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Napa Valley Winery Sues Insurance Company Over Failure To Pay Smoke Taint Claim

by Kerana Todorov
November 23, 2021

A Napa Valley winery has filed a lawsuit against its insurance company for refusing to pay its smoke-tainted wine claim, according to court records.

Hoopes Vineyard LLC, which produces ultra-premium wines, said United States Fire Insurance Co. should have paid for the losses resulting from smoke damage from the 2017 Wine County wildfires, according to the complaint filed Nov.8 in Napa.

Matthew Dudek, attorney for Hoopes Vineyard, said Tuesday that the winery is seeking $2 million in damages. 

The winery, located south of Yountville, sold wine as bulk after smoke taint characteristics appeared in wine produced with fruit from the 2017 harvest, according to the lawsuit.

Hoopes had the fruit tested after the 2017 wildfires but the tests did not raise smoke taint concerns, according to the complaint. Neither smoke taint or other concerns were detected at “numerous” tastings during crush, fermentation and aging of the wines, according to the court filing.

The fruit was tested at ETS Laboratories, according to the lawsuit. “The results led Hoopes and its team of experts to believe the grapes were not contaminated,” according to the complaint. The wines were also tested at Napa Wine Company, a custom crush facility.

Hoopes’ employees and winemakers tasted the wine grapes during the 2017 wildfires but did not detect smoke taint or other “quality concerns,” according to the lawsuit.

However, in May 2019, the winery became concerned that wine produced with fruit from the 2017 harvest was contaminated, according to the complaint. Hoopes’ experts were concerned about “smoke tainted flavor in the wine” and described it as “tasting like an ashtray,” according to the court filing.

“Specifically, after the grapes were off the vine, and during the processing of Hoopes’ wine, compounds that had not previously exhibited signs of smoke taint started to present as contaminated,” according to the lawsuit.

In May 2019, the winery contacted Randy Derr, broker and agent for United States Fire Insurance Co. about “potential insurance claims,” according to the complaint. But there was no response, the lawsuit alleged.

The winery began to sell its wine on the bulk market in order to mitigate the financial damages, according to the complaint. The wine was sold for a “mere fraction of the price Hoopes could have received,” according to the complaint. Untainted, the wine would have been used for “ultra-premium” wines, according to the lawsuit.

In July 2019, Hoopes switched insurance agents. It was then that the winery learned that United States Fire Insurance Co. should cover the wine losses under its existing policy, according to the complaint.

In February 2020, the winery filed a claim for six lots totaling about 7,460 gallons, according to the lawsuit. The dollar value of the six lots was not included in the complaint. According to its website, Hoopes’ wines available for online purchase includes a 1.5-liter bottle of 2015 Hoopes Dante’s Block Cabernet Sauvignon for $375.

The insurance company did not inspect the wine for months, the lawsuit alleges.

A consultant working for the insurance company investigated the matter. The expert concluded that Hoopes “should have known that the grapes could become contaminated, despite the fact that Hoopes acted within industry standards in continuing to process the grapes after having conducted multiple tests shortly following the 2017 wildfires,” according to the complaint.

Based on the expert’s opinion, the insurance company “wrongfully concluded that there was no evidence that any damage occurred to the subject wine lots after the grapes were harvested,” according to the lawsuit.

United States Fire Insurance Co. declined coverage for the wine on Oct. 13, 2020, according to the lawsuit. The insurance company said it was up to Hoopes to prove that the wine had been damaged after the fruit was harvested and delivered to the winery, according to the lawsuit.

The insurance company said the winery failed to preserve “holdback” wine samples, according to the complaint. The winery’s position was that it could not have preserved such wine samples as “mold would have formed and ruined the samples, and thus, such samples would have become naturally tainted,” according to the lawsuit.

The defendants include United States Fire Insurance Co. and its parent company, Crum & Forster Holdings Corp., and Derr.

A Crum & Forster representative declined to comment on the lawsuit.

The wine industry has yet to come up with threshold standards indicating levels of smoke exposures. Researchers continue to study the effects of wildfire smoke on wine grapes. One much discussed goal is the establishment of industry-wide threshold levels for smoke compounds.

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