There are several essential and specialized insurance coverages that every brewery should be familiar with. Your insurance professional can help you with further details on pricing and availability, but the following should give you a solid overview for consideration.
Business Property Insurance
Also called commercial property insurance, this type of policy protects against losses to the physical structure and contents of your business in case of damage, theft or complete destruction. It covers parts of the building, as well as items such as inventory, furnishings, office equipment and even some outdoor structures.
If you rent the building, your landlord will carry insurance for the structure, but you’ll still need a policy for any on-site materials that you own or for which you carry financial responsibility.
When selecting coverage, you can choose either replacement cost value or actual cash value (ACV). The first option covers the full cost of an item’s replacement, while the second pays only the depreciated value of the item. Although an ACV policy pays less at the time of a claim, it usually charges a lower premium.
Of course, every property policy also comes with some exclusions – such as loss due to flooding, sewage backup or earthquakes – so be sure to understand these exclusions. Coverage for these perils can be added or obtained separately, so talk to your insurance professional about the costs and benefits. We will address some specialized coverages for brewery equipment further on.
Know that the equipment you take to festivals or elsewhere can also be protected, so talk about any plans you have to take product or equipment off-site.
General Liability Coverage
This type of policy covers medical and legal costs related to bodily injury, distress or damage to personal property a visitor suffers while at your business. It also protects against claims of slander or advertising injury. Remember that you don’t need to be at fault for a guest to sue you, so this coverage is imperative.
You can expand your liability protection with an umbrella policy, so talk to your insurance professional if you are concerned your liability limits of coverage are too low.
Although coverage requirements differ by state, workers’ compensation insurance is typically the best way to assist injured employees and protect your company against financial catastrophe due to workplace injury.
Workers’ compensation insurance pays for lost wages, disability and medical care for employees who are injured, disabled or sickened on the job, regardless of who is at fault. There are also substantial death benefits in the case of a work site fatality. This coverage is provided in exchange for an employee’s contractual agreement not to sue the employer following a covered incident.
Specialized Brewery Insurance Coverage
Your equipment is your livelihood. Specialized coverages to discuss with your insurance professional include:
- Tank collapse – This insurance protects you should a tank collapse due to implosion. It is not typically included with a standard policy.
- Tank leakage – This policy addresses the cost of repair or replacement, as well as lost beer or issues with other storage containers.
Equipment breakdown – This coverage protects against the financial loss that can result from equipment malfunction, including costs to repair or replace the equipment, and lost income due to operational interruptions resulting from the breakdown. There are usually categories of equipment coverage that you can select based on your particular operations. These include:
- Mechanical, such as motors, engines, water pumps and specialized production equipment
- Electrical equipment, such as transformers, electric panels and cables
- Computers and communications equipment
- Air conditioning or refrigeration systems
- Boilers and pressure equipment
- Contamination and spoilage – Without this coverage, you would have to assume the financial loss due to beer or ingredient contamination or spoilage, regardless of the cause. With this coverage, not only would the cost of lost items be covered, but you would also be compensated for any required equipment cleaning, employee medical testing or vaccinations, loss of income, and even the cost of advertising to help restore your reputation. The policy typically covers incidents caused by extended power outages beyond your control, equipment breakdown or failure, mechanical breakdowns, and improperly handled ingredients or finished product.
- Restaurant property – If you have expanded operations to include a restaurant, taproom or small area for sampling, your insurance professional can advise you of the additional insurance policies you need to carry. Even if food is not served, liquor liability is essential and protects you in the case of claims of bodily injury or property damage caused by an individual who is “over-served” your beer.
- Key employee coverage – Many breweries depend on the talents of a brewmaster. If this individual is permanently disabled or dies, you may struggle with consistency, recipe development or branding that mentions “expert” brewing. You will need to name the covered employee specifically, but this common craft brewery policy will cover the costs associated with finding a new brewmaster.
Let’s consider a scenario: One of your employees pulls ingredients from a refrigerator that, unbeknownst to you, has not been maintaining proper temperature. Those ingredients are used in a batch of beer. This tainted beer is bottled and given to customers, causing several to become ill.
- If you have the proper equipment breakdown policy, the cost of repairing or replacing your refrigerator is covered.
- If storage tanks or bottling units require cleaning because of the bad batch, you’re covered by your spoilage and contamination policy. This coverage will also recoup the cost of lost inventory – including any shipped off-premises – and help you launch a new campaign to lure customers back to your brewery if the incident becomes widely known.
- General liability will help you with any medical or legal claims filed by any customers who were harmed.
- Workers’ compensation would cover employees sickened by handling the tainted product.
Your insurance should always be coupled with the best risk management practices you can employ. By working hard to prevent errors, accidents and damage, your brewery will be more attractive to the best insurers, and you may even experience advantageous premium rates. Connect with us about both loss control and insurance coverage to achieve the best protection.