Winter, spring, summer, fire season, and fall – as Californians, we have all become accustomed to a fifth season – fire season. Even worse, fire season was once confined to just a few months, but now is a threat for most of the year. So, what is a vineyard owner to do? We have some critical suggestions for you with respect to your insurance that will help you rebuild and resume normal operations if the worst should happen. These suggestions are important not just for fire preparedness, but year-round.
First, review your insurance policies (fire, crop, and stock throughput, if you carry it). Confirm that the named insured(s) is correct, including spelling and punctuation, and that the policy lists all of the names of corporations, trusts, and LLCs that have an ownership interest in the real property, structures, personal property, and crops. If anything is incorrect, or you notice that an entity is missing, email your insurance agent or broker with the changes. We recommend requesting policy changes by email, rather than by phone or in person, for the sake of accuracy and to provide an electronic record of the change you requested.
Second, review the schedule of locations on your policy. If your policy does not include a schedule of locations (which is a 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 likely provided prior to your last policy renewal. Review the schedule and double-check that every location you own, lease, or have stock at (such as custom crush facilities) is listed with the correct address. For rural addresses and large parcels, try to include the assessor’s parcel number (APN), where possible. Again, email any changes or corrections to your agent or broker. But, be forewarned that your insurer will likely charge you additional premium to endorse (change) the policy to add locations that might have been missed at renewal.
For each location that has structures (wineries, dwellings, barns, pump houses, or other buildings), we recommend reviewing the insured value of each structure with your agent or broker to ensure you have sufficient coverage. With inflation, supply chain issues, and increased labor costs, having adequate limits to rebuild is more important than ever. Also, be sure to ask your agent or broker if you have coverage for extended replacement cost (extra protection in case constructions costs increase) and building and ordinance coverage, which is additional coverage to help bring the structure up to code after a covered loss. Importantly, do not forget to discuss coverage for pumps, irrigation equipment, and trellises. If you do not “schedule” these items (list them on your policy), then you likely have no coverage or only a small amount of coverage. While growing vineyards often provide a useful firebreak, irrigation equipment and trellises can still burn, and you want to make sure that you have coverage to replace them in order to continue operations following a loss.
Next, it’s time to think about coverage for your stock. Crop insurance covers grapes while they are on the vine. If you do not have crop insurance, look into it for the upcoming crop season. As soon as your grapes are harvested, they become stock, whether table grapes, raisin grapes, or wine, your stock can be insured either on your property insurance policy or a stock throughput policy. A stock throughput policy will insure your grapes from the moment they are harvested until they reach their final destination. If you do not have a stock throughput policy and are relying on your property policy for coverage, we recommend that you regularly update your agent or broker about the value of your stock and where it is located. Often, you could have millions of dollars’ worth of wine stock in tanks at your winery or a custom crush facility. After bottling, though, it is moved to a distribution or fulfillment center. When your stock moves, you either need to keep your agent or broker informed of the value at each location, or ask for blanket coverage at renewal.
Another important consideration is coverage for loss of business income. This could be lost future sales after a fire destroys your production facility or stock. We also frequently see this as 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 scheduled amount for Business Income (also called Time Element) losses, or is it a blanket or combined limit? Again, consult with your accountant – as well as your insurance agent or broker – to be sure you have adequate coverage.
Finally, don’t forget about your equipment and business personal property. If your policy has an equipment schedule, review it and make sure that all of your equipment is scheduled. If you have a blanket limit for equipment and/or business personal property, do you have enough coverage? Tractors, hydroseeders, wine barrels, harvesting machines, ATVs – just think of all the equipment you have accumulated and what it would cost you to replace it in the event of a fire. Whenever you buy a new piece of equipment, get in the habit of informing your agent or broker. It only takes a moment to snap a photo of the receipt for your new John Deere and email it to your agent, and you will be glad you did if the worst happens.
Over the past five years, there has been a lot of discussion about fire preparedness and how property owners can “harden” their property to make it more fire resistant. We agree that is an important step to help you and your neighbors avoid a catastrophic event. As the saying goes, an ounce of prevention is worth a pound of 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 property and tightening your policies.