Craft beer companies need unique insurance solutions to address the distinct risks inherent in their industry. Companies can minimize the financial effects that these risks can create by purchasing specialized craft brewery coverage. In the article “Crafting insurance for the new brewery industry,” Milliman’s Michael Henk explores some of the larger risks a craft brewer faces along with the type of coverages the brewery should consider obtaining.
Here’s an excerpt:
Boilers and machinery expose breweries to multiple liabilities. First of all, with production being reliant on machinery, any major breakdown could be devastating for business. When a brewery does not produce a lot of beer to begin with, even a temporary halt in production could have large consequences.
Along with a halt in production, brewers have the extra added risk of injuries if something more serious happens. An exploding boiler doesn’t just affect the production and finances of the brewery, but may also result in damages and injuries for workers, contractors, and tour-goers.
There are many steps that craft brewers can take to mitigate the potential economic impact of this risk. For the production side of the liability, brewers can obtain boiler and machinery coverage that will cover them for replacement or repair costs. Property insurance can also cover some of the loss of income from a breakdown in production.
One of the more interesting phenomena with respect to craft brewing is the great popularity of brewery tours, where breweries open their doors to the public (sometimes while the brewery is still in full operational mode). This serves craft breweries well as a marketing tool because it gets people in the door learning about and sampling the product. Popular tours sell out with regularity and have even become “must-see” tourist attractions in many cities. Macro-breweries have gotten in on the tour game as well. However, tours at larger breweries tend to avoid the production floor and tend not to include areas of the brewery that are currently operating.
With these production floor tours of active breweries comes unique liability. Paying customers are invited to walk around the brewery among the fermentation tanks and machinery (accompanied by a tour guide, of course). A brewer needs to make sure that conditions are safe for customers and take preventive measures.
In one specific case, a fermentation tank explosion during a tour led to customer injuries at a craft brewery in Texas.7 Not only was there an obvious halt in production in this case, but also two years after the incident, customers who were on the tour went to court for damages, citing pain and suffering as a result of the incident.
Brewers need to be covered for less “explosive” events as well. Slips and falls are a lot more likely, especially when the brewery tours contains stairwells and wet floors. Brewers must obtain general liability insurance with sufficient limits to cover the bodily injury caused to tour-goers or the potential property damage caused by them.