From grapes to retail, wineries have special insurance needs

Mary Lou Jay

More than 7,600 U.S. wineries were open for business in 2010, according to the Wine Institute. While operating a vineyard and winery may seem like a dream job, in reality it's a complicated and demanding business. In addition to understanding the intricacies of growing and blending grapes to produce flavorful wines, a vintner must handle all of the financial and legal aspects of the business. Making sure that the business is financially protected with the right insurance is an important part of those responsibilities.

Insuring every step of the process

Making and selling wine involves numerous processes, and problems at any point can dramatically reduce a winery's production for a year. Crop insurance can help when grapes are damaged by weather and other perils, like insect damage. Keep in mind that your policy may exclude certain disasters. Moreover, crop insurance covers grapes only until they are picked. If they're damaged while being transported to the crushing area, you'll need to make sure you have insurance that covers them.

If vines or trellises are destroyed in a fire or if the agricultural equipment used for growing or harvesting the grapes is stolen, property insurance coverage can help pay to replace them. Apollo General Insurance Agency, for example, insures equipment, barrels, bottles and the wine itself. Meanwhile, Chubb's commercial insurance policy for wineries covers wine lost through leakage and the cost of removing pollutants if the wine is contaminated.

Given the vulnerability of your operation, business interruption insurance is a necessity. If a disaster forces you to shut down temporarily, this type of coverage will pay you the income you would have earned had the disaster never taken place.

Even after the wine is bottled and ready to sell, winery owners still face the potential for losses. Travelers Insurance allows those with its winery and vineyard coverage to add an endorsement that extends coverage to the wine while it's in transit. If you're keeping any wine in storage, read your policy carefully. Some policies may cover only the winery itself and won't cover off-site storage, according to a December 2005 story in the Napa Valley Register about a winery owner who learned that the hard way.

Liability coverage

Liability insurance is essential to any business insurance policy, as it shields business owners from the legal fees and court costs if they get sued. For example, product liability coverage would protect a winery if a customer claims the wine caused a serious illness and takes you to court. Many wineries also have on-site retail operations and tasting rooms. Fireman's Fund offers coverage for wineries' retail stores, tasting rooms, tours and special events, in case, for example, a visitor has a slip-and-fall accident on the steps leading to the cellar.

Many wineries use insecticides or anti-fungal sprays to protect their crops. That leaves them open to lawsuits from neighbors who claim that their health and property have been harmed because of drifting spray. Both Chubb and Travelers offer third-party damage coverage and chemical drift coverage for scenarios like this.

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