2017 Wild Fire Disaster. Questions and Answers for Winemakers. Gary Eastlund CIC CRM ARM Risk Management Consultant Hagan Hamilton Insurance

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1 2017 Wild Fire Disaster Questions and Answers for Winemakers Gary Eastlund CIC CRM ARM Risk Management Consultant Hagan Hamilton Insurance

2 How would my insurance respond to destruction of my winery and vineyards in a wild fire? A generic winery insurance package may include the following coverage sections: Property- Buildings: Home, Winery, Equipment Building, Barns, Fences, Gates, Pavilions, other structures Contents: Personal property, Business property, Wine stock (Bulk and Packaged), Business Income: Loss of income and extra expense due to a covered loss to a commercial building i.e. fire Loss of income and extra expense due to an off premise loss caused by a covered loss i.e. fire Loss of income due to an action of a civil authority i.e. evacuation or road closure Auto and Inland Marine physical damage Autos, scheduled on the policy with comprehensive coverage Mobile Equipment scheduled on the policy All of these coverage sections include coverage for damages caused by fire, wild fire is not excluded from the definition of fire. However the coverage is only triggered if the items are scheduled or listed on the policy. The following omissions are common: Trellises; irrigation systems; fences; gates; gazebos; pump houses Limits are lower than replacement cost or actual cash value Business income is not included in the coverage

3 What exposures are not covered by my insurance policy? No insurance is provided for replacement of vines. No standard policies are available which provide insurance for vines No insurance is provided for damage to unharvested grapes. Federal Crop Insurance is available for loss of production. This is a named peril insurance program which is subsidized and funded by the Federal government and subject to limitations on values, and percentage of damage requirements. Not a commonly used coverage for grapes in Oregon. Business income and extra expense losses. Many wineries are insured on farm insurance policies or a combination of farm policy and commercial property policy. Coverage for loss of income or extra expenses are only available on the commercial property schedule. It would require damage from a covered peril to a commercial structure before coverage is triggered. Fire damage to uninsured property such as vines, trellises, unharvested fruit, irrigation systems and fencing would not trigger loss of income Fire damage to a dwelling, farm equipment or autos would not trigger loss of income If included in the policy, off premises or contingent business income, could provide coverage, if fire causes damages power lines or a facility which processes the insured s grapes. This coverage is rarely included in Oregon winery policies A loss of income caused by an action by a civil authority, such as evacuations and road closures may be triggered but is commonly subject to limitations such as a 72 hour waiting period and 3 week maximum coverage period.

4 What can I do to mitigate uninsured losses resulting from wild fire to my winery and vineyards? Clear brush, grass and other plant materials on the property perimeter, creating a clear fire break. Identify all water sources on the premises and supplement these sources with storage tanks or water features which can be accessed by fire prevention equipment. Purchase and maintain generators capable of providing power to critical systems for a reasonable period of time. In lieu of purchasing generators, independent companies such as Agility Recovery Systems, contract to provide emergency power, communications and IT recovery after a catastrophic event. Develop and maintain a Catastrophe Plan which provides time sensitive actions to be taken before, during and after a major event. Review insurance programs at least once a year with your insurance and risk management advisor to have the discussion as what would and would not be covered by a catastrophic event.

5 What did we learn from the California Wine County fires? The human lives lost and the replacement of personal property and memories of all the impacted families is impossible to assess or replace. It is evidenced, that the wine community is resolute and strong when confronted by an unforeseeable catastrophic event. The damages were horrific and impacted the entire Northern California wine community. The lack of warning and high speed nature of the fires took everyone by surprise allowing for very little preparation or defense or evacuation. The insurable damages are estimated at close to 5 billion dollars.uninured losses add significantly to that number. In light of these devastatingly high loss numbers, it is important to note some surprisingly positive observations with regard to the wine industry. Most of the vines were not totally destroyed by the fire, because the fire moved so fast the vines were charred but hopefully will survive. The 2017 harvest was 80 to 85% complete and the production from the completed harvest was robust. Most of the winery facilities were spared from damage, as well as the major storage facilities. In retrospect it would appear that the industry will survive which is the primary goal of all risk management plans. The next step is to get back to profitability as quickly as possible.

6 Gary E. Eastlund CIC CRM ARM Hagan Hamilton Insurance PO Box 847 McMinnville OR (503)