With the amount of available land for wineries diminishing, more and more wine businesses are turning to custom crush and alternating proprietor (“AP”) arrangements to make their wine. The contracts that spell out the rights, duties and obligations of each party in these arrangements become paramount in the event of loss or damage to the wine.
We have all heard nightmare stories of a pump over gone wrong or a bad addition in the winery, causing a partial or total loss to a whole vintage’s labor. Once the dust settles, the question becomes who is liable for the loss and is it covered by insurance? Liability and insurance provisions in custom crush and AP agreements are often vague and ambiguous. At the outset of the arrangement, each party should ensure that responsibility for loss and/or damage is adequately addressed.
For the host winery:
When GVM develops form custom crush and AP agreements for its clients, we emphasize the importance of detailed liability provisions to help our clients understand the extent of their potential exposure while making other people’s wine.
For the custom crush client:
To the extent possible, the custom crush client will want to ensure the agreement imposes liability on the host winery for negligence or willful misconduct in the production of the wine which results in damage to or loss of its product.
For both parties:
The devil is in the details. It is crucial for both parties to understand their insurance policies and exclusion from coverage, as well as the type of insurance, if any, required under the agreement.
For example, does the custom crush client’s policy cover work performed by the host winery? Does the host winery’s policy cover loss or damage to wine that doesn’t belong to them? Does the insurance policy cover negligence? As a practical matter, make sure your broker understands the custom crush or AP arrangement and the risks associated with it.
The use of detailed liability and insurance provisions, on both sides, will ensure that the parties understand their respective rights and responsibilities, will encourage proper insurance coverage, and will incentivize the host winery to maintain a high level of training and supervision in the winery.
Please contact Katy Barfield of GVM’s Wine Law Team at email@example.com for further discussion of your circumstances.