Insurance Payouts May Not Cover All Wildfire Damage for California WineriesInsurance Payouts May Not Cover All Wildfire Damage for California Wineries

By Suzanne Barlyn

Oct 17 (Reuters) - Wineries damaged by wildfires tearingthrough Northern California are starting insurance claims, andat least some of the smaller vintners are likely to find limitsin their policies mean payouts fall short of rebuilding costs.

Gaps in coverage and a spike in rebuilding costs, typicalafter disaster, may come as a shock to many small wineries,favorites of Napa and Sonoma county tourists, said Tom Pagano,who heads the vineyard insurance practice for insurance brokerAon Plc.

"The easy part of insurance is buildings burning down,”Pagano said, describing the complicated claims process. Cropsare covered, but not vines, and policies often impose quirkylimits, such as when grapes spoil due to electrical failuresinstead of fires. The blazes came as harvest was ending andproduction was underway at many wineries.

Even with best insurance protection, vines themselves cantake years to grow and mature.

Insured losses from the California wildfires will totalbillions of dollars for vintners, home owners and otherentities, said Pagano.

Catastrophe risk modeler RMS calculates the region sustained$3 billion to $6 billion of insured and economic losses as ofOct. 12. The figures do not include automobile or crop losses,and RMS wrote in a blog post that long-term businessinterruption to the wine industry "could result in a highertotal loss.”

The fires north of San Francisco Bay have destroyed at leasta dozen wineries among more than 5,000 structures, as well askilling more than 40.

About thirty wineries in the Napa Valley Vintners tradegroup reported "some degree of damage" including to wine-makingfacilities, vineyards and tasting rooms, said Patsy McGaughy, aspokeswoman for the group, which has surveyed half of its 550members. About a half dozen wineries reported significant lossesand are part of an industry that contributes $57.6 billion tothe state's annual economy, according to industry figures.

Vineyards, which mainly occupy the valley floor, appear tohave been largely unscathed, as the fires in Napa County burnedmainly in the hillsides, McGaughy said.

Smaller wineries, especially, are likely to find "thelimitations that were not expected" in their policies saidRobert Gall, managing director for the National Property ClaimsPractice of insurance broker Marsh, a subsidiary of Marsh &McLennan Companies Inc.

Paradise Ridge Winery in Santa Rosa is one of the betterprepared, and is moving fast. It has hired a forensic expert toassess damages and a builder in order to stay ahead of thedemand for construction services.

"It’s a maze of information and things to keep track of,"said Sonia Byck-Barwick, who runs the winery with her brother,Rene.

The winery has already started the insurance claims processwith a specialty lines unit of Allianz, which coversits buildings and property, and Lloyd's of London, which coverswines in production and storage, she added.

Fire destroyed its winemaking facility, tasting room, eventcenter and 7,500 cases of wine. The winery is still shippingwine, thanks to 10,000 cases it stored elsewhere. About 12weddings, scheduled on the property during the coming weeks,have been canceled, Byck-Barwick said.

"Luckily we have great insurance which covers everything,"Byck-Barwick said. "Some things might be a little low, but Ifeel very confident that we'll be able to rebuild," Byck-Barwicksaid.

Other U.S. winery insurers include the Travelers CompaniesInc and Chubb Ltd.

Smaller wineries may lack resources or expertise tonegotiate additional coverage for issues such as spoilage causedby utility failures, which is typically subject to far lowerlimits than other parts of a policy, Aon's Pagano said.

For example, a clause for the coverage may be limited to$100,000 and hidden deep in a policy that otherwise covers up to$2.6 million in damages.

Wineries that try to cut corners by underinsuring must alsooften pay co-insurance, a type of penalty that is equivalent toa percentage of the underinsured amount, based on factors suchas coverage the business should have had, and deducted from thefinal payout.

"It's going to be a big issue," Pagano said.(Reporting by Suzanne Barlyn; editing by Peter Henderson andLisa Shumaker)