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Insight on How to InsureWineries and Vineyards

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Insight Insurance Consulting


DisclaimerNot only are policy forms, clauses, rules and court decisions constantly changing, but

forms vary from company to company and state to state.This material is intended as a general guideline and might not apply to a specific

situation.The authors, Insurance Skills Center, Inc., and any organization for whom this seminar is conducted shall have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of

information contained in this book.Insight Insurance Consulting

(714) 803-5830 Laurie@insightinsuranceconsulting.comwww.insightinsuranceconsulting.com

Copyright Insight Insurance Consulting 2010All Rights Reserved

This approved course number may only be taken once within your two year renewal period.

www.afisdesignation.com


70 Countries Produce Wine Food & Agriculture Organization

France 5,329,449 tons

Italy 5,506,648 tons

Spain 3,934,140 tons

United States 2,232,000 tons

Argentina 1,564,000 tons

China 1,300,000 tons

Australia 1,274,000 tons

South Africa 1,147,895 tons

Germany 1,014,700 tons

Chile 788,551 tons

http://en.wikipedia.org/wiki/List_of_wine-producing_countries


Wine Update

• U.S. wine exports, 90 percent from California, passed the $1 billion milestone for the first time with $1,008,259,000 in winery export revenues in 2008

• Wine is California’s second leading export product by value


Wine Industry 2008• There are more than 23,000 farms that grow grapes,

of which 90 percent are on plots smaller than 100 acres

• In 2007, while total U.S. grape bearing area rose a modest 0.5 percent to 939,250 acres , total grape production rose 5.7 percent to 6.73 million tons

• About 60 percent of total grape production is wine grape production and that portion rose 3.5 percent to 3.76 million tons

• http://www.ita.doc.gov/td/ocg/wine2008.pdf


Since 1999, the number of wineries has increased by 81 percent from 2688 to 4867

California 89.25% New York 4.37% Washington 3.11% Oregon 0.64% Florida 0.27%

New Jersey 0.26% Kentucky 0.19% Ohio 0.18% Virginia 0.15% North Carolina 0.14%


Wineries and Vineyards

Wine Stock Planting Growing Plant Disease Harvesting

Harvesting De-Stemming Crushing Storage

BlendingFining/Filtration Storage Storage Testing

Bottling Corking Labeling Lots of Fun

Transportation

Sales


The Process For Review Each Step Has It’s Exposures & “Perils”

1. Grapes Growing2. Grapes Harvesting3. De-stemming,

crushing, pressing, racking

4. Fermentation5. Pressing and Tank

Cleaning

6. Barrel and Tank Aging7. Blending8. Fining Process9. Bottling/Labeling10. Storage11. Transportation/Shipping

12. Selling13. Consumption & More


1.Grape Growing• Intellectual Property (Root Stock, Bench

Grafts, ENTAV-Clones)• Weather• Pests


Rootstock• The use of separate rootstock - essentially a clump of

roots - onto which the vines are grafted was made necessary by the arrival of Phylloxera. The solution - graft vinifera plants onto Phylloxera-resistant rootstock. The vast majority of modern vineyards are planted using grafted material.

• http://www.thewinedoctor.com/glossary/a.shtml


Rootstock/Grafting• Problem:

– Misuse/misappropriation of rootstocks

• Problem:– The United States Supreme Court on

12/01declared that it is legal to claim utility patents on plants.

• Problem:– Patent holders are suing for patent infringement


Wine Patents--Google

• Patent #4351851– Method for freeze stabilizing wine

• Patent #4874615– Process for preparing wine

• Patent #5718263– Patent for wine aerator


Vintage Nursery Case

• Sunridge Nurseries of Bakersfield, along with three other California nurseries, is suing Vintage Nurseries of Wasco, saying Vintage sold tightly regulated French clones without a proper license.


Vintage Nursery Case• If the clones which Vintage have offered for sale are

not the clones stated in their marketing materials and catalog, then Vintage is alleged to be engaged in false advertising.

• If the clones which Vintage has offered for sale are the clones stated in their marketing materials and catalog, then Vintage is alleged to be engaged in an unfair business practice, since these clones have only been sold under an exclusive license, and sold only to customers who agree not to propagate or distribute them any further.


Insurance Issues and Solutions

• Intellectual Property– Patent Infringement

• Offense• Defense

• Intellectual Property Insurance– IPIS


Pests and Disease Phylloxera


Phylloxera

• Phylloxera is a small yellow root feeding aphid. It lives on both European and American grape vines.

• The pest can be spread by wind or the insects crawling from one plant to the next, but long distance movement of the pest is usually caused by humans transporting infected plant material or soil from vineyard to vineyard perhaps inadvertently in machinery or on boots.


Pests & Disease

• There are many pests and diseases that can attack and kill grape vines. Red spiders, moth grubs and various mites, bugs and beetles can all prey on the plant above ground. Most of these may be controlled with either sulfur sprays, or by newer "green" methods, such as introducing predacious insects and protective cover crops between vine rows.


Pests & Disease

• In climates with summer rainfall, molds such as oidium, mildew, white rot, grey rot (see box at left) and black rot may be prevented by regular sprayings of a solution of copper sulfate, slaked lime and water (Bordeaux mixture).


Pests & Disease

• New vineyards are particularly susceptible to destruction from gophers and moles. There are many methods of control and eradication, including attracting predatory raptors, trapping, poisoning, flooding and even a device that implodes burrows.


Sniffer Dogs (Insect Detection Dogs)• “An innovative project underway since

2006 at the Assistance Dog Institute combines elements of the Institute’s research with the result of dogs trained to sniff out the vine mealybug (VMP).


Pests and Disease

Problem: Growing CropSolution: Crop Insurance but not for

PhylloxeraProblem: VinesSolution: NOT Crop InsuranceSolution: Live Assets Insurance


Unusual SolutionsLive Asset Coverage• Not only is there limited coverage in terms of

amount available and coverages, the winery's financial lenders are unwilling/unable to provide credit to the grower unless there is viable live asset coverage.

• Solution - Vineyard & Winery Insurance for the Vines, Trellises, Clips & Irrigation System


Unusual SolutionsLive Asset Coverage• For more details regarding the program,

contact David J. Teed, CIC. Managing Director of Live Asset Insurance at 800-644-0178

• www.liveassetinsurance.com


Crop Insurance• Crop insurance has a limited response on the

Multiple Peril Crop Insurance, Grape Crop Form 2000 NCIS717.

• Cause of Loss– (1) Adverse Weather– Insects except (10.b1)—Phylloxera regardless of

cause– Plant disease but not due to insufficient of improper

application of disease control measures.


Causes of LossTable Grape Provisions• Adverse Weather• Fire…• Wildlife• Earthquake• Volcanic Eruption• Failure of irrigation water supply if

caused by any insured cause of loss


Market Value

• For grapes the value is set at the time the policy is issued based on the previous values based on prior averages and future promulgation.


Insurable Crop and Eligibility Requirements• The vines must have reached 4th growing

season after being set out or 3rd year after grafting

• Acreage must have a minimum average yield of 2 tons per acre

• Growers can select which grape varieties they want to insure


Insurable Crop and Eligibility Requirements• Growers can insure any varieties but must

insure all acres of any variety selected in the country on which they receive a share of the crop

• When vineyards are rented out as crop share, either the landlord or operator, or both can insure their share % of crop


Crop Insurance Productswww.rcis.com• Multi-Peril Crop Insurance (MPCI) – • Catastrophic (CAT)—lowest amount• Group Risk Plan (GRP) —not on grapes• Crop Revenue Coverage (CRC) not on grapes• Indexed Income Protection (IIP) not on grapes• Group Risk Income Protection (GRIP) not on grapes• Adjusted Gross Revenue Insurance (AGR)—Available on

Grapes• AGRI-Lite


Climate and Natural DisastersA Constant Threat


Weather & The Vine (Grapes/Wine)• Flooding• Drought• High Winds• Freeze• Landslides• Earthquake• Fire Noble Rot Botrytis


Climate

• The average growing season climate and temperature extremes such as very hot days can affect vine and fruit development

• Generally prices are substantially higher for fruit from moderately cooler regions

Practical Winery & Vineyard March/April 2008


Climate• For example, Cabernet Sauvignon from

the Fresno district sold for about $260/ton in 2006 compared with fruit from the Napa district which sold for over $4,000/ton

• This 15 fold difference in price as accompanied by only a 2.7C (5F) cooler average annually temperature

Practical Winery & Vineyard (March/April 2008


iMetos is a new product line using the

latest internet technologies to have real time access to field data.

With iMETOS, all relevant agriculture

weather data are measured permanently and sent to the Internet climate database every two hours.

The internet browser (Explorer) and your personal log in password to the site http://www.metos.at/fieldclimate

will get you online to data, reports and graphs observed in your own vineyard

iMetos - Real Time Monitoring using the Internet


2. Grapes are harvested • Too much maceration in field from mechanical

harvester (no coverage)• Grapes begin to ferment early during transport to

winery (no coverage)• Low yields from mechanical harvesters (no coverage)• Grape pickers' health problems

(i.e. heat stroke, exhaustion, dehydration) (Workers Compensation)


2. Grapes are harvested• Damage to Mobile Equipment used in

harvesting and growing operations– Mobile agricultural equipment – including

equipment used for operations such as planting, fertilizing or irrigating and a separate limit for the continuing rental cost of mobile agricultural equipment (Chubb)


Could This Happen To You?www.chubb.com

• A critical piece of your harvesting equipment is damaged during harvest and you have to pay for a replacement.


3. De-stemming, Crushing, Pressing, Racking

• Contaminations left in wine juices from poor pressing procedures (Some limited contamination provided by some carriers but typically in processing)

• Losses from inefficient racking procedures (typically not covered unless covered causation occurs)


Could This Happen To You?

• You own a winery overseas and the bottling facility is contaminated by an unknown bacteria, causing you to find a replacement bottler.

• www.chubb.com


Wine Spoilage

• Throughout all stages of the winemaking process, spoilage microbes can negatively impact wine quality

• Wine spoilage can present itself in several different fashions


Wine Spoilage

– Off Aromas– Off Flavors– Acetic Acid– Ethyl Acetate– Ethylphenol– Trichloranisole– Bitterness

– Mousiness– Cosmetic Issues

• FILMS• Sediment• Viscosity• Off color


Issues and Solutions• Product Contamination

– Accidental– Malicious

• Products Recall• Replacement Costs and Rehabilitation Expense

(AIG)• 3rd party Business Interruption and Recall (AIG)• Product Tampering• Product Extortion


4. Alcoholic Fermentation• Stopped Fermentation

(Fermentation process stops short of total conversion of sugar to alcohol)

• Excessive heat "cooks" wine• Contaminated Yeast Culture• Non-sterile conditions• Improper pump-overs from one tank to the other• Not enough SO2• Too much SO2


5. Pressing and Tank Cleaning

• Low yields from pressing• Workers exposed to high amounts of

sulfur in tanks• Tank cleaners suffocate while inside

tanks cleaning


6. Barrel/Tank AgingVinegar acids in barrels

Non-sanitary conditions in tanks

Leaking Barrels (wine leakage limited coverage)

Barrel bores eating away the oak causing barrels to spring leaks

Evaporation of wine through staves

Wine oxidation from oxygen exposure

Broken barrels from unsafe maintenance operations

Forklift Accidents

Topping off barrels with wrong wine


7. Blending• Leaking hose fittings• Blend the wrong wines together• Blend a contaminated wine with a good

wine• Oxygenation of wine through transfer pipes• Wine Leakage


7. Blending

• An employee doesn’t turn off a tank valve and you lose 20,000 gallons of wine due to leakage. (Chubb)


8. Fining Processes

• Contaminated fining agents• Improper titration methods• All solids not removed from wines,

clarity problems


9. Bottling/Labeling

• Contaminated/dry corks• Bad seals around corks and bottles causing

wine to oxidize over time• Unclean bottles• Bottling line jams• Unintended fermentations in bottle

resulting in a "carbonated" wine



• Contamination from cleaning solvents used in the bottling process ruins $60,000 worth of wine.

• www.chubb.com


Corks are the main culprit of TCA contamination

• Cork taint is a problem. traditional closure ruins a significant percentage of wine bottles . While in some cases this is due to the mechanical failure of the cork, in most instances it is through the contamination of the wine with tiny (but still detectable) quantities of trichloroanisole (TCA).


Corks are the main culprit of TCA contamination

• Semi-quantitative estimates of cork taint consistently come up with figures in the range of 2-7%, although most of these studies don't involve chemical verification of the presence of TCA in offending bottles. Even so, this is an alarmingly high failure rate and one that many in the wine industry consider to be intolerable.

Patent # 4812317 Transparent Wine Bottle Closure


Labeling

• Vintners have been using byproducts from milk, eggs, wheat and even fish gut in the winemaking process for centuries.

• The FDA adopted the Food Allergen Labeling and Consumer Protection Act in 2004 which requires labels on every food or drink that contains one of eight major food allergens: milk, eggs, fish, crustacean, shellfish, tree nuts, peanuts, wheat and soybeans



• Ink used on your label runs during the bottling process, forcing you to buy new labels and reapply them.

• www.chubb.com


Labeling Intellectual Property


Kendall Jackson vs. Turning Leaf

• Since its inception in 1983, Kendall-Jackson has sold over ten million cases of its Vintner's Reserve line of premium wines. By 1994, Kendall-Jackson was selling over $100 million worth of Vintner's Reserve wine a year, and its chardonnay was the number one selling chardonnay in the United States.


Kendall Jackson vs. Turning Leaf• Kendall Jackson featured on its Vintner's

Reserve wine labels a downward-pointing, stylized grape leaf design using various shades of green, yellow, orange, red, and brown. In addition to using the leaf design, Kendall-Jackson tried to distinguish its Vintner's Reserve wine by packaging the wine in recognizable bottles.


Kendall Jackson vs. Turning Leaf

• Gallo introduced a chardonnay named Turning Leaf which had a label that looked very similar to Kendall Jackson’s. Kendall-Jackson sued Gallo asserting claims under the Lanham Act, for trademark infringement, trade dress infringement, trademark dilution, and trade dress dilution; unfair competition claims: false advertising, unfair competition, and palming off.


1998 CGL (A.I.) Definition

14.“Personal and advertising injury” means injury, including consequential “bodily injury,” arising out of one or more of the following offenses.

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services;

e .Oral or written publication of material that violates a person’s right of privacy;


1998 CGL (A.I.) Definition

F. The use of another’s advertising idea in your “advertisement”; or

G. Infringing upon another’s copyright, trade dress, or slogan in your “advertisement.


Intellectual Property

Categories• Copyright• Trademark• Trade Dress• Trade Secret• Patent

Policy Considerations• Defensive• Offensive• License Agreements


Insurance Issues

• Advertising Liability• Web Site advertising• Warranties and Representations• Labeling


10. Storage

• Issues include storage of grapes, grape by products

• Includes storage of owned and non-owned

• Includes storage of finished goods owned and non owned

• Review Contracts


10. Storage

• Storage in owned locations• Storage in non owned locations

– 3PL (Third Party Logistics Handlers)

• Storage outside the United States


Lessons Learned From Mare Island• 10/12/05 fire consumed at least half of a

240,000 warehouse storing wine on Mare Island in Vallejo

• Approximately 150 customers, comprised mostly of Bay Area wineries and private collectors, stored wine in the 63-year-old building

• Estimated $100 million worth of wine was in storage


Lessons Learned From Mare Island

• The blaze could not be controlled by firefighters because the Mare Island building -- a 1942 structure that once housed Navy torpedoes -- had steel doors and 3-foot-thick concrete walls and a concrete roof that could not be penetrated."

• There is some concern wine spilled into storm drains, perhaps affecting city water supplies

• Fire proven to be an arson


Lessons Learned From Mare Island

• Issues:– Valuation– Location– Contaminated?– Salvage– Obligation of the Warehouse– First party rather than third party response


Warehouseman’s Legal Liability

• Where does the obligation lie?– Many court decisions have been rendered as

a result of this question between owner and warehouseman.

• Question of whether the wine was actually “warehoused” by definition or in temporary storage?


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


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.


11. Transportation & Shipping

• Owned Vehicles/Trucks• Air• Rail• International• International Airspace/Waterways



• Concerns:– Across all industries, moving products in

shipping containers can expose the goods to severe temperature fluctuations. In many cases this can cause irreversible damage to the product resulting in lost sales and expensive insurance claims


11. Transportation & Shipping• Even minimal fluctuations can result in

such problems as loss of bouquet, product oxidation and even leakage through cork dryness.

• Shipping during extreme weather conditions


Excerpt from Wine Shipping Agreement• “Please note that shipping insurance does not

cover damage due to heat or freezing. We endeavor to ship in such a way as to avoid such damage, but in questionable circumstances will attempt to contact you about alternatives. Please notify us immediately is you believe such damage has occurred.”



• A Lloyd’s policy would typically cover all risks of physical loss or damage, but usually excludes loss due to changes in temperature or humidity unless it is as a result of an insured peril such as fire or flood. Policies won’t cover against corked wine or ullage (when some evaporation occurs) either. Loss of label insurance can also be bought separately.


12. Selling

• Methods– Internet– Winery Location– Membership– Retail Stores– Restaurants– Wine Futures


Selling Challenges

• Direct shipping restrictions from BATF and state laws

• Poor winery-distributor relations• Winery is too small to get prime shelf space in

stores through major distribution companies• Competition from other wineries, local and

national• Loss of Brand


Court Questions On Interstate Commerce• On May 16th, 2005, the United States Supreme

Court ruled that states may not discriminate against out-of-state wineries seeking to ship wine directly to consumers if they allow their in-state wineries to ship directly to consumers Granholm v. Heald . The High Court reasoned that state laws banning such shipments were discriminatory and, therefore, unconstitutional.


Court Questions On Interstate Commerce

• A decade ago, just four states were allowed to do direct interstate shipments.

• Now, that number has increased to 30 states. • In some states, the penalty for a burglary

conviction is equivalent to that of shipping a bottle of Chardonnay to an adult under 21 years.


Direct shipment Not PermittedOnsite Rules Special Labeling Required (Reciprocity States) Winery must ensure that shipping label contains required language set forth by state or region it is shipped toAggregate Volume Rules. This is a limit on volume of total shipments from a winery to all consumers in the region over a specified period of time

Direct Shipment Laws as of 9/21/09Wine Institute www.wineinstitute.org


Wine Industry Code for Direct Sales (www.wineinstitute.org)• Out-of-state licensees may direct ship wine sold

to adult consumers, for personal use only in states where it is legal to do so.

• Out-of-state licensees must not ship to an address in an area identified by an appropriate state department of alcohol beverage control as a "dry" or local option area for such shipments


Wine Industry Code for Direct Sales (www.wineinstitute.org)• Cartons used to direct ship wine to adult

consumers must be conspicuously labeled with a minimum notification "signature of person age 21 or older required for delivery" and must include a return address and other language required by specific state laws.


Wine Industry Code for Direct Sales (www.wineinstitute.org)• Licensees must verify the purchaser’s age at the

point of online purchase before completing any transaction. Some state laws now require age verification using a state approved vendor, or by receiving a copy of the purchaser’s drivers license, prior to the completion of the transaction.


Disclaimer on Site


Web Site Review


Web Site Analysis

• Does the winery have a web site?• Is the Web Site for Advertising (Presence) only?• Does the winery sell their wine via the internet?• Does the winery sell items other than wine?• Does the winery offer any other services on their

website?• Are there any foreign operations?• Are there any links or frames?


Web Site Analysis• Are there any warranties or representations

made?• Is there any form of social networking?• Is there a bulletin board?• Is there a chat room?• Is there protection for credit card use?• Is there a clear privacy statement?


Duckhorn Vineyards • Paraduxx • Goldeneye

News & Events Order Online Share Your Experience

Questions? Contact Us

Duckhorn Wine Company 1000 Lodi Lane St. Helena, CA 94574©2006 Duckhorn Wine Company. All Rights Reserved. Site Usability Security/Privacy Policy Site Map

Introducing Paraduxx DirectWe invite you to join Paraduxx Direct and enjoy the convenience of automatic shipments of this boldly elegant Napa Valley Red Wine. Create your own annual portfolio by choosing three, six or twelve bottles, and we will take care of the rest, ensuring that you will never miss a vintage.Join Paraduxx Direct...We will be introducing Goldeneye Direct on March 1st and Duckhorn Vineyards Direct on April 1st. If you are currently not on our mailing list, Join the Family to be notified of these programs.

New Release - 2003 Paraduxx Napa Valley Red Wine

We are pleased to introduce our tenth vintage of Paraduxx!

Our 2003 Paraduxx Napa Valley Red Wine is a medium bodied wine with ample tannins and

structure to evolve well for several years. Aromas exude ripe fruit with flavors of strawberry jam, rich blackberry, cedar, dill, and oak. Limit 12 bottles,

please.Order the 2003 Paraduxx... Shopping Cart

Disclaimer Language

Automatic Shipping

NewslettersThere own and

OthersSee SlideOf Events

Share Your ExperienceBulletin BoardWine Affiliations Links


March 17 & 18, 2007Napa Valley Mustard Festival

The Marketplace - The Signature EventFeaturing Duckhorn Vineyards and Paraduxx

COPIA: The American Center for Wine, Food & the ArtsNapa, California

April 28, 2007Great Chefs of MarinBenefiting Lifehouse

Featuring Duckhorn Vineyards, Paraduxx and GoldeneyeFireman's Fund Insurance Company

Novato, California415-472-2373 x305


September 12 - 24, 2007Crystal Cruises' "Adriatic & Aegean

Adventures"Join Margaret Duckhorn on this voyage from

Venice to AthensFeaturing Duckhorn Vineyards, Paraduxx and

GoldeneyeCruise Itinerary

For Reservations, call Fine Wine Voyages at 888-946-3885


Duckhorn Wine Company Affiliations

This section offers insight into organizations within the California and International wine community that Duckhorn is either a member of or with whom we share similar interests on issues that have an effect on the wine industry. Napa Valley VintnersNapa Valley Vintners promotes and protects the Napa Valley as the finest winegrowing region in the world through the preservation and enhancement of its resources. Wine InstituteWine Institute is an organization whose goal is - "to initiate and advocate state, federal and international public policy to enhance the environment for the responsible consumption and enjoyment of wine.“ Free the GrapesFree the Grapes is a consumer advocacy group whose mission is to educate the laws and issues pertaining to the direct shipment of wine to consumers.

AIWFThe AIWF is a non-profit educational organization that is devoted to improving the understanding, appreciation and accessibility of food and drink through a lively and comprehensive exchange of information.


Intellectual Property

Cyber-LiabilityAdvertising

ForeignLiability

Umbrella

Crime

E-Commerce Issues


13. Consumption & More

• Wineries do a LOT more than just process and sell wine

• They do just about everything


Tasting Rooms• Most of the 3,000

wineries in the country’s 50 states begin their sales and marketing efforts primarily through their on-premise tasting rooms. In California alone, wineries are receiving nearly 11 million visitors annually.

www.wineinstitute.com

• CGL--Products• Umbrella• Liquor Liability


Wine Tasting• Do they promote and

conduct private wine tasting off their premises at such places as restaurants or private social gatherings?

• CGL--Products• Umbrella• Liquor Liability• Additional Insured Status• ***ADA Compliance


Wine Festivals• More than 300 wine festivals

and events take place each year in Virginia. Listen to jazz or blues, dine on Virginia down-home cooking or haute cuisine, taste a new release right from the barrel or sip a vintage vino. The choice is yours. See you there!

• Premises Liability• Products Liability• Umbrella• Insured Status—Additional

Insured


Tradeshows

• January 25-27 Unified Wine & Grape SymposiumSacramento, CaliforniaAmerican Society for Enology and Viticulture (ASEV) and the California Association of Winegrape Growers (CAWG). The largest wine and grape show in the nation. By combining a trade show with a broad spectrum of seminars, the Unified Symposium provides attendees direct access to all the latest information. It also provides an excellent forum for active networking between registrants and suppliers, winemakers and grapegrowers.


What else is happening at the winery?• Do they sell products other

than wine?– Other types of liquor—

may also have a distillery

– Food Products– Gift items (books,

cooking additives, tea shirts, wine glasses, etc)

• Do they have a restaurant or sell food at their location?


Wineries Trying To Diversify And Innovate


What else is happening at the winery?• Do they have

tours of their premises open to the public?

• CGL• Umbrella


What else is happening at the winery?

• Do they have other activities at their winery such as– Rent it out for

special occasions such as weddings?

– Have rides on premises

• CGL• Umbrella• Special Event• Additional Insured


What else is happening at the winery?• Opened in June 2002, Cherry Hill Vineyard

became the first ever seasonal camp of its kind. Those who stay at Cherry Hill become part of the vineyard team, participating in a Vine and Wine training and monitoring program. All "workers" reserve their own cabins, and Cherry Hill provides the cuisine, three meals each day of your visit.


What else is happening at the winery?

• Do they have valet parking?

• Do they shuttle customers from one location to another in their own vehicles on or off the premises?

• Garage• Garage Keepers• Business Auto


Insurance and Risk Control Considerations


Risk Management

• Risk Analysis• Risk Review• Risk Identification• Risk Transfer• Risk Sharing• Risk Control


Regulation Compliance

• As an alcohol production business, any winery faces an array of state and federal statutory and regulatory requirements. Issues such as licensing, zoning, bonding of the winery, label approval, trademark and copyright registration and, in some instances, antitrust compliance, trigger regulatory requirements at both state and federal levels and must be addressed before a winery begins operation.


Regulation Compliance

• In addition, there are a multitude of issues that arise during operations, such as shipping regulations and restrictions, e-mail and Web site sales and distribution, advertising, and trademark or copyright enforcement. State liquor control laws vary widely. For example in Washington, the "tied house" statutes and regulations make it particularly difficult for wineries to operate both a winery production and restaurant/retail facility.


Different Exposures—Different Players

• Hobby Winery• Boutique Winery• Larger Winery• Vineyard Operation

• Farm Owners• Definition• Definition• Farm Department


PropertyBuildings and Structures


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

• Bottling plant• Cellars (1st yr, 2nd yr…)• Caves• Tasting room (building)• Non Owned Location

Considerations• Gift Stores


Building Coverages

• Building – Homeowners– Commercial Building Coverage– Increased “Other Structure Coverage”

• Replacement Cost, Reproduction Cost, Functional Cost


Building Coverage

• Building Ordinance• Cause of Loss—Special Form• Earthquake• Flood• Increased trees, shrubs and plants• Signage• Pavements, Walkways, Foundations


Equipment


Types of Equipment• Mobile Equipment

versus Auto** New Definition

• Gondola trucks• Hoists• Conveyors• Crushers• Fermenting tanks• Juice separators• Pumps


Types of Equipment

• Storage containers– Oak; redwood;

lined concrete, iron or steel

• Piping systems• Filtration units• Heat exchangers• Pasteurizers


Types of Equipment• Fining tanks,• Yeast propagators• Refrigeration and air

conditioning equipment

• Presses• Centrifuges

• Ion exchange columns• Blending devices• Flow meters• Washing, bottling,

corking, labeling and casing equipment

• Computers• Phone Systems


Computers and Equipment

• Computer Hardware• Peripherals• Computerized

Equipment• Telephone Systems

• Remote computer sensor equipment

• Computerized equipment in the fields

• Software **• Proprietary Software **


Equipment Insurance

• Property• Boiler & Machinery• Off Premises Utility Interruption• EDP• Perils Coverage


Stock & Merchandise


Where Is The Stock?

• Wine and products on site• Wine and products in warehouses• Wine and products at conventions• Wine and products in transit• Wine and products in the care, custody

and control of a salesperson


Stock

• Grapes• Wine during

processing• Wine during

fermenting• Wine during aging• Wine ready for sale

• Wine sold but not delivered– Pre-sold prior to

production—wine futures

– Pre-sold after production—after wine is introduced

• Wine that is unsold


Stock

• Collector Wine• Wine accessories produced by insured

– Lavender Products from Matanzas Creek Winery


Stock

• Merchandise of others for re-sale– Gift items: decanters, books, shirts– Food products

• VALUATION is the key!– Market Value– Selling Price– Replacement Cost


Property Coverages

Stock (Wine)• Manufacturing Selling

Price• Retail Selling Price• Brand & Label• Control of Salvage• Preclusion of Salvage• Trade Shows• Wine Leakage Coverage

• Political Risk• Intellectual Property• Peak Season• Personal Property of

Others Considerations• Spoilage• Boiler & Machinery• Off Premises


Other Property Considerations

• Fine Art Collections• Antiques• Library Collections


Transportation Issues and Solutions


TransportationLong haul trucking presents the most serious exposure. Bulk loss of wine is a major concern.– What is the value of the wine shipments?– Does the insured transport in owned, leased,

rented trucks?– Does insured use common or contract

carriers?– Does the insured use released bills of lading?


Transportation• Cargo is subject to hijacking. An Alarm

must be installed with warranties required.

• Where are the trucks stored and how are they protected?


Inland Marine Coverages

• Transportation Floater

• Motor Truck Cargo• Ocean Marine

Cargo– Warehouse to

Warehouse

• Valuable Papers

• Accounts Receivable

• EDP• Fine Arts• Bailee Coverage

– Warehousemen• Farm/winery

equipment• Signs


Business IncomeIt’s A Risk Management Issue!!!• Business Income and

Extra Expense• Extended Period of

Indemnity• Agreed Value• Off Premises Utility

Interruption• Boiler & Machinery• Spoilage Clarification

• Dependent Property Coverage

• Transit Business Income

• Building Ordinance Increased Period of Restoration

• Mobile Ag Extra Expense

• Mobile Ag Rental


Dependency Issues for Business Income

• Dependency—Property/Liability– Supplier of goods– Supplier of Services– Recipient of goods– Recipient of services

• Location of recipient/supplier (global)• Alternate Suppliers/Stockpiling• Time frame for goods/services


Dependency--Product

• Barrels • Packaging• Wine Bottles & Repackaging Services • Bottles (Specially designed/Decorator

bottles)• Corks• Labels• Machinery & Packaging Supplies


Dependency--Services

• Storage-- Dry & Temperature Controlled Warehousing

• Shipping• Repack Services• Bulk Wine Brokers • Energy Service Providers• E-Commerce/Internet


Crime Insurance

• Employee Dishonesty

• Money Coverage• Depositors Forgery• Computer Fraud

• Surety (Federal)– Alcohol, Tobacco

and Firearms– Bond—Liquor

License– Sales Tax Bond– Internet Sales State

Specific Bonds


International Considerations

• Exporters Package Portfolio

• Political Risk• Trade Credit—

Credit Insurance• Political Risk• Foreign Liability• Foreign Auto

• Worldwide Dependent Property

• Trade Disruption• Admitted Insurance• D.O.C—Difference of

Conditions• D. I. C—Difference in

Conditions• D. I. L. Difference in

Limits


Liability



• During a wine tasting held in your underground storage caverns, a customer slips and falls and sues your winery.



• Someone becomes ill in another country as a result of consuming your wine.

• An employee accidentally drives a forklift into a wine tank, causing the tank to collapse and the wine tospill out, potentially causing $100,000 in damages.


Liability Coverages

• CGL• Umbrella• Products Liability• Product Tampering,

Contamination• Product Recall Including

Voluntary and Involuntary

• Advertising Liability• Personal Injury

• Intellectual Property• Liquor Liability• Pollution Liability

(Environmental Impairment Liability)

• Herbicide/Pesticide Cover

• Directors & Officers• EPLI


Liability Coverages

• Railroad Protective

• Special Events Coverage

• Wind drift or overspray liability

• Agricultural Chemical Liability

• Error in labeling, bottling or packaging

• Personal liability for sole proprietor or partnership


Automobile Exposures

• The winery’s own vehicles, delivery trucks and trailers

• Some wineries have a wholesale license and own a fleet of many different size trucks to distribute wine directly to retail outlets or distributors.


Automobile Exposures

• A large winery may use flatbed truck to deliver cased wine.

• Wineries may be delivering both intra and inter state.

• Valet Parking—Garage and Garage Keepers Legal Liability.


Automobile/Mobile Equipment Exposures

• Slow moving trucks and gondolas which are used to transport grapes to the crusher, can cause traffic tie ups. This equipment may be owned either by the winery that operates its own vineyards or by independent grape growers who sell to the winery.


Business Auto & Garage

• Business Auto• Non Owned Auto• Hired Auto• Pollution exception for

mobile equipment

• Garage• Garage Keepers


Workers Compensation


Workers Compensation

• Foreign Voluntary Workers Compensation

• 24 hour coverage and repatriation for employees

• Medex assistance for medical emergencies abroad

• Stop Gap• USL &

H/Longshoreman• Other States• *Florida Approved

Workers Comp Carrier

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