Wine-making is a complicated business, more complicated than many outside the industry realize. For craft grape growers and winemakers all hands are on deck to make sure that each step of the process ensures the best quality finished stock.
Craft growers and winemakers are especially creative in employing partners along the way to achieve success, but with each step that gets you closer to the customer’s first pour, risk and uncertainty may threaten your business.
Reviewing your contracts alongside your insurance policies with your insurance agent and attorney is a highly recommended annual practice to close the gaps of risk and uncertainty.
- Start by outlining your production and workflow. Be specific with each step of your production process and identify your suppliers and partners.
- Identify who has the baton with each step. Craft winemaking usually requires the baton to be passed by a succession of vendors and partners, and identifying who carries the responsibility to the next hand-off is vital to closing risk gaps. Who transports the grapes? Do you use another winery’s facility to make your wine? Whose equipment are you using? Where do you store the unfinished wine? Who owns the barrels? Who transports the finished stock? Where is it stored?
- Review contracts with partners. At PayneWest Insurance, this is where we start in-depth contract review with clients to make sure that contracts reflect who holds the primary responsibility (the baton) for each stage. If the product is in the care of a partner, generally, they should be insuring it, but in some cases we may recommend that the risk be transferred.
- Examine insurance policy requirements. Insurance companies and underwriters prefer that contract language with a vendor or partner includes the insurance requirements. If it is not spelled out in a contract, underwriters may have difficulty making decisions on the coverage. Having the right contract language makes it much easier to get the best insurance coverage in place. And clearly defining what coverage you have, and your partners have, for each step in the process gives you insight into where you may need to close gaps.
- Evaluate the risk. Proper valuation of the wine itself is vital if a loss is filed. Are you are producing and selling a $22 bottle of wine or a $200 boutique wine? For example, if there was a huge leak or contamination at some point, having the proper valuation for your product makes all the difference.
Having the right contracts and insurance coverages in place makes business in the long run a lot more straight forward and, ultimately, produces productive working relationships and peace of mind for yourself and everyone helping you along the way.
Heather Cooke is a winery insurance and risk management specialist, working with dozens of wine industry clients throughout the Pacific Northwest.