By John Novaria, Managing Director, Amplify
you think of winemaking, you picture grapes on the vine and a hearty glass of
red on your table. But you probably don’t think of all the steps involved in
the production of wine and the fact that those grapes – and later, the finished
product – travel long distances to reach our palates.
where marine insurance comes in: to protect businesses along the supply chain
from the unexpected.
American Institute of Marine Underwriters (AIMU) drew a robust
crowd to its recent webinar, “From Vine to Wine and the Fire In Between,” where
participants learned of the risks associated with wine production and the
coverages that are designed to mitigate losses. The two-hour session is part of
AIMU’s extensive and popular educational series, and drew a crowd of
underwriters, claims experts and brokers from the ranks of marine insurers and
of the biggest roles we perform is education, and it’s not limited to our
members,” says John Miklus, President of AIMU. “Marine touches so many aspects
of business that there’s a real thirst for knowledge in the broader insurance
community and we try to quench that thirst.”
Pamela Schultz, Jonathan Thames and Erik Kowalewsky of Hinshaw & Culbertson opened by discussing the effects of the
2017 wildfires on the Napa and Sonoma wine growers and wineries, where 10
percent of the harvest was still on the vine when the fires started.
are nearly 20 steps involved in wine production, including include growing,
harvesting, fermenting, storage, barreling, aging, blending, bottling, labeling
and distributing. Each presents opportunities for things to go wrong.
explained that Stock Throughput is a form of marine coverage that insures goods
in all their physical states along the supply chain with the exception of damage
caused by the processes of turning the raw materials into the finished
products. He said policies are generally very broadly worded and cover all
pointed out how marine insurance comes into play during shipment. Stock
Throughput policies are designed to cover supply chains and anything that moves
inventory against loss due to:
- Extreme weather and
natural disasters can cause supply chain interruptions and even loss of product.
Obviously, wine has to get from the vineyard to the table and that table may be
anywhere in the world.
problems/disruption: This affects imports and exports, especially delays due to
current COVID-19 crisis.
- Lack of Control: Products
are sometimes shipped long distances, and it’s difficult to know everything
about every link of the supply or travel chain.
- Invaders: Yes, pests
have been known to get into wine and cause damage and so can fumigation.
- CTL: Constructive Total
Loss becomes an issue if the wine is stolen. Most policies exclude consumption
of wine, but Schultz said that hasn’t stopped some insureds from trying to
claim it on that basis.
2017 California wildfires brought into focus the issue of smoke taint. The smoke
that lingers for weeks after the fires are extinguished can taint the grapes,
rendering a wine unpalatable, or worse, undrinkable.
noted that smoke taint claims don’t arise until after fermentation, after the
wine has been tasted, and the grower must prove damage with scientific evidence
and serve notice of potential loss within 60 days. However, he said there are
cost effective processes winemakers can put in place beforehand to mitigate the
presenters discussed the difference between crop insurance and whole farm
revenue protection, both of which offer only limited protection to the grower. Crop
insurance is not a 100 percent indemnity product; it only covers the grapes
pre-harvest, so there will always be a gap. Limits are based on past yields so it’s
difficult to expand limits in the first few years.
As a result of the 2017 fires in Oregon, one winemaker now requires
its growers to carry crop insurance and pays half the premium.
farm revenue protection insures against lost revenue, but doesn’t protect
particular crops as it is not a property policy. To make a claim on this policy
the insured must establish that farm revenue is down as a result of the winery
rejecting the grapes.
were invited to vote on their favorite wine, and the overwhelming choice was
Red, at 70 percent. White garnered 17 percent of the vote and Rose 12 percent.