Even if your winery or vineyard has so far escaped damage from the wine country wildfires, Blank Rome LLP attorney and insurance recover expert Linda Kornfeld says find your insurance policy immediately.
Kornfeld supplied Wine Business Monthly a quick checklist for wineries and vineyard owners to follow whether they have suffered damage or loss or not.
1. Find your insurance policy
2. Give notice to your insurance company, especially before making decisions to spend money
3. If you can’t get ahold of your insurance company, read your policy and know where the sticky points are
Sticky points: referring to grapes as “crops” or “stock”; what state the grapes are in (i.e. growth, removed from vines, in vats); state of destruction (i.e. vine isn’t destroyed, but grapes are smoke infiltrated); what constitutes covered loss/damage; who bears the burden of proving what happened; independent adjuster versus public adjuster
4. Gather documents to establish what your financial obligations to others are and who has financial obligations to you; and, what your historical profits have been and how you’ll prove damage
Kornfeld cautions wineries and vineyard owners to the different type of policies concerning grapes. Crop insurance applies generally to vines and grapes on the vines. “But once the grapes are off the vine, and they're in the vats, and they're fermenting, and the manufacturing process is happening, they're no longer a crop, and at that point you're looking at traditional property insurance or traditional business interruption insurance. So you're no longer talking about this specific grape on the vine, and the volatility of that grape, now that it's in a vat or barrel. Instead we are trying to value it based upon the language used in a traditional property policy.,” advises Kornfeld.
What is the right time to give notice to the insurance company – while the threat of fire is active or after the fact?
“It's as soon as you can. It's really what's reasonable circumstances. You would like your insurance company involved as soon as possible to help make decisions about money that you should spend, or money that you think you should spend, to respond to the event, to try to litigate your losses, to address issues that you're experiencing because of what's happened at your property. So, to the extent that the insurance company can be involved immediately, then that's the best approach,” states Kornfeld.
When there is partial damage to certain blocks of grapevines how damage is assessed falls into a fuzzy legal area according to Kornfeld.“ It’s a question that has been debated among policy holders and insurers for years every time there is a natural disaster event. And in this situation, I think that this question will be one that gets debated in even greater detail because how do you determine the value of the loss?. You lose a grape, and it's the year 2017, and those who have been thinking about the grapes this year, and the wine that will be made from those grapes have concluded that 2017 likely was going to be a great year. So, do you just replace grapes, or do you replace grapes that are of the 2017 vintage based upon historical data about other vintages that were also identified to be seller vintages? Do you replace them based on some other model?
“It's certainly going to depend in part on the policy language, but it's also going to depend upon the policy holder's ability to explain why these particular grapes, or if the wine was already in process of being produced, why this year and these grapes should be valued higher than maybe last year's vintage or the last five years. The debate between insurance holders and insurance companies is which historical data should be used to determine the value of the loss. Much depends on how your policy is written,” explains Kornfeld.
With the wide spread devastation and the sheer number of claims it will produce, the entire process of securing payments will take longer than usual. Accordingly, contacting insurance companies as soon as possible will get wineries higher in the line of attention.
A reader comments:
Hi, I wanted to comment that Crop Insurance does not apply to vines at all. Only to the fruit on the vines. The article seems to imply that the crop insurance policy may have some coverage for damage to vines; this is not the case. Please feel free to reach out to me if you have any questions. Regards, Greg