alcohol, transportation of product, and bottling and storing the winery’s finished wine as well as that of custom crush customers. It is important to pay attention to the losses covered, the measure of loss valuation, and the overall loss limits when securing insurance coverage. It is also important to promptly notify an insurance broker and counsel of any potential losses. Depending on an insurance policy’s notice requirements, failure to promptly notify the insurance company about a loss or potential loss could limit insurance coverage.