Breweries, Brewpubs, Brewfests, and the many related craft beverage businesses have a wide range of insurance and HR exposures. This page is intended to give you a general overview of the most common exposures business owners face.
That said, every craft beverage business has its unique exposures and warrants having a craft beverage insurance expert evaluate those needs and put together a comprehensive insurance and HR strategy to minimize financial loss should a major insurance claim or HR complaint occur.
Please contact us and we will be happy to discuss your situation and help you sort out the complex maze of insurance and human resources compliance.
Insuring The Prized Possession: Beer
There are lots of upsetting things in the world, but for a brewery, a ruined or bad batch of beer - or worse, batches - is right up there. It can hit a pocketbook hard. Inventory will need to be replenished by brewing more and, naturally, bad beer can’t be sold so there won’t be any revenue coming in.
In this scenario, you need the right coverage, which can protect against contamination, spoilage, and tank leakage. Understanding how beer is insured will help determine proper limits and make sure everyone is on the same page if something goes wrong.
Other types of property include:
Understanding how property is defined is critical for it to be insured correctly. Problems may arise because all property insurance policies define business property differently than the brewery owner, his or her contractors or accountant may define it.
Not only is it critical to understand the definition of what constitutes a building in an insurance policy, it is equally critical to understand the definition of brewing equipment, and if your space is leased, understanding the definition of tenant fit-up is critical too.
When writing an insurance policy, it is important to have an agent who will work as part of the team to properly classify property.
Correctly classifying brewery and brewpub property means a) getting the right level of insurance in each category, b) potentially saving money since insurance rates on the building can be lower than rates on other types of property and equipment, and c) properly classifying property increases the chances a claim will be settled fairly and satisfactorily.
Keeping The Doors Open After A Claim Happens
When a loss to property happens, it is important to have the right coverage to help keep brewery and brewpub doors open. Having a revenue stream, even if production is halted, is critical.
Say, for example, a brewery or brewpub closes unexpectedly due to a fire and production is shut down for weeks or months. Revenue ceases or significantly reduces. There will be no beer for customers today. What happens next could be a make or break situation.
While things are being repaired or rebuilt, breweries and brewpubs will need coverage that provides a continued flow of revenue to be able to pay key employees, cover overhead, debt service, and other ongoing operational expenses that will continue even though revenue from beer sales cease.
And having coverage for extra expenses like temporary offices, warehousing, and other expenses a brewery or brewpub will incur while rebuilding its facility is essential. There are coverages breweries and brewpubs can purchase to cover these exposures.
If a brewery or brewpub already has these coverages, limits should be reviewed, at least annually, to keep up with growing sales. Failing to do this means the level of coverage originally purchased may be outdated as the brewery or brewpub has grown and expanded.
The Complexities of Liability Coverage
Getting into the fine details of liability insurance is like individually counting every grain of barley put into making beer - there’s a lot to it. For broader liability coverage, having the help of an experienced brewery or brewpub agent who can tailor the policy for specific operations can make a big difference.
As an example, anyone who has a tap room or attends brewfests needs to pay attention to his or her liability coverage.
Opening the doors of a tap room to the public is a great source of revenue. However, breweries with tap rooms have more risk. Unfortunately, customers occasionally have a slip, trip or fall.
And then there’s the person who visits a brewery or brewpub at the end of a pub crawl for one last beer. He leaves and get into an accident on his way home and hurts himself and others. Will this brewery or brewpub have the right coverage, and enough coverage, for these exposures?
Another tricky exposure to navigate is insurance for events and brewfests. It’s great exposure for any brewery or brewpub but how is the insurance impacted?
Event organizers routinely ask to be named as ‘additional insured’ on general liability insurance and, possibly, liquor liability. Typically someone from the brewery or brewpub contacts the insurance agent to request a certificate of insurance and off it goes.
What this now means is that the brewery’s or brewpub’s general liability policy will be sharing its limit with the event organizer - and others who may be asked to be added to the policy - should a claim be made. In this scenario, imagine someone trips and gets hurt at the brewfest and it’s the brewery’s or brewpub’s fault!
This person then sues the brewery or brewpub and the event organizers. Again, since the event organizers are an ‘additional insured’ on the policy, the brewery or brewpub is now sharing its limit with them, which means there may be less coverage to protect the brewery or brewpub.
Now, imagine if the brewery or brewpub is asked to add the city/town, license holder, or others to its policy and everyone gets sued. Now the brewery’s or brewpub’s limit may be shared by multiple parties. Where does that leave the brewery or brewpub? A brewery/brewpub insurance expert can offer solutions to this concerning situation.
Correctly Classifying A Liability Policy Matters
Different aspects of a brewery or brewpub need to be classified differently, and correctly. These are called ‘liability classifications.’ Similar to property, brewery/brewpub owners need to understand how liability classifications apply to the business and make sure sales are assigned correctly.
These classifications need to be kept up to date as the brewery/brewpub evolves and grows.
To give an example, the brewery liability classification for beer sold in bottles is rated differently than beer sold in cans, and kegged beer is different again.
Merchandise sales have a separate class too. Do brewery/brewpub owners want to pay the higher rate on the sale of a t-shirt as they would for the sale of a beer? Probably not!
Most breweries/brewpubs have four or five different liability classifications, but there could be more, and if there is a missing classification, coverage could be in question should a liability claim occur!
When policies are classified incorrectly, issues surface when an insurance company audits the policy. Because sales are estimated at the beginning of the policy term, if the final sales end up higher at the end of the policy term, the brewery/brewpub will get a bill it did not budget for. And if sales are incorrectly classified, the audit could cost the brewery/brewpub even more.
Making sure liability classifications are correct and up-to-date is important, something that is easily done with the help of a craft beer insurance specialist.
Liquor liability provides coverage in the event there is a claim related to alcohol intoxication or underage drinking that may result in bodily injury or property damage.
For instance, if a patron leaves a brewery or a brewpub intoxicated and causes a car accident, or a fight or altercation takes place after a few too many beers, or even if an intoxicated patron falls down and injures him or herself, that business could be held liable and be drawn into expensive litigation with the possibility of high jury awards.
This type of coverage is essential for breweries, brewpubs, and brewfests since it is excluded under the general liability policy for businesses that manufacture, sell, or serve alcoholic beverages.
Navigating Vehicle Insurance
As a small brewery, having a delivery van may be a ways off. For larger breweries, using a distributor means someone else is delivering brew. In both cases it could mean that a brewery does not own any vehicles, but there could still be auto related exposures the business may be subjected to.
For example, many brewers use personal vehicles to deliver beer, run to the bank or commute to events. These are all business journeys. If there’s an accident while doing official beer business, anyone injured as a result can bring a suit against the owner of the vehicle and the brewery.
This is because the vehicle was operating on behalf of the brewery at the time. Without the right type of auto insurance, the vehicle owner and/or the brewery may not be covered.
So even if the brewery doesn’t own a van, truck or car, it could be exposed when using other people’s vehicles for company business. It’s worth discussing this exposure with an agent who has expertise with insuring breweries.
The same concepts apply to brewpubs and virtually all types of businesses.
Employee Related Insurance
Employees are one of the greatest assets of any business, but they can also be one of the biggest exposures to every business. Here are a few of the exposures:
Workers’ Compensation - Protecting a brewery/brewpub and its employees for workplace injuries means getting workers’ compensation insurance. But like liability coverage, there are different classifications for the different jobs and roles in every business.
Getting this right ensures there won’t be any surprises with a big audit, and that employees will be covered if they get hurt on the job.
Another important note about workers’ compensation, if there are family or friends who volunteer at the brewery/brewpub, there may not be coverage for this situation.
Employment Practices Liability – Employees bring other exposures to businesses such as claims related to harassment, discrimination, salary disputes, or wrongful termination.
Neither general liability nor workers’ compensation policies cover Employment Practices Liability exposures. An experienced brewery insurance agent can give advice and information needed to make well informed decisions on handling these exposures.
Employee Dishonesty – Unfortunately some employees decide to steal product or money from their employer. Without the right coverage, this exposure is excluded. Ask our craft brewery/brewpub experts how much coverage you should carry. ERISA – If you have a 401k or other retirement plan, you are required to carry a special bond. Ask us about this and we can easily take care of it for you.
Most breweries/brewpubs today have websites, take electronic payments, and even store business and employee information on a network.
Cyber liability coverage is insurance coverage for liability that arises out of unauthorized use of, or unauthorized access to, electronic data or software within your network or business.
It can include web site liability, data breach, extortion, and public relations expense. More than likely it is not a matter of if you will have a breach, it is a matter of when you will have a breach.
All business owners should consider purchasing an umbrella liability policy which will provide you with a higher limit of liability over and above your general liability, business auto liability, and employer liability limits.
Umbrella limits can be increased to $10,000,000 and higher depending on your business needs and exposures.
The Added Extras
These areas of insurance are just the froth on the pint. When it comes to insuring a craft brewery or brewpub there are other potential gaps:
Data protection and cyber security
Theft — both physical and of intellectual property.
And Let’s Not Forget A Non-Insurance Exposure … Human Resources.
As if there aren’t already enough exposures facing brewery and brewpub owners but the importance of solid HR protocols are just as important and should never be overlooked.
Things like properly completed I-9 forms, ADA compliant job applications and job descriptions, and a properly written personnel manual are just a few of the priorities when it comes to HR compliance.
All of this may feel overwhelming but building the right team of advisers, including an insurance agent who has expertise with insuring breweries and brewpubs, can make the process much less complicated so at the end of the day, after a couple cold brews, brewery and brewpub owners can go to bed feeling comfortable that should something bad happen at the brewery or brewpub the right insurance and HR protocols are in place to put the pieces back together and get back to brewing and selling great beer.