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Uncovered: The Harsh Reality of California Winery Insurance in 2023

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Golden State growers and producers are facing
an almost unprecedented insurance crisis.

By Jeff Siegel

 

When his agency’s winery and vineyard clients renewed their insurance policies this year, Brendan Snyder told them they needed to acknowledge a new reality: Higher rates and less coverage – assuming they could even get renewed.

“No one is happy to get a rate increase,” says Snyder, who works for the George Peterson Insurance Agency, an independently owned company with 10 locations throughout Northern California. “But this year, increases — even big increases, as high as 20% — were the good news. We told our clients they should be happy just getting renewed, because a lot of people weren’t.”

In this, California growers and producers are facing an almost unprecedented insurance crisis, brought on by a combination of climate change, insurer reluctance and state regulation. The situation started after the 2017 Wine Country fires and slowly gathered momentum until this year, when several things happened.

Large insurers denied

First, the California Department of Insurance denied rate increases for several insurers. As a result, State Farm, Farmers, Allstate, AIG and Nationwide said they wouldn’t write new property casualty policies in the state and dropped out of the market. Their reasons varied, but centered around the rate increase refusals and what Nationwide called actions to “balance risks within its small and middle-market commercial lines business.”

The Nationwide loss, says Snyder, was especially painful, since it focused on small businesses that include many of the state’s family-owned wineries and growers. The company may have written as much as 60% of the state’s small-market business insurance. Insurers differentiate between small- and middle-market businesses; Snyder says the latter, in wine business terms, typically have more than one location and fit among the middle tier of the state’s wine producing and growing hierarchy.

Hanging over all of this, say those interviewed for this story, was climate change and the threat of more — and more destructive — wildfires as climate change continues to influence weather patterns. 

“The bottom line is that this is just one more challenge for our members,” says Michael Haney, executive director of the Sonoma County Vintners trade group, which has some 250 members. Some [SVC members] have seen triple-digit percentage increases as well as decreased coverage, he says, “But our members are used to meeting challenges. It’s what they do to succeed.”

The fallout

No one seems to be quite sure how the insurer withdrawals will specifically affect growers and producers; there aren’t yet specific figures about rate increases and uninsured businesses. The state insurance department didn’t respond to an emailed request for an interview for this story.

Broadly, though, anecdotal evidences points to a number of trends:

  • Paul Tincknell, whose family owns the Lytton Manor Vineyard in Healdsburg, Calif., says Nationwide canceled its vineyard policy after 2020, because “[it was] no longer insuring California agriculture in our ZIP Code” — even though the company continued to write homeowner’s policies in the same area. Tincknell was able to find new insurance with Travelers, but “for a lot more money.”
  • It has not been unusual, says SCV’s Haney, for some Sonoma County wineries and growers to have to buy policies from more than one insurer to equal the coverage that they had previously through a single policy. Even then, he says, rates have increased substantially.
  • Many small-market wine businesses have had to switch to the California FAIR Plan, a state-backed insurance fund of last resort, but at much, much higher rates. (Launched in 1968, the FAIR program was designed to be “a temporary safety net – here to support [homeowners] until coverage offered by a traditional carrier becomes available.” It wasn’t intended for business coverage, which means there are significant gaps in what’s protected.)
    Figures are scant on how many have had to buy insurance through FAIR or how much rates have increased. But, says Haney, not only are rates significantly higher, they also don’t always cover things such as the value of wine in a warehouse that burns (though it does cover the value of the warehouse). In addition, FAIR doesn’t necessarily offer discounts for fire mitigation practices such as more heat resistant paint and removing brush from winery grounds. 
  • Given the cancellations and insurer withdrawals, says the Peterson agency’s Snyder, there has been very little chance for producers and growers to shop for better rates. In fact, he says, his agency has advised its clients to accept double-digit policy renewal increases rather than looking elsewhere, since it’s cheaper than buying a new policy. If they can find one. 

All told, says Snyder, “If you’re losing carriers, you’re losing competition. And if you’re losing competition, there’s no way to drive down prices.”

Which means there’s little sign the situation will get better any time soon. If rates continue to climb and coverage continues to decrease (or disappear) for California’s wineries, it may someday fall to larger systems to guarantee the safety and value of the state’s wine industry.

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Jeff Siegel

Jeff Siegel is an award-winning wine writer, as well as the co-founder and former president of Drink Local Wine, the first locavore wine movement. He has taught wine, beer, spirits, and beverage management at El Centro College and the Cordon Bleu in Dallas. He has written seven books, including “The Wine Curmudgeon’s Guide to Cheap Wine.”

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