Brewing is a controlled process. Temperature, pressure, sanitation and time all have to stay inside a narrow range for weeks, and the equipment doing that work is expensive to repair and slow to replace. That is why the losses that make craft brewery owners nervous are usually the ones a standard commercial property policy was never designed to pay.
Equipment breakdown
Pressure builds in tanks and vessels during fermentation and packaging. If equipment fails because of mechanical breakdown, electrical problems or pressure issues, the losses include the repair or replacement cost and the production you can't do while it's down. Standard property forms often exclude mechanical breakdown, so equipment breakdown coverage is typically added on purpose. Some carriers that write brewery programs broaden the definition of building to include production equipment.
Ask what is considered covered equipment: glycol chillers, boilers, compressors, pumps, refrigeration and the canning or bottling line all matter.
Spoilage and temperature
A power outage or a refrigeration failure can spoil perishable ingredients and beer in process, and a bad seal or a packaging problem can leave a batch unsellable. Spoilage coverage is designed to respond to loss of perishables from mechanical breakdown or power interruption. Two questions are worth getting answered in writing:
- How is spoiled product valued? Cost, or selling price? Some brewery programs value lost product at market price, which can be a very different number.
- What causes are covered? Off-premises power failure, equipment failure and contamination are not always treated the same way.
Recall and withdrawal
Product liability responds if someone is injured by your beer. Product recall or product withdrawal coverage addresses a different problem: the cost of pulling a product out of the market after a contamination or labeling or packaging mistake, even when nobody has been hurt. Costs can include notifying customers and distributors, retrieving and destroying beer, and in some forms, income lost after a covered recall. Some package policies offer product withdrawal expense coverage for unforeseen quality issues; others don't include it at all.
Anyone selling in cans, bottles or kegs through distributors or retail should know exactly whether this coverage is on their policy, and what the limit is.
Business income and extra expense
If a covered loss shuts down brewing, business income coverage replaces lost net income and continuing expenses. Extra expense coverage pays the costs of keeping the operation going in the meantime, such as renting tank space or paying a contract brewer. Check the waiting period, the length of coverage, and whether the policy covers a shutdown caused by a supplier or a contract packager. Beer in transit and equipment taken to off-site events generally fall under inland marine coverage rather than the main property form.
Questions for your agent
- Is mechanical breakdown covered, or excluded?
- Does spoilage coverage apply to power loss, refrigeration failure and contamination?
- Is finished beer valued at cost or selling price?
- Do I have recall or withdrawal coverage, and for what dollar amount?
- How long is the waiting period on business income, and does extra expense apply?
- Is beer covered while it's being shipped or taken to events?
If the answers aren't clear on your current policy, send it over. Reviewing a brewery policy line by line is something we're happy to do, and we can compare it against other carriers and specialty markets.