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Although losses caused by fire have the most potential to ruin a winery owner's business, wineries face numerous other exposures.
A key exposure for commercial wineries is wine leakage and contamination, which often occurs when employees don't turn off valves or when wine is processed or transferred. Although leakage and contamination are the most frequent causes of insurance losses for wineries, they usually generate only small claims, insurers say.
Claims for wine leakage, though, can be as high as $100,000, so wineries often take steps to mitigate potential losses, including carefully monitoring the transport of wine to ensure that no leakage occurs, said Robin Reever, senior commercial underwriter for Chubb Corp. in Pleasanton, Calif.
Liquor liability is a constant exposure for wineries with tasting rooms, but claims in this area are not frequent because of the high cost of wine tasting and the training received by winery employees serving alcohol, insurers say.
From a weather perspective, frost is probably the biggest concern for wineries, although heat-related damage is another risk, said Gary Delucchi, vp of St. Helena Insurance Associates in St. Helena, Calif. Most farmers, though, have protective equipment such as wind machines or overhead sprinklers to help mitigate weather damage, he said.
Intellectual property issues have become a significant exposure, particularly with disputes arising over similar wording on wine bottle labels, said Barbara Herbert, agricultural product specialist for Seattle-based Unigard Insurance Group.
An evolving exposure in the wine industry relates to virtual or custom-crush wineries--those that do not have winery operations but buy the fruit and pay a winery to process it. These arrangements are becoming more prevalent and there are an increasing number of disputes over liability for accidents that damage wine during processing. As a result, custom-crush operators should ensure they are covered for any potential exposures, said John Sutak of John Sutak Risk Services, a San Francisco-based brokerage that specializes in coverage for wineries.
Wineries often choose to self-insure certain risks due to the expense associated with the policies.
Many wineries, for example, do not have coverage for earthquakes even though they are a concern for wineries in the Napa Valley region, said Suzie Reynolds, a vp with surplus lines broker and general agent M.J. Hall & Co. Inc. in Stockton, Calif., and owner of the Reynolds Family Winery in Napa, Calif.
Quake coverage tends to be expensive, with a typical deductible of 15% to 25% of insured value and often requiring a $30,000 annual premium to include wine leakage cover, she noted. For her winery operations, Ms. Reynolds purchased earthquake coverage only for damage to her building, not her actual wine stocks, she said.