Distillery Insurance

Distillery Insurance

There is a sense of gratification in watching a start-up grow. Many entrepreneurs enjoy the thrill of narrowing down on a niche, branding, and marketing. It’s for this reason that an investor may set up a distillery. 

In addition, a distillery has a relatively low running cost and is more profitable than brewing. Even so, it’s essential to understand the costs and risks of running a successful distillery.

For example, production staff may make an ill-advised choice to ‘taste’ the whiskey during working hours, leading to intoxication. Unfortunately, high alcohol levels impair judgment, increasing the risk of work-related injuries.

That said, it’s prudent to acquire distillery insurance to shield your business from unforeseen losses and liabilities.

Here’s what you need to know about distillery insurance.

The Common Risks in the Distillery Industry

Fire and Explosions

Ethanol, a flammable liquid, is one of the main ingredients in distilleries. During production, an accidental leak may occur via tanks, pipes, flexible hoses, or transfer pumps, causing a fire outbreak. 

That said, distilleries face constant fire hazards.

Spirits and hard liquor are common distillation products containing ethanol, compounding the risk of fire in the distillery. Therefore, a fire hazard in a distillery exists due to raw materials, during fermentation, and with the final product.

Here’s a further breakdown of the hazards.

  • Fermentation: Generally, the alcohol content is low during fermentation, translating to a mild fire risk. Even so, fermentation produces high levels of carbon dioxide that can rise to toxic levels. On the other hand, pre-fermentation produces large amounts of dust during milling that’s highly combustible.
  • Ethanol as Ingredient or alcohol: Pure ethanol's ignition point(flash point) is well below room temperature. On the other hand, the flash point of alcohol(40% ethanol) is 79°F, slightly above room temperatures. Remember, distillation occurs in warm environments that activate the risk of fire hazards.

Here are further sources of possible ignition:

  • Hot surfaces
  • Electric sparks
  • Friction
  • Welding operations

Physical Injuries

A distillery is a hazardous environment that can lead to injuries and physical harm without the necessary protection. 

Here’s the breakdown of the hazards exposed to employees.

  • Falls and Slip Injuries: The distillery mirrors a production line with multiple risks of falls and slips. For instance, the cleaning crew uses a significant amount of water and detergent, which causes an accumulation of scum on the floor.

Without proper cleaning and safety gear, an employee is at high risk of falling and suffering an injury. The risk of falls is aggravated by a lack of handrails, loose electric cords, transition of floor types, and damaged ladder steps.

Ultimately, employees face an active risk of fall injuries like broken bones, cuts, brain injuries, spinal injuries, neck injuries, and severe cuts.   

  • Chemical Burns: The distilling process involves flammable ingredients like ethanol and combustible dust. As a result, employees are vulnerable to chemical burns during their duty.

Employers are obliged by labor laws to provide Personal Protective Equipment(PPE)like gloves, industrial masks, aprons, and steel caps and boots. In addition, experts recommend distillery best practices like separating ignition sources, safe decantation, safe disposal of vapors, controlling spillage, and avoiding static electricity.

  • Ergonomic Injuries: Workers responsible for moving barrels undertake heavy lifting, which strains their backs or joints. Keeping packaging employees safe requires special training to avoid ergonomic injuries.

Inventory Loss

Inventory is both a current and strategic asset to the distillery. Accidental damage to the final product or raw material could lead to massive losses. That said, most distillers install alarms, access controls, and sprinkler systems to combat fire, theft, and other incidents.

Here’s a breakdown of risks that can lead to inventory loss in a distillery.

  • Explosion: Besides ethanol and alcohol, the distillery has multiple other ignition sources. For instance, the maintenance crew applies flammable products for cleaning and sanitizing distilling equipment. It’s, therefore, prudent to store these chemicals safely to mitigate the fire risk.
  • Contamination: Unlike wines, distilled spirits do not age or mature. Therefore, an unopened bottle of spirit will taste the same in 20 years. However, opened bottles will lose taste or character in several months.

That said, consider applying best practices in storage facilities to avert the risk of contamination. Consider keeping liquor in tightly sealed bottles, avoiding heat or cold exposure, and minimizing direct or bright light.

Equipment and Machinery Breakdown

A distillery is a machine-intensive operation that relies on different sets of equipment in the production workflow. Before a batch is ready for sale, it must pass through the mill, Lauter turn, fermenters, stripping still, and lastly, into the barrel.

Each set of machinery contributes to the quality and completeness of the product. For instance, a mash tun converts starch into sugar before fermentation begins. If the heating elements in the mash turn develop a mechanical issue, it can delay the current batch and impede the day's production.

Product Recalls

Sometimes mistakes occur even when adhering to the best practices in the distillery. Sadly, a mistake can lead to a product recall. For instance, Apollo Bay Distillery issued a product recall because a batch of gin contained glycerol and hydrogen peroxide—active ingredients of a hand sanitizer.

Fundamentally, product recalls reduces the distillery's projected revenue. Remember, the affected distiller must notify customers, and suppliers, issue refunds, and other administration costs. 

Coverage Offered by Distillery Insurance

Property Coverage

A distillery relies on a set of physical assets to run seamlessly, for example, machinery, furniture, computers, landscaping, inventory, personal assets, and sundry tools. These assets are exposed to typical risks like theft, vandalism, and fire damage.

It’s, therefore, essential to insure business property to mitigate loss when faced with the above risks.

Here’s the direct benefit of property coverage in distilleries.

  • Protection against natural disasters: The force of nature is unforgiving; floods, heat waves, storms, or tornadoes have the potential to bring down a distillery. The property coverage insurance protects a distillery from the resulting loss.
  • The coverage also shields the business from losing assets from typical causes like theft.
  • Liability protection. It can also cover accidental damage to a third-party property within the distillery.

Product Withdrawal Expense

Product withdrawal expenses meet the cost incurred by vendors, distributors, customers, and other parties concerning the recalled product. In addition, it covers the cost of litigation or legal defense.

What’s more, it covers the relatively expensive involuntary recall— required by a regulator or government.

Workers Compensation

The production line in the distillery business exposes employees to the risk of injuries, burns, or death. On the other hand, prolonged exposure to carbon dioxide may result in asthma, coma, increased heart rates, and convulsions.

Unfortunately, the distillery must cater to victims’ medical bills, follow-up care, lost income, and disability.

Lastly, some employees may seek legal redress after suffering an injury. In such a case, the worker's compensation helps to settle court costs, settlement, and legal fees.

Liquor liability

Regardless of size, any business that sells alcohol needs liquor liability. In some cases, it’s mandatory to acquire liquor liability coverage as a prerequisite before opening your doors for business.

A distillery is obliged by the law to stop serving alcohol to a patron who’s almost intoxicated. Remember, consequential misdemeanors like drunk driving can attract legal liability to the distillery.

Ultimately, liquor liability coverage is vital protection for distilleries against legal liability.

Equipment Breakdown Coverage

This policy covers equipment breakdowns due to electrical or mechanical failures. First, it covers the cost of repairs or the replacement value of the damaged equipment. Secondly, if the broken machine halts production, the coverage reimburses lost sales and revenue.

Ultimately, equipment breakdown coverage averts consequential losses like revenue, missed orders, and legal suits.

Commercial Auto

Small and established distilleries acquire several vehicles to fulfill transport needs. For instance, a staff van to ease commuting challenges, delivery trucks, or SUVs for transporting executives.

Here are the benefits of commercial auto insurance to a distillery.

  • Liability coverage protects the business from legal liability when a vehicle collision damages third-party vehicles or properties.
  • Medical payments: The coverage meets the medical expenses of the injured victims and resulting legal liability.
  • Comprehensive protection: Comprehensive coverage protects vehicles against losses caused by natural disasters, theft, vandalism, and fire.
  • Physical damage: In case of an accident, the vehicle encounters physical damage. This coverage reimburses the distillery the cost of vehicle repair, write-off, and other vehicles involved in the accident.

Commercial General Liability

General liability coverage protects a distillery from the risk of legal suits directed at the business or employees. The most common sources of legal liability include bodily injury, medical payments, advertising errors, slander, libel, or property damage.

Any business that doesn’t acquire general liability coverage stares at the risk of legal liability, which can ruin its finances.

Try Our Distillery Insurance Services Today

Although running a distillery is profitable and rewarding, it’s operated in a risky environment. It’s, therefore, prudent to acquire a responsive and dedicated distillery insurance professional. At FACE Insurance, we apply a customized approach to offer ideal distillery insurance solutions. Contact us online or call us at 916.721.2845 to learn more.

Frequently Asked Questions

Your should contact the police as soon as possible. The quicker you act, the faster the authorities will be able to collect information regarding your stolen item. Your insurance agent should also be notified right after you have made contact with the police.

The most common way art is stolen is Burglary. It’s important that your installations have proper security in order to prevent these crimes from happening. Its also very important to make sure that the staff you higher to give your building maintenance has a clean record and has no criminal history.

Its responsibility of the insurance carrier to work with the FBI to recover the art that was stolen. It’s possible that you may be asked to work with the corresponding authority.

If your valuable art items are not insured, your efforts will have to be focused on working with the authorities to recover your stolen items. The odds of recovering your stolen items is very low.

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