Proceed with caution: Changing brewery business models on the fly means new risk exposure

There are few businesses more resilient than breweries. That’s why it is unsurprising that the industry is doing its best to adapt to the frightening and strange realities of life during the COVID-19 pandemic. Some are lending a hand against the spread of the disease by shifting production to hand sanitizer. Other breweries are stepping up supplying thirsty homebound beer drinkers with curbside pickup and delivery.  We’re trying to do our part as an insurer to help these thoughtful brewers by waiving additional premium costs that could be related to producing hand sanitizer on the premises.

We can all admire the industry’s quick response to the current reality. But, as in all business ventures, breweries need to proceed with caution when changing their business models on the fly. As I have been speaking with breweries over the past month, I have noticed some red flags for common business risk exposures facing breweries as they wade through this crisis and find ways to adapt. Here, I’ll review the top three.

Cybersecurity exposures 

Many breweries have shifted back office employees to work-from-home arrangements during the pandemic. Unfortunately, the reality is that most home technology arrangements are not as secure as on-site networks and devices. Consider that many in the brewery world may have employees making company transactions on personal computers, as they did not have laptops to send home.

When it comes to accounting, accounts payable/receivable and handling sensitive employee data, security is always paramount. Cybercriminals don’t stop for pandemics.

Everything from social media use to taking payment online or over the phone exposes your brewery to cybersecurity risks. For brewery-owned laptops, make sure cyber policies and procedures are up to date and remind team members of those policies. Employees must be educated about cyberattacks so they can be alert to potential phishing and hacking attempts. Further, brewery cyber policies should detail company rules regarding the use of personal information and social media. Finally, be sure anti-virus software is up to date. Encourage those using home computers to do the same and discourage the use of personal computers where you can.

Cyber insurance can also protect the brewery from a cyber-attack that could run in the tens of thousands of dollars or more. Coverage can protect the brewery from liability related to a data breach where customer information or credit card numbers were compromised, help the brewery respond and offset costs related to the attack. 

Liquor Liability

Though the taproom is closed, liquor liability may continue to be a concern for breweries offering curbside pickup. As always, it’s critical to consider carefully the person purchasing alcohol. Is the brewery checking IDs for age verification? Is this person the brewery is selling alcohol to already intoxicated? And is the brewery operating within the hours legal for its state/municipality?

State Dram Shop laws determine who is accountable for serving alcohol to underage or intoxicated customers. In fact, 35 states hold breweries accountable for such actions rather than the patrons. While 35 states have such laws, Dram Shop laws are constantly evolving in other states, which means that brewery owners across the country should use caution when serving alcohol to customers whether in the taproom or via curbside pickup. 

It should first be determined that the individual is not intoxicated and their age should be verified. In some states, underage individuals or overserved individuals can bring action for any injuries they endured against the brewery. These suits can be costly, with some states capping liability cases at $150,000 to $1 million, and others providing no cap at all.

Auto exposures

Some breweries are adapting to the limited business environment by offering delivery. If employees are using their own cars to do this, brewery owners should understand that there is a “non-owned auto” exposure. Breweries should consider adding both hired and non-owned auto coverage to their insurance policies if they have employees making deliveries. Generally, the brewery could be found liable for injury or damage caused by an employee who is making a delivery within the scope of his or her employment with the brewery. 

Further, as new drivers are entering the mix, it is also important to consider key auto risk management practices. It is best practice to depend on employees with defensive driving training for deliveries. Before putting someone behind the wheel, check their motor vehicle records for red flags like accidents, DUI charges, and frequent speeding tickets. If possible, incorporate the use of telematics to monitor driver behavior. Finally, it is as important as ever to monitor for alcohol and drug use (though it may be difficult to secure formal drug testing at this time). 

In this unprecedented time, breweries have gotten creative, not only to simply stay in business, but to assist their communities as we all grapple with this terrible virus. Breweries working to help our communities in need should be applauded, as should those looking to continue to serve their customers and keep our economy humming along. Please keep doing what you are doing, but make sure you are not exposing your business to any new risk exposures you may not have realized. Talk to your insurer or legal team to better understand your risks related to doing business in a COVID-19 environment.

Paul Martinez is the Brewery PAK Program Manager at PAK Insurance Programs.