Contract Winemakers – Your Risk Management plan is vital
The increase in small to large processing facilities has created an increasing number of insurance issues relating to contract winemaking. These are largely centred around your contracts &/or agreements.
A Contract is an agreement (we prefer written) entered into by two or more parties with the intention of creating a legal obligation.
Winemaking contracts will specify responsibilities of the grower and the winemaker for production of wine.
From an insurance point of view, the most important aspect of the contract is that it specifies and details who is responsible for the wine whilst at the processing facility, the storage of wine, the quality of equipment used during and after the production process.
We are now seeing a higher amount of incidences where damage has occurred during wine process &/or production where both parties have ‘assumed’ the other has the stock or other items insured.
For a legal point of view, unless otherwise specified via contractual agreement, there is a ‘Bailee/Bailor’ relationship between the Grape Grower and the winemaker, where the winemaker is responsible for the safekeeping of the goods whilst in their possession.
Of course relying on this is problematic, as the law is always subject to legal arguments and challenges which are costly and time consuming.
The easiest way to handle this situation is for both parties to know where they stand – whether this be a formal contract winemaking agreement or some written correspondence.
We have also seen a number of instances where contract winemakers are relying on the Public Liability to cover them in the event of damage to client wine – after all, PL covers damage or injury to Third Party persons or property.
It’s important to note that, Public Liability relies on Negligence in order to cover damage - if there is no negligence on your behalf for an event outside your control (storm/bushfire etc.), there is no cover. Secondly most Liability policies have an exclusion removing cover caused by or resulting from ‘Faulty workmanship’ and exclusion for Failure of Professional Services.
This brings us to issue of Professional Indemnity – as mentioned previously; we were involved in the creating of Australia first Professional Indemnity cover for Contract winemakers.
We are very concerned when we see a PI policy where the insured occupation is listed as ‘Winemaking consultant’ (consultants provide advice, not hand on production) and even such vague occupations as “Consultantancy services of chemical mixing techniques”.
One very important rule of insurance and risk reduction is that vague definitions and concepts in an insurance cover open up the possibility of the insurer declining the intended or expected cover.
We advise that you consult with an insurance professional that understands your occupation and industry to avoid any costly risks.
For further information please contact Longfellows Insurance Brokers via email: info@longfellows.com.au or 03 9428 5444
