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Underwriting & Loss Control
Emerging Craft Brewing Industry Presents Unique Range of Risks

Best’s Underwriting Reports and Best’s Loss Control Reports provide insight into the lines of coverage, exposures and loss control for craft breweries, microbreweries and brewpubs.
  • Anthony Bellano
  • November 2022

The craft brewing industry is an emerging business, and one that can be a cash cow for many states. For example, Wyoming's state economy was boosted by about $198 million from the craft brewing industry last year, according to reporting by the Cowboy State Daily.

But like any other business, the industry brings with it a range of insurance risks, including the sale or sampling of beer on the premises, grain and yeast dusts, specialized machinery and premises requirements, according to Best's Underwriting & Loss Control Resources.

In New Jersey, brewery owners are fighting back against perceived over-regulation from the state's Division of Alcoholic Beverage Control. Those regulations limit the amount of on-site activities, food service and private parties and events breweries are permitted to have, according to the state's ABC.

The state says the goal is to help microbreweries while balancing the concerns of restaurant and bar owners, noting that a growing number of craft breweries began serving alcohol “well beyond what the limited licenses allowed or ever envisioned.”

“This resulted in complaints of unfair competition from bars and restaurant owners who hold licenses allowing full retail privileges,” according to an ABC release.

Best’s Hazard Index

Line of Coverage Best’s Hazard Index
Liquor Liability 6
Property 6
Business Interruption 6
General Liability: Premises and Operation 5
Equipment Breakdown 5

While this battle continues, AM Best explores the insurance risks associated with breweries across the country.

Best's Underwriting Reports identify 11 lines of coverage for craft breweries, microbreweries and brewpubs: Automobile Liability; Automobile Physical Damage; General Liability: Premises and Operations; General Liability: Products - Completed Operations; Liquor Liability; Workers' Compensation; Crime; Property; Business Interruption; Inland Marine; and Equipment Breakdown.

Best's Hazard Index ranks the risk exposure for the lines of business as Low (1-3), Medium (4-6), High (7-9) and Very High (10).

Following are excerpts of the Lines of Coverage reports that have the highest hazard index rankings.

Lines of Coverage


Liquor Liability

The Liquor Liability exposure for craft breweries will be significant. The primary exposure will be the sale or sampling of beer on the premises; craft brewers that do not sell or offer samples of beer on the premises will not face a Liquor Liability exposure.

Property

The Property exposure for craft breweries will be significant. The most common ignition sources for craft breweries will include faulty wiring, malfunctioning electrical equipment and brewing machinery and possibly smoking. The fire load will consist of raw materials, fuel, packaging materials, paper and trash. Gas fumigants, pesticides, and fungicides stored on the premises will add to the fire load. The possibility of kettle and steam jacket explosions and the presence of grain and yeast dust creates additional special exposures. There may also be a moral hazard. Computers will be covered here.

Business Interruption

The Business Interruption exposure for microbreweries will be significant due to the wide-ranging use of specialized brewing machinery, the potential for supply disruptions and premises requirements (e.g., sizable brewing systems, multi-floor production areas, warehouses).

General Liability: Premises and Operations

Craft breweries will have a moderate General Liability: Premises and Operations exposure due to the frequent presence of a number of visitors to the insured's premises. Visitors will include tour groups, customers, delivery personnel (if distribution services are contracted out), sales representatives from other companies, equipment service and repair contractors, sanitation engineers, pest control applicators, inspectors (e.g., from the Occupational Safety and Health Administration [OSHA] in the United States) and friends and family members of employees. Possible injuries to any visitors allowed access to production areas will include burns, cuts, lacerations and dismemberment.

Equipment Breakdown

Craft breweries will face a moderate Equipment Breakdown exposure. The severity of this exposure will depend primarily on the extent and scope of the insured's brewing operations, and the extent of the insured's heating and cooling systems. The insured will depend on steam pressure vessels in the mashing and brewing processes, as well as on the machinery used to run and power the facility.

 

Loss Control


On-Site Inspection:

  • What are the age, construction and condition of the brewer's buildings?
  • Are hazards posed by any adjacent buildings?
  • Layout of the craft brewery
  • Are “Employees Only” signs posted at entrances to all areas from which visitors are restricted, such as production, storage and warehouse areas?
  • Production and packaging equipment: number, age, type, condition.
  • Boilers: number, age, type, condition

Items to Investigate:

  • What are the dram laws in the state or nation where the insured is located?
  • To avoid selling alcohol to minors, do alcohol servers verify identification on all patrons of questionable age?
  • Is the craft brewery more dependent on its location or reputation?
  • How long would it take the insured to rebuild or repair the premises in the event of a loss?

For more on this and other risk classifications, visit Best's Underwriting & Loss Control Resources.


Anthony Bellano is an associate editor. He can be reached at anthony.bellano@ambest.com.



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