(For more information on business income and extra expense coverage, please see these editions of our technical publication Adjusting Today: “Valuing Business Income Exposures – A Case for Blanket Business Income Insurance” and “Questions About Business Income Insurance.”) Even if a fire at a brewery or distillery is contained and the loss is only a partial one, the property may have to be rebuilt to conform with standards of an updated fire code, thus prolonging the time needed to reopen and increasing the amount of income loss. In August 2021, the International Code Council revised its International Fire Code to impose a requirement that sprinklers be installed in buildings where distilled spirits are created or stored in bulk. “Distilled spirits have the properties of flammable liquids and proper safeguards must be provided for the occupancies and structures that house such activities,” the ICC states.8 In light of that, owners of buildings where alcoholic beverages are brewed or distilled will probably face an exposure for the increased costs incurred to bring the undamaged part of a damaged structure up to the latest code requirements. This exposure for “increased cost — ordinance or law” is excluded from standard commercial property coverage but can be added by endorsement. (For more information on ordinance or law coverage, see our Adjusting Today edition “Ordinance or Law Coverage: Code for Recovery!”) Not Tied to the Land Risks of loss for craft breweries and distilleries are distinct from those of wineries. Whereas wineries often include a grape- or fruit-growing operation, and the attendant agricultural exposures, The Risks and Rewards of Breweries and Distilleries Continued PAG E 3 breweries and distilleries typically buy their hops, barley, and other ingredients from third-party growers. (This is not to say that any batch or selection will do, brewers and distilleries often choose particular strains or producers of grain and other ingredients, and disruptions to agricultural can have a direct impact on beverage producers.) Since breweries and distilleries are rarely connected to a growing operation, at least directly, they are not geographically limited to the extent wineries are. As explained in this edition of Insights for Your Industry devoted to wineries, the vast majority of U.S. wineries are located in states on the Pacific Coast and have suffered severe damage fromwildfires that have ravaged the region in recent years. A few populous states (California, New York, Pennsylvania, and Texas) account for nearly a quarter of the country’s independent breweries and distilleries, but there is no geographic or climatic limitation to where one can be located; access to markets will be the prime consideration. It follows that the success of a brewery or distillery is less tied than a winery to a location, to what vintners refer to as “terroir,” a French term referring to the overall environment in which a wine is produced — its soil, climate, and topography, and the types of grapes the region produces. Since breweries and distilleries are less dependent on specific locations than wineries, it also follows that their success is more dependent on supply chains and the skills of individual brew masters and distillers. For this reason, risk analysts advise craft breweries and distilleries to plan explicitly for the loss of a key craftsperson. Insights for Your Industry PROTECTING YOUR PROPERTY E01-1028 800.382.2468 | AdjustersInternational.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com | 126 Business Park Drive, Bldg 2 | Utica, NY 13502 Copyright 2023 Adjusters International. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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