Friday, September 25, 2015 Des Moines, IA 12:45 3:00 p.m. WINERIES AND VINEYARDS Presented by Gail Fosse, CIC, CRM, ARM, AAM, CPIW Senior Underwriter Fairmont Specialty The number of wineries in the United States has increased by 190 percent since 1999, with wine now being produced in every state. The United States is now third among the 70 countries producing wine. Each step in the process from growing grapes in the vineyard to producing the wine to transportation to sales has its unique exposures that must be addressed. This session will look at the exposures during the various stages of the process and discuss insurance issues and solutions to address the risks. Copyright 2015 International Risk Management Institute, Inc. 1 www.irmi.com
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Gail Fosse, CIC, CRM, ARM, AAM, CPIW Senior Underwriter Fairmont Specialty Gail Fosse is a senior underwriter with Fairmont Specialty, where she underwrites commercial and agricultural packages. Prior to joining Fairmont, she was lead underwriter for commercial and agricultural risks with QBE the Americas. She has also been an underwriter with CIGNA Group Insurance and Zenith Insurance Company. Ms. Fosse holds the Associate in Risk Management (ARM), the Associate in Automated Management (AAM), Certified Insurance Counselor (CIC), Certified Risk Manager (CRM), and Certified Professional Insurance Woman (CPIW) designations. She is active with the Insurance Women of Fresno, where she currently serves as a board member. She instructs two Certified Insurance Service Representatives (CISR) programs for the National Alliance Insurance Center. Ms. Fosse received her B.S.C. in marketing from the University of Santa Clara. 3
Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 4
Vineyards and Wineries Exposures and Insurance Presented by Gail Fosse, CIC, CRM, ARM, AAM, CPIW Senior Underwriter Fairmont Specialty 5
Wine Production Grape and Wine Stats: Top 10 Wine Producing States Rank, State, Gallons 1 California 783,047,749 2 Washington 34,712,644 3 New York 28,900,557 4 Pennsylvania 10,278,722 5 Oregon 7,964,417 6 Vermont 4,315,420 7 Ohio 3,582,902 8 Michigan 2,334,036 9 Kentucky 2,241,527 10 Texas 1,026,465 US Tax and Trade Bureau, 2013. 3 Wine Production Top 10 Wineries by State Rank, State, Number of Wineries 1 California 3,782 2 Washington 681 3 Oregon 599 4 New York 320 5 Virginia 248 6 Texas 204 7 Pennsylvania 182 8 Ohio 143 9 Michigan 137 10 North Carolina 129 US Tax and Trade Bureau, 2013. 4 6
US Wine Consumption Source: wineinstitute.org. 5 American Wine Update Bonded wineries: As of 2012, there are 8,806 bonded winery premises. Bonded winery licenses are issued by US Tax and Trade Bureau for the purpose of designating a tax-paid environment for wine. Bonded winery includes every licensed production facility of single firms or individuals, licensed warehouses, experimental wineries, and wineries with no cased goods production or fermentation capacity. All states now produce On April 17, 2002, the Bureau of Alcohol, Tobacco, Firearms and Explosives granted license to the last remaining state. Who was last? North Dakota Source: wineinstitute.org. 6 7
California Wine Production Source: wineinstitute.org. 7 California Wine Profile America s top wine producer 4,100 bonded wineries 214.6 million cases $23.1 billion retail value 57% share of the US market by volume $1.55 billion in export revenue 5,900 wine grape growers 570,000 acres of wine grapes 4.24 million tons of wine grapes harvested Source: wineinstitute.org. 8 8
Largest Producers E & J Gallo Winery Constellation Brands The Wine Group Bronco Wine Company Diageo Brown-Forman Corporation Beringer Blass Jackson Wine Estates 9 In the News: 2015 1. Recent lawsuit that certain wines contain unsafe levels of arsenic 2. Screw cap triumphs in maturation test (Australia) 3. Alcohol ads increased 400 percent over 40 years, but Americans aren t drinking more (University of Texas study) Valuable websites include: wineinstitute.org wineindustryinsight.com winesandvines.com winebusiness.com 10 9
Vineyard and Winery Process 1. Grapes are grown in the vineyard 2. Grapes are harvested 3. De-stemming, crushing, pressing, racking 4. Alcoholic fermentation 6. Barrel and tank aging 7. Blending 8. Fining process 9. Bottling/labeling 10. Storage 11. Transportation 12. Consumption and more 5. Pressing 11 Vineyards Vineyard operations 12 10
Vineyard Property Dwellings High values Age Location Owner Employee/tenants Fine arts Outbuildings Age and use Permanent equipment 13 Vineyard Property Mobile ag High values Rental reimbursement Trellis and vines Cargo Owned autos Common carrier 14 11
Vineyard Liability Personal liability Toys o Trampolines o Swimming pools Farming liability ATV Farm equipment Chemical application Subcontractors 15 Winery Trivia When did winemaking begin? Mesopotamians produced first wines in 6000 B.C. How much wine is in a bottle? 750 ml is standard in most bottles (25 oz.) How many grapes does it take to make average bottle of wine? 2 ½ pounds of grapes How many bottles of wine in a case? 12 How many gallons of wine are in a single barrel? 60 How many gallons are produced from 1 acre of grapevines? About 800 gallons How many grapevines make up an acre? 400 grapevines 16 12
Convert Cases into Gallons 2.38 gallons per case Why should I know this? 17 Traditional Types of Wineries Are considered a wine manufacturer in the eyes of the law Have an 02 license or an alternating premises 02 license Have a physical space where they make their own wine Custom crush Facilities make wine for others and possibly themselves Have an 02 manufacturing license Technically own the wine until it is released to the customer Virtual Have a combination 17/20 license o 17: beer and wine wholesaler o 20: off-sale beer and wine Do not technically own the wine until it is released from the manufacturing facility. However, they have a stake in the outcome, by contract, and can legally insure the wine. 18 13
Winery Equipment 19 Winery Equipment 20 14
Winery Buildings Typical types: Winery Warehouses for stock (owned/nonowned) General storage Office Tasting room Habitational units Halls/event center and more 21 COPE Construction Occupancy Protection Exposures 22 15
Caves Will insurer insure? Excluded perils? Equipment breakdown coverage? 23 Solar Building or equipment? Equipment breakdown 24 16
Wine Stock Check insurer s definition of stock Does it include? Picked or crushed grapes Wine in process Wine in any stage of fermentation Bottled wine Wine in cooperage Finished stock held in storage or for sale Stock of others in your care, custody, or control 25 Barns ee Housing Wine Stock VALUATION is key! Bottled winery products: price it could have been sold for as case goods Bulk wine: market value Price it could have been sold for Or The market price of replaceable bulk wine of like kind quality Typical exclusion: unpaid US IRS taxes and discounts and expenses you would have had. 26 17
Wine Leakage Direct physical loss or damage to wine products Check insurer s definition Accidental damage to the tanks, vessels or barrels, or any of their component parts or connections caused by you or your employee(s); The implosion or inward collapse of the tank, vessel, or barrel due to the failure of a pressure relief device on the tank, vessel, or barrel Errors or omissions by you or your employee(s) with respect to: o (a) The storage, bottling, or maintenance of wine stock ; or o (b) Maintenance of or work upon the tanks, vessels, or barrels 27 Wine Leakage Claims Stripped wing nut $240,000 leakage claim 28 18
Wine Leakage Claims At large tank farm man way door failed Wine leakage $500,000 29 Wine Leakage Claims Employee error while driving forklift During racking process 30 19
Wine Leakage Limits Size of largest tank? What is the MAXIMUM value per gallon? 31 Wine Stock Contamination Check insurer s wording: We will pay, under this Additional Coverage, for loss of or damage to wine stock whether finished or in-process, caused by contamination. Contamination means any impurity caused by contact or mixture with a foreign substance. Wine, sulfur dioxide, yeast, and any other component used in the winemaking process are not foreign substances. In addition, defects or inadequacies of raw stock are not considered foreign substances. 32 20
Employee drowning in tank Cleaning agents in bottling process Wine Stock Contamination Claims 33 Mare Island Warehouse 10/12/2005 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. 34 21
Barns ee Housing Mare Island Lessons Aggregation of limits Loss of blanket coverage Valuation of stock 35 Winery Business Income Business income and extra expense Extended period of indemnity Off premise utility interruption Dependency issues 36 22
Winery Crime Exposures Primary crime exposures Employee fidelity Money coverage Computer fraud Surety bonds 37 Winery Inland Marine Transportation floater Motor truck cargo Ocean marine cargo Accounts receivable Valuable papers Electronic data processing Fine arts Signs 38 23
Winery Liability Wine products: still and sparkling Customer becomes ill from drinking wine Sparkling wine bottle explodes while opening Liquor liability Tasting room: pouring and sales to intoxicated customers Sales to underage customers 39 Winery Liability Tasting rooms: On site of winery Picnic facility? Playground? Ponds Off-site storefront Off-site tasting CGL Umbrella Liquor liability CGL: commercial general liability. 40 24
Winery Liability Retail exposures: Gift stores Food products Deli Full restaurant CGL Umbrella Liquor liability 41 Winery Liability LODGING EXPOSURES Life safety Pools Lakes Meals Activities CGL Umbrella Liquor liability Cherry Hill Vineyard seasonal camp opened in 2002. Viticulture dude ranch. Tend vines, hoist grapes for first crush 42 25
SPECIAL EVENTS ON SITE Weddings, corporate events Concerts BBQ Grape stomps Bottle your own Holiday parties Hay rides Fireworks Winery Liability CGL Special event Umbrella Liquor liability Garagekeepers legal liability 43 Winery Liability TOURS Winery Cave Vineyard Auto CGL Auto liability Umbrella 44 26
Winery Liability Intellectual property: copyright, trade dress, slogan Advertising injury 45 Winery Liability Cyberliability? Is there a website? o Any warranties or representations made o Personal information of customers o Advertising and use of meta tags Product recall Winemakers errors and omissions 46 27
Vineyard and Winery Auto Types of autos Farm use Seasonal Personal use Delivery of wine Unique and unusual Motorhomes High performance Motorcycles Antique 47 Vineyard and Winery Auto Drivers Age Licensed Employee personal use Coverage forms Individual named insured endorsement Drive other car Auto pollution Filings 48 28
Workers compensation Employee benefits Employment practice Vineyard and Winery Employees 49 Thanks for Your Time! 50 29
Notes This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If you print this file, we suggest that you set your printer to duplex. 30