Breweries continue to face a wide range of emerging and existing risks that threaten operations. Tank collapses and explosions, product contamination, overserved customers, staff members, exploding cans, and broken bottles are just some of the challenges breweries navigated in 2023.
Fortunately, good insurance coverage and risk mitigation practices can go a long way in keeping breweries intact amid these trying times.
At PAK Programs, we see firsthand the damage and financial loss brewery owners can experience related to these risk exposures. Recently, a brewery client was forced to close their taproom after a third-party vehicle crashed into it. The brewery experienced several months of downtime during repairs. Fortunately, the incident did not prove as costly to the brewery owner as it could have. The brewery’s business interruption policy allowed the brewery owner to replace their lost income when operations were on hiatus.
What can brewery owners do to ensure their businesses do not become a victim of the risk exposures threatening the brewing space?
Taking time to assess your risks, understanding coverage options, and enforcing strong risk mitigation practices will set you on the right path.
Addressing leading risks
Understanding a brewery’s risk profile and its top risk exposures are critical to developing a safer operation and confirming your business has the right coverage. Top risks are often related to the following:
Supply chain shortages. Craft brewery owners and operators are navigating issues receiving their deliveries of hops and malts. Finding replacement parts has also been a challenge during cases of equipment breakdowns.
Equipment breakdowns. The sudden or accidental breakdown of equipment can mean business lost or shuttered for a brewery owner.
Auto liability. Most of the claims we see involve drivers failing to check their surroundings while pulling out at breweries or drivers hitting parked cars while making a delivery.
Product liability. In the past few years, exploding cans have endangered business partners and customers and been a source of financial stress for brewery owners. Often, these incidents are due to breweries canning beers during fermentation, which led the cans to explode as the fermentation process continued. Of course, beer bottles can also cause injuries. Bottle breaks have led to many incidents where the glass cuts staff or customers.
Quality control. For breweries that distribute to multiple states, we’ve seen issues with contamination or unacceptable product lead to product liability concerns.
Liquor liability. In taprooms, we have seen several claims where a customer – or employee – was overserved and caused an accident. Many breweries allow a certain amount of free beer to staff during the workday. Similarly, the craft brewing industry often holds beer festivals and trade shows where staff needs to be careful.
Understanding coverage options
These threats can derail craft breweries from continued healthy operations without the right insurance coverage in place. Brewery owners and operators should talk to their broker or insurer about coverage options, including:
Equipment breakdown: As long as the incident is sudden and accidental, equipment breakdown coverage can cover brewery losses on the equipment side.
Liquor liability: Liquor liability coverage can cover taproom incidents and claims involving overserved staff or customers.
Product withdrawal expense: In the event of a product liability case where a recall would be necessary, this coverage would cover expenses related to taking product off the shelves.
Commercial auto: Commercial auto coverage can cover breweries in losses where their drivers are involved in accidents.
Business interruption: This is a vital coverage that covers breweries for loss of profits when out of service. Business interruption coverage allowed the brewery to continue to pay bills, make payroll and covered additional expenses, such as brewing at other breweries, during this downtime.
Protecting your business
Following proper safety practices is also critical. Here are some best practices for brewery owners and operators to consider to mitigate risk exposures to their operations:
Work ahead of the supply chain: Always have alternative suppliers so there is a backup plan in case replacement parts or inventory do not arrive on time. We have also seen breweries implement ready-to-drink cocktails in their down time to make up for lost beer product. Diversification is a strong strategy.
Don’t cut corners: Keep up with scheduled maintenance. Wear and tear losses are often not covered because these are not classified as sudden and accidental, as they are preventable. Schedule regular and comprehensive equipment maintenance. Consider implementing technology such as mobile apps that track machinery and can send alerts if any machinery is running too hot.
Emphasize quality control: Inspect all tanks before brewing beer to confirm they are cleaned. Similarly, taste and try beer before selling to ensure it meets quality standards. Consider building out a product recall plan as well in the event any products end up an issue.
Enforce strict overserving policies: Ensure staff are trained on proper serving regulations so they know how to identify overserved customers. The same policy should be upheld for staff to prevent them from getting too drunk during the workday. At work events, make sure teams have designated drivers in case any staff member is overserved.
Craft brewery business owners have plenty to do to keep businesses running smoothly. Understanding their risk exposures and insurance coverage should be a priority. Paying careful attention to your suite of insurance coverages, building out comprehensive safety practices and working proactively to address any potential risk exposures could prove more important than you think.
Paul Martinez is program manager and insurance brewmaster for Brewery PAK Insurance Program. Martinez has 20+ years of commercial insurance experience and 10 years of experience underwriting breweries. He can be reached at 888-386-5701 or [email protected].
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