7 Crazy Insurance Claims ─ Could Your Brewery Fall Victim?
In case you missed it, Craft Brewing Business published 7 Crazy Insurance Claims ─ Could Your Brewery Fall Victim? by Paul Martinez. As you can see from these claims stories, the unimaginable can happen:
The beer industry has bounced back after the pandemic served up a major setback. Craft breweries saw a 9% decline in sales in 2020. 2022, while not as favorable as 2021, was still positive with off-premise beer sales reaching $44B according to IRI data and the U.S. Tax and Trade Bureau reporting a record high 14,112 brewery permits in the U.S.
While growth is always a great sign for the industry, good tidings often lead to gaps in safety operations.
As we proceed through 2023, breweries need to ensure they are keeping a careful eye on the safety side. We often discuss some of the more traditional risks at breweries, such as those stemming from faulty equipment or technology, dram shop laws, staffing concerns and more, but what are some of the more unheralded threats to operations?
Business owners may think, “it won’t happen to me.” But, what if? Here, we’ll cover seven of the more unique claims we’ve seen and what steps breweries can take to address them:
1. Defective kettle
One business had a three-year-old mash kettle tank that had developed leaks and needed to be shut down for inspection. When the technician inspected the tank, they found spider cracks throughout the stainless-steel jacket. Consequently, the insured had to shut down production.
The damage to the stainless-steel jacket was so severe they couldn’t weld the cracks and the tank had to be replaced. This tank was also so large that the building’s roof had to be removed and the tank had to pulled out by a crane, which took several weeks of work and resulted in loss of business income.
The losses totaled $778,530 ─ a massive hit to any business, but the insured was covered under their equipment breakdown policy.
In addition to equipment breakdown coverage, a well-thought risk management plan, which can help to limit exposure, is also critical. Finally, brewery owners should take the time to examine the hurdles that may come into play when fixing and installing large tanks and build out a comprehensive plan in case anything goes wrong.
2 Boiler error
One of our insureds was in the process of brewing a batch of beer when they found several issues with the boiler that brought production to a stop as they awaited repairs. The technician found the pilot assembly and flame safeguard had mechanically failed and needed to be replaced. Labor and replacement costs reached $20,912 and the insured also had to face a $138,063 loss of business income.
In this case, we recommend brewery owners talk to their insurance partner about a comprehensive equipment breakdown policy. We also recommend business owners have a maintenance and inspection partner regularly checking all vital brewing equipment. Finally, brewery owners might want to consider keeping backup parts on site if possible to limit downtime.
3. Misplaced chip
An insured found an oak chip in their centrifuge filtration machine. The staff member then disassembled the machine to pull out the chip and clean out the machine. Once they finished, they reassembled the machine and began a cleaning cycle. After 10 to 15 minutes, the staff member noticed unusually loud sounds coming from the machine and decided to hit the emergency shutoff button. Then, they noticed severe damage to several internal parts and the costs to repair the centrifuge was $125,100, though this was covered under their equipment breakdown policy.
Brewery management can work to avoid this type of claim by enforcing regular cleaning and organizing of equipment and ensuring connecting lines on any equipment are completely free of debris.
4. Faulty manway door gasket
Recently, one of our insureds had an issue with a manway door gasket seal on one of their stainless-steel fermentation tanks. A failed wingnut caused the tank to vacuum implode on itself. The accident spilled more than 14,000 gallons of finished product, costing the brewery $73,672 to replace the tank and another $31,092 to replace the lost product.
Was this preventable? Yes, the disaster could have possibly been prevented with regular safety checks and maintenance. Staff should inspect wear on gaskets and valves at pre-determined intervals. Management should also enforce a culture where regular double and triple checks of vital valves and gaskets are commonplace.
5. Outdoor accident
Outdoor taprooms have been rapidly rising in popularity during the past few years. Unfortunately, one brewery suffered significant losses to their outdoor facility when a vehicle drove into their outdoor taproom, damaging the fence and retail signage surrounding it. Not only did the beer garden look worse for wear, but the property damage loss totaled $23,404 for the fence and the signage and the loss of income totaled $34,010.
Fortunately, both losses were covered.
That said, this scenario serves as a great reminder for breweries to ensure all outdoor improvements and additions are shared with their insurers. Additionally, when it comes to outdoor facilities near vehicles, managers should consider installing bollards to protect customers and property from potential accidents.
6. Excess of microbes
In the process of transferring product into holding tanks and bottling the completed product, one insured noticed too many microbes, spoiling the batch.
This insured was covered for some of the lost product under their endorsement for wineries, distilleries, breweries and cideries coverage. This covered up to $5,000 in foreign microbial contamination, though there was an additional $7,000 in damages.
To avoid losses like this due to microbe contamination, we recommend business owners build out a comprehensive lab and yeast program and a strong clean in place (CIP) program.
7. Concerning aroma
One brewery was fermenting a 20-barrel batch of pale ale when staff suddenly noticed something smelled off. The smell was so concerning, they had to destroy the batch and send the beer to the lab for testing. Tests unveiled a presence of wild yeast strains and bacteria growth.
The brewery then went through several rounds of cleaning to their brew house and fermentation vessels. After brewing again, they found no further issues, which meant that the vessels and lines were responsible for the contamination. The loss totaled $3,569.
Fortunately, the brewery had wild yeast and cellar funk coverage, which took care of the loss. That said, brewery owners should understand that this coverage is often limited to $5,000. Consequently, in addition to coverage, breweries should again have a good clean in place program to try to avoid such a situation.
As you can see from these claims stories, the unimaginable can happen.
Fortunately, good insurance, provided by a specialist who knows the unique risk exposures facing breweries can help save the day. As the industry continues to grow, new risks and threats will arise, and breweries need to be prepared with the right coverage and safety practices.
Article Retrieved from Craft Brewing Business, written By Paul Martinez, Program Manager and Insurance Brewmaster for Brewery PAK Insurance Program.
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