Fire preparedness for vineyards and wineries | Farella Braun + Martel LLP
Winter, spring, summer, fire season and fall – as Californians we have all become accustomed to a fifth season – fire season. Worse still, the fire season was once limited to just a few months, but is now a threat for most of the year. So what should a vineyard owner do? We have some essential suggestions for you regarding your insurance that will help you rebuild and resume your normal activities should the worst happen. These suggestions are important not only for fire preparedness, but throughout the year.
First, review your insurance policies (fire, crop, and stock, if you have any). Confirm that the named insured(s) is correct, including spelling and punctuation, and that the policy lists all names of companies, trusts and LLCs that have an ownership interest in the real estate, structures, personal property and crops. If anything is incorrect, or you notice an entity is missing, email your insurance agent or broker with the changes. We recommend that you request policy changes by email, rather than by phone or in person, for accuracy and to provide an electronic record of the change you requested.
Second, review the slot schedule on your policy. If your policy does not include a schedule of locations (which is just a list of addresses), ask your insurance broker to send you a copy of the most recent schedule on file with the insurer. , which was probably provided before your last font. renewal. Review the schedule and verify that each location you own, lease or have inventory (like custom crushing plants) is listed with the correct address. For rural addresses and large parcels, try to include the Assessor’s Parcel Number (APN), if possible. Again, email any changes or corrections to your agent or broker. But be aware that your insurer will likely charge you an additional premium for approving (modifying) the policy to add locations that may have been missed during renewal.
For each location that has structures (wineries, homes, barns, pump stations, or other buildings), we recommend that you review each structure’s insured value with your agent or broker to ensure you have sufficient coverage. With inflation, supply chain issues and rising labor costs, having adequate limits to rebuild is more important than ever. Also be sure to ask your agent or broker if you have Extended Replacement Cost coverage (additional protection against rising construction costs) and Buildings and Ordinances coverage, which is coverage additional to help bring the structure to code after a covered loss. Above all, don’t forget to discuss coverage of pumps, irrigation equipment, and trellises. If you don’t “plan” for these items (list them on your policy), then you probably have no coverage or only a small amount of coverage. Although growing vineyards often provide a useful firebreak, irrigation equipment and trellises can still burn, and you want to make sure you have cover to replace them in order to continue operations after a loss. .
Next, it’s time to think about hedging your stock. Crop insurance covers grapes while they are on the vine. If you don’t have crop insurance, find out for the next crop season. As soon as your grapes are harvested they become inventory, whether it is table grapes, raisins or wine, your inventory can be insured either on your property insurance policy or on a stock flow. A stock flow policy will insure your grapes from harvest to final destination. If you do not have a stock debit policy and are relying on your property policy for coverage, we recommend that you regularly advise your agent or broker of the value of your stock and its location. Often, you might have millions of dollars worth of wine in tanks at your winery or custom crushing facility. After bottling, however, it is transferred to a distribution or processing center. As your stock moves, you should either keep your agent or broker informed of the value at each location or apply for blanket coverage at renewal.
Another important consideration is coverage for loss of business income. This could be a loss of future sales after a fire destroys your production facility or inventory. We also consider this to be lost tasting room or special event revenue if you lose access to your property due to mandatory evacuations or road closures. Does your policy have a set amount for loss of business income (also known as a time element), or is it an aggregate or combined limit? Again, check with your accountant – as well as your insurance agent or broker – to make sure you have adequate coverage.
Finally, don’t forget your professional equipment and personal belongings. If your policy has an equipment schedule, review it and make sure all your equipment is planned. If you have an overall limit for company equipment and/or personal property, do you have sufficient coverage? Tractors, hydroseeders, wine barrels, grape harvesters, ATVs, think of all the equipment you’ve accumulated and what it would cost to replace it in the event of a fire. Whenever you buy new equipment, make it a habit to let your agent or broker know. It only takes a moment to snap a photo of your new John Deere receipt and email it to your agent, and you’ll be glad you did if the worst should happen.
Over the past five years, there has been a lot of talk about fire preparedness and how homeowners can “harden” their property to make it more fire resistant. We agree that this is an important step in helping you and your neighbors avoid a catastrophic event. As the saying goes, an ounce of prevention is better than cure. However, smart business owners will also take the time to review their insurance policies and “tighten up” their insurance coverage as part of their fire preparedness efforts. We recommend both hardening your ownership and tightening your policies.